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116 Phil.

501 "(f) Battery charger (Tungar charge machine) appearing in the attached
G.R. No. L-17870, September 29, 1962 photograph, marked Annex 'F'; and
"(g) D-Engine Waukesha-M-Fuel, appearing in the attached photograph,
MINDANAO BUS COMPANY, PETITIONER, VS. THE CITY marked Annex 'G'.
ASSESSOR & TREASURER AND THE BOARD OF TAX APPEALS OF "4. That these machineries are sitting on cement or wooden platforms as may
CAGAYAN DE ORO CITY, RESPONDENTS. be seen in the attached photographs which form part of this agreed
stipulation of facts;
DECISION "5. That petitioner is the owner of the land where it maintains and operates a
LABRADOR, J.: garage for its TPU motor trucks; a repair shop; blacksmith and carpentry
This is a petition for the review of the decision of the Court of Tax Appeals shops, and with these machineries which are placed therein, its TPU trucks
in C.T.A. Case No. 710 holding that the petitioner Mindanao Bus Company are made; body constructed; and same are repaired in a condition to be
is liable to the payment of the realty tax on its maintenance and repair serviceable in the TPU land transportation business it operates;
equipment hereunder referred to. "6. That these machineries have never been or were never used as industrial
Respondent City Assessor of Cagayan de Oro City assessed at P4,400 equipments to produce finished products for sale, nor to repair machineries,
petitioner's above-mentioned equipment. Petitioner appealed the assessment parts and the like offered to the general public indiscriminately for business
to the respondent Board of Tax Appeals on the ground that the same are not or commercial purposes for which petitioner has never engaged in, to date."
realty. The Board of Tax Appeals of the City sustained the city assessor, so The Court of Tax Appeals having sustained the respondent city assessor's
petitioner herein filed with the Court of Tax Appeals a petition for the review ruling, and having denied a motion for reconsideration, petitioner brought the
of the assessment. case to this Court assigning the following errors:
In the Court of Tax Appeals the parties submitted the following stipulation of "1. The Honorable Court of Tax Appeals erred in upholding respondents'
facts: "Petitioner and respondents, thru their respective counsels agreed to the contention that the questioned assessments are valid; and that said tools,
following stipulation of facts: equipments or machineries are immovable taxable real properties.
"1. That petitioner is a public utility solely engaged in transporting "2. The Tax Court erred in its interpretation of paragraph 5 of Article 415 of
passengers and cargoes by motor trucks, over its authorized lines in the the New Civil Code, and holding that pursuant thereto, the movable
Island of Mindanao, collecting rates approved by the Public Service equipments are taxable realties, by reason of their being intended or destined
Commission; for use in an industry.
"2. That petitioner has its main office and shop at Cagayan de Oro City. It "3. The Court of Tax Appeals erred in denying petitioner's contention that the
maintains Branch Offices and/or stations at Iligan City, Lanao; Pagadian, respondent City Assessor's power to assess and levy real estate taxes on
Zamboanga del Sur; Davao City and Kibawe, Bukidnon Province; machineries is further restricted by section 31, paragraph (c) of Republic Act
"3. That the machineries sought to be assessed by the respondent as real No. 521; and
properties are the following: "4. The Tax Court erred in denying petitioner's motion for reconsideration."
"(a) Hobart Electric Welder Machine, appearing in the attached photograph, Respondents contend that said equipments, the movable, are immobilized by
marked Annex 'A'; destination, in accordance with paragraph 5 of Article 415 of the New Civil
"(b) Storm Boring machine, appearing in the attached photograph, marked Code which provides:
Annex 'B';
"(c) Lathe machine with motor, appearing in the attached photograph, "ART. 415.—The following are immovable properties: "
marked Annex 'C'; (5) Machinery, receptacles, instruments or implements intended by the owner
"(d) Black and Decker Grinder, appearing in the attached photograph, of the tenement for an industry or works which maybe carried on in a
marked Annex 'D'; building or on a piece of land, and which tend directly to meet the needs of
"(e) PEMCO Hydraulic Press, appearing in the attached photograph, marked the said industry or works." (Italics ours.)* * * * * * *
Annex 'E';
Note that the stipulation expressly states that the equipment are pllaced on Similarly, the tools and equipments in question in this instant case are, by
wooden or cement platforms. They can be moved around and about in their nature, not essential and principal elements of petitioner's business of
petitioner’s repair shop. In the case of B. H. Berkenkotter vs. Cu Unjieng, 61 transporting passengers and cargoes by motor trucks. They are merely
Phil. 663, the Supreme Court said: incidentals—acquired as movables and used only for expediency to facilitate
and/or improve its service. Even without such tools and equipments, its
"Article 344 (Now Art. 415), paragraph (5) of the Civil Code, gives the business may be carried on, as petitioner has carried on, without such
character of real property to 'machinery, liquid containers, instruments or equipments, before the war. The transportation business could be carried on
implements intended by the owner of any building or land for use in without the repair or service shop if its rolling equipment is repaired or
connection with any industry or trade being carried on therein and which are serviced in another shop belonging to another.
expressly adapted to meet the requirements of such trade or industry.'
The law that governs the determination of the question at issue is as follows:
"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 industry, converted them into real property by reason of
their purpose, it cannot be said that their incorporation therewith was not ART. 415. The following are immovable property:
permanent in character because, as essential and principal elements of a
sugar central, without them the sugar central would be unable to function or "(5) Machinery, receptacles, instruments or implements intended by the
carry on the industrial purpose for which it was established. Inasmuch as the owner of the tenement for an industry or works which may be carried on in a
central is permanent in character, the necessary machinery and equipment building or on a piece of land, and which tend directly to meet the needs of
installed for carrying on the sugar industry for which it has been established the said industry or works;" (Civil Code of the Phil.)
must necessarily be permanent." (Italics ours.)
Aside from the element of essentiality the above-quoted provision also
So that movable equipments to be immobilized in contemplation of the law requires that the industry or works be carried on in a building or on a piece
must first be "essential and principal elements" of an industry or works of land. Thus in the case of Berkenkotter vs. Cu Unjieng, supra, the
without which such industry or works would be "unable to function or carry "machinery, liquid containers, and instruments or implements" are found in a
on the industrial purpose for which it was established." We may here building constructed on the land. A saw-mill would also be installed in a
distinguish, therefore, those movables which become immobilized by buillding on land more or less permanently, and the sawing is conducted in
destination because they are essential and principal elements in the industry the land or building.
from those which may not be so considered immobilized because they are
merely incidental, not essential and principal. Thus, cash registers, But in the case at bar the equipments in question are destined only to repair
typewriters, etc., usually found and used in hotels, restaurants, theaters, etc. or service the transportation business, which is not carried on in a building
are merely incidentals and are not and should not be considered immobilized or permanently on a piece of land, as demanded by the law. Said equipments
by destination, for these businesses can continue or carry on their functions may not, therefore, be deemed real property.
without these equipments. Airline companies use forklifts, jeep-wagons,
pressure pumps, IMB machines, etc. which are incidentals, not essentials, Resuming what we have set forth above, we hold that the equipments in
and thus retain their movable nature. On the other hand, machineries of question are not absolutely essential to the petitioner's transportation
breweries used in the manufacture of liquor and soft drinks, though movable business, and petitioner's business is not carried on in a building, tenement or
in nature, are immobilized because they are essential to said industries; but on a specified land, so said equipment may not be considered real estate
the delivery trucks and adding machines which they usually own and use and within the meaning of Article 415 (c) of the Civil Code.
are found within their industrial compounds are merely incidentals and retain
their movable nature.
Wherefore, the decision subject of the petition for review is hereby set aside Acting on petitioner's application for replevin, the lower Court issued a writ
and the equipment in question declared not subject to assessment as real of seizure, the enforcement of which was however subsequently restrained
estate for the purposes of the real estate tax. Without costs. So ordered.
Bengzon, C. J., Padilla, Bautista Angelo, Reyes, J. B. L., Paredes, Dizon, and upon private respondent's filing of a motion for reconsideration. After several
Makalintal, JJ., concur. 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
207 Phil. 262 order to break open the premises of private respondent to enforce said writ.
SECOND DIVISION The lower court reaffirmed its stand upon private respondent's filing of a
G.R. No. 58469, May 16, 1983 further motion for reconsideration.
MAKATI LEASING AND FINANCE CORPORATION, PETITIONER, VS.
WEAREVER TEXTILE MILLS, INC., AND HONORABLE COURT OF APPEALS, On July 13, 1981, the sheriff enforcing the seizure order, repaired to the
RESPONDENTS. premises of private respondent and removed the main drive motor of the
DECISION subject machinery.
DE CASTRO, J.:
Petition for review on certiorari of the decision of the Court of Appeals (now The Court of Appeals, in certiorari and prohibition proceedings subsequently
Intermediate Appellate Court) promulgated on August 27, 1981 in CA-G.R. filed by herein private respondent, set aside the Orders of the lower court and
No. SP-12731, setting aside certain Orders later specified herein, of Judge ordered the return of the drive motor seized by the sheriff pursuant to said
Ricardo J. Francisco, as Presiding Judge of the Court of First Instance of Orders, after ruling that the machinery in suit cannot be the subject of
Rizal, Branch VI, issued in Civil Case No. 36040, as well as the resolution replevin, much less of a chattel mortgage, because it is a real property
dated September 22, 1981 of the said appellate court, denying petitioner's pursuant to Article 415 of the new Civil Code, the same being attached to the
motion for reconsideration. 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
It appears that in order to obtain financial accommodations from herein that the sheriff could do to enforce the writ was to take the main drive motor
petitioner Makati Leasing and Finance Corporation, the private respondent of said machinery. The appellate court rejected petitioner's argument that
Wearever Textile Mills, Inc, discounted and assigned several receivables private respondent is estopped from claiming that the machine is real
with the former under a Receivable Purchase Agreement. To secure the property by constituting a chattel mortgage thereon.
collection of the receivables assigned, private respondent executed a Chattel
Mortgage over certain raw materials inventory as well as a machinery A motion for reconsideration of this decision of the Court of Appeals having
described as an Artos Aero Dryer Stentering Range. 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
Upon private respondent's default, petitioner filed a petition for extrajudicial petition was rendered moot and academic by petitioner's act of returning the
foreclosure of the properties mortgage to it. However, the Deputy Sheriff subject motor drive of respondent's machinery after the Court of Appeals'
assigned to implement the foreclosure failed to gain entry into private decision was promulgated.
respondent's premises and was not able to effect the seizure of the
aforedescribed machinery. Petitioner thereafter filed a complaint for judicial The contention of private respondent is without merit. When petitioner
foreclosure with the Court of First Instance of Rizal, Branch VI, docketed as returned the subject motor drive, it made itself unequivocably clear that said
Civil Case No. 36040, the case before the lower court. 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 materials, like what was involved in the above Tumalad case, may be
representative.[1] Considering that petitioner has reserved its right to question considered as personal property for purposes of executing a chattel mortgage
the propriety of the Court of Appeals' decision, the contention of private thereon as long as the parties to the contract so agree and no innocent third
respondent that this petition has been mooted by such return may not be party will be prejudiced thereby, there is absolutely no reason why a
sustained. 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
The next and the more crucial question to be resolved in this petition is because one who has so agreed is estopped from denying the existence of the
whether the machinery in suit is real or personal property from the point of chattel mortgage.
view of the parties, with petitioner arguing that it is a personalty, while the
respondent claiming the contrary, and was sustained by the appellate court, In rejecting petitioner's assertion on the applicability of the Tumalad
which accordingly held that the chattel mortgage constituted thereon is null doctrine, the Court of Appeals lays stress on the fact that the house involved
and void, as contended by said respondent. 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
A similar, if not identical issue was raised in Tumalad vs. Vicencio, 41 SCRA which the house is built and We should not lay down distinctions not
143 where this Court, speaking through Justice J.B.L. Reyes, ruled: contemplated by law.

"Although there is no specific statement referring to the subject house as It must be pointed out that the characterization of the subject machinery as
personal property, yet by ceding, selling or transferring a property by way of chattel by the private respondent is indicative of intention and impresses
chattel mortgage defendants-appellants could only have meant to convey the upon the property the character determined by the parties. As stated in
house as chattel, or at least, intended to treat the same as such, so that they Standard Oil Co. of New York vs. Jaramillo, 44 Phil. 630, it is undeniable
should not now be allowed to make an inconsistent stand by claiming that the parties to a contract may by agreement treat as personal property that
otherwise. Moreover, the subject house stood on a rented lot to which which by nature would be real property, as long as no interest of third parties
defendants-appellants merely had a temporary right as lessee, and although would be prejudiced thereby.
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 Private respondent contends that estoppel cannot apply against it because it
parties, particularly the mortgagors, intended to treat the house as personalty. had never represented nor agreed that the machinery in suit be considered as
Finally, unlike in the Iya cases, Lopez vs. Orosa, Jr. & Plaza Theatre, Inc. & personal property but was merely required and dictated on by herein
Leung Yee vs. F.L. Strong Machinery & Williamson, wherein third persons petitioner to sign a printed form of chattel mortgage which was in a blank
assailed the validity of the chattel mortgage, it is the defendants appellants form at the time of signing. This contention lacks persuasiveness. As aptly
themselves, as debtors-mortgagors, who are attacking the validity of the pointed out by petitioner and not denied by the respondent, the status of the
chattel mortgage in this case. The doctrine of estoppel therefore applies to the subject machinery as movable or immovable was never placed in issue
herein defendants-appellants, having treated the subject house as personalty." before the lower court and the Court of Appeals except in a supplemental
memorandum in support of the petition filed in the appellate court.
Examining the records of the instant case, We find no logical justification to Moreover, even granting that the charge is true, such fact alone does not
exclude and rule out, as the appellate court did, the present case from the render a contract void ab initio, but can only be a ground for rendering said
application of the above-quoted pronouncement. If a house of strong 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 entitled "Santos Evangelista vs. Ricardo Rivera," for a sum of money. On the
mortgage has been annulled. Neither is it disclosed that steps were taken to same date, he obtained a writ of attachment, which was levied upon a house,
nullify the same. On the other hand, as pointed out by petitioner and again built by Rivera on a land situated in Manila and leased to him, by filing copy
not refuted by respondent, the latter has indubitably benefited from said of said writ and the corresponding notice of attachment with the Office of the
contract. Equity dictates that one should not benefit at the expense of Register of Deeds of Manila, on June 8, 1949. In due course, judgment was
another. Private respondent could not now therefore, be allowed to impugn rendered in favor of Evangelista, who, on October 8, 1951, bought the house
the efficacy of the chattel mortgage after it has benefited therefrom. at public auction held in compliance with the writ of execution issued in said
case. The corresponding definite deed of sale was issued to him on October
From what has been said above, the error of the appellate court in ruling that 22, 1952, upon expiration of the period of redemption. When Evangelista
the questioned machinery is real, not personal property, becomes very sought to take possession of the house, Rivera refused to surrender it, upon
apparent. Moreover, the case of Machinery and Engineering Supplies Inc. v. the ground that he had leased the property from the Alto Surety & Insurance
CA, 96 Phil 70, heavily relied upon by said court is not applicable to the case Co., Inc.—respondent herein—and that the latter is now the true owner of
at bar, the nature of the machinery and equipment involved therein as real said property. It appears that on May 10, 1952, a definite deed of sale of the
properties never having been disputed nor in issue, and they were not the same house had been issued to respondent, as the highest bidder at an auction
subject of a Chattel Mortgage. Undoubtedly, the Tumalad case bears more sale held, on September 29, 1950, in compliance with a writ of execution
nearly perfect parity with the instant case to be the more controlling
issued in Civil Case No. 6268 of the same court, entitled "Alto Surety &
jurisprudential authority.
Insurance Co., Inc. vs. Maximo Quiambao, Rosario Guevara and Ricardo
Rivera," in which judgment, for the sum of money, had been rendered in
WHEREFORE, the questioned decision and resolution of the Court of
favor of respondent herein, as plaintiff therein. Hence, on June 13, 1953,
Appeals are hereby reversed and set aside, and the Orders of the lower court
Evangelista instituted the present action against respondent and Ricardo
are hereby reinstated, with costs against the private respondent.
Rivera, for the purpose of establishing his (Evangelista) title over said house,
SO ORDERED. and securing possession, thereof, apart from recovering damages.
Makasiar (Chairman), Aquino, Concepcion Jr., Guerrero and Escolin, JJ.,
concur. In its answer, respondent alleged, in substance, that it has a better right to the
Abad Santos, J., in the result. house, because the sale made, and the definite deed of sale executed, in its
favor, on September 29, 1950 and May 10, 1952, respectively, precede the
sale to Evangelista (October 8, 1951) and the definite deed of sale in his
103 Phil. 401 favor (October 22, 1952). It, also, made some special defenses which are
G. R. No. L-11139, April 23, 1958 discussed hereafter. Rivera, in effect, joined forces with respondent. After
SANTOS EVANGELISTA, PETITIONER, VS. ALTO SURETY & INSURANCE CO.,
INC., RESPONDENT. due trial, the Court of First Instance of Manila rendered judgment for
DECISION Evangelista, sentencing Rivera and respondent to deliver the house in
CONCEPCION, J.: question to petitioner herein and to pay him, jointly and severally, forty pesos
This is an appeal by certiorari from a decision of the Court of Appeals. (P40.00) a month from October, 1952, until said delivery, plus costs.
Briefly, the facts are: On June 4, 1949, petitioner herein, Santos Evangelista,
instituted Civil Case No. 8235 ef the Court of First Instance of Manila, On appeal taken by respondent, this decision was reversed by the Court of
Appeals, which absolved said respondent from the complaint, upon the section 7, Rule 59 of the Rules of Court, pursuant to which the attachment
ground that, although the writ of attachment in favor of Evangelista had been should be made "by filing with the registrar of deeds a copy of the order,
filed with the Register of Deeds of Manila prior to the sale in favor of together with a description of the property attached, and a notice that it is
respondent, Evangelista did not acquire thereby a preferential lien, the attached, and by leaving a copy of such order, description, and notice with
attachment having been levied as if the house in question were immovable the occupant of the property, if any there be."
property, although, in the opinion of the Court of Appeals, it is "ostensibly a
personal property," As such, the Court of Appeals held, "the order of Respondent maintains, however, and the Court of Appeals held, that Rivera's
attachment * * * should have been served in the manner provided in house is personal property, the levy upon which must be made in conformity
subsection (e) of section 7 of Rule 59," of the Rules of Court, reading: with subsections (c) and (e) of said section 7 of Rule 59. Hence, the main
"The property of the defendant shall be attached by the officer executing the issue before us is whether a house, constructed by the lessee of the land on
order in the following: manner: which it is built, should be dealt with, for purposes of attachment, as
******* immovable property, or as personal property.

