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judgment
for
that
amount,
levied
execution
upon
the
building,
bought
it
in


G.R.
No.
L‐11658











February
15,
1918

at
the
sheriff's
sale
on
or
about
the
18th
of
December,
1914,
and
had
the

LEUNG
 YEE,
 plaintiff‐appellant,
 
vs.
FRANK
 L.
 STRONG
 MACHINERY
 sheriff's
 certificate
 of
 the
 sale
 duly
 registered
 in
 the
 land
 registry
 of
 the

COMPANY
and
J.
G.
WILLIAMSON,
defendants‐appellees.
 Province
of
Cavite.

Booram
 and
 Mahoney
 for
 appellant.
Williams,
 Ferrier
 and
 SyCip
 for
 At
 the
 time
 when
 the
 execution
 was
 levied
 upon
 the
 building,
 the

appellees.
 defendant
 machinery
 company,
 which
 was
 in
 possession,
 filed
 with
 the

CARSON,
J.:
 sheriff
 a
 sworn
 statement
 setting
 up
 its
 claim
 of
 title
 and
 demanding
 the

release
 of
 the
 property
 from
 the
 levy.
 Thereafter,
 upon
 demand
 of
 the

The
 "Compañia
 Agricola
 Filipina"
 bought
 a
 considerable
 quantity
 of
 rice‐ sheriff,
the
plaintiff
executed
an
indemnity
bond
in
favor
of
the
sheriff
in

cleaning
machinery
company
from
the
defendant
machinery
company,
and
 the
sum
of
P12,000,
in
reliance
upon
which
the
sheriff
sold
the
property
at

executed
 a
 chattel
 mortgage
 thereon
 to
 secure
 payment
 of
 the
 purchase
 public
auction
to
the
plaintiff,
who
was
the
highest
bidder
at
the
sheriff's

price.
It
included
in
the
mortgage
deed
the
building
of
strong
materials
in
 sale.

which
 the
 machinery
 was
 installed,
 without
 any
 reference
 to
 the
 land
 on

which
 it
 stood.
 The
 indebtedness
 secured
 by
 this
 instrument
 not
 having
 This
 action
 was
 instituted
 by
 the
 plaintiff
 to
 recover
 possession
 of
 the

been
paid
when
it
fell
due,
the
mortgaged
property
was
sold
by
the
sheriff,
 building
from
the
machinery
company.

in
pursuance
of
the
terms
of
the
mortgage
instrument,
and
was
bought
in
 The
 trial
 judge,
 relying
 upon
 the
 terms
 of
 article
 1473
 of
 the
 Civil
 Code,

by
 the
 machinery
 company.
 The
 mortgage
 was
 registered
 in
 the
 chattel
 gave
judgment
in
favor
of
the
machinery
company,
on
the
ground
that
the

mortgage
registry,
and
the
sale
of
the
property
to
the
machinery
company
 company
had
its
title
to
the
building
registered
prior
to
the
date
of
registry

in
 satisfaction
 of
 the
 mortgage
 was
 annotated
 in
 the
 same
 registry
 on
 of
the
plaintiff's
certificate.

December
29,
1913.

Article
1473
of
the
Civil
Code
is
as
follows:

A
 few
 weeks
 thereafter,
 on
 or
 about
 the
 14th
 of
 January,
 1914,
 the

If
 the
 same
 thing
 should
 have
 been
 sold
 to
 different
 vendees,
 the

"Compañia
 Agricola
 Filipina"
 executed
 a
 deed
 of
 sale
 of
 the
 land
 upon

ownership
 shall
 be
 transfer
 to
 the
 person
 who
 may
 have
 the
 first
 taken

which
the
building
stood
to
the
machinery
company,
but
this
deed
of
sale,

possession
thereof
in
good
faith,
if
it
should
be
personal
property.

although
 executed
 in
 a
 public
 document,
 was
 not
 registered.
 This
 deed

makes
no
reference
to
the
building
erected
on
the
land
and
would
appear
 Should
 it
 be
 real
 property,
 it
 shall
 belong
 to
 the
 person
 acquiring
 it
 who

to
have
been
executed
for
the
purpose
of
curing
any
defects
which
might
 first
recorded
it
in
the
registry.

be
 found
 to
 exist
 in
 the
 machinery
 company's
 title
 to
 the
 building
 under

Should
there
be
no
entry,
the
property
shall
belong
to
the
person
who
first

the
 sheriff's
 certificate
 of
 sale.
 The
 machinery
 company
 went
 into

took
 possession
 of
 it
 in
 good
 faith,
 and,
 in
 the
 absence
 thereof,
 to
 the

possession
of
the
building
at
or
about
the
time
when
this
sale
took
place,

person
who
presents
the
oldest
title,
provided
there
is
good
faith.

that
 is
 to
 say,
 the
 month
 of
 December,
 1913,
 and
 it
 has
 continued
 in

possession
ever
since.
 The
registry
her
referred
to
is
of
course
the
registry
of
real
property,
and
it

must
 be
 apparent
 that
 the
 annotation
 or
 inscription
 of
 a
 deed
 of
 sale
 of

At
or
about
the
time
when
the
chattel
mortgage
was
executed
in
favor
of

real
property
in
a
chattel
mortgage
registry
cannot
be
given
the
legal
effect

the
 machinery
 company,
 the
 mortgagor,
 the
 "Compañia
 Agricola
 Filipina"

of
an
inscription
in
the
registry
of
real
property.
By
its
express
terms,
the

executed
 another
 mortgage
 to
 the
 plaintiff
 upon
 the
 building,
 separate

Chattel
Mortgage
Law
contemplates
and
makes
provision
for
mortgages
of

and
 apart
 from
 the
 land
 on
 which
 it
 stood,
 to
 secure
 payment
 of
 the

personal
 property;
 and
 the
 sole
 purpose
 and
 object
 of
 the
 chattel

balance
 of
 its
 indebtedness
 to
 the
 plaintiff
 under
 a
 contract
 for
 the

mortgage
registry
is
to
provide
for
the
registry
of
"Chattel
mortgages,"
that

construction
of
the
building.
Upon
the
failure
of
the
mortgagor
to
pay
the

is
to
say,
mortgages
of
personal
property
executed
in
the
manner
and
form

amount
of
the
indebtedness
secured
by
the
mortgage,
the
plaintiff
secured


 1

prescribed
 in
 the
 statute.
 The
 building
 of
 strong
 materials
 in
 which
 the
 court
of
Spain
held
in
its
sentencia
of
the
13th
of
May,
1908,
that:

rice‐cleaning
 machinery
 was
 installed
 by
 the
 "Compañia
 Agricola
 Filipina"

This
 rule
 is
 always
 to
 be
 understood
 on
 the
 basis
 of
 the
 good
 faith

was
real
property,
and
the
mere
fact
that
the
parties
seem
to
have
dealt

mentioned
in
the
first
paragraph;
therefore,
it
having
been
found
that
the

with
 it
 separate
 and
 apart
 from
 the
 land
 on
 which
 it
 stood
 in
 no
 wise

second
 purchasers
 who
 record
 their
 purchase
 had
 knowledge
 of
 the

changed
 its
 character
 as
 real
 property.
 It
 follows
 that
 neither
 the
 original

previous
 sale,
 the
 question
 is
 to
 be
 decided
 in
 accordance
 with
 the

registry
in
the
chattel
mortgage
of
the
building
and
the
machinery
installed

following
 paragraph.
 (Note
 2,
 art.
 1473,
 Civ.
 Code,
 Medina
 and
 Maranon

therein,
 not
 the
 annotation
 in
 that
 registry
 of
 the
 sale
 of
 the
 mortgaged

[1911]
edition.)

property,
had
any
effect
whatever
so
far
as
the
building
was
concerned.

