Property 1 (FULL)
thus cutting off the supply of gas from said premises.
US v Tambunting
EN BANC
[G.R. No. 16513. January 18, 1921.]
THE UNITED STATES, plaintiff-appellee, vs. MANUEL TAMBUNTING, defendant-
appellant. Manuel Garcia Goyena for appellant. Acting Attorney-General Feria for
appellee.
SYLLABUS
1. THEFT; APPROPRIATION OF GAS. — The clandestine substraction and
appropriation of gas, without the consent of the owner, et animo lucrandi,
constitutes theft.
DECISION
STREET, J p:
This appeal was instituted for the purpose of reversing a judgment of the Court
of First Instance of the city of Manila, finding the accused, Manuel Tambunting,
guilty of stealing a quantity of gas belonging to the Manila Gas Corporation, and
sentencing him to undergo imprisonment for two months and one day,
of arresto mayor, with the accessories prescribed by law; to indemnify the said
corporation in the sum of P2, with subsidiary imprisonment in case of insolvency;
and to pay the costs.
The evidence submitted in behalf of the prosecution shows that in January of the
year 1918, the accused and his wife became occupants of the upper floor of the
house situated at No. 443, Calle Evangelista, in the city of Manila. In this house
the Manila Gas Corporation had previously installed apparatus for the delivery of
gas on both the upper and lower floors, consisting of the necessary piping and a
gas meter, which last mentioned apparatus was installed below. When the
occupants at whose request this installation had been made vacated the
premises, the gas company disconnected the gas pipe and removed the meter,
Upon June 2, 1919, one of the inspectors of the gas company visited the house in
question and found that gas was being used, without the knowledge and consent
of the gas company, for cooking in the quarters occupied by the defendant and
his wife: to effect which a short piece of iron pipe had been inserted in the gap
where the gas meter had formerly been placed, and piece of rubber tubing had
been used to connect the gas pipe in the kitchen with the gas stove, or plate,
used for cooking.
At the time this discovery was made, the accused, Manuel Tambunting, was not
at home, but he presently arrived and admitted to the agent of the gas company
that he had made the connection with the rubber tubing between the gas pipe
and the stove, though he denied making the connection below. He also admitted
that he knew he was using gas without the knowledge of the company and that
he had been so using it for probably two or three months.
The clandestine use of gas by the accused in the manner stated is thus
established in our opinion beyond a doubt; and inasmuch as the animo
lucrandi is obvious, it only remains to consider, first, whether gas can be the
subject of larceny and, secondly, whether the quantity of gas appropriated in the
two months, during which the accused admitted having used the same, has been
established with sufficient certainty to enable the court to fix an appropriate
penalty.
Some legal minds, perhaps more academic than practical, have entertained
doubt upon the question whether gas can be the subject of larceny; but no
judicial decision has been called to our attention wherein any respectable court
has refused to treat it as such. In U. S. vs. Genato (15 Phil., 170, 175), this court,
speaking through Mr. Justice Torres, said ". . . the right of the ownership of
electric current is secured by articles 517 and 518 of the Penal Code; the
application of these articles in cases of substraction of gas, a fluid used for
lighting, and in some respects resembling electricity, is confirmed by the rule laid
down in the decisions of the supreme court of Spain of January 20, 1887, and
April 1, 1897, construing and enforcing the provisions of articles 530 and 531 of
the Penal Code of that country, articles identical with articles 517 and 518 of the
code in force in these Islands." These expressions were used in a case which
involved the substraction and appropriation of electrical energy and the court
held, in accordance with the analogy of the case involving the theft of gas, that
electrical energy could also be the subject of theft. The same conclusion was
reached in U. S. vs. Carlos (21 Phil., 553), which was also a case of prosecution for
stealing electricity.
The precise point whether the taking of gas may constitute larceny has never
before, so far as the present writer is aware, been the subject of adjudication in
this court, but the decisions of Spanish, English, and American courts all answer
the question in the affirmative. (See U. S. vs. Carlos, 21 Phil., 553, 560.)
In this connection it will suffice to quote the following from the topic "Larceny,"
at page 34, Vol. 17, of Ruling Case Law:
"There is nothing in the nature of gas used for illuminating purposes which
renders it incapable of being feloniously taken and carried away. It is a valuable
article of merchandise, bought and sold like other personal property, susceptible
of being severed from a mass or larger quantity and of being transported from
place to place. Likewise water which is confined in pipes and electricity which is
conveyed by wires are subjects of larceny."
As to the amount and value of the gas appropriated by the accused in the period
during which he admits having used it, the proof is not entirely satisfactory.
Nevertheless we think the trial court was justified in fixing the value of the gas at
P2 per month, which is the minimum charge for gas made by the gas company,
however small the amount consumed. That is to say, no person desiring to use
gas at all for domestic purposes can purchase the commodity at a lower rate per
month than P2. There was evidence before the court showing that the general
average of the monthly bills paid by consumers throughout the city for the use of
gas in a kitchen equipped like that used by the accused is from P18 to P20, while
the average minimum is about P8 per month. We think that the facts above
stated are competent evidence; and the conclusion is inevitable that the accused
is at least liable to the extent of the minimum charge of P2 per month. The
market value of the property at the time and place of the theft is of course the
proper value to be proven (17 R. C. L., p. 66); and when it is found that the least
amount that a consumer can take costs P2 per month, this affords proof that the
amount which the accused took was certainly worth that much. Absolute
certainty as to the full amount taken is of course impossible, because no meter
was used; but absolute certainty upon this point is not necessary, when it is
certain that the minimum that could have been taken was worth a determinable
amount.
It appears that before the present prosecution was instituted, the accused had
been unsuccessfully prosecuted for an infraction of section 504 of the Revised
Ordinances of the city of Manila, under a complaint charging that the accused,
not being a registered installer of gas equipment, had placed a gas installation in
the house at No. 443, Calle Evangelista. Upon this it is argued for the accused
that, having been acquitted of that charge, he is not now subject to prosecution
for the offense of theft, having been acquitted of the former charge. The
contention is evidently not well-founded, since the two offenses are of totally
distinct nature. Furthermore, a prosecution for violation of a city ordinance is not
ordinarily a bar to a subsequent prosecution for the same offense under the
general law of the land. (U. S. vs. Garcia Gavieres, 10 Phil., 694.)
The conclusion is that the accused is properly subject to punishment under No. 5
of article 518 of the Penal Code, for the gas taken in the course of two months at
the rate of P2 per month. There being no aggravating or attenuating
circumstance to be estimated, it results that the proper penalty is two months
and one day of arresto mayor, as fixed by the trial court. The judgment will
therefore be affirmed, with costs against the appellant, it being under stood that
the amount of the indemnity which the accused shall pay to the gas company is
P4, instead of P2, with subsidiary imprisonment for one day in case of insolvency.
So ordered.
FIRST DIVISION
[G.R. No. 155076. February 27, 2006.]
LUIS MARCOS P. LAUREL, petitioner, vs. HON. ZEUS C. ABROGAR, Presiding facilities of the terminating country (the country where the call is destined). The
Judge of the Regional Trial Court, Makati City, Branch 150, PEOPLE OF THE IPL is linked to switching equipment which is connected to a PLDT telephone
PHILIPPINES & PHILIPPINE LONG DISTANCE TELEPHONE line/number. In the process, the calls bypass the IGF found at the terminating
COMPANY, respondents. country, or in some instances, even those from the originating country. 4

DECISION One such alternative calling service is that offered by Baynet Co., Ltd. (Baynet)
which sells "Bay Super Orient Card" phone cards to people who call their friends
CALLEJO, SR., J p: and relatives in the Philippines. With said card, one is entitled to a 27-minute call
to the Philippines for about ¥37.03 per minute. After dialing the ISR access
Before us is a Petition for Review on Certiorari of the Decision 1 of the Court of
number indicated in the phone card, the ISR operator requests the subscriber to
Appeals (CA) in CA-G.R. SP No. 68841 affirming the Order issued by Judge Zeus C.
give the PIN number also indicated in the phone card. Once the caller's identity
Abrogar, Regional Trial Court (RTC), Makati City, Branch 150, which denied the
(as purchaser of the phone card) is confirmed, the ISR operator will then provide
"Motion to Quash (With Motion to Defer Arraignment)" in Criminal Case No. 99-
a Philippine local line to the requesting caller via the IPL. According to PLDT, calls
2425 for theft.
made through the IPL never pass the toll center of IGF operators in the
Philippine Long Distance Telephone Company (PLDT) is the holder of a legislative Philippines. Using the local line, the Baynet card user is able to place a call to any
franchise to render local and international telecommunication services point in the Philippines, provided the local line is National Direct Dial (NDD)
under Republic Act No. 7082. 2 Under said law, PLDT is authorized to establish, capable. 5
operate, manage, lease, maintain and purchase telecommunication systems,
PLDT asserts that Baynet conducts its ISR activities by utilizing an IPL to course its
including transmitting, receiving and switching stations, for both domestic and
incoming international long distance calls from Japan. The IPL is linked to
international calls. For this purpose, it has installed an estimated 1.7 million
switching equipment, which is then connected to PLDT telephone lines/numbers
telephone lines nationwide. PLDT also offers other services as authorized by
and equipment, with Baynet as subscriber. Through the use of the telephone
Certificates of Public Convenience and Necessity (CPCN) duly issued by the
lines and other auxiliary equipment, Baynet is able to connect an international
National Telecommunications Commission (NTC), and operates and maintains an
long distance call from Japan to any part of the Philippines, and make it appear
International Gateway Facility (IGF). The PLDT network is thus principally
as a call originating from Metro Manila. Consequently, the operator of an ISR is
composed of the Public Switch Telephone Network (PSTN), telephone handsets
able to evade payment of access, termination or bypass charges and accounting
and/or telecommunications equipment used by its subscribers, the wires and
rates, as well as compliance with the regulatory requirements of the NTC. Thus,
cables linking said telephone handsets and/or telecommunications equipment,
the ISR operator offers international telecommunication services at a lower rate,
antenna, the IGF, and other telecommunications equipment which provide
to the damage and prejudice of legitimate operators like PLDT. 6
interconnections. 3
PLDT pointed out that Baynet utilized the following equipment for its ISR
PLDT alleges that one of the alternative calling patterns that constitute network
activities: lines, cables, and antennas or equipment or device capable of
fraud and violate its network integrity is that which is known as International
transmitting air waves or frequency, such as an IPL and telephone lines and
Simple Resale (ISR). ISR is a method of routing and completing international long
equipment; computers or any equipment or device capable of accepting
distance calls using International Private Leased Lines (IPL), cables, antenna or air
information applying the prescribed process of the information and supplying the
wave or frequency, which connect directly to the local or domestic exchange
result of this process; modems or any equipment or device that enables a data
terminal equipment such as computers to communicate with other data terminal
equipment via a telephone line; multiplexers or any equipment or device that
enables two or more signals from different sources to pass through a common
cable or transmission line; switching equipment, or equipment or device capable
of connecting telephone lines; and software, diskettes, tapes or equipment or
device used for recording and storing information. 7
PLDT also discovered that Baynet subscribed to a total of 123 PLDT telephone
lines/numbers. 8 Based on the Traffic Study conducted on the volume of calls
passing through Baynet's ISR network which bypass the IGF toll center, PLDT
incurred an estimated monthly loss of P10,185,325.96. 9 Records at the
Securities and Exchange Commission (SEC) also revealed that Baynet was not
authorized to provide international or domestic long distance telephone service
in the country. The following are its officers: Yuji Hijioka, a Japanese national
(chairman of the board of directors); Gina C. Mukaida, a Filipina (board member
and president); Luis Marcos P. Laurel, a Filipino (board member and corporate
secretary); Ricky Chan Pe, a Filipino (board member and treasurer); and Yasushi
Ueshima, also a Japanese national (board member). HcDaAI
Upon complaint of PLDT against Baynet for network fraud, and on the strength of
two search warrants 10 issued by the RTC of Makati, Branch 147, National
Bureau of Investigation (NBI) agents searched its office at the 7th Floor, SJG
Building, Kalayaan Avenue, Makati City on November 8, 1999. Atsushi Matsuura,
Nobuyoshi Miyake, Edourd D. Lacson and Rolando J. Villegas were arrested by
NBI agents while in the act of manning the operations of Baynet. Seized in the
premises during the search were numerous equipment and devices used in its
ISR activities, such as multiplexers, modems, computer monitors, CPUs, antenna,
assorted computer peripheral cords and microprocessors, cables/wires, assorted
PLDT statement of accounts, parabolic antennae and voltage regulators.
State Prosecutor Ofelia L. Calo conducted an inquest investigation and issued a
Resolution 11 on January 28, 2000, finding probable cause for theft under Article
308 of the Revised Penal Code and Presidential Decree No. 401 12 against the
respondents therein, including Laurel.
On February 8, 2000, State Prosecutor Calo filed an Information with the RTC of
Makati City charging Matsuura, Miyake, Lacson and Villegas with theft under
Article 308 of the Revised Penal Code. After conducting the requisite preliminary
investigation, the State Prosecutor filed an Amended Information impleading
Laurel (a partner in the law firm of Ingles, Laurel, Salinas, and, until November
19, 1999, a member of the board of directors and corporate secretary of Baynet),
and the other members of the board of directors of said corporation, namely,
Yuji Hijioka, Yasushi Ueshima, Mukaida, Lacson and Villegas, as accused for theft
under Article 308 of the Revised Penal Code. The inculpatory portion of the
Amended Information reads:
On or about September 10-19, 1999, or prior thereto, in Makati City, and within
the jurisdiction of this Honorable Court, the accused, conspiring and
confederating together and all of them mutually helping and aiding one another,
with intent to gain and without the knowledge and consent of the Philippine
Long Distance Telephone (PLDT), did then and there willfully, unlawfully and
feloniously take, steal and use the international long distance calls belonging to
PLDT by conducting International Simple Resale (ISR), which is a method of
routing and completing international long distance calls using lines, cables,
antennae, and/or air wave frequency which connect directly to the local or
domestic exchange facilities of the country where the call is destined, effectively
stealing this business from PLDTwhile using its facilities in the estimated amount
of P20,370,651.92 to the damage and prejudice of PLDT, in the said amount.
CONTRARY TO LAW. 13
Accused Laurel filed a "Motion to Quash (with Motion to Defer Arraignment)" on
the ground that the factual allegations in the Amended Information do not
constitute the felony of theft under Article 308 of the Revised Penal Code. He
averred that the Revised Penal Code, or any other special penal law for that
matter, does not prohibit ISR operations. He claimed that telephone calls with
the use of PLDT telephone lines, whether domestic or international, belong to
the persons making the call, not to PLDT. He argued that the caller merely uses
the facilities of PLDT, and what the latter owns are the telecommunication
infrastructures or facilities through which the call is made. He also asserted that
PLDT is compensated for the caller's use of its facilities by way of rental; for an
outgoing overseas call, PLDT charges the caller per minute, based on the
duration of the call. Thus, no personal property was stolen from PLDT. According
to Laurel, the P20,370,651.92 stated in the Information, if anything, represents
the rental for the use of PLDT facilities, and not the value of anything owned by
it. Finally, he averred that the allegations in the Amended Information are
already subsumed under the Information for violation of Presidential Decree
(P.D.) No. 401 filed and pending in the Metropolitan Trial Court of Makati City,
docketed as Criminal Case No. 276766.
The prosecution, through private complainant PLDT, opposed the
motion, 14 contending that the movant unlawfully took personal property
belonging to it, as follows: 1) intangible telephone services that are being offered
by PLDT and other telecommunication companies, i.e., the connection and
interconnection to their telephone lines/facilities; 2) the use of those
facilities over a period of time; and 3) the revenues derived in connection with
the rendition of such services and the use of such facilities. 15
The prosecution asserted that the use of PLDT's intangible telephone
services/facilities allows electronic voice signals to pass through the same, and
ultimately to the called party's number. It averred that such service/facility is
akin to electricity which, although an intangible property, may, nevertheless, be
appropriated and be the subject of theft. Such service over a period of time for a
consideration is the business that PLDT provides to its customers, which enables
the latter to send various messages to installed recipients. The service rendered
by PLDT is akin to merchandise which has specific value, and therefore, capable
of appropriation by another, as in this case, through the ISR operations
conducted by the movant and his co-accused. TCAHES
The prosecution further alleged that "international business calls and revenues
constitute personal property envisaged in Article 308 of the Revised Penal Code."
Moreover, the intangible telephone services/facilities belong to PLDT and not to
the movant and the other accused, because they have no telephone services and
facilities of their own duly authorized by the NTC; thus, the taking by the movant
and his co-accused of PLDT services was with intent to gain and without the
latter's consent.
The prosecution pointed out that the accused, as well as the movant, were paid
in exchange for their illegal appropriation and use of PLDT's telephone services
and facilities; on the other hand, the accused did not pay a single centavo for
their illegal ISR operations. Thus, the acts of the accused were akin to the use of
a "jumper" by a consumer to deflect the current from the house electric meter,
thereby enabling one to steal electricity. The prosecution emphasized that its
position is fortified by the Resolutions of the Department of Justice in PLDT v.
Tiongson, et al. (I.S. No. 97-0925) and in PAOCTF-PLDT v. Elton John Tuason, et al.
(I.S. No. 2000-370) which were issued on August 14, 2000 finding probable cause
for theft against the respondents therein.
On September 14, 2001, the RTC issued an Order 16 denying the Motion to
Quash the Amended Information. The court declared that, although there is no
law that expressly prohibits the use of ISR, the facts alleged in the Amended
Information "will show how the alleged crime was committed by conducting
ISR," to the damage and prejudice of PLDT.
Laurel filed a Motion for Reconsideration 17 of the Order, alleging that
international long distance calls are not personal property, and are not capable
of appropriation. He maintained that business or revenue is not considered
personal property, and that the prosecution failed to adduce proof of its
existence and the subsequent loss of personal property belonging to another.
Citing the ruling of the Court in United States v. De Guzman, 18 Laurel averred
that the case is not one with telephone calls which originate with a particular
caller and terminates with the called party. He insisted that telephone calls are
considered privileged communications under the Constitution and cannot be
considered as "the property of PLDT." He further argued that there is no kinship
between telephone calls and electricity or gas, as the latter are forms of energy
which are generated and consumable, and may be considered as personal
property because of such characteristic. On the other hand, the movant argued,
the telephone business is not a form of energy but is an activity.
In its Order 19 dated December 11, 2001, the RTC denied the movant's Motion
for Reconsideration. This time, it ruled that what was stolen from PLDT was its
"business" because, as alleged in the Amended Information, the international
long distance calls made through the facilities of PLDT formed part of its
business. The RTC noted that the movant was charged with stealing the business
of PLDT. To support its ruling, it cited Strochecker v. Ramirez, 20 where the Court
ruled that interest in business is personal property capable of appropriation. It
further declared that, through their ISR operations, the movant and his co-
accused deprived PLDT of fees for international long distance calls, and that the
ISR used by the movant and his co-accused was no different from the "jumper"
used for stealing electricity.
Laurel then filed a Petition for Certiorari with the CA, assailing the Order of the
RTC. He alleged that the respondent judge gravely abused his discretion in
denying his Motion to Quash the Amended Information. 21 As gleaned from the
material averments of the amended information, he was charged with stealing
the international long distance calls belonging to PLDT, not its business.
Moreover, the RTC failed to distinguish between the business of PLDT (providing
services for international long distance calls) and the revenues derived
therefrom. He opined that a "business" or its revenues cannot be considered as
personal property under Article 308 of the Revised Penal Code, since a
"business" is "(1) a commercial or mercantile activity customarily engaged in as a
means of livelihood and typically involving some independence of judgment and
power of decision; (2) a commercial or industrial enterprise; and (3) refers to
transactions, dealings or intercourse of any nature." On the other hand, the term
"revenue" is defined as "the income that comes back from an investment (as in
real or personal property); the annual or periodical rents, profits, interests, or
issues of any species of real or personal property." 22
Laurel further posited that an electric company's business is the production and
distribution of electricity; a gas company's business is the production and/or
distribution of gas (as fuel); while a water company's business is the production
and distribution of potable water. He argued that the "business" in all these
cases is the commercial activity, while the goods and merchandise are the
products of such activity. Thus, in prosecutions for theft of certain forms of
energy, it is the electricity or gas which is alleged to be stolen and not the
"business" of providing electricity or gas. However, since a telephone company
does not produce any energy, goods or merchandise and merely renders a
service or, in the words of PLDT, "the connection and interconnection to their
telephone lines/facilities," such service cannot be the subject of theft as defined
in Article 308 of the Revised Penal Code. 23
He further declared that to categorize "business" as personal property under
Article 308 of the Revised Penal Code would lead to absurd consequences; in
prosecutions for theft of gas, electricity or water, it would then be permissible to
allege in the Information that it is the gas business, the electric business or the
water business which has been stolen, and no longer the merchandise produced
by such enterprise. 24
Laurel further cited the Resolution of the Secretary of Justice in Piltel v.
Mendoza, 25 where it was ruled that the Revised Penal Code, legislated as it was
before present technological advances were even conceived, is not adequate to
address the novel means of "stealing" airwaves or airtime. In said resolution, it
was noted that the inadequacy prompted the filing of Senate Bill 2379 (sic)
entitled "The Anti-Telecommunications Fraud of 1997" to deter cloning of
cellular phones and other forms of communications fraud. The said bill "aims to
protect in number (ESN) (sic) or Capcode, mobile identification number (MIN),
electronic-international mobile equipment identity (EMEI/IMEI), or subscriber
identity module" and "any attempt to duplicate the data on another cellular
phone without the consent of a public telecommunications entity would be
punishable by law." 26 Thus, Laurel concluded, "there is no crime if there is no
law punishing the crime." THADEI
On August 30, 2002, the CA rendered judgment dismissing the petition. 27 The
appellate court ruled that a petition for certiorari under Rule 65 of the Rules of
Court was not the proper remedy of the petitioner. On the merits of the petition,
it held that while business is generally an activity which is abstract and intangible
in form, it is nevertheless considered "property" under Article 308 of the Revised
Penal Code. The CA opined that PLDT's business of providing international calls is
personal property which may be the object of theft, and cited United States v.
Carlos 28 to support such conclusion. The tribunal also cited Strochecker v.
Ramirez, 29where this Court ruled that one-half interest in a day's business is
personal property under Section 2 of Act No. 3952, otherwise known as the Bulk
Sales Law. The appellate court held that the operations of the ISR are not
subsumed in the charge for violation of P.D. No. 401.
Laurel, now the petitioner, assails the decision of the CA, contending that —
THE COURT OF APPEALS ERRED IN RULING THAT THE PERSONAL PROPERTY
ALLEGEDLY STOLEN PER THE INFORMATION IS NOT THE "INTERNATIONAL LONG
DISTANCE CALLS" BUT THE "BUSINESS OF PLDT."
THE COURT OF APPEALS ERRED IN RULING THAT THE TERM "BUSINESS" IS
PERSONAL PROPERTY WITHIN THE MEANING OF ART. 308 OF THE REVISED
PENAL CODE. 30
Petitioner avers that the petition for a writ of certiorari may be filed to nullify an
interlocutory order of the trial court which was issued with grave abuse of
discretion amounting to excess or lack of jurisdiction. In support of his petition
before the Court, he reiterates the arguments in his pleadings filed before the
CA. He further claims that while the right to carry on a business or an interest or
participation in business is considered property under the New Civil Code, the
term "business," however, is not. He asserts that the Philippine Legislature,
which approved the Revised Penal Code way back in January 1, 1932, could not
have contemplated to include international long distance calls and "business" as
personal property under Article 308 thereof.
In its comment on the petition, the Office of the Solicitor General (OSG)
maintains that the amended information clearly states all the essential elements
of the crime of theft. Petitioner's interpretation as to whether an "international
long distance call" is personal property under the law is inconsequential, as a
reading of the amended information readily reveals that specific acts and
circumstances were alleged charging Baynet, through its officers, including
petitioner, of feloniously taking, stealing and illegally using international long
distance calls belonging to respondent PLDT by conducting ISR operations, thus,
"routing and completing international long distance calls using lines, cables,
antenna and/or airwave frequency which connect directly to the local or
domestic exchange facilities of the country where the call is destined." The OSG
maintains that the international long distance calls alleged in the amended
information should be construed to mean "business" of PLDT, which, while
abstract and intangible in form, is personal property susceptible of
appropriation. 31 The OSG avers that what was stolen by petitioner and his co-
accused is the business of PLDT providing international long distance calls which,
though intangible, is personal property of the PLDT. 32
For its part, respondent PLDT asserts that personal property under Article 308 of
the Revised Penal Code comprehends intangible property such as electricity and
gas which are valuable articles for merchandise, brought and sold like other
personal property, and are capable of appropriation. It insists that the business
of international calls and revenues constitute personal property because the
same are valuable articles of merchandise. The respondent reiterates that
international calls involve (a) the intangible telephone services that are being
offered by it, that is, the connection and interconnection to the telephone
network, lines or facilities; (b) the use of its telephone network, lines or facilities
over a period of time; and (c) the income derived in connection therewith. 33
PLDT further posits that business revenues or the income derived in connection
with the rendition of such services and the use of its telephone network, lines or
facilities are personal properties under Article 308 of the Revised Penal Code; so
is the use of said telephone services/telephone network, lines or facilities which
allow electronic voice signals to pass through the same and ultimately to the
called party's number. It is akin to electricity which, though intangible property,
may nevertheless be appropriated and can be the object of theft. The use of
respondent PLDT's telephone network, lines, or facilities over a period of time for
consideration is the business that it provides to its customers, which enables the
latter to send various messages to intended recipients. Such use over a period of
time is akin to merchandise which has value and, therefore, can be appropriated
by another. According to respondent PLDT, this is what actually happened when
petitioner Laurel and the other accused below conducted illegal ISR
operations. 34
The petition is meritorious.
The issues for resolution are as follows: (a) whether or not the petition
for certiorari is the proper remedy of the petitioner in the Court of Appeals; (b)
whether or not international telephone calls using Bay Super Orient Cards
through the telecommunication services provided by PLDT for such calls, or, in
short, PLDT's business of providing said telecommunication services, are proper
subjects of theft under Article 308 of the Revised Penal Code; and (c) whether or
not the trial court committed grave abuse of discretion amounting to excess or
lack of jurisdiction in denying the motion of the petitioner to quash the amended
information. IaHAcT
On the issue of whether or not the petition for certiorari instituted by the
petitioner in the CA is proper, the general rule is that a petition
for certiorari under Rule 65 of the Rules of Court, as amended, to nullify an order
denying a motion to quash the Information is inappropriate because the
aggrieved party has a remedy of appeal in the ordinary course of law. Appeal
and certiorari are mutually exclusive of each other. The remedy of the aggrieved
party is to continue with the case in due course and, when an unfavorable
judgment is rendered, assail the order and the decision on appeal. However, if
the trial court issues the order denying the motion to quash the Amended
Information with grave abuse of discretion amounting to excess or lack of
jurisdiction, or if such order is patently erroneous, or null and void for being
contrary to the Constitution, and the remedy of appeal would not afford
adequate and expeditious relief, the accused may resort to the extraordinary
remedy ofcertiorari. 35 A special civil action for certiorari is also available where
there are special circumstances clearly demonstrating the inadequacy of an
appeal. As this Court held in Bristol Myers Squibb (Phils.), Inc. v. Viloria: 36
Nonetheless, the settled rule is that a writ of certiorari may be granted in cases
where, despite availability of appeal after trial, there is at least a prima
facieshowing on the face of the petition and its annexes that: (a) the trial court
issued the order with grave abuse of discretion amounting to lack of or in excess
of jurisdiction; (b) appeal would not prove to be a speedy and adequate remedy;
(c) where the order is a patent nullity; (d) the decision in the present case will
arrest future litigations; and (e) for certain considerations such as public welfare
and public policy. 37
In his petition for certiorari in the CA, petitioner averred that the trial court
committed grave abuse of its discretion amounting to excess or lack of
jurisdiction when it denied his motion to quash the Amended Information
despite his claim that the material allegations in the Amended Information do
not charge theft under Article 308 of the Revised Penal Code, or any offense for
that matter. By so doing, the trial court deprived him of his constitutional right to
be informed of the nature of the charge against him. He further averred that the
order of the trial court is contrary to the constitution and is, thus, null and void.
He insists that he should not be compelled to undergo the rigors and tribulations
of a protracted trial and incur expenses to defend himself against a non-existent
charge.
Petitioner is correct.
An information or complaint must state explicitly and directly every act or
omission constituting an offense 38 and must allege facts establishing conduct
that a penal statute makes criminal; 39 and describes the property which is the
subject of theft to advise the accused with reasonable certainty of the accusation
he is called upon to meet at the trial and to enable him to rely on the judgment
thereunder of a subsequent prosecution for the same offense. 40 It must show,
on its face, that if the alleged facts are true, an offense has been committed. The
rule is rooted on the constitutional right of the accused to be informed of the
nature of the crime or cause of the accusation against him. He cannot be
convicted of an offense even if proven unless it is alleged or necessarily included
in the Information filed against him.
As a general prerequisite, a motion to quash on the ground that the Information
does not constitute the offense charged, or any offense for that matter, should
be resolved on the basis of said allegations whose truth and veracity are
hypothetically committed; 41 and on additional facts admitted or not denied by
the prosecution. 42 If the facts alleged in the Information do not constitute an
offense, the complaint or information should be quashed by the court. 43
We have reviewed the Amended Information and find that, as mentioned by the
petitioner, it does not contain material allegations charging the petitioner of
theft of personal property under Article 308 of the Revised Penal Code. It, thus,
behooved the trial court to quash the Amended Information. The Order of the
trial court denying the motion of the petitioner to quash the Amended
Information is a patent nullity.
On the second issue, we find and so hold that the international telephone calls
placed by Bay Super Orient Card holders, the telecommunication services
provided by PLDT and its business of providing said services are not personal
properties under Article 308 of the Revised Penal Code. The construction by the
respondents of Article 308 of the said Code to include, within its coverage, the
aforesaid international telephone calls, telecommunication services and business
is contrary to the letter and intent of the law. SDHITE
The rule is that, penal laws are to be construed strictly. Such rule is founded on
the tenderness of the law for the rights of individuals and on the plain principle
that the power of punishment is vested in Congress, not in the judicial
department. It is Congress, not the Court, which is to define a crime, and ordain
its punishment.44 Due respect for the prerogative of Congress in defining
crimes/felonies constrains the Court to refrain from a broad interpretation of
penal laws where a "narrow interpretation" is appropriate. The Court must take
heed to language, legislative history and purpose, in order to strictly determine
the wrath and breath of the conduct the law forbids. 45 However, when the
congressional purpose is unclear, the court must apply the rule of lenity, that is,
ambiguity concerning the ambit of criminal statutes should be resolved in favor
of lenity. 46
Penal statutes may not be enlarged by implication or intent beyond the fair
meaning of the language used; and may not be held to include offenses other
than those which are clearly described, notwithstanding that the Court may think
that Congress should have made them more comprehensive. 47 Words and
phrases in a statute are to be construed according to their common meaning and
accepted usage.
As Chief Justice John Marshall declared, "it would be dangerous, indeed, to carry
the principle that a case which is within reason or mischief of a statute is within
its provision, so far as to punish a crime not enumerated in the statute because it
is of equal atrocity, or of kindred character with those which are
enumerated. 48When interpreting a criminal statute that does not explicitly
reach the conduct in question, the Court should not base an expansive reading
on inferences from subjective and variable understanding. 49
Article 308 of the Revised Penal Code defines theft as follows:
Art. 308. Who are liable for theft. — Theft is committed by any person who, with
intent to gain but without violence, against or intimidation of persons nor force
upon things, shall take personal property of another without the latter's consent.
The provision was taken from Article 530 of the Spanish Penal Code which reads:
1. Los que con ánimo de lucrarse, y sin violencia o intimidación en las personas ni
fuerza en las cosas, toman las cosas muebles ajenas sin la voluntad de su
dueño. 50
For one to be guilty of theft, the accused must have an intent to steal (animus
furandi) personal property, meaning the intent to deprive another of his
ownership/lawful possession of personal property which intent is apart from and
concurrently with the general criminal intent which is an essential element of a
felony of dolo (dolus malus).
An information or complaint for simple theft must allege the following elements:
(a) the taking of personal property; (b) the said property belongs to another; (c)
the taking be done with intent to gain; and (d) the taking be accomplished
without the use of violence or intimidation of person/s or force upon things. 51
One is apt to conclude that "personal property" standing alone, covers both
tangible and intangible properties and are subject of theft under the Revised
Penal Code. But the words "Personal property" under the Revised Penal Code
must be considered in tandem with the word "take" in the law. The statutory
definition of "taking" and movable property indicates that, clearly, not all
personal properties may be the proper subjects of theft. The general rule is that,
only movable properties which have physical or material existence and
susceptible of occupation by another are proper objects of theft. 52 As explained
by Cuelo Callon: "Cosa juridicamente es toda sustancia corporal, material,
susceptible de ser aprehendida que tenga un valor cualquiera." 53
According to Cuello Callon, in the context of the Penal Code, only those movable
properties which can be taken and carried from the place they are found are
proper subjects of theft. Intangible properties such as rights and ideas are not
subject of theft because the same cannot be "taken" from the place it is found
and is occupied or appropriated. IHcSCA
Solamente las cosas muebles y corporales pueden ser objeto de hurto. La
sustracción de cosas inmuebles y la cosas incorporales (v. gr., los derechos, las
ideas) no puede integrar este delito, pues no es posible asirlas, tomarlas, para
conseguir su apropiación. El Codigo emplea la expresión "cosas mueble" en el
sentido de cosa que es susceptible de ser llevada del lugar donde se encuentra,
como dinero, joyas, ropas, etcétera, asi que su concepto no coincide por completo
con el formulado por el Codigo civil (arts. 335 y 336). 54
Thus, movable properties under Article 308 of the Revised Penal Code should be
distinguished from the rights or interests to which they relate. A naked right
existing merely in contemplation of law, although it may be very valuable to the
person who is entitled to exercise it, is not the subject of theft or
larceny. 55 Such rights or interests are intangible and cannot be "taken" by
another. Thus, right to produce oil, good will or an interest in business, or the
right to engage in business, credit or franchise are properties. So is the credit line
represented by a credit card. However, they are not proper subjects of theft or
larceny because they are without form or substance, the mere "breath" of the
Congress. On the other hand, goods, wares and merchandise of businessmen and
credit cards issued to them are movable properties with physical and material
existence and may be taken by another; hence, proper subjects of theft.
There is "taking" of personal property, and theft is consummated when the
offender unlawfully acquires possession of personal property even if for a short
time; or if such property is under the dominion and control of the thief. The
taker, at some particular amount, must have obtained complete and absolute
possession and control of the property adverse to the rights of the owner or the
lawful possessor thereof. 56 It is not necessary that the property be actually
carried away out of the physical possession of the lawful possessor or that he
should have made his escape with it. 57 Neither asportation nor actual manual
possession of property is required. Constructive possession of the thief of the
property is enough. 58
The essence of the element is the taking of a thing out of the possession of the
owner without his privity and consent and without animus revertendi. 59
Taking may be by the offender's own hands, by his use of innocent persons
without any felonious intent, as well as any mechanical device, such as an access
device or card, or any agency, animate or inanimate, with intent to gain. Intent to
gain includes the unlawful taking of personal property for the purpose of deriving
utility, satisfaction, enjoyment and pleasure. 60
We agree with the contention of the respondents that intangible properties such
as electrical energy and gas are proper subjects of theft. The reason for this is
that, as explained by this Court in United States v. Carlos 61 and United States v.
Tambunting, 62 based on decisions of the Supreme Court of Spain and of the
courts in England and the United States of America, gas or electricity are capable
of appropriation by another other than the owner. Gas and electrical energy may
be taken, carried away and appropriated. In People v. Menagas, 63 the Illinois
State Supreme Court declared that electricity, like gas, may be seen and felt.
Electricity, the same as gas, is a valuable article of merchandise, bought and sold
like other personal property and is capable of appropriation by another. It is a
valuable article of merchandise, bought and sold like other personal
property, susceptible of being severed from a mass or larger quantity and of
being transported from place to place. Electrical energy may, likewise, be taken
and carried away. It is a valuable commodity, bought and sold like other personal
property. It may be transported from place to place. There is nothing in the
nature of gas used for illuminating purposes which renders it incapable of being
feloniously taken and carried away. AaECSH
In People ex rel Brush Electric Illuminating Co. v. Wemple, 64 the Court of Appeals
of New York held that electric energy is manufactured and sold in determinate
quantities at a fixed price, precisely as are coal, kerosene oil, and gas. It may be
conveyed to the premises of the consumer, stored in cells of different capacity
known as an accumulator; or it may be sent through a wire, just as gas or oil may
be transported either in a close tank or forced through a pipe. Having reached
the premises of the consumer, it may be used in any way he may desire, being,
like illuminating gas, capable of being transformed either into heat, light, or
power, at the option of the purchaser. In Woods v. People, 65 the Supreme Court
of Illinois declared that there is nothing in the nature of gas used for illuminating
purposes which renders it incapable of being feloniously taken and carried
away. It is a valuable article of merchandise, bought and sold like other
personal property, susceptible of being severed from a mass or larger quantity
and of being transported from place to place.
Gas and electrical energy should not be equated with business or services
provided by business entrepreneurs to the public. Business does not have an
exact definition. Business is referred as that which occupies the time, attention
and labor of men for the purpose of livelihood or profit. It embraces everything
that which a person can be employed. 66 Business may also mean employment,
occupation or profession. Business is also defined as a commercial activity for
gain benefit or advantage. 67 Business, like services in business, although are
properties, are not proper subjects of theft under the Revised Penal Code
because the same cannot be "taken" or "occupied." If it were otherwise, as
claimed by the respondents, there would be no juridical difference between the
taking of the business of a person or the services provided by him for gain, vis-à-
vis, the taking of goods, wares or merchandise, or equipment comprising his
business. 68 If it was its intention to include "business" as personal property
under Article 308 of the Revised Penal Code, the Philippine Legislature should
have spoken in language that is clear and definite: that business is personal
property under Article 308 of the Revised Penal Code. 69
We agree with the contention of the petitioner that, as gleaned from the
material averments of the Amended Information, he is charged of "stealing the
international long distance calls belonging to PLDT" and the use thereof, through
the ISR. Contrary to the claims of the OSG and respondent PLDT, the petitioner is
not charged of stealing P20,370,651.95 from said respondent. Said amount of
P20,370,651.95 alleged in the Amended Information is the aggregate amount of
access, transmission or termination charges which the PLDT expected from the
international long distance calls of the callers with the use of Baynet Super
Orient Cards sold by Baynet Co. Ltd.
In defining theft, under Article 308 of the Revised Penal Code, as the taking of
personal property without the consent of the owner thereof, the Philippine
legislature could not have contemplated the human voice which is converted
into electronic impulses or electrical current which are transmitted to the party
called through the PSTN of respondent PLDT and the ISR of Baynet Card Ltd.
within its coverage. When the Revised Penal Code was approved, on December
8, 1930, international telephone calls and the transmission and routing of
electronic voice signals or impulses emanating from said calls, through the PSTN,
IPL and ISR, were still non-existent. Case law is that, where a legislative history
fails to evidence congressional awareness of the scope of the statute claimed by
the respondents, a narrow interpretation of the law is more consistent with the
usual approach to the construction of the statute. Penal responsibility cannot be
extended beyond the fair scope of the statutory mandate. 70
Respondent PLDT does not acquire possession, much less, ownership of the
voices of the telephone callers or of the electronic voice signals or current
emanating from said calls. The human voice and the electronic voice signals or
current caused thereby are intangible and not susceptible of possession,
occupation or appropriation by the respondent PLDT or even the petitioner, for
that matter. PLDT merely transmits the electronic voice signals through its
facilities and equipment. Baynet Card Ltd., through its operator, merely
intercepts, reroutes the calls and passes them to its toll center. Indeed, the
parties called receive the telephone calls from Japan.
In this modern age of technology, telecommunications systems have become so
tightly merged with computer systems that it is difficult to know where one
starts and the other finishes. The telephone set is highly computerized and
allows computers to communicate across long distances. 71 The instrumentality
at issue in this case is not merely a telephone but a telephone inexplicably linked
to a computerized communications system with the use of Baynet Cards sold by
the Baynet Card Ltd. The corporation uses computers, modems and software,
among others, for its ISR. 72
The conduct complained of by respondent PLDT is reminiscent of "phreaking" (a
slang term for the action of making a telephone system to do something that it
normally should not allow by "making the phone company bend over and grab its
ankles"). A "phreaker" is one who engages in the act of manipulating phones and
illegally markets telephone services. 73 Unless the phone company replaces all
its hardware, phreaking would be impossible to stop. The phone companies in
North America were impelled to replace all their hardware and adopted full
digital switching system known as the Common Channel Inter Office Signaling.
Phreaking occurred only during the 1960's and 1970's, decades after the Revised
Penal Code took effect. aHTEIA
The petitioner is not charged, under the Amended Information, for theft of
telecommunication or telephone services offered by PLDT. Even if he is, the term
"personal property" under Article 308 of the Revised Penal Code cannot be
interpreted beyond its seams so as to include "telecommunication or telephone
services" or computer services for that matter. The word "service" has a variety
of meanings dependent upon the context, or the sense in which it is used; and, in
some instances, it may include a sale. For instance, the sale of food by
restaurants is usually referred to as "service," although an actual sale is
involved. 74 It may also mean the duty or labor to be rendered by one person to
another; performance of labor for the benefit of another. 75 In the case of PLDT,
it is to render local and international telecommunications services and such
other services as authorized by the CPCA issued by the NTC. Even at common
law, neither time nor services may be taken and occupied or appropriated. 76 A
service is generally not considered property and a theft of service would not,
therefore, constitute theft since there can be no caption or
asportation. 77 Neither is the unauthorized use of the equipment and facilities of
PLDT by the petitioner theft under the aforequoted provision of the Revised
Penal Code. 78
If it was the intent of the Philippine Legislature, in 1930, to include services to be
the subject of theft, it should have incorporated the same in Article 308 of the
Revised Penal Code. The Legislature did not. In fact, the Revised Penal Code does
not even contain a definition of services.
If taking of telecommunication services or the business of a person, is to be
proscribed, it must be by special statute 79 or an amendment of the Revised
Penal Code. Several states in the United States, such as New York, New Jersey,
California and Virginia, realized that their criminal statutes did not contain any
provisions penalizing the theft of services and passed laws defining and
penalizing theft of telephone and computer services. The Pennsylvania Criminal
Statute now penalizes theft of services, thus:
(a) Acquisition of services. —
(1) A person is guilty of theft if he intentionally obtains services for himself or for
another which he knows are available only for compensation, by deception or
threat, by altering or tampering with the public utility meter or measuring device
by which such services are delivered or by causing or permitting such altering or
tampering, by making or maintaining any unauthorized connection, whether
physically, electrically or inductively, to a distribution or transmission line, by
attaching or maintaining the attachment of any unauthorized device to any
cable, wire or other component of an electric, telephone or cable television
system or to a television receiving set connected to a cable television system, by
making or maintaining any unauthorized modification or alteration to any device
installed by a cable television system, or by false token or other trick or artifice
to avoid payment for the service.
In the State of Illinois in the United States of America, theft of labor or services or
use of property is penalized:
(a) A person commits theft when he obtains the temporary use of property, labor
or services of another which are available only for hire, by means of threat or
deception or knowing that such use is without the consent of the person
providing the property, labor or services.
In 1980, the drafters of the Model Penal Code in the United States of America
arrived at the conclusion that labor and services, including professional services,
have not been included within the traditional scope of the term "property" in
ordinary theft statutes. Hence, they decided to incorporate in the Code Section
223.7, which defines and penalizes theft of services, thus:
(1) A person is guilty of theft if he purposely obtains services which he knows are
available only for compensation, by deception or threat, or by false token or
other means to avoid payment for the service. "Services" include labor,
professional service, transportation, telephone or other public service,
accommodation in hotels, restaurants or elsewhere, admission to exhibitions,
use of vehicles or other movable property. Where compensation for service is
ordinarily paid immediately upon the rendering of such service, as in the case of
hotels and restaurants, refusal to pay or absconding without payment or offer to
pay gives rise to a presumption that the service was obtained by deception as to
intention to pay; (2) A person commits theft if, having control over the
disposition of services of others, to which he is not entitled, he knowingly diverts
such services to his own benefit or to the benefit of another not entitled thereto.