"(e) Debts and credits, and other personal property not capable of manual It is our considered opinion that said house is not personal property, much
delivery, by leaving with the person owing such debts, or having in his less a debt,1 Credit or other personal property not capable of manual
possession or under his control, such credits or other personal property, or delivery, but immovable property.. As explicitly held, in Laddera vs. Hodges
with his agent, a copy of the order, and a notice that the debts owing by him (48 Off. Gaz., 5374), "a true building (not merely superimposed on the soil)
to the defendant, and the credits and other personal property in his is immovable or real property, whether it is erected by the owner of the land
possession, or under his control, belonging to the defendant, are attached in or by a usufructuary or lessee. This is the doctrine of our Supreme Court in
pursuance of such order." (Italics ours.) Leung Yee vs. Strong Machinery Company, 37 Phil., 644. And it is amply
However, the Court of Appeals seems to have been of the opinion, also, that supported by the rulings of the French Court * * *."
the house of Rivera should have been attached in accordance with subsection
(c) of said section 7, as "personal property capable of manual delivery, by It is true that the parties to a deed of chattel mortgage may agree to consider
taking and safely keeping in his custody", for it declared that "Evangelista a house as personal property for purposes of said contract (Luna vs.
could not have * * * validly purchased Ricardo Rivera's house from the Encarnacion,*48 Off. Gaz., 2664; Standard Oil Co. of New York vs.
sheriff as the latter was not in possession thereof at the time he sold it at a Jaramillo, .44 Phil., 630; De Jesus vs. Juan Dee Co., Inc., 72 Phil., 464).
public auction." However, this view is good only insofar as the contracting parties are
concerned. It is based, partly, upon the principle of estoppel. Neither this
Evangelista now seeks a review, by certiorari, of this decision of the Court of principle, nor said view, is applicable to strangers to said contract. Much less
Appeals. In this connection, it is not disputed that although the sale to the is it in point where there has been no contract whatsoever, with respect to the
respondent preceded that made to Evangelista, the latter would have a better status of the house involved, as in the case at bar. Apart from this, in
right if the writ of attachment, issued in his favor before the sale to the Manarang vs. Ofilada (99 Phil., 108; 52 Off. Gaz., 3954), we held:
respondent, had been properly executed or enforced. This question, in turn, "The question now before us, however, is: Does the fact that the parties
depends upon whether the house of Ricardo Rivera is real property or not. In entering into a contract regarding a house gave said property the
the affirmative case, the applicable provision would be subsection (a) of consideration of personal property in their contract, bind the sheriff in
advertising the property's sale at public auction as personal property? It is to land, which is real property. (42 Am. Jur. 199-200; Leung Yee vs. Strong
be remembered that in the case at bar the action was to collect a loan secured Machinery Co., 37 Phil., 644; Republic vs. Ceniza, et al., 90 Phil., 544;
by a chattel mortgage on the house. It is also to be remembered that in Ladera, et al. vs. Hodges, et al., [C.A.], 48 Off. Gaz., 5374.)" (Italics ours.)
practice it is the judgment creditor who points out to the sheriff the properties The foregoing considerations apply, with equal force, to the conditions for
that the sheriff is to levy upon in execution, and the judgment creditor in the the levy of attachment, for it similarly affects the public and third persons.
case at bar is the party in whose favor the owner of the house had conveyed it
by way of chattel mortgage and, therefore, knew its consideration as personal It is argued, however, that, even if the house in question were immovable
property. property, its attachment by Evangelista was void or ineffective, because, in
the language of the Court of Appeals, "after presenting a copy of the order of
"These considerations notwithstanding, we hold that the rules on execution attachment in the Office of the Register of Deeds, the person who might then
do not allow, and we should not interpret them in such a way as to allow, the be in possession of the house, the sheriff took no pains to serve Ricardo
special consideration that parties to a contract may have desired to impart to Rivera, or other copies thereof." This finding of the Court of Appeals is
real estate, for example, as personal property, when they are not ordinarily neither conclusive upon us, nor accurate.
so. Sales on execution affect the public and third persons. The regulation
governing sales on execution are for public officials to follow. The form of The Record on Appeal, annexed to the petition for certiorari, shows that
proceedings prescribed for each kind of property is suited to its character, not petitioner alleged, in paragraph 3 of the complaint, that he acquired the house
to the character which the parties have given to it or desire to give it. When in question "as a consequence of the levy of an attachment and execution of
the rules speak of personal property, property which is ordinarily so the judgment in Civil Case No. 8235" of the Court of First Instance of
considered is meant; and when real property is spoken of, it means properly Manila. In his answer (paragraph 2), Ricardo Rivera admitted said
which is generally known, as real property. The regulations were never attachment and execution of judgment. He alleged, however, by way of
intended to suit the consideration that parties may have privately given to the special defense, that the title of respondent "is superior to that of plaintiff
property levied upon. Enforcement of regulations would be difficult were the because it is based on a public instrument," whereas Evangelista relied upon
convenience or agreement of private parties to determine or govern the a "promissory note" which "is only a private instrument"; that said public
nature of the proceedings. We, therefore, hold that the mere fact that a house instrument in favor of respondent "is superior also to the judgment in Civil
was the subject of a chattel mortgage and was considered as personal Case No. 8235"; and that plaintiff's claim against Rivera amounted only to
property by the parties does not make said house personal property for P866, "which is much below the real value" of said house, for which reason it
purposes of the notice to be given for its sale at public, auction. This ruling is would be "grossly unjust to allow plaintiff to acquire the property for such an
demanded by the need for a definite, orderly and well-defined regulation for inadequate consideration". Thus, Rivera impliedly admitted that his house
official and public guidance and which would prevent confusion and had been attached, that the house had been sold to Evangelista in accordance
misunderstanding. with the requisite formalities, and that said attachment was valid, although
allegedly inferior to the rights of respondent, and the consideration for the
"We, therefore, declare that the house of mixed materials levied upon on sale to Evangelista was claimed to be inadequate.
execution, although subject of a contract of chattel mortgage between the
owner and a third person, is real property within the purview of Rule 39, Respondent, in turn, denied the allegation in said paragraph 3 of the
section 16, of the Rules of Court as it has become a permanent fixture of the complaint, but only "for the reasons stated in its special defenses" namely:
(1) that by virtue of the sale at public auction, and the final deed executed by and the truth of this assertion has not been directly and positively challenged
the sheriff in favor of respondent, the same became the "legitimate owner of or denied in the brief filed before us by respondent herein. The latter did not
the house" in question; (2) that respondent "is a buyer in good faith and for dare therein to go beyond making a statement—for the first time in the
value"; (3) that respondent "took possession and control of said house"; (4) course of these proceedings, begun almost five (5) years ago (June 18,
that "there "was no valid attachment by the plaintiff and/or the Sheriff of 1953)—reproducing substantially the aforementioned finding of the Court of
Manila of the property in question as neither took actual or constructive Appeals and then quoting the same.
possession or control of the property at any time"; and (5) "that the alleged
registration of plaintiff's attachment, certificate of sale and final deed in the Considering, therefore, that neither the pleadings, nor the briefs in the Court
Office, of Register of Deeds, Manila, if there was any, is likewise, not valid of Appeals, raised am issue on whether or not copies of the writ of
as there is no registry of transactions' covering houses erected on land attachment and notice of attachment had been served upon Rivera; that the
belonging to or leased from another." In this manner, respondent claimed a defendants had impliedly admitted—in said pleadings and briefs, as well as
better right, merely under the theory that, in case of double sale of by their conduct during the entire proceedings, prior to the rendition of the
immovable property, the purchaser who first obtains possession in good decision of the Court of Appeals—that Rivera had received copies of said
faith, acquires title, if the sale has not been "recorded * * * in the Registry of documents; and that, for this reason, evidently, no proof was and introduced
Property" (Art. 1544, Civil Code of the Philippines), and that the writ of thereon, we are of the opinion, and so hold that the finding of the Court of
attachment and the notice of attachment in favor of Evangelista should be Appeals to the effect that said copies had not been served upon Rivera is
considered unregistered, "as there is no registry of transactions covering based upon a misapprehension of the specific issues involved therein and
houses erected on land belonging to or leased from another." In fact, said goes beyond the range of such issues, apart from being contrary to the
article 1544 of the Civil Code of the Philippines, governing double sales, was aforementioned admission by the parties, and that, accordingly, a grave abuse
quoted on page 15 of the brief for respondent in the Court of .Appeals, in of discretion was committed in making said finding, which is, furthermore,
support of its fourth assignment of error therein, to the effect that it "has inaccurate.
preference or priority over the sale of the same property" to Evangelista.
Wherefore, the decision of the Court of Appeals is hereby reversed, and
In other words, there was no issue on whether copy of the writ and notice of another one shall be entered affirming that of the Court of First Instance of
attachment had been served on Rivera. No evidence whatsoever, to the effect Manila, with the costs of this instance against respondent, the Alto Surety &
that Rivera had not been served with copies of said writ and notice, was Insurance Co., Inc. It is so ordered.
introduced in the Court of First Instance. In its brief in the Court of Appeals,
respondent did not aver, or even intimate, that no such copies were served by Paras, C. J., Bengzon, Montemayor, Reyes, A., Bautista Angelo, Labrador,
the sheriff upon Rivera. Service thereof on Rivera had been impliedly Reyes, J. B. L., Endencia, and Felix, JJ., concur.
admitted by the defendants, in their respective answers, and by their
behaviour throughout the proceedings in the Court of First Instance, and, as *91 Phil., 531
regards respondent, in the Court of Appeals. In fact, petitioner asserts in his
brief herein (p. 26) that copies of said writ and notice were delivered to
Rivera, simidtaneously with copy of the complaint, upon service of summons,
prior to the filing of copies of said writ and notice with the register of deeds,
418 Phil. 606 A. Forty Eight (48) units of Vayrow Knitting Machines-Tompkins made
SECOND DIVISION in Hongkong:
G.R. No. 120098, October 02, 2001
RUBY L. TSAI, PETITIONER, VS. HON. COURT OF APPEALS, EVER TEXTILE Serial Numbers Size of Machines
MILLS, INC. AND MAMERTO R. VILLALUZ, RESPONDENTS.
[G.R. NO. 120109. OCTOBER 2, 2001] xxx
PHILIPPINE BANK OF COMMUNICATIONS, PETITIONER, VS. HON. COURT OF
APPEALS, EVER TEXTILE MILLS AND MAMERTO R. VILLALUZ, B. Sixteen (16) sets of Vayrow Knitting Machines made in Taiwan.
RESPONDENTS. xxx
DECISION
C. Two (2) Circular Knitting Machines made in West Germany.
QUISUMBING, J.: xxx
These consolidated cases assail the decision[1] of the Court of Appeals in CA- D. Four (4) Winding Machines.
G.R. CV No. 32986, affirming the decision[2] of the Regional Trial Court of xxx
Manila, Branch 7, in Civil Case No. 89-48265. Also assailed is respondent
court's resolution denying petitioners' motion for reconsideration. SCHEDULE "A"

On November 26, 1975, respondent Ever Textile Mills, Inc. (EVERTEX) I. TCT # 372097 - RIZAL
obtained a three million peso (P3,000,000.00) loan from petitioner Philippine xxx
Bank of Communications (PBCom). As security for the loan, EVERTEX
executed in favor of PBCom, a deed of Real and Chattel Mortgage over the II. Any and all buildings and improvements now existing or hereafter to
lot under TCT No. 372097, where its factory stands, and the chattels located exist on the above-mentioned lot.
therein as enumerated in a schedule attached to the mortgage contract. The
pertinent portions of the Real and Chattel Mortgage are quoted below: III. MACHINERIES & EQUIPMENT situated, located and/or installed
MORTGAGE on the above-mentioned lot located at xxx
(REAL AND CHATTEL)
xxx (a) Forty eight sets (48)
The MORTGAGOR(S) hereby transfer(s) and convey(s), by way of First Vayrow Knitting Machines
Mortgage, to the MORTGAGEE, xxx certain parcel(s) of land, together with xxx
all the buildings and improvements now existing or which may hereafter (b) Sixteen sets (16) Vayrow
exist thereon, situated in xxx. Knitting Machines xxx
"Annex A" (c) Two (2) Circular Knitting
(Real and Chattel Mortgage executed by Ever Textile Mills in favor of Machines xxx
PBCommunications - continued) (d) Two (2) Winding Machines
LIST OF MACHINERIES & EQUIPMENT xxx
(e) Two (2) Winding Machines On March 7, 1984, PBCom consolidated its ownership over the lot and all
xxx the properties in it. In November 1986, it leased the entire factory premises
to petitioner Ruby L. Tsai for P50,000.00 a month. On May 3, 1988, PBCom
IV Any and all replacements, substitutions, additions, increases and sold the factory, lock, stock and barrel to Tsai for P9,000,000.00, including
accretions to above properties. the contested machineries.
xxx[3]
On March 16, 1989, EVERTEX filed a complaint for annulment of sale,
On April 23, 1979, PBCom granted a second loan of P3,356,000.00 to reconveyance, and damages with the Regional Trial Court against PBCom,
EVERTEX. The loan was secured by a Chattel Mortgage over personal alleging inter alia that the extrajudicial foreclosure of subject mortgage was
properties enumerated in a list attached thereto. These listed properties were in violation of the Insolvency Law. EVERTEX claimed that no rights having
similar to those listed in Annex A of the first mortgage deed. been transmitted to PBCom over the assets of insolvent EVERTEX, therefore
Tsai acquired no rights over such assets sold to her, and should reconvey the
After April 23, 1979, the date of the execution of the second mortgage assets.
mentioned above, EVERTEX purchased various machines and equipments.
Further, EVERTEX averred that PBCom, without any legal or factual basis,
On November 19, 1982, due to business reverses, EVERTEX filed appropriated the contested properties, which were not included in the Real
insolvency proceedings docketed as SP Proc. No. LP-3091-P before the and Chattel Mortgage of November 26, 1975 nor in the Chattel Mortgage of
defunct Court of First Instance of Pasay City, Branch XXVIII. The CFI April 23, 1979, and neither were those properties included in the Notice of
issued an order on November 24, 1982 declaring the corporation insolvent. Sheriff's Sale dated December 1, 1982 and Certificate of Sale dated
All its assets were taken into the custody of the Insolvency Court, including December 15, 1982.
the collateral, real and personal, securing the two mortgages as
abovementioned. The disputed properties, which were valued at P4,000,000.00, are: 14
Interlock Circular Knitting Machines, 1 Jet Drying Equipment, 1 Dryer
In the meantime, upon EVERTEX's failure to meet its obligation to PBCom, Equipment, 1 Raisin Equipment and 1 Heatset Equipment.
the latter commenced extrajudicial foreclosure proceedings against
EVERTEX under Act 3135, otherwise known as "An Act to Regulate the The RTC found that the lease and sale of said personal properties were
Sale of Property under Special Powers Inserted in or Annexed to Real Estate irregular and illegal because they were not duly foreclosed nor sold at the
Mortgages" and Act 1506 or "The Chattel Mortgage Law". A Notice of December 15, 1982 auction sale since these were not included in the
Sheriff's Sale was issued on December 1, 1982. schedules attached to the mortgage contracts. The trial court decreed:

On December 15, 1982, the first public auction was held where petitioner WHEREFORE, judgment is hereby rendered in favor of plaintiff corporation
PBCom emerged as the highest bidder and a Certificate of Sale was issued in and against the defendants:
its favor on the same date. On December 23, 1982, another public auction
was held and again, PBCom was the highest bidder. The sheriff issued a 1. Ordering the annulment of the sale executed by defendant Philippine Bank
Certificate of Sale on the same day. of Communications in favor of defendant Ruby L. Tsai on May 3, 1988
insofar as it affects the personal properties listed in par. 9 of the complaint, I THE HONORABLE COURT OF APPEALS (SECOND DIVISION)
and their return to the plaintiff corporation through its assignee, plaintiff ERRED IN EFFECT MAKING A CONTRACT FOR THE PARTIES BY
Mamerto R. Villaluz, for disposition by the Insolvency Court, to be done TREATING THE 1981 ACQUIRED MACHINERIES AS CHATTELS
within ten (10) days from finality of this decision; INSTEAD OF REAL PROPERTIES WITHIN THEIR EARLIER 1975
2. Ordering the defendants to pay jointly and severally the plaintiff DEED OF REAL AND CHATTEL MORTGAGE OR 1979 DEED OF
corporation the sum of P5,200,000.00 as compensation for the use and CHATTEL MORTGAGE.
possession of the properties in question from November 1986 to February II THE HONORABLE COURT OF APPEALS (SECOND DIVISION)
1991 and P100,000.00 every month thereafter, with interest thereon at the ERRED IN HOLDING THAT THE DISPUTED 1981 MACHINERIES
legal rate per annum until full payment; ARE NOT REAL PROPERTIES DEEMED PART OF THE MORTGAGE -
3. Ordering the defendants to pay jointly and severally the plaintiff DESPITE THE CLEAR IMPORT OF THE EVIDENCE AND
corporation the sum of P50,000.00 as and for attorney's fees and expenses of APPLICABLE RULINGS OF THE SUPREME COURT.
litigation; III THE HONORABLE COURT OF APPEALS (SECOND DIVISION)
4. Ordering the defendants to pay jointly and severally the plaintiff ERRED IN DEEMING PETITIONER A PURCHASER IN BAD FAITH.
corporation the sum of P200,000.00 by way of exemplary damages; IV THE HONORABLE COURT OF APPEALS (SECOND DIVISION)
5. Ordering the dismissal of the counterclaim of the defendants; and ERRED IN ASSESSING PETITIONER ACTUAL DAMAGES,
6. Ordering the defendants to proportionately pay the costs of suit. ATTORNEY'S FEES AND EXPENSES OF LITIGATION - FOR WANT
OF VALID FACTUAL AND LEGAL BASIS.
SO ORDERED.[4] V THE HONORABLE COURT OF APPEALS (SECOND DIVISION)
ERRED IN HOLDING AGAINST PETITIONER'S ARGUMENTS ON
Dissatisfied, both PBCom and Tsai appealed to the Court of Appeals, which PRESCRIPTION AND LACHES.[6]
issued its decision dated August 31, 1994, the dispositive portion of which
reads: In G.R. No. 120109, PBCom raised the following issues:
WHEREFORE, except for the deletion therefrom of the award for exemplary I. DID THE COURT OF APPEALS VALIDLY DECREE THE
damages, and reduction of the actual damages, from P100,000.00 to MACHINERIES LISTED UNDER PARAGRAPH 9 OF THE COMPLAINT
P20,000.00 per month, from November 1986 until subject personal BELOW AS PERSONAL PROPERTY OUTSIDE OF THE 1975 DEED OF
properties are restored to appellees, the judgment appealed from is hereby REAL ESTATE MORTGAGE AND EXCLUDED THEM FROM THE
AFFIRMED, in all other respects. No pronouncement as to costs.[5] REAL PROPERTY EXTRAJUDICIALLY FORECLOSED BY PBCOM
DESPITE THE PROVISION IN THE 1975 DEED THAT ALL AFTER-
Motion for reconsideration of the above decision having been denied in the ACQUIRED PROPERTIES DURING THE LIFETIME OF THE
resolution of April 28, 1995, PBCom and Tsai filed their separate petitions MORTGAGE SHALL FORM PART THEREOF, AND DESPITE THE
for review with this Court. UNDISPUTED FACT THAT SAID MACHINERIES ARE BIG AND
HEAVY, BOLTED OR CEMENTED ON THE REAL PROPERTY
In G.R. No. 120098, petitioner Tsai ascribed the following errors to the MORTGAGED BY EVER TEXTILE MILLS TO PBCOM, AND WERE
respondent court: ASSESSED FOR REAL ESTATE TAX PURPOSES?
II. CAN PBCOM, WHO TOOK POSSESSION OF THE MACHINERIES part of the foreclosed real properties, rendering the lease and the subsequent
IN QUESTION IN GOOD FAITH, EXTENDED CREDIT FACILITIES TO sale thereof to Tsai a nullity.[12]
EVER TEXTILE MILLS WHICH AS OF 1982 TOTALLED P9,547,095.28,
WHO HAD SPENT FOR MAINTENANCE AND SECURITY ON THE Considering the assigned errors and the arguments of the parties, we find the
DISPUTED MACHINERIES AND HAD TO PAY ALL THE BACK petitions devoid of merit and ought to be denied.
TAXES OF EVER TEXTILE MILLS BE LEGALLY COMPELLED TO
RETURN TO EVER THE SAID MACHINERIES OR IN LIEU THEREOF Well settled is the rule that the jurisdiction of the Supreme Court in a petition
BE ASSESSED DAMAGES. IS THAT SITUATION TANTAMOUNT TO for review on certiorari under Rule 45 of the Revised Rules of Court is
A CASE OF UNJUST ENRICHMENT?[7] limited to reviewing only errors of law, not of fact, unless the factual findings
complained of are devoid of support by the evidence on record or the assailed
The principal issue, in our view, is whether or not the inclusion of the judgment is based on misapprehension of facts.[13] This rule is applied more
questioned properties in the foreclosed properties is proper. The secondary stringently when the findings of fact of the RTC is affirmed by the Court of
issue is whether or not the sale of these properties to petitioner Ruby Tsai is Appeals.[14]
valid.
The following are the facts as found by the RTC and affirmed by the Court of
For her part, Tsai avers that the Court of Appeals in effect made a contract Appeals that are decisive of the issues: (1) the "controverted machineries" are
for the parties by treating the 1981 acquired units of machinery as chattels not covered by, or included in, either of the two mortgages, the Real Estate
instead of real properties within their earlier 1975 deed of Real and Chattel and Chattel Mortgage, and the pure Chattel Mortgage; (2) the said
Mortgage or 1979 deed of Chattel Mortgage.[8] Additionally, Tsai argues that machineries were not included in the list of properties appended to the Notice
respondent court erred in holding that the disputed 1981 machineries are not of Sale, and neither were they included in the Sheriff's Notice of Sale of the
real properties.[9] Finally, she contends that the Court of Appeals erred in foreclosed properties.[15]
holding against petitioner's arguments on prescription and laches[10] and in
assessing petitioner actual damages, attorney's fees and expenses of Petitioners contend that the nature of the disputed machineries, i.e., that they
litigation, for want of valid factual and legal basis.[11] were heavy, bolted or cemented on the real property mortgaged by
EVERTEX to PBCom, make them ipso facto immovable under Article 415
Essentially, PBCom contends that respondent court erred in affirming the (3) and (5) of the New Civil Code. This assertion, however, does not settle
lower court's judgment decreeing that the pieces of machinery in dispute the issue. Mere nuts and bolts do not foreclose the controversy. We have to
were not duly foreclosed and could not be legally leased nor sold to Ruby look at the parties' intent.
Tsai. It further argued that the Court of Appeals' pronouncement that the
pieces of machinery in question were personal properties have no factual and While it is true that the controverted properties appear to be immobile, a
legal basis. Finally, it asserts that the Court of Appeals erred in assessing perusal of the contract of Real and Chattel Mortgage executed by the parties
damages and attorney's fees against PBCom. herein gives us a contrary indication. In the case at bar, both the trial and the
appellate courts reached the same finding that the true intention of PBCOM
In opposition, private respondents argue that the controverted units of and the owner, EVERTEX, is to treat machinery and equipment as chattels.
machinery are not "real properties" but chattels, and, therefore, they were not The pertinent portion of respondent appellate court's ruling is quoted below:
As stressed upon by appellees, appellant bank treated the machineries as Estate Mortgage and Chattel Mortgage," instead of just "Real Estate
chattels; never as real properties. Indeed, the 1975 mortgage contract, which Mortgage" if indeed their intention is to treat all properties included therein
was actually real and chattel mortgage, militates against appellants' posture. as immovable, and (2) attached to the said contract a separate "LIST OF
It should be noted that the printed form used by appellant bank was mainly MACHINERIES & EQUIPMENT". These facts, taken together, evince the
for real estate mortgages. But reflective of the true intention of appellant conclusion that the parties' intention is to treat these units of machinery as
PBCOM and appellee EVERTEX was the typing in capital letters, chattels. A fortiori, the contested after-acquired properties, which are of the
immediately following the printed caption of mortgage, of the phrase "real same description as the units enumerated under the title "LIST OF
and chattel." So also, the "machineries and equipment" in the printed form of MACHINERIES & EQUIPMENT," must also be treated as chattels.
the bank had to be inserted in the blank space of the printed contract and
connected with the word "building" by typewritten slash marks. Now, then, Accordingly, we find no reversible error in the respondent appellate court's
if the machineries in question were contemplated to be included in the real ruling that inasmuch as the subject mortgages were intended by the parties to
estate mortgage, there would have been no necessity to ink a chattel involve chattels, insofar as equipment and machinery were concerned, the
mortgage specifically mentioning as part III of Schedule A a listing of the Chattel Mortgage Law applies, which provides in Section 7 thereof that: "a
machineries covered thereby. It would have sufficed to list them as chattel mortgage shall be deemed to cover only the property described
immovables in the Deed of Real Estate Mortgage of the land and building therein and not like or substituted property thereafter acquired by the
involved. mortgagor and placed in the same depository as the property originally
mortgaged, anything in the mortgage to the contrary notwithstanding."
As regards the 1979 contract, the intention of the parties is clear and beyond
question. It refers solely to chattels. The inventory list of the mortgaged And, since the disputed machineries were acquired in 1981 and could not
properties is an itemization of sixty-three (63) individually described have been involved in the 1975 or 1979 chattel mortgages, it was
machineries while the schedule listed only machines and 2,996,880.50 worth consequently an error on the part of the Sheriff to include subject
of finished cotton fabrics and natural cotton fabrics.[16] machineries with the properties enumerated in said chattel mortgages.

In the absence of any showing that this conclusion is baseless, erroneous or As the auction sale of the subject properties to PBCom is void, no valid title
uncorroborated by the evidence on record, we find no compelling reason to passed in its favor. Consequently, the sale thereof to Tsai is also a nullity
depart therefrom. under the elementary principle of nemo dat quod non habet, one cannot give
what one does not have.[17]
Too, assuming arguendo that the properties in question are immovable by
nature, nothing detracts the parties from treating it as chattels to secure an Petitioner Tsai also argued that assuming that PBCom's title over the
obligation under the principle of estoppel. As far back as Navarro v. Pineda, contested properties is a nullity, she is nevertheless a purchaser in good faith
9 SCRA 631 (1963), an immovable may be considered a personal property if and for value who now has a better right than EVERTEX.
there is a stipulation as when it is used as security in the payment of an
obligation where a chattel mortgage is executed over it, as in the case at bar. To the contrary, however, are the factual findings and conclusions of the trial
court that she is not a purchaser in good faith. Well-settled is the rule that the
In the instant case, the parties herein: (1) executed a contract styled as "Real person who asserts the status of a purchaser in good faith and for value has
the burden of proving such assertion.[18] Petitioner Tsai failed to discharge inequitable to allow a party to enforce his legal rights. Moreover, except for
this burden persuasively. very strong reasons, this Court is not disposed to apply the doctrine of laches
to prejudice or defeat the rights of an owner.[22]
Moreover, a purchaser in good faith and for value is one who buys the
property of another without notice that some other person has a right to or As to the award of damages, the contested damages are the actual
interest in such property and pays a full and fair price for the same, at the compensation, representing rentals for the contested units of machinery, the
time of purchase, or before he has notice of the claims or interest of some exemplary damages, and attorney's fees.
other person in the property.[19] Records reveal, however, that when Tsai
purchased the controverted properties, she knew of respondent's claim As regards said actual compensation, the RTC awarded P100,000.00
thereon. As borne out by the records, she received the letter of respondent's corresponding to the unpaid rentals of the contested properties based on the
counsel, apprising her of respondent's claim, dated February 27, 1987.[20] She testimony of John Chua, who testified that the P100,000.00 was based on the
replied thereto on March 9, 1987.[21] Despite her knowledge of respondent's accepted practice in banking and finance, business and investments that the
claim, she proceeded to buy the contested units of machinery on May 3, rental price must take into account the cost of money used to buy them. The
1988. Thus, the RTC did not err in finding that she was not a purchaser in Court of Appeals did not give full credence to Chua's projection and reduced
good faith. the award to P20,000.00.

Petitioner Tsai's defense of indefeasibility of Torrens Title of the lot where Basic is the rule that to recover actual damages, the amount of loss must not
the disputed properties are located is equally unavailing. This defense refers only be capable of proof but must actually be proven with reasonable degree
to sale of lands and not to sale of properties situated therein. Likewise, the of certainty, premised upon competent proof or best evidence obtainable of
mere fact that the lot where the factory and the disputed properties stand is in the actual amount thereof.[23] However, the allegations of respondent
PBCom's name does not automatically make PBCom the owner of company as to the amount of unrealized rentals due them as actual damages
everything found therein, especially in view of EVERTEX's letter to Tsai remain mere assertions unsupported by documents and other competent
enunciating its claim. evidence. In determining actual damages, the court cannot rely on mere
assertions, speculations, conjectures or guesswork but must depend on
Finally, petitioners' defense of prescription and laches is less than competent proof and on the best evidence obtainable regarding the actual
convincing. We find no cogent reason to disturb the consistent findings of amount of loss.[24] However, we are not prepared to disregard the following
both courts below that the case for the reconveyance of the disputed dispositions of the respondent appellate court:
properties was filed within the reglementary period. Here, in our view, the ... In the award of actual damages under scrutiny, there is nothing on record
doctrine of laches does not apply. Note that upon petitioners' adamant warranting the said award of P5,200,000.00, representing monthly rental
refusal to heed EVERTEX's claim, respondent company immediately filed an income of P100,000.00 from November 1986 to February 1991, and the
action to recover possession and ownership of the disputed properties. There additional award of P100,000.00 per month thereafter.
is no evidence showing any failure or neglect on its part, for an unreasonable
and unexplained length of time, to do that which, by exercising due As pointed out by appellants, the testimonial evidence, consisting of the
diligence, could or should have been done earlier. The doctrine of stale testimonies of Jonh (sic) Chua and Mamerto Villaluz, is shy of what is
demands would apply only where by reason of the lapse of time, it would be necessary to substantiate the actual damages allegedly sustained by
appellees, by way of unrealized rental income of subject machineries and financially handicapped respondent, including those properties not covered
equipments. by or included in the mortgages, is equally oppressive and tainted with bad
faith. Thus, we are in agreement with the RTC that an award of exemplary
The testimony of John Cua (sic) is nothing but an opinion or projection based damages is proper.
on what is claimed to be a practice in business and industry. But such a
testimony cannot serve as the sole basis for assessing the actual damages The amount of P200,000.00 for exemplary damages is, however, excessive.
complained of. What is more, there is no showing that had appellant Tsai not Article 2216 of the Civil Code provides that no proof of pecuniary loss is
taken possession of the machineries and equipments in question, somebody necessary for the adjudication of exemplary damages, their assessment being
was willing and ready to rent the same for P100,000.00 a month. x x x left to the discretion of the court in accordance with the circumstances of
each case.[29] While the imposition of exemplary damages is justified in this
Then, too, even assuming arguendo that the said machineries and equipments case, equity calls for its reduction. In Inhelder Corporation v. Court of
could have generated a rental income of P30,000.00 a month, as projected by Appeals, G.R. No. L-52358, 122 SCRA 576, 585, (May 30, 1983), we laid
witness Mamerto Villaluz, the same would have been a gross income. down the rule that judicial discretion granted to the courts in the assessment
Therefrom should be deducted or removed, expenses for maintenance and of damages must always be exercised with balanced restraint and measured
repairs. ... Therefore, in the determination of the actual damages or objectivity. Thus, here the award of exemplary damages by way of example
unrealized rental income sued upon, there is a good basis to calculate that at for the public good should be reduced to P100,000.00.
least four months in a year, the machineries in dispute would have been idle
due to absence of a lessee or while being repaired. In the light of the By the same token, attorney's fees and other expenses of litigation may be
foregoing rationalization and computation, We believe that a net unrealized recovered when exemplary damages are awarded.[30] In our view, RTC's
rental income of P20,000.00 a month, since November 1986, is more realistic award of P50,000.00 as attorney's fees and expenses of litigation is
and fair.[25] reasonable, given the circumstances in these cases.