Although
 article
 1473,
 in
 its
 second
 paragraph,
 provides
 that
 the
 title
 of

We
conclude
that
the
ruling
in
favor
of
the
machinery
company
cannot
be

conveyance
of
ownership
of
the
real
property
that
is
first
recorded
in
the

sustained
 on
 the
 ground
 assigned
 by
 the
 trial
 judge.
 We
 are
 of
 opinion,

registry
 shall
 have
 preference,
 this
 provision
 must
 always
 be
 understood

however,
 that
 the
 judgment
 must
 be
 sustained
 on
 the
 ground
 that
 the

on
 the
 basis
 of
 the
 good
 faith
 mentioned
 in
 the
 first
 paragraph;
 the

agreed
 statement
 of
 facts
 in
 the
 court
 below
 discloses
 that
 neither
 the

legislator
could
not
have
wished
to
strike
it
out
and
to
sanction
bad
faith,

purchase
of
the
building
by
the
plaintiff
nor
his
inscription
of
the
sheriff's

just
to
comply
with
a
mere
formality
which,
in
given
cases,
does
not
obtain

certificate
 of
 sale
 in
 his
 favor
 was
 made
 in
 good
 faith,
 and
 that
 the

even
in
real
disputes
between
third
persons.
(Note
2,
art.
1473,
Civ.
Code,

machinery
company
must
be
held
to
be
the
owner
of
the
property
under

issued
by
the
publishers
of
the
La
Revista
de
los
Tribunales,
13th
edition.)

the
third
paragraph
of
the
above
cited
article
of
the
code,
it
appearing
that

the
 company
 first
 took
 possession
 of
 the
 property;
 and
 further,
 that
 the
 The
agreed
statement
of
facts
clearly
discloses
that
the
plaintiff,
when
he

building
 and
 the
 land
 were
 sold
 to
 the
 machinery
 company
 long
 prior
 to
 bought
 the
 building
 at
 the
 sheriff's
 sale
 and
 inscribed
 his
 title
 in
 the
 land

the
date
of
the
sheriff's
sale
to
the
plaintiff.
 registry,
 was
 duly
 notified
 that
 the
 machinery
 company
 had
 bought
 the

building
from
plaintiff's
judgment
debtor;
that
it
had
gone
into
possession

It
has
been
suggested
that
since
the
provisions
of
article
1473
of
the
Civil

long
 prior
 to
 the
 sheriff's
 sale;
 and
 that
 it
 was
 in
 possession
 at
 the
 time

Code
require
"good
faith,"
in
express
terms,
in
relation
to
"possession"
and

when
the
sheriff
executed
his
levy.
The
execution
of
an
indemnity
bond
by

"title,"
but
contain
no
express
requirement
as
to
"good
faith"
in
relation
to

the
plaintiff
in
favor
of
the
sheriff,
after
the
machinery
company
had
filed

the
"inscription"
of
the
property
on
the
registry,
it
must
be
presumed
that

its
 sworn
 claim
 of
 ownership,
 leaves
 no
 room
 for
 doubt
 in
 this
 regard.

good
faith
is
not
an
essential
requisite
of
registration
in
order
that
it
may

Having
bought
in
the
building
at
the
sheriff's
sale
with
full
knowledge
that

have
 the
 effect
 contemplated
 in
 this
 article.
 We
 cannot
 agree
 with
 this

at
the
time
of
the
levy
and
sale
the
building
had
already
been
sold
to
the

contention.
 It
 could
 not
 have
 been
 the
 intention
 of
 the
 legislator
 to
 base

machinery
 company
 by
 the
 judgment
 debtor,
 the
 plaintiff
 cannot
 be
 said

the
 preferential
 right
 secured
 under
 this
 article
 of
 the
 code
 upon
 an

to
 have
 been
 a
 purchaser
 in
 good
 faith;
 and
 of
 course,
 the
 subsequent

inscription
 of
 title
 in
 bad
 faith.
 Such
 an
 interpretation
 placed
 upon
 the

inscription
 of
 the
 sheriff's
 certificate
 of
 title
 must
 be
 held
 to
 have
 been

language
of
this
section
would
open
wide
the
door
to
fraud
and
collusion.

tainted
with
the
same
defect.

The
 public
 records
 cannot
 be
 converted
 into
 instruments
 of
 fraud
 and

oppression
 by
 one
 who
 secures
 an
 inscription
 therein
 in
 bad
 faith.
 The
 Perhaps
we
should
make
it
clear
that
in
holding
that
the
inscription
of
the

force
 and
 effect
 given
 by
 law
 to
 an
 inscription
 in
 a
 public
 record
 sheriff's
certificate
of
sale
to
the
plaintiff
was
not
made
in
good
faith,
we

presupposes
the
good
faith
of
him
who
enters
such
inscription;
and
rights
 should
 not
 be
 understood
 as
 questioning,
 in
 any
 way,
 the
 good
 faith
 and

created
 by
 statute,
 which
 are
 predicated
 upon
 an
 inscription
 in
 a
 public
 genuineness
 of
 the
 plaintiff's
 claim
 against
 the
 "Compañia
 Agricola

registry,
 do
 not
 and
 cannot
 accrue
 under
 an
 inscription
 "in
 bad
 faith,"
 to
 Filipina."
 The
 truth
 is
 that
 both
 the
 plaintiff
 and
 the
 defendant
 company

the
benefit
of
the
person
who
thus
makes
the
inscription.
 appear
to
have
had
just
and
righteous
claims
against
their
common
debtor.

No
criticism
can
properly
be
made
of
the
exercise
of
the
utmost
diligence

Construing
 the
 second
 paragraph
 of
 this
 article
 of
 the
 code,
 the
 supreme

by
the
plaintiff
in
asserting
and
exercising
his
right
to
recover
the
amount


 2

of
 his
 claim
 from
 the
 estate
 of
 the
 common
 debtor.
 We
 are
 strongly
 and
outward
acts
by
which
alone
the
inward
motive
may,
with
safety,
be

inclined
to
believe
that
in
procuring
the
levy
of
execution
upon
the
factory
 determined.
 So
 it
 is
 that
 "the
 honesty
 of
 intention,"
 "the
 honest
 lawful

building
 and
 in
 buying
 it
 at
 the
 sheriff's
 sale,
 he
 considered
 that
 he
 was
 intent,"
 which
 constitutes
 good
 faith
 implies
 a
 "freedom
 from
 knowledge

doing
no
more
than
he
had
a
right
to
do
under
all
the
circumstances,
and
it
 and
 circumstances
 which
 ought
 to
 put
 a
 person
 on
 inquiry,"
 and
 so
 it
 is

is
highly
possible
and
even
probable
that
he
thought
at
that
time
that
he
 that
proof
of
such
knowledge
overcomes
the
presumption
of
good
faith
in

would
 be
 able
 to
 maintain
 his
 position
 in
 a
 contest
 with
 the
 machinery
 which
 the
 courts
 always
 indulge
 in
 the
 absence
 of
 proof
 to
 the
 contrary.

company.
There
was
no
collusion
on
his
part
with
the
common
debtor,
and
 "Good
faith,
or
the
want
of
it,
is
not
a
visible,
tangible
fact
that
can
be
seen

no
thought
of
the
perpetration
of
a
fraud
upon
the
rights
of
another,
in
the
 or
 touched,
 but
 rather
 a
 state
 or
 condition
 of
 mind
 which
 can
 only
 be

ordinary
 sense
 of
 the
 word.
 He
 may
 have
 hoped,
 and
 doubtless
 he
 did
 judged
of
by
actual
or
fancied
tokens
or
signs."
(Wilder
vs.
Gilman,
55
Vt.,

hope,
that
the
title
of
the
machinery
company
would
not
stand
the
test
of
 504,
 505;
 Cf.
 Cardenas
 Lumber
 Co.
 vs.
 Shadel,
 52
 La.
 Ann.,
 2094‐2098;

an
 action
 in
 a
 court
 of
 law;
 and
 if
 later
 developments
 had
 confirmed
 his
 Pinkerton
Bros.
Co.
vs.
Bromley,
119
Mich.,
8,
10,
17.)

unfounded
 hopes,
 no
 one
 could
 question
 the
 legality
 of
 the
 propriety
 of

We
conclude
that
upon
the
grounds
herein
set
forth
the
disposing
part
of

the
course
he
adopted.

the
decision
and
judgment
entered
in
the
court
below
should
be
affirmed

But
 it
 appearing
 that
 he
 had
 full
 knowledge
 of
 the
 machinery
 company's
 with
costs
of
this
instance
against
the
appellant.
So
ordered.

claim
of
ownership
when
he
executed
the
indemnity
bond
and
bought
in

Arellano,
 C.J.,
 Johnson,
 Araullo,
 Street
 and
 Malcolm,
 JJ.,
 concur.
Torres,

the
 property
 at
 the
 sheriff's
 sale,
 and
 it
 appearing
 further
 that
 the

Avanceña
and
Fisher,
JJ.,
took
no
part.

machinery
company's
claim
of
ownership
was
well
founded,
he
cannot
be

said
 to
 have
 been
 an
 innocent
 purchaser
 for
 value.
 He
 took
 the
 risk
 and
 

must
stand
by
the
consequences;
and
it
is
in
this
sense
that
we
find
that
he
 

was
not
a
purchaser
in
good
faith.