Interestingly, after the State Supreme Court of Virginia promulgated its decision
in Lund v. Commonwealth, 80 declaring that neither time nor services may be
taken and carried away and are not proper subjects of larceny, the General
Assembly of Virginia enacted Code No. 18-2-98 which reads:
Computer time or services or data processing services or information or data
stored in connection therewith is hereby defined to be property which may be
the subject of larceny under § § 18.2-95 or 18.2-96, or embezzlement under §
18.2-111, or false pretenses under § 18.2-178. TAIEcS
In the State of Alabama, Section 13A-8-10(a)(1) of the Penal Code of Alabama of
1975 penalizes theft of services:
"A person commits the crime of theft of services if: (a) He intentionally obtains
services known by him to be available only for compensation by deception,
threat, false token or other means to avoid payment for the services . . . "
In the Philippines, Congress has not amended the Revised Penal Code to include
theft of services or theft of business as felonies. Instead, it approved a
law,Republic Act No. 8484, otherwise known as the Access Devices Regulation
Act of 1998, on February 11, 1998. Under the law, an access device means
any card, plate, code, account number, electronic serial number, personal
identification number and other telecommunication services, equipment or
instrumentalities-identifier or other means of account access that can be used to
obtain money, goods, services or any other thing of value or to initiate a transfer
of funds other than a transfer originated solely by paper instrument. Among the
prohibited acts enumerated in Section 9 of the law are the acts of obtaining
money or anything of value through the use of an access device, with intent to
defraud or intent to gain and fleeing thereafter; and of effecting transactions
with one or more access devices issued to another person or persons to receive
payment or any other thing of value. Under Section 11 of the law, conspiracy to
commit access devices fraud is a crime. However, the petitioner is not charged of
violation of R.A. 8484.
Significantly, a prosecution under the law shall be without prejudice to any
liability for violation of any provisions of the Revised Penal Code inclusive of theft
under Rule 308 of the Revised Penal Code and estafa under Article 315 of the
Revised Penal Code. Thus, if an individual steals a credit card and uses the same
to obtain services, he is liable of the following: theft of the credit card under
Article 308 of the Revised Penal Code; violation of Republic Act No. 8484;
and estafa under Article 315(2)(a) of the Revised Penal Code with the service
provider as the private complainant. The petitioner is not charged
of estafa before the RTC in the Amended Information.
Section 33 of Republic Act No. 8792, Electronic Commerce Act of 2000 provides:
Sec. 33. Penalties. — The following Acts shall be penalized by fine and/or
imprisonment, as follows:
a) Hacking or cracking which refers to unauthorized access into or interference in
a computer system/server or information and communication system; or any
access in order to corrupt, alter, steal, or destroy using a computer or other
similar information and communication devices, without the knowledge and
consent of the owner of the computer or information and communications
system, including the introduction of computer viruses and the like, resulting on
the corruption, destruction, alteration, theft or loss of electronic data messages
or electronic documents shall be punished by a minimum fine of One hundred
thousand pesos (P100,000.00) and a maximum commensurate to the damage
incurred and a mandatory imprisonment of six (6) months to three (3) years.
IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The assailed Orders
of the Regional Trial Court and the Decision of the Court of Appeals are
REVERSED and SET ASIDE. The Regional Trial Court is directed to issue an order
granting the motion of the petitioner to quash the Amended Information.
EN BANC
[G.R. No. 155076. January 13, 2009.]
LUIS MARCOS P. LAUREL, petitioner, vs. HON. ZEUS C. ABROGAR, Presiding
Judge of the Regional Trial Court, Makati City, Branch 150, PEOPLE OF THE
PHILIPPINES & PHILIPPINE LONG DISTANCE TELEPHONE
COMPANY, respondents.
RESOLUTION
YNARES-SANTIAGO, J p:
On February 27, 2006, this Court's First Division rendered judgment in this case
as follows: aEDCSI
IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The assailed Orders
of the Regional Trial Court and the Decision of the Court of Appeals
are REVERSED and SET ASIDE. The Regional Trial Court is directed to issue an
order granting the motion of the petitioner to quash the Amended Information.
SO ORDERED. 1
By way of brief background, petitioner is one of the accused in Criminal Case No.
99-2425, filed with the Regional Trial Court of Makati City, Branch 150. The
Amended Information charged the accused with theft under Article 308 of the
Revised Penal Code, committed as follows:
On or about September 10-19, 1999, or prior thereto in Makati City, and within
the jurisdiction of this Honorable Court, the accused, conspiring and
confederating together and all of them mutually helping and aiding one another,
with intent to gain and without the knowledge and consent of the Philippine
Long Distance Telephone (PLDT), did then and there willfully, unlawfully and
feloniously take, steal and use the international long distance calls belonging to
PLDT by conducting International Simple Resale (ISR), which is a method of
routing and completing international long distance calls using lines, cables,
antenae, and/or air wave frequency which connect directly to the local or
domestic exchange facilities of the country where the call is destined, effectively
stealing this business from PLDT while using its facilities in the estimated amount
of P20,370,651.92 to the damage and prejudice of PLDT, in the said amount.
CONTRARY TO LAW. 2
Petitioner filed a "Motion to Quash (with Motion to Defer Arraignment)," on the
ground that the factual allegations in the Amended Information do not constitute
the felony of theft. The trial court denied the Motion to Quash the Amended
Information, as well as petitioner's subsequent Motion for Reconsideration.
Petitioner's special civil action for certiorari was dismissed by the Court of
Appeals. Thus, petitioner filed the instant petition for review with this Court.
In the above-quoted Decision, this Court held that the Amended Information
does not contain material allegations charging petitioner with theft of personal
property since international long distance calls and the business of providing
telecommunication or telephone services are not personal properties under
Article 308 of the Revised Penal Code.
Respondent Philippine Long Distance Telephone Company (PLDT) filed a Motion
for Reconsideration with Motion to Refer the Case to the Supreme Court En
Banc. It maintains that the Amended Information charging petitioner with theft is
valid and sufficient; that it states the names of all the accused who were
specifically charged with the crime of theft of PLDT's international calls and
business of providing telecommunication or telephone service on or about
September 10 to 19, 1999 in Makati City by conducting ISR or International
Simple Resale; that it identifies the international calls and business of providing
telecommunication or telephone service of PLDT as the personal properties
which were unlawfully taken by the accused; and that it satisfies the test of
sufficiency as it enabled a person of common understanding to know the charge
against him and the court to render judgment properly. ISHaCD
PLDT further insists that the Revised Penal Code should be interpreted in the
context of the Civil Code's definition of real and personal property. The
enumeration of real properties in Article 415 of the Civil Code is exclusive such
that all those not included therein are personal properties. Since Article 308 of
the Revised Penal Code used the words "personal property" without
qualification, it follows that all "personal properties" as understood in the
context of the Civil Code, may be the subject of theft under Article 308 of the
Revised Penal Code. PLDT alleges that the international calls and business of
providing telecommunication or telephone service are personal properties
capable of appropriation and can be objects of theft.
PLDT also argues that "taking" in relation to theft under the Revised Penal Code
does not require "asportation", the sole requisite being that the object should be
capable of "appropriation". The element of "taking" referred to in Article 308 of
the Revised Penal Code means the act of depriving another of the possession and
dominion of a movable coupled with the intention, at the time of the "taking", of
withholding it with the character of permanency. There must be intent to
appropriate, which means to deprive the lawful owner of the thing. Thus, the
term "personal properties" under Article 308 of the Revised Penal Code is not
limited to only personal properties which are "susceptible of being severed from
a mass or larger quantity and of being transported from place to place."
PLDT likewise alleges that as early as the 1930s, international telephone calls
were in existence; hence, there is no basis for this Court's finding that the
Legislature could not have contemplated the theft of international telephone
calls and the unlawful transmission and routing of electronic voice signals or
impulses emanating from such calls by unlawfully tampering with the telephone
device as within the coverage of the Revised Penal Code.
According to respondent, the "international phone calls" which are "electric
currents or sets of electric impulses transmitted through a medium, and carry a
pattern representing the human voice to a receiver," are personal properties
which may be subject of theft. Article 416 (3) of the Civil Code deems "forces of
nature" (which includes electricity) which are brought under the control by
science, as personal property.
In his Comment to PLDT's motion for reconsideration, petitioner Laurel claims
that a telephone call is a conversation on the phone or a communication carried
out using the telephone. It is not synonymous to electric current or impulses.
Hence, it may not be considered as personal property susceptible of
appropriation. Petitioner claims that the analogy between generated electricity
and telephone calls is misplaced. PLDT does not produce or generate telephone
calls. It only provides the facilities or services for the transmission and switching
of the calls. He also insists that "business" is not personal property. It is not the
"business" that is protected but the "right to carry on a business". This right is
what is considered as property. Since the services of PLDT cannot be considered
as "property", the same may not be subject of theft. AaHDSI
The Office of the Solicitor General (OSG) agrees with respondent PLDT that
"international phone calls and the business or service of providing international
phone calls" are subsumed in the enumeration and definition of personal
property under the Civil Code hence, may be proper subjects of theft. It noted
that the cases of United States v. Genato, 3 United States v. Carlos 4 and United
States v. Tambunting, 5 which recognized intangible properties like gas and
electricity as personal properties, are deemed incorporated in our penal laws.
Moreover, the theft provision in the Revised Penal Code was deliberately
couched in broad terms precisely to be all-encompassing and embracing even
such scenario that could not have been easily anticipated.
According to the OSG, prosecution under Republic Act (RA) No. 8484 or
the Access Device Regulations Act of 1998 and RA 8792 or the Electronic
Commerce Act of 2000 does not preclude prosecution under the Revised Penal
Code for the crime of theft. The latter embraces unauthorized appropriation or
use of PLDT's international calls, service and business, for personal profit or gain,
to the prejudice of PLDT as owner thereof. On the other hand, the special laws
punish the surreptitious and advanced technical means employed to illegally
obtain the subject service and business. Even assuming that the correct
indictment should have been under RA 8484, the quashal of the information
would still not be proper. The charge of theft as alleged in the Information
should be taken in relation to RA 8484 because it is the elements, and not the
designation of the crime, that control.
Considering the gravity and complexity of the novel questions of law involved in
this case, the Special First Division resolved to refer the same to the Banc.
We resolve to grant the Motion for Reconsideration but remand the case to the
trial court for proper clarification of the Amended Information.
Article 308 of the Revised Penal Code provides:
Art. 308. Who are liable for theft. — Theft is committed by any person who, with
intent to gain but without violence against, or intimidation of persons nor force
upon things, shall take personal property of another without the latter's consent.
The elements of theft under Article 308 of the Revised Penal Code are as follows:
(1) that there be taking of personal property; (2) that said property belongs to
another; (3) that the taking be done with intent to gain; (4) that the taking be
done without the consent of the owner; and (5) that the taking be accomplished
without the use of violence against or intimidation of persons or force upon
things. SDHETI
Prior to the passage of the Revised Penal Code on December 8, 1930, the
definition of the term "personal property" in the penal code provision on theft
had been established in Philippine jurisprudence. This Court, in United States v.
Genato, United States v. Carlos, and United States v. Tambunting, consistently
ruled that any personal property, tangible or intangible, corporeal or
incorporeal, capable of appropriation can be the object of theft.
Moreover, since the passage of the Revised Penal Code on December 8, 1930,
the term "personal property" has had a generally accepted definition in civil law.
In Article 335 of the Civil Code of Spain, "personal property" is defined
as "anything susceptible of appropriation and not included in the foregoing
chapter (not real property)". Thus, the term "personal property" in the Revised
Penal Code should be interpreted in the context of the Civil Code provisions in
accordance with the rule on statutory construction that where words have been
long used in a technical sense and have been judicially construed to have a
certain meaning, and have been adopted by the legislature as having a certain
meaning prior to a particular statute, in which they are used, the words used in
such statute should be construed according to the sense in which they have been
previously used. 6 In fact, this Court used the Civil Code definition of "personal
property" in interpreting the theft provision of the penal code in United States v.
Carlos.
Cognizant of the definition given by jurisprudence and the Civil Code of Spain to
the term "personal property" at the time the old Penal Code was being revised,
still the legislature did not limit or qualify the definition of "personal property" in
the Revised Penal Code. Neither did it provide a restrictive definition or an
exclusive enumeration of "personal property" in the Revised Penal Code, thereby
showing its intent to retain for the term an extensive and unqualified
interpretation. Consequently, any property which is not included in the
enumeration of real properties under the Civil Code and capable of appropriation
can be the subject of theft under the Revised Penal Code.
The only requirement for a personal property to be the object of theft under the
penal code is that it be capable of appropriation. It need not be capable of
"asportation", which is defined as "carrying away". 7 Jurisprudence is settled that
to "take" under the theft provision of the penal code does not require
asportation or carrying away. 8
To appropriate means to deprive the lawful owner of the thing. 9 The word
"take" in the Revised Penal Code includes any act intended to transfer possession
which, as held in the assailed Decision, may be committed through the use of the
offenders' own hands, as well as any mechanical device, such as an access device
or card as in the instant case. This includes controlling the destination of the
property stolen to deprive the owner of the property, such as the use of a meter
tampering, as held in Natividad v. Court of Appeals, 10 use of a device to
fraudulently obtain gas, as held in United States v. Tambunting, and the use of a
jumper to divert electricity, as held in the cases of United States v. Genato,
United States v. Carlos, and United States v. Menagas. 11 cDCaTH
As illustrated in the above cases, appropriation of forces of nature which are
brought under control by science such as electrical energy can be achieved by
tampering with any apparatus used for generating or measuring such forces of
nature, wrongfully redirecting such forces of nature from such apparatus, or
using any device to fraudulently obtain such forces of nature. In the instant case,
petitioner was charged with engaging in International Simple Resale (ISR) or the
unauthorized routing and completing of international long distance calls using
lines, cables, antennae, and/or air wave frequency and connecting these calls
directly to the local or domestic exchange facilities of the country where
destined.
As early as 1910, the Court declared in Genato that ownership over electricity
(which an international long distance call consists of), as well as telephone
service, is protected by the provisions on theft of the Penal Code. The pertinent
provision of the Revised Ordinance of the City of Manila, which was involved in
the said case, reads as follows:
Injury to electric apparatus; Tapping current; Evidence. — No person shall
destroy, mutilate, deface, or otherwise injure or tamper with any wire, meter, or
other apparatus installed or used for generating, containing, conducting, or
measuring electricity, telegraph or telephone service, nor tap or otherwise
wrongfully deflect or take any electric current from such wire, meter, or other
apparatus.
No person shall, for any purpose whatsoever, use or enjoy the benefits of any
device by means of which he may fraudulently obtain any current of electricity or
any telegraph or telephone service; and the existence in any building premises of
any such device shall, in the absence of satisfactory explanation, be deemed
sufficient evidence of such use by the persons benefiting thereby.
It was further ruled that even without the above ordinance, the acts of
subtraction punished therein are covered by the provisions on theft of the Penal
Code then in force, thus:
Even without them (ordinance), the right of the ownership of electric current is
secured by articles 517 and 518 of the Penal Code; the application of these
articles in cases of subtraction of gas, a fluid used for lighting, and in some
respects resembling electricity, is confirmed by the rule laid down in the
decisions of the supreme court of Spain of January 20, 1887, and April 1, 1897,
construing and enforcing the provisions of articles 530 and 531 of the Penal Code
of that country, articles 517 and 518 of the code in force in these islands.
The acts of "subtraction" include: (a) tampering with any wire, meter, or other
apparatus installed or used for generating, containing, conducting, or measuring
electricity, telegraph or telephone service; (b) tapping or otherwise wrongfully
deflecting or taking any electric current from such wire, meter, or other
apparatus; and (c) using or enjoying the benefits of any device by means of which
one may fraudulently obtain any current of electricity or any telegraph or
telephone service.HAaECD
In the instant case, the act of conducting ISR operations by illegally connecting
various equipment or apparatus to private respondent PLDT's telephone system,
through which petitioner is able to resell or re-route international long distance
calls using respondent PLDT's facilities constitutes all three acts of subtraction
mentioned above.
The business of providing telecommunication or telephone service is likewise
personal property which can be the object of theft under Article 308 of the
Revised Penal Code. Business may be appropriated under Section 2 of Act No.
3952 (Bulk Sales Law), hence, could be object of theft:
Section 2. Any sale, transfer, mortgage, or assignment of a stock of goods, wares,
merchandise, provisions, or materials otherwise than in the ordinary course of
trade and the regular prosecution of the business of the vendor, mortgagor,
transferor, or assignor, or any sale, transfer, mortgage, or assignment of all, or
substantially all, of the business or trade theretofore conducted by the vendor,
mortgagor, transferor or assignor, or all, or substantially all, of the fixtures and
equipment used in and about the business of the vendor, mortgagor, transferor,
or assignor, shall be deemed to be a sale and transfer in bulk, in contemplation
of the Act. . . . .
In Strochecker v. Ramirez, 12 this Court stated:
With regard to the nature of the property thus mortgaged which is one-half
interest in the business above described, such interest is a personal property
capable of appropriation and not included in the enumeration of real properties
in article 335 of the Civil Code, and may be the subject of mortgage.
Interest in business was not specifically enumerated as personal property in the
Civil Code in force at the time the above decision was rendered. Yet, interest in
business was declared to be personal property since it is capable of
appropriation and not included in the enumeration of real properties. Article 414
of the Civil Code provides that all things which are or may be the object of
appropriation are considered either real property or personal property. Business
is likewise not enumerated as personal property under the Civil Code. Just like
interest in business, however, it may be appropriated. Following the ruling
in Strochecker v. Ramirez,business should also be classified as personal property.
Since it is not included in the exclusive enumeration of real properties under
Article 415, it is therefore personal property. 13 aSTcCE
As can be clearly gleaned from the above disquisitions, petitioner's acts
constitute theft of respondent PLDT's business and service, committed by means
of the unlawful use of the latter's facilities. In this regard, the Amended
Information inaccurately describes the offense by making it appear that what
petitioner took were the international long distance telephone calls, rather than
respondent PLDT's business.
A perusal of the records of this case readily reveals that petitioner and
respondent PLDT extensively discussed the issue of ownership of telephone calls.
The prosecution has taken the position that said telephone calls belong to
respondent PLDT. This is evident from its Comment where it defined the issue of
this case as whether or not "the unauthorized use or appropriation of PLDT
international telephone calls, service and facilities, for the purpose of generating
personal profit or gain that should have otherwise belonged to PLDT, constitutes
theft." 14
In discussing the issue of ownership, petitioner and respondent PLDT gave their
respective explanations on how a telephone call is generated. 15 For its part,
respondent PLDT explains the process of generating a telephone call as follows:
38. The role of telecommunication companies is not limited to merely providing
the medium (i.e., the electric current) through which the human voice/voice
signal of the caller is transmitted. Before the human voice/voice signal can be so
transmitted, a telecommunication company, using its facilities, must first break
down or decode the human voice/voice signal into electronic impulses and
subject the same to further augmentation and enhancements. Only after such
process of conversion will the resulting electronic impulses be transmitted by a
telecommunication company, again, through the use of its facilities. Upon
reaching the destination of the call, the telecommunication company will again
break down or decode the electronic impulses back to human voice/voice signal
before the called party receives the same. In other words, a telecommunication
company both converts/reconverts the human voice/voice signal and provides
the medium for transmitting the same.
39. Moreover, in the case of an international telephone call, once the electronic
impulses originating from a foreign telecommunication company country (i.e.,
Japan) reaches the Philippines through a local telecommunication company (i.e.,
private respondent PLDT), it is the latter which decodes, augments and enhances
the electronic impulses back to the human voice/voice signal and provides the
medium (i.e., electric current) to enable the called party to receive the call. Thus,
it is not true that the foreign telecommunication company provides (1) the
electric current which transmits the human voice/voice signal of the caller and
(2) the electric current for the called party to receive said human voice/voice
signal. HIEAcC
40. Thus, contrary to petitioner Laurel's assertion, once the electronic impulses
or electric current originating from a foreign telecommunication company (i.e.,
Japan) reaches private respondent PLDT's network, it is private respondent PLDT
which decodes, augments and enhances the electronic impulses back to the
human voice/voice signal and provides the medium (i.e., electric current) to
enable the called party to receive the call. Without private respondent PLDT's
network, the human voice/voice signal of the calling party will never reach the
called party. 16
In the assailed Decision, it was conceded that in making the international phone
calls, the human voice is converted into electrical impulses or electric current
which are transmitted to the party called. A telephone call, therefore, is electrical
energy. It was also held in the assailed Decision that intangible property such as
electrical energy is capable of appropriation because it may be taken and carried
away. Electricity is personal property under Article 416 (3) of the Civil Code,
which enumerates "forces of nature which are brought under control by
science." 17
Indeed, while it may be conceded that "international long distance calls", the
matter alleged to be stolen in the instant case, take the form of electrical energy,
it cannot be said that such international long distance calls were personal
properties belonging to PLDT since the latter could not have acquired ownership
over such calls. PLDT merely encodes, augments, enhances, decodes and
transmits said calls using its complex communications infrastructure and
facilities. PLDT not being the owner of said telephone calls, then it could not
validly claim that such telephone calls were taken without its consent. It is the
use of these communications facilities without the consent of PLDT that
constitutes the crime of theft, which is the unlawful taking of the telephone
services and business.
Therefore, the business of providing telecommunication and the telephone
service are personal property under Article 308 of the Revised Penal Code, and
the act of engaging in ISR is an act of "subtraction" penalized under said article.
However, the Amended Information describes the thing taken as, "international
long distance calls", and only later mentions "stealing the business from PLDT" as
the manner by which the gain was derived by the accused. In order to correct
this inaccuracy of description, this case must be remanded to the trial court and
the prosecution directed to amend the Amended Information, to clearly state
that the property subject of the theft are the services and business of
respondent PLDT. Parenthetically, this amendment is not necessitated by a
mistake in charging the proper offense, which would have called for the dismissal
of the information under Rule 110, Section 14 and Rule 119, Section 19 of the
Revised Rules on Criminal Procedure. To be sure, the crime is properly
designated as one of theft. The purpose of the amendment is simply to ensure
that the accused is fully and sufficiently apprised of the nature and cause of the
charge against him, and thus guaranteed of his rights under the Constitution.
ACCORDINGLY, the motion for reconsideration is GRANTED. The assailed
Decision dated February 27, 2006 is RECONSIDERED and SET ASIDE. The Decision
of the Court of Appeals in CA-G.R. SP No. 68841 affirming the Order issued by
Judge Zeus C. Abrogar of the Regional Trial Court of Makati City, Branch 150,
which denied the Motion to Quash (With Motion to Defer Arraignment) in
Criminal Case No. 99-2425 for theft, is AFFIRMED. The case is remanded to the
trial court and the Public Prosecutor of Makati City is hereby DIRECTED to amend
the Amended Information to show that the property subject of the theft were
services and business of the private offended party.
SO ORDERED.
Puno, C.J., Quisumbing, Carpio, Austria-Martinez, Carpio-Morales, Azcuna, Chico- possible the resulting call. The conversation, however, remains protected by our
Nazario, Velasco, Jr., Nachura, Leonardo-de Castro and Brion, JJ., concur. privacy laws.

Corona, J., see separate opinion. Accordingly, I vote to GRANT the motion for reconsideration.

Tinga, J., please see concurring opinion. TINGA, J., concurring:

Separate Opinions I do not have any substantive disagreements with the ponencia. I write
separately to flesh out one of the key issues behind the Court's present
CORONA, J.,: disposition — whether the Philippine Long Distance Company (PLDT) can validly
claim ownership over the telephone calls made using its telephone services. As
The bone of contention in this case is: who owns the telephone calls that we
the subject Amended Information had alleged that petitioners had "unlawfully
make? If respondent Philippine Long Distance Telephone Company (PLDT) can
and feloniously take, steal and use the international long distance calls belonging
claim ownership over them, then petitioner Luis Marcos P. Laurel (Laurel) can be
to PLDT", said information could have been sustained only if its premise were
charged with theft of such telephone calls under Article 308 of the Revised Penal
accepted that PLDT indeed owned those phone calls.
Code. If PLDT does not own them, then the crime of theft was not committed
and Laurel cannot be charged with this crime. aHTCIc I.
One view is that PLDT owns the telephone calls because it is responsible for It is best to begin with an overview of the facts that precede this case. Among
creating such calls. The opposing view is that it is the caller who owns the phone many other services, PLDT operates an International Gateway Facility
calls and PLDT merely encodes and transmits them. (IGF), 1through which pass phone calls originating from overseas to local PLDT
phones. However, there exists a method of routing and completing international
The question of whether PLDT creates the phone calls or merely encodes and
long distance calls called International Simple Resale (ISR), which makes use of
transmits them is a question of fact that can be answered by science. I agree
International Private Leased Lines (IPL). Because IPL lines may be linked to
with Justice Consuelo Ynares-Santiago that, while telephone calls "take the form
switching equipment connected to a PLDT phone line, it becomes possible to
of electrical energy, it cannot be said that such [telephone] calls were personal
make an overseas phone call to the Philippines without having to pass through
properties belonging to PLDT since the latter could not have acquired ownership
the IGF. 2
over such calls. PLDT merely encodes, augments, enhances, decodes and
transmits said calls using its complex infrastructure and facilities." Petitioner Laurel was, until November of 1999, the Corporate Secretary of
Baynet Co., Ltd. (Baynet), as well as a member of its Board of Directors. 3 Baynet
In my view, it is essential to differentiate between the conversation of a caller
was in the business of selling phone cards to people who wished to call people in
and recipient of the call, and the telephone service that made the call possible.
the Philippines. Each phone card, which apparently was sold in Japan, contained
Undoubtedly, any conversation between or among individuals is theirs alone. For
an ISR telephone number and a PIN. For the caller to use the phone card, he or
example, if two children use two empty cans and a string as a makeshift play
she would dial the ISR number indicated, and would be connected to an ISR
phone, they themselves create their "phone call". However, if individuals
operator. The caller would then supply the ISR operator with the PIN, and the
separated by long distances use the telephone and have a conversation through
operator would then connect the caller with the recipient of the call in the
the telephone lines of the PLDT, then the latter owns the service which made
Philippines through the IPL lines. Because the IPL Lines bypass the IGF, PLDT as
operator of the IGF would have no way of knowing that the long-distance call
was being made. 4
Apparently, the coursing of long distance calls through ISR is not per se illegal.
For example, the Federal Communications Commission of the United States is
authorized by statute to approve long-distance calling through ISR for calls made
to certain countries, as it has done so with nations such as Australia, France and
Japan. 5 However, as indicated by the Office of the Solicitor General's support for
the subject prosecution, there was no authority yet for the practice during the
time of the subject incidents.
Taking issue with this scheme, PLDT filed a complaint against Baynet "for
network fraud". 6 A search warrant issued caused the seizure of various
equipment used in Baynet's operations. However, after the inquest investigation,
the State Prosecutor, on 28 January 2000, issued a Resolution finding probable
cause "for theft under Article 308" of the RPC and for violating Presidential
Decree No. 401, a law which criminalizes the installation of a telephone
connection without the prior authority from the PLDT, or the tampering of its
lines. 7 However, when the Information was filed against petitioner with the
Regional Trial Court (RTC) of Makati on 8 February 2000, the Information charged
petitioner only with theft under Article 308 of the RPC. The accusatory portion
of the Amended Information reads as follows: HCTEDa
On or about September 10-19, 1999, or prior thereto, in Makati City, and within
the jurisdiction of this Honorable Court, the accused, conspiring and
confederating together and all of them mutually helping and aiding one another,
with intent to gain and without the knowledge and consent of the Philippine
Long Distance Telephone (PLDT), did then and there willfully, unlawfully and
feloniously take, steal and use the international long distance calls belonging to
PLDT by conducting International Simple Resale (ISR), which is a method of
routing and completing international long distance calls using lines, cables,
antennae, and/or air wave frequency which connect directly to the local or
domestic exchange facilities of the country where the call is destined, effectively
stealing this business from PLDT while using its facilities in the estimated amount
of P20,370,651.92 to the damage and prejudice of PLDT, in the said amount. 8
Prior to arraignment, petitioner filed a Motion to Quash on the ground that the
factual allegations in the Amended Information do not constitute the felony of
theft under Article 308 of the Revised Penal Code. He claimed, among others,
that telephone calls with the use of PLDT telephone lines, whether domestic or
international, belong to the persons making the call, not to PLDT. The RTC denied
the Motion to Quash, and the Court of Appeals affirmed the denial of the
motion. However, in its Decision now sought to be reconsidered the Court
reversed the lower courts and directed the quashal of the Amended Information.
II.
Preliminarily, it should be noted that among the myriad possible crimes with
which petitioner could have been charged, he was charged with theft, as defined
in the RPC provision which has remained in its vestal 1930 form. Even our earlier
Decision now assailed pointed out that petitioner could have been charged
instead with estafa under the RPC, or with violation of the Access Devices
Regulation Act of 1998. 9 Moreover, it appears that PLDT's original complaint
was for "network fraud", and that the State Prosecutor had initially
recommended prosecution as well under P.D. 401, a law specifically designed
against tampering with the phone service operations of PLDT. Facially, it would
appear that prosecution of petitioner under any of these other laws would have
been eminently more appropriate than the present recourse, which utilizes the
same provision used to penalize pickpockets.
But since the State has preferred to pursue this more cumbersome theory of the
case, we are now belabored to analyze whether the facts as alleged in the
Amended Information could somehow align with the statutory elements of theft
under the RPC. cCSDTI
The crime of theft is penalized under Article 308 of the RPC. From that provision,
we have long recognized the following as the elements of theft: (1) that there be
taking of personal property; (2) that said property belongs to another; (3) that
the taking be done with intent to gain; (4) that the taking be done without the
consent of the owner; and (5) that the taking be accomplished without the use of
violence against or intimidation of persons or force upon things. 10
In analyzing whether the crime of theft had been committed given the
allegations in this case, it is against these five elements that the facts must be
tested. We can agree outright that the "taking" alleged in this case was
accomplished without the use of violence against or intimidation of persons or
force upon things. It can also be conceded for now that the element of animo
lucrandi, or intent to gain, does not bear materiality to our present discussion
and its existence may be presumed for the moment.
Let us discuss the remaining elements of theft as they relate to the Amended
Information, and its contentious allegation that petitioner did "unlawfully and
feloniously take, steal and use the international long distance calls belonging to
PLDT."
Are "international long distance calls" personal property? The assailed Decision
did not believe so, but I agree with the present Resolution that they are. The
Court now equates telephone calls to electrical energy. To be clear, telephone
calls are not exactly alike as pure electricity. They are sound waves (created by
the human voice) which are carried by electrical currents to the recipient on the
other line. 11 While electricity is merely the medium through which the
telephone calls are carried, it is sufficiently analogous to allow the courts to
consider such calls as possessing similar physical characteristics as electricity.
The assailed Decision conceded that when a telephone call was made, "the
human voice [is] converted into electronic impulses or electrical current." 12 As
the Resolution now correctly points out, electricity or electronic energy may be
the subject of theft, as it is personal property capable of appropriation. Since
physically a telephone call is in the form of an electric signal, our jurisprudence
acknowledging that electricity is personal property which may be stolen through
theft is applicable.
III.
I now turn to the issue of the legal ownership of the "international long distance
calls", or telephone calls in general for that matter. An examination of the
physical characteristics of telephone calls is useful for our purposes. ISTHED
As earlier stated, telephone calls take on the form of electrical current, though
they are distinguished from ordinary electricity in that they are augmented by
the human voice which is transmitted from one phone to another. A material
inquiry is how these calls are generated in the first place?
It bears significance that neither the RTC nor the Court of Appeals concluded that
PLDT owns the telephone calls. Instead, they concluded that PLDT owns the
telephone service, a position that is intellectually plausible, unlike the contention
that PLDT owns the actual calls themselves. Yet PLDT is willing to make the highly
controversial claim that it owns the phone calls, despite the absence of any
reliable or neutral evidence to that effect.
PLDT argues that it does not merely transmit the telephone calls but "actually
creates them". The claim should beggar belief, if only for the underlying
implication that if PLDT "creates" telephone calls, such calls can come into
existence without the participation of a caller, or a human voice for that matter.
Let us examine the analysis of the American law professors Benjamin, Lichtman
and Shelanski in their textbook Telecommunications Law and Policy. In
illustrating the "telephone system vocabulary", they offer the following
discussion:
Consumers have in their homes standard equipment (like telephones) capable of
encoding and receiving voice communications. Businesses have similar basic
equipment. This equipment is what insiders call customer premises equipment,
which is abbreviated "CPE". The Telecommunications Act of 1996 defines CPE as
"equipment employed on the premises of a person (other than a carrier) to
originate, route or terminate telecommunications." 47 U.S.C. §153(14). This
category, as implemented by the FCC, includes not only basic telephones but also
answering machines, fax machines, modems, and even private branch exchange
(PBX) equipment (in which a large entity maintains, in effect, its own switchboard
to various internal extensions). 13
It has been suggested that PLDT owns the phone calls because it is the entity that
encodes or decodes such calls even as they originate from a human voice. Yet it
is apparent from the above discussion that the device that encodes or decodes
telephone calls is the CPE, more particularly the telephone receiver. It is the
telephone receiver, which is in the possession of the telephone user, which
generates the telephone call at the initiative of the user. Now it is known from
experience that while PLDT does offer its subscribers the use of telephone
receivers marked with the PLDT logo, subscribers are free to go to Abenson and
purchase a telephone receiver manufactured by an entity other than PLDT, such
as Sony or Bell Siemens or Panasonic. Since such is the case, it cannot be
accurately said that the encoding or decoding of Philippine telephone calls is
done through the exclusive use of PLDT equipment, because the telephone
receivers we use are invariably purchased directly by the very same people who
call or receive the phone calls. IESDCH
It likewise appears from the particular facts of this case that some, if not many of
the phone calls alleged to have been stolen from PLDT were generated by calls
originating not from the Philippines, but from Japan. Assuming that the
telephone company exclusively generates the phone calls, those calls originating
from Japan were not generated by PLDT, but by KDDI, NTT, Japan Telecom,
Verizon Japan, and all the other long distance telephone service providers in
Japan.
If PLDT were indeed the owner of the telephone calls, then it should be able to
demonstrate by which mode did it acquire ownership under the Civil Code.
Under that Code, ownership may be acquired by occupation, by intellectual
creation, by law, by donation, by testate and intestate succession, by
prescription, and in consequence of certain contracts, by tradition. 14 Under
which mode of acquisition could PLDT deemed as acquiring ownership over the
telephone calls? We can exclude outright, without need of discussion, such
modes as testate and intestate succession, prescription, and tradition. Neither
can the case be made that telephone calls are susceptible to intellectual
creation. Donation should also be ruled out, since a donation must be accepted
in writing by the donee in order to become valid, and that obviously cannot apply
as to telephone calls.
Can telephone calls be acquired by "occupation"? According to Article 713,
properties which are acquired by occupation are "things appropriable by nature
which are without an owner, such as animals that are the object of hunting and
fishing, hidden treasure and abandoned movables". It is not possible to establish
a plausible analogy between telephone calls and "animals that are the object of
hunting or fishing", or of "hidden treasure" and of "abandoned movables".
Is it possible that PLDT somehow acquired ownership over the phone calls by
reason of law? No law vesting ownership over the phone calls to PLDT or any
other local telephone service provider is in existence.
All these points demonstrate the strained reasoning behind the claim that PLDT
owns the international long distance calls. Indeed, applying the traditional legal
paradigm that governs the regulation of telecommunications companies, it
becomes even clearer that PLDT cannot validly assert such ownership. Telephone
companies have historically been regulated as common carriers. 15 The 1936
Public Service Act classifies wire or wireless communications systems as a "public
service", along with other common carriers. 16 In the United States, telephone
providers were expressly decreed to operate as common carriers in the Mann-
Elkins Act of 1910, 17 utilizing an analogy typically akin to the regulation of
railroads. 18 CAIHaE
Under the Public Service Act, a telephone communication system is classified as a
"public service", not a "common carrier". That fact might seem to imply that the
two phrases are mutually exclusive, despite the fact that the Public Service Act
does categorize as belonging to "public service", "any common carrier, railroad,
street railway, subway motor vehicle, either for freight or passenger, or both,
with or without fixed route and whatever may be its classification, freight or
carrier service of any class, express service, steamboat, or steamship, or
steamship line, pontines, ferries and water craft, engaged in the transportation
of passengers or freight or both." 19
It may be correct to say that under the Civil Code, a telephone system is not a
common carrier, the civil law definition of such term limited to "persons,
corporations, firms or associations engaged in the business of carrying or
transporting passengers or goods or both, by land, water or air. . ." 20 Still, it
cannot be denied that the weight of authorities have accepted that the
traditional regulation regime of telephone service providers has been akin to
common carriers, both in the United States and the Philippines. 21
The legal paradigm that treats PLDT as akin to a common carrier should alert
against any notion that it is the owner of the "long distance overseas calls"
alleged as having been stolen in the Amended Information. More precisely, it
merely transmits these calls, owned by another, to the intended recipient.
Applying the common carrier paradigm, when a public transport system is
contracted to transport goods or persons to a destination, the transport
company does not acquire ownership over such goods or such persons, even
though it is in custody of the same for the duration of the trip. Just because the
phone calls are transmitted using the facilities and services of PLDT, it does not
follow that PLDT is the owner of such calls.
On this score, the distinction must be made between a telephone company such
as PLDT, and a power company such as Meralco. Both companies are engaged in
the business of distributing electrical energy to end-users. In the case of Meralco,
it is pure electricity, while in PLDT's case, it is an electronic signal converted out
of an indispensable element which is the human voice and transformed back to
the original voice at the point of reception. Neither Meralco nor PLDT created
the electronic energy it transmits. But in Meralco's case, it purchases the
electricity from a generating company such as the National Power Corporation,
and it may thus be considered as the owner of such electricity by reason of the
sale. PLDT's case is different, as it does not purchase the electronic signals it
transmits. These signals are created by the interaction between the human voice
and the electrical current.
Indeed, the logical consequences should it be held that PLDT owns these "long
distance overseas calls" are quite perilous. PLDT, as owner of these calls (or any
telephone calls made for that matter), would have in theory, the right to record
these calls and sell them. 22 That is a circumstance not one of us wants to
contemplate. aAcDSC
At the very least, it is clear that the caller or the recipient of the phone call has a
better right to assert ownership thereof than the telephone company. And
critically, the subject Amended Information does not allege that the
"international long distance calls" were taken without the consent of either the
caller or the recipient.
I am thus hard pressed to conclude that the Amended Information as it stands
was able to allege one of the essential elements of the crime of theft, that the
personal property belonging to another was taken without the latter's consent.
All the Amended Information alleged was that the taking was without PLDT's
consent, a moot point considering that PLDT is most definitely not the owner of
the phone calls.
The consensus of the majority has been to direct the amendment of the subject
Amended Information to sustain the current prosecution of the petitioners
without suggesting in any way that PLDT is the owner of those "international
long distance calls". Said result is acceptable to me, and I concur therein.
EN BANC
[G.R. No. 41643. July 31, 1935.]
B. H. BERKENKOTTER, plaintiff-appellant, vs. CU UNJIENG E HIJOS, YEK TONG
LIN FIRE AND MARINE INSURANCE COMPANY, MABALACAT SUGAR COMPANY
and THE PROVINCIAL SHERIFF OF PAMPANGA, defendants-appellees.
Briones & Martinez for appellant.
Araneta, Zaragoza & Araneta for appellees Cu Unjieng e Hijos.
No appearance for the other appellees.
SYLLABUS
1. MORTGAGE; IMPROVEMENT ON THE MORTGAGED PROPERTY, INCLUDED IN
THE MORTGAGE. — The installation of a machinery and equipment in a
mortgaged sugar central, in lieu of another of less capacity, for the purpose of
carrying out the industrial functions of the latter and increasing production,
constitutes a permanent improvement on said sugar central and subjects said
machinery and equipment to the mortgage constituted thereon. (Article 1877,
Civil Code.)
2. ID.; ID.; PERMANENT CHARACTER OF THE IMPROVEMENT. — The fact that the
purchaser of the new machinery and equipment has bound himself to the person
supplying him the purchase money to hold them as security for the payment of
the latter's credit, and to refrain from mortgaging or otherwise encumbering
them does not alter the permanent character of the incorporation of said
machinery and equipment with the central.
3. ID.; ID.; OWNERSHIP OF THE IMPROVEMENT. — The sale of the machinery and
equipment in question by the purchaser who was supplied the money, after the
incorporation thereof with the mortgaged sugar central, does not vest the
creditor with ownership of said machinery and equipment but simply with the
right of redemption.
DECISION
VILLA-REAL, J p:
This is an appeal taken by the plaintiff, B. H. Berkenkotter, from the judgment of
the Court of First Instance of Manila, dismissing said plaintiff's complaint against
Cu Unjieng e Hijos et al., with costs.
In support of his appeal, the appellant assigns six alleged errors as committed by
the trial court in its decision in question, which will be discussed in the course of
this decision.
The first question to be decided in this appeal, which is raised in the first
assignment of alleged error, is whether or not the lower court erred in declaring
that the additional machinery and equipment as improvement incorporated with
the central are subject to the mortgage deed executed in favor of the defendants
Cu Unjieng e Hijos.
It is admitted by the parties that on April 26, 1926, the Mabalacat Sugar Co., Inc.,
owner of the sugar central situated in Mabalacat, Pampanga, obtained from the
defendants, Cu Unjieng e Hijos, a loan secured by a first mortgage constituted on
two parcels of land "with all its buildings, improvements, sugar-cane mill, steel
railway, telephone line, apparatus, utensils and whatever forms part or is a
necessary complement of said sugar-cane mill, steel railway, telephone line, now
existing or that may in the future exist in said lots."
On October 5, 1926, shortly after said mortgage had been constituted, the
Mabalacat Sugar Co., Inc., decided to increase the capacity of its sugar central by
buying additional machinery and equipment, so that instead of milling 150 tons
daily, it could produce 250. The estimated cost of said additional machinery and
equipment, so that instead of milling 150 tons daily, it could produce 250. The
estimated cost of said additional machinery and equipment was approximately
P100,000. In order to carry out this plan, B. A. Green, president of said
corporation, proposed to the plaintiff, B. H. Berkenkotter, to advance the
necessary amount for the purchase of said machinery and equipment, promising
to reimburse him as soon as he could obtain an additional loan from the
mortgagees, the herein defendants Cu Unjieng e Hijos. Having agreed to said
proposition made in a letter dated October 5, 1926 (Exhibit E), B. H.
Berkenkotter, on October 9th of the same year, delivered the sum of P1,710 to B.
A. Green, president of the Mabalacat Sugar Co., Inc., the total amount supplied
by him to said B. A. Green having been P25,750. Furthermore, B. H. Berkenkotter
had a credit of P22,000 against said corporation for unpaid salary. With the loan
of P25,750 and said credit of P22,000, the Mabalacat Sugar Co., Inc., purchased
the additional machinery and equipment now in litigation.
On June 10, 1927, B. A. Green, president of the Mabalacat Sugar Co., Inc., applied
to Cu Unjieng e Hijos for an additional loan of P75,000 offering as security the
additional machinery and equipment acquired by said B. A. Green and installed in
the sugar central after the execution of the original mortgage deed, on April 27,
1927, together with whatever additional equipment acquired with said loan. B.
A. Green failed to obtain said loan.
Article 1877 of the Civil Code provides as follows.
"ART. 1877. A mortgage includes all natural accessions, improvements, growing
fruits, and rents not collected when the obligation falls due, and the amount of
any indemnities paid or due the owner by the insurers of the mortgaged
property or by virtue of the exercise of the power of eminent domain, with the
declarations, amplifications, and limitations established by law, whether the
state continues in the possession of the person who mortgaged it or whether it
passes into the hands of a third person."