As to exemplary damages, the RTC awarded P200,000.00 to EVERTEX WHEREFORE, the petitions are DENIED. The assailed decision and
which the Court of Appeals deleted. But according to the CA, there was no resolution of the Court of Appeals in CA-G.R. CV No. 32986 are
clear showing that petitioners acted malevolently, wantonly and AFFIRMED WITH MODIFICATIONS. Petitioners Philippine Bank of
oppressively. The evidence, however, shows otherwise. Communications and Ruby L. Tsai are hereby ordered to pay jointly and
severally Ever Textile Mills, Inc. the following: (1) P20,000.00 per month, as
It is a requisite to award exemplary damages that the wrongful act must be compensation for the use and possession of the properties in question from
accompanied by bad faith,[26] and the guilty acted in a wanton, fraudulent, November 1986[31] until subject personal properties are restored to
oppressive, reckless or malevolent manner.[27] As previously stressed, respondent corporation; (2) P100,000.00 by way of exemplary damages, and
petitioner Tsai's act of purchasing the controverted properties despite her (3) P50,000.00 as attorney's fees and litigation expenses. Costs against
knowledge of EVERTEX's claim was oppressive and subjected the already petitioners.
insolvent respondent to gross disadvantage. Petitioner PBCom also received SO ORDERED.
the same letters of Atty. Villaluz, responding thereto on March 24, 1987. [28] Bellosillo, (Chairman), Mendoza, Buena, and De Leon, Jr., JJ., concur.
Thus, PBCom's act of taking all the properties found in the factory of the
393 Phil. 158 (Annex ‘E’), with an application for a writ of replevin docketed as Civil Case
G.R. No. 137705, August 22, 2000 No. Q-98-33500.
SERG’S PRODUCTS, INC., AND SERGIO T. GOQUIOLAY, PETITIONERS, VS. PCI “On March 6, 1998, upon an ex-parte application of PCI Leasing, respondent
LEASING AND FINANCE, INC., 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
DECISION the payment of the necessary expenses.
PANGANIBAN, J.: “On March 24, 1998, in implementation of said writ, the sheriff proceeded to
After agreeing to a contract stipulating that a real or immovable property be petitioner’s factory, seized one machinery with [the] word that he [would]
considered as personal or movable, a party is estopped from subsequently return for the other machineries.
claiming otherwise. Hence, such property is a proper subject of a writ of “On March 25, 1998, petitioners filed a motion for special protective order
replevin obtained by the other contracting party. (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
The Case sheriff to defer enforcement of the writ of replevin.
Before us is a Petition for Review on Certiorari assailing the January 6, 1999 “This motion was opposed by PCI Leasing (Annex ‘F’), on the ground that
Decision[1] of the Court of Appeals (CA)[2] in CA-GR SP No. 47332 and its the properties [were] still personal and therefore still subject to seizure and a
February 26, 1999 Resolution[3] denying reconsideration. The decretal writ of replevin.
portion of the CA Decision reads as follows: “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’
“WHEREFORE, premises considered, the assailed Order dated February 18, agreement to the contrary notwithstanding. They argued that to give effect to
1998 and Resolution dated March 31, 1998 in Civil Case No. Q-98-33500 the agreement would be prejudicial to innocent third parties. They further
are hereby AFFIRMED. The writ of preliminary injunction issued on June stated that PCI Leasing [was] estopped from treating these machineries as
15, 1998 is hereby LIFTED.”[4] personal because the contracts in which the alleged agreement [were]
embodied [were] totally sham and farcical.
In its February 18, 1998 Order,[5] the Regional Trial Court (RTC) of Quezon “On April 6, 1998, the sheriff again sought to enforce the writ of seizure and
City (Branch 218)[6] issued a Writ of Seizure.[7] The March 18, 1998 take possession of the remaining properties. He was able to take two more,
Resolution[8] denied petitioners’ Motion for Special Protective Order, praying but was prevented by the workers from taking the rest.
that the deputy sheriff be enjoined “from seizing immobilized or other real “On April 7, 1998, they went to [the CA] via an original action for
properties in (petitioners’) factory in Cainta, Rizal and to return to their certiorari.”
original place whatever immobilized machineries or equipments he may have
removed.”[9] Ruling of the Court of Appeals
The Facts Citing the Agreement of the parties, the appellate court held that the subject
The undisputed facts are summarized by the Court of Appeals as follows:[10] machines were personal property, and that they had only been leased, not
“On February 13, 1998, respondent PCI Leasing and Finance, Inc. (“PCI owned, by petitioners. It also ruled that the “words of the contract are clear
Leasing” for short) filed with the RTC-QC a complaint for [a] sum of money 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 There is no question that the present recourse is under Rule 45. This
realized the import of the document he signed.” The CA further held: conclusion finds support in the very title of the Petition, which is “Petition
for Review on Certiorari.”[13]
“Furthermore, to accord merit to this petition would be to preempt the trial While Judge Laqui should not have been impleaded as a respondent,[14]
court in ruling upon the case below, since the merits of the whole matter are substantial justice requires that such lapse by itself should not warrant the
laid down before us via a petition whose sole purpose is to inquire upon the dismissal of the present Petition. In this light, the Court deems it proper to
existence of a grave abuse of discretion on the part of the [RTC] in issuing remove, motu proprio, the name of Judge Laqui from the caption of the
the assailed Order and Resolution. The issues raised herein are proper present case.
subjects of a full-blown trial, necessitating presentation of evidence by both Main Issue: Nature of the Subject Machinery
parties. The contract is being enforced by one, and [its] validity is attacked Petitioners contend that the subject machines used in their factory were not
by the other – a matter x x x which respondent court is in the best position to proper subjects of the Writ issued by the RTC, because they were in fact real
determine.” property. Serious policy considerations, they argue, militate against a
Hence, this Petition.[11] contrary characterization.
Rule 60 of the Rules of Court provides that writs of replevin are issued for
The Issues the recovery of personal property only.[15] Section 3 thereof reads:
In their Memorandum, petitioners submit the following issues for our “SEC. 3. Order. - Upon the filing of such affidavit and approval of the bond,
consideration: the court shall issue an order and the corresponding writ of replevin
“A. Whether or not the machineries purchased and imported by SERG’S describing the personal property alleged to be wrongfully detained and
became real property by virtue of immobilization. requiring the sheriff forthwith to take such property into his custody.”
B. Whether or not the contract between the parties is a loan or a lease.”[12] On the other hand, Article 415 of the Civil Code enumerates immovable or
In the main, the Court will resolve whether the said machines are personal, real property as follows:
not immovable, property which may be a proper subject of a writ of replevin. “ART. 415. The following are immovable property:
As a preliminary matter, the Court will also address briefly the procedural x x x....................................x x x....................................x x x
points raised by respondent. (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
The Court’s Ruling building or on a piece of land, and which tend directly to meet the needs of
The Petition is not meritorious. the said industry or works;
x x x....................................x x x....................................x x x”
Preliminary Matter:Procedural Questions In the present case, the machines that were the subjects of the Writ of Seizure
Respondent contends that the Petition failed to indicate expressly whether it were placed by petitioners in the factory built on their own land.
was being filed under Rule 45 or Rule 65 of the Rules of Court. It further Indisputably, they were essential and principal elements of their chocolate-
alleges that the Petition erroneously impleaded Judge Hilario Laqui as making industry. Hence, although each of them was movable or personal
respondent. 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 “12.1 The PROPERTY is, and shall at all times be and remain, personal
personal, property pursuant to Article 415 (5) of the Civil Code.[17] property notwithstanding that the PROPERTY or any part thereof may now
Be that as it may, we disagree with the submission of the petitioners that the be, or hereafter become, in any manner affixed or attached to or embedded
said machines are not proper subjects of the Writ of Seizure. in, or permanently resting upon, real property or any building thereon, or
The Court has held that contracting parties may validly stipulate that a real attached in any manner to what is permanent.”
property be considered as personal.[18] After agreeing to such stipulation, they Clearly then, petitioners are estopped from denying the characterization of
are consequently estopped from claiming otherwise. Under the principle of the subject machines as personal property. Under the circumstances, they are
estoppel, a party to a contract is ordinarily precluded from denying the truth proper subjects of the Writ of Seizure.
of any material fact found therein. It should be stressed, however, that our holding -- that the machines should
Hence, in Tumalad v. Vicencio,[19] the Court upheld the intention of the be deemed personal property pursuant to the Lease Agreement – is good only
parties to treat a house as a personal property because it had been made the insofar as the contracting parties are concerned.[22] Hence, while the parties
subject of a chattel mortgage. The Court ruled: are bound by the Agreement, third persons acting in good faith are not
“x x x. Although there is no specific statement referring to the subject house affected by its stipulation characterizing the subject machinery as
as personal property, yet by ceding, selling or transferring a property by way personal.[23] In any event, there is no showing that any specific third party
of chattel mortgage defendants-appellants could only have meant to convey would be adversely affected.
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 Validity of the Lease Agreement
otherwise.” In their Memorandum, petitioners contend that the Agreement is a loan and
Applying Tumalad, the Court in Makati Leasing and Finance Corp. v. not a lease.[24] Submitting documents supposedly showing that they own the
Wearever Textile Mills[20] also held that the machinery used in a factory and subject machines, petitioners also argue in their Petition that the Agreement
essential to the industry, as in the present case, was a proper subject of a writ suffers from “intrinsic ambiguity which places in serious doubt the intention
of replevin because it was treated as personal property in a contract. Pertinent of the parties and the validity of the lease agreement itself.”[25] In their Reply
portions of the Court’s ruling are reproduced hereunder: to respondent’s Comment, they further allege that the Agreement is
“x x x. If a house of strong materials, like what was involved in the above invalid.[26]
Tumalad case, may be considered as personal property for purposes of These arguments are unconvincing. The validity and the nature of the
executing a chattel mortgage thereon as long as the parties to the contract so contract are the lis mota of the civil action pending before the RTC. A
agree and no innocent third party will be prejudiced thereby, there is resolution of these questions, therefore, is effectively a resolution of the
absolutely no reason why a machinery, which is movable in its nature and merits of the case. Hence, they should be threshed out in the trial, not in the
becomes immobilized only by destination or purpose, may not be likewise proceedings involving the issuance of the Writ of Seizure.
treated as such. This is really because one who has so agreed is estopped Indeed, in La Tondeña Distillers v. CA,[27] the Court explained that the policy
from denying the existence of the chattel mortgage.” under Rule 60 was that questions involving title to the subject property –
In the present case, the Lease Agreement clearly provides that the machines questions which petitioners are now raising -- should be determined in the
in question are to be considered as personal property. Specifically, Section trial. In that case, the Court noted that the remedy of defendants under Rule
12.1 of the Agreement reads as follows:[21] 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 also allege that the seizure would nullify all efforts to rehabilitate the
subject property. The Court ruled: corporation.
“In other words, the law does not allow the defendant to file a motion to Petitioners’ arguments do not preclude the implementation of the Writ. As
dissolve or discharge the writ of seizure (or delivery) on ground of earlier discussed, law and jurisprudence support its propriety. Verily, the
insufficiency of the complaint or of the grounds relied upon therefor, as in above-mentioned consequences, if they come true, should not be blamed on
proceedings on preliminary attachment or injunction, and thereby put at issue this Court, but on the petitioners for failing to avail themselves of the remedy
the matter of the title or right of possession over the specific chattel being under Section 5 of Rule 60, which allows the filing of a counter-bond. The
replevied, the policy apparently being that said matter should be ventilated provision states:
and determined only at the trial on the merits.”[28] “SEC. 5. Return of property. - If the adverse party objects to the sufficiency
Besides, these questions require a determination of facts and a presentation of the applicant’s bond, or of the surety or sureties thereon, he cannot
of evidence, both of which have no place in a petition for certiorari in the CA immediately require the return of the property, but if he does not so object,
under Rule 65 or in a petition for review in this Court under Rule 45.[29] 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
Reliance on the Lease Agreement a bond executed to the applicant, in double the value of the property as stated
It should be pointed out that the Court in this case may rely on the Lease in the applicant’s affidavit for the delivery thereof to the applicant, if such
Agreement, for nothing on record shows that it has been nullified or delivery be adjudged, and for the payment of such sum to him as may be
annulled. In fact, petitioners assailed it first only in the RTC proceedings, recovered against the adverse party, and by serving a copy bond on the
which had ironically been instituted by respondent. Accordingly, it must be applicant.”
presumed valid and binding as the law between the parties. WHEREFORE, the Petition is DENIED and the assailed Decision of the
Makati Leasing and Finance Corporation[30] is also instructive on this point. Court of Appeals AFFIRMED. Costs against petitioners.
In that case, the Deed of Chattel Mortgage, which characterized the subject SO ORDERED.
machinery as personal property, was also assailed because respondent had Melo, (Chairman), Vitug, Purisima, and Gonzaga-Reyes, JJ., concur.
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: 218 Phil. 754
“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 EN BANC
said contract voidable, or annullable pursuant to Article 1390 of the new G.R. No. L-64261, December 26, 1984
Civil Code, by a proper action in court. There is nothing on record to show JOSE BURGOS, SR., JOSE BURGOS, JR., BAYANI SORIANO AND J.BURGOS
that the mortgage has been annulled. Neither is it disclosed that steps were MEDIA SERVICES, INC., PETITIONERS, VS. THE CHIEF OF STAFF, ARMED
taken to nullify the same. x x x” FORCES OF THE PHILIPPINES, THE CHIEF PHILIPPINE CONSTABULARY,
THE CHIEF LEGAL OFFICER, PRESIDENTIAL SECURITY COMMAND, THE
Alleged Injustice Committed on the Part of Petitioners JUDGE ADVOCATE GENERAL, ET AL., RESPONDENTS.
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
DECISION aforementioned case until final resolution of the legality of the seizure of the
ESCOLIN, J.: aforementioned articles, x x x." [2] With this manifestation, the prayer for
preliminary prohibitory injunction was rendered moot and academic.
Assailed in this petition for certiorari, prohibition and mandamus with
preliminary mandatory and prohibitory injunction is the validity of two[2] Respondents would have this Court dismiss the petition on the ground that
search warrants issued on December 7, 1982 by respondent Judge Ernani petitioners had come to this Court without having previously sought the
Cruz-Pano, Executive Judge of the then Court of First Instance of Rizal quashal of the search warrants before respondent judge. Indeed, petitioners,
[Quezon City], under which the premises known as No. 19, Road 3, Project before impugning the validity of the warrants before this Court, should have
6, Quezon City, and 784 Units C & D, RMS Building, Quezon Avenue, filed a motion to quash said warrants in the court that issued them.[3] But this
Quezon City, business addresses of the "Metropolitan Mail" and "We procedural flaw notwithstanding, we take cognizance of this petition in view
Forum" newspapers, respectively, were searched, and office and printing of the seriousness and urgency of the constitutional issues raised, not to
machines, equipment, paraphernalia, motor vehicles and other articles used mention the public interest generated by the search of the "We Forum"
in the printing, publication and distribution of the said newspapers, as well as offices, which was televised in Channel 7 and widely publicized in all
numerous papers, documents, books and other written literature alleged to be metropolitan dailies. The existence of this special circumstance justifies this
in the possession and control of petitioner Jose Burgos, Jr. publisher-editor of Court to exercise its inherent power to suspend its rules. In the words of the
the "We Forum" newspaper, were seized. revered Mr. Justice Abad Santos in the case of C. Vda. de Ordoveza vs.
Raymundo, [4] "it is always in the power of the court [Supreme Court] to
Petitioners further pray that a writ of preliminary mandatory and prohibitory suspend its rules or to except a particular case from its operation, whenever
injunction be issued for the return of the seized articles, and that respondents, the purposes of justice require it x x x."
"particularly the Chief Legal Officer, Presidential Security Command, the
Judge Advocate General, AFP, the City Fiscal of Quezon City, their Respondents likewise urge dismissal of the petition on ground of laches.
representatives, assistants, subalterns, subordinates, substitute or successors" Considerable stress is laid on the fact that while said search warrants were
be enjoined from using the articles thus seized as evidence against petitioner issued on December 7, 1982, the instant petition impugning the same was
Jose Burgos, Jr. and the other accused in Criminal Case No. Q-022782 of the filed only on June 16, 1983 or after the lapse of a period of more than six[6]
Regional Trial Court of Quezon City, entitled "People vs. Jose Burgos, Jr. et months.
al."[1]
Laches is failure or negligence for an unreasonable and unexplained length of
In our Resolution dated June 21, 1983, respondents were required to answer time to do that which, by exercising due diligence, could or should have been
the petition. The plea for preliminary mandatory and prohibitory injunction done earlier. It is negligence or omission to assert a right within a reasonable
was set for hearing on June 28, 1983, later reset to July 7, 1983, on motion of time, warranting a presumption that the party entitled to assert it either has
the Solicitor General in behalf of respondents. abandoned it or declined to assert it. [5]

At the hearing on July 7, 1983, the Solicitor General, while opposing Petitioners, in their Consolidated Reply, explained the reason for the delay in
petitioners' prayer for a writ of preliminary mandatory injunction, manifested the filing of the petition thus:
that respondents "will not use the aforementioned articles as evidence in the
"Respondents should not find fault, as they now do [p. 1, Answer, p. 3, evidence does not and cannot in any way affect the validity or invalidity of
Manifestation] with the fact that the Petition was filed on June 16, 1983, the search warrants assailed in this petition.
more than half a year after the petitioners' premises had been raided.
Several and diverse reasons have been advanced by petitioners to nullify the
"The climate of the times has given petitioners no other choice. If they had search warrants in question.
waited this long to bring their case to court, it was because they tried at first
to exhaust other remedies. The events of the past eleven[11] years had taught Petitioners fault respondent judge for his alleged failure to conduct an
them that everything in this country, from release of public funds to release examination under oath or affirmation of the applicant and his witnesses, as
of detained persons from custody, has become a matter of executive mandated by the above-quoted constitutional provision as well as Sec. 4,
benevolence or largesse. Rule 126 of the Rules of Court.[6] This objection, however, may properly be
considered moot and academic, as petitioners themselves conceded during
"Hence, as soon as they could, petitioners, upon suggestion of persons close the hearing on August 9, 1983, that an examination had indeed been
to the President, like Fiscal Flaminiano, sent a letter to President Marcos, conducted by respondent judge of Col. Abadilla and his witnesses.
through counsel Antonio Coronel asking the return at least of the printing
equipment and vehicles. And after such a letter had been sent, through Col. Search Warrants No. 20-82[a] and No. 20-82lb] were used to search two
Balbino V. Diego, Chief Intelligence and Legal Officer of the Presidential distinct places: No. 19, Road 3, Project 6, Quezon City and 784 Units C & D,
Security Command, they were further encouraged to hope that the latter RMS Building, Quezon Avenue, Quezon City, respectively. Objection is
would yield the desired results. interposed to the execution of Search Warrant No. 20-82 [b] at the latter
address on the ground that the two search warrants pinpointed only one place
"After waiting in vain for five[5] months, petitioners finally decided to come where petitioner Jose Burgos, Jr. was allegedly keeping and concealing the
to Court." [pp. 123-124, Rollo] articles listed therein, i.e., No. 19, Road 3, Project 6, Quezon City. This
assertion is based on that portion of Search Warrant No. 20-82[b] which
Although the reason given by petitioners may not be flattering to our judicial states:
system, We find no ground to punish or chastise them for an error in
judgment. On the contrary, the extrajudicial efforts exerted by petitioners "Which have been used, and are being used as instruments and means of
quite evidently negate the presumption that they had abandoned their right to committing the crime of subversion penalized under P.D. 885 as amended
the possession of the seized property, thereby refuting the charge of laches and he is keeping and concealing the same at 19 Road 3, Project 6, Quezon
against them. City."