One
who
purchases
real
estate
with
knowledge
of
a
defect
or
lack
of
title

in
his
vendor
cannot
claim
that
he
has
acquired
title
thereto
in
good
faith
 

as
 against
 the
 true
 owner
 of
 the
 land
 or
 of
 an
 interest
 therein;
 and
 the
 

same
 rule
 must
 be
 applied
 to
 one
 who
 has
 knowledge
 of
 facts
 which

should
 have
 put
 him
 upon
 such
 inquiry
 and
 investigation
 as
 might
 be
 

necessary
 to
 acquaint
 him
 with
 the
 defects
 in
 the
 title
 of
 his
 vendor.
 A
 

purchaser
 cannot
 close
 his
 eyes
 to
 facts
 which
 should
 put
 a
 reasonable


man
upon
his
guard,
and
then
claim
that
he
acted
in
good
faith
under
the

belief
that
there
was
no
defect
in
the
title
of
the
vendor.
His
mere
refusal
 

to
 believe
 that
 such
 defect
 exists,
 or
 his
 willful
 closing
 of
 his
 eyes
 to
 the


possibility
 of
 the
 existence
 of
 a
 defect
 in
 his
 vendor's
 title,
 will
 not
 make

him
an
innocent
purchaser
for
value,
if
afterwards
develops
that
the
title
 

was
in
fact
defective,
and
it
appears
that
he
had
such
notice
of
the
defects
 

as
 would
 have
 led
 to
 its
 discovery
 had
 he
 acted
 with
 that
 measure
 of

precaution
 which
 may
 reasonably
 be
 acquired
 of
 a
 prudent
 man
 in
 a
 like
 

situation.
Good
faith,
or
lack
of
it,
is
in
its
analysis
a
question
of
intention;
 

but
 in
 ascertaining
 the
 intention
 by
 which
 one
 is
 actuated
 on
 a
 given

occasion,
we
are
necessarily
controlled
by
the
evidence
as
to
the
conduct
 



 3


 respondent
‐
Lacsamana
secured
title
over
the
property
in
her
name
(TCT

No.
173744)
as
well
as
separate
tax
declarations
for
the
land
and
building.
1


On
 November
 22,
 1979,
 petitioner
 commenced
 suit
 for
 "Annulment
 of

G.R.
No.
L‐55729
March
28,
1983

Deed
 of
 Sale
 with
 Damages"
 against
 herein
 respondents
 PNB
 and

ANTONIO
 PUNSALAN,
 JR.,
 petitioner,
 
vs.
REMEDIOS
 VDA.
 DE
 Lacsamana
before
respondent
Court
of
First
Instance
of
Rizal,
Branch
XXXI,

LACSAMANA
 and
 THE
 HONORABLE
 JUDGE
 RODOLFO
 A.
 ORTIZ,
 Quezon
 City,
 essentially
 impugning
 the
 validity
 of
 the
 sale
 of
 the
 building

respondents.
 as
 embodied
 in
 the
 Amended
 Deed
 of
 Sale.
 In
 this
 connection,
 petitioner

Benjamin
S.
Benito
&
Associates
for
petitioner.
 alleged:


Expedito
Yummul
for
private
respondent.
 xxx
xxx
xxx




 22.
That
defendant,
Philippine
National
Bank,
through
its
Branch
Manager

...
by
virtue
of
the
request
of
defendant
...
executed
a
document
dated
July

MELENCIO‐HERRERA,
J.:
 31,
 1978,
 entitled
 Amendment
 to
 Deed
 of
 Absolute
 Sale
 ...
 wherein
 said

The
 sole
 issue
 presented
 by
 petitioner
 for
 resolution
 is
 whether
 or
 not
 defendant
 bank
 as
 Vendor
 sold
 to
 defendant
 Lacsamana
 the
 building

respondent
Court
erred
in
denying
the
Motion
to
Set
Case
for
Pre‐trial
with
 owned
 by
 the
 plaintiff
 under
 Tax
 Declaration
 No.
 5619,
 notwithstanding

respect
to
respondent
Remedios
Vda.
de
Lacsamana
as
the
case
had
been
 the
fact
that
said
building
is
not
owned
by
the
bank
either
by
virtue
of
the

dismissed
on
the
ground
of
improper
venue
upon
motion
of
co‐respondent
 public
 auction
 sale
 conducted
 by
 the
 Sheriff
 and
 sold
 to
 the
 Philippine

Philippine
National
Bank
(PNB).
 National
Bank
or
by
virtue
of
the
Deed
of
Sale
executed
by
the
bank
itself

in
its
favor
on
September
21,
1977
...;

It
appears
that
petitioner,
Antonio
Punsalan,
Jr.,
was
the
former
registered

owner
 of
 a
 parcel
 of
 land
 consisting
 of
 340
 square
 meters
 situated
 in
 23.
That
said
defendant
bank
fraudulently
mentioned
...
that
the
sale
in
its

Bamban,
 Tarlac.
 In
 1963,
 petitioner
 mortgaged
 said
 land
 to
 respondent
 favor
should
likewise
have
included
the
building,
notwithstanding
no
legal

PNB
 (Tarlac
 Branch)
 in
 the
 amount
 of
 P10,000.00,
 but
 for
 failure
 to
 pay
 basis
 for
 the
 same
 and
 despite
 full
 knowledge
 that
 the
 Certificate
 of
 Sale

said
 amount,
 the
 property
 was
 foreclosed
 on
 December
 16,
 1970.
 executed
 by
 the
 sheriff
 in
 its
 favor
 ...
 only
 limited
 the
 sale
 to
 the
 land,

Respondent
PNB
(Tarlac
Branch)
was
the
highest
bidder
in
said
foreclosure
 hence,
 by
 selling
 the
 building
 which
 never
 became
 the
 property
 of

proceedings.
 However,
 the
 bank
 secured
 title
 thereto
 only
 on
 December
 defendant,
they
have
violated
the
principle
against
'pactum
commisorium'.

14,
1977.
 Petitioner
 prayed
 that
 the
 Deed
 of
 Sale
 of
 the
 building
 in
 favor
 of

In
 the
 meantime,
 in
 1974,
 while
 the
 properly
 was
 still
 in
 the
 alleged
 respondent
Lacsamana
be
declared
null
and
void
and
that
damages
in
the

possession
of
petitioner
and
with
the
alleged
acquiescence
of
respondent
 total
sum
of
P230,000.00,
more
or
less,
be
awarded
to
him.
2

PNB
 (Tarlac
 Branch),
 and
 upon
 securing
 a
 permit
 from
 the
 Municipal
 In
her
Answer
filed
on
March
4,
1980,‐respondent
Lacsamana
averred
the

Mayor,
 petitioner
 constructed
 a
 warehouse
 on
 said
 property.
 Petitioner
 affirmative
defense
of
lack
of
cause
of
action
in
that
she
was
a
purchaser

declared
 said
 warehouse
 for
 tax
 purposes
 for
 which
 he
 was
 issued
 Tax
 for
value
and
invoked
the
principle
in
Civil
Law
that
the
"accessory
follows

Declaration
 No.
 5619.
 Petitioner
 then
 leased
 the
 warehouse
 to
 one
 the
principal".
3

Hermogenes
Sibal
for
a
period
of
10
years
starting
January
1975.

On
 March
 14,
 1980,
 respondent
 PNB
 filed
 a
 Motion
 to
 Dismiss
 on
 the

On
 July
 26,
 1978,
 a
 Deed
 of
 Sale
 was
 executed
 between
 respondent
 PNB
 ground
 that
 venue
 was
 improperly
 laid
 considering
 that
 the
 building
 was

(Tarlac
 Branch)
 and
 respondent
 Lacsamana
 over
 the
 property.
 This
 real
 property
 under
 article
 415
 (1)
 of
 the
 New
 Civil
 Code
 and
 therefore

contract
was
amended
on
July
31,
1978,
particularly
to
include
in
the
sale,
 section
2(a)
of
Rule
4
should
apply.
4

the
 building
 and
 improvement
 thereon.
 By
 virtue
 of
 said
 instruments,


 4

Opposing
said
Motion
to
Dismiss,
petitioner
contended
that
the
action
for
 Hence,
this
Petition
for
Certiorari,
to
which
we
gave
due
course.

annulment
 of
 deed
 of
 sale
 with
 damages
 is
 in
 the
 nature
 of
 a
 personal

We
affirm
respondent
Court's
Order
denying
the
setting
for
pre‐trial.

action,
which
seeks
to
recover
not
the
title
nor
possession
of
the
property

but
to
compel
payment
of
damages,
which
is
not
an
action
affecting
title
to
 The
warehouse
claimed
to
be
owned
by
petitioner
is
an
immovable
or
real

real
property.
 property
 as
 provided
 in
 article
 415(l)
 of
 the
 Civil
 Code.
 6
 Buildings
 are

always
 immovable
 under
 the
 Code.
 7
 A
 building
 treated
 separately
 from

On
April
25,
1980,
respondent
Court
granted
respondent
PNB's
Motion
to

the
land
on
which
it
stood
is
immovable
property
and
the
mere
fact
that

Dismiss
as
follows:

the
 parties
 to
 a
 contract
 seem
 to
 have
 dealt
 with
 it
 separate
 and
 apart

