Riza Ella P.

Tulio JD 2-B
MAKATI LEASING AND FINANCE CORP. V. WEAREVER TEXTILE MILLS, INC.
G.R. No. L-58469, May 16, 1983.

Facts: 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.

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 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 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 set aside the Orders of the lower court and ordered the return of
the drive motor seized by the sheriff after ruling that the machinery 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
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.

Issue: Whether or not the machinery in suit is real or personal property from the point
of view of the parties.

Held: The machinery is a personal property, The SC relied on its ruling in Tumalad v.
Vicencio, that if a house of strong materials can be the subject of a Chattel Mortgage as
long as the parties to the contract agree and no innocent 3rd party will be prejudiced
then moreso that a machinery may treated as a movable since it is movable by nature
and becomes immobilized only by destination. And treating it as a chattel by way of a
Chattel Mortgage, Wearever is estopped from claiming otherwise.
Riza Ella P. Tulio JD 2-B
PRUDENTIAL BANK v. PANIS
G.R. No. L-50008, August 31, 1987.

Facts: Spouses Magcale secured a loan from Prudential Bank. To secure payment, they
executed a real estate mortgage over a residential building. The mortgage included also
the right to occupy the lot and the information about the sales patent applied for by the
spouses for the lot to which the building stood.

After securing the first loan, the spouses secured another from the same bank. To
secure payment, another real estate mortgage was executed over the same properties.
The Secretary of Agriculture then issued a Miscellaneous Sales Patent over the land
which was later on mortgaged to the bank. The spouses then failed to pay for the loan
and the REM was extrajudicially foreclosed and sold in public auction despite opposition
from the spouses. The respondent court held that the REM was null and void.

Issue: Whether or not a Real Estate Mortgage can be constituted on the building
erected on a lot belonging to another

Held: Yes. A real estate mortgage can be constituted on the building erected on the land
belonging to another. The inclusion of building distinct and separate from the land in
the Civil Code can only mean that the building itself is an immovable property.

While it is true that a mortgage of land necessarily includes in the absence of stipulation
improvements thereon, buildings, still a building in itself may be mortgaged by itself
apart from the land on which it is built.

Such a mortgage would still be considered as a REM for the building would still be
considered as immovable property even if dealt with separately and apart from the
land. The original mortgage on the building and right to occupancy of the land was
executed before the issuance of the sales patent and before the government was
divested of title to the land. It is evident that the mortgage executed by private
respondent on his own building building was a valid mortgage. As to the second
mortgage, it was done after the sales patent was issued and thus prohibits pertinent
provisions of the Public Land Act.

Riza Ella P. Tulio JD 2-B

 EVANGELISTA V. ALTO SURETY
GR No. L-11139, Apr 23, 1958.

Facts: Petitioner Santos Evangelista, instituted a civil case entitled Santos Evangelista v.
Ricardo Rivera for a sum of money. He obtained a writ of attachment, which levied
upon a house, built by Rivera on a land situated in Manila and leased to him, by filing
copy of said writ and the corresponding notice of attachment with the Office of the
Register of Deeds of Manila. In due course, judgment was rendered in favor of
Evangelista, who bought the house at public auction held in compliance with the writ of
execution issued in said case on 8 October 1951.

The corresponding definite deed of sale was issued to him on 22 October 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. and that the latter is now the true
owner of said property. It appears that on 10 May 1952, a definite deed of sale of the
same house had been issued to Alto Surety, as the highest bidder at an auction sale
held, on 29 September 1950, in compliance with a writ of execution issued in Civil Case
6268 of the same court (Alto Surety & Insurance vs. Maximo Quiambao, Rosario
Guevara and Ricardo Rivera)" in which judgment for the sum of money, had been
rendered in favor of Alto Surety.

Hence, on 13 June 1953, Evangelista instituted an action against Alto Surety and Ricardo
Rivera, for the purpose of establishing his title over said house, and securing possession
thereof, apart from recovering damages. After due trial, the CFI Manila rendered
judgment for Evangelista, sentencing Rivera and Alto Surety to deliver the house in
question to Evangelista and to pay him, jointly and severally, P40.00 a month from
October 1952, until said delivery. The decision was however reversed by the Court of
Appeals, which absolved Alto Surety from the complaint on account 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 Alto Surety, Evangelista did not acquire thereby a
preferential lien, the attachment having been levied as if the house in question were
immovable property.

Issue: Whether or not a house constructed by the lessee of the land on which it is built,
should be dealt with, for purpose of attachment, as immovable property.

Held: The court ruled that the house is not personal property, much less a debt, credit
or other personal property not capable of manual delivery, but immovable property. As
held in Laddera vs. Hodges, "a true building is immovable or real property, whether it is
erected by the owner of the land or by a usufructuary or lessee.”

The opinion that the house of Rivera should have been attached, as "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” is untenable. Parties to a deed of chattel mortgage may agree to consider a
house as personal property for purposes of said contract.

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. The rules on execution do not allow, and should
not be interpreted as to allow, the special consideration that parties to a contract may
have desired to impart to real estate 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. The regulations were never intended to suit
the consideration that parties, may have privately given to the property levied upon.
The court therefore affirms the decision of the CA with cost against Alto Surety.

Riza Ella P. Tulio JD 2-B

SERG’S PRODUCTS AND GOQUIOLAY V. PCI LEASING AND FINANCE
Facts: Respondent PCI Leasing filed with the RTC-QC a complaint for a sum of money
with an application for a writ of replevin. Upon an ex-parte application of PCI Leasing,
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 the payment of the
necessary expenses. In implementation of said writ, the sheriff proceeded to petitioners
factory, seized one machinery with the word that he would return for the other
machineries.