In the case of Bischoff vs. Pomar and Compañia General de Tabacos (12 Phil.,
690), cited with approval in the case of Cea vs. Villanueva (18 Phil., 538), this
court laid down the following doctrine:
"1. REALTY; MORTGAGE OF REAL ESTATE INCLUDES IMPROVEMENTS AND
FIXTURES. — It is a rule, established by the Civil Code and also by the Mortgage
Law, with which the decisions of the courts of the United States are in accord,
that in a mortgage of real estate, the improvements on the same are included;
therefore, all objects permanently attached to a mortgaged building or land,
although they may have been placed there after the mortgage was constituted,
are also included. (Arts. 110 and 111 of the Mortgage Law, and 1877 of the Civil
Code; decision of U.S. Supreme Court in the matter of Royal Insurance Co. vs. R.
Miller, liquidator, and Amadeo [26 Sup. Ct. Rep., 46; 199 U.S., 353].)
"2. ID.; ID.; INCLUSION OR EXCLUSION OF MACHINERY, ETC. — In order that it
may be understood that the machinery and other objects placed upon and used
in connection with a mortgaged estate are excluded from the mortgage, when it
was stated in the mortgage that the improvements, buildings, and machinery
that existed thereon were also comprehended, it is indispensable that the
exclusion thereof be stipulated between the contracting parties."
The appellant contends that the installation of the machinery and equipment
claimed by him in the sugar central of the Mabalacat Sugar Company, Inc., was
not permanent in character inasmuch as B. A. Green, in proposing to him to
advance the money for the purchase thereof, made it appear in the letter,
Exhibit E, that in case B. A. Green should fail to obtain an additional loan from
the defendants Cu Unjieng e Hijos, said machinery and equipment would become
security therefor, said B. A. Green binding himself not to mortgage nor encumber
them to anybody until said plaintiff be fully reimbursed for the corporation's
indebtedness to him.
Upon acquiring the machinery and equipment in question with money obtained
as loan from the plaintiff-appellant by B. A. Green, as president of the Mabalacat
Sugar Co., Inc., the latter became owner of said machinery and equipment,
otherwise B. A. Green, as such president, could not have offered them to the
plaintiff as security for the payment of his credit.
Article 334, paragraph 5, of the Civil Code gives the character of real property to
"machinery, liquid containers, instruments or implements intended by the owner
of any building or land for use in connection with any industry or trade being
carried on therein and which are expressly adapted to meet the requirements of
such trade or industry."
If the installation of the machinery and equipment in question in the central of
the Mabalacat Sugar Co., Inc., in lieu of the other of less capacity existing therein,
for its sugar industry, converted them into real property by reason of their
purpose, it cannot be said that their incorporation therewith was not permanent
in character because, as essential and principal elements of a sugar central,
without them the sugar central would be unable to function or carry on the
industrial purpose for which it was established. Inasmuch as the central is
permanent in character, the necessary machinery and equipment installed for
carrying on the sugar industry for which it has been established must necessary
be permanent.
Furthermore, the fact that B. A. Green bound himself to the plaintiff B. H.
Berkenkotter to hold said machinery and equipment as security for the payment
of the latter's credit and to refrain from mortgaging or otherwise encumbering
them until Berkenkotter has been fully reimbursed therefor, is not incompatible
with the permanent character of the incorporation of said machinery and
equipment with the sugar central of the Mabalacat Sugar Co., Inc., as nothing
could prevent B. A. Green from giving them as security at least under a second
mortgage.
As to the alleged sale of said machinery and equipment to the plaintiff and
appellant after they had been permanently incorporated with the sugar central
of the Mabalacat Sugar Co., Inc., and while the mortgage constituted on said
sugar central to Cu Unjieng e Hijos remained in force, only the right of
redemption of the vendor Mabalacat Sugar Co., Inc., in the sugar central with
which said machinery and equipment had been incorporated, was transferred
thereby, subject to the right of the defendants Cu Unjieng e Hijos under the first
mortgage.
For the foregoing considerations, we are of the opinion and so hold: (1) That the
installation of a machinery and equipment in a mortgaged sugar central, in lieu of
another of less capacity, for the purpose of carrying out the industrial functions
of the latter and increasing production, constitutes a permanent improvement
on said sugar central and subjects said machinery and equipment to the
mortgage constituted thereon (article 1877, Civil Code); (2) that the fact that the
purchaser of the new machinery and equipment has bound himself to the person
supplying him the purchase money to hold them as security for the payment of
the latter's credit, and to refrain from mortgaging or otherwise encumbering
them does not alter the permanent character of the incorporation of said
machinery and equipment with the central; and (3) that the sale of the
machinery and equipment in question by the purchaser who was supplied the
money, after the incorporation thereof with the mortgaged sugar central, does
not vest the creditor with ownership of said machinery and equipment but
simply with the right of redemption.
Wherefore, finding no error in the appealed judgment, it is affirmed in all its
parts, with costs to the appellant. So ordered.
EN BANC
[G.R. No. 41506. March 25, 1935.]
PHILIPPINE REFINING CO., INC., plaintiff-appellant, vs. FRANCISCO JARQUE,
JOSE COROMINAS, and ABOITIZ & CO., defendants. JOSE COROMINAS, in his
capacity as assignee of the estate of the insolvent Francisco Jarque, appellee.
Thos. G. Ingalls, Vicente Pelaez and DeWitt, Perkins & Brady for appellant.
D. G. McVean and Vicente L. Faelnar for appellee.
SYLLABUS
1. COURTS; JURISDICTION; ADMIRALTY. — The mere mortgage of a ship does not
confer admiralty jurisdiction.
2. SHIPS AND SHIPPING; PROPERTY; CHATTEL MORTGAGES; VESSELS, NATURE
OF. — Vessels are considered personal property under the civil law and the
common law.
3. ID.; ID.; ID.; ID. — Vessels are subject to mortgage agreeably to the provisions
of the Chattel Mortgage Law.
4. ID.; ID.; ID.; ID. — The only difference between a chattel mortgage of a vessel
and a chattel mortgage of other personality is that it is not now necessary for a
chattel mortgage of a vessel to be noted in the registry of the register of deeds,
but it is essential that a record of documents affecting the title to a vessel be
entered in the record of the Collector of Customs at the port of entry. Otherwise
a mortgage on a vessel is generally like other chattel mortgages as to its
requisites and validity.
5. ID.; ID.; ID.; ID.; EFFECT OF ABSENCE OF AFFIDAVIT OF GOOD FAITH. —
The Chattel Mortgage Law, in its section 5, in describing what shall be deemed
sufficient to constitute a good chattel mortgage, includes the requirement of an
affidavit of good faith appended to the mortgage and recorded therewith. The
absence of the affidavit vitiates a mortgage as against creditors and subsequent
encumbrances. As a consequence a chattel mortgage of a vessel wherein the
affidavit of good faith required by the Chattel Mortgage Law is lacking, is
unenforceable against third persons.
DECISION
MALCOLM, J p:
First of all the reason why this case has been decided by the court in banc needs
explanation. A motion was presented by counsel for the appellant in which it was
asked that the case be heard and determined by the court sitting in
banc because the admiralty jurisdiction of the court was involved, and this
motion was granted in regular course. On further investigation it appears that
this was error. The mere mortgage of a ship is a contract entered into by the
parties to it without reference to navigation or perils of the sea, and does not,
therefore, confer admiralty jurisdiction. (Bogart vs. Steamboat John Jay [1854],
17 How., 399.)
Coming now to the merits, it appears that on varying dates the Philippine
Refining Co., Inc., and Francisco Jarque executed three mortgages on the motor
vessels Pandan and Zaragoza. These documents were recorded in the record of
transfers and incumbrances of vessels for the port of Cebu and each was therein
denominated a "chattel mortgage". Neither of the first two mortgages had
appended an affidavit of good faith. The third mortgage contained such an
affidavit of good faith. The third mortgage contained such an affidavit, but this
mortgage was not registered in the customs house until May 17, 1932, or within
the period of thirty days prior to the commencement of insolvency proceedings
against Francisco Jarque; also, while the last mentioned mortgage was
subscribed by Francisco Jarque and M. N. Brink, there was nothing to disclose in
what capacity the said M. N. Brink signed. A fourth mortgage was executed by
Francisco Jarque and Ramon Aboitiz on the motorship Zaragoza and was entered
in the chattel mortgage registry of the register of deeds on May 12, 1932, or
again within the thirty-day period before the institution of insolvency
proceedings. These proceedings were begun on June 2, 1932, when a petition
was filed with the Court of First Instance if Cebu in which it was prayed that
Francisco Jarque be declared an insolvent debtor, which soon thereafter was
granted, with the result that an assignment of all the properties of the insolvent
debtor, which soon thereafter was granted, with the result that an assignment of
all the properties of the insolvent was executed in favor of Jose Corominas.
On these facts, Judge Jose M. Hontiveros declined to order the foreclosure of the
mortgages, but on the contrary sustained the special defenses of fatal
defectiveness of the mortgages. In so doing we believe that the trial judge acted
advisedly.
Vessels are considered personal property under the civil law. (Code of
Commerce, article 585.) Similarly under the common law, vessels are personal
property under the common law, vessels are personal property although
occasionally referred to as a peculiar kind of personal property. (Reynolds vs.
Nielson [1903], 96 Am. Rep., 1000; Atlantic Maritime Co. vs. City of Gloucester
[1917], 117 N. E., 924.) Since the term "personal property" includes vessels, they
are subject to mortgage agreeably to the provisions of the Chattel Mortgage Law.
(Act No. 1508, section 2.) Indeed, it has heretofore been accepted without
discussion that a mortgage on a vessel is in nature a chattel mortgage.
(McMicking vs. Banco Español-Filipino [1909], 13 Phil., 429; Arroyo vs. Yu de Sane
[1930], 54 Phil., 511.) The only difference between a chattel mortgage of a vessel
and a chattel mortgage of other personality is that it is not now necessary for a
chattel mortgage of a vessel to be noted in the registry of the register of deeds,
but it is essential that a record of documents affecting the title to a vessel be
entered in the record of the Collector of Customs at the port of entry. (Rubiso
and Gelito vs. Rivera [1917], 37 Phil., 72; Arroyo vs. Yu de Sane, supra.)
Otherwise a mortgage on a vessel is generally like other chattel mortgages as to
its requisites and validity. (58 C. J., 92.)
The Chattel Mortgage Law in its section 5, in describing what shall be deemed
the requirement of an affidavit of good faith appended to the mortgage and
recorded therewith. The absence of the affidavit vitiates a mortgage as against
creditors and subsequent encumbrancers. (Giberson vs. A. N. Jureidini Bros.
[1922], 44 Phil., 216; Benedicto de Tarrosa vs. F. M. Yap Tico & Co. and Provincial
Sheriff of Occidental Negros [1923], 46 Phil., 753.) As a consequence a chattel
mortgage of a vessel wherein the affidavit of good faith required by the Chattel
Mortgage Law is lacking, is unenforceable against third persons.
In effect appellant asks us to find that the documents appearing in the record do
not constitute chattel mortgages or at least to gloss over the failure to include
the affidavit of good faith made a requisite for a good chattel mortgage by
the Chattel Mortgage Law. Counsel would further have us disregard article 585 of
the Code of Commerce, but no reason is shown for holding this article not in
force. Counsel would further have us revise doctrines heretofore announced in a
series of cases, which it is not desirable to do since those principles were
confirmed after due deliberation and constitute a part of the commercial law of
the Philippines. And finally counsel would have us make rulings on points entirely
foreign to the issues of the case. As neither the facts nor the law remains is
doubt, the seven assigned errors will be overruled.
Judgment affirmed, the costs of this instance to be paid by the appellant.
EN BANC
[G.R. No. L-17870. September 29, 1962.]
MINDANAO BUS COMPANY, petitioner, vs. THE CITY ASSESSOR & TREASURER
and the BOARD OF TAX APPEALS OF CAGAYAN DE ORO CITY,respondents.
Binamira, Barria & Irabagon for petitioner.
Vicente E. Sabellina for respondents.
SYLLABUS
1. PROPERTY; IMMOVABLE PROPERTY BY DESTINATION; TWO REQUISITES
BEFORE MOVABLES MAY BE DEEMED TO HAVE BEEN IMMOBILIZED; TOOLS AND
EQUIPMENTS MERELY INCIDENTAL TO BUSINESS NOT SUBJECT TO REAL ESTATE
TAX. — Movable equipments, to be immobilized in contemplation of Article 415
of the Civil Code, must be the essential and principal elements of an industry or
works which are carried on in a building or on a piece of land. Thus, where the
business is one of transportation, which is carried on without a repair or service
shop, and its rolling equipment is repaired or serviced in a shop belonging to
another, the tools and equipments in its repair shop which appear movable are
merely incidentals and may not be considered immovables, and, hence, not
subject to assessment as real estate for purposes of the real estate tax.
DECISION
LABRADOR, J p:
This is a petition for the review of the decision of the Court of Tax Appeals in
C.T.A. Case No. 710 holding that the petitioner Mindanao Bus Company is liable
to the payment of the realty tax on its maintenance and repair equipment
hereunder referred to.
Respondent City Assessor of Cagayan de Oro City assessed at P4,400 petitioner's
above-mentioned equipment. Petitioner appealed the assessment to the
respondent Board of Tax Appeals on the ground that the same are not realty.
The Board of Tax Appeals of the City sustained the city assessor, so petitioner
herein filed with the Court of Tax Appeals a petition for the review of the
assessment.
In the Court of Tax Appeals the parties submitted the following stipulation of
facts:
"Petitioner and respondents, thru their respective counsels agreed to the
following stipulation of facts:
"1. That petitioner is a public utility solely engaged in transporting passengers
and cargoes by motor trucks, over its authorized lines in the Island of Mindanao,
collecting rates approved by the Public Service Commission;
"2. That petitioner has its main office and shop at Cagayan de Oro City. It
maintains Branch Offices and/or stations at Iligan City, Lanao; Pagadian,
Zamboanga del Sur; Davao City and Kibawe, Bukidnon Province;
"3. That the machineries sought to be assessed by the respondent as real
properties are the following:
"(a) Hobart Electric Welder Machine, appearing in the attached photograph,
marked Annex 'A';
"(b) Storm Boring machine, appearing in the attached photograph, marked
Annex 'B';
"(c) Lathe machine with motor, appearing in the attached photograph, marked
Annex 'C';
"(d) Black and Decker Grinder, appearing in the attached photograph, marked
Annex 'D';
"(e) PEMCO Hydraulic Press, appearing in the attached photograph, marked
Annex 'E';
"(f) Battery charger (Tungar charge machine) appearing in the attached
photograph, marked Annex 'F'; and
"(g) D-Engine Waukesha-M-Fuel, appearing in the attached photograph, marked
Annex 'G'.
"4. That these machineries are sitting on cement or wooden platforms as may be
seen in the attached photographs which form part of this agreed stipulation of
facts;
"5. That petitioner is the owner of the land where it maintains and operates a
garage for its TPU motor trucks; a repair shop; blacksmith and carpentry shops,
and with these machineries which are placed therein, its TPU trucks are made;
body constructed; and same are repaired in a condition to be serviceable in the
TPU land transportation business it operates;
"6. That these machineries have never been or were never used as industrial
equipments to produce finished products for sale, nor to repair machineries,
parts and the like offered to the general public indiscriminately for business or
commercial purposes for which petitioner has never engaged in, to date."
The Court of Tax Appeals having sustained the respondent city assessor's ruling,
and having denied a motion for reconsideration, petitioner brought the case to
this Court assigning the following errors:
"1. The Honorable Court of Tax Appeals erred in upholding respondents'
contention that the questioned assessments are valid; and that said tools,
equipments or machineries are immovable taxable real properties.
"2. The Tax Court erred in its interpretation of paragraph 5 of Article 415 of
the New Civil Code, and holding that pursuant thereto, the movable equipments
are taxable realties, by reason of their being intended or destined for use in an
industry.
"3. The Court of Tax Appeals erred in denying petitioner's contention that the
respondent City Assessor's power to assess and levy real estate taxes on
machineries is further restricted by section 31, paragraph (c) of Republic Act No.
521; and
"4. The Tax Court erred in denying petitioner's motion for reconsideration."
Respondents contend that said equipments, the movable, are immobilized by
destination, in accordance with paragraph 5 of Article 415 of the New Civil
Codewhich provides:
"ART. 415. The following are immovable properties:
xxx xxx xxx
"(5) Machinery, receptacles, instruments or implements intended by the owner
of the tenement for an industry or works which may be carried on in a building
or on a piece of land, and which tend directly to meet the needs of the said
industry or works." (Emphasis ours.)
Note that the stipulation expressly states that the equipment are placed on
wooden or cement platforms. They can be moved around and about in
petitioner's repair shop. In the case of B. H. Berkenkotter vs. Cu Unjieng, 61 Phil.
663, the Supreme Court said:
"Article 344 (Now Art. 415), paragraph (5) of the Civil Code, gives the character of
real property to 'machinery, liquid containers, instruments or implements
intended by the owner of any building or land for use in connection with any
industry or trade being carried on therein and which are expressly adapted to
meet the requirements of such trade or industry.'
"If the installation of the machinery and equipment in question in the central of
the Mabalacat Sugar Co., Inc., in lieu of the other of less capacity existing therein,
for its sugar industry, converted them into real property by reason of their
purpose, it cannot be said that their incorporation therewith was not permanent
in character because, as essential and principal elements of a sugar central,
without them the sugar central would be unable to function or carry on the
industrial purpose for which it was established. Inasmuch as the central is
permanent in character, the necessary machinery and equipment installed for
carrying on the sugar industry for which it has been established must necessarily
be permanent." (Emphasis ours.)
So that movable equipments to be immobilized in contemplation of the law must
first be "essential and principal elements" of an industry or works without which
such industry or works would be "unable to function or carry on the industrial
purpose for which it was established." We may here distinguish, therefore, those
movables which become immobilized by destination because they are essential
and principal elements in the industry from those which may not be so
considered immobilized because they are merely incidental, not essential and
principal. Thus, cash registers, typewriters, etc., usually found and used in hotels,
restaurants, theaters, etc. are merely incidentals and are not and should not be
considered immobilized by destination, for these businesses can continue or
carry on their functions without these equipments. Airline companies use
forklifts, jeep-wagons, pressure pumps, IMB machines, etc. which are incidentals,
not essentials, and thus retain their movable nature. On the other hand,
machineries of breweries used in the manufacture of liquor and soft drinks,
though movable in nature, are immobilized because they are essential to said
industries; but the delivery trucks and adding machines which they usually own
and use and are found within their industrial compounds are merely incidentals
and retain their movable nature.
Similarly, the tools and equipments in question in this instant case are, by their
nature, not essential and principal elements of petitioner's business of
transporting passengers and cargoes by motor trucks. They are merely
incidentals — acquired as movables and used only for expediency to facilitate
and/or improve its service. Even without such tools and equipments, its business
may be carried on, as petitioner has carried on, without such equipments, before
the war. The transportation business could be carried on without the repair or
service shop if its rolling equipment is repaired or serviced in another shop
belonging to another.
The law that governs the determination of the question at issue is as follows:
"ART. 415. The following are immovable property:
xxx xxx xxx
"(5) Machinery, receptacles, instruments or implements intended by the owner
of the tenement for an industry or works which may be carried on in a building
or on a piece of land, and which tend directly to meet the needs of the said
industry or works;" (Civil Code of the Phil.)
Aside from the element of essentiality the above-quoted provision also requires
that the industry or works be carried on in a building or on a piece of land. Thus
in the case of Berkenkotter vs. Cu Unjieng, supra, the "machinery, liquid
containers, and instruments or implements" are found in a building constructed
on the land. A sawmill would also be installed in a building on land more or less
permanently, and the sawing is conducted in the land or building.
But in the case at bar the equipments in question are destined only to repair or
service the transportation business, which is not carried on in a building or
permanently on a piece of land, as demanded by the law. Said equipments may
not, therefore, be deemed real property.
Resuming what we have set forth above, we hold that the equipments in
question are not absolutely essential to the petitioner's transportation business,
and petitioner's business is not carried on in a building, tenement or on a
specified land, so said equipment may not be considered real estate within the
meaning of Article 415 (c) of the Civil Code.
WHEREFORE, the decision subject of the petition for review is hereby set aside
and the equipment in question declared not subject to assessment as real estate
for the purposes of the real estate tax. Without costs. So ordered.
THIRD DIVISION
[G.R. No. 137705. August 22, 2000.]
SERG'S PRODUCTS, INC., and SERGIO T. GOQUIOLAY, petitioners, vs. PCI
LEASING AND FINANCE, INC., respondent.
Antonio R. Bautista & Partners for petitioners.
Perez & Calima Law Offices for respondent.
SYNOPSIS
On February 13, 1998, respondent PCI Leasing and Finance Inc. filed with the RTC
of Quezon City a complaint for sum of money, with an application for a writ of
replevin. On March 6, 1998, respondent judge issued a writ of replevin directing
its sheriff to seize and deliver the machineries and equipment to PCI Leasing
after 5 days and upon payment of the necessary expenses. The sheriff proceeded
to petitioner's factory and seized one machinery. On March 25, 1998, petitioner
filed a motion for special protective order invoking the power of the court to
control the conduct of its officers and amend and control its processes, praying
for a directive for the sheriff to defer enforcement of the writ of replevin. The
motion was opposed by PCI on the ground that the properties were personal and
therefore still subject to seizure and writ of replevin. In their reply, petitioners
asserted that the properties were immovable. They further stated that PCI was
estopped from treating these machineries as personal because the contracts
were totally sham and farcical. On April 7, 1998, petitioners went to the Court of
Appeals via an original action forcertiorari. The Court of Appeals ruled that the
subject machines were personal property as provided by the agreement of the
parties. Hence, this petition. TaCEHA
The Court found the petition not meritorious. The Court ruled that the
contracting parties may validly stipulate that a real property be considered as
personal. After agreeing to such stipulation, they are consequently estopped
from claiming otherwise. Under the principle of estoppel, a party to a contract is
ordinarily precluded from denying the truth of any material fact found therein. In
the present case, the lease agreement clearly provides that the machines in
question are to be considered as personal properties. Clearly then, petitioners
were estopped from denying the characterization of the subject machines as
personal property. Under the circumstances, they are proper subject of the writ
of seizure. Accordingly, the petition was denied and the assailed decision of the
Court of Appeals was affirmed.
SYLLABUS
1. CIVIL LAW; CONTRACTS; CONTRACTING PARTIES MAY VALIDLY STIPULATE
THAT REAL PROPERTY BE CONSIDERED AS PERSONAL. — The Court has held that
contracting parties may validly stipulate that a real property be considered as
personal. After agreeing to such stipulation, they are consequently estopped
from claiming otherwise. Under the principle of estoppel, a party to a contract is
ordinarily precluded from denying the truth of any material fact found therein.
Hence, inTumalad v. Vicencio, the Court upheld the intention of the parties to
treat a house as a personal property because it had been made the subject of a
chattel mortgage. The Court ruled: ". . . . Although there is no specific statement
referring to the subject house as personal property, yet by ceding, selling or
transferring a property by way of chattel mortgage defendants-appellants could
only have meant to convey the house as chattel, or at least, intended to treat the
same as such, so that they should not now be allowed to make an inconsistent
stand by claiming otherwise." Applying Tumalad, the Court in Makati Leasing and
Finance Corp. v. Wearever Textile Mills also held that the machinery used in a
factory and essential to the industry, as in the present case, was a proper subject
of a writ of replevin because it was treated as personal property in a
contract. CcaASE
2. ID.; ID.; ID.; THIRD PERSONS ACTING IN GOOD FAITH ARE NOT AFFECTED BY
STIPULATION CHARACTERIZING MACHINERY AS PERSONAL. — In the present
case, the Lease Agreement clearly provides that the machines in question are to apparently being that said matter should be ventilated and determined only at
be considered as personal property. Specifically, Section 12.1 of the Agreement the trial on the merits." THADEI
reads as follows: "12.1 The PROPERTY is, and shall at all times be and remain,
personal property notwithstanding that the PROPERTY or any part thereof may DECISION
now be, or hereafter become, in any manner affixed or attached to or embedded
PANGANIBAN, J p:
in, or permanently resting upon, real property or any building thereon, or
attached in any manner to what is permanent." Clearly then, petitioners are After agreeing to a contract stipulating that a real or immovable property be
estopped from denying the characterization of the subject machines as personal considered as personal or movable, a party is estopped from subsequently
property. Under the circumstances, they are proper subjects of the Writ of claiming otherwise. Hence, such property is a proper subject of a writ of replevin
Seizure. It should be stressed, however, that our holding — that the machines obtained by the other contracting party.
should be deemed personal property pursuant to the Lease Agreement — is
good only insofar as the contracting parties are concerned. Hence, while the The Case
parties are bound by the Agreement, third persons acting in good faith are not
Before us is a Petition for Review on Certiorari assailing the January 6, 1999
affected by its stipulation characterizing the subject machinery as personal. In
Decision 1 of the Court of Appeals (CA) 2 in CA-GR SP No. 47332 and its February
any event, there is no showing that any specific third party would be adversely
26, 1999 Resolution 3 denying reconsideration. The decretal portion of the CA
affected.
Decision reads as follows: IEAacT
3. REMEDIAL LAW; PROVISIONAL REMEDIES; REPLEVIN; THE REMEDY OF
"WHEREFORE, premises considered, the assailed Order dated February 18, 1998
DEFENDANTS UNDER RULE 60 WAS EITHER TO POST A COUNTER-BOND OR TO
and Resolution dated March 31, 1998 in Civil Case No. Q-98-33500 are hereby
QUESTION THE SUFFICIENCY OF PLAINTIFF'S BOND. — The validity and the
AFFIRMED. The writ of preliminary injunction issued on June 15, 1998 is hereby
nature of the contract are the lis mota of the civil action pending before the RTC.
LIFTED." 4
A resolution of these questions, therefore, is effectively a resolution of the merits
of the case. Hence, they should be threshed out in the trial, not in the In its February 18, 1998 Order, 5 the Regional Trial Court (RTC) of Quezon City
proceedings involving the issuance of the Writ of Seizure. Indeed, in La Tondeña (Branch 218) 6 issued a Writ of Seizure. 7 The March 18, 1998
Distillers v. CA, the Court explained that the policy under Rule 60 was that Resolution 8 denied petitioners' Motion for Special Protective Order, praying that
questions involving title to the subject property — questions which petitioners the deputy sheriff be enjoined "from seizing immobilized or other real properties
are now raising — should be determined in the trial. In that case, the Court in [petitioners'] factory in Cainta, Rizal and to return to their original place
noted that the remedy of defendants under Rule 60 was either to post a counter- whatever immobilized machineries or equipments he may have removed." 9
bond or to question the sufficiency of the plaintiff's bond. They were not
allowed, however, to invoke the title to the subject property. The Court ruled: "In The Facts
other words, the law does not allow the defendant to file a motion to dissolve or
discharge the writ of seizure (or delivery) on ground of insufficiency of the The undisputed facts are summarized by the Court of Appeals as follows: 10
complaint or of the grounds relied upon therefor, as in proceedings on
preliminary attachment or injunction, and thereby put at issue the matter of the
title or right of possession over the specific chattel being replevied, the policy
"On February 13, 1998, respondent PCI Leasing and Finance, Inc. (PCI Leasing for
short) filed with the RTC-QC a complaint for [a] sum of money (Annex 'E'), with
an application for a writ of replevin docketed as Civil Case No. Q-98-33500.
"On March 6, 1998, upon an ex-parte application of PCI Leasing, respondent
judge issued a writ of replevin (Annex 'B') directing its sheriff to seize and deliver
the machineries and equipment to PCI Leasing after 5 days and upon the
payment of the necessary expenses.
"On March 24, 1998, in implementation of said writ, the sheriff proceeded to
petitioner's factory, seized one machinery with [the] word that he [would] return
for the other machineries.
"On March 25, 1998, petitioners filed a motion for special protective order
(Annex 'C'), invoking the power of the court to control the conduct of its officers
and amend and control its processes, praying for a directive for the sheriff to
defer enforcement of the writ of replevin.
"This motion was opposed by PCI Leasing (Annex 'F'), on the ground that the
properties [were] still personal and therefore still subject to seizure and a writ of
replevin.
"In their Reply, petitioners asserted that the properties sought to be seized
[were] immovable as defined in Article 415 of the Civil Code, the parties'
agreement to the contrary notwithstanding. They argued that to give effect to
the agreement would be prejudicial to innocent third parties. They further stated
that PCI Leasing [was] estopped from treating these machineries as personal
because the contracts in which the alleged agreement [were] embodied [were]
totally sham and farcical.
"On April 6, 1998, the sheriff again sought to enforce the writ of seizure and take
possession of the remaining properties. He was able to take two more, but was
prevented by the workers from taking the rest.
"On April 7, 1998, they went to [the CA] via an original action for certiorari."
Ruling of the Court of Appeals
Citing the Agreement of the parties, the appellate court held that the subject
machines were personal property, and that they had only been leased, not
owned, by petitioners. It also ruled that the "words of the contract are clear and
leave no doubt upon the true intention of the contracting parties." Observing
that Petitioner Goquiolay was an experienced businessman who was "not
unfamiliar with the ways of the trade," it ruled that he "should have realized the
import of the document he signed." The CA further held:
"Furthermore, to accord merit to this petition would be to preempt the trial
court in ruling upon the case below, since the merits of the whole matter are laid
down before us via a petition whose sole purpose is to inquire upon the
existence of a grave abuse of discretion on the part of the [RTC] in issuing the
assailed Order and Resolution. The issues raised herein are proper subjects of a
full-blown trial, necessitating presentation of evidence by both parties. The
contract is being enforced by one, and [its] validity is attacked by the other — a
matter . . . which respondent court is in the best position to determine."
Hence, this Petition. 11
The Issues
In their Memorandum, petitioners submit the following issues for our
consideration:
"A. Whether or not the machineries purchased and imported by SERG'S became
real property by virtue of immobilization.
B. Whether or not the contract between the parties is a loan or a lease." 12
In the main, the Court will resolve whether the said machines are personal, not
immovable, property which may be a proper subject of a writ of replevin. As a
preliminary matter, the Court will also address briefly the procedural points
raised by respondent.
The Court's Ruling
The Petition is not meritorious.
Preliminary Matter:
Procedural Questions
Respondent contends that the Petition failed to indicate expressly whether it was
being filed under Rule 45 or Rule 65 of the Rules of Court. It further alleges that
the Petition erroneously impleaded Judge Hilario Laqui as respondent.
There is no question that the present recourse is under Rule 45. This conclusion
finds support in the very title of the Petition, which is "Petition for Review
onCertiorari." 13
While Judge Laqui should not have been impleaded as a
respondent, 14 substantial justice requires that such lapse by itself should not
warrant the dismissal of the present Petition. In this light, the Court deems it
proper to remove, motu proprio, the name of Judge Laqui from the caption of
the present case.
Main Issue:
Nature of the Subject Machinery
Petitioners contend that the subject machines used in their factory were not
proper subjects of the Writ issued by the RTC because they were in fact real
property. Serious policy considerations, they argue, militate against a contrary
characterization.
Rule 60 of the Rules of Court provides that writs of replevin are issued for the
recovery of personal property only. 15 Section 3 thereof reads:
"SECTION 3. Order. — Upon the filing of such affidavit and approval of the bonds,
the court shall issue an order and the corresponding writ of replevin describing
the personal property alleged to be wrongfully detained and requiring the sheriff
forthwith to take such property into his custody."
On the other hand, Article 415 of the Civil Code enumerates immovable or real
property as follows:
ARTICLE 415. The following are immovable property: HCTEDa
xxx xxx xxx
(5) Machinery, receptacles, instruments or implements intended by the owner of
the tenement for an industry or works which may be carried on in a building or
on a piece of land, and which tend directly to meet the needs of the said industry
or works.
xxx xxx xxx"
In the present case, the machines that were the subjects of the Writ of Seizure
were placed by petitioners in the factory built on their own land. Indisputably,
they were essential and principal elements of their chocolate-making industry.
Hence, although each of them was movable or personal property on its own, all
of them have become "immobilized by destination because they are essential
and principal elements in the industry." 16 In that sense, petitioners are correct
in arguing that the said machines are real, not personal, property pursuant to
Article 415 (5) of the Civil Code. 17
Be that as it may, we disagree with the submission of the petitioners that the
said machines are not proper subjects of the Writ of Seizure.
The Court has held that contracting parties may validly stipulate that a real
property be considered as personal. 18 After agreeing to such stipulation, they
are consequently estopped from claiming otherwise. Under the principle of
estoppel, a party to a contract is ordinarily precluded from denying the truth of
any material fact found therein.
Hence, in Tumalad v. Vicencio, 19 the Court upheld the intention of the parties to
treat a house as a personal property because it had been made the subject of a
chattel mortgage. The Court ruled:
". . . Although there is no specific statement referring to the subject house as
personal property, yet by ceding, selling or transferring a property by way of
chattel mortgage defendants-appellants could only have meant to convey the
house as chattel, or at least, intended to treat the same as such, so that they
should not now be allowed to make an inconsistent stand by claiming
otherwise."
Applying Tumalad, the Court in Makati Leasing and Finance Corp. v. Wearever
Textile Mills 20 also held that the machinery used in a factory and essential to the
industry, as in the present case, was a proper subject of a writ of replevin
because it was treated as personal property in a contract. Pertinent portions of
the Court's ruling are reproduced hereunder:
". . . if a house of strong materials, like what was involved in the
above Tumalad case, may be considered as personal property for purposes of
executing a chattel mortgage thereon as long as the parties to the contract so
agree and no innocent third party will be prejudiced thereby, there is absolutely
no reason why a machinery, which is movable in its nature and becomes
immobilized only by destination or purpose, may not be likewise treated as such.
This is really because one who has so agreed is estopped from denying the
existence of the chattel mortgage."
In the present case, the Lease Agreement clearly provides that the machines in
question are to be considered as personal property. Specifically, Section 12.1 of
the Agreement reads as follows: 21
"12.1 The PROPERTY is, and shall at all times be and remain, personal property
notwithstanding that the PROPERTY or any part thereof may now be, or
hereafter become, in any manner affixed or attached to or embedded in, or
permanently resting upon, real property or any building thereon, or attached in
any manner to what is permanent."
Clearly then, petitioners are estopped from denying the characterization of the
subject machines as personal property. Under the circumstances, they are
proper subjects of the Writ of Seizure.
It should be stressed, however, that our holding — that the machines should be
deemed personal property pursuant to the Lease Agreement — is good only
insofar as the contracting parties are concerned. 22 Hence, while the parties are
bound by the Agreement, third persons acting in good faith are not affected by
its stipulation characterizing the subject machinery as personal. 23 In any event,
there is no showing that any specific third party would be adversely affected.
Validity of the Lease Agreement
In their Memorandum, petitioners contend that the Agreement is a loan and not
a lease. 24 Submitting documents supposedly showing that they own the subject
machines, petitioners also argue in their Petition that the Agreement suffers
from "intrinsic ambiguity which places in serious doubt the intention of the
parties and the validity of the lease agreement itself." 25 In their Reply to
respondent's Comment, they further allege that the Agreement is invalid. 26
These arguments are unconvincing. The validity and the nature of the contract
are the lis mota of the civil action pending before the RTC. A resolution of these
questions, therefore, is effectively a resolution of the merits of the case. Hence,
they should be threshed out in the trial, not in the proceedings involving the
issuance of the Writ of Seizure.
Indeed, in La Tondeña Distillers v. CA, 27 the Court explained that the policy
under Rule 60 was that questions involving title to the subject property —
questions which petitioners are now raising — should be determined in the trial.
In that case, the Court noted that the remedy of defendants under Rule 60 was
either to post a counter-bond or to question the sufficiency of the plaintiff's
bond. They were not allowed, however, to invoke the title to the subject
property. The Court ruled:
"In other words, the law does not allow the defendant to file a motion to dissolve
or discharge the writ of seizure (or delivery) on ground of insufficiency of the
complaint or of the grounds relied upon therefor, as in proceedings on
preliminary attachment or injunction, and thereby put at issue the matter of the
title or right of possession over the specific chattel being replevied, the policy
apparently being that said matter should be ventilated and determined only at
the trial on the merits."28
Besides, these questions require a determination of facts and a presentation of
evidence, both of which have no place in a petition for certiorari in the CA under
Rule 65 or in a petition for review in this Court under Rule 45. 29
Reliance on the
Lease Agreement
It should be pointed out that the Court in this case may rely on the Lease
Agreement, for nothing on record shows that it has been nullified or annulled. In
fact, petitioners assailed it first only in the RTC proceedings, which had ironically
been instituted by respondent. Accordingly, it must be presumed valid and
binding as the law between the parties.
Makati Leasing and Finance Corporation 30 is also instructive on this point. In
that case, the Deed of Chattel Mortgage, which characterized the subject
machinery as personal property, was also assailed because respondent had
allegedly been required "to sign a printed form of chattel mortgage which was in
a blank form at the time of signing." The Court rejected the argument and relied
on the Deed, ruling as follows:
". . . Moreover, even granting that the charge is true, such fact alone does not
render a contract void ab initio, but can only be a ground for rendering said
contract voidable, or annullable pursuant to Article 1390 of the new Civil Code,
by a proper action in court. There is nothing on record to show that the
mortgage has been annulled. Neither is it disclosed that steps were taken to
nullify the same. . . ."
Alleged Injustice Committed
on the Part of Petitioners
Petitioners contend that "if the Court allows these machineries to be seized, then
its workers would be out of work and thrown into the streets." 31 They also
allege that the seizure would nullify all efforts to rehabilitate the corporation.
Petitioners' arguments do not preclude the implementation of the Writ. As
earlier discussed, law and jurisprudence support its propriety. Verily, the above-
mentioned consequences, if they come true, should not be blamed on this Court,
but on the petitioners for failing to avail themselves of the remedy under Section
5 of Rule 60, which allows the filing of a counter-bond. The provision states:
"SECTION 5. Return of property. — If the adverse party objects to the sufficiency
of the applicant's bond, or of the surety or sureties thereon, he cannot
immediately require the return of the property, but if he does not so object, he
may, at any time before the delivery of the property to the applicant, require the
return thereof, by filing with the court where the action is pending a bond
executed to the applicant, in double the value of the property as stated in the
applicant's affidavit for the delivery thereof to the applicant, if such delivery be
adjudged, and for the payment of such sum to him as may be recovered against
the adverse party, and by serving a copy bond on the applicant."
WHEREFORE, the Petition is DENIED and the assailed Decision of the Court of
Appeals AFFIRMED. Costs against petitioners.
EN BANC
[G.R. No. 40411. August 7, 1935.]
DAVAO SAW MILL CO., INC., plaintiff-appellant, vs. APRONIANO G. CASTILLO
and DAVAO LIGHT & POWER CO., INC., defendants-appellees.
Arsenio, Suazo & Jose L. Palma Gil and Pablo Lorenzo & Delfin Joven for
appellant.
J. W. Ferrier for appellees.
SYLLABUS
1. PROPERTY; MACHINERY AS PERSONAL PROPERTY; CIVIL CODE, ARTICLE 334,
PARAGRAPHS 1 and 5, CONSTRUED. — A lessee placed machinery in a building
erected on land belonging to another, with the understanding that the
machinery was not included in the improvements which would pass to the lessor
on the expiration or abandonment of the land leased. The lessee also treated the
machinery as personal property by executing chattel mortgages in favor of third
persons. The machinery was levied upon by the sheriff as personalty pursuant to
a writ of execution obtained without any protest being registered. Held: That the
machinery must be classified as personal property.
2. ID.; ID.; ID. — Machinery which is movable in its nature only becomes
immobilized when placed in a plant by the owner of the property or plant, but
not when so placed by a tenant, a usufructuary, or any person having only a
temporary right, unless such person acted as the agent of the owner.
DECISION
MALCOLM, J p:
The issue in this case, as announced in the opening sentence of the decision in
the trial court and as set forth by counsel for the parties on appeal, involves the
determination of the nature of the properties described in the complaint. The
trial judge found that those properties were personal in nature, and as a
consequence absolved the defendants from the complaint, with costs against the
plaintiff.
The Davao Saw Mill Co., Inc., is the holder of a lumber concession from the
Government of the Philippine Islands. It has operated a sawmill in the sitio of
Maa, barrio of Tigatu, municipality of Davao, Province of Davao. However, the
land upon which the business was conducted belonged to another person. On
the land the sawmill company erected a building which housed the machinery
used by it. Some of the implements thus used were clearly personal property,
the conflict concerning machines which were placed and mounted on
foundations of cement. In the contract of lease between the sawmill company
and the owner of the land there appeared the following provision:
"That on the expiration of the period agreed upon, all the improvements and
buildings introduced and erected by the party of the second part shall pass to the
exclusive ownership of the party of the first part without any obligation on its
part to pay any amount for said improvements and buildings; also, in the event
the party of the second part should leave or abandon the land leased before the
time herein stipulated, the improvements and buildings shall likewise pass to the
ownership of the party of the first part as though the time agreed upon had
expired: Provided, however, That the machineries and accessories are not
included in the improvements which will pass to the party of the first part on the
expiration or abandonment of the land leased."
In another action, wherein the Davao Light & Power Co., Inc., was the plaintiff
and the Davao Saw Mill Co., Inc., was the defendant, a judgment was rendered in
favor of the plaintiff in that action against the defendant in that action; a writ of
execution issued thereon, and the properties now in question were levied upon
as personalty by the sheriff. No third party claim was filed for such properties at
the time of the sales thereof as is borne out by the record made by the plaintiff
herein. Indeed the bidder, which was the plaintiff in that action, and the
defendant herein having consummated the sale, proceeded to take possession of
the machinery and other properties described in the corresponding certificates
of sale executed in its favor by the sheriff of Davao.
As connecting up with the facts, it should further be explained that the Davao
Saw Mill Co., Inc., has on a number of occasions treated the machinery as
personal property by executing chattel mortgages in favor of third persons. One
of such persons is the appellee by assignment from the original mortgagees.
Article 334, paragraphs 1 and 5, of the Civil Code, is in point. According to the
Code, real property consists of —
"1. Land, buildings, roads and constructions of all kinds adhering to the soil;
xxx xxx xxx
"5. Machinery, liquid containers, instruments or implements intended by the
owner of any building or land for use in connection with any industry or trade
being carried on therein and which are expressly adapted to meet the
requirements of such trade or industry."
Appellant emphasizes the first paragraph, and appellees the last mentioned
paragraph. We entertain no doubt that the trial judge and the appellees are right
in their appreciation of the legal doctrines flowing from the facts.
In the first place, it must again be pointed out that the appellant should have
registered its protest before or at the time of the sale of this property. It must
further be pointed out that while not conclusive, the characterization of the
property as chattels by the appellant is indicative of intention and impresses
upon the property the character determined by the parties. In this connection
the decision of this court in the case of Standard Oil Co. of New York vs. Jaramillo
([1923], 44 Phil., 630), whether obiter dicta or not, furnishes the key to such a
situation.
It is, however, not necessary to spend overly much time in the resolution of this
appeal on side issues. It is machinery which is involved; moreover, machinery not
intended by the owner of any building or land for use in connection therewith,
but intended by a lessee for use in a building erected on the land by the latter to
be returned to the lessee on the expiration or abandonment of the lease.