Acting
 upon
 the
 'Motion
 to
 Dismiss'
 of
 the
 defendant
 Philippine
 National
 from
 the
 land
 on
 which
 it
 stood
 in
 no
 wise
 changed
 its
 character
 as

Bank
 dated
 March
 13,
 1980,
 considered
 against
 the
 plaintiff's
 opposition
 immovable
property.
8

thereto
 dated
 April
 1,
 1980,
 including
 the
 reply
 therewith
 of
 said

While
it
is
true
that
petitioner
does
not
directly
seek
the
recovery
of
title

defendant,
 this
 Court
 resolves
 to
 DISMISS
 the
 plaintiff's
 complaint
 for

or
possession
of
the
property
in
question,
his
action
for
annulment
of
sale

improper
venue
considering
that
the
plaintiff's
complaint
which
seeks
for

and
 his
 claim
 for
 damages
 are
 closely
 intertwined
 with
 the
 issue
 of

the
declaration
as
null
and
void,
the
amendment
to
Deed
of
Absolute
Sale

ownership
of
the
building
which,
under
the
law,
is
considered
immovable

executed
 by
 the
 defendant
 Philippine
 National
 Bank
 in
 favor
 of
 the

property,
 the
 recovery
 of
 which
 is
 petitioner's
 primary
 objective.
 The

defendant
 Remedios
 T.
 Vda.
 de
 Lacsamana,
 on
 July
 31,
 1978,
 involves
 a

prevalent
 doctrine
 is
 that
 an
 action
 for
 the
 annulment
 or
 rescission
 of
 a

warehouse
allegedly
owned
and
constructed
by
the
plaintiff
on
the
land
of

sale
 of
 real
 property
 does
 not
 operate
 to
 efface
 the
 fundamental
 and

the
 defendant
 Philippine
 National
 Bank
 situated
 in
 the
 Municipality
 of

prime
 objective
 and
 nature
 of
 the
 case,
 which
 is
 to
 recover
 said
 real

Bamban,
 Province
 of
 Tarlac,
 which
 warehouse
 is
 an
 immovable
 property

property.
It
is
a
real
action.
9

pursuant
 to
 Article
 415,
 No.
 1
 of
 the
 New
 Civil
 Code;
 and,
 as
 such
 the

action
of
the
plaintiff
is
a
real
action
affecting
title
to
real
property
which,
 Respondent
 Court,
 therefore,
 did
 not
 err
 in
 dismissing
 the
 case
 on
 the

under
 Section
 2,
 Rule
 4
 of
 the
 New
 Rules
 of
 Court,
 must
 be
 tried
 in
 the
 ground
 of
 improper
 venue
 (Section
 2,
 Rule
 4)
 10,
 which
 was
 timely
 raised

province
where
the
property
or
any
part
thereof
lies.
5
 (Section
1,
Rule
16)
11.

In
 his
 Motion
 for
 Reconsideration
 of
 the
 aforestated
 Order,
 petitioner
 Petitioner's
 other
 contention
 that
 the
 case
 should
 proceed
 in
 so
 far
 as

reiterated
 the
 argument
 that
 the
 action
 to
 annul
 does
 not
 involve
 respondent
 Lacsamana
 is
 concerned
 as
 she
 had
 already
 filed
 an
 Answer,

ownership
or
title
to
property
but
is
limited
to
the
validity
of
the
deed
of
 which
 did
 not
 allege
 improper
 venue
 and,
 therefore,
 issues
 had
 already

sale
 and
 emphasized
 that
 the
 case
 should
 proceed
 with
 or
 without
 been
 joined,
 is
 likewise
 untenable.
 Respondent
 PNB
 is
 an
 indispensable

respondent
PNB
as
respondent
Lacsamana
had
already
filed
her
Answer
to
 party
as
the
validity
of
the
Amended
Contract
of
Sale
between
the
former

the
Complaint
and
no
issue
on
venue
had
been
raised
by
the
latter.
 and
 respondent
 Lacsamana
 is
 in
 issue.
 It
 would,
 indeed,
 be
 futile
 to

proceed
with
the
case
against
respondent
Lacsamana
alone.

On
 September
 1,
 1980,.respondent
 Court
 denied
 reconsideration
 for
 lack

of
merit.
 WHEREFORE,
 the
 petition
 is
 hereby
 denied
 without
 prejudice
 to
 the

refiling
of
the
case
by
petitioner
Antonio
Punsalan,
Jr.
in
the
proper
forum.

Petitioner
 then
 filed
 a
 Motion
 to
 Set
 Case
 for
 Pre‐trial,
 in
 so
 far
 as

respondent
 Lacsamana
 was
 concerned,
 as
 the
 issues
 had
 already
 been
 Costs
against
petitioner.

joined
with
the
filing
of
respondent
Lacsamana's
Answer.
 SO
ORDERED.

In
the
Order
of
November
10,
1980
respondent
Court
denied
said
Motion
 Teehankee
 (Chairman),
 Plana,
 Vasquez,
 Relova
 and
 Gutierrez,
 Jr.,
 JJ.,

to
Set
Case
for
Pre‐trial
as
the
case
was
already
dismissed
in
the
previous
 concur.

Orders
of
April
25,
1980
and
September
1,
1980.



 5


 A
 first
 class
 residential
 land
 Identffied
 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
 Duration
 No.
 19595
 issued
 by

G.R.
No.
L‐50008
August
31,
1987
 the
 Assessor
 of
 Olongapo
 City
 with
 an
 assessed
 value
 of
 P1,860.00;

bounded
on
the

PRUDENTIAL
 BANK,
 petitioner,
 
vs.
HONORABLE
 DOMINGO
 D.
 PANIS,

Presiding
 Judge
 of
 Branch
 III,
 Court
 of
 First
 Instance
 of
 Zambales
 and
 NORTH:
By
No.
6,
Ardoin
Street

Olongapo
 City;
 FERNANDO
 MAGCALE
 &
 TEODULA
 BALUYUT‐MAGCALE,
 SOUTH:
By
No.
2,
Ardoin
Street

respondents.

EAST:
By
37
Canda
Street,
and




WEST:
By
Ardoin
Street.

PARAS,
J.:

All
corners
of
the
lot
marked
by
conc.
cylindrical
monuments
of
the
Bureau

This
 is
 a
 petition
 for
 review
 on
 certiorari
 of
 the
 November
 13,
 1978
 of
Lands
as
visible
limits.
(
Exhibit
"A,
"
also
Exhibit
"1"
for
defendant).

Decision
 *
 of
 the
 then
 Court
 of
 First
 Instance
 of
 Zambales
 and
 Olongapo

Apart
from
the
stipulations
in
the
printed
portion
of
the
aforestated
deed

City
 in
 Civil
 Case
 No.
 2443‐0
 entitled
 "Spouses
 Fernando
 A.
 Magcale
 and

of
mortgage,
there
appears
a
rider
typed
at
the
bottom
of
the
reverse
side

Teodula
 Baluyut‐Magcale
 vs.
 Hon.
 Ramon
 Y.
 Pardo
 and
 Prudential
 Bank"

of
the
document
under
the
lists
of
the
properties
mortgaged
which
reads,

declaring
that
the
deeds
of
real
estate
mortgage
executed
by
respondent

as
follows:

spouses
in
favor
of
petitioner
bank
are
null
and
void.

AND
IT
IS
FURTHER
AGREED
that
in
the
event
the
Sales
Patent
on
the
lot

The
 undisputed
 facts
 of
 this
 case
 by
 stipulation
 of
 the
 parties
 are
 as

applied
for
by
the
Mortgagors
as
herein
stated
is
released
or
issued
by
the

follows:

Bureau
of
Lands,
the
Mortgagors
hereby
authorize
the
Register
of
Deeds
to

...
 on
 November
 19,
 1971,
 plaintiffs‐spouses
 Fernando
 A.
 Magcale
 and
 hold
 the
 Registration
 of
 same
 until
 this
 Mortgage
 is
 cancelled,
 or
 to

Teodula
Baluyut
Magcale
secured
a
loan
in
the
sum
of
P70,000.00
from
the
 annotate
this
encumbrance
on
the
Title
upon
authority
from
the
Secretary

defendant
 Prudential
 Bank.
 To
 secure
 payment
 of
 this
 loan,
 plaintiffs
 of
Agriculture
and
Natural
Resources,
which
title
with
annotation,
shall
be

executed
in
favor
of
defendant
on
the
aforesaid
date
a
deed
of
Real
Estate
 released
in
favor
of
the
herein
Mortgage.