Respondents also submit the theory that since petitioner Jose Burgos, Jr. had The defect pointed out is obviously a typographical error. Precisely, two
used and marked as evidence some of the seized documents in Criminal Case search warrants were applied for and issued because the purpose and intent
No. Q-022872, he is now estopped from challenging the validity of the were to search two distinct premises. It would be quite absurd and illogical
search warrants. We do not follow the logic of respondents. These documents for respondent judge to have issued two warrants intended for one and the
lawfully belong to petitioner Jose Burgos, Jr. and he can do whatever he same place. Besides, the addresses of the places sought to be searched were
pleases with them, within legal bounds. The fact that he has used them as specifically set forth in the application, and since it was Col. Abadilla
himself who headed the team which executed the search warrants, the Necessarily, stolen property must be owned by one other than the person in
ambiguity that might have arisen by reason of the typographical error is more whose possession it may be at the time of the search and seizure. Ownership,
apparent than real. The fact is that the place for which Search Warrant No. therefore, is of no consequence, and it is sufficient that the person against
20- 82[b] was applied for was 728 Units C & D, RMS Building, Quezon whom the warrant is directed has control or possession of the property sought
Avenue, Quezon City, which address appeared in the opening paragraph of to be seized, as petitioner Jose Burgos, Jr. was alleged to have in relation to
the said warrant.[7] Obviously, this is the same place that respondent judge the articles and property seized under the warrants.
had in mind when he issued Warrant No. 20-82 fb]. 4. Neither is there merit in petitioners' assertion that real properties were
seized underthe disputed warrants. Under Article 415[5] of the Civil Code of
In the determination of whether a search warrant describes the premises to be the Philippines, "machinery, receptacles, instruments or implements intended
searched with sufficient particularity, it has been held 'that the executing by the owner of the tenement for an industry or works which may be carried
officer's prior knowledge as to the place intended in the warrant is relevant. on in a building or on a piece of land and which tend directly to meet the
This would seem to be especially true where the executing officer is the needs of the said industry or works" are considered immovable property. In
affiant on whose affidavit the warrant had issued, and when he knows that Davao Sawmill Co. vs. Castillo [9] where this legal provision was invoked,
the judge who issued the warrant intended the building described in the this Court ruled that machinery which is movable by nature becomes
affidavit. And it has also been said that the executing officer may look to the immobilized when placed by the owner of the tenement, property or plant,
affidavit in the official court file to resolve an ambiguity in the warrant as to but not so when placed by a tenant, usufructuary, or any other person having
the place to be searched." [8] only a temporary right, unless such person acted as the agent of the owner.
In the case at bar, petitioners do not claim to be the owners of the land and/or
3. Another ground relied upon to annul the search warrants is the fact that building on which the machineries were placed. This being the case, the
although the warrants were directed against Jose Burgos, Jr. alone, articles machineries in question, while in fact bolted to the ground remain movable
belonging to his co-petitioners Jose Burgos, Sr., Bayani Soriano and the J. property susceptible to seizure under a search warrant.
Burgos Media Services, Inc. were seized. 5. The questioned search warrants were issued by respondent judge upon
application of Col. Rolando N. Abadilla, Intelligence Officer of the P.C.
Section 2, Rule 126 of the Rules of Court, enumerates the personal properties Metrocom.[10] The application was accompanied by the Joint Affidavit of
that may be seized under a search warrant, to wit: Alejandro M. Gutierrez and Pedro U. Tango[11] , members of the Metrocom
Intelligence and Security Group under Col. Abadilla which conducted a
"SEC. 2. Personal Property to be seized.— A search warrant may be issued surveillance of the premises prior to the filing of the application for the
for the search and seizure of the following personal property: search warrants on December 7, 1982.
Property subject of the offense;
Property stolen or embezzled and other proceeds or fruits of the offense; and It is contended by petitioners, however, that the above-mentioned documents
Property used or intended to be used as the means of committing an offense. could not have provided sufficient basis for the finding of a probable cause
The above rule does not require that the property to be seized should be upon which a warrant may validly issue in accordance with Section 3, Article
owned by the person against whom the search warrant is directed. It may or IV of the 1973 Constitution which provides:
may not be owned by him. In fact, under subsection [b] of the above-quoted
Section 2, one of the properties that may be seized is stolen property.
"SEC. 3. x x x and no search warrant or warrant of arrest shall issue except In mandating that "no warrant shall issue except upon probable cause to be
upon probable cause to be determined by the judge, or such other responsible determined by the judge, x x x after examination under oath or affirmation of
officer as may be authorized by law, after examination under oath or the complainant and the witnesses he may produce;[14] the Constitution
affirmation of the complainant and the witnesses he may produce, and requires no less than personal knowledge by the complainant or his witnesses
particularly describing the place to be searched and the persons or things to of the facts upon which the issuance of a search warrant may be justified. In
be seized." Alvarez vs. Court of First Instance,[15] this Court ruled that "the oath
required must refer to the truth of the facts within the personal knowledge of
We find petitioners' thesis impressed with merit. Probable cause for a search the petitioner or his witnesses, because the purpose thereof is to convince the
is defined as such facts and circumstances which would lead a reasonably committing magistrate, not the individual making the affidavit and seeking
discreet and prudent man to believe that an offense has been committed and the issuance of the warrant, of the existence of probable cause." As couched,
that the objects sought in connection with the offense are in the place sought the quoted averment in said joint affidavit filed before respondent judge
to be searched. And when the search warrant applied for is directed against a hardly meets the test of sufficiency established by this Court in Alvarez
newspaper publisher or editor in connection with the publication of case.
subversive materials, as in the case at bar, the application and/or its
supporting affidavits must contain a specification, stating with particularity Another factor which makes the search warrants under consideration
the alleged subversive material he has published or is intending to publish. constitutionally objectionable is that they are in the nature of general
Mere generalization will not suffice. Thus, the broad statement in Col. warrants. The search warrants describe the articles sought to be seized in this
Abadilla's application that petitioner "is in possession or has in his control wise:
printing equipment and other paraphernalia, news publications and other "1] All printing equipment, paraphernalia, paper, ink, photo equipment,
documents which were used and are all continuously being used as a means typewriters, cabinets, tables, communications/recording equipment, tape
of committing the offense of subversion punishable under Presidential recorders, dictaphone and the like used and/or connected in the printing of
Decree 885, as amended x x x"[12] is a mere conclusion of law and does not the "WE FORUM' newspaper and any and all documents, communications,
satisfy the requirements of probable cause. Bereft of such particulars as letters and facsimile of prints related to the 'WE FORUM" newspaper.
would justify a rinding of the existence of probable cause, said allegation 2] Subversive documents, pamphlets, leaflets, books, and other publications
cannot serve as basis for the issuance of a search warrant and it was a grave to promote the objectives and purposes of the subversive organizations
error for respondent judge to have done so. known as Movement for Free Philippines, Light-a-Fire Movement and April
6 Movement; and,
Equally insufficient as basis for the determination of probable cause is the 3] Motor vehicles used in the distribution/circulation of the 'WE FORUM'
statement contained in the joint affidavit of Alejandro M. Gutierrez and and other subversive materials and propaganda, more particularly,
Pedro U. Tango, "that the evidence gathered and collated by our unit clearly 1] Toyota-Corolla, colored yellow with Plate No. NKA 892; 2] DATSUN
shows that the premises above- mentioned and the articles and things above- pick-up colored white with Plate No. NKV 969; 3] A delivery truck with
described were used and are continuously being used for subversive activities Plate No. NBS 542;
in conspiracy with, and to promote the objective of, illegal organizations 4] TOYOTA-TAMARAW, colored white with Plate No. PBP 665; and,
such as the Light-a-Fire Movement, Movement for Free Philippines, and 5] TOYOTA Hi-Lux, pick-up truck with Plate No. NGV 472 with marking
April 6 Movement."[13] 'Bagong Silang.'
In Stanford vs. State of Texas,[16] the search warrant which authorized the where a free, alert and even militant press is essential for the political
search for "books, records, pamphlets, cards, receipts, lists, memoranda, enlightenment and growth of the citizenry.
pictures, recordings and other written instruments concerning the Communist
Parties of Texas, and the operations of the Communist Party in Texas," was Respondents would justify the continued sealing of the printing machines on
declared void by the U.S. Supreme Court for being too general. In like the ground that they have been sequestered under Section 8 of Presidential
manner, directions to "seize any evidence in connection with the violation of Decree No. 885, as amended, which authorizes "the sequestration of the
SDC 13-3703 or otherwise" have been held too general, and that portion of a property of any person, natural or artificial, engaged in subversive activities
search warrant which authorized the seizure of any ''paraphernalia which against the government and its duly constituted authorities x x x in
could be used to violate Sec. 54-197 of the Connecticut General Statutes [the accordance with implementing rules and regulations as may be issued by the
statute dealing with the crime of conspiracy]" was held to be a general Secretary of National Defense." It is doubtful, however, if sequestration
warrant, and therefore invalid.[17] The description of the articles sought to be could validly be effected in view of the absence of any implementing rules
seized under the search warrants in question cannot be characterized and regulations promulgated by the Minister of National Defense.
differently.
Besides, in the December 10, 1982 issue of the Daily Express, it was
In the Stanford case, the U.S. Supreme Court calls to mind a notable chapter reported that no less than President Marcos himself denied the request of the
in English history: the era of disaccord between the Tudor Government and military authorities to sequester the property seized from petitioners on
the English Press, when ''officers of the Crown were given roving December 7, 1982. Thus, "The President denied a request filed by
commissions to search where they pleased in order to suppress and destroy government prosecutors for sequestration of the WE FORUM newspaper and
the literature of dissent both Catholic and Puritan." Reference herein to such its printing presses, according to Information Minister Gregorio S. Cendaña.
historical episode would not be relevant for it is not the policy of our "On the basis of court orders, government agents went to the We Forum
government to suppress any newspaper or publication that speaks with "the offices in Quezon City and took a detailed inventory of the equipment and all
voice of non-conformity" but poses no clear and imminent danger to state materials in the premises. "Cendana said that because of the denial, the
security. newspaper and its equipment remain at the disposal of the owners, subject to
the discretion of the court."[19] That the property seized on December 7, 1982
As heretofore stated, the premises searched were the business and printing had not been sequestered is further confirmed by the reply of then Foreign
offices of the "Metropolitan Mail" and the "We Forum" newspapers. As a Minister Carlos P. Romulo to the letter dated February 10, 1983 of U. S.
consequence of the search and seizure, these premises were padlocked and Congressman Tony P. Hall addressed to President Marcos, expressing alarm
sealed, with the further result that the printing and publication of said over the "WE FORUM" case.[20] In this reply dated February 11, 1983,
newspapers were discontinued. Minister Romulo stated: "2. Contrary to reports, President Marcos turned
down the recommendation of our authorities to close the paper's printing
Such closure is in the nature of previous restraint or censorship abhorrent to facilities and confiscate theequipment and materials it uses."[21]
the freedom of the press guaranteed under the fundamental law,[18] and
constitutes a virtual denial of petitioners' freedom to express themselves in IN VIEW OF THE FOREGOING, Search Warrants Nos. 20- 82[a] and 20-
print. This state of being is patently anathematic to a democratic framework 82[b] issued by respondent judge on December 7, 1982 are hereby declared
null and void and are accordingly set aside. The prayer for a writ of
mandatory injunction for the return of the seized articles is hereby granted and the privacy of communication and correspondence at the mercy of the
and all articles seized thereunder are hereby ordered released to petitioners. whims, caprice or passion of peace officers." (Ibid., p.748.)
No costs. The two search warrants were issued without probable cause. To satisfy the
requirement of probable cause a specific offense must be alleged in the
SO ORDERED. application; abstract averments will not suffice. In the case at bar nothing
specifically subversive has been alleged; stated only is the claim that certain
objects were being used as instruments and means of committing the offense
[6]
Sec. 4, Rule 126, Rules of Court provides: of subversion punishable under P.D. No. 885, as amended. There is no
Sec. 4, Examination of the Applicant.-- The municipal or city judge must, mention of any specific provision of the decree. In the words of Chief Justice
before issuing the warrant, personally examine on oath or affirmation the Concepsion, "It would be legal heresy, of the highest order, to convict
complainant and any witnesses he may produce and take their deposition in anybody" of voilating the decree without reference to any determinate
writing and attach them to the record, in addition to any affidavits presented provision thereof.
to them. [7] The Opening paragraph of Search Warrant No. 20-82[b] reads: The search warrants are also void for lack of particularity. Both search
"It appearing to the satisfaction of the undersigned after examination under warrants authorize Col. Rolando Abadilla to seize and take possession,
oath of Maj. Alejandro M. Gutierrez and Lt. Pedro U. Tango, that there are among other things, of the following:
good and sufficient reason to believe that Jose Burghos, Jr. Publisher-Editor "Subversive documents, pamphlets, leaflets, books and other publication to
of 'WE FORUM' with office address at 784 Units C & D, RMS Building, promote the objectives and purposes of the subversive organizations known
Quezon Avenue, Quezon City, has in his possession and control at said as Movement for Free Philippines, Light-a-Fire Movement and April 6
address the following: xxx." Movement."
The obvious questions is: Why were documents, pamphlets, leaflets, books,
etc. subversive?What did they contain to make them subversive?There is
CONCURRING ABAD SANTOS, J.: nothing in the applications nor in the warrants which answers the questions. I
I am glad to give my concurrence to the ponencia of Mr. Justice Escolin. At must, therefore, conclude that the warrants are general warrants which are
the same time I wish to state my own reasons for holding that the search obnoxious to the Constitution.
warrants which are the subject of the petition are utterly void. In point of fact, there was nothing subversive published in the WE FORUM
The action against WE FORUM was a naked suppression of press freedom just as there is nothing subversive which has been published in MALAYA
for the search warrants were issued in gross violation of the Constitution. which has replaced the former and has the same content but against which no
The Constitutional requirement which is expressed in Section 3, Article IV, action has been taken.
stresses two points, namely: "(1) that no warrant shall issue but upon Conformably with existing jurisprudence everything seized pursuant to the
probable cause, to be determined by the judge in the manner set forth in said warrants should be returned to the owners and all of the items are subject to
provision; and (2) that the warrant shall particularly describe the things to be the exclusionary rule of evidence.
seized." (Stonehill vs. Diokno, 126 Phil. 738, 747; 20 SCRA 383[1967] .)
Any search which is conducted in disregard of the points mentioned above 103 Phil. 98
will result in wiping "out completely one of the most fundamental rights G. R. No. L-10817-18, February 28, 1958
guaranteed in our Constitution, for it would place the sanctity of the domicile
ENRIQUE LOPEZ, PETITIONER, VS. VICENTE OROSA, JR., AND PLAZA when the corporation applied for the registration of the land under Act 496,
THEATRE, INC., RESPONDENTS such mortgage was not revealed and thus Original Certificate of Title No. 0-
DECISION 391 was correspondingly issued on October 25, 1947, without any
FELIX, J.: encumbrance appearing thereon.
Enrique Lopez is a resident of Balayan, Batangas, doing business under the
trade name of Lopez-Castelo Sawmill. Sometime in May, 1946, Vicente Persistent demand from Lopez for the payment of the amount due him
Orosa, Jr., also a resident of the same province, dropped at Lopez' house and caused Vicente Orosa, Jr. to execute on March 17, 1947, an alleged "deed of
invited him to make an investment in the theatre business. It was intimated assignment" of his 420 shares of stock of the Plaza Theater, Inc., at P100 per
that Orosa, his family and close friends were organizing- a corporation to be share or with a total value of P42,000 in favor of the creditor, and as the
known as Plaza Theatre, Inc., that would engage in such venture. Although obligation still remained unsettled, Lopez filed on November 12, 1947, a
Lopez expressed his unwillingness to invest on the same, he agreed to supply complaint with1 the Court of First Instance of Batangas (Civil Case No. 4501
the lumber necessary for the construction of the proposed theatre, and at which later became R-57) against Vicente Orosa, Jr. and Plaza Theatre, Inc.,
Orosa's behest and assurance that the latter would be personally liable for any praying that defendants be sentenced to pay him jointly and severally the
account that the said construction might incur, Lopez further agreed that sura of P41,771.35, with legal interest from the filing of the action; that in
payment therefor would be on demand and not cash on delivery basis. case defendants fail to pay the same, that the building and the land covered
Pursuant to said verbal agreement, Lopez delivered the lumber which was by OCT No. 0-391 owned by the corporation be sold at public auction and
used for the construction of the Plaza Theatre on May 17, 1946, up to the proceeds thereof be applied to said indebtedness; or that the 420 shares of
December 4 of the same year. But of the total cost of the materials amounting the capital stock of the Plaza Theatre, Inc., assigned by Vicente Orosa, Jr., to
to P62,255.85, Lopez was paid only P20,848.50, thus leaving a balance of. said plaintiff be sold at public auction for the same purpose; and for such
P41,771.35. other remedies as may be warranted by the circumstances. Plaintiff also
caused the annotation of a notice of lis pendens on said properties with the
We may state at this juncture that the Plaza Theatre was erected on a piece of Register of Deeds.
land with an area of 679.17 square meters formerly owned by Vicente Orosa,
Jr., and was acquired by the corporation on September 25, 1946, for P6,000. Defendants Vicente Orosa, Jr., and Plaza Theatre, Inc., filed separate
As Lopez was pressing Orosa for payment of the remaining unpaid answers, the first denying that the materials were delivered to him as a
obligation, the latter and Belarmino Rustia, the president of the corporation, promoter and later treasurer of the corporation, because he had purchased
promised to obtain a bank loan by mortgaging- the properties of the Plaza and received the same on his personal account; that the land on which the
Theatre, Inc., out of which said amount of P41,771.35 would be satisfied, to movie house was constructed was not charged with a Hen to secure the
which assurance Lopez had' to accede. Unknown to him, however, as early as payment of the aforementioned unpaid obligation; and that the 420 shares of
November, 1946, the corporation already got a loan for P30,000 from the stock of the Plaza Theatre, Inc. was not assigned to plaintiff as collaterals but
Philippine National Bank with the. Luzon Surety Company as surety, and the as direct security for the payment of his indebtedness. As special defense,
corporation in turn executed a mortgage on the land and building in favor of this defendant contended that as the 420 shares of stock assigned and
said company as counter-security. As the land at that time was not yet conveyed by the assignor and accepted by Lopez as direct security for the
brought under the operation of the Torrens System, the mortgage on the same payment of the amount of P41,771.35 were personal properties, plaintiff was
was registered on November 16, 1946, under Act No. 3344. Subsequently, barred from recovering any deficiency if the proceeds of the sale thereof at
public auction would" not be sufficient to cover and satisfy the obligation. It of the obligors; that the surety company was guilty of negligence when it
was thus prayed that he be declared exempted from the payment of any failed to present an opposition "to the application for registration of the
deficiency in case the proceeds from the sale of said personal properties property; and if any annotation of the rights and interest of said surety would
would not be enough to cover the amount sought to be collected. ever be made, same must be subject to the Hen in his favor.