A similar question arose in Puerto Rico, and on appeal being taken to the United
States Supreme Court, it was held that machinery which is movable in its nature
only becomes immobilized when placed in a plant by the owner of the property
or plant, but not when so placed by a tenant, a usufructuary, or any person
having only a temporary right, unless such person acted as the agent of the
owner. In the opinion written by Chief Justice White, whose knowledge of the
Civil Law is well known, it was in part said:
"To determine this question involves fixing the nature and character of the
property from the point of view of the rights of Valdes and its nature and
character from the point of view of Nevers & Callaghan as a judgment creditor of
the Altagracia Company and the rights derived by them from the execution
levied on the machinery placed by the corporation in the plant. Following the
Code Napoleon, the Porto Rican Code treats as immovable (real) property, not
only land and buildings, but also attributes immovability in some cases to
property of a movable nature, that is, personal property, because of the
destination to which it is applied. 'Things,' says section 334 of the Porto Rican
Code, 'may be immovable either by their own nature or by their destination or
the object to which they are applicable.' Numerous illustrations are given in the
fifth subdivision of section 335, which is as follows: 'Machinery, vessels,
instruments or implements intended by the owner of the tenements for the
industry or works that they may carry on in any building or upon any land and
which tend directly to meet the needs of the said industry or works.' (See
also Code Nap., articles 516, 518 et seq. to and inclusive of article 534,
recapitulating the things which, though in themselves movable, may be
immobilized.) So far as the subject-matter with which we are dealing —
machinery placed in the plant — it is plain, both under the provisions of the
Porto Rican Law and of the Code Napoleon, that machinery which is movable in
its nature only becomes immobilized when placed in a plant by the owner of the
property or plant. Such result would not be accomplished, therefore, by the
placing of machinery in a plant by a tenant or a usufructuary or any person
having only a temporary right. (Demolombe, Tit. 9, No. 203; Aubry et Rau, Tit. 2,
p. 12, Section 164; Laurent, Tit. 5, No. 447; and decisions quoted in Fuzier-
Herman ed. Code Napoleon under articles 522 et seq.) The distinction rests, as
pointed out by Demolombe, upon the fact that one only having a temporary right
to the possession or enjoyment of property is not presumed by the law to have
applied movable property belonging to him so as to deprive him of it by causing
it by an act of immobilization to become the property of another. It follows that
abstractly speaking the machinery put by the Altagracia Company in the plant
belonging to Sanchez did not lose its character of movable property and become
immovable by destination. But in the concrete immobilization took place
because of the express provisions of the lease under which the Altagracia held,
since the lease in substance required the putting in of improved machinery,
deprived the tenant of any right to charge against the lessor the cost of such
machinery, and it was expressly stipulated that the machinery so put in should
become a part of the plant belonging to the owner without compensation to the
lessee. Under such conditions the tenant in putting in the machinery was acting
but as the agent of the owner in compliance with the obligations resting upon
him, and the immobilization of the machinery which resulted arose in legal effect
from the act of the owner in giving by contract a permanent destination to the
machinery.
xxx xxx xxx
"The machinery levied upon by Nevers & Callaghan, that is, that which was
placed in the plant by the Altagracia Company, being, as regards Nevers &
Callaghan, movable property, it follows that they had the right to levy on it under
the execution upon the judgment in their favor, and the exercise of that right did
not in a legal sense conflict with the claim of Valdes, since as to him the property
was a part of the realty which, as the result of his obligations under the lease, he
could not, for the purpose of collecting his debt, proceed separately against."
(Valdes vs. Central Altagracia [1912], 225 U. S., 58.)
Finding no reversible error in the record, the judgment appealed from will be
affirmed, the costs of this instance to be paid by the appellant.
FIRST DIVISION
[G.R. No. L-50008. August 31, 1987.]
PRUDENTIAL BANK, petitioner, vs. HONORABLE DOMINGO D. PANIS, Presiding
Judge of Branch III, Court of First Instance of Zambales and Olongapo City;
FERNANDO MAGCALE and TEODULA BALUYUT-MAGCALE, respondents.
SYLLABUS
1. CIVIL LAW; CONTRACTS; REAL ESTATE MORTGAGE; BUILDING ALONE MAY BE
SUBJECT THEREOF. — The pivotal issue in this case is whether or not a valid real
estate mortgage can be constituted on the building erected on the land
belonging to another. The answer is in the affirmative. In the enumeration of
properties under Article 415 of the Civil Code of the Philippines, this Court ruled
that, "it is obvious that the inclusion of 'building' separate and distinct from the
land, in said provision of law can only mean that a building is by itself an
immovable property." (Lopez vs. Orosa, Jr., et al., L-10817-18, Feb. 28, 1958;
Associated Inc. and Surety Co., Inc. vs. Iya, et al., L-10837-38, May 30, 1958).
Thus, while it is true that a mortgage of land necessarily includes, in the absence
of stipulation of the improvements thereon, buildings, still a building by itself
may be mortgaged apart from the land on which it has been built. Such a
mortgage would be still a real estate mortgage for the building would still be
considered immovable property even if dealt with separately and apart from the
land (Leung Yee vs. Strong Machinery Co., 37 Phil. 644).
2. ID.; ID.; ID.; ID.; POSSESSORY RIGHTS OVER A BUILDING MAY BE VALIDLY
MORTGAGED. — In the same manner, this Court has also established that
possessory rights over said properties before title is vested on the grantee, may
be validly transferred or conveyed as in a deed of mortgage (Vda. de Bautista vs.
Marcos, 3 SCRA 438 [1961]).
3. ID.; ID.; ID.; ID.; CASE AT BAR. — Coming back to the case at bar, the records
show, as aforestated that the original mortgage deed on the 2-storey semi-
concrete residential building with warehouse and on the right of occupancy on
the lot where the building was erected, was executed on November 19, 1971 and
registered under the provisions of Act 3344 with the Register of Deeds of
Zambales on November 23, 1971. Miscellaneous Sales Patent No. 4776 on the
land was issued on April 24, 1972, on the basis of which OCT No. 2554 was issued
in the name of private respondent Fernando Magcale on May 15, 1972. It is
therefore without question that the original mortgage was executed before the
issuance of the final patent and before the government was divested of its title
to the land, an event which takes effect only on the issuance of the sales patent
and its subsequent registration in the Office of the Register of Deeds (Visayan
Realty Inc. vs. Meer, 96 Phil. 515; Director of Lands vs. De Leon, 110 Phil. 28;
Director of Lands vs. Jurado, L-14702, May 23, 1961; Peña, "Law on Natural
Resources", p. 49). Under the foregoing considerations, it is evident that the
mortgage executed by private respondent on his own building which was erected
on the land belonging to the government is to all intents and purposes a valid
mortgage.
4. ID.; ID.; DOCTRINE OF ESTOPPEL CANNOT GIVE VALIDITY TO A VOID
CONTRACT. — The Court, in recently ruling on violations of Section 124 which
refers to sections 118, 120, 122 and 123 of Commonwealth Act 141, has held: ". .
. Nonetheless, we apply our earlier rulings because we believe that as in pari
delicto may not be invoked to defeat the policy of the State neither may the
doctrine of estoppel give a validating effect to a void contract. Indeed, it is
generally considered that as between parties to a contract, validity cannot be
given to it by estoppel if it is prohibited by law or is against public policy (19 Am.
Jur. 802). It is not within the competence of any citizen to barter away what
public policy by law seeks to preserve (Gonzalo Puyat & Sons, Inc. vs. De los
Amas and Alino, supra). . . . " (Arsenal vs. IAC, 143 SCRA 54 [1986]).
5. ID.; ID.; ID.; CASE AT BAR. — This pronouncement covers only the previous
transaction already alluded to and does not pass upon any new contract
between the parties as in the case at bar. It should not preclude new contracts
that may be entered into between petitioner bank and private respondents that
are in accordance with the requirements of the law. After all, private
respondents themselves declare that they are not denying the legitimacy of their
debts and appear to be open to new negotiations under the law. Any new
transaction, however, would be subject to whatever steps the Government may
take for the reversion of the land in its favor.
DECISION
PARAS, J p:
This is a petition for review on certiorari of the November 13, 1978 Decision * of
the then Court of First Instance of Zambales and Olongapo City in Civil Case No.
2443-0 entitled "Spouses Fernando A. Magcale and Teodula Baluyut-Magcale vs.
Hon. Ramon Y. Pardo and Prudential Bank" declaring that the deeds of real
estate mortgage executed by respondent spouses in favor of petitioner bank are
null and void.
The undisputed facts of this case by stipulation of the parties are as follows: prcd
". . . on November 19, 1971, plaintiffs-spouses Fernando A. Magcale and Teodula
Baluyut Magcale secured a loan in the sum of P70,000.00 from the defendant
Prudential Bank. To secure payment of this loan, plaintiffs executed in favor of
defendant on the aforesaid date a deed of Real Estate Mortgage over the
following described properties:
'1. A 2-STOREY, SEMI-CONCRETE, residential building with warehouse spaces
containing a total floor area of 263 sq. meters, more or less, generally
constructed of mixed hard wood and concrete materials, under a rooming of cor.
g.i. sheets; declared and assessed in the name of FERNANDO MAGCALE under
Tax Declaration No. 21109, issued by the Assessor of Olongapo City with an
assessed value of P35,290.00. This building is the only improvement of the lot.
'2. THE PROPERTY hereby conveyed by way of MORTGAGE includes the right of
occupancy on the lot where the above property is erected, and more particularly
described and bounded, as follows:
'A first class residential land identified as Lot No. 720, (Ts-308, Olongapo
Townsite Subdivision) Ardoin Street, East Bajac-Bajac, Olongapo City, containing
an area of 465 sq. m., more or less, declared and assessed in the name of
FERNANDO MAGCALE under Tax Declaration No. 19595 issued by the Assessor of
Olongapo City with an assessed value of P1,860.00; bounded on the.
NORTH: By No. 6, Ardoin Street
SOUTH: By No. 2, Ardoin Street
EAST: By 37 Canda Street, and
WEST: By Ardoin Street.'
All corners of the lot marked by conc. cylindrical monuments of the Bureau of
Lands as visible limits.' (Exhibit "A," also Exhibit "1" for defendant)
Apart from the stipulations in the printed portion of the aforestated deed of
mortgage, there appears a rider typed at the bottom of the reverse side of the
document under the lists of the properties mortgaged which reads, as follows:
'AND IT IS FURTHER AGREED that in the event the Sales Patent on the lot applied
for by the Mortgagors as herein stated is released or issued by the Bureau of
Lands, the Mortgagors hereby authorize the Register of Deeds to hold the
Registration of same until this Mortgage is cancelled, or to annotate this
encumbrance on the Title upon authority from the Secretary of Agriculture and
Natural Resources, which title with annotation, shall be released in favor of the
herein Mortgage.'
From the aforequoted stipulation, it is obvious that the mortgagee (defendant
Prudential Bank) was at the outset aware of the fact that the mortgagors
(plaintiffs) have already filed a Miscellaneous Sales Application over the lot,
possessory rights over which, were mortgaged to it.
Exhibit "A" (Real Estate Mortgage) was registered under the Provisions of Act
3344 with the Registry of Deeds of Zambales on November 23, 1971.
On May 2, 1973, plaintiffs secured an additional loan from defendant Prudential
Bank in the sum of P20,000.00. To secure payment of this additional loan,
plaintiffs executed in favor of the said defendant another deed of Real Estate
Mortgage over the same properties previously mortgaged in Exhibit "A." (Exhibit
"B;" also Exhibit "2" for defendant). This second deed of Real Estate Mortgage
was likewise registered with the Registry of Deeds, this time in Olongapo City, on
May 2, 1973.
On April 24, 1973, the Secretary of Agriculture issued Miscellaneous Sales Patent
No. 4776 over the parcel of land, possessory rights over which were mortgaged
to defendant Prudential Bank, in favor of plaintiffs. On the basis of the aforesaid
Patent, and upon its transcription in the Registration Book of the Province of
Zambales, Original Certificate of Title No. P-2554 was issued in the name of
Plaintiff Fernando Magcale, by the Ex-Oficio Register of Deeds of Zambales, on
May 15, 1972. cdrep
For failure of plaintiffs to pay their obligation to defendant Bank after it became
due, and upon application of said defendant, the deeds of Real Estate Mortgage
(Exhibits "A" and "B") were extrajudicially foreclosed. Consequent to the
foreclosure was the sale of the properties therein mortgaged to defendant as the
highest bidder in a public auction sale conducted by the defendant City Sheriff on
April 12, 1978 (Exhibit "E"). The auction sale aforesaid was held despite written
request from plaintiffs through counsel, dated March 29, 1978, for the defendant
City Sheriff to desist from going with the scheduled public auction sale (Exhibit
"D"). (Decision, Civil Case No. 2443-0, Rollo, pp. 29-31).
Respondent Court, in a Decision dated November 3, 1978 declared the deeds of
Real Estate Mortgage us null and void (Ibid., p. 35).
On December 14, 1978, petitioner filed a Motion for Reconsideration (Ibid., pp.
41-53), opposed by private respondents on January 5, 1979 (Ibid., pp. 54-62), and
in an Order dated January 10, 1979 (Ibid., p. 63), the Motion for Reconsideration
was denied for lack of merit. Hence, the instant petition (Ibid., pp. 5-28).
The first Division of this Court, in a Resolution dated March 9, 1979, resolved to
require the respondents to comment (Ibid., p. 65), which order was complied
with the Resolution dated May 18, 1979, (Ibid., p. 100), petitioner filed its Reply
on June 2, 1979 (Ibid., pp. 101-112).
Thereafter, in the Resolution dated June 13, 1979, the petition was given due
course and the parties were required to submit simultaneously the irrespective
memoranda. (Ibid., p. 114)
On July 18, 1979, petitioner filed its Memorandum (Ibid., pp. 116-144), while
private respondents filed their Memorandum on August 1, 1979 (Ibid., pp. 146-
155).
In a Resolution dated August 10, 1979, this case was considered submitted for
decision (Ibid., p. 158).
In its Memorandum, petitioner raised the following issues:
1. WHETHER OR NOT THE DEEDS OF REAL ESTATE MORTGAGE ARE VALID; AND
2. WHETHER OR NOT THE SUPERVENING ISSUANCE IN FAVOR OF PRIVATE
RESPONDENTS OF MISCELLANEOUS SALES PATENT NO. 4776 ON APRIL 24, 1972
UNDER ACT NO. 730 AND THE COVERING ORIGINAL CERTIFICATE OF TITLE NO. P-
2554 ON MAY 15, 1972 HAVE THE EFFECT OF INVALIDATING THE DEEDS OF REAL
ESTATE MORTGAGE. (Memorandum for Petitioner, Rollo, p. 122).
This petition is impressed with merit.
The pivotal issue in this case is whether or not a valid real estate mortgage can
be constituted on the building erected on the land belonging to another. Cdpr
The answer is in the affirmative.
In the enumeration of properties under Article 415 of the Civil Code of the
Philippines, this Court ruled that, "it is obvious that the inclusion of 'building'
separate and distinct from the land, in said provision of law can only mean that a
building is by itself an immovable property." (Lopez vs. Orosa, Jr., et al., L-10817-
18, Feb. 28, 1958; Associated Inc. and Surety Co., Inc. vs. Iya, et al., L-10837-38,
May 30, 1958).
Thus, while it is true that a mortgage of land necessarily includes, in the absence
of stipulation of the improvements thereon, buildings, still a building by itself
may be mortgaged apart from the land on which it has been built. Such a
mortgage would be still a real estate mortgage for the building would still be
considered immovable property even if dealt with separately and apart from the
land (Leung Yee vs. Strong Machinery Co., 37 Phil. 644). In the same manner, this
Court has also established that possessory rights over said properties before title
is vested on the grantee, may be validly transferred or conveyed as in a deed of
mortgage (Vda. de Bautista vs. Marcos, 3 SCRA 438 [1961]).
Coming back to the case at bar, the records show, as aforestated that the original
mortgage deed on the 2-storey semi-concrete residential building with
warehouse and on the right of occupancy on the lot where the building was
erected, was executed on November 19, 1971 and registered under the
provisions of Act 3344 with the Register of Deeds of Zambales on November 23,
1971. Miscellaneous Sales Patent No. 4776 on the land was issued on April 24,
1972, on the basis of which OCT No. 2554 was issued in the name of private
respondent Fernando Magcale on May 15, 1972. It is therefore without question
that the original mortgage was executed before the issuance of the final patent
and before the government was divested of its title to the land, an event which
takes effect only on the issuance of the sales patent and its subsequent
registration in the Office of the Register of Deeds (Visayan Realty Inc. vs. Meer,
96 Phil. 515; Director of Lands vs. De Leon, 110 Phil. 28; Director of Lands vs.
Jurado, L-14702, May 23, 1961; Peña, "Law on Natural Resources", p. 49). Under
the foregoing considerations, it is evident that the mortgage executed by private
respondent on his own building which was erected on the land belonging to the
government is to all intents and purposes a valid mortgage. prLL
As to restrictions expressly mentioned on the face of respondents' OCT No. P-
2554, it will be noted that Sections 121, 122 and 124 of the Public Land Act, refer
to land already acquired under the Public Land Act, or any improvement thereon
and therefore have no application to the assailed mortgage in the case at bar
which was executed before such eventuality. Likewise, Section 2 of Republic Act
No. 730, also a restriction appearing on the face of private respondent's title has
likewise no application in the instant case, despite its reference to encumbrance
or alienation before the patent is issued because it refers specifically to
encumbrance or alienation on the land itself and does not mention anything
regarding the improvements existing thereon.
But it is a different matter, as regards the second mortgage executed over the
same properties on May 2, 1973 for an additional loan of P20,000.00 which was
registered with the Registry of Deeds of Olongapo City on the same date.
Relative thereto, it is evident that such mortgage executed after the issuance of
the sales patent and of the Original Certificate of Title, falls squarely under the
prohibitions stated in Sections 121, 122 and 124 of the Public Land Act and
Section 2 of Republic Act 730, and is therefore null and void.
Petitioner points out that private respondents, after physically possessing the
title for five years, voluntarily surrendered the same to the bank in 1977 in order
that the mortgaged may be annotated, without requiring the bank to get the
prior approval of the Ministry of Natural Resources beforehand, thereby
implicitly authorizing Prudential Bank to cause the annotation of said mortgage
on their title.
However, the Court, in recently ruling on violations of Section 124 which refers
to sections 118, 120, 122 and 123 of Commonwealth Act 141, has held:
". . . Nonetheless, we apply our earlier rulings because we believe that as in pari
delicto may not be invoked to defeat the policy of the State neither may the
doctrine of estoppel give a validating effect to a void contract. Indeed, it is
generally considered that as between parties to a contract, validity cannot be
given to it by estoppel if it is prohibited by law or is against public policy (19 Am.
Jur. 802). It is not within the competence of any citizen to barter away what
public policy by law seeks to preserve (Gonzalo Puyat & Sons, Inc. vs. De los
Amas and Alino, supra). . . . " (Arsenal vs. IAC, 143 SCRA 54 [1986]).
This pronouncement covers only the previous transaction already alluded to and
does not pass upon any new contract between the parties (Ibid.), as in the case
at bar. It should not preclude new contracts that may be entered into between
petitioner bank and private respondents that are in accordance with the
requirements of the law. After all, private respondents themselves declare that
they are not denying the legitimacy of their debts and appear to be open to new
negotiations under the law (Comment; Rollo, pp. 95-96). Any new transaction,
however, would be subject to whatever steps the Government may take for the
reversion of the land in its favor. llcd
PREMISES CONSIDERED, the decision of the Court of First Instance of Zambales &
Olongapo City is hereby MODIFIED, declaring that the Deed of Real Estate
Mortgage for P70,000.00 is valid but ruling that the Deed of Real Estate
Mortgage for an additional loan of P20,000.00 is null and void, without prejudice
to any appropriate action the Government may take against private respondents.
SO ORDERED.
Teehankee, C.J., Narvasa, Cruz and Gancayco, JJ., concur.
||| (Prudential Bank v. Panis, G.R. No. L-50008, [August 31, 1987], 237 PHIL 380-
388)
SECOND DIVISION
[G.R. No. L-50466. May 31, 1982.]
CALTEX (PHILIPPINES) INC., petitioner, vs. CENTRAL BOARD OF ASSESSMENT
APPEALS and CITY ASSESSOR OF PASAY, respondents.
Siguion Reyna, Montecillo & Ongsiako for petitioner.
Eduardo Z. Gatchalian for respondents.
SYNOPSIS
Petitioner installed underground tanks, elevated tanks, elevated water tanks,
water tanks, gasoline and computing pumps, car washers, car and tire hoists, air
compressors and tireflators in its gasoline stations located on leased land. They
were attached to the pavement covering the entire lot. The said machines were
loaned by petitioner to gas station operators under lease contracts to be
returned to petitioner upon demand. The city assessor of Pasay City treated the
said machines as taxable realty and imposed real tax thereon. The city board of
tax appeals ruled that they are personality not subject to realty tax, but the
Central Board of Assessment Appeals reversed the ruling and found that the
machines and equipment were real property within the meaning of Section 3(k)
and (m) and 38 of the Real Property Tax Code, Presidential Decree 464, and that
the definitions of real property and personal property in Articles 415 and 416 of
the Civil Code are not applicable to this case. Hence, this petition.
The Supreme Court, on review, held that the equipment and machinery
necessary to the operation of a gas station and which are attached or affixed
permanently thereto or embedded therein are taxable improvements and
machinery within the meaning of the Assessment Law and the Real Property Tax
Code.
Petition dismissed and the questioned decision and resolution of the Central
Board of Assessment Appeals are affirmed. LibLex
SYLLABUS
1. ADMINISTRATIVE LAW; TAXATION; REALTY TAX; EQUIPMENT AND MACHINERY
PERMANENTLY AFFIXED TO GAS STATION SUBJECT THEREOF AS IMPROVEMENT.
— The said equipment and machinery, as appurtenances to the gas station
building or shed owned by Caltex (as to which it is subject to realty tax) and
which fixtures are necessary to the gas station, for without them the gas station
would be useless, and which have been attached or affixed permanently to the
gas station site or embedded therein, are taxable improvements and machinery
within the meaning of the Assessment Law and the Real Property Tax Code.
2. ID.; ID.; PROPERTY SUBJECT THERETO; IMPROVEMENTS ON LAND COMMONLY
TAXED AS A REALTY. — Improvements on land are commonly taxed as realty
even though for some purposes they might be considered personality (84 C.J.S.
181-2, Notes 40 and 41). It is a familiar phenomenon to see things in classed as
real property for purposes of taxation which on general principle might be
considered personal property (Standard Oil Co. of New York vs. Jaramillo, 44 Phil.
630, 633).
DECISION
AQUINO, J p:
This case is about the realty tax on machinery and equipment installed by Caltex
(Philippines) Inc. in its gas stations located on leased land.
The machines and equipment consists of underground tanks, elevated tank,
elevated water tanks, water tanks, gasoline pumps, computing pumps, water
pumps, car washer, car hoists, truck hoists, air compressors and tireflators. The
city assessor described the said equipment and machinery in this manner:
"A gasoline service station is a piece of lot where a building or shed is erected, a
water tank if there is any is placed in one corner of the lot, car hoists are placed
in an adjacent shed, an air compressor is attached in the wall of the shed or at
the concrete wall fence.
"The controversial underground tank, depository of gasoline or crude oil, is dug
deep about six feet more or less, a few meters away from the shed. This is done
to prevent conflagration because gasoline and other combustible oil are very
inflammable.
"This underground tank is connected with a steel pipe to the gasoline pump and
the gasoline pump is commonly placed or constructed under the shed. The
footing of the pump is a cement pad and this cement pad is imbedded in the
pavement under the shed, and evidence that the gasoline underground tank is
attached and connected to the shed or building through the pipe to the pump
and the pump is attached and affixed to the cement pad and pavement covered
by the roof of the building or shed. cdasia
"The building or shed, the elevated water tank, the car hoist under a separate
shed, the air compressor, the underground gasoline tank, neon lights signboard,
concrete fence and pavement and the lot where they are all placed or erected,
all of them used in the pursuance of the gasoline service station business formed
the entire gasoline service station.
"As to whether the subject properties are attached and affixed to the tenement,
it is clear they are, for the tenement we consider in this particular case are (is)
the pavement covering the entire lot which was constructed by the owner of the
gasoline station and the improvement which holds all the properties under
question, they are attached and affixed to the pavement and to the
improvement.
"The pavement covering the entire lot of the gasoline service station, as well as
all the improvements, machines, equipments and apparatus are allowed by
Caltex (Philippines) Inc. . . .
"The underground gasoline tank is attached to the shed by the steel pipe to the
pump, so with the water tank it is connected also by a steel pipe to the
pavement, then to the electric motor which electric motor is placed under the
shed. So to say that the gasoline pumps, water pumps and underground tanks
are outside of the service station, and to consider only the building as the service
station is grossly erroneous." (pp. 58-60, Rollo).
The said machines and equipment are loaned by Caltex to gas station operators
under an appropriate lease agreement or receipt. It is stipulated in the lease
contract that the operators, upon demand, shall return to Caltex the machines
and equipment in good condition as when received, ordinary wear and tear
excepted.
The lessor of the land, where the gas station is located, does not become the
owner of the machines and equipment installed therein. Caltex retains the
ownership thereof during the term of the lease.
The city assessor of Pasay City characterized the said items of gas station
equipment and machinery as taxable realty. The realty tax on said equipment
amounts to P4,541.10 annually (p. 52, Rollo). The city board of tax appeals ruled
that they are personality. The assessor appealed to the Central Board of
Assessment Appeals. prcd
The Board, which was composed of Secretary of Finance Cesar Virata as
chairman, Acting Secretary of Justice Catalino Macaraig, Jr. and Secretary of Local
Government and Community Development Jose Roño, held in its decision of June
3, 1977 that the said machines and equipment are real property within the
meaning of sections 3(k) & (m) and 38 of the Real Property Tax Code, Presidential
Decree No. 464, which took effect on June 1, 1974, and that the definitions of
real property and personal property in articles 415 and 416 of the Civil Code are
not applicable to this case.
The decision was reiterated by the Board (Minister Vicente Abad Santos took
Macaraig's place) in its resolution of January 12, 1978, denying Caltex's motion
for reconsideration, a copy of which was received by its lawyer on April 2, 1979.
On May 2, 1979 Caltex filed this certiorari petition wherein it prayed for the
setting aside of the Board's decision and for a declaration that the said machines
and equipment are personal property not subject to realty tax (p. 16, Rollo).
The Solicitor General's contention that the Court of Tax Appeals has exclusive
appellate jurisdiction over this case is not correct. When Republic act No.
1125 created the Tax Court in 1954, there was as yet no Central Board of
Assessment Appeals. Section 7(3) of that law in providing that the Tax Court had
jurisdiction to review by appeal decisions of provincial or city boards of
assessment appeals had in mind the local boards of assessment appeals but not
the Central Board of Assessment Appeals which under the Real Property Tax
Code has appellate jurisdiction over decisions of the said local boards of
assessment appeals and is, therefore, in the same category as the Tax Court. cdll
Section 36 of the Real Property Tax Code provides that the decision of the
Central Board of Assessment Appeals shall become final and executory after the
lapse of fifteen days from the receipt of its decision by the appellant. Within that
fifteen-day period, a petition for reconsideration may be filed. The Code does not
provide for the review of the Board's decision by this Court.
Consequently, the only remedy available for seeking a review by this Court of the
decision of the Central Board of Assessment Appeals is the special civil action of
certiorari, the recourse resorted to herein by Caltex (Philippines), Inc.
The issue is whether the pieces of gas station equipment and machinery already
enumerated are subject to realty tax. This issue has to be resolved primarily
under the provisions of the Assessment Law and the Real Property Tax Code.
Section 2 of the Assessment Law provides that the realty tax is due "on real
property, including land, buildings, machinery, and other improvements" not
specifically exempted in section 3 thereof. This provision is reproduced with
some modification in the Real Property Tax Code which provides:
"SEC. 38. Incidence of Real Property Tax. — There shall be levied, assessed and
collected in all provinces, cities and municipalities an annual ad valorem tax on
real property, such as land, buildings, machinery and other improvements affixed
or attached to real property not hereinafter specifically exempted."
The Code contains the following definitions in its section 3:
"k) Improvements — is a valuable addition made to property or an amelioration
in its condition, amounting to more than mere repairs or replacement of waste,
costing labor or capital and intended to enhance its value, beauty or utility or to
adapt it for new or further purposes."
"m) Machinery — shall embrace machines, mechanical contrivances,
instruments, appliances and apparatus attached to the real estate. It includes the
physical facilities available for production, as well as the installations and
appurtenant service facilities, together with all other equipment designed for or
essential to its manufacturing, industrial or agricultural purposes." (See sec. 3[f],
Assessment Law).
We hold that the said equipment and machinery, as appurtenances to the gas
station building or shed owned by Caltex (as to which it is subject to realty tax)
and which fixtures are necessary to the operation of the gas station, for without
them the gas station would be useless, and which have been attached or affixed
permanently to the gas station site or embedded therein, are taxable
improvements and machinery within the meaning of the Assessment Law and
the Real Property Tax Code. LLphil
Caltex invokes the rule that machinery which is movable in its nature only
becomes immobilized when placed in a plant by the owner of the property or
plant but not when so placed by a tenant, a usufructuary, or any person having
only a temporary right, unless such person acted as the agent of the owner
(Davao Saw Mill Co. vs. Castillo, 61 Phil. 709).
That ruling is an interpretation of paragraph 5 of article 415 of the Civil Code
regarding machinery that becomes real property by destination. In the Davao
Saw Mills case the question was whether the machinery mounted on
foundations of cement and installed by the lessee on leased land should be
regarded as real property forpurposes of execution of a judgment against the
lessee. The sheriff treated the machinery as personal property. This Court
sustained the sheriff's action. (Compare with Machinery & Engineering Supplies,
Inc. vs. Court of Appeals, 96 Phil. 70, where in a replevin case machinery was
treated as realty).
Here, the question is whether the gas station equipment and machinery
permanently affixed by Caltex to its gas station and pavement (which are
indubitably taxable realty) should be subject to the realty tax. This question is
different from the issue raised in the Davao Saw Mill case.
Improvements on land are commonly taxed as realty even though for some
purposes they might be considered personality (84 C.J.S. 181-2, Notes 40 and
41). "It is a familiar phenomenon to see things classed as real property for
purposes of taxation which on general principle might be considered personal
property" (Standard Oil Co. of New York vs. Jaramillo, 44 Phil. 630, 633). LexLib
This case is also easily distinguishable from Board of Assessment Appeals vs.
Manila Electric Co., 119 Phil. 328, where Meralco's steel towers were considered
poles within the meaning of paragraph 9 of its franchise which exempts its poles
from taxation. The steel towers were considered personality because they were
attached to square metal frames by means of bolts and could be moved from
place to place when unscrewed and dismantled.
Nor are Caltex's gas station equipment and machinery the same as tools and
equipment in the repair shop of a bus company which were held to be personal
property not subject to realty tax (Mindanao Bus Co. vs. City Assessor, 116 Phil.
501).
The Central Board of Assessment Appeals did not commit a grave abuse of
discretion in upholding the city assessor's imposition of the realty tax on Caltex's
gas station and equipment.
WHEREFORE, the questioned decision and resolution of the Central Board of
Assessment Appeals are affirmed. The petition for certiorari is dismissed for lack
of merit. No costs.
SO ORDERED.
||| (Caltex (Philippines) Inc. v. Central Board of Assessment Appeals, G.R. No. L-
50466, [May 31, 1982], 199 PHIL 487-493)
EN BANC
[G.R. No. 106041. January 29, 1993.]
BENGUET CORPORATION, petitioner, vs. CENTRAL BOARD OF ASSESSMENT
APPEALS, BOARD OF ASSESSMENT APPEALS OF ZAMBALES, PROVINCIAL
ASSESSOR OF ZAMBALES, PROVINCE OF ZAMBALES, and MUNICIPALITY OF SAN
MARCELINO, respondents.
Romulo, Mabanta, Buenaventura, Sayoc & De los Angeles for petitioner.
SYLLABUS
1. TAXATION; REAL PROPERTY TAX CODE; REAL PROPERTY, NOT DEFINED
THEREIN; DEFINITION SUPPLIED BY THE CIVIL CODE. — The Real Property Tax
Code does not carry a definition of "real property" and simply says that the realty
tax is imposed on "real property, such as lands, buildings, machinery and other
improvements affixed or attached to real property." In the absence of such a
definition, we apply Article 415 of the Civil Code, the pertinent portions of which
state: ART. 415. The following are immovable property. (1) Lands, buildings and
constructions of all kinds adhered to the soil; . . . (3) Everything attached to an
immovable in a fixed manner, in such a way that it cannot be separated
therefrom without breaking the material or deterioration of the object.
2. ID.; COMMONWEALTH ACT NO. 470 (ASSESSMENT LAW); REALTY TAX; TAILING
DAM, NOT EXEMPT FROM PAYMENT THEREOF. — Section 2 of C.A. No. 470,
otherwise known as the Assessment Law, provides that the realty tax is due "on
the real property, including land, buildings, machinery and other improvements"
not specifically exempted in Section 3 thereof. A reading of that section shows
that the tailings dam of the petitioner does not fall under any of the classes of
exempt real properties therein enumerated.
3. ID.; REAL PROPERTY TAX CODE; IMPROVEMENT, DEFINED. — Section 3 (k) of
the Real Property Tax Code defines improvement as follows: (k) Improvements
— is a valuable addition made to property or an amelioration in its condition,
amounting to more than mere repairs or replacement of waste, costing labor or
capital and intended to enhance its value, beauty or utility or to adopt it for new
or further purposes. The term has also been interpreted as "artificial alterations
of the physical condition of the ground that are reasonably permanent in
character."
4. ID.; ID.; TAILING DAM, AN IMPROVEMENT AND SUBJECT TO TAX. — The Court
is convinced that the subject dam falls within the definition of an "improvement"
because it is permanent in character and it enhances both the value and utility of
petitioner's mine. Moreover, the immovable nature of the dam defines its
character as real property under Article 415 of the Civil Code and thus makes it
taxable under Section 38 of the Real Property Tax Code.
5. REMEDIAL LAW; EVIDENCE; CONCLUSIONS OF QUASI-JUDICIAL AGENCIES,
GENERALLY RESPECTED ON APPEAL; CASE AT BAR, NOT AN EXCEPTION. — It has
been the long-standing policy of this Court to respect the conclusions of quasi-
judicial agencies like the CBAA, which, because of the nature of its functions and
its frequent exercise thereof, has developed expertise in the resolution of
assessment problems. The only exception to this rule is where it is clearly shown
that the administrative body has committed grave abuse of discretion calling for
the intervention of this Court in the exercise of its own powers of review. There
is no such showing in the case at bar.
6. ID.; SUPREME COURT; MAY RESOLVE ISSUES RAISED FOR THE FIRST TIME ON
APPEAL. — We disagree with the ruling of respondent CBAA that it cannot take
cognizance of the issue of the propriety of the penalties imposed upon it, which
was raised by the petitioner for the first time only on appeal. The CBAA held that
this "is an entirely new matter that petitioner can take up with the Provincial
Assessor (and) can be the subject of another protest before the Local Board or a
negotiation with the local sanggunian . . ., and in case of an adverse decision by
either the Local Board or the local sanggunian, (it can) elevate the same to this
Board for appropriate action." There is no need for this time-wasting procedure.
The Court may resolve the issue in this petition instead of referring it back to the
local authorities. We have studied the facts and circumstances of this case as
above discussed and find that the petitioner has acted in good faith in
questioning the assessment on the tailings dam and the land submerged
thereunder. It is clear that it has not done so for the purpose of evading or
delaying the payment of the questioned tax. Hence, we hold that the petitioner
is not subject to penalty for its non-declaration of the tailings dam and the
submerged lands for realty tax purposes.
DECISION
CRUZ, J p:
The realty tax assessment involved in this case amounts to P11,319,304.00. It has
been imposed on the petitioner's tailings dam and the land thereunder over its
protest. LibLex
The controversy arose in 1985 when the Provincial Assessor of Zambales
assessed the said properties as taxable improvements. The assessment was
appealed to the Board of Assessment Appeals of the Province of Zambales. On
August 24, 1988, the appeal was dismissed mainly on the ground of the
petitioner's "failure to pay the realty taxes that fell due during the pendency of
the appeal."
The petitioner seasonably elevated the matter to the Central Board of
Assessment Appeals, 1 one of the herein respondents. In its decision dated
March 22, 1990, the Board reversed the dismissal of the appeal but, on the
merits, agreed that "the tailings dam and the lands submerged thereunder
(were) subject to realty tax."
For purposes of taxation the dam is considered as real property as it comes
within the object mentioned in paragraphs (a) and (b) of Article 415 of the New
Civil Code, It is a construction adhered to the soil which cannot be separated or
detached without breaking the material or causing destruction on the land upon
which it is attached, The immovable nature of the dam as an improvement
determines its character as real property, hence taxable under Section 38 of
the Real Property Tax Code. (P.D. 464).
Although the dam is partly used as an anti-pollution device, this Board cannot
accede to the request for tax exemption in the absence of a law authorizing the
same.
xxx xxx xxx
We find the appraisal on the land submerged as a result of the construction of
the tailings dam, covered by Tax Declaration Nos. 002-0260 and 002-0266, to be
in accordance with the Schedule of Market Values for Zambales which was
reviewed and allowed for use by the Ministry (Department) of Finance in the
1981-1982 general revision. No serious attempt was made by Petitioner-
Appellant Benguet Corporation to impugn its reasonableness, i.e., that the
P50.00 per square meter applied by Respondent-Appellee Provincial Assessor is
indeed excessive and unconscionable. Hence, we find no cause to disturb the
market value applied by Respondent Appellee Provincial Assessor of Zambales on
the properties of Petitioner-Appellant Benguet Corporation covered by Tax
Declaration Nos. 002-0260 and 002-0266. llcd
This petition for certiorari now seeks to reverse the above ruling.
The principal contention of the petitioner is that the tailings dam is not subject to
realty tax because it is not an "improvement" upon the land within the meaning
of theReal Property Tax Code. More particularly, it is claimed —
(1) as regards the tailings dam as an "improvement":
(a) that the tailings dam has no value separate from and independent of the
mine; hence. by itself it cannot be considered an improvement separately
assessable;
(b) that it is an integral part of the mine;
(c) that at the end of the mining operation of the petitioner corporation in the
area, the tailings dam will benefit the local community by serving as an irrigation
facility;
(d) that the building of the dam has stripped the property of any commercial
value as the property is submerged under water wastes from the mine;
(e) that the tailings dam is an environmental pollution control device for which
petitioner must be commended rather than penalized with a realty tax
assessment;
(f) that the installation and utilization of the tailings dam as a pollution control
device is a requirement imposed by law;
(2) as regards the valuation of the tailings dam and the submerged lands:
(a) that the subject properties have no market value as they cannot be sold
independently of the mine;
(b) that the valuation of the tailings dam should be based on its incidental use by
petitioner as a water reservoir and not on the alleged cost of construction of the
dam and the annual build-up expense;
(c) that the "residual value formula" used by the Provincial Assessor and adopted
by respondent CBAA is arbitrary and erroneous; and
(3) as regards the petitioner's liability for penalties for non-declaration of the
tailings dam and the submerged lands for realty tax purposes.
(a) that where a tax is not paid in an honest belief that it is not due, no penalty
shall be collected in addition to the basic tax;
(b) that no other mining companies in the Philippines operating a tailings dam
have been made to declare the dam for realty tax purposes. prLL
The petitioner does not dispute that the tailings dam may be considered realty
within the meaning of Article 415. It insists, however, that the dam cannot be
subjected to realty tax as a separate and independent property because it does
not constitute an "assessable improvement" on the mine although a
considerable sum may have been spent in constructing and maintaining it.
To support its theory, the petitioner cites the following cases:
1. Municipality of Cotabato v. Santos (105 Phil. 963), where this Court considered
the dikes and gates constructed by the taxpayer in connection with a fishpond
operation as integral parts of the fishpond.
2. Bisig Bay Lumber Co. v. Provincial Government of Surigao (100 Phil. 303),
involving a road constructed by the timber concessionaire in the area, where this
Court did not impose a realty tax on the road primarily for two reasons:
In the first place, it cannot be disputed that the ownership of the road that was
constructed by appellee belongs to the government by right of accession not
only because it is inherently incorporated or attached to the timber land . . . but
also because upon the expiration of the concession said road would ultimately
pass to the national government. . . . In the second place, while the road was
constructed by appellee primarily for its use and benefit, the privilege is not
exclusive, for . . . appellee cannot prevent the use of portions, of the concession
for homesteading purposes. It is also duty bound to allow the free use of forest
products within the concession for the personal use of individuals residing in or
within the vicinity of the land. . . . In other words, the government has practically
reserved the rights to use the road to promote its varied activities. Since as
above shown, the road in question cannot be considered as an improvement
which belongs to appellee, although in part is for its benefit, it is clear that the
same cannot be the subject of assessment within the meaning of Section 2
of C.A. No. 470.
Apparently, the realty tax was not imposed not because the road was an integral
part of the lumber concession but because the government had the right to use
the road to promote its varied activities.
3. Kendrick v. Twin Lakes Reservoir Co. (144 Pacific 884), an American case,
where it was declared that the reservoir dam went with and formed part of the
reservoir and that the dam would be "worthless and useless except in connection
with the outlet canal and the water rights in the reservoir represent and include
whatever utility or value there is in the dam and headgates."
4. Ontario Silver Mining Co. v. Hixon (164 Pacific 498), a so from the United
States. This case involved drain tunnels constructed by plaintiff when it expanded
its mining operations downward, resulting in. a constantly increasing flow of
water in the said mine. It was held that: LLpr
"Whatever value they have is connected with and in fact is an integral part of the
mine itself. Just as much so as any shaft which descends into the earth or an
underground incline, tunnel, or drift would be which was used in connection with
the mine.
On the other hand, the Solicitor General argues that the dam is an assessable
improvement because it enhances the value and utility of the mine. The primary
function of the dam is to receive, retain and hold the water coming from the
operations of the mine, and it also enables the petitioner to impound water,
which is then recycled for use in the plant.
There is also ample jurisprudence to support this view, thus:
. . . The said equipment and machinery, as appurtenances to the gas station
building or shed owned by Caltex (as to which it is subject to realty tax) and
which fixtures are necessary to the operation of the gas station, for without
them the gas station would be useless and which have been attached or affixed
permanently to the gas station site or embedded therein, are taxable
improvements and machinery within the meaning of the Assessment Law and
the Real Property Tax Code. (Caltex [Phil.] Inc. v. CBAA, 114 SCRA 296)
We hold that while the two storage tanks are not embedded in the land, they
may, nevertheless, be considered as improvements on the land, enhancing its
utility and rendering it useful to the oil industry. It is undeniable that the two
tanks have been installed with some degree of permanence as receptacles for
the considerable quantities of oil needed by MERALCO for its operations, (Manila
Electric Co. v. CBAA, 114 SCRA 273)
The pipeline system in question is indubitably a construction adhering to the soil.
It is attached to the land in such a way that it cannot be separated therefrom
without dismantling the steel pipes which were welded to form the pipeline.
(MERALCO Securities Industrial Corp. v. CBAA. 114 SCRA 261)
The tax upon the dam was properly assessed to the plaintiff as a tax upon real
estate. (Flax-Pond Water Co. v. City of Lynn, 16 N.E. 742).
The oil tanks are structures within the statute, that they are designed and used
by the owner as permanent improvement of the free hold, and that for such
reasons they were properly assessed by the respondent taxing district as
improvements. (Standard Oil Co. of New Jersey v. Atlantic City, 15 A 2d. 271)
The Real Property Tax Code does not carry a definition of "real property" and
simply says that the realty tax is imposed on "real property, such as lands,
buildings, machinery and other improvements affixed or attached to real
property." In the absence of such a definition, we apply Article 415 of the Civil
Code, the pertinent portions of which state: LLjur
ART. 415. The following are immovable property.
(1) Lands, buildings and constructions of all kinds adhered to the soil;
xxx xxx xxx
(3) Everything attached to an immovable in a fixed manner, in such a way that it
cannot be separated therefrom without breaking the material or deterioration of
the object.
Section 2 of C.A. No. 470, otherwise known as the Assessment Law, provides that
the really tax is due "on the real property, including land, buildings, machinery
and other improvements" not specifically exempted in Section 3 thereof. A
reading of that section shows that the tailings dam of the petitioner does not fall
under any of the classes of exempt real properties therein enumerated.
Is the tailings dam an improvement on the mine? Section 3 (k) of the Real
Property Tax Code defines improvement as follows:
(k) Improvements — is a valuable addition made to property or an amelioration
in its condition, amounting to more than mere repairs or replacement of waste,
costing labor or capital and intended to enhance its value, beauty or utility or to
adopt it for new or further purposes.