Mortgage
over
the
following
described
properties:

From
 the
 aforequoted
 stipulation,
 it
 is
 obvious
 that
 the
 mortgagee

l.
 A
 2‐STOREY,
 SEMI‐CONCRETE,
 residential
 building
 with
 warehouse
 (defendant
 Prudential
 Bank)
 was
 at
 the
 outset
 aware
 of
 the
 fact
 that
 the

spaces
 containing
 a
 total
 floor
 area
 of
 263
 sq.
 meters,
 more
 or
 less,
 mortgagors
(plaintiffs)
have
already
filed
a
Miscellaneous
Sales
Application

generally
constructed
of
mixed
hard
wood
and
concrete
materials,
under
a
 over
the
lot,
possessory
rights
over
which,
were
mortgaged
to
it.

roofing
 of
 cor.
 g.
 i.
 sheets;
 declared
 and
 assessed
 in
 the
 name
 of

Exhibit
"A"
(Real
Estate
Mortgage)
was
registered
under
the
Provisions
of

FERNANDO
 MAGCALE
 under
 Tax
 Declaration
 No.
 21109,
 issued
 by
 the

Act
3344
with
the
Registry
of
Deeds
of
Zambales
on
November
23,
1971.

Assessor
 of
 Olongapo
 City
 with
 an
 assessed
 value
 of
 P35,290.00.
 This

building
is
the
only
improvement
of
the
lot.
 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

2.
 THE
 PROPERTY
 hereby
 conveyed
 by
 way
 of
 MORTGAGE
 includes
 the

additional
loan,
plaintiffs
executed
in
favor
of
the
said
defendant
another

right
 of
 occupancy
 on
 the
 lot
 where
 the
 above
 property
 is
 erected,
 and

deed
 of
 Real
 Estate
 Mortgage
 over
 the
 same
 properties
 previously

more
particularly
described
and
bounded,
as
follows:

mortgaged
in
Exhibit
"A."
(Exhibit
"B;"
also
Exhibit
"2"
for
defendant).
This



 6

second
 deed
 of
 Real
 Estate
 Mortgage
 was
 likewise
 registered
 with
 the
 In
a
Resolution
dated
August
10,
1979,
this
case
was
considered
submitted

Registry
of
Deeds,
this
time
in
Olongapo
City,
on
May
2,1973.
 for
decision
(Ibid.,
P.
158).

On
April
24,
1973,
the
Secretary
of
Agriculture
issued
Miscellaneous
Sales
 In
its
Memorandum,
petitioner
raised
the
following
issues:

Patent
No.
4776
over
the
parcel
of
land,
possessory
rights
over
which
were

1.
WHETHER
OR
NOT
THE
DEEDS
OF
REAL
ESTATE
MORTGAGE
ARE
VALID;

mortgaged
to
defendant
Prudential
Bank,
in
favor
of
plaintiffs.
On
the
basis

AND

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
 2.
WHETHER
OR
NOT
THE
SUPERVENING
ISSUANCE
IN
FAVOR
OF
PRIVATE

issued
in
the
name
of
Plaintiff
Fernando
Magcale,
by
the
Ex‐Oficio
Register
 RESPONDENTS
OF
MISCELLANEOUS
SALES
PATENT
NO.
4776
ON
APRIL
24,

of
Deeds
of
Zambales,
on
May
15,
1972.
 1972
UNDER
ACT
NO.
730
AND
THE
COVERING
ORIGINAL
CERTIFICATE
OF

TITLE
 NO.
 P‐2554
 ON
 MAY
 15,1972
 HAVE
 THE
 EFFECT
 OF
 INVALIDATING

For
 failure
 of
 plaintiffs
 to
 pay
 their
 obligation
 to
 defendant
 Bank
 after
 it

THE
 DEEDS
 OF
 REAL
 ESTATE
 MORTGAGE.
 (Memorandum
 for
 Petitioner,

became
 due,
 and
 upon
 application
 of
 said
 defendant,
 the
 deeds
 of
 Real

Rollo,
p.
122).

Estate
 Mortgage
 (Exhibits
 "A"
 and
 "B")
 were
 extrajudicially
 foreclosed.

Consequent
 to
 the
 foreclosure
 was
 the
 sale
 of
 the
 properties
 therein
 This
petition
is
impressed
with
merit.

mortgaged
 to
 defendant
 as
 the
 highest
 bidder
 in
 a
 public
 auction
 sale
 The
pivotal
issue
in
this
case
is
whether
or
not
a
valid
real
estate
mortgage

conducted
by
the
defendant
City
Sheriff
on
April
12,
1978
(Exhibit
"E").
The
 can
 be
 constituted
 on
 the
 building
 erected
 on
 the
 land
 belonging
 to

auction
 sale
 aforesaid
 was
 held
 despite
 written
 request
 from
 plaintiffs
 another.

through
 counsel
 dated
 March
 29,
 1978,
 for
 the
 defendant
 City
 Sheriff
 to

desist
 from
 going
 with
 the
 scheduled
 public
 auction
 sale
 (Exhibit
 "D")."
 The
answer
is
in
the
affirmative.

(Decision,
Civil
Case
No.
2443‐0,
Rollo,
pp.
29‐31).
 In
the
enumeration
of
properties
under
Article
415
of
the
Civil
Code
of
the

Respondent
 Court,
 in
 a
 Decision
 dated
 November
 3,
 1978
 declared
 the
 Philippines,
 this
 Court
 ruled
 that,
 "it
 is
 obvious
 that
 the
 inclusion
 of

deeds
of
Real
Estate
Mortgage
as
null
and
void
(Ibid.,
p.
35).
 "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.

On
 December
 14,
 1978,
 petitioner
 filed
 a
 Motion
 for
 Reconsideration
 Orosa,
Jr.,
et
al.,
L‐10817‐18,
Feb.
28,
1958;
Associated
Inc.
and
Surety
Co.,

(Ibid.,
 pp.
 41‐53),
 opposed
 by
 private
 respondents
 on
 January
 5,
 1979
 Inc.
vs.
Iya,
et
al.,
L‐10837‐38,
May
30,1958).

(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
 Thus,
 while
 it
 is
 true
 that
 a
 mortgage
 of
 land
 necessarily
 includes,
 in
 the

instant
petition
(Ibid.,
pp.
5‐28).
 absence
 of
 stipulation
 of
 the
 improvements
 thereon,
 buildings,
 still
 a

building
 by
 itself
 may
 be
 mortgaged
 apart
 from
 the
 land
 on
 which
 it
 has

The
 first
 Division
 of
 this
 Court,
 in
 a
 Resolution
 dated
 March
 9,
 1979,
 been
built.
Such
a
mortgage
would
be
still
a
real
estate
mortgage
for
the

resolved
to
require
the
respondents
to
comment
(Ibid.,
p.
65),
which
order
 building
 would
 still
 be
 considered
 immovable
 property
 even
 if
 dealt
 with

was
 complied
 with
 the
 Resolution
 dated
 May
 18,1979,
 (Ibid.,
 p.
 100),
 separately
 and
 apart
 from
 the
 land
 (Leung
 Yee
 vs.
 Strong
 Machinery
 Co.,

petitioner
filed
its
Reply
on
June
2,1979
(Ibid.,
pp.
101‐112).
 37
 Phil.
 644).
 In
 the
 same
 manner,
 this
 Court
 has
 also
 established
 that

Thereafter,
in
the
Resolution
dated
June
13,
1979,
the
petition
was
given
 possessory
rights
over
said
properties
before
title
is
vested
on
the
grantee,

due
 course
 and
 the
 parties
 were
 required
 to
 submit
 simultaneously
 their
 may
be
validly
transferred
or
conveyed
as
in
a
deed
of
mortgage
(Vda.
de

respective
memoranda.
(Ibid.,
p.
114).
 Bautista
vs.
Marcos,
3
SCRA
438
[1961]).

On
 July
 18,
 1979,
 petitioner
 filed
 its
 Memorandum
 (Ibid.,
 pp.
 116‐144),
 Coming
back
to
the
case
at
bar,
the
records
show,
as
aforestated
that
the

while
 private
 respondents
 filed
 their
 Memorandum
 on
 August
 1,
 1979
 original
mortgage
deed
on
the
2‐storey
semi‐concrete
residential
building

(Ibid.,
pp.
146‐155).
 with
 warehouse
 and
 on
 the
 right
 of
 occupancy
 on
 the
 lot
 where
 the


 7

building
was
erected,
was
executed
on
November
19,
1971
and
registered
 1977
in
order
that
the
mortgaged
may
be
annotated,
without
requiring
the

under
 the
 provisions
 of
 Act
 3344
 with
 the
 Register
 of
 Deeds
 of
 Zambales
 bank
 to
 get
 the
 prior
 approval
 of
 the
 Ministry
 of
 Natural
 Resources

on
November
23,
1971.
Miscellaneous
Sales
Patent
No.
4776
on
the
land
 beforehand,
 thereby
 implicitly
 authorizing
 Prudential
 Bank
 to
 cause
 the

was
 issued
 on
 April
 24,
 1972,
 on
 the
 basis
 of
 which
 OCT
 No.
 2554
 was
 annotation
of
said
mortgage
on
their
title.

issued
 in
 the
 name
 of
 private
 respondent
 Fernando
 Magcale
 on
 May
 15,

However,
 the
 Court,
 in
 recently
 ruling
 on
 violations
 of
 Section
 124
 which

1972.
 It
 is
 therefore
 without
 question
 that
 the
 original
 mortgage
 was

refers
 to
 Sections
 118,
 120,
 122
 and
 123
 of
 Commonwealth
 Act
 141,
 has

executed
 before
 the
 issuance
 of
 the
 final
 patent
 and
 before
 the

held:

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
 ...
Nonetheless,
we
apply
our
earlier
rulings
because
we
believe
that
as
in

registration
 in
 the
 Office
 of
 the
 Register
 of
 Deeds
 (Visayan
 Realty
 Inc.
 vs.
 pari
 delicto
 may
 not
 be
 invoked
 to
 defeat
 the
 policy
 of
 the
 State
 neither

Meer,
96
Phil.
515;
Director
of
Lands
vs.
De
Leon,
110
Phil.
28;
Director
of
 may
 the
 doctrine
 of
 estoppel
 give
 a
 validating
 effect
 to
 a
 void
 contract.