Defendant Plaza Theatre, Inc., on the other hand, practically set up the same The two cases were heard jointly and in a decision dated October 30, 1952,
line of defense by alleging that the building materials delivered to Orosa the lower Court, after making an exhaustive and detailed analysis of the
were on the latter's personal account; and that there was no understanding respective stands of the parties and the evidence adduced at the trial, held
that said materials would be paid jointly and severally by Orosa and the that defendants Vicente Orosa, Jr., and the Plaza Theatre, Inc., were jointly
corporation, nor was a lien charged on the properties of the latter to secure liable for the unpaid balance of the cost of lumber used in the construction of
payment of the same obligation. As special defense, defendant corporation the building and the plaintiff thus acquired the materialman's lien over the
averred that while it was true that the materials purchased by Orosa were sold same. In making the pronouncement that the lien was merely confined to the
by the latter to the corporation, such transactions were in good faith and for building and did not extend to the land on which the construction was made,
valuable consideration thus when plaintiff failed to claim said materials the trial judge took into consideration the fact that when plaintiff started the
within 30 days from the time of removal thereof from Orosa, said lumber delivery of lumber in May, 1946, the land was not yet owned by the
became a different and distinct specie and plaintiff lost whatever rights he corporation; that the mortgage in favor , of Luzon Surety Company was
might have in the same and consequently had no recourse against the Plaza previously registered under Act No. 3344; that the codal provision (Art. 1923
Theatre, Inc.; that the claim could not have been refectionary credit, for such of the old Spanish Civil Code) specifying that refection credits are preferred
kind of obligation referred to an indebtedness incurred in the repair or could refer only to buildings, which are also classified as real properties,
reconstruction of something already existing and this concept did not include upon which said refection was made. It was, however, declared that
an entirely new work; and that the Plaza Theatre, Inc., having been plaintiff's lien on the building was superior to the right of the surety
incorporated on October 14, 1946, it could not have contracted any company. And finding that the Plaza Theatre, Inc., had no objection to the
obligation prior to said date. It was, therefore, prayed that the complaint be review of the decree issued in its favor by the land registration court and the
dismissed; that said defendant be awarded the sum of P5,000 for damages, inclusion in the title of the encumbrance in favor of the surety company, the
and such other relief as may be just and proper in the premises. court a quo granted the petition filed by the latter company. Defendants
Orosa and the Plaza Theatre, Inc., were thus required to pay jointly the
The surety company, in the meantime, upon discovery that the land was amount of P41,771.35 with legal interest and costs within 90 days from
already registered under the Torrens System and that there was a notice of lis notice of said decision; that in case of default, the 420 shares of stock
pendens thereon, filed on August 17, 1948, or within the 1-year period after assigned by Orosa to plaintiff be sold at public auction and the proceeds
the issuance of the certificate of title, a petition for review of the decree of thereof be applied to the payment of the amount due the plaintiff, plus
the land registration court dated October 18, 1947, which was made the basis interest and costs; and that the encumbrance in favor of the surety company
of OCT No. 0-319, In order to annotate the rights and interests of the surety be endorsed at the back of OCT No. 0-391, with the notation that with
company over said properties (Land Registration Case No. 17 GLRO Rec. respect to the building, said mortgage was subject to the material man's lien
No. 296). Opposition thereto was offered by Enrique Lopez, asserting that in favor of Enrique Lopez.
the amount demanded by him constituted a preferred lien over the properties
Plaintiff tried to secure a modification of the decision in so far as it declared obvious that the inclusion of the building, separate and distinct from the land,
that the obligation of therein defendants was joint instead of solidary and that in the enumeration of what may constitute real properties,[1] could mean only
the lien did not extend to the land, but same was denied by order of the court one thing-that a building is by itself an immovable property, a doctrine
of December 23, 1952. The matter was thus appealed to the Court of already pronounced by this Court in the case of Leung Yee vs. Strong
Appeals, which affirmed the lower court's ruling, and then to this Tribunal. In Machinery Co., 37 Phil., 644. Cc Moreover, and in view of the absence of
this instance, plaintiff-appellant raises 2 issues: (1) whether a material-man's any specific provision of law to the contrary, a building is an immovable
lien for the value of the materials used in the construction of a building property, irrespective of whether or not said m structure and the land on
attaches to said structure alone and does not extend to the land on which the which it is adhered to belong 2 to the same owner.
building is adhered to; and (2) whether the lower court and the Court of
Appeals erred in not providing that the rnaterial-man's lien is superior to the A close examination of the provision of the Civil Code invoked by appellant
mortgage executed in favor of the surety company not only on the building reveals that the law gives preference to unregistered refectionary credits only
but also on the land. with respect to the real estate upon which the refection or work was made.
This being so, the inevitable conclusion must be that the lien so created
It is to be noted in this appeal that Enrique Lopez has not raised any question attaches merely to the immovable property for the construction or repair of
against the part of tha decision sentencing defendants Orosa and Plaza which the obligation was incurred. Evidently, therefore, the lien in favor of
Theatre, Inc., to pay jointly the sum of P41,771.35, so We will not take up or appellant for the unpaid value of the lumber used in the construction of the
consider anything on that point. Appellant, however, contends that the lien building attaches only to said structure and to no other property of the
created in favor of the furnisher of the materials used for the construction, obligors.
repair or refection of a building, is also extended to the land on which the
construction was made, and in support thereof he relies on Article 1923 of Considering the conclusion thus arrived at, i.e., that the materialman's lien
the Spanish Civil Code, the pertinent law on the matter, which reads as could be charged only to the building for which the credit was made or which
follows: received the benefit of refection, the lower court was right in holding that the
interest of the mortgagee over the land is superior and cannot be made
ART. 1923. With, respect to determinate real property and real rights of the subject to the said materialman's lien. Wherefore, and on the strength of the
debtor, the following' are preferred: * * * * * * * foregoing considerations, the decision appealed from is hereby affirmed, with
5. Credits for refection, not entered or recorded, with respect to the real estate costs against appellant. It is so ordered.
upon which the refection was made, and only with respect to other credits
different from those mentioned in four next preceding paragraphs. Paras, C. J., Bengzon, Padilla, Montemayor, Reyes, A., Bautista Angelo,
Labrador, Concepcion, Reyes, J B. L., and Endencia, JJ., concur.
It is argued that in view of the employment of the phrase real estate or
immovable property, and inasmuch as said provision does not contain any
[1]
specification delimiting the lien to the building, said article must be Article 415 of the new Civil Code (Art. 334 of the old) enumerates what
construed as to embrace both the land and the building or structure adhering are considered immovable property, among which are land, buildings, roads
thereto. We cannot subscribe to this view, for while it is true that generally, and constructions of all kinds adhered to the soil.
real estate connotes the land and the building constructed thereon, it is
the latter to pay to the former the sum of P1,459.30 with interest at the rate of
246 Phil. 475 12% per annum until fully paid, computed from August 12, 1968, date of the
FIRST DIVISION filing of the complaint; to pay the sum of P364.80 as reasonable attorney's
G.R. No. L-32917, July 18, 1988 fees, which is equivalent to 25% of the unpaid principal obligation; and to
JULIAN S. YAP, PETITIONER, VS. HON. SANTIAGO O. TAÑADA, ETC., AND pay the costs, if any."
GOULDS PUMPS INTERNATIONAL (PHIL.), INC., RESPONDENTS.
Yap appealed to the Court of First Instance. The appeal was assigned to the
DECISION sala of respondent Judge Tañada. For failure to appear for pre-trial on
NARVASA, J.: August 28, 1968, this setting being intransferable since the pre-trial had
The petition for review on certiorari at bar involves two (2) Orders of already been once postponed at his instance,[5] Yap was declared in default
respondent Judge Tañada[1] to Civil Case No. 10984. The first, dated by Order of Judge Tañada dated August 28, 1969,[6] reading as follows:
September 16, 1970, denied petitioner Yap's motion to set aside execution
safe and to quash alias writ of execution. The second, dated November 21, "When this case was called for pre-trial this morning, the plaintiff and
1970, denied Yap's motion for reconsideration. The issues concern the counsel appeared, but neither the defendants nor his counsel appeared despite
propriety of execution of a judgment claimed to be "incomplete, vague and the fact that they were duly notified of the pre-trial set this morning. Instead
non-final," and the denial of petitioner's application to prove and recover he filed an Ex-Parte Motion for Postponement which this Court received
damages resulting from alleged irregularities in the process of execution. only this morning, and on petition of counsel for the plaintiff that the Ex-
Parte Motion for Postponement was not filed in accordance with the Rules of
The antecedents will take some time in the telling. The case began in the City Court he asked that the same be denied and the defendants be declared in
Court of Cebu with the filing by Goulds Pumps International (Phil.), Inc. of a default; * * * the motion for the plaintiff being well-grounded, the defendants
complaint[2] against Yap and his wife,[3] seeking recovery of P1,459.30 are hereby declared in default and the Branch Clerk of Court * * * is hereby
representing the balance of the price and installation cost of a water pump in authorized to receive evidence for the plaintiff and * * * submit his report
the latter's premises.[4] The case resulted in a judgment by the City Court on within ten (10) days after reception of evidence."
November 25, 1968, reading as follows:
Goulds presented evidence ex parte; and judgment by default was rendered
"When this case was called for trial today, Atty. Paterno Natinga appeared the following day by Judge Tañada requiring Yap to pay to Goulds (1)
for the plaintiff (Goulds) and informed the court that he is ready for trial. P1,459.30 representing the unpaid balance of the pump purchased by him;
However, none of the defendants appeared despite notices having been (2) interest of 12% per annum thereon until fully paid; and (3) a sum
served upon them. equivalent to 25% of the amount due as attorney's fees and costs and other
expenses in prosecuting the action. Notice of the judgment was served on
"Upon petition of Atty. Natinga, the plaintiff is hereby allowed to present its Yap on September 1, 1969.[7]
evidence ex-parte.
On September 16, 1969 Yap filed a motion for reconsideration.[8] In it he
"After considering the evidence of the plaintiff, the court hereby renders insisted that his motion for postponement should have been granted since it
judgment in favor of the plaintiff and against the defendant (Yap), ordering expressed his desire to explore the possibility of an amicable settlement; that
the court should give the parties time to arrive at an amicable settlement appeal. The opposition also drew attention to the failure of the motion for
failing which, he should be allowed to present evidence in support of his reconsideration to specify the findings or conclusions in the judgment
defenses (discrepancy as to the price and breach of warranty). The motion claimed to be contrary to law or not supported by the evidence, making it a
was not verified or accompanied by any separate affidavit. Goulds opposed pro forma motion also incapable of stopping the running of the appeal
the motion. Its opposition[9] drew attention to the eleventh-hour motion for period. On October 23, 1969, Judge Tañada denied Yap’s motion for
postponement of Yap which had resulted in the cancellation of the prior reconsideration and authorized execution of the judgment.[15] Yap sought
hearing of June 30, 1969 despite Gould's vehement objection, and the re- reconsideration of this order, by another motion dated October 29, 1969.[16]
setting thereof on August 28, 1969 with intransferable character; it averred This motion was denied by Order dated January 26, 1970.[17] Again Yap
that Yap had again sought postponement of this last hearing by another moved for reconsideration, and again was rebuffed, by Order dated April 28,
eleventh-hour motion on the plea that an amicable settlement would be 1970.[18]
explored, yet he had never up to that time ever broached the matter,[10] and
that this pattern of seeking to obtain last-minute postponements was In the meantime the Sheriff levied on the water pump in question, [19] and by
discernible also in the proceedings before the City Court. In its opposition, notice dated November 4, 1969, scheduled the execution sale thereof on
Goulds also adverted to the examination made by it of the pump, on November 14, 1969.[20] But in view of the pendency of Yap’s motion for
instructions of the City Court, with a view to remedying the defects claimed reconsideration of October 29, 1969, suspension of the sale was directed by
to exist by Yap; but the examination had disclosed the pump's perfect Judge Tañada in an order dated November 6, 1969:[21]
condition. Yap's motion for reconsideration was denied by Order dated
October 10, 1969, notice of which was received by Yap on October 14, “Counsel for the plaintiff is hereby given 10 days time to answer the Motion,
1969.[11] dated October 29, 1969, from receipt of this Order and in the meantime, the
Order of October 23, 1969, insofar as it orders the sheriff to enforce the writ
On October 15, 1969 Judge Tañada issued on Order granting Goulds' Motion of execution is hereby suspended.”
for Issuance of Writ of Execution dated October 14, 1969, declaring the
reasons therein alleged to be meritorious.[12] Yap forthwith filed an "Urgent It appears however that a copy of this Order was not transmitted to the
Motion for Reconsideration of Order" dated October 17, 1969,[13] contending Sheriff “through oversight, inadvertence and pressure of work” of the Branch
that the judgment had not yet become final, since contrary to Goulds' view, Clerk of Court.[22] So the Deputy Provincial Sheriff went ahead with the
his motion for reconsideration was not pro forma for lack of an affidavit of scheduled auction sale and sold the property levied on to Goulds as the
merit, this not being required under Section 1(a) of Rule 37 of the Rules of highest bidder.[23] He later submitted the requisite report to the Court dated
Court upon which his motion was grounded. Goulds presented an opposition November 17, 1969,[24] as well as the “Sheriff’s Return of Service” dated
dated October 22, 1969.[14] It pointed out that in his motion for February 13, 1970,[25] in both of which it was stated the execution had been
reconsideration Yap claimed to have a valid defense to the action, i.e., "* * * “partially satisfied.” It should be observed that up to this time, February,
discrepancy as to price and breach of seller's warranty," in effect, that there 1970, Yap had not bestirred himself to take an appeal from the judgment of
was fraud on Goulds' part; Yap's motion for reconsideration should therefore August 29, 1969.
have been supported by an affidavit of merit respecting said defenses; the
absence thereof rendered the motion for reconsideration fatally defective On May 9, 1970 Judge Tañeda ordered the issuance of an alias writ of
with the result that its filing did not interrupt the running of the period of execution on Goulds' ex parte motion therefor.[26] Yap received notice of the
Order on June 11. Twelve (12) days later, he filed a "Motion to Set Aside which he failed to do extra-judicially despite the ample time before him, he
Execution Sale and to Quash Alias Writ of Execution."[27] As regards the should have appeared in the pre-trial to achieve the same purpose."
original, partial execution of the judgment, he argued that —
1) "the issuance of the writ of execution on October 16, 1969 was contrary to Judge Tañada thereafter promulgated another Order dated September 21,
law, the judgment sought to be executed not being final and executory;" and 1970 granting a motion of Goulds for completion of execution of the
2) "the sale was made without the notice required by Sec. 18, Rule 39, of the judgment of August 29, 1969 to be undertaken by the City Sheriff of Cebu.
New Rules of Court", i.e., notice by publication in case of execution sale of Once more, Yap sought reconsideration. Ho submitted a "Motion for
real property, the pump and its accessories being immovable because Reconsideration of Two Orders" dated October 13, 1970,[28] seeking the
attached to the ground with character of permanency (Art. 415, Civil Code). setting aside not only of this Order of September 21, 1970 but also that dated
And with respect to the alias writ, he argued that it should not have issued September 16, 1970, denying his motion to set aside execution dated June 23,
because - 1970. He contended that the Order of September 21, 1970 (authorizing
1) "the judgment sought to be executed is null and void" as "it deprived the execution by the City Sheriff) was premature, since the 30-day period to
defendant of his day in court" and "of due process"; appeal from the earlier order of September 16, 1970 (denying his motion to
2) "said judgment is incomplete and vague" because there is no starting point set aside) had not yet expired. He also reiterated his view that his motion for
for computation of the interest imposed, or a specification of the" other reconsideration dated September 15, 1969 did not require that it be
expenses incurred in prosecuting this case" which Yap had also been ordered accompanied by an affidavit of merits. This last motion was also denied for
to pay; "lack of merits," by Order dated November 21, 1970.[29]
3) "said judgment is defective" because it contains no statement of facts but a
mere recital of the evidence; and On December 3, 1970, Yap filed a "Notice of Appeal" manifesting his
4) "there has been a change in the situation of the parties which makes intention to appeal to the Supreme Court on certiorari only on questions of
execution unjust and inequitable" because Yap suffered damages by reason law, "from the Order * * * of September 16, 1970 * * * and from the Order *
of the illegal execution. * * of November 21, 1970, * * *pursuant to sections2 and 3 of Republic Act
No. 5440." He filed his petition for review with this Court on January 5,
Goulds filed an opposition on July 6, 1970. Yap's motion was thereafter 1971, after obtaining an extension therefor.[30]
denied by Order dated September 16, 1970. Judge Tañada pointed out that The errors of law, he attributes to the Court a quo are the following:[31]
the motion had "become moot and academic" since the decision of August 1) refusing to invalidate the execution pursuant to its Order of October 16,
29, 1969, "received by the defendant on September 1, 1969 had long become 1969 although the judgment had not then become final and executory and
final when the Order for the Issuance of a Writ of Execution was despite its being incomplete and vague;
promulgated on October 15, 1969." His Honor also stressed that- 2) ignoring the fact that the execution sale was carried out although it (the
Court) had itself ordered suspension of execution on November 6, 1969;
"The defendant's Motion for Reconsideration of the Court's decision was in 3) declining to annul the execution sale of the pump and accessories subject
reality one for new trial. Regarded as motion for new trial it should allege the of the action although made without the requisite notice prescribed for the
grounds for new trial, provided for in the Rules of Court, to be supported by sale of immovables; and
affidavit of merits; and this the defendant failed to do. If the defendant 4) refusing to allow the petitioner to prove irregularities in the process of
sincerely desired for an opportunity to submit to an amicable settlement, execution which had resulted in damages to him.
Notice of the Trial Court's judgment was served on Yap on September 1, In his motion for reconsideration, Yap also contended that since he had
1969. His motion for reconsideration thereof was filed 15 days thereafter, on expressed a desire to explore the possibility of an amicable settlement, the
September 16, 1969. Notice of the Order denying the motion was received by Court should have given him time to do so, instead of declaring him in
him on October 14, 1969. The question is whether or not the motion for default and thereafter rendering judgment by default on Goulds’ ex parte
reconsideration — which was not verified, or accompanied by an affidavit of evidence.
merits (setting forth facts constituting his meritorious defenses to the suit) or
other sworn statement (stating facts excusing his failure to appear at the pre- The bona fides of his desire to compromise is however put in doubt by the
trial) — was pro forma and consequently had not interrupted the running of attendant circumstances. It was manifested in an eleventh-hour motion for
the period of appeal. It is Yap's contention that his motion was not pro forma postponement of the pre-trial — which had been scheduled with
for lack of an affidavit of merits, such a document not being required by intransferable character since it had already been earlier postponed at Yap’s
Section 1 (a) of Rule 37 of the Rules of Court upon which his motion was instance; it had never been mentioned at any prior time since commencement
based. This is incorrect. of the litigation; such a possible compromise (at least in general or
Section 2, Rule 37 precisely requires that when the motion for new trial is preliminary terms) was certainly most appropriate for consideration at the
founded on Section 1 (a), it should be accompanied by an affidavit of merits. pre-trial; in fact Yap was aware that the matter was indeed a proper subject
"* * * *** *** of a pre-trial agenda, yet he sought to avoid appearance at said pre-trial
"When the motion is made for the causes mentioned in subdivisions (a) and which he knew to be intransferable in character. The considerations and the
(b) of the preceding section, it shall be proved in the manner provided for dilatory tactics thus far attributable to him — seeking postponements of
proof of motions. Affidavit or affidavits of merits shall also be attached to a hearings, or failing to appear therefore despite notice, not only in the Court of
motion for the cause mentioned in subdivision (a) which may be rebutted by First Instance but also in the City Court — proscribe belief in the sincerity of
counter-affidavits. his avowed desire to negotiate a compromise. Morever, the disregard by Yap
*** *** * * *." [32] of the general requirement that “(n)otice of a motion shall be served by the
Since Yap himself asserts that his motion for reconsideration is grounded on applicant to all parties concerned at least three (3) days before the hearing
Section 1 (a) of Rule 37,[33] i.e., fraud, accident, mistake or excusable thereof, together with a copy of the motion, and of any affidavits and other
negligence which ordinary prudence could not have guarded against and by papers accompanying it,”[36] for which no justification whatever has been
reason of which * * * (the) aggrieved party has probably been impaired in his offered, also militates against the bona fides of Yap’s expressed wish for an
rights" — this being in any event clear from a perusal of the motion which amicable settlement. The relevant circumstances do not therefore justify
theorizes that he had "been impaired in his rights" because he was denied the condemnation, as a grave abuse of discretion, or a serious mistake, of the
right to present evidence of his defenses (discrepancy as to price and breach refusal of the Trial Judge to grant postponement upon this proferred ground.
of warranty) — it was a fatal omission to fail to attach to his motion an
affidavit of merits, i.e., an affidavit "showing the facts (not conclusions) The motion for reconsideration did not therefore interrupt the running of the
constituting the valid * * * defense which the movant may prove in case a period of appeal. The time during which it was pending before the court —
new trial is granted."[34] The requirement of such an affidavit is essential from September 16, 1969 when it was filed with the respondent Court until
because obviously “a new trial would be a waste of the court’s time if the October 14, 1969 when notice of the order denying the motion was received
complaint turns out to be groundless or the defense ineffective.”[35] by the movant — could not be deducted from the 30-day period of appeal.[37]
This is the inescapable conclusion from a consideration of Section 3 of Rule
41 which in part declares that, "The time during which a motion to set aside the separation or removal of the pump involved nothing more complicated
the judgment or order or for a new trial has been pending shall be deducted, than the loosening of bolts or dismantling of other fasteners.
unless such motion fails to satisfy the requirements of Rule 37,"[38]
Yap’s last claim is that in the process of removal of the pump from his house,
Notice of the judgment having been received by Yap on September 1, 1969, Goulds’ men had trampled on the plants growing there, destroyed the shed
and the period of appeal therefrom not having been interrupted by the motion over the pump, plugged the exterior casings with rags and cut the electrical
for reconsideration filed on September 16, 1968, the reglementary period of and conduit pipes; that he had thereby suffered actual damages in an amount
appeal expired thirty (30) days after September 1, 1969, or on October 1, of not less than P2,000.00, as well as moral damages in the sum of
1969, without an appeal being taken by Yap. The judgment then became P10,000.00 resulting from his deprivation of the use of his water supply; but
final and executory; Yap could no longer take an appeal therefrom or from the Court had refused to allow him to prove these acts and recover the
any other subsequent orders; and execution of judgment correctly issued on damages rightfully due him. Now, as to the loss of his water supply, since
October 15, 1969, "as a matter of right."[39] this arose from acts legitimately done, the seizure on execution of the water
pump in enforcement of a final and executory judgment, Yap most certainly
The next point discussed by Yap, that the judgment is incomplete and vague, is not entitled to claim moral or any other form of damages therefor.
is not well taken, it is true that the decision does not fix the starting time of
the computation of interest on the judgment debt, but this is inconsequential WHEREFORE, the petition and DENIED and the appeal DISMISSED, and
since that time is easily determinable from the opinion, i.e., from the day the the Orders of September 16, 1970 and November 21, 1970 subject thereof,
buyer (Yap) defaulted in the payment of his obligation,[40] on May 31, AFFIRMED in toto. Costs against petitioner.
1968.[41] The absence of any disposition regarding his counterclaim is also
immaterial and does not render the judgment incomplete. Yap's failure to Cruz, Gancayco, Griño-Aquino and Medialdea, JJ., concur.
appear at the pre-trial without justification and despite notice, which caused
the declaration of his default, was a waiver of his right to controvert the 96 Phil. 70
plaintiffs proofs and of his right to prove the averments of his answer,
inclusive of the counterclaim therein pleaded. Moreover, the conclusion in G.R. No. L-7057, October 29, 1954
the judgment of the merit of the plaintiffs cause of action was necessarily and MACHINERY & ENGINEERING SUPPLIES, INC., PETITIONER, VS. THE
at the same time a determination of the absence of merit of the defendant's HONORABLE COURT OF APPEALS, HON. POTENCIANO PECSON, JUDGE OF
claim of untenability of the complaint and of malicious prosecution. THE COURT OF FIRST INSTANCE OF MANILA, IPO LIMESTONE CO., INC.,
AND ANTONIO VILLARAMA, RESPONDENTS.
Yap's next argument that the water pump had become immovable property DECISION
by its being installed in his residence is also untenable. The Civil Code CONCEPCION, J.:
considers as immovable property, among others, anything "attached to an This is an appeal by certiorari, taken by petitioner Machinery and
immovable in a fixed manner, in such a way that it cannot be separated Engineering Supplies Inc., from a decision of the Court of Appeals denying
therefrom without breaking the material or deterioration of the object."6 The an original petition for certiorari filed by said petitioner against Hon.
pump does not fit this description. It could be, and was in fact separated from Potenciano Pecson, Ipo Limestone Co., Inc., and Antonio Villarama, the
Yap’s premises without being broken or suffering deterioration. Obviously
respondents herein. The pertinent facts are set forth in the decision, of the the deputy sheriffs returned the properties seized, by depositing them along
Court of Appeals, from which we quote: the road, near the quarry, of the defendant Company, at Bigti, without the
benefit of inventory and without re-installing them in their former position
"On March 13, 1953, the herein petitioner filed a complaint for replevin in and replacing the destroyed posts, which rendered their use impracticable.
the Court of First Instance of Manila, Civil Case No. 19067, entitled On March 23, 1953, the defendants' counsel asked the Provincial Sheriff if
'Machinery & Engineering Supplies, Inc., Plaintiff, vs. Ipo Limestone Co,, the machineries and equipments, dumped on the road would be re-installed to
Inc., and Dr. Antonio Villarama, defendants', for the recovery of the their former position and conditi6n (letter, Appendix 4). On March 24, 1953,
machineries and equipments sold and delivered to said defendants at their the Provincial Sheriff filed an urgent motion in court, manifesting that Roco
factory in barrio Bigti, Norzagaray, Bulacan. Upon application ex-parte of had been asked to furnish the Sheriff's office with expenses, laborers,
the petitioner, accompanied by the affidavit of Ramon S. Eoco, president of technical men and equipments, to carry into effect the court's order, to return
petitioner company, and upon approval of petitioner's bond in the sum of the seized properties in the same way said Roco found them on the day of
P15,769.00, on March 13, 1953, respondent judge issued an order, seizure, but said Roco absolutely refused to do so, and asking the court that
commanding the Provincial Sheriff of Bulacan to seize and take immediate the Plaintiff therein be ordered to provide the required aid op relieve the said
possession of the properties specified in the order (Appendix I, Answer). On Sheriff of the duty of complying with the said order of March 20, 1953
March 19, 1953, two deputy sheriffs of Bulacan, the said Ramon S. Roco, (Appendix 5). On March 30, 1953, the trial court ordered the Provincial
and a crew of technical men and laborers proceeded to Bigti, for the purpose Sheriff and the Plaintiff to reinstate the machineries and equipments removed
of carrying the court's order into effect. Leonardo Contreras, Manager of the by them in their original condition in which they were found before their
respondent Company, and Pedro Torres, in charge thereof, met the deputy removal at the expense of the Plaintiff (Appendix 7). An urgent motion of the
sheriffs, and Contreras handed to them a letter addressed to Atty. Leopoldo Provincial Sheriff dated April 15, 1953, praying for an extension of 20 days
C. Palad, ex-officio Provincial Sheriff of Bulacan, signed by Atty. Adolfo within which to comply with the order of the court (Appendix 10) was
Garcia of the defendants therein, protesting against the seizure of the denied; and on May 4, 1953, the trial court ordered the Plaintiff therein to
properties in question, on the ground that they are not personal properties. furnish the Provincial Sheriff within 5 days with the necessary funds,
Contending that the Sheriff's duty is merely ministerial, the deputy sheriffs, technical men, laborers, equipments and materials to effect the repeatedly
Roco, the latter's crew of technicians and laborers, Contreras and Torres, mentioned re-installation (Appendix 12)." (Petitioner's brief, Appendix A,
went to the factory. Roco's attention was called to the fact that the pp. I-IV.)
equipments could not possibly be dismantled without causing damages or
injuries to the wooden frames attached to them. As Roco insisted in Thereupon petitioner instituted in the Court of Appeals civil case G. R. No.
dismantling the equipments on his own. responsibility, alleging that the bond 11248-R, entitled "Machinery & Engineering Supplies, inc. vs. Honorable
was posted for such eventuality, the deputy sheriffs directed that some of the Potenciano Pecson, Provincial Sheriff of Bulacan, Ipo Limestone Co., Inc.,
supports thereof be cut (Appendix 2). On March 20, 1953, the defendant and Antonio Villarama." In the petition therein filed, it was alleged that, in
Company filed an urgent motion, with a counter-bond in the amount of ordering the petitioner to furnish the provincial sheriff of Bulacan "with
P15,769, for the return of the properties seized by the deputy sheriffs. On the necessary funds, technical men, laborers, equipment and materials, to effect
same day, the trial court issued an order, directing the Provincial Sheriff of the installation of the machinery and equipment" in question, the Court of
Bulacan to return the machineries and equipments to the place where they First Instance of Bulacan had committed a grave abuse of discretion and
were installed at the time of the seizure (Appendix 3). On March 21, 1953, acted in excess of its jurisdiction, for which reason it was prayed that its
order to this effect be nullified, and that, meanwhile, a writ of preliminary property has to be returned, it should be returned in as good a condition as
injunction be issued to restrain the enforcement of said order of May 4, 1953. when taken (Bachrach Motor Co., Inc., vs. Bona, 44 Phil., 378). If any one
Although the aforementioned writ was issued by the Court of Appeals, the had gone beyond the scope of his authority, it is the respondent Provincial
same subsequently dismissed the case for lack of merit, with costs against the Sheriff. But considering the fact that he acted under the pressure of Ramon S.
petitioner, upon the following grounds: "While the seizure of the equipments Roco, and that the order impugned was issued not by him, but by the
and personal properties was ordered by the respondent Court, it is, however, respondent Judge, We simply declare that said Sheriff's act was most unusual
logical to presume that said court did not authorize the petitioner or its agents and the result of a poor judgment. Moreover, the Sheriff not being an officer
to destroy, as they did, said machineries and equipments, by dis mantling and exercising judicial functions, the writ may not reach him, for certiorari lies
unbolting the same from their concrete basements, and cutting and sawing only to review judicial actions.
their wooden supports, thereby rendering them unserviceable and beyond
repair, unless those parts removed, cut and sawed be replaced, which the The Petitioner complains that the respondent Judge had completely
petitioner, notwithstanding the respondent Court's order, adamantly refused disregarded his manifestation that the machineries and equipments seized
to do. The Provincial Sheriff's tortuous act, in obedience to the insistent were and still are the Petitioner's property until fully paid for and as such,
proceedings of the president of the petitioner, Ramon S. Roco, has no never became immovable. The question of ownership and the applicability of
justification in law, notwithstanding the Sheriff's claim that his duty was Art. 415 of the new Civil Code are immaterial in the determination of the
ministerial. It was the bounden duty of the respondent Judge to give redress only issue involved in this case. It is a matter of evidence which should be
to the respondent Company, for the unlawful and wrongful acts committed decided in the hearing of the case on the merits. The question as to whether
by the petitioner and its agents. And as this was the true object of the order of the machineries or equipments in litigation are immovable or not is likewise
March 30, 1953, we can not but hold that same was within its jurisdiction to immaterial, because the only issue raised before the trial court was whether
issue. The ministerial duty of the Sheriff should have its limitations. The the Provincial Sheriff of Bulacan, at the Petitioner's instance, was justified in.
Sheriff knew or must have known what is inherently,.right and inherently destroying the machineries and in refusing to restore them to their original
wrong, more so when, as in this particular case, the deputy sheriffs were form, at the expense of the Petitioner. Whatever might be the legal character
shown a letter of respondent Company's attorney, that the machineries and of the machineries and equipments, would not in any way justify their
equipments were not personal properties and, therefore, not subject to seizure destruction by the Sheriff's and the said Petitioner's." (Petitioner's brief,
by the terms of the order. While it may be conceded that this was a question Appendix A, pp IV-VII.)
of law too technical to decide on the spot, it would not have cost the Sheriff
much time and difficulty to bring the letter to the court's attention and have A motion for reconsideration of this decision of the Court of Appeals having
the equipments and machineries guarded, so as not to frustrate the order of been denied, petitioner has brought the case to Us for review by writ of
seizure issued by the trial court. But, acting upon the directives of the certiorari. Upon examination of the record, We are satisfied, however, that
president of the Petitioner, to seize the properties at any cost, the deputy the Court of Appeals was justified in dismissing the case. The special civil
sheriffs lent themselves as instruments to harass and embarrass the action known as replevin, governed by Rule 62 of the Rules of Court, is
respondent Company. The respondent Court, in issuing the order sought to be applicable only to "personal property". "Ordinarily replevin may be brought
annulled, had not committed abuse of discretion at all or acted in an arbitrary to recover any specific personal property unlawfully taken or detained from
or despotic manner, by reason of passion or personal hostility; on the the owner thereof, provided such, property is capable of identification and
contrary, it issued said order, guided by the well known principle that if the delivery; but replevin will not lie for the recovery of real property or
incorporeal personal property". (77 C. J. S. 17) (Italics supplied.) When the ordered, the goods in question shall be returned in substantially the same
sheriff repaired to the premises of respondent, Ipo Limestone Co., Inc., the condition as when taken (54 C.J., 590-600, 640-641). Inasmuch as the
machinery and equipment in question appeared to be attached to the land, machinery and equipment involved in this case were duly installed and
particularly to the concrete foundation of said premises, in a fixed manner, in affixed in the premises of respondent company when petitioner's
such a way that the former could not be separated from the latter "without representative caused said property to be dismantled and then removed, it
breaking the material or deterioration of the object." Hence, in order to follows that petitioner must also do everything necessary to the re-
remove said outfit, it became necessary, not only to unbolt the same, but, installation of said property in conformity with its original condition.
also, to cut some of its wooden supports. Moreover, said machinery and
equipment were "intended by the owner of the tenement for an industry" Wherefore, the decision of the Court of Appeals is hereby affirmed, with
carried on said immovable and tended "directly to meet the needs of the said costs against the petitioner. So ordered.
industry." For these reasons, they were already immovable property pursuant
to paragraphs 3 and 5 of Article 415 of Civil Code of the Philippines, which, Pablo, Bengzon, Padilla, Montemayor, Reyes, A., Jugo, Bautista Angelo and
are substantially identical to paragraphs 3 and 5 of Article 334 of the Civil Reyes, J. B. L., JJ., concur.
Code of Spain. As such immovable property, they were not subject to
replevin. "In so far as an article, including a fixture annexed by a tenant, is Paras, C. J., concurs in the result.
regarded as part of the realty, it is not the subject of trover, replevin, detinus,
or any action lying only for personalty; * * *. "* * * the action of replevin
does not lie for articles so annexed to the realty as to be part thereof, as, for SECOND DIVISION