The term has also been interpreted as "artificial alterations of the physical
condition of the ground that are reasonably permanent in character." 2
The Court notes that in the Ontario case the plaintiff admitted that the mine
involved therein could not be operated without the aid of the drain tunnels,
which were indispensable to the successful development and extraction of the
minerals therein. This is not true in the present case.
Even without the tailings dam, the petitioner's mining operation can still be
carried out because the primary function of the dam is merely to receive and
retain the wastes and water coming from the mine. There is no allegation that
the water coming from the dam is the sole source of water for the mining
operation so as to make the dam an integral part of the mine. In fact, as a result
of the construction of the dam, the petitioner can now impound and recycle
water without having to spend for the building of a water reservoir. And as the
petitioner itself points out, even if the petitioner's mine is shut down or ceases
operation, the dam may still be used for irrigation of the surrounding areas,
again unlike in the Ontario case.
As correctly observed by the CBAA, the Kendrick case is also not applicable
because it involved water reservoir dams used for different purposes and for the
benefit of the surrounding areas. By contrast, the tailings dam in question is
being used exclusively for the benefit of the petitioner.
Curiously, the petitioner, while vigorously arguing that the tailings dam has no
separate existence, just as vigorously contends that at the end of the mining
operation the tailings dam will serve the local community as an irrigation facility,
thereby implying that it can exist independently of the mine.
From the definitions and the cases cited above, it would appear that whether a
structure constitutes an improvement so as to partake of the status of realty
would depend upon the degree of permanence intended in its construction and
use, The expression "permanent" as applied to an improvement does not imply
that the improvement must be used perpetually but only until the purpose to
which the principal realty is devoted has been accomplished. It is sufficient that
the improvement is intended to remain as long as the land to which it is annexed
is still used for the said purpose.
The Court is convinced that the subject dam falls within the definition of an
"improvement" because it is permanent in character and it enhances both the
value and utility of petitioner's mine. Moreover, the immovable nature of the
dam defines its character as real property under Article 415 of the Civil Code and
thus makes it taxable under Section 38 of the Real Property Tax Code. cdphil
The Court will also reject the contention that the appraisal at P50.00 per square
meter made by the Provincial Assessor is excessive and that his use of the
"residual value formula" is arbitrary and erroneous.
Respondent Provincial Assessor explained the use of the "residual value formula"
as follows:
A 50% residual value is applied in the computation because, while it is true that
when slime fills the dike, it will then be covered by another dike or stage, the
stage covered is still there and still exists and since only one face of the dike is
filled, 50% or the other face is unutilized.
In sustaining this formula, the CBAA gave the following justification:
We find the appraisal on the land submerged as a result of the construction of
the tailings dam, covered by Tax Declaration Nos. 002-0260 and 002-0266, to be
in accordance with the Schedule of Market Values for San Marcelino, Zambales,
which is fifty (50.00) pesos per square meter for third class industrial land (TSN,
page 17, July 5, 1989) and Schedule of Market Values for Zambales which was
reviewed and allowed for use by the Ministry (Department) of Finance in the
1981-1982 general revision. No serious attempt was made by Petitioner-
Appellant Benguet Corporation to impugn its reasonableness, i.e., that the
P50.00 per square meter applied by Respondent-Appellee Provincial Assessor is
indeed excessive and unconscionable. Hence, we find no cause to disturb the
market value applied by Respondent-Appellee Provincial Assessor of Zambales
on the properties of Petitioner-Appellant Benguet Corporation covered by Tax
Declaration Nos. 002-0260 and 002-0266.
It has been the long-standing policy of this Court to respect the conclusions of
quasi-judicial agencies like the CBAA, which, because of the nature of its
functions and its frequent exercise thereof, has developed expertise in the
resolution of assessment problems. The only exception to this rule is where it is
clearly shown that the administrative body has committed grave abuse of
discretion calling for the intervention of this Court in the exercise of its own
powers of review. There is no such showing in the case at bar.
We disagree, however, with the ruling of respondent CBAA that it cannot take
cognizance of the issue of the propriety of the penalties imposed upon it, which
was raised by the petitioner for the first time only on appeal. The CBAA held that
this "is an entirely new matter that petitioner can take up with the Provincial
Assessor (and) can be the subject of another protest before the Local Board or a
negotiation with the local sanggunian . . ., and in case of an adverse decision by
either the Local Board or the local sanggunian, (it can) elevate the same to this
Board for appropriate action." LLpr
There is no need for this time-wasting procedure. The Court may resolve the
issue in this petition instead of referring it back to the local authorities. We have
studied the facts and circumstances of this case as above discussed and find that
the petitioner has acted in good faith in questioning the assessment on the
tailings dam and the land submerged thereunder. It is clear that it has not done
so for the purpose of evading or delaying the payment of the questioned tax.
Hence, we hold that the petitioner is not subject to penalty for its non-
declaration of the tailings dam and the submerged lands for realty tax purposes.
WHEREFORE, the petition is DISMISSED for failure to show that the questioned
decision of respondent Central Board of Assessment Appeals is tainted with
grave abuse of discretion except as to the imposition of penalties upon the
petitioner which is hereby SET ASIDE. Costs against the petitioner. It is ordered.
||| (Benguet Corp. v. Central Board of Assessment Appeals, G.R. No. 106041,
[January 29, 1993])
EN BANC
[G.R. No. L-30173. September 30, 1971.]
GAVINO A. TUMALAD and GENEROSA R. TUMALAD, plaintiffs-
appellees, vs. ALBERTA VICENCIO and EMILIANO SIMEON, defendants-
appellants.
Castelo & Suck for plaintiffs-appellees.
Jose Q. Calingo for defendants-appellants.
SYLLABUS
1. REMEDIAL LAW; SPECIAL CIVIL ACTION; UNLAWFUL DETAINER; CLAIM OF
OWNERSHIP IS A MATTER OF DEFENSE THEREIN. — In detainer cases the claim of
ownership "is a matter of defense and raises an issue of fact which should be
determined from the evidence at the trial."
2. CIVIL LAW; CONTRACTS; FRAUD OR DECEIT RENDERS CONTRACT VOIDABLE,
NOT VOID AB INITIO. — Fraud or deceit does not render a contract void ab initio,
and can only be a ground for rendering the contract voidable or annullable
pursuant to Article 1390 of the New Civil Code, by a proper action in court.
3. ID.; ID.; PARTIES THERETO MAY TREAT AS PERSONAL PROPERTY THAT WHICH
IS REAL PROPERTY. — In the case of Manarang and Manarang vs. Ofilada (99 Phil.
109), this Court stated that "it is undeniable that the parties to a contract may by
agreement treat as personal property that which by nature would be real
property," citing Standard Oil Company of New York vs. Jaramillo (44 Phil. 632).
4. ID.; ID.; ID.; CASE AT BAR. — In the contract now before Us, the house on
rented land is not only expressly designated as Chattel Mortgage; it specifically
provides that "the mortgagor. . . voluntarily CEDES, SELLS and TRANSFERS by way
of Chattel Mortgage the property together with its leasehold rights over the lot
on which it is constructed and participation . . ." Although there is no specific
statement referring to the subject house as personal property, yet by ceding,
selling or transferring a property by way of chattel mortgage defendants-
appellants could only have meant to convey the house as chattel, or at least,
intended to treat the same as such, so that they should not now be allowed to
make an inconsistent stand by claiming otherwise. Moreover, the subject house
stood on a rented lot to which defendants-appellants merely had a temporary
right as lessee, and although this can not in itself alone determine the status of
the property, it does so when combined with other factors to sustain the
interpretation that the parties, particularly the mortgagors, intended to treat the
house as personality.
5. ID.; ID.; PARTIES ESTOPPED TO ASSAIL VALIDITY THEREOF. — It is the
defendants-appellants themselves, as debtors-mortgagors, who are attacking the
validity of the chattel mortgage in this case. The doctrine of estoppel therefore
applies to the herein defendants-appellants, having treated the subject house as
personality.
6. ID.; ID.; MORTGAGE; FORECLOSURE; MORTGAGOR MAY BE ALLOWED
POSSESSION DURING THE ONE-YEAR PERIOD OF REDEMPTION. — Section 6 of
the Act referred to (Act No. 3135) provides that the debtor-mortgagor
(defendants-appellants herein) may, at any time within one year from and after
the date of the auction sale, redeem the property sold at the extra judicial
foreclosure sale. Section 7 of the same Act allows the purchaser of the property
to obtain from the court the possession during the period of redemption: but the
same provision expressly requires the filing of a petition with the proper Court of
First Instance and the furnishing of a bond. It is only upon filing of the proper
motion and the approval of the corresponding bond that the order for a writ of
possession issues as a matter of course. No discretion is left to the court. In the
absence of such a compliance, as in the instant case, the purchaser can not claim
possession during the period of redemption as a matter of right.
7. ID.; ID.; ID.; ID.; PURCHASER RECEIVING RENTALS DURING REDEMPTION
PERIOD IS ACCOUNTABLE TO MORTGAGOR; RATIONALE. — "In other words,
before the expiration of the 1-year period within which the judgment-debtor or
mortgagor may redeem the property, the purchaser thereof is not entitled, as a
matter of right, to possession of the same. Thus, while it is true that the Rules of
Court allow the purchaser to receive the rentals if the purchased property is
occupied by tenants, he is, nevertheless, accountable to the judgment-debtor
or mortgagor as the case may be, for the amount so received and the same will
be duly credited against the redemption price when the said debtor or
mortgagor effects the redemption. Differently stated, the rentals receivable from
tenants, although they may be collected by the purchaser during the redemption
period, do not belong to the latter but still pertain to the debtor or mortgagor.
The rationale for the Rule, it seems, is to secure for the benefit of the debtor or
mortgagor, the payment of the redemption amount and the consequent return
to him of his properties sold at public auction." (Italics supplied)
DECISION
REYES, J.B.L., J p:
Case certified to this Court by the Court of Appeals (CA-G.R. No. 27824-R) for the
reason that only questions of law are involved.
This case was originally commenced by defendants-appellants in the municipal
court of Manila in Civil Case No. 43073, for ejectment. Having lost therein,
defendants-appellants appealed to the court a quo (Civil Case No. 30993) which
also rendered a decision against them, the dispositive portion of which follows:
"WHEREFORE, the court hereby renders judgment in favor of the plaintiffs and
against the defendants, ordering the latter to pay jointly and severally the former
a monthly rent of P200.00 on the house, subject-matter of this action, from
March 27, 1956, to January 14, 1967, with interest at the legal rate from April 18,
1956, the filing of the complaint, until fully paid, plus attorney's fees in the sum
of P300.00 and to pay the costs."
It appears on the records that on 1 September 1955 defendants-appellants
executed a chattel mortgage 1 in favor of plaintiffs-appellees over their house of
strong materials located at No. 550 Int. 3, Quezon Boulevard, Quiapo, Manila,
over Lot No. 6-B and 7-B, Block No. 2554, which were being rented from
Madrigal & Company, Inc. The mortgage was registered in the Registry of Deeds
of Manila on 2 September 1955. The herein mortgage was executed to guarantee
a loan of P4,800.00 received from plaintiffs-appellees, payable within one year at
12% per annum. The mode of payment was P150.00 monthly, starting
September, 1955, up to July 1956, and the lump sum of P3,150 was payable on
or before August, 1956. It was also agreed that default in the payment of any of
the amortizations would cause the remaining unpaid balance to become
immediately due and payable and —
"the Chattel Mortgage will be enforceable in accordance with the provisions of
Special Act No. 3135, and for this purpose, the Sheriff of the City of Manila or any
of his deputies is hereby empowered and authorized to sell all the Mortgagor's
property after the necessary publication in order to settle the financial debts of
P4,500.00, plus 12% yearly interest, and attorney's fees. . ." 2
When defendants-appellants defaulted in paying, the mortgage was
extrajudicially foreclosed, and on 27 March 1956, the house was sold at public
auction pursuant to the said contract. As highest bidder, plaintiffs-appellees were
issued the corresponding certificate of sale. 3 Thereafter, on 18 April 1956,
plaintiffs-appellees commenced Civil Case No. 43073 in the municipal court of
Manila, praying, among other things, that the house be vacated and its
possession surrendered to them, and for defendants-appellants to pay rent of
P200.00 monthly from 27 March 1956 up to the time the possession is
surrendered. 4 On 21 September 1956, the municipal court rendered its decision
— Court. Plaintiffs-appellees failed to file a brief and this appeal was submitted for
". . . ordering the defendants to vacate the premises described in the complaint;
ordering further to pay monthly the amount of P200.00 from March 27, 1956,
until such (time that) the premises is (sic) completely vacated; plus attorney's
fees of P100.00 and the costs of the suit." 5
Defendants-appellants, in their answers in both the municipal court and court a
quo impugned the legality of the chattel mortgage, claiming that they are still the
owners of the house; but they waived the right to introduce evidence, oral or
documentary. Instead, they relied on their memoranda in support of their
motion to dismiss, predicated mainly on the grounds that: (a) the municipal court
did not have jurisdiction to try and decide the case because (1) the issue involved
is ownership, and (2) there was no allegation of prior possession; and (b) failure
to prove prior demand pursuant to Section 2, Rule 72, of the Rules of Courts. 6
During the pendency of the appeal to the Court of First Instance, defendants-
appellants failed to deposit the rent for November, 1956 within the first 10 days
of December, 1956 as ordered in the decision of the municipal court. As a result,
the court granted plaintiffs-appellees' motion for execution, and it was actually
issued on 24 January 1957. However, the judgment regarding the surrender of
possession to plaintiffs-appellees could not be executed because the subject
house had been already demolished on 14 January 1957 pursuant to the order of
the court in a separate civil case (No. 25816) for ejectment against the present
defendants for non-payment of rentals on the land on which the house was
constructed.
The motion of plaintiffs for dismissal of the appeal, execution of the supersedeas
bond and withdrawal of deposited rentals was denied for the reason that the
liability therefor was disclaimed and was still being litigated, and under Section 8,
Rule 72, rentals deposited had to be held until final disposition of the appeal. 7
On 7 October 1957, the appellate court of First Instance rendered its decision,
the dispositive portion of which is quoted earlier. The said decision was appealed
by defendants to the Court of Appeals which, in turn, certified the appeal to this
decision without it.
Defendants-appellants submitted numerous assignments of error which can be
condensed into two questions, namely:
(a) Whether the municipal court from which the case originated had jurisdiction
to adjudicate the same;
(b) Whether the defendants are, under the law, legally bound to pay rentals to
the plaintiffs during the period of one (1) year provided by law for the
redemption of the extrajudicially foreclosed house.
We will consider these questions seriatim.
(a) Defendants-appellants mortgagors question the jurisdiction of the municipal
court from which the case originated, and consequently, the appellate
jurisdiction of the Court of First Instance a quo, on the theory that the chattel
mortgage is void ab initio; whence it would follow that the extrajudicial
foreclosure, and necessarily the consequent auction sale, are also void. Thus, the
ownership of the house still remained with defendants-appellants who are
entitled to possession and not plaintiffs-appellees. Therefore, it is argued by
defendants-appellants, the issue of ownership will have to be adjudicated first in
order to determine possession. It is contended further that ownership being in
issue, it is the Court of First Instance which has jurisdiction and not the municipal
court.
Defendants-appellants predicate their theory of nullity of the chattel mortgage
on two grounds, which are: (a) that their signatures on the chattel mortgage
were obtained through fraud, deceit, or trickery; and (b) that the subject matter
of the mortgage is a house of strong materials, and, being an immovable, it can
only be the subject of a real estate mortgage and not a chattel mortgage.
On the charge of fraud, deceit or trickery, the Court of First Instance found
defendants-appellants' contentions as not supported by evidence and
accordingly dismissed the charge, 8 confirming the earlier finding of the
municipal court that "the defense of ownership as well as the allegations of fraud
and deceit . . . are mere allegations."9
It has been held in Supia and Batiaco vs. Quintero and Ayala 10 that "the answer
is a mere statement of the facts which the party filing it expects to prove, but it is
not evidence; 11 and further, that when the question to be determined is one of
title, the Court is given the authority to proceed with the hearing of the cause
until this fact is clearly established. In the case of Sy vs. Dalman, 12 wherein the
defendant was also a successful bidder in an auction sale, it was likewise held by
this Court that in detainer cases the claim of ownership "is a matter of defense
and raises an issue of fact which should be determined from the evidence at the
trial." What determines jurisdiction are the allegations or averments in the
complaint and the relief asked for. 13
Moreover, even granting that the charge is true, fraud or deceit does not render
a contract void ab initio, and can only be a ground for rendering the contract
voidable or annullable pursuant to Article 1390 of the New Civil Code, by a
proper action in court. 14 There is nothing on record to show that the mortgage
has been annulled. Neither is it disclosed that steps were taken to nullify the
same. Hence, defendants-appellants' claim of ownership on the basis of a
voidable contract which has not been voided fails.
It is claimed in the alternative by defendants-appellants that even if there was no
fraud, deceit or trickery, the chattel mortgage was still null and void ab
initio because only personal properties can be subject of a chattel mortgage. The
rule about the status of buildings as immovable property is stated in Lopez vs.
Orosa, Jr. and Plaza Theatre, Inc., 15 cited in Associated Insurance Surety Co., Inc.
vs. Iya, et al. 16 to the effect that —
". . . it is obvious that the inclusion of the building, separate and distinct from the
land, in the enumeration of what may constitute real properties (art. 415, New
Civil Code) could only mean one thing — that a building is by itself an immovable
property irrespective of whether or not said structure and the land on which it is
adhered to belong to the same owner."
Certain deviations, however, have been allowed for various reasons. In the case
of Manarang and Manarang vs. Ofilada, 17 is Court stated that "it is undeniable
that the parties to a contract may by agreement treat as personal property that
which by ,nature would be real property", citing Standard Oil Company of New
York vs. Jaramillo. 18 In the latter case, the mortgagor conveyed and transferred
to the mortgagee by way of mortgage "the following described personal
property." 19 The "personal property" consisted of leasehold rights and a
building. Again, in the case of Luna vs. Encarnacion, 20 the subject of the
contract designated as Chattel Mortgage was a house of mixed materials, and
this Court held therein that it was a valid Chattel mortgage because it was
so expressly designated and specifically that the property given as security "is a
house of mixed materials, which by its very nature is considered personal
property." In the later case of Navarro vs. Pineda, 21 this Court stated that —
"The view that parties to a deed of chattel mortgage may agree to consider a
house as personal property for the purposes of said contract, 'is good only
insofar as the contracting parties are concerned. It is based, partly, upon the
principle of estoppel' (Evangelista vs. Alto Surety, No. L-11139, 23 April 1958). In
a case, a mortgaged house built on a rented land was held to be a personal
property, not only because the deed of mortgage considered it as such, but also
because it did not form part of the land (Evangelista vs. Abad, [CA]; 36 O.G.
2913), for it is now settled that an object placed on land by one who had only a
temporary right to the same, such as the lessee or usufructuary, does not
become immobilized by attachment (Valdez vs. Central Altagracia, 222 U.S. 58,
cited in Davao Sawmill Co., Inc. vs. Castillo, et al., 61 Phil. 709). Hence, if a house
belonging to a person stands on a rented land belonging to another person, it
may be mortgaged as a personal property as so stipulated in the document of
mortgage. (Evangelista vs. Abad, supra.) It should be noted, however that the
principle is predicated on statements by the owner declaring his house to be a
chattel, a conduct that may conceivably estop him from subsequently claiming
otherwise." (Ladera vs. C.N. Hodges, [CA] 48 O.G. 5374). 22
In the contract now before Us, the house on rented land is not only expressly
designated as Chattel Mortgage; it specifically provides that "the mortgagor . . .
voluntarily CEDES, SELLS and TRANSFERS by way of Chattel Mortgage 23 the
property together with its leasehold rights over the lot on which it is constructed
and participation . . ."24 Although there is no specific statement referring to the
subject house as personal property, yet by ceding, selling or transferring a
property by way of chattel mortgage defendants-appellants could only have
meant to convey the house as chattel, or at least, intended to treat the same as
such, so that they should not now be allowed to make an inconsistent stand by
claiming otherwise. Moreover, the subject house stood on a rented lot to which
defendants-appellants merely had a temporary right as lessee, and although this
can not in itself alone determine the status of the property, it does so when
combined with other factors to sustain the interpretation that the parties,
particularly the mortgagors, intended to treat the house as personality. Finally,
unlike in the Iya cases, Lopez vs. Orosa, Jr. and Plaza Theatre, Inc. 25 and Leung
Yee vs. F. L. Strong Machinery and Williamson, 26 wherein third persons assailed
the validity of the chattel mortgage, 27 it is the defendants-appellants
themselves, as debtors-mortgagors, who are attacking the validity of the chattel
mortgage in this case. The doctrine of estoppel therefore applies to the herein
defendants-appellants, having treated the subject house as personalty.
(b) Turning now to the question of possession and rentals of the premises in
question. The Court of First Instance noted in its decision that nearly a year after
the foreclosure sale the mortgaged house had been demolished on 14 and 15
January 1957 by virtue of a decision obtained by the lessor of the land on which
the house stood. For this reason, the said court limited itself to sentencing the
erstwhile mortgagors to pay plaintiffs a monthly rent of P200.00 from 27 March
1956 (when the chattel mortgage was foreclosed and the house sold) until 14
January 1957 (when it was torn down by the Sheriff), plus P300.00 attorney's
fees.
Appellants mortgagors question this award, claiming that they were entitled to
remain in possession without any obligation to pay rent during the one year
redemption period after the foreclosure sale, i.e., until 27 March 1957. On this
issue, We must rule for the appellants.
Chattel mortgages are covered and regulated by the Chattel Mortgage Law, Act
No. 1508. 28 Section 14 of this Act allows the mortgagee to have the property
mortgaged sold at public auction through a public officer in almost the same
manner as that allowed by Act No. 3135, as amended by Act No. 4118, provided
that the requirements of the law relative to notice and registration are complied
with. 29 In the instant case, the parties specifically stipulated that "the chattel
mortgage will beenforceable in accordance with the provisions of Special Act No.
3135 . . ." 30 (Emphasis supplied).
Section 6 of the Act referred to 31 provides that the debtor-mortgagor
(defendants-appellants herein) may, at any time within one year from and after
the date of the auction sale, redeem the property sold at the extra judicial
foreclosure sale. Section 7 of the same Act 32 allows the purchaser of the
property to obtain from the court the possession during the period of
redemption: but the same provision expressly requires the filing of a petition
with the proper Court of First Instance and the furnishing of a bond. It is only
upon filing of the proper motion and the approval of the corresponding bond
that the order for a writ of possession issues as a matter of course. No discretion
is left to the court. 33 In the absence of such a compliance, as in the instant case,
the purchaser can not claim possession during the period of redemption as a
matter of right. In such a case, the governing provision is Section 34, Rule 39, of
the Revised Rules of Court 34 which also applies to properties purchased in
extrajudicial foreclosure proceedings. 35 Construing the said section, this Court
stated in the aforestated case of Reyes vs. Hamada,
"In other words, before the expiration of the 1-year period within which the
judgment-debtor or mortgagor may redeem the property, the purchaser thereof
is not entitled, as a matter of right, to possession of the same. Thus, while it is
true that the Rules of Court allow the purchaser to receive the rentals if the
purchased property is occupied by tenants, he is, nevertheless, accountable to
the judgment-debtor or mortgagor as the case may be, for the amount so
received and the same will be duly credited against the redemption price when
the said debtor or mortgagor effects the redemption. Differently stated, the
rentals receivable from tenants, although they may be collected by the purchaser
during the redemption period, do not belong to the latter but still pertain to the
debtor of mortgagor. The rationale for the Rule, it seems, is to secure for the
benefit of the debtor or mortgagor, the payment of the redemption amount and
the consequent return to him of his properties sold at public auction." (Emphasis
supplied)
The Hamada case reiterates the previous ruling in Chan vs. Espe. 36
Since the defendants-appellants were occupying the house at the time of the
auction sale, they are entitled to remain in possession during the period of
redemption or within one year from and after 27 March 1956, the date of the
auction sale, and to collect the rents or profits during the said period.
It will be noted further that in the case at bar the period of redemption had not
yet expired when action was instituted in the court of origin, and that plaintiffs-
appellees did not choose to take possession under Section 7, Act No. 3135, as
amended, which is the law selected by the parties to govern the extrajudicial
foreclosure of the chattel mortgage. Neither was there an allegation to that
effect. Since plaintiffs-appellees' right to possess was not yet born at the filing of
the complaint, there could be no violation or breach thereof. Wherefore, the
original complaint stated no cause of action and was prematurely filed. For this
reason, the same should be ordered dismissed, even if there was no assignment
of error to that effect. The Supreme Court is clothed with ample authority to
review palpable errors not assigned as such if it finds that their consideration is
necessary in arriving at a just decision of the case. 37
It follows that the court below erred in requiring the mortgagors to pay rents for
the year following the foreclosure sale, as well as attorney's fees.
FOR THE FOREGOING REASONS, the decision appealed from is reversed and
another one entered, dismissing the complaint. With costs against plaintiffs-
appellees.
||| (Tumalad v. Vicencio, G.R. No. L-30173, [September 30, 1971], 148-B PHIL
625-638)
SECOND DIVISION
[G.R. No. L-58469. May 16, 1983.]
MAKATI LEASING and FINANCE CORPORATION, petitioner, vs. WEAREVER
TEXTILE MILLS, INC., and HONORABLE COURT OF APPEALS, respondents.
Loreto C. Baduan for petitioner.
Ramon D. Bagatsing & Assoc. (collaborating counsel) for petitioner.
Jose V. Mancella for respondent.
SYLLABUS
1. REMEDIAL LAW; PETITION FOR REVIEW; NOT RENDERED MOOT AND
ACADEMIC; WHERE RIGHT TO QUESTION DECISION, TIMELY RESERVED. — The
contention of private respondent is without merit. When petitioner returned the
subject motor drive, it made itself unequivocably clear that said action was
without prejudice to a motion for reconsideration of the Court of Appeals'
decision, as shown by the receipt duly signed by respondent's representative.
Considering that petitioner has reserved its right to question the propriety of the
Court of Appeals' decision, the contention of private respondent that this
petition has been mooted by such return may not be sustained.
2. CIVIL LAW; PROPERTY; MACHINERY THOUGH IMMOBILIZED BY DESTINATION
IF TREATED BY THE PARTIES AS A PERSONALTY FOR PURPOSES OF A CHATTEL
MORTGAGE LEGAL, WHERE NO THIRD PARTY IS PREJUDICED. — The next and the
more crucial question to be resolved in this petition is whether the machinery in
suit is real or personal property from the point of view of the parties. Examining
the records of the instance case, the Supreme Court found no logical justification
to exclude and rule out, as the appellate court did, the present case from the
application of the pronouncement in the TUMALAD v. VICENCIO CASE (41 SCRA
143) where a similar, if not identical issue was raised. If a house of strong
materials, like what was involved in the Tumalad case may be considered as
personal property for purposes of executing a chattel mortgage thereon as long
as the parties to the contract so agree and no innocent third party will be
prejudiced thereby, there is absolutely no reason why a machinery, which is
movable in its nature and becomes immobilized only by destination or purpose,
may not be likewise treated as such. This is really because one who has so agreed
is estopped from denying the existence of the chattel mortgage.
3. ID.; ID.; ID.; COURT SHOULD NOT MAKE DISTINCTIONS, WHERE THE LAW DOES
NOT. — In rejecting petitioner's assertion on the applicability of the Tumalad
doctrine, the Court of Appeals lays stress on the fact that the house involved
therein was built on a land that did not belong to the owner of such house. But
the law makes no distinction with respect to the ownership of the land on which
the house is built and the Supreme Court should not lay down distinctions not
contemplated by law.
4. ID.; ID.; ID.; CHARACTERIZATION OF PROPERTY, INDICATIVE OF THE INTENTION
OF THE PARTIES. — It must be pointed out that the characterization of the
subject machinery as chattel by the private respondent is indicative of intention
and impresses upon the property the character determined by the parties. As
stated in Standard Oil Co. of New York v. Jaramillo, 44 Phil. 630, it is undeniable
that the parties to a contract may by agreement treat as personal property that
which by nature would be real property, as long as no interest of third parties
would be prejudiced thereby.
5. CIVIL LAW; ESTOPPEL; REPRESENTING OR AGREEING ON THE CONSTITUTION
OF A PROPERTY AS CHATTEL; A CASE THEREOF. — Private respondent contends
that estoppel cannot apply against it because it had never represented nor
agreed that the machinery in suit he considered as personal property but was
merely required and dictated on by herein petitioner to sign a printed form of
chattel mortgage which was in a blank format the time of signing. This
contention lacks persuasiveness. As aptly pointed out by petitioner and not
denied by the respondent, the status of the subject machine as movable or
immovable was never placed in issue before the lower court and the Court of
Appeals except ins supplemental memorandum in support of the petition filed in
the appellate court.
6. ID.; CONTRACT; TREATING A MACHINERY AS A CHATTEL; AGREEMENT
DEEMED VALID UNLESS ANNULLED OR VOIDED IN A PROPER ACTION. —
Moreover, even granting that the charge is true, such fact alone does not render
a contract void ab initio, but can only be a ground for rendering said contract
voidable or annullable pursuant to Article 1390 of the new Civil Code, by a
proper action in court. There is nothing on record to show that the mortgage has
been annulled. Neither is it disclosed that steps were taken to nullify the same.
7. ID.; ID.; UNDUE BENEFIT OVER A CONTRACT AT THE EXPENSE OF ANOTHER
NOT COUNTENANCED BY EQUITY. — On the other hand, as pointed out by
petitioner and again not refuted by respondent, the latter has indubitably
benefited from said contract. Equity dictates that one should not benefit at the
expense of another. Private respondent could not now therefore, he allowed to
impugn the efficacy of the chattel mortgage after it has benefited therefrom.
DECISION
DE CASTRO, J p:
Petition for review on certiorari of the decision of the Court of Appeals (now
Intermediate Appellate Court) promulgation August 27, 1981 in CA-G.R. No. SP-
12731, setting aside certain Orders later specified herein, of Judge Ricardo J.
Francisco, as Presiding Judge of the Court of First Instance of Rizal, Branch VI,
issued in Civil Case No. 36040, as well as the resolution dated September 22,
1981 of the said appellate court, denying petitioner's motion for reconsideration.
It appears that in order to obtain financial accommodations from herein
petitioner Makati Leasing and Finance Corporation, the private respondent
Wearever Textile Mills, Inc., discounted and assigned several receivables with the
former under a Receivable Purchase Agreement. To secure the collection of the
receivables assigned, private respondent executed a Chattel Mortgage over
certain raw materials inventory as well as a machinery described as an Artos
Aero Dryer Stentering Range.
Upon private respondent's default, petitioner filed a petition for extrajudicial
foreclosure of the properties mortgage to it. However, the Deputy Sheriff
assigned to implement the foreclosure failed to gain entry into private
respondent's premises and was not able to effect the seizure of the
aforedescribed machinery. Petitioner thereafter filed a complaint for judicial
foreclosure with the Court of First Instance of Rizal, Branch VI, docketed as Civil
Case No. 36040, the case before the lower court.LexLib
Acting on petitioner's application for replevin, the lower court issued a writ of
seizure, the enforcement of which was however subsequently restrained upon
private respondent's filing of a motion for reconsideration. After several
incidents, the lower court finally issued on February 11, 1981, an order lifting the
restraining order for the enforcement of the writ of seizure and an order to
break open the premises of private respondent to enforce said writ. The lower
court reaffirmed its stand upon private respondent's filing of a further motion for
reconsideration.
On July 13, 1981, the sheriff enforcing the seizure order, repaired to the
premises of private respondent and removed the main drive motor of the subject
machinery.
The Court of Appeals, in certiorari and prohibition proceedings subsequently
filed by herein private respondent, set aside the Orders of the lower court and
ordered the return of the drive motor seized by the sheriff pursuant to said
Orders, after ruling that the machinery in suit cannot be the subject of replevin,
much less of a chattel mortgage, because it is a real property pursuant to Article
415 of the new Civil Code, the same being attached to the ground by means of
bolts and the only way to remove it from respondent's plant would be to drill out
or destroy the concrete floor, the reason why all that the sheriff could do to
enforce the writ was to take the main drive motor of said machinery. The
appellate court rejected petitioner's argument that private respondent is
estopped from claiming that the machine is real property by constituting a
chattel mortgage thereon.
A motion for reconsideration of this decision of the Court of Appeals having been
denied, petitioner has brought the case to this Court for review by writ of
certiorari. It is contended by private respondent, however, that the instant
petition was rendered moot and academic by petitioner's act of returning the
subject motor drive of respondent's machinery after the Court of Appeals'
decision was promulgated.
The contention of private respondent is without merit. When petitioner returned
the subject motor drive, it made itself' unequivocably clear that said action was
without prejudice to a motion for reconsideration of the Court of Appeals
decision, as shown by the receipt duly signed by respondent's
representative. 1 Considering that petitioner has reserved its right to question
the propriety of the Court of Appeals' decision, the contention of private
respondent that this petition has been mooted by such return may not be
sustained.
The next and the more crucial question to be resolved in this petition is whether
the machinery in suit is real or personal property from the point of view of the
parties, with petitioner arguing that it is a personalty, while the respondent
claiming the contrary, and was sustained by the appellate court, which
accordingly held that the chattel mortgage constituted thereon is null and void,
as contended by said respondent. LLpr
A similar, if not identical issue was raised in Tumalad v. Vicencio, 41 SCRA
143 where this Court, speaking through Justice J.B.L. Reyes, ruled:
"Although there is no specific statement referring to the subject house as
personal property, yet by ceding, selling or transferring a property by way of
chattel mortgage defendants-appellants could only have meant to convey the
house as chattel, or at least, intended to treat the same as such, so that they
should not now be allowed to make an inconsistent stand by claiming otherwise.
Moreover, the subject house stood on a rented lot to which defendants-
appellants merely had a temporary right as lessee, and although this can not in
itself alone determine the status of the property, it does so when combined with
other factors to sustain the interpretation that the parties, particularly the
mortgagors, intended to treat the house as Personalty. Finally, unlike in the Iya
cases, Lopez vs. Orosa, Jr. & Plaza Theatre, Inc. & Leung Yee vs. F.L. Strong
Machinery & Williamson, wherein third persons assailed the validity of the
chattel mortgage, it is the defendants-appellants themselves, as debtors
mortgagors, who are attacking the validity of the chattel mortgage in this case.
The doctrine of estoppel therefore applies to the herein defendants appellants,
having treated the subject house as personalty."
Examining the records of the instant case, We find no logical justification to
exclude the rule out, as the appellate court did, the present case from the
application of the abovequoted pronouncement. If a house of strong materials,
like what was involved in the above Tumalad case, may be considered as
personal property for purposes of executing a chattel mortgage thereon as long
as the parties to the contract so agree and no innocent third party will be
prejudiced thereby, there is absolutely no reason why a machinery, which is
movable in its nature and becomes immobilized only by destination or purpose,
may not be likewise treated as such. This is really because one who has so agreed
is estopped from denying the existence of the chattel mortgage.
In rejecting petitioner's assertion on the applicability of the Tumalad doctrine,
the Court of Appeals lays stress on the fact that the house involved therein was
built on a land that did not belong to the owner of such house. But the law
makes no distinction with respect to the ownership of the land on which the
house is built and We should not lay down distinctions not contemplated by law.
It must be pointed out that the characterization of the subject machinery as
chattel by the private respondent is indicative of intention and impresses upon
the property the character determined by the parties. As stated in Standard Oil
Co. of New York v. Jaramillo, 44 Phil. 630, it is undeniable that the parties to a
contract may by agreement treat as personal property that which by nature
would be real property, as long as no interest of third parties would be
prejudiced thereby.
Private respondent contends that estoppel cannot apply against it because it had
never represented nor agreed that the machinery in suit be considered as
personal property but was merely required and dictated on by herein petitioner
to sign a printed form of chattel mortgage which was in a blank form at the time
of signing. This contention lacks persuasiveness. As aptly pointed out by
petitioner and not denied by the respondent, the status of the subject machinery
as movable or immovable was never placed in issue before the lower court and
the Court of Appeals except in a supplemental memorandum in support of the
petition filed in the appellate court. Moreover, even granting that the charge is
true, such fact alone does not render a contract void ab initio, but can only be a
ground for rendering said contract voidable, or annullable pursuant to Article
1390 of the new Civil Code, by a proper action in court. There is nothing on
record to show that the mortgage has been annulled. Neither is it disclosed that
steps were taken to nullify the same. On the other hand, as pointed out by
petitioner and again not refuted by respondent, the latter has indubitably
benefited from said contract. Equity dictates that one should not benefit at the
expense of another. Private respondent could not now therefore, be allowed to
impugn the efficacy of the chattel mortgage after it has benefited
therefrom. LexLib
From what has been said above, the error of the appellate court in ruling that the
questioned machinery is real, not personal property, becomes very apparent.
Moreover, the case of Machinery and Engineering Supplies, Inc. v. CA, 96 Phil. 70,
heavily relied upon by said court is not applicable to the case at bar, the nature
of the machinery and equipment involved therein as real properties never having
been disputed nor in issue, and they were not the subject of a Chattel Mortgage.
Undoubtedly, the Tumalad case bears more nearly perfect parity with the instant
case to be the more controlling jurisprudential authority.
WHEREFORE, the questioned decision and resolution of the Court of Appeals are
hereby reversed and set aside, and the Orders of the lower court are hereby
reinstated, with costs against the private respondent.
SO ORDERED.
||| (Makati Leasing and Finance Corp. v. Wearever Textile Mills, Inc., G.R. No. L-
58469, [May 16, 1983], 207 PHIL 262-269)
EN BANC
[G.R. No. L-11139. April 23, 1958.]
SANTOS EVANGELISTA, petitioner, vs. ALTO SURETY & INSURANCE CO.,
INC., respondent.
Gonzalo D. David for petitioner.
Raul A. Aristorenas and Benjamin Relova for respondent.
SYNOPSIS
1. PROPERTY; HOUSE IS NOT PERSONAL BUT REAL PROPERTY FOR PURPOSES OF
ATTACHMENT. — A house is not personal property, much less a debt, credit or
other personal property capable of manual delivery, but immovable property "A
true building (not merely superimposed on the soil), is immovable or real
property, whether it is erected by the owner of the land or by a usufructuary or
lessee" (Laddera vs. Hodges, 48 Off. Gaz., 5374.) and the attachment of such
building is subject to the provisions of subsection (a) of section 7, Rule 59 of the
Rules of Court.
DECISION
CONCEPCION, J p:
This is an appeal by certiorari from a decision of the Court of Appeals.
Briefly, the facts are: On June 4, 1949, petitioner herein, Santos Evangelista,
instituted Civil Case No. 8235 of the Court of First Instance of Manila, entitled
"Santos Evangelista vs. Ricardo Rivera," for a sum of money. On the same date,
he obtained a writ of attachment, which was levied upon a house, built by Rivera
on a land situated in Manila and leased to him, by filing copy of said writ and the
corresponding notice of attachment with the Office of the Register of Deeds of
Manila, on June 8, 1949. In due course, judgment was rendered in favor of
Evangelista, who, on October 8, 1951, bought the house at public auction held in
compliance with the writ of execution issued in said case. The corresponding
definite deed of sale was issued to him on October 22, 1952, upon expiration of
the period of redemption. When Evangelista sought to take possession of the
house, Rivera refused to surrender it, upon the ground that he had leased the
property from the Alto Surety & Insurance Co., Inc. — respondent herein — and
that the latter is now the true owner of said property. It appears that on May 10,
1952, a definite deed of sale of the same house had been issued to respondent,
as the highest bidder at an auction sale held, on September 29, 1950, in
compliance with a writ of execution issued in Civil Case No. 6268 of the same
court, entitled "Alto Surety & Insurance Co., Inc. vs. Maximo Quiambao, Rosario
Guevara and Ricardo Rivera," in which judgment, for the sum of money, had
been rendered in favor of respondent herein, as plaintiff therein. Hence, on June
13, 1953, Evangelista instituted the present action against respondent and
Ricardo Rivera, for the purpose of establishing his (Evangelista) title over said
house, and securing possession thereof, apart from recovering damages.
In its answer, respondent alleged, in substance, that it has a better right to the
house, because the sale made, and the definite deed of sale executed, in its
favor, on September 29, 1950 and May 10, 1952, respectively, precede the sale
to Evangelista (October 8, 1951) and the definite deed of sale in his favor
(October 22, 1952). It, also, made some special defenses which are discussed
hereafter. Rivera, in effect, joined forces with respondent. After due trial, the
Court of First Instance of Manila rendered judgment for Evangelista, sentencing
Rivera and respondent to deliver the house in question to petitioner herein and
to pay him, jointly and severally, forty pesos (P40.00) a month from October,
1952, until said delivery, plus costs.
On appeal taken by respondent, this decision was reversed by the Court of
Appeals, which absolved said respondent from the complaint, upon the ground
that, although the writ of attachment in favor of Evangelista had been filed with
the Register of Deeds of Manila prior to the sale in favor of respondent,
Evangelista did not acquire thereby a preferential lien, the attachment having
been levied as if the house in question were immovable property, although, in
the opinion of the Court of Appeals, it is "ostensibly a personal property." As
such, the Court of Appeals held, "the order of attachment . . . should have been
served in the manner provided in subsection (e) of section 7 of Rule 59," of the
Rules of Court, reading:
"The property of the defendant shall be attached by the officer executing the
order in the following manner:
...
"(e) Debts and credits, and other personal property not capable of manual
delivery, by leaving with the person owing such debts, or having in his possession
or under his control, such credits or other personal property, or with his agent, a
copy of the order, and a notice that the debts owing by him to the defendant, and
the credits and other personal property in his possession, or under his control,
belonging to the defendant, are attached in pursuance of such order." (Emphasis
ours.)
However, the Court of Appeals seems to have been of the opinion, also, that the
house of Rivera should have been attached in accordance with subsection (c) of
said section 7, as "personal property capable of manual delivery, by taking and
safely keeping in his custody", for it declared that "Evangelista could not have . . .
validly purchased Ricardo Rivera's house from the sheriff as the latter was not in
possession thereof at the time he sold it at a public auction."
Evangelista now seeks a review, by certiorari, of this decision of the Court of
Appeals. In this connection, it is not disputed that although the sale to the
respondent preceded that made to Evangelista, the latter would have a better
right if the writ of attachment, issued in his favor before the sale to the
respondent, had been properly executed or enforced. This question, in turn,
depends upon whether the house of Ricardo Rivera is real property or not. In the
affirmative case, the applicable provision would be subsection (a) of section 7,
Rule 59 of the Rules of Court, pursuant to which the attachment should be made
"by filing with the registrar of deeds a copy of the order, together with a
description of the property attached, and a notice that it is attached, and by
leaving a copy of such order, description, and notice with the occupant of the
property, if any there be.
Respondent maintains, however, and the Court of Appeals held, that Rivera's
house is personal property, the levy upon which must be made in conformity
with subsections (c) and (e) of said section 7 of Rule 59. Hence, the main issue
before us is whether a house, constructed by the lessee of the land on which it is
built, should be dealt with, for purposes of attachment, as immovable property,
or as personal property.
It is our considered opinion that said house is not personal property, much less a
debt, credit or other personal property not capable of manual delivery, but
immovable property. As explicitly held, in Laddera vs. Hodges (48 Off. Gaz.,
5374), "a true building (not merely superimposed on the soil) is immovable or
real property, whether it is erected by the owner of the land or by a usufructuary
or lessee. This is the doctrine of our Supreme Court in Leung Yee vs. Strong
Machinery Company, 37 Phil., 644. And it is amply supported by the rulings of
the French Court . . .."
It is true that the parties to a deed of chattel mortgage may agree to consider a
house as personal property for purposes of said contract
(Luna vs.Encarnacion, * 48 Off. Gaz., 2664; Standard Oil Co. of New
York vs. Jaramillo, 44 Phil., 630; De Jesus vs. Juan Dee Co., Inc., 72 Phil., 464).