Lands
 vs.
 Jurado,
 L‐14702,
 May
 23,
 1961;
 Pena
 "Law
 on
 Natural
 Indeed,
 it
 is
 generally
 considered
 that
 as
 between
 parties
 to
 a
 contract,

Resources",
 p.
 49).
 Under
 the
 foregoing
 considerations,
 it
 is
 evident
 that
 validity
 cannot
 be
 given
 to
 it
 by
 estoppel
 if
 it
 is
 prohibited
 by
 law
 or
 is

the
 mortgage
 executed
 by
 private
 respondent
 on
 his
 own
 building
 which
 against
public
policy
(19
Am.
Jur.
802).
It
is
not
within
the
competence
of

was
erected
on
the
land
belonging
to
the
government
is
to
all
intents
and
 any
 citizen
 to
 barter
 away
 what
 public
 policy
 by
 law
 was
 to
 preserve

purposes
a
valid
mortgage.
 (Gonzalo
 Puyat
 &
 Sons,
 Inc.
 vs.
 De
 los
 Amas
 and
 Alino
 supra).
 ...
 (Arsenal

vs.
IAC,
143
SCRA
54
[1986]).

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
 This
pronouncement
covers
only
the
previous
transaction
already
alluded

Act,
 refer
 to
 land
 already
 acquired
 under
 the
 Public
 Land
 Act,
 or
 any
 to
and
does
not
pass
upon
any
new
contract
between
the
parties
(Ibid),
as

improvement
 thereon
 and
 therefore
 have
 no
 application
 to
 the
 assailed
 in
 the
 case
 at
 bar.
 It
 should
 not
 preclude
 new
 contracts
 that
 may
 be

mortgage
in
the
case
at
bar
which
was
executed
before
such
eventuality.
 entered
into
between
petitioner
bank
and
private
respondents
that
are
in

Likewise,
Section
2
of
Republic
Act
No.
730,
also
a
restriction
appearing
on
 accordance
 with
 the
 requirements
 of
 the
 law.
 After
 all,
 private

the
 face
 of
 private
 respondent's
 title
 has
 likewise
 no
 application
 in
 the
 respondents
 themselves
 declare
 that
 they
 are
 not
 denying
 the
 legitimacy

instant
case,
despite
its
reference
to
encumbrance
or
alienation
before
the
 of
 their
 debts
 and
 appear
 to
 be
 open
 to
 new
 negotiations
 under
 the
 law

patent
is
issued
because
it
refers
specifically
to
encumbrance
or
alienation
 (Comment;
 Rollo,
 pp.
 95‐96).
 Any
 new
 transaction,
 however,
 would
 be

on
 the
 land
 itself
 and
 does
 not
 mention
 anything
 regarding
 the
 subject
 to
 whatever
 steps
 the
 Government
 may
 take
 for
 the
 reversion
 of

improvements
existing
thereon.
 the
land
in
its
favor.

But
it
is
a
different
matter,
as
regards
the
second
mortgage
executed
over
 PREMISES
 CONSIDERED,
 the
 decision
 of
 the
 Court
 of
 First
 Instance
 of

the
same
properties
on
May
2,
1973
for
an
additional
loan
of
P20,000.00
 Zambales
&
Olongapo
City
is
hereby
MODIFIED,
declaring
that
the
Deed
of

which
 was
 registered
 with
 the
 Registry
 of
 Deeds
 of
 Olongapo
 City
 on
 the
 Real
 Estate
 Mortgage
 for
 P70,000.00
 is
 valid
 but
 ruling
 that
 the
 Deed
 of

same
 date.
 Relative
 thereto,
 it
 is
 evident
 that
 such
 mortgage
 executed
 Real
Estate
Mortgage
for
an
additional
loan
of
P20,000.00
is
null
and
void,

after
the
issuance
of
the
sales
patent
and
of
the
Original
Certificate
of
Title,
 without
 prejudice
 to
 any
 appropriate
 action
 the
 Government
 may
 take

falls
squarely
under
the
prohibitions
stated
in
Sections
121,
122
and
124
of
 against
private
respondents.

the
Public
Land
Act
and
Section
2
of
Republic
Act
730,
and
is
therefore
null
 SO
ORDERED.

and
void.

Teehankee,
C.J.,
Narvasa,
Cruz
and
Gancayco,
JJ.,
concur.

Petitioner
points
out
that
private
respondents,
after
physically
possessing

the
 title
 for
 five
 years,
 voluntarily
 surrendered
 the
 same
 to
 the
 bank
 in
 



 8


 proceeded
 westward;
 Saludo
 was
 then
 wearing
 rubber
 shoes,
 white
 polo

shirt
and
fatigue
pants.
And
that
was
the
last
time
his
family
saw
him.


At
around
11:00
o'clock
of
that
same
morning,
Marcelo
Verano,
who
was


pasturing
 his
 carabao
 in
 the
 north
 part
 of
 barrio
 Bucal,
 heard
 someone


 groaning;
 out
 of
 curiosity,
 he
 proceeded
 to
 the
 place
 whence
 the
 sounds

G.R.
No.
L‐11641










November
29,
1962
 had
 come,
 cautiously
 peered
 through
 some
 bushes
 and
 espied
 appellant

beating
 Vidal
 Saludo
 with
 a
 rice
 pestle,
 in
 the
 presence
 of
 armed

THE
 PEOPLE
 OF
 THE
 PHILIPPINES,
 plaintiff‐appellee,
 
vs.
VIVENCIO
 CATLI,
 companions,
one
of
whom
remarked:
"That
is
enough
Babing,
he
is
already

defendant‐appellant.
 dead";
 seized
 fear,
 Verano
 left
 the
 place
 but
 refrained
 from
 disclosing
 to

Office
of
the
Solicitor
General
for
plaintiff‐appellee.
De
Mesa
and
De
Mesa
 others
what
he
had
observed,
because
he
surmised
that
appellant
and
his

for
defendant‐appellant.
 men
were
Huks.


BENGZON,
C.J.:
 At
about
2:00
p.m.
of
the
same
day,
Diego
Martija,
then
a
member
of
the

rural
 council
 of
 Bucal,
 met
 Maria
 Saludo
 who
 sobbingly
 told
 him
 that
 her

This
 case
 began
 with
 an
 information
 against
 Vivencio
 Catli
 charging
 that
 brother
Vidal
had
been
taken
by
the
Huks
led
by
appellant;
she
begged
his

sometime
 in
 May
 1948,
 in
 Tiaong,
 Quezon
 Province,
 he
 inflicted
 mortal
 help
 to
 locate
 Vidal,
 and
 after
 some
 hesitation,
 Martija
 responded
 by

injuries
upon
Vidal
Saludo,
assisted
by
two
others
still
at
large.
Aggravating
 asking
 a
 neighbor,
 Leoncio
 Manimtim
 to
 accompany
 him
 to
 search
 for

circumstances
 of
 treachery,
 superior
 strength
 and
 means
 to
 weaken
 the
 Vidal.
The
pair
followed
the
trail
Vidal
was
last
seen
to
have
taken,
making

defense
were
cited.
 inquiries
from
people
who
may
have
seen
Saludo's
group
the
search
ended

After
 trial,
 the
 court
 of
 first
 instance
 of
 Quezon
 adjudged
 him
 guilty
 of
 near
 the
 Capanglao
 river;
 en
 route,
 the
 two,
 Martija
 and
 Manimtim

murder,
 and
 sentenced
 him
 to
 suffer
 life
 imprisonment
 with
 the
 discovered
 some
 drops
 of
 blood.
 As
 they
 approached
 the
 river,
 the
 two

accessories,
 to
 indemnify
 Saludo's
 heirs
 in
 the
 sum
 of
 P6,000.00,
 sans
 found
 a
 newly
 dug
 grave
 covered
 with
 coconut
 leaves;
 they
 brushed
 the

subsidiary
imprisonment,
and
to
defray
the
costs.
 leaves
 only
 to
 find
 acastorillo
 hat
 which
 they
 recognized
 as
 one
 Vidal