example, a house or a turbine pump constituting part of a building's cooling G.R. No. 180110, May 30, 2016

system; * * *" (36 C.J.S. 1000 & 1001) Moreover, as the provincial sheriff CAPITOL WIRELESS, INC., PETITIONER, VS. THE PROVINCIAL TREASURER

hesitated to remove the property in question, petitioner's agent and president, OF BATANGAS, THE PROVINCIAL ASSESSOR OF BATANGAS, THE

Mr. Ramon Roco, insisted "on the dismantling at his own responsibility," MUNICIPAL TREASURER AND ASSESSOR OF NASUGBU, BATANGAS,

stating that, precisely, "that is the reason why plaintiff posted a bond." In this RESPONDENTS.

manner, petitioner clearly assumed the corresponding risks. Such assumption


of risk becomes more apparent when we consider that, pursuant to Section 5 DECISION

of Rule 62 of the Rules of Court, the defendant in an action for replevin is PERALTA, J.:

entitled to the return of the property in dispute upon the filing of a Before the Court is a petition for review on certiorari under Rule 45 of the
counterbond, as provided therein. In other words, petitioner knew that the Rules of Court seeking to annul and set aside the Court of Appeals'
restitution of said property to respondent company might be ordered under Decision[1] dated May 30, 2007 and Resolution[2] dated October 8, 2007 in
said provision of the Rules of Court, and that, consequently, it may become CA-G.R. SP No. 82264, which both denied the appeal of petitioner against
necessary for petitioner to meet the liabilities incident to such return. the decision of the Regional Trial Court.

Lastly, although the parties have not cited, and We have not found, any Below are the facts of the case. Petitioner Capitol Wireless Inc. (Capwire) is
authority squarely in point—obviously because real property are not subject a Philippine corporation in the business of providing international
to replevin—it is well settled that, when the restitution of what has been telecommunications services.[3] As such provider, Capwire has signed
agreements with other local and foreign telecommunications companies
covering an international network of submarine cable systems such as the Capwire claims that it also reported that the system "interconnects at the
Asia Pacific Cable Network System (APCN) (which connects Australia, PLDT Landing Station in Nasugbu, Batangas," which is covered by a
Thailand, Malaysia, Singapore, Hong Kong, Taiwan, Korea, Japan, Indonesia transfer certificate of title and tax declarations in the name of PLDT.[11]
and the Philippines); the Brunei-Malaysia-Philippines Cable Network System
(BMP-CNS), the Philippines-Italy (SEA-ME-WE-3 CNS), and the Guam As a result, the respondent Provincial Assessor of Batangas (Provincial
Philippines (GP-CNS) systems.[4] The agreements provide for co-ownership Assessor) issued the following Assessments of Real Property (ARP) against
and other rights among the parties over the network.[5] Capwire:

Petitioner Capwire claims that it is co-owner only of the so-called "Wet ARP Cable System Assessed Value
Segment" of the APCN, while the landing stations or terminals and Segment 019-00967 BMP-CNS P 52,529,600.00
E of APCN located in Nasugbu, Batangas are allegedly owned by the 019-00968 APCN P 162,640,000.00
Philippine Long Distance Telephone Corporation (PLDT).[6] Moreover, it 019-00969 SEA-ME-WE3-CNS P 6,032,000.00
alleges that the Wet Segment is laid in international, and not Philippine, 019-00970 GP-CNS P 1,431,200.00
waters.[7]
In essence, the Provincial Assessor had determined that the submarine cable
Capwire claims that as co-owner, it does not own any particular physical part systems described in Capwire's Sworn Statement of True Value of Real
of the cable system but, consistent with its financial contributions, it owns Properties are taxable real property, a determination that was contested by
the right to use a certain capacity of the said system.[8] This property right is Capwire in an exchange of letters between the company and the public
allegedly reported in its financial books as "Indefeasible Rights in Cable respondent.[12] The reason cited by Capwire is that the cable system lies
Systems."[9] outside of Philippine territory, i.e., on international waters.[13]

However, for loan restructuring purposes, Capwire claims that "it was On February 7, 2003 and March 4, 2003, Capwire received a Warrant of
required to register the value of its right," hence, it engaged an appraiser to Levy and a Notice of Auction Sale, respectively, from the respondent
"assess the market value of the international submarine cable system and the Provincial Treasurer of Batangas (Provincial Treasurer).[14]
cost to Capwire."[10] On May 15, 2000, Capwire submitted a Sworn
On March 10, 2003, Capwire filed a Petition for Prohibition and Declaration
Statement of True Value of Real Properties at the Provincial Treasurer's
of Nullity of Warrant of Levy, Notice of Auction Sale and/or Auction Sale
Office, Batangas City, Batangas Province, for the Wet Segment of the
with the Regional Trial Court (RTC) of Batangas City.[15]
system, stating:
System Sound Value Alter the filing of the public respondents' Comment,[16] on May 5, 2003, the
APCN P 203,300,000.00 RTC issued an Order dismissing the petition for failure of the petitioner
BMP-CNS P 65,662,000.00 Capwire to follow the requisite of payment under protest as well as failure to
SEA-ME-WE-3 CNS P P 7,540,000.00 appeal to the Local Board of Assessment Appeals (LBAA), as provided for in
GP-CNS P1,789,000.00
Sections 206 and 226 of Republic Act (R.A.) No. 7160, or the Local impose the tax and of the treasurer to collect it.[25] It contends that there is
Government Code.[17] only a pure question of law since the issue is whether its submarine cable
system, which it claims lies in international waters, is taxable.[26] Capwire
Capwire filed a Motion for Reconsideration, but the same was likewise holds the position that the cable system is not subject to tax.[27]
dismissed by the RTC in an Order[19] dated August 26, 2003. It then filed an
appeal to the Court of Appeals.[20] Respondents assessors and treasurers of the Province of Batangas ana
Municipality of Nasugbu, Batangas disagree with Capwire and insist that the
On May 30, 2007, the Court of Appeals promulgated its Decision dismissing
case presents questions of fact such as the extent and portion of the
the appeal filed by Capwire and affirming the order of the trial court. The
submarine cable system that lies within the jurisdiction of the said local
dispositive portion of the CA's decision states:
governments, as well as the nature of the so-called indefeasible rights as
WHEREFORE, premises considered, the assailed Orders dated May 5, 2003 property of Capwire.[28] Such questions are allegedly resolvable only before
and August 26, 2003 of the Regional Trial Court, Branch 11 of Batangas administrative agencies like the Local Board of Assessment Appeals.[29]
City, are AFFIRMED.
SO ORDERED.[21] The Court confronts the following issues: Is the case cognizable by the
administrative agencies and covered by the requirements in Sections 226 and
229 of the Local Government Code which makes the dismissal of Capwire's
The appellate court held that the trial court correctly dismissed Capwire's petition by the RTC proper? May submarine communications cables be
petition because of the latter's failure to comply with the requirements set in classified as taxable real property by the local governments?
Sections 226 and 229 of the Local Government Code, that is, by not availing
of remedies before administrative bodies like the LBAA and the Central The petition is denied. No error attended the ruling of the appellate court that
Board of Assessment Appeals (CBAA).[22] Although Capwire claims that it the case involves factual questions that should have been resolved before the
saw no need to undergo administrative proceedings because its petition raises appropriate administrative bodies.
purely legal questions, the appellate court did not share this view and noted
that the case raises questions of fact, such as the extent to which parts of the In disputes involving real property taxation, the general rule is to require the
submarine cable system lie within the territorial jurisdiction of the taxing taxpayer to first avail of administrative remedies and pay the tax under
authorities, the public respondents.[23] Further, the CA noted that Capwire protest before allowing any resort to a judicial action, except when the
failed to pay the tax assessed against it under protest, another strict assessment itself is alleged to be illegal or is made without legal authority.[30]
requirement under Section 252 of the Local Government Code.[24] For example, prior resort to administrative action is required when among the
issues raised is an allegedly erroneous assessment, like when the
reasonableness of the amount is challenged, while direct court action is
Hence, the instant petition for review of Capwire. Petitioner Capwire asserts permitted when only the legality, power, validity or authority of the
that recourse to the Local Board of Assessment Appeals, or payment of the assessment itself is in question.[31] Stated differently, the general rule of a
tax under protest, is inapplicable to the case at bar since there is no question prerequisite recourse to administrative remedies applies when questions of
of fact involved, or that the question involved is not the reasonableness of the fact are raised, but the exception of direct court action is allowed when
amount assessed but, rather, the authority and power of the assessor to purely questions of law are involved.[32]
This Court has previously and rather succinctly discussed the difference As early as 1944, the law was described as growing downward toward "roots
between a question of fact and a question of law. In Cosmos Bottling of fact" which grew upward to meet it. In 1950, the late Professor Louis Jaffe
Corporation v. Nagrama, Jr.,[33] it held: saw fact and law as a spectrum, with one shade blending imperceptibly into
The Court has made numerous dichotomies between questions of law and the other. Others have defined questions of law as those that deal with the
fact. A reading of these dichotomies shows that labels attached to law and general body of legal principles; questions of fact deal with "all other
fact are descriptive rather than definitive. We are not alone in Our difficult phenomena x x x." Kenneth Gulp Davis also weighed in and noted that the
task of clearly distinguishing questions of feet from questions of law. The difference between fact and law has been characterized as that between
United States Supreme Court has ruled that: "we [do not| yet know of any "ought" questions and "is" questions.[34] Guided by the quoted
other rule or principle that will unerringly distinguish a tactual finding from a pronouncement, the Court sustains the CA's finding that petitioner's case is
legal conclusion." one replete with questions of fact instead of pure questions of law, which
renders its filing in a judicial forum improper because it is instead cognizable
by local administrative bodies like the Board of Assessment Appeals, which
In Ramos v. Pepsi-Cola Bottling Co. of the P.I., the Court ruled: There is a are the proper venues for trying these factual issues. Verily, what is alleged
question of law in a given case when the doubt or difference arises as to what by Capwire in its petition as "the crux of the controversy," that is, "whether
the law is on a certain state of facts; there is a question of fact when the doubt or not an indefeasible right over a submarine cable system that lies in
or difference arises as to the truth or the falsehood of alleged facts. international waters can be subject to real property tax in the Philippines," [35]
is not the genuine issue that the case presents - as it is already obvious and
fundamental that real property that lies outside of Philippine territorial
We shall label this the doubt dichotomy. In Republic v. Sandiganbayan, the
jurisdiction cannot be subjected to its domestic and sovereign power of real
Court ruled: x x x A question of law exists when the doubt or controversy
property taxation - but, rather, such factual issues as the extent and status of
concerns the correct application of law or jurisprudence to a certain set of
Capwire's ownership of the system, the actual length of the cable/s that lie in
facts; or when the issue docs not call for an examination of the probative
Philippine territory, and the corresponding assessment and taxes due on the
value of the evidence presented, the truth or falsehood of facts being
same, because the public respondents imposed and collected the assailed real
admitted. In contrast, a question of fact exists when the doubt or difference
property tax on the finding that at least a portion or some portions of the
arises as to the truth or falsehood of facts or when the query invites
submarine cable system that Capwire owns or co-owns lies inside Philippine
calibration of the whole evidence considering mainly the credibility of the
territory. Capwire's disagreement with such findings of the administrative
witnesses, the existence and relevancy of specific surrounding circumstances
bodies presents little to no legal question that only the courts may directly
as well as their relation to each other and to the whole, and the probability of
resolve.
the situation.