However, this view is good only insofar as the contracting parties are concerned.
It is based, partly, upon the principle of estoppel. Neither this principle, nor said
view, is applicable to strangers to said contract. Much less is it in point where
there has been no contract whatsoever, with respect to the status of the house
involved, as in the case at bar. Apart from this, in Manarang vs. Ofilada (99 Phil.,
108; 52 Off. Gaz., 3954), we held:
"The question now before us, however, is: Does the fact that the parties entering
into a contract regarding a house gave said property the consideration of
personal property in their contract, bind the sheriff in advertising the property's
sale at public auction as personal property? It is to be remembered that in the
case at bar the action was to collect a loan secured by a chattel mortgage on the
house. It is also to be remembered that in practice it is the judgment creditor
who points out to the sheriff the properties that the sheriff is to levy upon in
execution, and the judgment creditor in the case at bar is the party in whose
favor the owner of the house had conveyed it by way of chattel mortgage and,
therefore, knew its consideration as personal property.
"These considerations notwithstanding, we hold that the rules on execution
do not allow, and we should not interpret them in such a way as to allow, the
special consideration that parties to a contract may have desired to impart to
real estate, for example, as personal property, when they are not ordinarily
so. Sales on execution affect the public and third persons. The regulation
governing sales on execution are for public officials to follow. The form of
proceedings prescribed for each kind of property is suited to its character, not to
the character which the parties have given to it or desire to give it. When the
rules speak of personal property, property which is ordinarily so considered is
meant; and when real property is spoken of, it means property which is generally
known as real property. The regulations were never intended to suit the
consideration that parties may have privately given to the property levied
upon. Enforcement of regulations would be difficult were the convenience or
agreement of private parties to determine or govern the nature of the
proceedings. We, therefore, hold that the mere fact that a house was the subject
of a chattel mortgage and was considered as personal property by the parties
does not make said house personal property for purposes of the notice to be
given for its sale at public auction. This ruling is demanded by the need for a
definite, orderly and well-defined regulation for official and public guidance and
which would prevent confusion and misunderstanding.
"We, therefore, declare that the house of mixed materials levied upon on
execution, although subject of a contract of chattel mortgage between the
owner and a third person, is real property within the purview of Rule 39, section
16, of the Rules of Court as it has become a permanent fixture of the land, which
is real property. (42 Am. Jur. 199-200; Leung Yee vs. Strong Machinery Co., 37
Phil., 644; Republic vs. Ceniza, et al., 90 Phil., 544; Ladera, et al. vs. Hodges, et al.,
[C.A.], 48 Off. Gaz., 5374.)" (Emphasis ours.)
The foregoing considerations apply, with equal force, to the conditions for the
levy of attachment, for it similarly affects the public and third persons.
It is argued, however, that, even if the house in question were immovable
property, its attachment by Evangelista was void or ineffective, because, in the
language of the Court of Appeals, "after presenting a copy of the order of
attachment in the Office of the Register of Deeds, the person who might then be
in possession of the house, the sheriff took no pains to serve Ricardo Rivera, or
other copies thereof ." This finding of the Court of Appeals is neither conclusive
upon us, nor accurate.
The Record on Appeal, annexed to the petition for certiorari, shows that
petitioner alleged, in paragraph 3 of the complaint, that he acquired the house in
question "as a consequence of the levy of an attachment and execution of the
judgment in Civil Case No. 8235" of the Court of First Instance of Manila. In his
answer (paragraph 2), Ricardo Rivera admitted said attachment and execution of
judgment. He alleged, however, by way of special defense, that the title of
respondent "issuperior to that of plaintiff because it is based on a public
instrument," whereas Evangelista relied upon a "promissory note" which "is only
a private instrument"; that said public instrument in favor of respondent
"is superior also to the judgment in Civil Case No. 8235"; and that plaintiff's claim
against Rivera amounted only to P866, "which is much below the real value" of
said house, for which reason it would be "grossly unjust to allow plaintiff to
acquire the property for such an inadequate consideration". Thus, Rivera
impliedly admitted that his house had been attached, that the house had been
sold to Evangelista in accordance with the requisite formalities, and that said
attachment was valid, although allegedly inferior to the rights of respondent, and
the consideration for the sale to Evangelista was claimed to be inadequate.
Respondent, in turn, denied the allegation in said paragraph 3 of the
complaint, but only "for the reasons stated in its special defenses" namely: (1)
that by virtue of the sale at public auction, and the final deed executed by the
sheriff in favor of respondent, the same became the "legitimate owner of the
house" in question; (2) that respondent "is a buyer in good faith and for value";
(3) that respondent "took possession and control of said house"; (4) that "there
was no valid attachment by the plaintiff and/or the Sheriff of Manila of the
property in question as neither took actual or constructive possession or control
of the property at any time"; and (5) "that the alleged registration of plaintiff's
attachment, certificate of sale and final deed in the Office of Register of Deeds,
Manila, if there was any, is likewise, not valid as there is no registry of
transactions covering houses erected on land belonging to or leased from
another." In this manner, respondent claimed a better right, merely under the
theory that, in case of double sale of immovable property, the purchaser who
first obtains possession in good faith, acquires title, if the sale has not been
"recorded . . . in the Registry of Property" (Art. 1544, Civil Code of the
Philippines), and that the writ of attachment and the notice of attachment in
favor of Evangelista should be considered unregistered, "as there is no registry of
transactions covering houses erected on land belonging to or leased from
another." In fact, said article 1544 of the Civil Code of the Philippines, governing
double sales, was quoted on page 15 of the brief for respondent in the Court of
Appeals, in support of its fourth assignment of error therein, to the effect that it
"has preference or priority over the sale of the same property" to Evangelista.
In other words, there was no issue on whether copy of the writ and notice of
attachment had been served on Rivera. No evidence whatsoever, to the effect
that Rivera had not been served with copies of said writ and notice, was
introduced in the Court of First Instance. In its brief in the Court of
Appeals, respondent did not aver, or even intimate, that no such copies were
served by the sheriff upon Rivera. Service thereof on Rivera had been impliedly
admitted by the defendants, in their respective answers, and by their behaviour
throughout the proceedings in the Court of First Instance, and, as regards
respondent, in the Court of Appeals. In fact, petitioner asserts in his brief herein
(p. 26) that copies of said writ and notice were delivered to Rivera,
simultaneously with copy of the complaint, upon service of summons, prior to the
filing of copies of said writ and notice with the register of deeds, and the truth of
this assertion has not been directly and positively challenged or denied in the
brief filed before us by respondent herein. The latter did not dare therein to go
beyond making a statement — for the first time in the course of these
proceedings, begun almost five (5) years ago (June 18, 1953) — reproducing
substantially the aforementioned finding of the Court of Appeals and then
quoting the same.
Considering, therefore, that neither the pleadings, nor the briefs in the Court of
Appeals, raised an issue on whether or not copies of the writ of attachment and
notice of attachment had been served upon Rivera; that the defendants had
impliedly admitted — in said pleadings and briefs, as well as by their conduct
during the entire proceedings, prior to the rendition of the decision of the Court of
Appeals — that Rivera had received copies of said documents; and that, for this
reason, evidently, no proof was introduced thereon, we are of the opinion, and
so hold that the finding of the Court of Appeals to the effect that said copies had
not been served upon Rivera is based upon a misapprehension of the specific
issues involved therein and goes beyond the range of such issues, apart from
beingcontrary to the aforementioned admission by the parties, and that,
accordingly, a grave abuse of discretion was committed in making said finding,
which is, furthermore, inaccurate.
Wherefore, the decision of the Court of Appeals is hereby reversed, and another
one shall be entered affirming that of the Court of First Instance of Manila, with
the costs of this instance against respondent, the Alto Surety & Insurance Co.,
Inc. It is so ordered.
||| (Evangelista v. Alto Surety & Insurance Co., Inc., G.R. No. L-11139, [April 23,
1958], 103 PHIL 401-409)
SECOND DIVISION
[G.R. No. 120098. October 2, 2001.]
RUBY L. TSAI, petitioner, vs. HON. COURT OF APPEALS, EVER TEXTILE MILLS,
INC. and MAMERTO R. VILLALUZ, respondents.
[G.R. No. 120109. October 2, 2001.]
PHILIPPINE BANK OF COMMUNICATIONS, petitioner, vs. HON. COURT OF
APPEALS, EVER TEXTILE MILLS and MAMERTO R. VILLALUZ, respondents.
Eduardo C. Ong for R.L. Tsai.
Laogan Silva Baeza & Llantino Law Offices for PBCom.
M.R. Villaluz & Associates for private respondents.
SYNOPSIS
Respondent Ever Textile Mills, Inc. (Evertex) obtained two loans from petitioner
Philippine Bank of Communications (PBCom). As security for the first loan,
Evertex executed a deed of Real and Chattel Mortgage over the lot where its
factory stands, and the chattels located therein as enumerated in a schedule
attached to the mortgage contract. The second loan was secured by a chattel
mortgage over personal properties enumerated in a list attached thereto. Due to
business reverses, Evertex filed insolvency proceeding, where it was declared
insolvent by the then Court of First Instance. All its assets were taken into the
custody of the insolvency court, including the collateral, real and personal,
securing the two mortgages. Upon Evertex's failure to meet its obligation to
PBCom, the latter commenced extrajudicial foreclosure proceedings. PBCom was
the highest bidder on the two public auctions held. PBCom consolidated its
ownership over the lot and all the properties in it. It leased the entire factory
premises to petitioner Ruby L. Tsai, and subsequently sold it to her, including the
contested machineries. Evertex filed a complaint for annulment of sale,
reconveyance, and damages with the Regional Trial Court against PBCom,
alleging that the extrajudicial foreclosure of subject mortgage was in violation of
the Insolvency Law. Evertex claimed that PBCom, without any legal or factual
basis, appropriated the contested properties, which were not included in the real
and chattel mortgage and neither were those properties included in the notice of
sheriff's sale. The RTC agreed with Evertex and ruled that the lease and sale of
said personal properties were irregular and illegal. Dissatisfied, both PBCom and
Tsai appealed to the Court of Appeals. The CA affirmed the judgment appealed
from and denied the motion for reconsideration. PBCom and Tsai filed their
separate petitions for review with the Supreme Court.HITEaS
According to the Supreme Court, while it was true that the controverted
properties appeared to be immobile, a perusal of the contract executed by the
parties herein intended to treat the subject machinery and equipment as
chattels. The Court previously ruled that an immovable may be considered a
personal property if there is a stipulation as when it is used as security in the
payment of an obligation where a chattel mortgage is executed over it, as in the
case at bar. Accordingly, the Court found no reversible error in the respondent
appellate court's ruling that inasmuch as the subject mortgages were intended
by the parties to involve chattels, insofar as equipment and machinery were
concerned, the Chattel Mortgage Law applies. The law provides that a chattel
mortgage shall be deemed to cover only the property described therein and not
like or substituted property thereafter acquired by the mortgagor and placed in
the same depository as the property originally mortgaged, anything in the
mortgage to the contrary notwithstanding. Since the disputed machineries were
acquired in 1981 and could not have been involved in the 1975 or 1979 chattel
mortgages, the petitions were denied. The assailed decision and resolution of the
Court of Appeals were affirmed with modifications. Petitioners Philippine Bank of
Communications and Ruby L. Tsai were ordered to pay jointly and severally
Evertex compensation for the use and possession of the properties in question
until subject personal properties were restored to respondent Evertex and to pay
exemplary damages, attorney's fees and litigation expenses.
SYLLABUS
1. REMEDIAL LAW; APPEAL; APPEAL FROM COURT OF APPEALS TO THE SUPREME
COURT; LIMITED TO REVIEWING ONLY ERRORS OF LAW; EXCEPTION. — Well
settled is the rule that the jurisdiction of the Supreme Court in a petition for
review on certiorari under Rule 45 of the Revised Rules of Court is limited to
reviewing only errors of law, not of fact, unless the factual findings complained
of are devoid of support by the evidence on record or the assailed judgment is
based on misapprehension of facts. This rule is applied more stringently when
the findings of fact of the RTC is affirmed by the Court of Appeals.
2. CIVIL LAW; SALES; PURCHASER IN GOOD FAITH AND FOR VALUE; DEFINED;
NOT PRESENT IN CASE AT BAR. — A purchaser in good faith and for value is one
who buys the property of another without notice that some other person has a
right to or interest in such property and pays a full and fair price for the same, at
the time of purchase, or before he has notice of the claims or interest of some
other person in the property. Records reveal, however, that when Tsai purchased
the controverted properties, she knew of respondent's claim thereon. As borne
out by the records, she received the letter of respondent's counsel, apprising her
of respondent's claim, dated February 27, 1987. She replied thereto on March 9,
1987. Despite her knowledge of respondent's claim, she proceeds to buy the
contested units of machinery on May 3, 1988. Thus, the RTC did not err in finding
that she was not a purchaser in good faith.
3. ID.; LAND REGISTRATION; INDEFEASIBILITY OF TORRENS TITLE; REFERS TO
TITLE OF LAND AND NOT TO THE PROPERTIES SITUATED THEREIN; CASE AT BAR.
— Petitioner Tsai's defense of indefeasibility of Torrens Title of the lot where the
disputed properties are located is equally unavailing. This defense refers to sale
of lands and not to sale of properties situated therein. Likewise, the mere fact
that the lot where the factory and the disputed properties stand is in PBCom's
name does not automatically make PBCom the owner of everything found
therein, especially in view of EVERTEX's letter to Tsai enunciating its claim.
4. ID.; PRESCRIPTION AND LACHES; APPLICABLE ONLY WHERE BY REASON OF
LAPSE OF TIME, IT WOULD BE INEQUITABLE TO ALLOW A PARTY TO ENFORCE HIS
LEGAL RIGHTS; NOT PRESENT IN CASE AT BAR. — Petitioner's defense of
prescription and laches is less than convincing. We find no cogent reason to
disturb the consistent findings of both courts below that the case for the
reconveyance of the disputed properties was filed within the reglementary
period. Here, in our view, the doctrine of laches does not apply. Note that upon
petitioners' adamant refusal to heed EVERTEX's claim, respondent company
immediately filed an action to recover possession and ownership of the disputed
properties. There is no evidence showing any failure or neglect on its part, for an
unreasonable and unexplained length of time, to do that which, by exercising
due diligence, could or should have been done earlier. The doctrine of stale
demands would apply only where by reason of the lapse of time, it would be
inequitable to allow a party to enforce his legal rights. Moreover, except for very
strong reasons, this Court is not disposed to apply the doctrine of laches to
prejudice or defeat the rights of an owner.
5. ID.; DAMAGES; ACTUAL DAMAGES; AWARD THEREOF MUST DEPEND ON
COMPETENT PROOF REGARDING THE ACTUAL AMOUNT OF LOSS. — Basic is the
rule that to recover actual damages, the amount of loss must not only be capable
of proof but must actually be proven with reasonable degree of certainty,
premised upon competent proof or best evidence obtainable of the actual
amount thereof. However, the allegations of respondent company as to the
amount of unrealized rentals due them as actual damages remain mere
assertions unsupported by documents and other competent evidence. In
determining actual damages, the court cannot rely on mere assertions,
speculations, conjectures or guesswork but must depend on competent proof
and on the best evidence obtainable regarding the actual amount of loss. DaEcTC
6. ID.; ID.; EXEMPLARY DAMAGES; AWARD THEREOF REQUIRES THAT THE
WRONGFUL ACT MUST BE ACCOMPANIED BY BAD FAITH; PRESENT IN CASE AT
BAR. — It is a requisite to award exemplary damages that the wrongful act must
be accompanied by bad faith, and the guilty acted in a wanton, fraudulent,
oppressive, reckless or malevolent manner. As previously stressed, petitioner
Tsai's act of purchasing the controverted properties despite her knowledge of
EVERTEX's claim was oppressive and subjected the already insolvent respondent
to gross disadvantage. Petitioner PBCom also received the same letters of Atty.
Villaluz, responding thereto on March 24, 1987. Thus, PBCom's act of taking all
the properties found in the factory of the financially handicapped respondent,
including those properties not covered by or included in the mortgages, is
equally oppressive and tainted with bad faith. Thus, we are in agreement with A. Forty Eight (48) units of Vayrow Knitting Machines-Tompkins made in
the RTC that an award of exemplary damages is proper. Hongkong:

DECISION Serial Numbers Size of Machines

QUISUMBING, J p: xxx xxx xxx

These consolidated cases assail the decision 1 of the Court of Appeals in CA-G.R. B. Sixteen (16) sets of Vayrow Knitting Machines made in Taiwan.
CV No. 32986, affirming the decision 2 of the Regional Trial Court of Manila,
Branch 7, in Civil Case No. 89-48265. Also assailed is respondent court's xxx xxx xxx
resolution denying petitioners' motion for reconsideration.
C. Two (2) Circular Knitting Machines made in West Germany.
On November 26, 1975, respondent Ever Textile Mills, Inc. (EVERTEX) obtained a
xxx xxx xxx
three million peso (P3,000,000.00) loan from petitioner Philippine Bank of
Communications (PBCom). As security for the loan, EVERTEX executed in favor of D. Four (4) Winding Machines.
PBCom, a deed of Real and Chattel Mortgage over the lot under TCT No. 372097,
where its factory stands, and the chattels located therein as enumerated in a xxx xxx xxx
schedule attached to the mortgage contract. The pertinent portions of the Real
SCHEDULE "A"
and Chattel Mortgage are quoted below:
I. TCT # 372097 - RIZAL
MORTGAGE
xxx xxx xxx
(REAL AND CHATTEL)
II. Any and all buildings and improvements now existing or hereafter to exist on
xxx xxx xxx
the above-mentioned lot.
The MORTGAGOR(S) hereby transfer(s) and convey(s), by way of First Mortgage,
III. MACHINERIES & EQUIPMENT situated, located and/or installed on the above-
to the MORTGAGEE, . . . certain parcel(s) of land, together with all the buildings
mentioned lot located at . . .
and improvements now existing or which may hereafter exist thereon, situated
in . . . . (a) Forty eight sets (48) Vayrow Knitting Machines . . .

"Annex A" (b) Sixteen sets (16) Vayrow Knitting Machines . . .

(Real and Chattel Mortgage executed by Ever Textile Mills in favor of (c) Two (2) Circular Knitting Machines . . .
PBCommunications — continued)
(d) Two (2) Winding Machines . . .
LIST OF MACHINERIES & EQUIPMENT
(e) Two (2) Winding Machines . . .
IV. Any and all replacements, substitutions, additions, increases and accretions to
above properties.
xxx xxx xxx 3
On April 23, 1979, PBCom granted a second loan of P3,356,000.00 to EVERTEX.
The loan was secured by a Chattel Mortgage over personal properties
enumerated in a list attached thereto. These listed properties were similar to
those listed in Annex A of the first mortgage deed.
After April 23, 1979, the date of the execution of the second mortgage
mentioned above, EVERTEX purchased various machines and equipments.
On November 19, 1982, due to business reverses, EVERTEX filed insolvency
proceedings docketed as SP Proc. No. LP-3091-P before the defunct Court of First
Instance of Pasay City, Branch XXVIII. The CFI issued an order on November 24,
1982 declaring the corporation insolvent. All its assets were taken into the
custody of the Insolvency Court, including the collateral, real and personal,
securing the two mortgages as abovementioned.
In the meantime, upon EVERTEX's failure to meet its obligation to PBCom, the
latter commenced extrajudicial foreclosure proceedings against EVERTEX
under Act 3135, otherwise known as "An Act to Regulate the Sale of Property
under Special Powers Inserted in or Annexed to Real Estate Mortgages" and Act
1506 or "The Chattel Mortgage Law." A Notice of Sheriff's Sale was issued on
December 1, 1982.
On December 15, 1982, the first public auction was held where petitioner PBCom
emerged as the highest bidder and a Certificate of Sale was issued in its favor on
the same date. On December 23, 1982, another public auction was held and
again, PBCom was the highest bidder. The sheriff issued a Certificate of Sale on
the same day.
On March 7, 1984, PBCom consolidated its ownership over the lot and all the
properties in it. In November 1986, it leased the entire factory premises to
petitioner Ruby L. Tsai for P50,000.00 a month. On May 3, 1988, PBCom sold the
factory, lock, stock and barrel to Tsai for P9,000,000.00, including the contested
machineries. EHITaS
On March 16, 1989, EVERTEX filed a complaint for annulment of sale,
reconveyance, and damages with the Regional Trial Court against PBCom,
alleging inter aliathat the extrajudicial foreclosure of subject mortgage was in
violation of the Insolvency Law. EVERTEX claimed that no rights having been
transmitted to PBCom over the assets of insolvent EVERTEX, therefore Tsai
acquired no rights over such assets sold to her, and should reconvey the assets.
Further, EVERTEX averred that PBCom, without any legal or factual basis,
appropriated the contested properties, which were not included in the Real and
Chattel Mortgage of November 26, 1975 nor in the Chattel Mortgage of April 23,
1979, and neither were those properties included in the Notice of Sheriff's Sale
dated December 1, 1982 and Certificate of Sale dated December 15, 1982.
The disputed properties, which were valued at P4,000,000.00, are: 14 Interlock
Circular Knitting Machines, 1 Jet Drying Equipment, 1 Dryer Equipment, 1 Raisin
Equipment and 1 Heatset Equipment.
The RTC found that the lease and sale of said personal properties were irregular
and illegal because they were not duly foreclosed nor sold at the December 15,
1982 auction sale since these were not included in the schedules attached to the
mortgage contracts. The trial court decreed:
WHEREFORE, judgment is hereby rendered in favor of plaintiff corporation and
against the defendants:
1. Ordering the annulment of the sale executed by defendant Philippine Bank of
Communications in favor of defendant Ruby L. Tsai on May 3, 1988 insofar as it
affects the personal properties listed in par. 9 of the complaint, and their return
to the plaintiff corporation through its assignee, plaintiff Mamerto R. Villaluz, for
disposition by the Insolvency Court, to be done within ten (10) days from finality
of this decision;
2. Ordering the defendants to pay jointly and severally the plaintiff corporation
the sum of P5,200,000.00 as compensation for the use and possession of the
properties in question from November 1986 to February 1991 and P100,000.00
every month thereafter, with interest thereon at the legal rate per annum until
full payment;
3. Ordering the defendants to pay jointly and severally the plaintiff corporation
the sum of P50,000.00 as and for attorney's fees and expenses of litigation;
4. Ordering the defendants to pay jointly and severally the plaintiff corporation
the sum of P200,000.00 by way of exemplary damages;
5. Ordering the dismissal of the counterclaim of the defendants; and
6. Ordering the defendants to proportionately pay the costs of suit.
SO ORDERED. 4
Dissatisfied, both PBCom and Tsai appealed to the Court of Appeals, which issued
its decision dated August 31, 1994, the dispositive portion of which reads:
WHEREFORE, except for the deletion therefrom of the award for exemplary
damages, and reduction of the actual damages, from P100,000.00 to P20,000.00
per month, from November 1986 until subject personal properties are restored
to appellees, the judgment appealed from is hereby AFFIRMED, in all other
respects. No pronouncement as to costs. 5
Motion for reconsideration of the above decision having been denied in the
resolution of April 28, 1995, PBCom and Tsai filed their separate petitions for
review with this Court.
In G.R. No. 120098, petitioner Tsai ascribed the following errors to the
respondent court:
I REAL PROPERTY EXTRAJUDICIALLY FORECLOSED BY PBCOM DESPITE THE
THE HONORABLE COURT OF APPEALS (SECOND DIVISION) ERRED IN EFFECT
MAKING A CONTRACT FOR THE PARTIES BY TREATING THE 1981 ACQUIRED
MACHINERIES AS CHATTELS INSTEAD OF REAL PROPERTIES WITHIN THEIR
EARLIER 1975 DEED OF REAL AND CHATTEL MORTGAGE OR 1979 DEED OF
CHATTEL MORTGAGE.
II
THE HONORABLE COURT OF APPEALS (SECOND DIVISION) ERRED IN HOLDING
THAT THE DISPUTED 1981 MACHINERIES ARE NOT REAL PROPERTIES DEEMED
PART OF THE MORTGAGE — DESPITE THE CLEAR IMPORT OF THE EVIDENCE AND
APPLICABLE RULINGS OF THE SUPREME COURT.
III
THE HONORABLE COURT OF APPEALS (SECOND DIVISION) ERRED IN DEEMING
PETITIONER A PURCHASER IN BAD FAITH.
IV
THE HONORABLE COURT OF APPEALS (SECOND DIVISION) ERRED IN ASSESSING
PETITIONER ACTUAL DAMAGES, ATTORNEY'S FEES AND EXPENSES OF LITIGATION
— FOR WANT OF VALID FACTUAL AND LEGAL BASIS.
V
THE HONORABLE COURT OF APPEALS (SECOND DIVISION) ERRED IN HOLDING
AGAINST PETITIONER'S ARGUMENTS ON PRESCRIPTION AND LACHES. 6
In G.R. No. 120109, PBCom raised the following issues:
I.
DID THE COURT OF APPEALS VALIDLY DECREE THE MACHINERIES LISTED UNDER
PARAGRAPH 9 OF THE COMPLAINT BELOW AS PERSONAL PROPERTY OUTSIDE OF
THE 1975 DEED OF REAL ESTATE MORTGAGE AND EXCLUDED THEM FROM THE
PROVISION IN THE 1975 DEED THAT ALL AFTER-ACQUIRED PROPERTIES DURING
THE LIFETIME OF THE MORTGAGE SHALL FORM PART THEREOF, AND DESPITE
THE UNDISPUTED FACT THAT SAID MACHINERIES ARE BIG AND HEAVY, BOLTED
OR CEMENTED ON THE REAL PROPERTY MORTGAGED BY EVER TEXTILE MILLS TO
PBCOM, AND WERE ASSESSED FOR REAL ESTATE TAX PURPOSES?
II.
CAN PBCOM, WHO TOOK POSSESSION OF THE MACHINERIES IN QUESTION IN
GOOD FAITH, EXTENDED CREDIT FACILITIES TO EVER TEXTILE MILLS WHICH AS OF
1982 TOTALLED P9,547,095.28, WHO HAD SPENT FOR MAINTENANCE AND
SECURITY ON THE DISPUTED MACHINERIES AND HAD TO PAY ALL THE BACK
TAXES OF EVER TEXTILE MILLS BE LEGALLY COMPELLED TO RETURN TO EVER THE
SAID MACHINERIES OR IN LIEU THEREOF BE ASSESSED DAMAGES. IS THAT
SITUATION TANTAMOUNT TO A CASE OF UNJUST ENRICHMENT? 7
The principal issue, in our view, is whether or not the inclusion of the questioned
properties in the foreclosed properties is proper. The secondary issue is whether
or not the sale of these properties to petitioner Ruby Tsai is valid.
For her part, Tsai avers that the Court of Appeals in effect made a contract for
the parties by treating the 1981 acquired units of machinery as chattels instead
of real properties within their earlier 1975 deed of Real and Chattel Mortgage or
1979 deed of Chattel Mortgage. 8 Additionally, Tsai argues that respondent court
erred in holding that the disputed 1981 machineries are not real
properties. 9 Finally, she contends that the Court of Appeals erred in holding
against petitioner's arguments on prescription and laches 10 and in assessing
petitioner actual damages, attorney's fees and expenses of litigation, for want of
valid factual and legal basis. 11 TaCSAD
Essentially, PBCom contends that respondent court erred in affirming the lower
court's judgment decreeing that the pieces of machinery in dispute were not duly
foreclosed and could not be legally leased nor sold to Ruby Tsai. It further argued
that the Court of Appeals' pronouncement that the pieces of machinery in
question were personal properties have no factual and legal basis. Finally, it
asserts that the Court of Appeals erred in assessing damages and attorney's fees
against PBCom.
In opposition, private respondents argue that the controverted units of
machinery are not "real properties" but chattels, and, therefore, they were not
part of the foreclosed real properties, rendering the lease and the subsequent
sale thereof to Tsai a nullity. 12
Considering the assigned errors and the arguments of the parties, we find the
petitions devoid of merit and ought to be denied.
Well-settled is the rule that the jurisdiction of the Supreme Court in a petition for
review on certiorari under Rule 45 of the Revised Rules of Court is limited to
reviewing only errors of law, not of fact, unless the factual findings complained
of are devoid of support by the evidence on record or the assailed judgment is
based on misapprehension of facts. 13 This rule is applied more stringently when
the findings of fact of the RTC is affirmed by the Court of Appeals. 14
The following are the facts as found by the RTC and affirmed by the Court of
Appeals that are decisive of the issues: (1) the "controverted machineries" are
not covered by, or included in, either of the two mortgages, the Real Estate and
Chattel Mortgage, and the pure Chattel Mortgage; (2) the said machineries were
not included in the list of properties appended to the Notice of Sale, and neither
were they included in the Sheriff's Notice of Sale of the foreclosed properties. 15
Petitioners contend that the nature of the disputed machineries, i.e., that they
were heavy, bolted or cemented on the real property mortgaged by EVERTEX to
PBCom, make them ipso facto immovable under Article 415 (3) and (5) of the
New Civil Code. This assertion, however, does not settle the issue. Mere nuts and
bolts do not foreclose the controversy. We have to look at the parties' intent.
While it is true that the controverted properties appear to be immobile, a
perusal of the contract of Real and Chattel Mortgage executed by the parties
herein gives us a contrary indication. In the case at bar, both the trial and the
appellate courts reached the same finding that the true intention of PBCOM and
the owner, EVERTEX, is to treat machinery and equipment as chattels. The
pertinent portion of respondent appellate court's ruling is quoted below:
As stressed upon by appellees, appellant bank treated the machineries as
chattels; never as real properties. Indeed, the 1975 mortgage contract, which
was actually real and chattel mortgage, militates against appellants' posture. It
should be noted that the printed form used by appellant bank was mainly for real
estate mortgages. But reflective of the true intention of appellant PBCOM and
appellee EVERTEX was the typing in capital letters, immediately following the
printed caption of mortgage, of the phrase "real and chattel." So also, the
"machineries and equipment" in the printed form of the bank had to be inserted
in the blank space of the printed contract and connected with the word
"building" by typewritten slash marks. Now, then, if the machineries in question
were contemplated to be included in the real estate mortgage, there would have
been no necessity to ink a chattel mortgage specifically mentioning as part III of
Schedule A a listing of the machineries covered thereby. It would have sufficed to
list them as immovables in the Deed of Real Estate Mortgage of the land and
building involved.
As regards the 1979 contract, the intention of the parties is clear and beyond
question. It refers solely to chattels. The inventory list of the mortgaged
properties is an itemization of sixty-three (63) individually described machineries
while the schedule listed only machines and 2,996,880.50 worth of finished
cotton fabrics and natural cotton fabrics. 16
In the absence of any showing that this conclusion is baseless, erroneous or
uncorroborated by the evidence on record, we find no compelling reason to
depart therefrom.
Too, assuming arguendo that the properties in question are immovable by
nature, nothing detracts the parties from treating it as chattels to secure an
obligation under the principle of estoppel. As far back as Navarro v. Pineda, 9
SCRA 631 (1963), an immovable may be considered a personal property if there
is a stipulation as when it is used as security in the payment of an obligation
where a chattel mortgage is executed over it, as in the case at bar.
In the instant case, the parties herein: (1) executed a contract styled as "Real
Estate Mortgage and Chattel Mortgage," instead of just "Real Estate Mortgage" if
indeed their intention is to treat all properties included therein as immovable,
and (2) attached to the said contract a separate "LIST OF MACHINERIES &
EQUIPMENT." These facts, taken together, evince the conclusion that the parties'
intention is to treat these units of machinery as chattels. A fortiori, the contested
after-acquired properties, which are of the same description as the units
enumerated under the title "LIST OF MACHINERIES & EQUIPMENT," must also be
treated as chattels.
Accordingly, we find no reversible error in the respondent appellate court's
ruling that inasmuch as the subject mortgages were intended by the parties to
involve chattels, insofar as equipment and machinery were concerned,
the Chattel Mortgage Law applies, which provides in Section 7 thereof that: "a
chattel mortgage shall be deemed to cover only the property described therein
and not like or substituted property thereafter acquired by the mortgagor and
placed in the same depository as the property originally mortgaged, anything in
the mortgage to the contrary notwithstanding."
And, since the disputed machineries were acquired in 1981 and could not have
been involved in the 1975 or 1979 chattel mortgages, it was consequently an
error on the part of the Sheriff to include subject machineries with the properties
enumerated in said chattel mortgages.
As the auction sale of the subject properties to PBCom is void, no valid title
passed in its favor. Consequently, the sale thereof to Tsai is also a nullity under
the elementary principle of nemo dat quod non habet, one cannot give what one
does not have. 17
Petitioner Tsai also argued that assuming that PBCom's title over the contested
properties is a nullity, she is nevertheless a purchaser in good faith and for value
who now has a better right than EVERTEX.
To the contrary, however, are the factual findings and conclusions of the trial
court that she is not a purchaser in good faith. Well-settled is the rule that the
person who asserts the status of a purchaser in good faith and for value has the
burden of proving such assertion. 18 Petitioner Tsai failed to discharge this
burden persuasively.
Moreover, a purchaser in good faith and for value is one who buys the property
of another without notice that some other person has a right to or interest in
such property and pays a full and fair price for the same, at the time of purchase,
or before he has notice of the claims or interest of some other person in the
property. 19 Records reveal, however, that when Tsai purchased the
controverted properties, she knew of respondent's claim thereon. As borne out
by the records, she received the letter of respondent's counsel, apprising her of
respondent's claim, dated February 27, 1987. 20 She replied thereto on March 9,
1987. 21 Despite her knowledge of respondent's claim, she proceeded to buy the
contested units of machinery on May 3, 1988. Thus, the RTC did not err in finding
that she was not a purchaser in good faith.
Petitioner Tsai's defense of indefeasibility of Torrens Title of the lot where the
disputed properties are located is equally unavailing. This defense refers to sale
of lands and not to sale of properties situated therein. Likewise, the mere fact
that the lot where the factory and the disputed properties stand is in PBCom's
name does not automatically make PBCom the owner of everything found
therein, especially in view of EVERTEX's letter to Tsai enunciating its claim.
Finally, petitioners' defense of prescription and laches is less than convincing. We
find no cogent reason to disturb the consistent findings of both courts below that
the case for the reconveyance of the disputed properties was filed within the
reglementary period. Here, in our view, the doctrine of laches does not apply.
Note that upon petitioners' adamant refusal to heed EVERTEX's claim,
respondent company immediately filed an action to recover possession and
ownership of the disputed properties. There is no evidence showing any failure
or neglect on its part, for an unreasonable and unexplained length of time, to do
that which, by exercising due diligence, could or should have been done earlier.
The doctrine of stale demands would apply only where by reason of the lapse of
time, it would be inequitable to allow a party to enforce his legal rights.
Moreover, except for very strong reasons, this Court is not disposed to apply the
doctrine of laches to prejudice or defeat the rights of an owner. 22
As to the award of damages, the contested damages are the actual
compensation, representing rentals for the contested units of machinery, the
exemplary damages, and attorney's fees.
As regards said actual compensation, the RTC awarded P100,000.00
corresponding to the unpaid rentals of the contested properties based on the
testimony of John Chua, who testified that the P100,000.00 was based on the
accepted practice in banking and finance, business and investments that the
rental price must take into account the cost of money used to buy them. The
Court of Appeals did not give full credence to Chua's projection and reduced the
award to P20,000.00. TDEASC
Basic is the rule that to recover actual damages, the amount of loss must not
only be capable of proof but must actually be proven with reasonable degree of
certainty, premised upon competent proof or best evidence obtainable of the
actual amount thereof. 23 However, the allegations of respondent company as
to the amount of unrealized rentals due them as actual damages remain mere
assertions unsupported by documents and other competent evidence. In
determining actual damages, the court cannot rely on mere assertions,
speculations, conjectures or guesswork but must depend on competent proof
and on the best evidence obtainable regarding the actual amount of
loss. 24 However, we are not prepared to disregard the following dispositions of
the respondent appellate court:
. . . In the award of actual damages under scrutiny, there is nothing on record
warranting the said award of P5,200,000.00, representing monthly rental income
of P100,000.00 from November 1986 to February 1991, and the additional award
of P100,000.00 per month thereafter.
As pointed out by appellants, the testimonial evidence, consisting of the
testimonies of Jonh (sic) Chua and Mamerto Villaluz, is shy of what is necessary
to substantiate the actual damages allegedly sustained by appellees, by way of
unrealized rental income of subject machineries and equipments.
The testimony of John Cua (sic) is nothing but an opinion or projection based on
what is claimed to be a practice in business and industry. But such a testimony
cannot serve as the sole basis for assessing the actual damages complained of.
What is more, there is no showing that had appellant Tsai not taken possession
of the machineries and equipments in question, somebody was willing and ready
to rent the same for P100,000.00 a month.
xxx xxx xxx
Then, too, even assuming arguendo that the said machineries and equipments
could have generated a rental income of P30,000.00 a month, as projected by
witness Mamerto Villaluz, the same would have been a gross income. Therefrom
should be deducted or removed, expenses for maintenance and repairs. . . .
Therefore, in the determination of the actual damages or unrealized rental
income sued upon, there is a good basis to calculate that at least four months in
a year, the machineries in dispute would have been idle due to absence of a
lessee or while being repaired. In the light of the foregoing rationalization and
computation, We believe that a net unrealized rental income of P20,000.00 a
month, since November 1986, is more realistic and fair. 25
As to exemplary damages, the RTC awarded P200,000.00 to EVERTEX which the
Court of Appeals deleted. But according to the CA, there was no clear showing
that petitioners acted malevolently, wantonly and oppressively. The evidence,
however, shows otherwise.
It is a requisite to award exemplary damages that the wrongful act must be
accompanied by bad faith, 26 and the guilty acted in a wanton, fraudulent,
oppressive, reckless or malevolent manner. 27 As previously stressed, petitioner
Tsai's act of purchasing the controverted properties despite her knowledge of
EVERTEX's claim was oppressive and subjected the already insolvent respondent
to gross disadvantage. Petitioner PBCom also received the same letters of Atty.
Villaluz, responding thereto on March 24, 1987. 28 Thus, PBCom's act of taking
all the properties found in the factory of the financially handicapped respondent,
including those properties not covered by or included in the mortgages, is
equally oppressive and tainted with bad faith. Thus, we are in agreement with
the RTC that an award of exemplary damages is proper.
The amount of P200,000.00 for exemplary damages is, however,
excessive. Article 2216 of the Civil Code provides that no proof of pecuniary loss
is necessary for the adjudication of exemplary damages, their assessment being
left to the discretion of the court in accordance with the circumstances of each
case. 29 While the imposition of exemplary damages is justified in this case,
equity calls for its reduction. In Inhelder Corporation v. Court of Appeals, G.R. No.
L-52358, 122 SCRA 576, 585, (May 30, 1983), we laid down the rule that judicial
discretion granted to the courts in the assessment of damages must always be
exercised with balanced restraint and measured objectivity. Thus, here the
award of exemplary damages by way of example for the public good should be
reduced to P100,000.00.
By the same token, attorney's fees and other expenses of litigation may be
recovered when exemplary damages are awarded. 30 In our view, RTC's award of
P50,000.00 as attorney's fees and expenses of litigation is reasonable, given the
circumstances in these cases.
WHEREFORE, the petitions are DENIED. The assailed decision and resolution of
the Court of Appeals in CA-G.R. CV No. 32986 are AFFIRMED WITH
MODIFICATIONS. Petitioners Philippine Bank of Communications and Ruby L. Tsai
are hereby ordered to pay jointly and severally Ever Textile Mills, Inc. the
following: (1) P20,000.00 per month, as compensation for the use and possession
of the properties in question from November 1986 31 until subject personal
properties are restored to respondent corporation; (2) P100,000.00 by way of
exemplary damages, and (3) P50,000.00 as attorney's fees and litigation
expenses. Costs against petitioners.
||| (Tsai v. Court of Appeals, G.R. Nos. 120098 & 120109, [October 2, 2001], 418
PHIL 606-624)
EN BANC
[G.R. No. 64261. December 26, 1984.]
JOSE BURGOS, SR., JOSE BURGOS, JR., BAYANI SORIANO and J. BURGOS MEDIA
SERVICES, INC., petitioners, vs. THE CHIEF OF STAFF, ARMED FORCES OF THE
PHILIPPINES, THE CHIEF, PHILIPPINE CONSTABULARY, THE CHIEF LEGAL
OFFICER, PRESIDENTIAL SECURITY COMMAND, THE JUDGE ADVOCATE
GENERAL, ET AL., respondents.
Lorenzo M. Tañada, Wigberto E. Tañada, Martiniano Vino, Augusto Sanchez,
Joker P. Arroyo, Jejomar Binay and Rene Saguisag for petitioners.
The Solicitor General for respondents.
SYLLABUS
1. REMEDIAL LAW; CIVIL PROCEDURE; ESTOPPEL BY LACHES; DEFINED. — Laches
is failure or negligence for an unreasonable time to do that which, by exercising
due diligence, could or should have been done earlier. It is negligence or omission
to assert a right within a reasonable time, warranting a presumption that the
party entitled to assert it either has abandoned it or declined to assert it.
2. ID.; ID.; ID.; CHARGE OF LACHES NEGATED BY EXTRAJUDICIAL EFFORTS
EXERTED BY PETITIONERS IN CASE AT BAR. — Although the reason given by
petitioners may not be flattering to our judicial system, the Supreme Court finds
no ground to punish or chastise them for an error in judgment. On the contrary,
the extrajudicial efforts exerted by petitioners quite evidently negate the
presumption that they had abandoned their right to the possession of the seized
property, thereby refuting the charge of laches against them
3. ID.; EVIDENCE; PETITIONER NOT ESTOPPED FROM QUESTIONING THE VALIDITY
OF SEARCH WARRANTS ALTHOUGH HE HAD USED AND MARKED AS EVIDENCE
THE SEIZED DOCUMENTS; CASE AT BAR. — Respondents submit the theory that
since petitioner Jose Burgos, Jr. had used and marked as evidence some of the
seized documents in Criminal Case No. Q-022872, he is now estopped from
challenging the validity of the search warrants. The Supreme Court does not
follow the logic of respondents. These documents lawfully belong to petitioner
Jose Burgos, Jr. and he can do whatever he pleases with them, within legal
bounds. The fact that he has used them as evidence does not and cannot in any
way affect the validity or invalidity of the assailed search warrants.
4. ID.; CRIMINAL PROCEDURE; SEARCH AND SEIZURE OF PERSONAL PROPERTY;
THE PERSON AGAINST WHOM THE WARRANT IS DIRECTED MUST HAVE CONTROL
OR POSSESSION OF PROPERTY SOUGHT TO BE SEIZED; CASE AT BAR. — Section 2,
Rule 126 of the Rules of Court, enumerates the personal properties that may be
seized under a search warrant. The rule does not require that the property to be
seized is stolen property. Necessarily stolen property must be owned by one other
than the person in whose possession it may be at the time of the search and
seizure. Ownership, therefore, is of no consequence, and it is sufficient that the
person against whom the warrant is directed has control or possession of the
property sought to be seized, as petitioner Jose Burgos, Jr. was alleged to have in
relation to the articles and property seized under the warrants.
5. CIVIL LAW; PROPERTY; MACHINERIES INTENDED FOR AN INDUSTRY WHICH
MAY BE CARRIED ON IN A BUILDING WHEN PLACED BY A TENANT REMAIN
MOVABLE PROPERTY SUSCEPTIBLE TO SEIZURE; CASE AT BAR. — Under Article
415 [5] of the Civil Code of the Philippines, "machinery, receptacles. instruments
or implements intended by the owner of the tenement for an industry or works
which may be carried on in a building or on a piece of land and which tend
directly to meet the needs of the said industry or works" are considered
immovable property . In Davao Sawmill Co. vs. Castillo (61 Phil. 709) where this
legal provision was invoked, this Court ruled that machinery which is movable by
nature becomes immobilized when placed by the owner of the tenement,
property or plant, but not so when placed by a tenant, usufructuary, or any other
person having only a temporary right, unless such person acted as the agent of
the owner. In the case at bar, petitioners do not claim to be the owners of the
land and/or building on which the machineries were placed. This being the case,
the machineries in question, while in fact bolted to the ground remain movable
property susceptible to seizure under a search warrant.