Petitioners 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. This motion was
opposed by PCI Leasing, 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 embodied were totally sham and farcical.

Issue: Whether or not the machineries became real property by virtue of

immobilization.

Ruling:
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.

Writ of Replevin: Rule 60 of the Rules of Court provides that writs of replevin are issued
for the recovery of personal property only.

Article 415 (5) of the Civil Code provides that 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

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. 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.”
However, 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.

Section 12.1 of the Agreement between the parties provides “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.”

The machines are personal property and they are proper subjects of the Writ of
Replevin.

Riza Ella P. Tulio JD 2-B

TOLENTINO V BALTAZAR
 G. R. No. L-14597, March 27, 1961.

Facts: Angel Baltazar filed therefore a homestead application for a land in Nueva Ecija
which was approved by the Director of Lands. Subsequently, he mortgaged the present
and future improvements on said land to Pastor Tolentino with the understanding that
if the same were not paid within six (6) years, Tolentino could elect, either to foreclose
the mortgage or to compel the debtor to execute a deed of absolute sale of said
improvements.

After the death of Angel Baltazar, his widow and children conveyed to his son Basilio
Baltazar their rights and interest in and to said land. Apparently relying upon this
conveyance, Basilio Baltazar filed with the Bureau of Lands a petition praying that the
homestead application in his father's name be cancelled, and that, in lieu thereof, his
own (Basilio's) application be admitted. This petition was soon granted. Subsequently,
Homestead Patent No. V-8832 was issued to Basilio Baltazar, and upon the authority
thereof, he secured Original Certificate of Title in his name.

Tolentino instituted the present action against the estate of Angel Baltazar, deceased,
his son Basilio Baltazar, and the Director of Lands, for the cancellation of said Original
Certificate of Title upon the ground that Basilio Baltazar had secured it by fraud.

Issue: Whether or not the mortgage on the said land is valid

Held: Yes, the present and future improvements on the land were subject to a valid and
subsisting mortgage in favor of Pastor Tolentino and Basilio acknowledged the same.

Section 118 of CA No. 141 explicitly permits the encumbrance, by mortgage or pledge of
the improvements and crops on the land, without limitation in point of time. Although
the parties to a contract may treat certain improvements and crops as chattels, insofar
as they are concerned, it is now settled in this jurisdiction that, in general, and insofar
as the public a concerned, such improvements, if falling under the provisions of Article
415 of the Civil Code of the Philippines are immovable property (Evangelista vs. Alto
Surety & Insurance Co., Inc., L-11139, April 23, 1958; Manarag vs. Ofilada, 52 Off. Gaz.,
3954; Republic vs. Ceniza, et al., L-4169, December 17, 1951; Leung Yee vs. Strong
Machinery Co., 37 Phil. 644).

As a consequence, a mortgage constituted on said improvements must be susceptible

registration as a real estate mortgage and of annotate on the certificate of title to the
land of which they for part, although the land itself may not be subject to said
encumbrance, if the debt guaranteed thereby was co traded within the period stated in
said section 118 of Commonwealth Act No. 141. Otherwise, the provision authorizing
the mortgage of the improvements would be defeated.
Riza Ella P. Tulio JD 2-B
PIANSAY v. DAVID
 G.R. No. L-19468 , October 30, 1964.

FACTS: David obtained a loan from Uy Kim secured with a chattel mortgage on a house
in Tondo. David failed to pay, thus was Kim foreclosed. Kim then bought the house at
the resulting public auction. Thereafter, Kim sold the same to Marcos Mangubat, who
later filed a complaint against David for the collection of a portion of the loan. The
complaint was later amended to implead Uy Kim and Piansay praying that the auction
sale and deed of absolute sale executed by Uy Kim in favor of Piansay be annulled.

CFI Manila ordered David to pay and annulled the chattel mortgage. CA affirmed. David
was ordered to pay and the house was levied upon. To prevent the sale at the public
auction, Piansay and Uy Kim filed a petition for certiorari and mandamus with
preliminary injunction before the CA; it was denied. Subsequently, Piansay and Uy Kim
instituted an action against David and Mangubat praying that judgment be rendered
declaring Piansay as the true owner and restrain the levy and sale to public auction.
David demanded from Piansay the payment of the rentals for the use and occupation of
the house; the latter claims it is his property. Mangubat, on one hand, moved to dismiss
the complaint on the ground of res adjudicata and lackof personality to sue; it was
granted.

CA affirmed explaining that Uy Kim had no right to foreclose the chattel mortgage
because it was in reality a mere contract of an unsecured loan. Piansay assailed
Mangubat's right to levy execution upon the house alleging that the same belongs to
him, he having bought it from Uy Kim who acquired it at the auction sale.

Issue: Whether or not the chattel mortgage and sale are valid

Held: No. Upon the theory that the chattel mortgage and sale in favor of Uy Kim had
been annulled in the original decision, as affirmed by the CA, the fact is that said order
became final and executory upon the denial of the petition for certiorari and
mandamus. Hence, Uy Kim and Piansay are now barred from asserting that the chattel
mortgage and sale are valid.

At any rate, regardless of the validity of a contract constituting a chattel mortgage on a

house, as between the parties to said contract, the same cannot and does not bind third
persons, who are not parties to the contract of their privies. As a consequence, the sale
of the house in question in the proceedings for the extra judicial foreclosure of said
chattel mortgage, is null and void insofar as defendant Mangubat is concerned, and did
not confer upon Uy Kim, as buyer in said sale, any dominical right in and to said house,
so that she could not have transmitted to her assignee Piansay any such right as against
Mangubat. In short, they do not have a cause of action against Mangubat and David.