For the sake of brevity, We shall label this the law application and calibration Instead, Capwire argues and makes claims on mere assumptions of certain
dichotomy. facts as if they have been already admitted or established, when they have
not, since no evidence of such have yet been presented in the proper agencies
In contrast, the dynamic legal scholarship in the United States has birthed and even in the current petition. As such, it remains unsettled whether
many commentaries on the question of law and question of fact dichotomy. Capwire is a mere co-owner, not full owner, of the subject submarine cable
and, if the former, as to what extent; whether all or certain portions of the
cable are indeed submerged in water; and whether the waters wherein the taxation. Both electric lines and communications cables, in the strictest sense,
cable/s is/are laid are entirely outside of Philippine territorial or inland are not directly adhered to the soil but pass through posts, relays or landing
waters, i.e., in international waters. More simply, Capwire argues based on stations, but both may be classified under the term "machinery" as real
mere legal conclusions, culminating on its claim of illegality of respondents' property under Article 415(5)[38] of the Civil Code for the simple reason that
acts, but the conclusions are yet unsupported by facts that should have been such pieces of equipment serve the owner's business or tend to meet the
threshed out quasi-judicially before the administrative agencies. It has been needs of his industry or works that are on real estate. Even objects in or on a
held that "a bare characterization in a petition of unlawfulness, is merely a body of water may be classified as such, as "waters" is classified as an
legal conclusion and a wish of the pleader, and such a legal conclusion immovable under Article 415(8)[39] of the Code. A classic example is a
unsubstantiated by facts which could give it life, has no standing in any court boathouse which, by its nature, is a vessel and, therefore, a personal property
where issues must be presented and determined by facts in ordinary and but, if it is tied to the shore and used as a residence, and since it floats on
concise language."[36] Therefore, Capwire's resort to judicial action, premised waters which is immovable, is considered real property.[40] Besides, the Court
on its legal conclusion that its cables (the equipment being taxed) lie entirely has already held that "it is a familiar phenomenon to see things classed as
on international waters, without first administratively substantiating such a real property for purposes of taxation which on general principle might be
factual premise, is improper and was rightly denied. Its proposition that the considered personal property."[41]
cables lie entirely beyond Philippine territory, and therefore, outside of
Philippine sovereignty, is a fact that is not subject to judicial notice since, on Thus, absent any showing from Capwire of any express grant of an
the contrary, and as will be explained later, it is in fact certain that portions of exemption for its lines and cables from real property taxation, then this
the cable would definitely lie within Philippine waters. Jurisprudence on the interpretation applies and Capwire's submarine cable may be held subject to
Local Government Code is clear that facts such as these must be threshed out real property tax.
administratively, as the courts in these types of cases step in at the first
instance only when pure questions of law are involved. Having determined that Capwire is liable, and public respondents have the
right to impose a real property tax on its submarine cable, the issue that is
Nonetheless, We proceed to decide on whether submarine wires or cables unresolved is how much of such cable is taxable based on the extent of
used for communications may be taxed like other real estate. Capwire's ownership or co-ownership of it and the length that is laid within
respondents' taxing jurisdiction. The matter, however, requires a factual
We hold in the affirmative. Submarine or undersea communications cables determination that is best performed by the Local and Central Boards of
are akin to electric transmission lines which this Court has recently declared Assessment Appeals, a remedy which the petitioner did not avail of.
in Manila Electric Company v. City Assessor and City Treasurer of Lucena
City,[37] as "no longer exempted from real property tax" and may qualify as At any rate, given the importance of the issue, it is proper to lay down the
"machinery" subject to real property tax under the Local Government Code. other legal bases for the local taxing authorities' power to tax portions of the
To the extent that the equipment's location is determinable to be within the submarine cables of petitioner. It is not in dispute that the submarine cable
taxing authority's jurisdiction, the Court sees no reason to distinguish system's Landing Station in Nasugbu, Batangas is owned by PLDT and not
between submarine cables used for communications and aerial or by Capwire. Obviously, Capwire is not liable for the real property tax on this
underground wires or lines used for electric transmission, so that both pieces Landing Station. Nonetheless, Capwire admits that it co-owns the submarine
of property do not merit a different treatment in the aspect of real property cable system that is subject of the tax assessed and being collected by public
respondents. As the Court takes judicial notice that Nasugbu is a coastal town Thus, the jurisdiction or authority over such part of the subject submarine
and the surrounding sea falls within what the United Nations Convention on cable system lying within Philippine jurisdiction includes the authority to tax
the Law of the Sea (UNCLOS) would define as the country's territorial sea (to the same, for taxation is one of the three basic and necessary attributes of
the extent of 12 nautical miles outward from the nearest baseline, under Part sovereignty,[49] and such authority has been delegated by the national
II, Sections 1 and 2) over which the country has sovereignty, including the legislature to the local governments with respect to real property taxation. [50]
seabed and subsoil, it follows that indeed a portion of the submarine cable
system lies within Philippine territory and thus falls within the jurisdiction of As earlier stated, a way for Capwire to claim that its cable system is not
the said local taxing authorities.[42] It easily belies Capwire's contention that covered by such authority is by showing a domestic enactment or even
the cable system is entirely in international waters. And even if such portion contract, or an international agreement or treaty exempting the same from
does not lie in the 12-nautical-mile vicinity of the territorial sea but further real property taxation. It failed to do so, however, despite the fact that the
inward, in Prof. Magallona v. Hon. Ermita, et al.[43] this Court held that burden of proving exemption from local taxation is upon whom the subject
"whether referred to as Philippine 'internal waters' under Article I of the real property is declared.[51] Under the Local Government Code, every person
Constitution[44] or as 'archipelagic waters' under UNCLOS Part III, Article by or for whom real property is declared, who shall claim tax exemption for
49(1, 2, 4),[45] the Philippines exercises sovereignty over the body of water such property from real property taxation "shall file with the provincial, city
lying landward of (its) baselines, including the air space over it and the or municipal assessor within thirty (30) days from the date of the declaration
submarine areas underneath." Further, under Part VI, Article 79[46] of the of real property sufficient documentary evidence in support of such
UNCLOS, the Philippines clearly has jurisdiction with respect to cables laid claim."[52] Capwire omitted to do so. And even under Capwire's legislative
in its territory that are utilized in support of other installations and structures franchise, RA 4387, which amended RA 2037, where it may be derived that
under its jurisdiction. there was a grant of real property tax exemption for properties that are part of
its franchise, or directly meet the needs of its business, [53] such had been
And as far as local government units are concerned, the areas described expressly withdrawn by the Local Government Code, which took effect on
above are to be considered subsumed under the term "municipal waters" January 1, 1992, Sections 193 and 234 of which provide:[54]
which, under the Local Government Code, includes "not only streams, lakes,
and tidal waters within the municipality, not being the subject of private Section 193. Withdrawal of Tax Exemption Privileges. - Unless otherwise
ownership and not comprised within the national parks, public forest, timber provided in this Code, tax exemptions or incentives granted to, or
lands, forest reserves or fishery reserves, but also marine waters included presently enjoyed by all persons, whether natural or juridical, including
between two lines drawn perpendicularly to the general coastline from points government-owned or controlled corporations, except local water
where the boundary lines of the municipality or city touch the sea at low tide districts, cooperatives duly registered under R.A. No. 6938, nonstock
and a third line parallel with the general coastline and fifteen (15) kilometers and nonprofit hospitals and educational institutions, are hereby
from it."[47] Although the term "municipal waters" appears in the Code in the withdrawn upon the effectivity of this Code.
context of the grant of quarrying and fisheries privileges for a fee by local
governments,[48] its inclusion in the Code's Book II which covers local xxxx
taxation means that it may also apply as guide in determining the territorial
extent of the local authorities' power to levy real property taxation. Section 234. Exemptions from Real Property Tax. - The following arc
exempted from payment of the real property tax:
(a) Real property owned by the Republic of the Philippines or any of its Velasco, Jr., (Chairperson), Peralta, Perez, and Mendoza,* JJ., concur.
political subdivisions except when the beneficial use thereof has been Jardeleza, J., on leave.
granted, for consideration of otherwise, to a taxable person;
(b) Charitable institutions, churches, parsonages or convents appurtenant
thereto, mosques, nonprofit or religious cemeteries and all lands, buildings,
and improvements actually, directly, and exclusively used for religious,
June 17, 2016
charitable or educational purposes;
N O T I C E OF J U D G M E N T
(c) All machineries and equipment that are actually, directly and exclusively
Sirs/Mesdames:
used by local water districts and government-owned or controlled
Please take notice that on ___May 30, 2016___ a Decision, copy attached
corporations engaged in the supply and distribution of water and/or
hereto, was rendered by the Supreme Court in the above-entitled case, the
generation and transmission of electric power;
original of which was received by this Office on June 17, 2016 at 1:30 p.m.
(d) All real property owned by duly registered cooperatives as provided for
under R.A. No. 6938; and
Very truly yours,
(c) Machinery and equipment used for pollution control and environmental
(SGD)
protection.
WILFREDO V. LAPITAN
Division Clerk of Court
Except as provided herein, any exemption from payment of real
property tax previously granted to, or presently enjoyed by, all persons, *
Designated Additional Member in lieu of Associate Justice Bicnvcnido L.
whether natural or juridical, including all government-owned or
Reyes, per Raffle dated May 23, 20 16. [1] Penned by Associate Justice
controlled corporations arc hereby withdrawn upon the effectivity of
Aurora Santiago-Lagman, with Associate Justices Bienvenido L. Reyes (now
this Code.[55]
a member of this Court) and Apolinario D. Bruselas, Jr.; concurring; rollo,
pp. 9-16.
Such express withdrawal had been previously held effective upon
Despite being impleaded in the petition, the Court ofAppeals is now being
exemptions bestowed by legislative franchises granted prior to the effectivity
excluded as respondent by this Court per Section 4(a), Rule 45 of the 1997
of the Local Government Code.[56] Capwire fails to allege or provide any
Rules of Civil Procedure.
other privilege or exemption that were granted to it by the legislature after [38]
CIVIL. CODE, Art. 415. The following are immovable property: x x x x
the enactment of the Local Government Code. Therefore, the presumption
(5) Machinery, receptacles, instruments or implements intended by the
stays that it enjoys no such privilege or exemption. Tax exemptions are
owner of the tenement for an industry or works which may be carried on in a
strictly construed against the taxpayer because taxes are considered the
building or on a piece of land, and which tend directly to meet the needs of
lifeblood of the nation.[57]
the said industry or works;
WHEREFORE, the petition is DENIED. The Court of Appeals' Decision
dated May 30, 2007 and Resolution dated October 8, 2007 are AFFIRMED. According to Manila Electric Company v. City Assessor and City Treasurer
SO ORDERED. of Lucena City, supra note 37, the requirements for the machinery to 1) be
placed in the tenement by the owner of the tenement; and 2) that they be
destined for use in the industry or work of the tenement are not required by consisting of its terrestrial, fluvial, and aerial domains, including its territorial
the Local Government Code for the machinery to be classified as real sea, the seabed, the subsoil, the insular shelves, and other submarine areas.
property for purposes of taxation as such real property. All that is needed is The waters around, between, and connecting the islands of the archipelago,
for the machinery to tend to directly meet the needs of the owner's industry regardless of their breadth and dimensions, form part of the internal waters of
or works. the Philippines.

[39] [45]
CIVIL CODE, Art. 415. The following are immovable properly: x x x x Article 49. Legal status of archipelagic waters, of the air space over
(8) Mines, quarries, and slag dumps, while the matter thereof forms part of archipelagic waters and of their heel and subsoil. -
the bed, and welters either running or stagnant; [40] Paras, Edgardo L., Civil 1. The sovereignty of an archipelagic State extends to the waters enclosed by
Code of the Philippines Annotated (16th cd. 2008), Vol. II, pp. 28-29. [41] the archipelagic baselines drawn in accordance with article 47, described as
Standard Oil Co. of New York v. Jaramillo, 44 Phil. 630, 633 (1923), cited in archipelagic waters, regardless of their depth or distance from the coast.
Callex (Phil.) Inc. v. Central Board of Assessment Appeals, et al, 199 Phil. 2. This sovereignty extends to the air space over the archipelagic waters, as
487, 492 (1982) and Manila Electric Company v. City Assessor and City well as to their bed and subsoil, and the resources contained therein.
Treasurer of Lucena City, supra note 37. [42] UNITED NATIONS xxxx
CONVENTION ON THE LAW OF THE SEA (UNCLOS), PART II. 4. The regime of archipelagic sea lanes passage established in this Part shall
not in other respects affect the status of the archipelagic waters, including the
Territorial Sea and Contiguous Zone, sea lanes, or the exercise by the archipelagic Slate of its sovereignty over
Section I. General Provisions. such waters and their air space, bed and subsoil, and the resources contained
Article 2. Legal status of" the territorial sea, of the air space over the therein.
[46]
territorial sea and of its bed and subsoil: Article 79. Submarine cables and pipelines on the continental shelf
1. The sovereignty of a coastal State extends, beyond its land territory and xxxx
internal waters and, in the case of an archipelagic State, its archipelagic 4. Nothing in this Part (i.e., Part VI, Continental Shell) affects the right of the
waters, to an adjacent belt of sea, described as the territorial sea. coastal SUite to establish conditions for cables or pipelines entering its
2. This sovereignty extends to the air space over the territorial sea as well as territory or territorial sea, or its jurisdiction over cables and pipelines
to its bed and subsoil. constructed or used in connection with the exploration of its continental shelf
3. The sovereignty over the territorial sea is exercised subject to this or exploitation of its resources or the operations of artificial islands,
Convention and to other rules of international law. installations and structures under its jurisdiction.
Section. 2. Limits of the Territorial Sea
[47]
Article 3. Breadth of the territorial sea. Every State has the right to establish LOCAL. GOVERNMENT CODE, Book II, Chapter 1, Sec. 131 (r)
the breadth of its territorial sea up to a limit not exceeding 12 nautical miles, "Municipal Waters" includes not only streams, lakes, and tidal waters within
measured from baselines determined in accordance wilh this Convention. the municipality, not being the subject of private ownership and not
[44]
CONSTITUTION, Art. I. National Territory. comprised within the national parks, public forest, timber lands, forest
The national territory comprises the Philippine reserves or fishery reserves, but also marine waters included between two
archipelago, with all the islands and waters embraced therein, and all other lines drawn perpendicularly to the general coastline from points where the
territories over which the Philippines has sovereignty or jurisdiction, boundary lines of the municipality or city touch the sea at low tide and a third
line parallel with the general coastline and fifteen (15) kilometers from it. certifications and mortgage deeds, and similar documents.
[53]
Where two (2) municipalities arc so situated on the opposite shores that there Sec. 5. The same Act is further amended by adding between Sections
is less than fifteen (15) kilometers of marine waters between them, the third thirteen and fourteen thereof a new section which shall read as follows:
line shall be equally distant from opposite shores of their respective Sec. 13-A. (a) The grantee shall be liable to pay the same taxes on its real
municipalities; estate, buildings, and personal property, exclusive of this franchise, as other
[48]
Id., at Sec. 138. Tax on Sand, Gravel and Other Quarry Resources. - The persons or corporations are now or hereinafter may be required by law to
province may levy and collect not more than ten percent (10%) of fair market pay.
[54]
value in the locality per cubic meter of ordinary stones, sand, gravel, earth, See Manila Electric Company v. City Assessor and City Treasurer of
and other quarry resources, as defined under the National Internal Revenue Lucena City, supra note 37.
[55]
Code, as amended, extracted from public lands or from the beds of seas, Emphasis supplied.
[56]
lakes, rivers, streams, creeks, and other public waters within its territorial Manila Electric Company v. City Assessor and City Treasurer of Lucena
jurisdiction. The permit to extract sand, gravel and other quarry resources City, supra note 37.
[57]
shall be issued exclusively by the provincial governor, pursuant to the City of Manila v. Colet, G.R. No. 120051, December 10, 2014.
ordinance of the Sangguniang Panlalawigan.
xxxx
Sec. 149. Fishery Rentals, Fees and Charges. - (a) Municipalities shall have
the exclusive authority to grant fishery privileges in the municipal waters and
impose rentals, fees or charges therefor in accordance with the provisions of
this Section, xxx
[49]
Compagnie Financiere Sucres El Denrees, v. Commissioner of Internal
Revenue, 531 Phil. 264, 267 (2006); Commissioner of Internal Revenue v.
Solidbank Corp., 462 Phil. 96, 127 (2003).
[50]
LOCAL GOVERNMENT CODE, Title II; The City Government of
Quezon City v. Bayan Telecommunications, Inc., 519 Phil. 159, 174 (2006).
[51]
Camp John Hay Development Corporation v. Central Board of
Assessment Appeals, G.R. No. 169234, October 2, 2013, citing the LOCAL
GOVERNMENT CODE, Section 206.

[52]
LOCAL GOVERNMENT CODE, Sec. 206. Proof of Exemption of Real
Properly from Taxation. - Every person by or for whom real property is
declared, who shall claim tax exemption for such property under this Title
shall file with the provincial, city or municipal assessor within thirty (30)
days from the date of the declaration of real property sufficient documentary
evidence in support of such claim including corporate charters, title of
ownership, articles of incorporation, by-laws, contracts, affidavits,

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