6. REMEDIAL LAW; CRIMINAL PROCEDURE; SEARCH AND SEIZURE; PROBABLE
CAUSE AS REQUISITE FOR ISSUANCE OF SEARCH WARRANT; DEFINED AND
EXPLAINED RELATIVE TO PUBLICATION OF SUBVERSIVE MATERIALS; CASE AT
BAR. — Probable cause for a search is defined as such facts and circumstances
which would lead a reasonably discreet and prudent man to believe that an
offense has been committed and that the objects sought in connection with the
offense are in the place sought to be searched. And when the search warrant
applied for is directed against a newspaper publisher or editor in connection with
the publication of subversive materials, as in the case at bar. the application
and/or its supporting affidavits must contain a specification, stating with
particularity the alleged subversive material he has published or is intending to
publish. Mere generalization will not suffice. Thus, the broad statement in Col.
Abadilla's application that petitioner "is in possession or has in his control
printing equipment and other paraphernalia, news publications and other
documents which were used and are all continuously being used as a means of
committing the offense of subversion punishable under Presidential Decree 885,
as amended. . . " (Annex 'C', Petition, p. 51, Rollo) is a mere conclusion of law and
does not satisfy the requirements of probable cause. Bereft of such particulars as
would justify a finding of the existence of probable cause, said allegation cannot
serve as basis for the issuance of a search warrant and it was a grave error for
respondent judge to have done so.
7. CONSTITUTIONAL LAW; BILL OF RIGHTS; ISSUANCE OF WARRANT UPON
PROBABLE CAUSE; TEST OF SUFFICIENCY NOT MET IN CASE AT BAR. — Insufficient
as basis for the determination of probable cause is the statement contained in
the joint affidavit of Alejandro M. Gutierrez and Pedro U. Tango, "that the
evidence gathered and collated by our unit clearly shows that the premises
above-mentioned were used and are continuously being used for subversive
activities in conspiracy with, and to promote the objective of, illegal organization
such as the Light-a-Fire Movement." In mandating that "no warrant shall issue
except upon probable cause to be determined by the judge,. . . after examination
under oath or affirmation of the complainant and the witnesses he may produce;
(Sec. 3, Art. IV, 1973 Constitution) the Constitution requires no less than personal
knowledge by the complainant or his witnesses of the facts upon which the
issuance of a search warrant may be justified. In Alvarez vs. Court of First
Instance (64 Phil. 33), the Supreme Court ruled that "the oath required must refer
to the truth of the facts within the personal knowledge of the petitioner or his
witnesses, because the purpose thereof is to convince the committing magistrate,
not the individual making the affidavit and seeking the issuance of the warrant,
of the existence of probable cause." The averment in the joint affidavit filed
before respondent judge hardly meets the test of sufficiency established by the
Court in Alvarez case.
8. ID.; ID.; ID.; GENERAL WARRANTS DECLARED VOID. — In Stanford vs. State of
Texas (379 U.S. 476, 13 L ed 2nd 431) the search warrants which authorized the
search for "books, records, pamphlets, cards, receipts, lists, memoranda, pictures,
recordings and other written instruments concerning the Communist Parties of
Texas, and the operations of the Communist party in Texas," was declared void by
the U.S. Supreme Court for being too general. In like manner, directions to "seize
any evidence in connection with the violation of SDC 13-3703 or otherwise" have
been held too general, and that portion of a search warrant which authorized the
seizure of any "paraphernalia which could be used to violate Sec. 54-197 of the
Connecticut General Statutes [the statute dealing with the crime of conspiracy]"
was held to be a general warrant, and therefore invalid. (68 am. Jur. 2d., pp. 736-
737). The description of the articles sought to be seized under the search
warrants in question cannot be characterized differently. In the Stanford case, the
U.S. Supreme Court calls to mind a notable chapter in English history: the era of
disaccord between the Tudor Government and the English Press, when "Officers
of the Crown were given roving commissions to search where they pleased in
order to suppress and destroy the literature of dissent both Catholic and Puritan."
Reference to such historical episode would not be relevant for it is not the policy
of our government to suppress any newspaper or publication that speaks with
"the voice of non-conformity" but poses no clear and imminent danger to state
security.
9. ID.; ID.; FREEDOM OF THE PRESS; VIOLATED BY CLOSURE OF BUSINESS AND
PRINTING OFFICES IN CASE AT BAR. — The premises searched were the business
and printing offices of the "Metropolitan Mail" and the "We Forum" newspapers.
As a consequence of the search and seizure, these premises were padlocked and
sealed, with the further result that the printing and publication of said
newspapers were discontinued. Such closure is in the nature of previous restraint
or censorship abhorrent to the freedom of the press guaranteed under the
fundamental law, (Sec. 9, Art. IV of the Constitution) and constitutes a virtual
denial of petitioners' freedom to express themselves in print. This state of being is
patently anathematic to a democratic framework where a free, alert and even
militant press is essential for the political enlightenment and growth of the
citizenry.
10. ID.; ID.; ID.; CONTINUED SEALING OF PRINTING MACHINES IN CASE AT BAR
PURSUANT TO PRESIDENTIAL DECREE 885 NOT JUSTIFIED; REASONS. —
Respondents would justify the continued sealing of the printing machines on the
ground that they have been sequestered under Section 8 of Presidential Decree
No. 885, as amended, which authorizes "the sequestration of the property of any
person, natural or artificial, engaged in subversive activities against the
government and its duly constituted authorities. . . in accordance with
implementing rules and regulations as may be issued by the Secretary of National
Defense." It is doubtful, however, if sequestration could validly be effected in view
of the absence of implementing rules and regulations promulgated by the
Ministry of National Defense. Besided, in the December 10, 1982 issue of
the Daily Express, it was reporter that no less than President Marcos himself
denied the request of the military authorities to sequester the property seized
from petitioners on December 7, 1982. That the property seized on December 7,
1982 had not been sequestered is further confirmed by the reply of then Foreign
Minister Carlos P. Romulo to the letter dated February 10, 1983 of U.S.
Congressman Tony P. Hall addressed to President Marcos, expressing alarm over
the "WE FORUM " case.
ABAD SANTOS, J., concurring:
CONSTITUTIONAL LAW; BILL OF RIGHTS; FREEDOM OF THE PRESS; SUPPRESSION
OF PRESS FREEDOM RESULTING FROM SERVICE OF GENERAL, WARRANTS IN
CASE AT BAR EXPLAINED. — The action against WE FORUM was a naked
suppression of press freedom for the search warrants were issued in gross
violation of the Constitution. The Constitutional requirement which is expressed in
Section 3, Article IV, stresses two points, namely: "(1) that no warrant shall issue
but upon probable cause, to be determined by the judge in the manner set forth
in said provision, and (2) that the warrant shall particularly describe the things to
be seized." (Stonehill vs. Diokno, 126 Phil. 738, 747: 20 SCRA 383 [1967].) Any
search warrant which is conducted in disregard of the points mentioned above
will result in wiping "out completely one of the most fundamental rights
guaranteed in our Constitution, for it would place the sanctity of the domicile and
the privacy of communication and correspondence at the mercy of the whims
caprice or passion of peace officers." (Ibid., p. 748.) The two search warrants
were issued without probable cause. To satisfy the requirement of probable cause
a specific offense must be alleged in the application; abstract averments will not
suffice. In the case at bar nothing specifically subversive has been alleged; stated
only is the claim that certain objects were being used as instruments and means
of committing the offense of subversion punishable under P.D. 885, as amended.
There is no mention of any specific provision of the decree. In the words of Chief
Justice Concepcion "It would be legal heresy, of the highest order, to convict
anybody" of violating the decree without reference to any determinate provision
thereof. The search warrants are also void for lack of particularity. Both search
warrants authorizes Col. Rolando Abadilla to seize and take possessions, among
other things, of the following: subversive documents, pamphlets, leaflets, books
and other publication to promote the objectives and purposes of the subversive
organizations known as Movement for Free Philippines, Light-a-Fire Movement
and April 6 Movement." The obvious question is: Why were the documents,
pamphlets, leaflets, books, etc. subversive? What did they contain to make them
subversive? There is nothing in the applications nor in the warrants which
answers the questions. The warrants, therefore are general warrants which are
obnoxious to the Constitution. In point of fact, there was nothing subversive
which had been published in MALAYA which has replaced the former and has the
same content but against which no action has been taken. Conformably with
existing jurisprudence everything seized pursuant to the warrants should be
returned to the owners and all of the items are subject to the exclusionary rule of
evidence.
DECISION
ESCOLIN, J p:
Assailed in this petition for certiorari, prohibition and mandamus with preliminary
mandatory and prohibitory injunction is the validity of two [2] search warrants
issued on December 7, 1982 by respondent Judge Ernani Cruz-Paño, Executive
Judge of the then Court of First Instance of Rizal [Quezon City], under which the
premises known as No. 19, Road 3, Project 6, Quezon City, and 784 Units C & D,
RMS Building, Quezon Avenue, Quezon City, business addresses of the
"Metropolitan Mail" and "We Forum" newspapers, respectively, were searched,
and office and printing machines, equipment, paraphernalia, motor vehicles and
other articles used in the printing, publication and distribution of the said
newspapers, as well as numerous papers, documents, books and other written
literature alleged to be in the possession and control of petitioner Jose Burgos, Jr.
publisher-editor of the "We Forum" newspaper, were seized.
Petitioners further pray that a writ of preliminary mandatory and prohibitory
injunction be issued for the return of the seized articles, and that respondents,
"particularly the Chief Legal Officer, Presidential Security Command, the Judge
Advocate General, AFP, the City Fiscal of Quezon City, their representatives,
assistants, subalterns, subordinates, substitute or successors" be enjoined from
using the articles thus seized as evidence against petitioner Jose Burgos, Jr. and
the other accused in Criminal Case No. Q-022782 of the Regional Trial Court of
Quezon City, entitled "People v. Jose Burgos, Jr. et al." 1
In our Resolution dated June 21, 1983, respondents were required to answer the
petition. The plea for preliminary mandatory and prohibitory injunction was set
for hearing on June 28, 1983, later reset to July 7, 1983, on motion of the Solicitor
General in behalf of respondents.
At the hearing on July 7, 1983, the Solicitor General, while opposing petitioners'
prayer for a writ of preliminary mandatory injunction, manifested that
respondents "will not use the aforementioned articles as evidence in the
aforementioned case until final resolution of the legality of the seizure of the
aforementioned articles . . . " 2With this manifestation, the prayer for preliminary
prohibitory injunction was rendered moot and academic. LexLib
Respondents would have this Court dismiss the petition on the ground that
petitioners had come to this Court without having previously sought the quashal
of the search warrants before respondent judge. Indeed, petitioners, before
impugning the validity of the warrants before this Court, should have filed a
motion to quash said warrants in the court that issued them. 3 But this
procedural flaw notwithstanding, we take cognizance of this petition in view of
the seriousness and urgency of the constitutional issues raised, not to mention
the public interest generated by the search of the "We Forum" offices, which was
televised in Channel 7 and widely publicized in all metropolitan dailies. The
existence of this special circumstance justifies this Court to exercise its inherent
power to suspend its rules. In the words of the revered Mr. Justice Abad Santos in
the case of C. Vda. de Ordoveza v. Raymundo, 4 "it is always in the power of the
court [Supreme Court] to suspend its rules or to except a particular case from its
operation, whenever the purposes of justice require it . . . "
Respondents likewise urge dismissal of the petition on ground of laches.
Considerable stress is laid on the fact that while said search warrants were issued
on December 7, 1982, the instant petition impugning the same was filed only on
June 16, 1983 or after the lapse of a period of more than six [6] months.
Laches is failure or negligence for an unreasonable and unexplained length of
time to do that which, by exercising due diligence, could or should have been
done earlier. It is negligence or omission to assert a right within a reasonable
time, warranting a presumption that the party entitled to assert it either has
abandoned it or declined to assert it. 5
Petitioners, in their Consolidated Reply, explained the reason for the delay in the
filing of the petition thus:
"Respondents should not find fault, as they now do [p. 1, Answer, p. 3,
Manifestation] with the fact that the Petition was filed on June 16, 1983, more
than half a year after the petitioners' premises had been raided.
"The climate of the times has given petitioners no other choice. If they had waited
this long to bring their case to court, it was because they tried at first to exhaust
other remedies. The events of the past eleven [11] years had taught them that
everything in this country, from release of public funds to release of detained
persons from custody, has become a matter of executive benevolence or largesse.
"Hence, as soon as they could, petitioners, upon suggestion of persons close to
the President, like Fiscal Flaminiano, sent a letter to President Marcos, through
counsel Antonio Coronel, asking the return at least of the printing equipment and
vehicles. And after such a letter had been sent, through Col. Balbino V. Diego,
Chief Intelligence and Legal Officer of the Presidential Security Command, they
were further encouraged to hope that the latter would yield the desired results.
"After waiting in vain for five [5] months, petitioners finally decided to come to
Court." [pp. 123-124, Rollo]
Although the reason given by petitioners may not be flattering to our judicial
system, We find no ground to punish or chastise them for an error in judgment.
On the contrary, the extrajudicial efforts exerted by petitioners quite evidently
negate the presumption that they had abandoned their right to the possession of
the seized property, thereby refuting the charge of laches against them.
Respondents also submit the theory that since petitioner Jose Burgos, Jr. had used
and marked as evidence some of the seized documents in Criminal Case No. Q-
022872, he is now estopped from challenging the validity of the search warrants.
We do not follow the logic of respondents. These documents lawfully belong to
petitioner Jose Burgos, Jr. and he can do whatever he pleases with them, within
legal bounds. The fact that he has used them as evidence does not and cannot in
any way affect the validity or invalidity of the search warrants assailed in this
petition.
Several and diverse reasons have been advanced by petitioners to nullify the
search warrants in question.
1. Petitioners fault respondent judge for his alleged failure to conduct an
examination under oath or affirmation of the applicant and his witnesses, as
mandated by the above-quoted constitutional provision as well as Sec. 4, Rule
126 of the Rules of Court. 6 This objection, however, may properly be considered
moot and academic, as petitioners themselves conceded during the hearing on
August 9, 1983, that an examination had indeed been conducted by respondent
judge of Col. Abadilla and his witnesses.
2. Search Warrants No. 20-82[a] and No. 20-82[b] were used to search two
distinct places: No. 19, Road 3, Project 6, Quezon City and 784 Units C & D, RMS
Building, Quezon Avenue, Quezon City, respectively. Objection is interposed to the
execution of Search Warrant No. 20-82[b] at the latter address on the ground
that the two search warrants pinpointed only one place where petitioner Jose
Burgos, Jr. was allegedly keeping and concealing the articles listed therein, i.e.,
No. 19, Road 3, Project 6, Quezon City. This assertion is based on that portion of
Search Warrant No. 20-82[b] which states:
"Which have been used, and are being used as instruments and means of
committing the crime of subversion penalized under P.D. 885 as amended and he
is keeping and concealing the same at 19 Road 3, Project 6, Quezon City."
The defect pointed out is obviously a typographical error. Precisely, two search
warrants were applied for and issued because the purpose and intent were to
search two distinct premises. It would be quite absurd and illogical for respondent
judge to have issued two warrants intended for one and the same place. Besides,
the addresses of the places sought to be searched were specifically set forth in
the application, and since it was Col. Abadilla himself who headed the team
which executed the search warrants, the ambiguity that might have arisen by
reason of the typographical error is more apparent than real. The fact is that the
place for which Search Warrant No. 20-82[b] was applied for was 728 Units C &
D, RMS Building, Quezon Avenue, Quezon City, which address appeared in the
opening paragraph of the said warrant. 7 Obviously, this is the same place that
respondent judge had in mind when he issued Warrant No. 20-82 [b].
In the determination of whether a search warrant describes the premises to be
searched with sufficient particularity, it has been held "that the executing officer's
prior knowledge as to the place intended in the warrant is relevant. This would
seem to be especially true where the executing officer is the affiant on whose
affidavit the warrant had issued, and when he knows that the judge who issued
the warrant intended the building described in the affidavit. And it has also been
said that the executing officer may look to the affidavit in the official court file to
resolve an ambiguity in the warrant as to the place to be searched." 8
3. Another ground relied upon to annul the search warrants is the fact that
although the warrants were directed against Jose Burgos, Jr. alone, articles
belonging to his co-petitioners Jose Burgos, Sr., Bayani Soriano and the J. Burgos
Media Services, Inc. were seized.
Section 2, Rule 126 of the Rules of Court, enumerates the personal properties that
may be seized under a search warrant, to wit:
"Sec. 2. Personal Property to be seized. — A search warrant may be issued for the
search and seizure of the following personal property:
[a] Property subject of the offense;
[b] Property stolen or embezzled and other proceeds or fruits of the offense; and
[c] Property used or intended to be used as the means of committing an offense.
The above rule does not require that the property to be seized should be owned
by the person against whom the search warrant is directed. It may or may not be
owned by him. In fact, under subsection [b] of the above-quoted Section 2, one of
the properties that may be seized is stolen property. Necessarily, stolen property
must be owned by one other than the person in whose possession it may be at
the time of the search and seizure. Ownership, therefore, is of no consequence,
and it is sufficient that the person against whom the warrant is directed has
control or possession of the property sought to be seized, as petitioner Jose
Burgos, Jr. was alleged to have in relation to the articles and property seized
under the warrants.
4. Neither is there merit in petitioners' assertion that real properties were seized
under the disputed warrants. Under Article 415[5] of the Civil Code of the
Philippines, "machinery, receptables, instruments or implements intended by the
owner of the tenement for an industry or works which may be carried on in a
building or on a piece of land and which tend directly to meet the needs of the
said industry or works" are considered immovable property. In Davao Sawmill Co.
v. Castillo 9where this legal provision was invoked, this Court ruled that
machinery which is movable by nature becomes immobilized when placed by the
owner of the tenement, property or plant, but not so when placed by a tenant,
usufructuary, or any other person having only a temporary right, unless such
person acted as the agent of the owner.
In the case at bar, petitioners do not claim to be the owners of the land and/or
building on which the machineries were placed. This being the case, the
machineries in question, while in fact bolted to the ground remain movable
property susceptible to seizure under a search warrant. prcd
5. The questioned search warrants were issued by respondent judge upon
application of Col. Rolando N. Abadilla, Intelligence Officer of the P.C.
Metrocom. 10 The application was accompanied by the Joint Affidavit of
Alejandro M. Gutierrez and Pedro U. Tango, 11 members of the Metrocom
Intelligence and Security Group under Col. Abadilla which conducted a
surveillance of the premises prior to the filing of the application for the search
warrants on December 7, 1982.
It is contended by petitioners, however, that the abovementioned documents
could not have provided sufficient basis for the finding of a probable cause upon
which a warrant may validly issue in accordance with Section 3, Article IV of
the 1973 Constitution which provides: LLphil
"SEC. 3. . . . and no search warrant or warrant of arrest shall issue except upon
probable cause to be determined by the judge, or such other responsible officer
as may be authorized by law, after examination under oath or affirmation of the
complainant and the witnesses he may produce, and particularly describing the
place to be searched and the persons or things to be seized."
We find petitioners' thesis impressed with merit. Probable cause for a search is
defined as such facts and circumstances which would lead a reasonably discreet
and prudent man to believe that an offense has been committed and that the
objects sought in connection with the offense are in the place sought to be
searched. And when the search warrant applied for is directed against a
newspaper publisher or editor in connection with the publication of subversive
materials, as in the case at bar, the application and/or its supporting affidavits
must contain a specification, stating with particularity the alleged subversive
material he has published or is intending to publish. Mere generalization will not
suffice. Thus, the broad statement in Col. Abadilla's application that petitioner "is
in possession or has in his control printing equipment and other paraphernalia,
news publications and other documents which were used and are all continuously
being used as a means of committing the offense of subversion punishable
under Presidential Decree 885, as amended . . . " 12 is a mere conclusion of law
and does not satisfy the requirements of probable cause. Bereft of such
particulars as would justify a finding of the existence of probable cause, said
allegation cannot serve as basis for the issuance of a search warrant and it was a
grave error for respondent judge to have done so.
Equally insufficient as basis for the determination of probable cause is the
statement contained in the joint affidavit of Alejandro M. Gutierrez and Pedro U.
Tango, "that the evidence gathered and collated by our unit clearly shows that
the premises above-mentioned and the articles and things above-described were
used and are continuously being used for subversive activities in conspiracy with,
and to promote the objective of, illegal organizations such as the Light-a-Fire
Movement, Movement for Free Philippines, and April 6 Movement." 13
In mandating that "no warrant shall issue except upon probable cause to be
determined by the judge, . . . after examination under oath or affirmation of the
complainant and the witnesses he may produce; 14 the Constitution requires no
less than personal knowledge by the complainant or his witnesses of the facts
upon which the issuance of a search warrant may be justified. In Alvarez v. Court
of First Instance, 15 this Court ruled that "the oath required must refer to the
truth of the facts within the personal knowledge of the petitioner or his
witnesses, because the purpose thereof is to convince the committing magistrate,
not the individual making the affidavit and seeking the issuance of the warrant,
of the existence of probable cause." As couched, the quoted averment in said
joint affidavit filed before respondent judge hardly meets the test of sufficiency
established by this Court in Alvarez case.
Another factor which makes the search warrants under consideration
constitutionally objectionable is that they are in the nature of general warrants.
The search warrants describe the articles sought to be seized in this wise:
"1] All printing equipment, paraphernalia, paper, ink, photo equipment,
typewriters, cabinets, tables, communications/recording equipment, tape
recorders, dictaphone and the like used and/or connected in the printing of the
'WE FORUM' newspaper and any and all documents/communications, letters and
facsimile of prints related to the 'WE FORUM' newspaper.
2] Subversive documents, pamphlets, leaflets, books, and other publications to
promote the objectives and purposes of the subversive organizations known as
Movement for Free Philippines, Light-a-Fire Movement and April 6 Movement;
and,
3] Motor vehicles used in the distribution/circulation of the 'WE FORUM' and
other subversive materials and propaganda, more particularly,
1] Toyota-Corolla, colored yellow with Plate No. NKA 892;
2] DATSUN pick-up colored white with Plate No. NKV 969;
3] A delivery truck with Plate No. NBS 542;
4] TOYOTA-TAMARAW, colored white with Plate No. PBP 665; and,
5] TOYOTA Hi-Lux, pick-up truck with Plate No. NGV 472 with marking 'Bagong
Silang.'"
In Standford v. State of Texas, 16 the search warrant which authorized the search
for 'books, records, pamphlets, cards, receipts, lists, memoranda, pictures,
recordings and other written instruments concerning the Communist Parties of
Texas, and the operations of the Community Party in Texas," was declared void
by the U.S. Supreme Court for being too general. In like manner, directions to
"seize any evidence in connection with the violation of SDC 13-3703 or otherwise"
have been held too general, and that portion of a search warrant - which
authorized the seizure of any "paraphernalia which could be used to violate Sec.
54-197 of the Connecticut General Statutes [the statute dealing with the crime of
conspiracy]" was held to be a general warrant, and therefore invalid. 17 The
description of the articles sought to be seized under the search warrants in a
question cannot be characterized differently.
In the Standford case, the U.S. Supreme Court calls to mind a notable chapter in
English history: the era of disaccord between the Tudor Government and the
English Press, when "Officers of the Crown were given roving commissions to
search where they pleased in order to suppress and destroy the literature of
dissent both Catholic and Puritan." Reference herein to such historical episode
would not be relevant for it is not the policy of our government to suppress any
newspaper or publication that speaks with "the voice of non-conformity" but
poses no clear and imminent danger to state security.
As heretofore stated, the premises searched were the business and printing
offices of the "Metropolitan Mail" and the "We Forum newspapers. As a
consequence of the search and seizure, these premises were padlocked and
sealed, with the further result that the printing and publication of said
newspapers were discontinued.
Such closure is in the nature of previous restraint or censorship abhorrent to the
freedom of the press guaranteed under the fundamental law, 18 and constitutes
a virtual denial of petitioners' freedom to express themselves in print. Thus state
of being is patently anathematic to a democratic framework where a free, alert
and even militant press is essential for the political enlightenment and growth of
the citizenry. LLjur
Respondents would justify the continued sealing of the printing machines on the
ground that they have been sequestered under Section 8 of Presidential Decree
No. 885, as amended, which authorizes "the sequestration of the property of any
person, natural or artificial, engaged in subversive activities against the
government and its duly constituted authorities . . . in accordance with
implementing rules and regulations as may be issued by the Secretary of National
Defense." It is doubtful, however, if sequestration could validly be effected in view
of the absence of any implementing rules and regulations promulgated by the
Minister of National Defense.
Besides, in the December 10, 1982 issue of the Daily Express, it was reported that
no less than President Marcos himself denied the request of the military
authorities to sequester the property seized from petitioners on December 7,
1982. Thus:
"The President denied a request filed by government prosecutors for
sequestration of the WE FORUM newspaper and its printing presses, according to
Information Minister Gregorio S. Cendaña."
"On the basis of court orders, government agents went to the We Forum offices
in Quezon City and took a detailed inventory of the equipment and all materials
in the premises.
"Cendaña said that because of the denial, the newspaper and its equipment
remain at the disposal of the owners, subject to the discretion of the court." 19
That the property seized on December 7, 1982 had not been sequestered is
further confirmed by the reply of then Foreign Minister Carlos P. Romulo to the
letter dated February 10, 1983 of U.S. Congressman Tony P. Hall addressed to
President Marcos, expressing alarm over the "WE FORUM" case. 20 In this reply
dated February 11, 1983, Minister Romulo stated:
"2. Contrary to reports, President Marcos turned down the recommendation of
our authorities to close the paper's printing facilities and confiscate the
equipment and materials it uses." 21
IN VIEW OF THE FOREGOING, Search Warrants Nos. 20-82[a] and 20-82[b] issued
by respondent judge on December 7, 1982 are hereby declared null and void and
are accordingly set aside. The prayer for a writ of mandatory injunction for the
return of the seized articles is hereby granted and all articles seized thereunder
are hereby ordered released to petitioners. No costs.
SO ORDERED.
Fernando, C .J ., Teehankee, Makasiar, Concepcion, Jr., Melencio-Herrera, Plana,
Relova, Gutierrez, Jr., De la Fuente and Cuevas, JJ ., concur.
Aquino, J ., took no part.
EN BANC
[G.R. Nos. L-10817-18. February 28, 1958.]
ENRIQUE LOPEZ, petitioner, vs. VICENTE OROSA, JR., and PLAZA THEATRE,
INC., respondents.
Nicolás Belmonte and Benjamín T. de Peralta for petitioner.
Tolentino & Garcia and D. R. Cruz for respondent Luzon Surety Co., Inc.
Jose B. Macatañgay for respondent Plaza Theatre, Inc.
SYLLABUS
1. PROPERTY; REAL ESTATE; MATERIALMAN'S LIEN; DOES NOT EXTEND TO THE
LAND; BUILDING SEPARATE AND DISTINCT FROM LAND. — Appellant's
contention that the lien executed in favor of the furnisher of the materials used
for the construction, repair or refection of a building is also extended to land on
which the construction was made is without merit, because while it is true that
generally, real estate connotes the land and the building constructed thereon, it
is obvious that the inclusion of the building, separate and distinct from the land,
in the enumeration of what constitute real properties (Art. 415 of the New Civil
Code [Art. 334 of the old]) could mean only one thing, that a building is by itself
an immovable property. (Leung Yee vs. Strong Machinery Co., 37 Phil. 644.)
2. ID.; ID.; ID.; BUILDING AS IMMOVABLE PROPERTY; IRRESPECTIVE OF
OWNERSHIP OF LAND AND BUILDING. — A building is an immovable property
irrespective of whether or not said structure and the land on which it is adhered
to belong to the same owner.
3. PREFERENCE AND PRIORITIES; MATERIALMAN'S LIEN AND MORTGAGE CREDIT
ON LAND WHERE BUILDING CONSTRUCTED. — Materialman's lien attaches
merely to the immovable property for the construction or repair of which the
obligation was incurred and in the case at bar, the lien in favor of appellant for
the unpaid value of the lumber used in the construction of the building attaches
only to said structure and to no other property of the obligor. Thus, the interest
of the mortgagee over the land is superior to and cannot be made subject to the
said materialman's lien.
DECISION
FELIX, J p:
Enrique Lopez is a resident of Balayan, Batangas, doing business under the trade
name of Lopez-Castelo Sawmill. Sometime in May, 1946, Vicente Orosa, Jr., also
a resident of the same province, dropped at Lopez' house and invited him to
make an investment in the theatre business. It was intimated that Orosa, his
family and close friends were organizing a corporation to be known as Plaza
Theatre, Inc., that would engage in such venture. Although Lopez expressed his
unwillingness to invest on the same, he agreed to supply the lumber necessary
for the construction of the proposed theatre, and at Orosa's behest and
assurance that the latter would be personally liable for any account that the said
construction might incur, Lopez further agreed that payment therefor would be
on demand and not cash on delivery basis. Pursuant to said verbal agreement,
Lopez delivered the lumber which was used for the construction of the Plaza
Theatre on May 17, 1946, up to December 4 of the same year. But of the total
cost of the materials amounting to P62,255.85, Lopez was paid only P20,848.50,
thus leaving a balance of P41,771.35.
We may state at this juncture that the Plaza Theatre was erected on a piece of
land with an area of 679.17 square meters formerly owned by Vicente Orosa, Jr.,
and was acquired by the corporation on September 25, 1946, for P6,000. As
Lopez was pressing Orosa for payment of the remaining unpaid obligation, the
latter and Belarmino Rustia, the president of the corporation, promised to obtain
a bank loan by mortgaging the properties of the Plaza Theatre, Inc., out of which
said amount of P41,771.35 would be satisfied, to which assurance Lopez had to
accede. Unknown to him, however, as early as November, 1946, the corporation
already got a loan for P30,000 from the Philippine National Bank with the Luzon
Surety Company as surety, and the corporation in turn executed a mortgage on
the land and building in favor of said company as counter-security. As the land at
that time was not yet brought under the operation of the Torrens System, the
mortgage on the same was registered on November 16, 1946, under Act No.
3344. Subsequently, when the corporation applied for the registration of the
land under Act 496, such mortgage was not revealed and thus Original Certificate
of Title No. O-391 was correspondingly issued on October 25, 1947, without any
encumbrance appearing thereon.
Persistent demand from Lopez for the payment of the amount due him caused
Vicente Orosa, Jr. to execute on March 17, 1947, an alleged "deed of
assignment" of his 420 shares of stock of the Plaza Theater, Inc., at P100 per
share or with a total value of P42,000 in favor of the creditor, and as the
obligation still remained unsettled, Lopez filed on November 12, 1947, a
complaint with the Court of First Instance of Batangas (Civil Case No. 4501 which
later became R-57) against Vicente Orosa Jr. and Plaza Theatre, Inc., praying that
defendants be sentenced to pay him jointly and severally the sum of P41,771.35
with legal interest from the filing of the action; that in case defendants fail to pay
the same, that the building and the land covered by OCT No. O-391 owned by the
corporation be sold at public auction and the proceeds thereof be applied to said
indebtedness; or that the 420 shares of the capital stock of the Plaza Theatre,
Inc., assigned by Vicente Orosa, Jr., to said plaintiff be sold at public auction for
the same purpose; and for such other remedies as may be warranted by the
circumstances. Plaintiff also caused the annotation of a notice of lis pendens on
said properties with the Register of Deeds.
Defendants Vicente Orosa, Jr., and Plaza Theatre, Inc., filed separate answers,
the first denying that the materials were delivered to him as a promoter and
later treasurer of the corporation, because he had purchased and received the
same on his personal account; that the land on which the movie house was
constructed was not charged with a lien to secure the payment of the
aforementioned unpaid obligation; and that the 420 shares of stock of the Plaza
Theatre, Inc. was not assigned to plaintiff as collaterals but as direct security for
the payment of his indebtedness. As special defense, this defendant contended
that as the 420 shares of stock assigned and conveyed by the assignor and
accepted by Lopez as direct security for the payment of the amount of
P41,771.35 were personal properties, plaintiff was barred from recovering any
deficiency if the proceeds of the sale thereof at public auction would not be
sufficient to cover and satisfy the obligation. It was thus prayed that he be
declared exempted from the payment of any deficiency in case the proceeds
from the sale of said personal properties would not be enough to cover the
amount sought to be collected.
Defendant Plaza Theatre, Inc., on the other hand, practically set up the same line
of defense by alleging that the building materials delivered to Orosa were on the
latter's personal account; and that there was no understanding that said
materials would be paid jointly and severally by Orosa and the corporation, nor
was a lien charged on the properties of the latter to secure payment of the same
obligation. As special defense, defendant corporation averred that while it was
true that the materials purchased by Orosa were sold by the latter to the
corporation, such transactions were in good faith and for valuable consideration
thus when plaintiff failed to claim said materials within 30 days from the time of
removal thereof from Orosa, said lumber became a different and distinct specie
and plaintiff lost whatever rights he might have in the same and consequently
had no recourse against the Plaza Theatre, Inc.; that the claim could not have
been refectionary credit, for such kind of obligation referred to an indebtedness
incurred in the repair or reconstruction of something already existing and this
concept did not include an entirely new work; and that the Plaza Theatre, Inc.,
having been incorporated on October 14, 1946, it could not have contracted any
obligation prior to said date. It was, therefore, prayed that the complaint be
dismissed; that said defendant be awarded the sum of P5,000 for damages, and
such other relief as may be just and proper in the premises.
The surety company, in the meantime, upon discovery that the land was already
registered under the Torrens System and that there was a notice of lis
pendens thereon, filed on August 17, 1948, or within the 1-year period after the
issuance of the certificate of title, a petition for review of the decree of the land
registration court dated October 18, 1947, which was made the basis of OCT No. notation that with respect to the building, said mortgage was subject to the
0-319, in order to annotate the lights and interests of the surety company over materialman's lien in favor of Enrique Lopez.
said properties (Land Registration Case No. 17 GLRO Rec. No. 296). Opposition
thereto was offered by Enrique Lopez, asserting that the amount demanded by
him constituted a preferred lien over the properties of the obligors; that the
Plaintiff tried to secure a modification of the decision in so far as it declared that
surety company was guilty of negligence when it failed to present an opposition
the obligation of therein defendants was joint instead of solidary and that the
to the application for registration of the property; and that if any annotation of
lien did not extend to the land, but same was denied by order of the court of
the rights and interest of said surety would ever be made, same must be subject
December 23, 1952. The matter was thus appealed to the Court of Appeals,
to the lien in his favor.
which affirmed the lower court's ruling, and then to this Tribunal. In this
The two cases were heard jointly and in a decision dated October 30, 1952, the instance, plaintiff-appellant raises 2 issues: (1) whether a materialman's lien for
lower Court, after making an exhaustive and detailed analysis of the respective the value of the materials used in the construction of a building attaches to said
stands of the parties and the evidence adduced at the trial, held that defendants structure alone and does not extend to the land on which the building is adhered
Vicente Orosa, Jr., and the Plaza Theatre, Inc., were jointly liable for the unpaid to; and (2) whether the lower court and the Court of Appeals erred in not
balance of the cost of lumber used in the construction of the building and the providing that the materialman's lien is superior to the mortgage executed in
plaintiff thus acquired the materialman's lien over the same. In making the favor of the surety company not only on the building but also on the land.
pronouncement that the lien was merely confined to the building and did not
It is to be noted in this appeal that Enrique Lopez has not raised any question
extend to the land on which the construction was made, the trial judge took into
against the part of the decision sentencing defendants Orosa and Plaza Theatre,
consideration the fact that when plaintiff started the delivery of lumber in May,
Inc., to pay jointly the sum of P41,771.35, so We will not take up or consider
1946, the land was not yet owned by the corporation; that the mortgage in favor
anything on that point. Appellant, however, contends that the lien created in
of Luzon Surety Company was previously registered under Act No. 3344; that the
favor of the furnisher of the materials used for the construction, repair or
codal provision (Art. 1923 of the old Spanish Civil Code) specifying that refection
refection of a building, is also extended to the land on which the construction
credits are preferred could refer only to buildings, which are also classified as
was made, and in support thereof he relies on Article 1923 of the Spanish Civil
real properties, upon which said refection was made. It was, however, declared
Code, the pertinent law on the matter, which reads as follows:
that plaintiff's lien on the building was superior to the right of the surety
company. And finding that the Plaza Theatre, Inc., had no objection to the review ART. 1923. With respect to determinate real property and real rights of the
of the decree issued in its favor by the land registration court and the inclusion in debtor, the following are preferred:
the title of the encumbrance in favor of the surety company, the court a
quo granted the petition filed by the latter company. Defendants Orosa and the xxx xxx xxx
Plaza Theatre, Inc., were thus required to pay jointly the amount of P41,771.35
5. Credits for refection, not entered or recorded, with respect to the real estate
with legal interest and costs within 90 days from notice of said decision; that in
upon which the refection was made, and only with respect to other credits
case of default, the 420 shares of stock assigned by Orosa to plaintiff be sold at
different from those mentioned in four next preceding paragraphs.
public auction and the proceeds thereof be applied to the payment of the
amount due the plaintiff, plus interest and costs; and that the encumbrance in
favor of the surety company be endorsed at the back of OCT No. 0-391, with the
It is argued that in view of the employment of the phrase real estate or
immovable property, and inasmuch as said provision does not contain any
specification delimiting the lien to the building, said article must be construed as
to embrace both the land and the building or structure adhering thereto. We
cannot subscribe to this view, for while it is true that generally, real estate
connotes the land and the building constructed thereon, it is obvious that the
inclusion of the building, separate and distinct from the land, in the enumeration
of what may constitute real properties 1 could mean only one thing — that a
building is by itself an immovable property, a doctrine already pronounced by
this Court in the case of Leung Yee vs. Strong Machinery Co., 37 Phil., 644.
Moreover, and in view of the absence of any specific provision of law to the
contrary, a building is an immovable property, irrespective of whether or not said
structure and the land on which it is adhered to belong to the same owner.
A close examination of the provision of the Civil Code invoked by appellant
reveals that the law gives preference to unregistered refectionary credits only
with respect to the real estate upon which the refection or work was made. This
being so, the inevitable conclusion must be that the lien so created attaches
merely to the immovable property for the construction or repair of which the
obligation was incurred. Evidently, therefore, the lien in favor of appellant for the
unpaid value of the lumber used in the construction of the building attaches only
to said structure and to no other property of the obligors.
Considering the conclusion thus arrived at, i.e., that the materialman's lien could
be charged only to the building for which the credit was made or which received
the benefit of refection, the lower court was right in holding that the interest of
the mortgagee over the land is superior and cannot be made subject to the said
materialman's lien.
Wherefore, and on the strength of the foregoing considerations, the decision
appealed from is hereby affirmed, with costs against appellant. It is so ordered.
||| (Lopez v. Orosa, G.R. Nos. L-10817-18, [February 28, 1958], 103 PHIL 98-106)
FIRST DIVISION
[G.R. No. L-32917. July 18, 1988.]
JULIAN S. YAP, petitioner, vs. HON. SANTIAGO O. TAÑADA, etc., and GOULDS
PUMPS INTERNATIONAL (PHIL.), INC., respondents.
Paterno P. Natinga, for private respondent.
SYLLABUS
1. REMEDIAL LAW; CIVIL PROCEDURE; MOTION FOR RECONSIDERATION BASED
ON GROUNDS FOR NEW TRIAL; MOTION SHOULD HAVE AFFIDAVIT OF MERITS;
REASON FOR REQUIREMENT — Since petitioner himself asserts that his motion
for reconsideration is grounded on Section 1 (a) of Rule 37, i.e., fraud, accident,
mistake or excusable negligence which ordinary prudence could not have
guarded against and by reason of which . . . (the) aggrieved party has probably
been impaired in his rights" — this being in any event clear from a perusal of the
motion which theorizes that he had "been impaired in his rights" because he was
denied the right to present evidence of his defenses (discrepancy as to price and
breach of warranty) — it was a fatal omission to fail to attach to his motion an
affidavit of merits, i.e., an affidavit "showing the facts (not conclusions)
constituting the valid . . . defense which the movant may prove in case a new
trial is granted." The requirement of such an affidavit is essential because
obviously "a new trial would be a waste of the court's time if the complaint turns
out to be groundless or the defense ineffective."
2. ID.; ID.; ID.; ID.; PERIOD OF APPEAL NOT INTERRUPTED IF MOTION IS WITHOUT
REQUIRED AFFIDAVIT OF MERITS — Where the motion for reconsideration
grounded on Section 1(a) of Rule 37 is not accompanied by the required affidavit
of merits, it does not interrupt the running of the period of appeal. In the case at
bar, the time during which the motion was pending before the court--from
September 16, 1969 when it was filed with the respondent court until October
14, 1969 when notice of the order denying the motion was received by the
movant--could not be deducted from the 30-day period of appeal. This is clear
from a consideration of Section 3 of Rule 41 which in part declares that, "[T]he
time during which a motion to set aside the judgment or order or for a new trial
has been pending shall be deducted, unless such motion fails to satisfy the
requirements of Rule 37."
3. ID.; ID.; ID.; ID.; ID.; JUDGMENT BECOMES FINAL AND EXECUTORY UPON
EXPIRATION OF PERIOD OF APPEAL AND EXECUTION SHOULD ISSUE AS A
MATTER OF RIGHT — As the period of appeal was not interrupted by the motion
for reconsideration for lack of the requisite affidavit of merits, such period
expired thirty days after receipt of the notice of judgment on September 1, 1969,
or on October 1, 1969, without an appeal being taken by Yap. The judgment then
became final and executory; Yap could no longer take an appeal therefrom or
from any other subsequent orders; and execution of judgment correctly issued
on October 15, 1969, "as a matter of right."
4. ID.; ID.; MOTION FOR POSTPONEMENT; POSSIBILITY OF SECURING
COMPROMISE AS GROUND THEREFOR; MOVANT MUST SHOW SINCERITY OF
DESIRE TO NEGOTIATE; BONA FIDES ABSENT IN CASE AT BAR — The bona fides of
petitioner's desire to compromise is however put in doubt by the attendant
circumstances. It was manifested in an eleventh-hour motion for postponement
of the pre-trial — which had been scheduled with intransferable character since
it had already been earlier postponed at Yap's instance; it had never been
mentioned at any prior time since commencement of the litigation; such a
possible compromise (at least in general or preliminary terms) was certainly
most appropriate for consideration at the pre-trial; in fact Yap was aware that
the matter was indeed a proper subject of a pre-trial agenda, yet he sought to
avoid appearance at said pre-trial which he knew to be intransferable in
character. These considerations and the dilatory tactics thus far attributable to
him — seeking postponements of hearings, or failing to appear therefor despite
notice, not only in the Court of First Instance but also in the City Court —
proscribe belief in the sincerity of his avowed desire to negotiate a compromise.
5. ID.; JUDGMENTS; RENDITION OF JUDGMENTS; JUDGMENT IS NOT VAGUE IF
MATTER NOT FIXED IN DECISION IS DETERMINABLE FROM THE OPINION — It is
true that the decision does not fix the starting time of the computation of
interest on the judgment debt, but this is inconsequential since that time is easily
determinable from the opinion, i.e., from the day the buyer (Yap) defaulted in
the payment of his obligation, on May 31, 1968.
6. ID.; ID.; ID.; ABSENCE OF DISPOSITION ON COUNTERCLAIM DOES NOT RENDER
JUDGMENT INCOMPLETE IF DEFENDANT HAS BEEN VALIDLY DECLARED IN
DEFAULT — Where the defendant fails to appear at the pre-trial without
justification and despite notice, which caused the declaration of his default, the
absence of any disposition in the judgment regarding his counterclaim does not
render the judgment incomplete The failure to appear despite notice was a
waiver of his right to prove the averments of his answer, inclusive of the
counterclaim therein pleaded. Moreover, the conclusion in the judgment of the
merit of the plaintiff's cause of action was necessarily and at the same time a
determination of the absence of merit of the defendant's claim of untenability of
the complaint and of malicious prosecution.