Saludo
 was
 wont
 to
 wear.
 Replacing
 the
 coconut
 leaves,
 the
 two
 left
 for

Insisting
 on
 his
 innocence,
 the
 accused
 seasonably
 appealed,
 raising
 here

their
 respective
 homes,
 but
 refrained
 from
 revealing
 their
 findings
 to
 the

these
material
points:
(a)
substantial
variance
between
the
allegations
and

authority
for
fear
of
the
Huks.

the
 proof,
 because
 while
 the
 information
 indicated
 three
 persons
 as

authors
of
the
crime,
the
prosecution's
evidence
showed
there
were
more;
 Years
 after
 or
 in
 1951,
 Diego
 Martija
 was
 appointed
 Barrio
 Lieutenant
 of

(b)
delay
of
seven
years
in
the
prosecution
of
the
crime;
(c)
the
testimonies
 Bucal
but
he
was
not
provided
with
firearms;
then
on
March
22,
1955,
he

of
the
State
witnesses
are
evidently
fabricated.
 was
named
chief
of
the
civilian
commando
unit
of
the
same
barrio
and
was

given
 a
 gun.
 Emboldened
 by
 the
 possession
 of
 such
 weapon
 and

The
 People's
 evidence
 discloses
 that
 on
 May
 6,
 1948,
 Vidal
 Saludo,
 then

encouraged
 by
 the
 government
 campaign
 against
 the
 dissidents,
 Martija

barrio
 lieutenant
 of
 Bucal,
 Tiaong,
 was
 living
 with
 his
 wife,
 Fausta

sometime
in
December,
1955,
reported
to
the
police
chief
of
Tiaong
what

Mercado,
 their
 children
 and
 a
 14‐year
 old
 godson
 Francisco
 Lopez,
 in
 a

he
knew
about
Vidal
Saludo's
killing.
On
December
5,
1955,
the
police
chief

house
located
in
said
barrio.
At
about
7:00
a.m.
of
said
day,
several
armed

with
 some
 PC
 soldiers
 exhumed
 the
 remains
 of
 Vidal
 Saludo;
 inside
 the

men
headed
by
appellant
Vivencio
Catli
inquired
from
Fausta
Mercado
the

grave,
which
he
pointed
out,
they
found
bones
of
a
human
skeleton
and
a

whereabouts
of
her
husband,
and
upon
being
informed
that
the
latter
was

pair
 of
 soles
 of
 rubber
 shoes.
 The
 bones
 were
 gathered
 in
 an
 army
 sack,

upstairs,
 Catli
 went
 up
 and
 requested
 Vidal
 Saludo
 to
 accompany
 him
 to

shipped
to
the
NBI
in
Manila
for
medico‐legal
examination,
and
following

look
 for
 Benito
 Tenorio
 who
 had
 strayed
 from
 the
 appellant's
 group;

such
examination,
Dr.
Jesus
D.
Crisostomo,
medico‐legal
officer
submitted

yielding
 to
 this
 request,
 Saludo
 joined
 the
 appellant's
 band
 which


 9

an
Osteological
report
with
the
conclusion
that:
 same
 incident,
 before
 Jose
 B.
 Tuason,
 deputy
 clerk
 of
 the
 CFI
 of
 Quezon

and
 on
 the
 basis
 of
 the
 two
 affidavits,
 a
 complaint
 for
 frustrated
 murder

1.
Those
bony
remains
are
human
in
origin.

filed
 by
 appellant
 before
 the
 assistant
 fiscal
 of
 Quezon
 was
 investigated.

2.
They
belong
to
only
one
individual.
 Appellant
also
averred
that
while
his
complaint
was
pending
investigation,

3.
That
the
set
of
bones
belongs
to
a
male
individual.
 Mayor
 Punzalan
 sent
 an
 emissary,
 Avelino
 by
 name,
 requesting
 him

(appellant)
 to
 withdraw
 his
 complaint
 in
 exchange
 for
 P3,000.00
 and
 an

4.
That
this
individual
has
a
stature
of
approximately
165.812
cms.
(5
feet
 appointment
as
a
caminero;
that
appellant
spurned
the
offer
and
instead,

inches)
plus
or
minus.
 on
September
1,
1955,
he
executed
another
affidavit
before
the
same
NBI

5.
 That
 the
 probable
 age
 of
 the
 time
 of
 death
 of
 this
 individual
 may
 lie
 Agent
No.
43
elaborating
on
his
first
affidavit;
that
on
December
5,
1955,

between
35
and
45
years.
 the
police
chief
of
Tiaong
directed
the
exhumation
of
Saludo's
remains
that

on
 December
 13,
 1955,
 the
 same
 officer
 fetched
 Fausta
 Mercado
 from

6.
 That
 no
 cause
 of
 death
 can
 be
 assigned
 or
 given
 in
 this
 particular
 barrio
 Bangcalat,
 Tanauan,
 Batangas
 and
 took
 her
 to
 Tiaong
 where
 she

individual,
as
the
submitted
and
assorted
bones
as
a
set
does
not
show
any
 subscribed
 to
 statement
 naming
 the
 appellant
 as
 the
 murderer
 of
 her

sign
of
antemortem
injury.
 husband
Vidal
Saludo;
and
that
the
complaint
against
him
was
trumped
up

7.
 That
 considering
 the
 moderately
 advanced
 postmortem
 disintegration
 at
the
instigation
of
Mayor
Punzalan
because
of
his
refusal
to
withdraw
his

of
the
bones
submitted
assorted
and
non‐assorted,
the
probable
length
of
 complaint
against
the
mayor
and
the
latter's
henchmen.

time
 that
 may
 have
 already
 elapsed
 after
 burial
 may
 be
 placed
 between
 Appellant's
alibi,
besides
being
inherently
weak,
sounds
unconvincing
and

five
(5)
and
ten
(10)
years.
 ineffectual.
His
claim
that
he
resided
in
his
sister‐in‐law's
(Elena
Jaurigue)

Appellant's
defense
revolves
around
an
alibi.
He
testified
that
in
1946,
he
 house
at
barrio
Sta.
Elena,
Sto.
Tomas,
Batangas
between
March
and
July

lived
 in
 the
 house
 of
 Arcadio
 Exconde
 in
 barrio
 Quipot,
 Tiaong
 that
 in
 1948,
 by
 no
 means
 erases
 the
 possibility
 that
 he
 was
 in
 barrio
 Bucal,

March
1948,
he
moved
to
barrio
Sta
Clara,
Sto.
Tomas,
Batangas,
residing
 Tiaong
on
May
6,
1948,
when
the
victim,
Vidal
Saludo
was
murdered.
Elena

in
the
house
of
Elena
Jaurigue,
sister
of
Gorgonia,
the
girl
he
was
courting;
 Jaurigue
 herself
 declared
 that
 the
 distance
 between
 the
 two
 barrios
 was

that
 following
 an
 old
 native
 custom,
 he
 stayed
 in
 Sta.
 Clara
 performing
 short
 and
 could
 be
 negotiated
 by
 bus
 in
 half
 an
 hour.
 Although
 she
 tried

such
chores
as
drawing
water
and
clearing
the
coffee
farm
in
the
service
of
 hard
 to
 corroborate
 appellants
 alibi
 by
 insisting
 that
 the
 latter
 did
 not

the
woman,
object
of
his
affections;
that
he
never
left
Sta.
Clara
until
July
 leave
 barrio
 Sta.
 Elena
 even
 once
 during
 the
 five
 months
 of
 his
 stay

1948
 when,
 having
 ostensibly
 won
 the
 girl's
 favor,
 he
 and
 his
 bride‐to‐be
 thereat,
 her
 testimony
 does
 not
 ring
 true.
 She
 said
 it
 was
 impossible
 for

departed
 for
 barrio
 Quipot,
 Tiaong,
 where
 they
 resided
 in
 peace
 and
 appellant
 to
 leave
 her
 house
 without
 her
 knowledge
 because
 her
 home

contentment.
He
recounts
that
on
April
6,
1951,
five
men
lured
him
from
 was
a
one‐room
affair
where
appellant
kept
his
clothes
and
that
this
room

his
 house
 at
 night
 and
 after
 leading
 him
 some
 five
 meters
 away,
 they
 was
under
lock,
the
key
to
which
she
always
kept.
But
this
situation
does

stabbed
him
repeatedly
and
then
left
him
for
dead;
that
fifteen
days
after,
 not
 rule
 out
 appellant's
 chance
 to
 slip
 out
 of
 the
 premises
 unnoticed
 by

he
 recovered
 from
 his
 wounds
 at
 the
 government
 hospital
 of
 San
 Pablo
 Elena,
because
precisely
he
was
locked
out;
and
since
he
was
purportedly

City
and
then
he
moved
to
Unisan,
Quezon
for
fear
his
of
assailants;
that
 rendering
 manual
 chores,
 he
 perforce
 had
 to
 be
 dressed
 and
 leave
 the

on
 April
 11,
 1955,
 he
 executed
 an
 affidavit
 before
 Agent
 No.
 43
 of
 the
 house
 once
 in
 a
 while.
 Withal,
 it
 is
 hard
 to
 believe
 that
 an
 able‐bodied

National
Bureau
of
Investigation
regarding
the
attempt
on
his
life,
naming
 laborer
 such
 as
 appellant
 would
 stay
 confined
 in
 only
 one
 place
 for
 a

his
 assailants
 Tomas
 Magwari,
 Hilarion
 Gutierrez,
 Pedro
 Mangubat,
 prolonged
and
continuous
period.