7. CIVIL LAW; PROPERTY; IMMOVABLE PROPERTY; WATER PUMP INSTALLED IN
RESIDENCE BUT REMOVABLE WITHOUT DETERIORATION, NOT IMMOVABLE
PROPERTY — The Civil Code considers as immovable property, among others,
anything "attached to an immovable in a fixed manner, in such a way that it
cannot be separated therefrom without breaking the material or deterioration of
the object." The pump does not fit this description. It could be, and was in fact
separated from Yap's premises without being broken or suffering deterioration.
Obviously the separation or removal of the pump involved nothing more
complicated than the loosening of bolts or dismantling of other fasteners.
8. ID.; DAMAGES; LOSS RESULTING FROM LEGITIMATE ACT OF ENFORCING
EXECUTORY JUDGMENT; NOT RECOVERABLE AS DAMAGES — As to the loss of his
water supply, since this arose from acts legitimately done, the seizure on
execution of the water pump in enforcement of a final and executory judgment,
Yap most certainly is not entitled to claim moral or any other form of damages
therefor.
DECISION
NARVASA, J p:
The petition for review on certiorari at bar involves two (2) Orders of respondent
Judge Tañada 1 in Civil Case No. 10984. The first, dated September 16, 1970,
denied petitioner Yap's motion to set aside execution sale and to quash alias writ
of execution. The second, dated November 21, 1970, denied Yap's motion for
reconsideration. The issues concerned the propriety of execution of a judgment
claimed to be "incomplete, vague and non-final," and the denial of petitioner's
application to prove and recover damages resulting from alleged irregularities in
the process of execution.
The antecedents will take some time in the telling. The case began in the City
Court of Cebu with the filing by Goulds Pumps International (Phil.), Inc. of a
complaint 2against Yap and his wife, 3 seeking recovery of P1,459.30
representing the balance of the price and installation cost of a water pump in the
latter's premises. 4 The case resulted in a judgment by the City Court on
November 25, 1968, reading as follows:
"When this case was called for trial today, Atty. Paterno Natinga appeared for
the plaintiff (Goulds) and informed the court that he is ready for trial. However,
none of the defendants appeared despite notices having been served upon
them.
"Upon petition of Atty. Natinga, the plaintiff is hereby allowed to present its
evidence ex-parte.
"After considering the evidence of the plaintiff, the court hereby renders
judgment in favor of the plaintiff and against the defendant (Yap), ordering the
latter to pay to the former the sum of P1,459.30 with interest at the rate of 12%
per annum until fully paid, computed from August 12, 1968, date of the filing of
the complaint; to pay the sum of P364.80 as reasonable attorney's fees, which is
equivalent to 25% of the unpaid principal obligation; and to pay the costs, if any."
Yap appealed to the Court of First Instance. The appeal was assigned to
the sala of respondent Judge Tañada. For failure to appear for pre-trial on August
28, 1968, this setting being intransferable since the pre-trial had already been
once postponed at his instance, 5 Yap was declared in default by Order of Judge
Tañada dated August 28, 1969, 6 reading as follows:
"When this case was called for pre-trial this morning, the plaintiff and counsel
appeared, but neither the defendants nor his counsel appeared despite the fact
that they were duly notified of the pre-trial set this morning. Instead he filed an
Ex-Parte Motion for Postponement which this Court received only this morning,
and on petition of counsel for the plaintiff that the Ex-Parte Motion for
Postponement was not filed in accordance with the Rules of Court he asked that
the same be denied and the defendants be declared in default; . . . the motion
for the plaintiff being well-grounded, the defendants are hereby declared in
default and the Branch Clerk of Court . . . is hereby authorized to receive
evidence for the plaintiff and . . . submit his report within ten (10) days after
reception of evidence."
Goulds presented evidence ex parte; and judgment by default was rendered the
following day by Judge Tañada requiring Yap to pay to Goulds (1) P1,459.30
representing the unpaid balance of the pump purchased by him; (2) interest of
12% per annum thereon until fully paid; and (3) a sum equivalent to 25% of the
amount due as attorney's fees and costs and other expenses in prosecuting the
action. Notice of the judgment was served on Yap on September 1, 1969. 7
On September 16, 1969 Yap filed a motion for reconsideration. 8 In it he insisted
that his motion for postponement should have been granted since it expressed
his desire to explore the possibility of an amicable settlement; that the court
should give the parties time to arrive at an amicable settlement failing which, he
should be allowed to present evidence in support of his defenses (discrepancy as
to the price and breach of warranty). The motion was not verified or
accompanied by any separate affidavit. Goulds opposed the motion. Its
opposition 9 drew attention to the eleventh-hour motion for postponement of
Yap which had resulted in the cancellation of the prior hearing of June 30, 1969
despite Goulds' vehement objection, and the re-setting thereof on August 28,
1969 with intransferable character; it averred that Yap had again sought
postponement of this last hearing by another eleventh-hour motion on the plea
that an amicable settlement would be explored, yet he had never up to that time
ever broached the matter, 10 and that this pattern of seeking to obtain last-
minute postponements was discernible also in the proceedings before the City
Court. In its opposition, Goulds also adverted to the examination made by it of
the pump, on instructions of the City Court, with a view to remedying the defects
claimed to exist by Yap; but the examination had disclosed the pump's perfect
condition. Yap's motion for reconsideration was denied by Order dated October
10, 1969, notice of which was received by Yap on October 4, 1969. 11
On October 15, 1969 Judge Tañada issued an Order granting Goulds' Motion for
Issuance of Writ of Execution dated October 14, 1969, declaring the reasons
therein alleged to be meritorious. 12 Yap forthwith filed an "Urgent Motion for
Reconsideration of Order" dated October 17, 1969, 13 contending that the
judgment had not yet become final, since contrary to Goulds' view, his motion
for reconsideration was not pro forma for lack of an affidavit of merit, this not
being required under Section 1(a) of Rule 37 of the Rules of Court upon which his
motion was grounded. Goulds presented an opposition dated October 22,
1969. 14 It pointed out that in his motion for reconsideration Yap had claimed to
have a valid defense to the action, i.e., ". . . discrepancy as to price and breach of
seller's warranty," in effect, that there was fraud on Goulds' part; Yap's motion
for reconsideration should therefore have been supported by an affidavit of
merit respecting said defenses; the absence thereof rendered the motion for
reconsideration fatally defective with the result that its filing did not interrupt
the running of the period of appeal. The opposition also drew attention to the
failure of the motion for reconsideration to specify the findings or conclusions in
the judgment claimed to be contrary to law or not supported by the evidence,
making it a pro forma motion also incapable of stopping the running of the
appeal period. On October 23, 1969, Judge Tañada denied Yap's motion for
reconsideration and authorized execution of the judgment. 15 Yap sought
reconsideration of this order, by another motion dated October 29, 1969. 16 This
motion was denied by Order dated January 26, 1970. 17 Again Yap moved for
reconsideration, and again was rebuffed, by Order dated April 28, 1970. 18
In the meantime the Sheriff levied on the water pump in question, 19 and by
notice dated November 4, 1969, scheduled the execution sale there of on
November 14, 1969. 20 But in view of the pendency of Yap's motion for
reconsideration of October 28, 1969, suspension of the sale was directed by
Judge Tañada in an order dated November 6, 1969. 21
"Counsel for the plaintiff is hereby given 10 days time to answer the Motion,
dated October 29, 1969, from receipt of this Order and in the meantime, the
Order of October 23, 1969, insofar as it orders the sheriff to enforce the writ of
execution is hereby suspended."
It appears however that a copy of this Order was not transmitted to the Sheriff
"through oversight, inadvertence and pressure of work" of the Branch Clerk of
Court.22 So the Deputy Provincial Sheriff went ahead with the scheduled auction
sale and sold the property levied on to Goulds as the highest bidder. 23 He later
submitted the requisite report to the Court dated November 17, 1969, 24 as well
as the "Sheriffs Return of Service" dated February 13, 1970, 25 in both of which it
was stated that execution had been "partially satisfied." It should be observed
that up to this time, February, 1970, Yap had not bestirred himself to take an
appeal from the judgment of August 29, 1969.
On May 9, 1970 Judge Tañada ordered the issuance of an alias writ 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 Execution Sale and to
Quash Alias Writ of Execution." 27 As regards the original partial execution of the
judgment, he argued that —
1) "the issuance of the writ of execution on October 16, 1969 was contrary to
law, the judgment sought to be executed not being final and executory;" and
2) "the sale was made without the notice required by Sec. 18, Rule 39, of the
New Rules of Court," i.e., notice by publication in case of execution sale of real
property, the pump and its accessories being immovable because attached to the
ground with character of permanency (Art. 415, Civil Code).
And with respect to the alias writ, he argued that it should not have issued
because —
1) "the judgment sought to be executed is null and void" as "it deprived the
defendant of his day in court" and "of due process;"
2) "said judgment is incomplete and vague" because there is no starting point for
computation of the interest imposed, or a specification of the "other expenses
incurred in prosecuting this case" which Yap had also been ordered to pay;
3) "said judgment is defective" because it contains no statement of facts but a
mere recital of the evidence; and
4) "there has been a change in the situation of the parties which makes
execution unjust and inequitable" because Yap suffered damages by reason of
the illegal execution.
Goulds filed an opposition on July 6, 1970. Yap's motion was thereafter denied
by Order dated September 16, 1970. Judge Tañada pointed out that the motion
had "become moot and academic" since the decision of August 29, 1969,
"received by the defendant on September 1, 1969 had long become final when
the Order for the Issuance of a Writ of Execution was promulgated on October
15, 1969." His Honor also stressed that —
"The defendant's Motion for Reconsideration of the Court's decision was in
reality one for new trial Regarded as motion for new trial it should allege the
grounds for new trial, provided for in the Rules of Court, to be supported by
affidavit of merits; and this the defendant failed to do. If the defendant sincerely
desired for an opportunity to submit to an amicable settlement, which he failed
to do extra-judicially despite the ample time before him, he should have
appeared in the pre-trial to achieve the same purpose."
Judge Tañada thereafter promulgated another Order dated September 21, 1970
granting a motion of Goulds for completion of execution of the judgment of
August 29, 1969 to be undertaken by the City Sheriff of Cebu. Once more, Yap
sought reconsideration. He submitted a "Motion for Reconsideration of Two
Orders" dated October 13, 1970, 28 seeking the setting aside not only of this
Order of September 21, 1970 but also that dated September 16, 1970, denying
his motion to set aside execution dated June 23, 1970. He contended that the
Order of September 21, 1970 (authorizing execution by the City Sheriff) was
premature, since the 30-day period to appeal from the earlier order of September
16, 1970 (denying his motion to set aside) had not yet expired. He also reiterated
his view that his motion for reconsideration dated September 15, 1969 did not
require that it be accompanied by an affidavit of merits. This last motion was also
denied for "lack of merits," by Order dated November 21, 1970. 29
On December 3, 1970, Yap filed a "Notice of Appeal" manifesting his intention to
appeal to the Supreme Court on certiorari only on questions of law, "from the
Order . . . of September 16, 1970 . . . and from the Order . . . of November 21,
1970, . . . pursuant to sections 2 and 3 of Republic Act No. 5440." He filed his
petition for review with this Court on January 5, 1971, after obtaining an
extension therefor. 30
The errors of law he attributes to the Court a quo are the following: 31
1) refusing to invalidate the execution pursuant to its Order of October 16, 1969
although the judgment had not then become final and executory and despite its
being incomplete and vague;
2) ignoring the fact that the execution sale was carried out although it (the Court)
had itself ordered suspension of execution on November 6, 1969;
3) declining to annul the execution sale of the pump and accessories subject of
the action although made without the requisite notice prescribed for the sale of
immovables; and
4) refusing to allow the petitioner to prove irregularities in the process of
execution which had resulted in damages to him.
Notice of the Trial Court's judgment was served on Yap on September 1, 1969.
His motion for reconsideration thereof was filed 15 days thereafter, on
September 16, 1969. Notice of the Order denying the motion was received by
him on October 14, 1969. The question is whether or not the motion for
reconsideration —which was not verified, or accompanied by an affidavit of
merits (setting forth facts constituting his meritorious defenses to the suit) or
other sworn statement (stating facts excusing his failure to appear at the pre-
trial) —was pro forma and consequently had not interrupted the running of the
period of appeal. It is Yap's contention that his motion was not pro forma for lack
of an affidavit of merits, such a document not being required by Section 1 (a) of
Rule 37 of the Rules of Court upon which his motion was based. This is incorrect.
Section 2, Rule 37 precisely requires that when the motion for new trial is
founded on Section 1 (a), it should be accompanied by an affidavit of merit.
xxx xxx xxx
"When the motion is made for the causes mentioned in subdivisions (a) and (b)
of the preceding section, it shall be proved in the manner provided for proof of
motions. Affidavit or affidavits of merits shall also be attached to a motion for
the cause mentioned in subdivision (a) which may be rebutted by counter-
affidavits.
xxx xxx xxx" 32
Since Yap himself asserts that his motion for reconsideration is grounded
on Section 1 (a) of Rule 37, 33 i.e., fraud, accident, mistake or excusable
negligence which ordinary prudence could not have guarded against and by
reason of which . . . (the) aggrieved party has probably been impaired in his
rights" — this being in any event clear from a perusal of the motion which
theorizes that he had "been impaired in his rights" because he was denied the
right to present evidence of his defenses (discrepancy as to price and breach of
warranty) — it was a fatal omission to fail to attach to his motion an affidavit of
merits, i.e., an affidavit "showing the facts (not conclusions) constituting the valid
. . . defense which the movant may prove in case a new trial is granted." 34 The
requirement of such an affidavit is essential because obviously "a new trial would
be a waste of the court's time if the complaint turns out to be groundless or the
defense ineffective." 35
In his motion for reconsideration, Yap also contended that since he had
expressed a desire to explore the possibility of an amicable settlement, the Court
should have given him time to do so, instead of declaring him in default and
thereafter rendering judgment by default on Goulds' ex parte evidence.
The bona fides of this desire to compromise is however put in doubt by the
attendant circumstances. It was manifested in an eleventh-hour motion for
postponement of the pre-trial — which had been scheduled with intransferable
character since it had already been earlier postponed at Yap's instance; it had
never been mentioned at any prior time since commencement of the litigation;
such a possible compromise (at least in general or preliminary terms) was
certainly most appropriate for consideration at the pre-trial; in fact Yap was
aware that the matter was indeed a proper subject of a pre-trial agenda, yet he
sought to avoid appearance at said pre-trial which he knew to be intransferable
in character. These considerations and the dilatory tactics thus far attributable to
him — seeking postponements of hearings, or failing to appear therefor despite
notice, not only in the Court of First Instance but also in the City Court —
proscribe belief in the sincerity of his avowed desire to negotiate a compromise.
Moreover, the disregard by Yap of the general requirement that "(n)otice of a
motion shall be served by the applicant to all parties concerned at least three (3)
days before the hearing thereof, together with a copy of the motion, and of any
affidavits and other papers accompanying it," 36 for which no justification
whatever has been offered, also militates against the bona fides of Yap's
expressed wish for an amicable settlement. The relevant circumstances do not
therefore justify condemnation, as a grave abuse of discretion, or a serious
mistake, of the refusal of the Trial Judge to grant postponement upon this
proferred ground.
The motion for reconsideration did not therefore interrupt the running of the
period of appeal. The time during which it was pending before the court — from
September 16, 1969 when it was filed with the respondent Court until October
14, 1969 when notice of the order denying the motion was received by the
movant — could not be deducted from the 30-day period of appeal. 37 This is
the inescapable conclusion from a consideration of Section 3 of Rule 41 which in
part declares that, "The time during which a motion to set aside the judgment or
order or for a new trial has been pending shall be deducted, unless such motion
fails to satisfy the requirements of Rule 37," 38
Notice of the judgment having been received by Yap on September 1, 1969, and
the period of appeal therefrom not having been interrupted by his motion for
reconsideration filed on September 16, 1969, the reglementary period of appeal
expired thirty (30) days after September 1, 1969, or on October 1, 1969, without
an appeal being taken by Yap. The judgment then became final and executory;
Yap could no longer take an appeal therefrom or from any other subsequent
orders; and execution of judgment correctly issued on October 15, 1969, "as a
matter of right." 39
The next point discussed by Yap, that the judgment is incomplete and vague, is
not well taken. It is true that the decision does not fix the starting time of the
computation of interest on the judgment debt, but this is inconsequential since
that time is easily determinable from the opinion, i.e., from the day the buyer
(Yap) defaulted in the payment of his obligation, 40 on May 31, 1968. 41 The
absence of any disposition regarding his counterclaim is also immaterial and does
not render the judgment incomplete. Yap's failure to appear at the pre-trial
without justification and despite notice, which caused the declaration of his
default, was a waiver of his right to controvert the plaintiff's proofs and of his
right to prove the averments of his answer, inclusive of the counterclaim therein
pleaded. Moreover, the conclusion in the judgment of the merit of the plaintiff's
cause of action was necessarily and at the same time a determination of the
absence of merit of the defendant's claim of untenability of the complaint and of
malicious prosecution.
Yap's next argument that the water pump had become immovable property by
its being installed in his residence is also untenable. The Civil Code considers as
immovable property, among others, anything "attached to an immovable in a
fixed manner, in such a way that it cannot be separated therefrom without
breaking the material or deterioration of the object." 42 The pump does not fit
this description. It could be, and was in fact separated from Yap's premises
without being broken or suffering deterioration. Obviously the separation or
removal of the pump involved nothing more complicated than the loosening of
bolts or dismantling of other fasteners.
Yap's last claim is that in the process of the removal of the pump from his house,
Goulds' men had trampled on the plants growing there, destroyed the shed over
the pump, plugged the exterior casings with rags and cut the electrical and
conduit pipes; that he had thereby suffered actual damages in an amount of not
less than P2,000.00, as well as moral damages in the sum of P10,000.00 resulting
from his deprivation of the use of his water supply; but the Court had refused to
allow him to prove these acts and recover the damages rightfully due him. Now,
as to the loss of his water supply, since this arose from acts legitimately done,
the seizure on execution of the water pump in enforcement of a final and
executory judgment, Yap most certainly is not entitled to claim moral or any
other form of damages therefor.
WHEREFORE, the petition is DENIED and the appeal DISMISSED, and the Orders
of September 16, 1970 and November 21, 1970 subject thereof, AFFIRMED in
toto.Costs against petitioner.
||| (Yap v. Tañada, G.R. No. L-32917, [July 18, 1988], 246 PHIL 475-489)
EN BANC
[G.R. No. L-7057. October 29, 1954.]
MACHINERY & ENGINEERING SUPPLIES, INC., petitioner, vs. THE HONORABLE
COURT OF APPEALS, HON. POTENCIANO PECSON, JUDGE OF THE COURT OF
FIRST INSTANCE OF MANILA, IPO LIMESTONE CO., INC., and ANTONIO
VILLARAMA, respondents.
Vicente J. Francisco for petitioner.
Capistrano & Capistrano for respondents.
SYLLABUS
1. REPLEVIN; DUTY OF SHERIFF IS MINISTERIAL IN CARRYING OUT THE COURT'S
ORDER BUT NOT TO DESTROY; POWER OF COURT TO ISSUE ORDER OF
REINSTALLATION OF EQUIPMENTS DESTROYED. — While the seizure of the
equipments and personal properties was ordered by the respondent court, it is
however, logical to presume that the same did not authorize the petitioner or its
agents to destroy, said machineries and equipments. The Provincial Sheriff's
tortious act has no justification in law, notwithstanding the Sheriff's claim that
his duty was ministerial. It was the bounden duty of the respondent judge to give
redress to the respondent company for the unlawful and wrongful acts
committed by the petitioner and its agents. And as this was the true object of the
order we can not but hold that same was within its jurisdiction to issue.
2. ID.; ID.; SCOPE OF SHERIFF'S DUTY. — The ministerial duty of the sheriff should
have its limitations. The sheriff knew and must have known what is inherently
right and inherently wrong, more so when a letter was shown to him that the
machineries and equipments were not personal properties and therefore, not
subject to seizure by the terms of the order. While it may be conceded that this
was a question of law too technical to decide on the spot, it would not have cost
the sheriff much time and difficulty to bring the letter to the court's attention
and have the equipments guarded so as not to frustrate the order of seizure
issued by the trial court.
3. ID.; APPLICABLE ONLY TO RECOVER PERSONAL PROPERTY. — Ordinarily
replevin may be brought to recover any specific personal property unlawfully
taken or detained from the owner thereof, provided such property is capable of
identification and delivery; but replevin will not lie for the recovery of real
property or incorporeal personal property.
4. ID.; MACHINERY AND EQUIPMENT, WHEN IMMOVABLE. — The machinery and
equipment in question appeared to be attached to the land, particularly to the
concrete foundation of a building, in a fixed manner, in such a way that the
former could not be separated from the latter without breaking the material or
deterioration of the object. Hence, in order to remove said outfit, it became
necessary not only to unbolt the same, but to also cut some of its wooden
supports. Said machinery and equipment were "intended by the owner of the
tenement for an industry" carried on said immovable and tended "directly to
meet the needs of said industry." For these reasons, they were already
immovable pursuant to paragraph 3 and 5 of Article 415 of Civil Code of the
Philippines.
5. ID.; RESTITUTION; REINSTALLATION OF DISMANTLED AND REMOVED
PROPERTY IN ITS ORIGINAL CONDITION. — When the restitution of what has
been taken by way of replevin has been ordered, the goods in question shall be
returned in substantially the same condition as when taken (54 C. J., 599-600,
640-641). Inasmuch as the machinery and equipment involved in this case were
duly installed and affixed in the premises of respondent company when
petitioner's representative caused said property to be dismantled and then
removed, it follows that petitioner must also do everything necessary to the
reinstallation of said property in conformity with its original condition.
DECISION
CONCEPCION, J p:
This is an appeal by certiorari, taken by petitioner Machinery and Engineering
Supplies Inc., from a decision of the Court of Appeals denying an original petition
for certiorari filed by said petitioner against Hon. Potenciano Pecson, Ipo
Limestone Co., Inc., and Antonio Villarama, the respondents herein.
The pertinent facts are set forth in the decision of the Court of Appeals, from
which we quote:
"On March 13, 1953, the herein petitioner filed a complaint for replevin in the
Court of First Instance of Manila, Civil Case No. 19067, entitled 'Machinery &
Engineering Supplies, Inc., Plaintiff, vs. Ipo Limestone Co., Inc., and Dr. Antonio
Villarama, defendants', for the recovery of the machineries and equipments sold
and delivered to said defendants at their factory in barrio Bigti, Norzagaray,
Bulacan. Upon application ex-parte of the petitioner, accompanied by the
affidavit of Ramon S. Roco, president of petitioner company, and upon approval
of petitioner's bond in the sum of P15,769.00, on March 13, 1953, respondent
judge issued an order, commanding the Provincial Sheriff of Bulacan to seize and
take immediate possession of the properties specified in the order (Appendix I,
Answer). On March 19, 1953, two deputy sheriffs of Bulacan, the said Ramon S.
Roco, and a crew of technical men and laborers proceeded to Bigti, for the
purpose of carrying the court's order into effect. Leonardo Contreras, Manager
of the respondent Company, and Pedro Torres, in charge thereof, met the
deputy sheriffs, and Contreras handed to them a letter addressed to Atty.
Leopoldo C. Palad, ex-officio Provincial Sheriff of Bulacan, signed by Atty. Adolfo
Garcia of the defendants therein, protesting against the seizure of the properties
in question, on the ground that they are not personal properties. Contending
that the Sheriff's duty is merely ministerial, the deputy sheriffs, Roco, the letter's
crew of technicians and laborers, Contreras and Torres went to the factory.
Roco's attention was called to the fact that the equipments could not possibly be
dismantled without causing damages or injuries to the wooden frames attached
to them. As Roco insisted in dismantling the equipments on his own
responsibility, alleging that the bond was posted for such eventuality, the deputy
sheriffs directed that some of the supports thereof be cut (Appendix 2). On
March 20, 1953, the defendant Company filed an urgent motion, with a counter-
bond in the amount of P15,769, for the return of the properties seized by the
deputy sheriffs. On the same day, the trial court issued an order, directing the
Provincial Sheriff of Bulacan to return the machineries and equipments to the
place where they were installed at the time of the seizure (Appendix 3). On
March 21, 1953, the deputy sheriffs returned the properties seized, by depositing
them along the road, near the quarry, of the defendant Company, at Bigti,
without the benefit of inventory and without re-installing them in their former
position and replacing the destroyed posts, which rendered their use
impracticable. On March 23, 1953, the defendants' counsel asked the Provincial
Sheriff if the machineries and equipments, dumped on the road would he re-
installed to their former position and condition (letter, Apendix 4). On March 24,
1953, the Provincial Sheriff filed an urgent motion in court, manifesting that Roco
had been asked to furnish the Sheriff's office with expenses, laborers, technical
men and equipments, to carry into effect the court's order, to return the seized
properties in the same way said Roco found them on the day of seizure, but said
Roco absolutely refused to do so, and asking the court that the Plaintiff therein
be ordered to provide the required aid or relieve the said Sheriff of the duty of
complying with the said order of March 20, 1953 (Appendix 5). On March 30,
1953, the trial court ordered the Provincial Sheriff and the Plaintiff to reinstate
the machineries and equipments removed by them in their original condition in
which they were found before their removal at the expense of the Plaintiff
(Appendix 7). An urgent motion of the Provincial Sheriff dated April 15, 1953,
praying for an extension of 20 days within which to comply with the order of the
court (Appendix 10) was denied; and on May 4, 1953, the trial court ordered the
Plaintiff therein to furnish the Provincial Sheriff within 5 days with the necessary
funds, technical men, laborers, equipments and materials to effect the
repeatedly mentioned re-installation (Appendix 13)." (Petitioner's brief,
Appendix A, pp. I-IV.)
Thereupon petitioner instituted in the Court of Appeals civil case G. R. No.
11248-R, entitled "Machinery & Engineering Supplies, Inc. vs. Honorable
Potenciano Pecson, Provincial Sheriff of Bulacan, Ipo Limestone Co., Inc., and
Antonio Villarama." In the petition therein filed, it was alleged that, in ordering
the petitioner to furnish the provincial sheriff of Bulacan "with necessary funds,
technical men, laborers, equipment and materials, to effect the installation of
the machinery and equipment" in question, the Court of First Instance of Bulacan
had committed a grave abuse of discretion and acted in excess of its jurisdiction,
for which reason it was prayed that its order to this effect be nullified, and that,
meanwhile, a writ of preliminary injunction be issued to restrain the
enforcement of said order of May 4, 1953. Although the aforementioned writ
was issued by the Court of Appeals, the same subsequently dismissed the case
for lack of merit, with costs against the petitioner, upon the following grounds:
"While the seizure of the equipments and personal properties was ordered by
the respondent Court, it is, however, logical to presume that said court did not
authorize the petitioner or its agents to destroy, as they did, said machineries
and equipments, by dismantling and unbolting the same from their concrete
basements, and cutting and sawing their wooden supports, thereby rendering
them unserviceable and beyond repair, unless those parts removed, cut and
sawed be replaced, which the petitioner, notwithstanding the respondent
Court's order, adamantly refused to do. The Provincial Sheriff's tortious act, in
obedience to the insistent proddings of the president of the petitioner, Ramon S.
Roco, has no justification in law, notwithstanding the Sheriff's claim that his duty
was ministerial. It was the bounden duty of the respondent Judge to give redress
to the respondent Company, for the unlawful and wrongful acts committed by
the petitioner and its agents. And as this was the true object of the order of
March 30, 1953, we can not but hold that same was within its jurisdiction to
issue. The ministerial duty of the Sheriff should have its limitations. The Sheriff
knew or must have known what is inherently right and inherently wrong, more
so when, as in this particular case, the deputy sheriffs were shown a letter of
respondent Company's attorney, that the machineries and equipments were not
personal properties and, therefore, not subject to seizure by the terms of the
order. While it may be conceded that this was a question of law too technical to
decide on the spot, it would not have cost the Sheriff much time and difficulty to
bring the letter to the court's attention and have the equipments and
machineries guarded, so as not to frustrate the order of seizure issued by the
trial court. But, acting upon the directives of the president of the Petitioner, to
seize the properties at any cost, the deputy sheriffs lent themselves as
instruments to harass and embarras the respondent Company. The respondent
Court, in issuing the order sought to be annulled, had not committed abuse of
discretion at all or acted in an arbitrary or despotic manner, by reason of passion
or personal hostility; on the contrary, it issued said order, guided by the well
known principle that if the property has to be returned, it should be returned in
as good a condition as when taken (Bachrach Motor Co., Inc., vs. Bona, 44 Phil.,
378). If any one had gone beyond the scope of his authority, it is the respondent
Provincial Sheriff. But considering the fact that he acted under the pressure of
Ramon S. Roco, and that the order impugned was issued not by him, but by the
respondent Judge, We simply declare that said Sheriff's act was most unusual
and the result of a poor judgment. Moreover, the Sheriff not being an officer
exercising judicial functions, the writ may not reach him, for certiorari lies only to
review judicial actions.
The Petitioner complains that the respondent Judge had completely disregarded
his manifestation that the machineries and equipments seized were and still are
the Petitioner's property until fully paid for and as such never became
immovable. The question of ownership and the applicability of Art. 415 of the
new Civil Code are immaterial in the determination of the only issue involved in
this case. It is a matter of evidence which should be decided in the hearing of the
case on the merits. The question as to whether the machineries or equipments in
litigation are immovable or not is likewise immaterial, because the only issue
raised before the trial court was whether the Provincial Sheriff of Bulacan, at the
Petitioner's instance, was justified in destroying the machineries and in refusing
to restore them to their original form, at the expense of the Petitioner. Whatever
might be the legal character of the machineries and equipments, would not in
any way justify their destruction by the Sheriff's and the said Petitioner's."
(Petitioner's brief, Appendix A, pp IV-VII.)
A motion for reconsideration of this decision of the Court of Appeals having been
denied, petitioner has brought the case to Us for review by writ of certiorari.
Upon examination of the record, We are satisfied, however, that the Court of
Appeals was justified in dismissing the case.
The special civil action known as replevin, governed by Rule 62 of the Rules of
Court, is applicable only to "personal property".
"Ordinarily replevin may be brought to recover any specific personal property
unlawfully taken or detained from the owner thereof, provided such property is
capable of identification and delivery; but replevin will not lie for the recovery of
real property or incorporeal personal property". (77 C. J. S. 17) (Italics supplied.)
When the sheriff repaired to the premises of respondent, Ipo Limestone Co., Inc.,
the machinery and equipment in question appeared to be attached to the land,
particularly to the concrete foundation of said premises, in a fixed manner, in
such a way that the former could not be separated from the latter "without
breaking the material or deterioration of the object." Hence, in order to remove
said outfit, it became necessary, not only to unbolt the same, but, also, to cut
some of its wooden supports. Moreover, said machinery and equipment were
"intended by the owner of the tenement for an industry" carried on said
immovable and tended "directly to meet the needs of the said 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 are substantially
identical to paragraphs 3 and 5 of Article 334 of the Civil Code of Spain. As such
immovable property, they were not subject to replevin.
"In so far as an article, including a fixture annexed by a tenant, is regarded as
part of the realty, it is not the subject of trover, replevin, detinus, or any action
lying only for personality; . . .
". . . the action of replevin does not lie for articles so annexed to the realty as to
be part thereof, as, for example, a house or a turbine pump constituting part of a
building's cooling system; . . . (36 C.J.S. 1000 & 1001)
Moreover, as the provincial sheriff hesitated to remove the property in question,
petitioner's agent and president, Mr. Ramon Roco, insisted "on the
dismantling at his own responsibility," stating that, precisely, "that is the reason
why plaintiff posted a bond." In this manner, petitioner clearly assumed the
corresponding risks.
Such assumption of risk becomes more apparent when we consider that,
pursuant to Section 5 of Rule 62 of the Rules of Court, the defendant in an action
for replevin is entitled to the return of the property in dispute upon the filing of a
counterbond, as provided therein. In other words, petitioner knew that the
restitution of said property to respondent company might be ordered under said
provision of the Rules of Court, and that, consequently, it may become necessary
for petitioner to meet the liabilities incident to such return.
Lastly, although the parties have not cited, and We have not found, any authority
squarely in point - obviously because real property are not subject to replevin - it
is well settled that, when the restitution of what has been ordered, the goods in
question shall be returned in substantially the same condition as when taken (54
C.J., 590-600, 640-641). Inasmuch as the machinery and equipment involved in
this case were duly installed and affixed in the premises of respondent company
when petitioner's representative caused said property to be dismantled and then
removed, it follows that petitioner must also do everything necessary to the
reinstallation of said property in conformity with its original condition.
Wherefore, the decision of the Court of Appeals is hereby affirmed, with costs
against the petitioner. So ordered.
EN BANC
[G.R. No. L-18456. November 30, 1963.]
CONRADO P. NAVARRO, plaintiff-appellee, vs. RUFINO G. PINEDA, RAMONA
REYES, ET AL., defendants-appellants.
Deogracias Tañedo, Jr. for plaintiff-appellee.
Renato A. Santos for defendants-appellants.
SYLLABUS
1. CHATTEL MORTGAGE; SUBJECT-MATTER; HOUSE ON LAND BELONGING TO
ANOTHER TREATED AS MOVABLE PROPERTY BETWEEN THE PARTIES. — Where a
house stands on a rented land belonging to another person, it may be the
subject-matter of a chattel mortgage as personal or movable property if so
stipulated in the document of mortgage, and in an action by the Mortgagee for
foreclosure, the validity of the chattel mortgage cannot be assailed by one of the
parties to the contract of mortgage.
2. PROPERTY; IMMOVABLE PROPERTY; HOUSE ON LAND BELONGING TO
ANOTHER; GENERAL RULE AND EXCEPTIONS. — Although in some instances, a
house of mixed materials has been considered as a chattel between the parties
and that the validity of the contract between them, has been recognized, it has
been a constant criterion that, with respect to third persons, who are not parties
to the contract, and specially in executed proceedings, the house is considered as
an immovable property.
DECISION
PAREDES, J p:
On December 14, 1959, defendants Rufino G. Pineda and his mother Juana
Gonzales (married to Gregorio Pineda), borrowed from plaintiff Conrado P.
Navarro, the sum of P2,550.00, payable 6 months after said date or on June 14,
1959. To secure the indebtedness, Rufino executed a document captioned "DEED
OF REAL ESTATE and CHATTEL MORTGAGES", whereby Juana Gonzales, by way
of Real Estate Mortgage hypothecated a parcel of land, belonging to her,
registered with, the register of Deeds of Tarlac, under Transfer Certificate of Title
No. 25776, and Rufino G. Pineda, by way of Chattel Mortgage, mortgaged his
two-story residential house, having a floor area of 912 square meters, erected on
a lot belonging to Atty. Vicente Castro, located at Bo. San Roque, Tarlac, Tarlac;
and one motor truck, registered in his name, under Motor Vehicle Registration
Certificate No A-171805. Both mortgages were contained in one instrument,
which was registered in both the Office of the Register of Deeds and the Motor
Vehicles Office of Tarlac.
When the mortgage debt became due and payable, the defendants, after
demands made on them, failed to pay. They, however, asked and were granted
an extension up to June 30, 1960, within which to pay. Came June 30, defendants
again failed to pay and, for the second time, asked for another extension, which
was given, up to July 30, 1960. In the second extension, defendant Pineda in a
document entitled "Promise", categorically stated that in the remote event he
should fail to make good the obligation on such date (July 30, 1960), the
defendant would no longer ask for further extension and there would be no need
for any formal demand, and plaintiff could proceed to take whatever action he
might desire to enforce his rights, under the said mortgage contract. In spite of
said promise, defendants failed and refused to pay the obligation.
On August 10, 1960, plaintiff filed a complaint for foreclosure of the mortgage
and for damages, which consisted of liquidated damages in the sum of P500.00
and 12% per annum interest on the principal, effective on the date of maturity,
until fully paid.
Defendants, answering the complaint, among others, stated —
"Defendants admit that the loan is overdue but deny that portion of paragraph 4
of the First Cause of Action which states that the defendants unreasonably failed
and refuse to pay their obligation to the plaintiff the truth being the defendants
are hard up these days and pleaded to the plaintiff to grant them more time
within which to pay their obligation and the plaintiff refused; . . .
"WHEREFORE, in view of the foregoing it is most respectfully prayed that this
Honorable court render judgment granting the defendants until January 31,
1961, within which to pay their obligation to the plaintiff."
On September 30, 1960, plaintiff presented a Motion for Summary Judgment,
claiming that the Answer failed to tender any genuine and material issue. The
motion was set for hearing, but the record is not clear what ruling the lower
court made on the said motion. On November 11, 1960, however, the parties
submitted a Stipulation of Facts, wherein the defendants admitted the
indebtedness, the authenticity and due execution of the Real Estate and Chattel
Mortgages; that the indebtedness has been due and unpaid since June 14, 1960;
that a liability of 12% per annum as interest was agreed, upon failure to pay the
principal when due and P500.00 as liquidated damages; that the instrument had
been registered in the Registry of Property and Motor Vehicles Office, both of
the province of Tarlac; that the only issue in the Case is whether or not the deed
of Real Estate and Chattel Mortgages is valid, particularly on the questions of
whether or not the residential house, subject of the mortgage therein, can be
considered a chattel and the propriety of the attorney's fees.
On February 24, 1961, the lower court held —
". . . WHEREFORE, this Court renders decision in this Case:
(a) Dismissing the complaint with regards to defendant Gregorio Pineda;
(b) Ordering defendants Juana Gonzales and the spouses Rufino Pineda and
Ramona Reyes, to pay jointly and severally and within ninety (90) days from the
receipt of the copy of this decision to the plaintiff Conrado P. Navarro the
principal sum of P2,550.00 with 12% compounded interest per annum from June
14, 1960, until said principal sum and interests are fully paid, plus P500.00 as
liquidated damages and the costs of this suit, with the warning that in default of
said payment the properties mentioned in the deed of real estate mortgage and
chattel mortgage (Annex 'A' to the complaint) be sold to realize said mortgage
debt, interests, liquidated damages and costs, in accordance with the pertinent
provisions of Act 3135, as amended by Act 4118, and Art. 14 of the Chattel
Mortgage Law, Act 1508; and
(c) Ordering the defendants Rufino Pineda and Ramona Reyes, to deliver
immediately to the Provincial Sheriff of Tarlac the personal properties mentioned
in said Annex 'A', immediately after the lapse of the ninety (90) days above-
mentioned, in default of such payment."
The above judgment was directly appealed to this Court, the defendants therein
assigning only a single error, allegedly committed by the lower court, to wit —
"In holding that the deed of real estate and chattel mortgages appended to the
complaint is valid, notwithstanding the fact that the house of the defendant
Rufino G. Pineda was made the subject of the chattel mortgage, for the reason
that it is erected on a land that belongs to a third person."
Appellants contend that Article 415 of the New Civil Code, in classifying a house
as immovable property, makes no distinctions whether the owner of the land is
or is not the owner of the building; the fact that the land belongs to another is
immaterial, it is enough that the house adheres to the land; that in case of
immovables by incorporation, such as houses, trees, plants, etc; the Code does
not require that the attachment or incorporation be made by the owner of the
land, the only criterion being the union or incorporation with the soil. In other
words, it is claimed that "a building is an immovable property, irrespective of
whether or not said structure and the land on which it is adhered to, belong to
the same owner" (Lopez vs. Orosa, G.R. Nos. L-10817-8, Feb. 28, 1958). (See also
the case of Leung Yee vs. Strong Machinery Co., 37 Phil. 644). Appellants argue
that since only movables can be the subject of a chattel mortgage (Sec. 1, Act No.
3952), then the mortgage in question which, is the basis of the present action,
cannot give rise to an action for foreclosure because it is a nullity. (Citing
Associated Ins. Co., et al. vs.Isabel Iya, Isabel Iya vs. Adriano Valino, et al. L-
10838, May 30, 1958.)
The trial court did not predicate its decision declaring the deed of chattel
mortgage valid solely on the ground that the house mortgaged was erected on
the land which belonged to a third person, but also and principally on the
doctrine of estoppel, in that "the parties have so expressly agreed" in the
mortgage to consider the house as a chattel "for its smallness and mixed
materials of sawali and wood". In construing Arts. 334 and 335 of the Spanish
Civil Code (corresponding to Arts. 415 and 416, N.C.C.), for purposes of the
application of the Chattel Mortgage Law, it was held that under certain
conditions, "a property may have a character different from that imputed to it in
said articles. It is undeniable that the parties to a contract may by agreement,
treat as personal property that which by nature would be real property"
(Standard Oil Co. of N.Y. vs. Jaranillo, 44 Phil., 632-633). "There can not be any
question that a building of mixed materials may be the subject of a chattel
mortgage, in which case, it is considered as between the parties as personal
property . . . The matter depends on the circumstances and the intention of the
parties". "Personal property may retain its character as such where it is so agreed
by the parties interested even though annexed to the realty . . .". (42 Am. Jur.
209-210, cited in Manarang, et al. vs. Ofilada, et al., G.R. No. L-8133, May 18,
1956; 52 O.G. No. 8, p. 3954). The view that parties to a deed of chattel
mortgage may agree to consider a house as personal property for the purposes
of said contract, "is good only insofar as the contracting parties are concerned. It
is based, partly, upon the principles of estoppel . . ." (Evangelista vs. Alto Surety
No. L-11139, Apr. 23, 1958). In a case, a mortgaged house built on a rented
land, was held to be a personal property not only because the deed of mortgage
considered. it as such, but also because it did not form an integral part of the
land (Evangelista vs. Abad, [CA]; 36 O.G. 2913), for it is now well settled that an
object placed on land by one who has only a temporary right to the same, such
as a lessee or usufructuary, does not become immobilized by attachment
(Valdez vs. Central Altagracia, 222 U.S. 58, cited in Davao Sawmill Co.
Inc. vs. Castillo, et al., 61 Phil. 709). Hence, if a house belonging to a person
stands on a rented land belonging to another person, it may be mortgaged as a
personal property if so stipulated in the document of mortgage
(Evangelista vs. Abad, supra). It should be noted, however, that the principle is
predicated on statements by the owner declaring his house to be a chattel, a
conduct that may conceivably estop him from subsequent claiming otherwise
(Ladera, et al. vs. C.W. Hodges, et al., [CA]; 48 O.G. 5374). The doctrine,
therefore, gathered from these cases is that although in some instances, a house
of mixed materials has been considered as a chattel between the parties and
that the validity of the contract between them, has been recognized, it has been
a constant criterion nevertheless that, with respect to third persons, who are not
parties to the contract, and specially in execution proceedings, the house is
considered as an immovable property (Art. 1431, New Civil Code).

In the case at bar, the house in question was treated as personal or movable
property, by the parties to the contract themselves. In the deed of chattel
mortgage, appellant Rufino G. Pineda conveyed by way of "Chattel Mortgage"
"my personal properties", a residential house and a truck. The mortgagor himself
grouped the house with the truck, which is, inherently a movable property. The
house which was not even declared for taxation purposes was small and made of
light construction materials: G.I. sheets roofing, sawali and wooden walls and
wooden posts; built on land belonging to another.

The cases cited by appellants are not applicable to the present case. The Iya
cases, (L-10837-38, supra), refer to a building or a house of strong materials,
permanently adhered to the land, belonging to the owner of the house himself.
In the case of Lopez vs. Orosa, (L-10817-18), the subject building was a theater,
built of materials worth more than P62,000.00 attached permanently to the soil.
In these two cases and in the Leung Yee Case, supra, third persons assailed the
validity of the deed of chattel mortgages; in the present case, it was one of the
parties to the contract of mortgages who assailed its validity.

CONFORMABLY WITH ALL THE FOREGOING, the decision appealed from, should
be, as it is hereby affirmed, with costs against appellants.

||| (Navarro v. Pineda, G.R. No. L-18456, [November 30, 1963], 118 PHIL 1481-
1487)