Eusebio
 Orense
 and
 another
 person
 whom
 he
 failed
 to
 recognize
 and
 As
against
appellant's
alibi,
there
is
the
positive
identification
made
of
him

especially
 pointing
 to
 Mayor
 Punzalan
 of
 Tiaong
 as
 the
 instigator
 of
 the
 by
Marcelo
Verano
who
peered
through
the
bushes
and
saw
him
clubbing

crime;
 that
 on
 July
 1,
 1955,
 he
 executed
 another
 affidavit
 concerning
 the
 Vidal
 Saludo
 with
 a
 rice
 pestle;
 and
 the
 testimony
 of
 the
 victim's
 wife


 10

pointing
 to
 appellant
 as
 the
 leader
 of
 the
 band
 that
 took
 her
 husband
 Record)
 of
 April
 7,
 1951,
 when
 he
 still
 had
 no
 opportunity
 to
 contrive,

away.
All
these
render
appellant's
alibi
unavailing.1
 reveals
 that
 he
 failed
 to
 recognize
 his
 assailants.
 This
 statement
 entitled

"Ante
 Mortem"
 bears
 the
 appellant's
 thumbmark
 and
 is
 witnessed
 by
 his

In
connection
with
the
variance
between
the
number
of
persons
alleged
in

own
brother‐in‐law,
Simon
Jaurigue.
Subsequently,
on
April
11,
1955,
five

the
 information
 and
 the
 number
 of
 persons
 cited
 by
 the
 witnesses
 as

days
 after
 he
 was
 stabbed,
 appellant
 executed
 an
 affidavit
 before
 Agent

having
participated
in
the
crime,
it
is
enough
to
state
that
such
variance
is

No.
 43
 of
 the
 NBI
 and
 this
 time,
 he
 named
 Hilarion
 Gutierrez,
 Tomas

not
material.
Appellant
was
properly
identified
both
in
the
information
and

Magwari,
Pedro
Mangubat
and
Eustaquio
Orense
as
his
attackers;
he
also

in
 the
 testimonial
 evidence
 of
 the
 witnesses;
 he
 was
 fully
 aware
 of
 the

claimed
 having
 overheard
 Gutierrez
 mutter
 "Ang
 sabi
 ni
 Mayor

nature
and
cause
of
the
accusation;
and
he
failed
to
object
seasonably
in

(PUNZALAN)
ay
huag
ng
barilin
at
saksakin
na
lamang"
(Exh.
6,
pp.
178179,

the
trial
to
the
testimonial
allegation
that
there
were
some
other
persons

Record).
 In
 the
 same
 statement,
 however,
 appellant
 stated
 that
 one

involved
in
the
crime.
And
it
is
the
rule
in
this
jurisdiction
that
a
"variance

Brigido
 Balmes
 aided
 him
 shortly
 after
 he
 was
 wounded;
 but
 in
 the
 trial,

between
 the
 allegations
 of
 the
 information
 and
 the
 evidence
 offered
 by

Balmes,
 testifying
 as
 a
 rebuttal
 witness
 for
 the
 State,
 declared
 that

the
prosecution
in
support
thereof,
does
not
of
itself
entitle
the
accused
to

appellant
 had
 told
 him
 that
 five
 persons
 had
 attacked
 and
 stabbed
 him

an
 acquittal."2
 More,
 it
 is
 within
 the
 prosecuting
 officer's
 discretion
 to

near
 a
 mango
 tree
 but
 that
 he
 (appellant)
 was
 unable
 to
 recognize
 his

determine
 what
 persons
 appear
 to
 be
 responsible
 for
 the
 commission
 of

attackers.

an
offense;
and
if
for
lack
of
knowledge
or
mistake
or
any
other
reason,
he

fails
 to
 include
 the
 names
 of
 one
 or
 more
 criminal
 signals
 in
 an
 In
 fine,
 we
 feel
 that
 the
 evidence
 on
 hand
 sufficiently
 establishes

information,
such
persons
will
not
be
relieved
of
penal
liability;
nor
will
the
 appellant's
guilt
beyond
reasonable
doubt.

accused
who
have
been
charged
with
the
offense,
be
permitted
to
escape

WHEREFORE,
the
judgment
of
conviction
must
be
upheld;
and
there
being

punishment
 merely
 because
 it
 develops
 in
 the
 course
 of
 trial
 that
 there

no
 question
 as
 to
 the
 penalty
 imposed
 upon
 this
 appellant,
 the
 appealed

were
other
guilty
participants
in
the
crime.3

decision
is
affirmed
in
toto
with
costs.
So
ordered.

Appellant
 ascribes
 unreasonableness
 in
 the
 delay
 between
 the
 supposed

Padilla,
 Bautista
 Angelo,
 Labrador,
 Concepcion,
 Reyes,
 J.B.L.,
 Barrera,

commission
 of
 the
 offense
 in
 1948
 its
 prosecution
 in
 1956.
 It
 appears,

Paredes,
Dizon,
Regala
and
Makalintal,
JJ.,
concur.

however,
that
the
silence
of
these
witnesses,
particularly
of
Martija,
Vera

and
 Fausta
 Mercado
 was
 satisfactorily
 explained:
 they
 feared
 Huk
 

reprisals.
 Indeed,
 before
 these
 witness
 disclosed
 the
 facts
 to
 the
 

authorities,
dissident
bands
asking
for
"binalut"
or
wrappers
with
food
had

been
foraged
in
the
barrios
and
intimidating
the
residents.
The
security
of
 

the
life
in
the
barrio
is
illustrated
by
appellant's
claim
that
he
was
stabbed
 

and
 left
 for
 dead
 April
 6,
 1951
 when
 he
 refused
 to
 give
 his
 firearm
 to

persons.
 


Appellant
 lastly
 asserts
 that
 the
 charge
 against
 him
 was
 trumped
 up
 and
 

the
witness'
testimonies
fabricated.
He
claims
that
he
was
stabbed
on
April
 

6,
1951
upon
orders
of
Mayor
Punzalan;
that
as
a
consequence,
he
filed
a


complaint
 for
 frustrated
 murder
 against
 the
 Mayor
 a
 his
 five
 henchmen;

and
 for
 his
 refusal
 to
 withdraw
 the
 charge,
 the
 mayor
 caused
 the
 instant
 

case
to
be
filed
against
him.


Appellant's
 claim
 lacks
 merit.
 His
 written
 statement
 (Exh.
 H,
 p.
 190,


 11


 harvested
 and
 taken
 possession
 of
 the
 palay
 in
 one
 of
 said
 seven
 parcels

and
in
another
parcel
described
in
the
second
cause
of
action,
amounting


to
300
cavans;
and
that
all
of
said
palay
belonged
to
the
plaintiff.


Plaintiff
prayed
that
a
writ
of
preliminary
injunction
be
issued
against
the


 defendant
Emiliano
J.
Valdez
his
attorneys
and
agents,
restraining
them
(1)


 from
distributing
him
in
the
possession
of
the
parcels
of
land
described
in

the
complaint;
(2)
from
taking
possession
of,
or
harvesting
the
sugar
cane


 in
question;
and
(3)
from
taking
possession,
or
harvesting
the
palay
in
said


 parcels
 of
 land.
 Plaintiff
 also
 prayed
 that
 a
 judgment
 be
 rendered
 in
 his

favor
 and
 against
 the
 defendants
 ordering
 them
 to
 consent
 to
 the


 redemption
of
the
sugar
cane
in
question,
and
that
the
defendant
Valdez

G.R.
No.
L‐26278












August
4,
1927
 be
condemned
to
pay
to
the
plaintiff
the
sum
of
P1,056
the
value
of
palay

harvested
 by
 him
 in
 the
 two
 parcels
 above‐mentioned
 ,with
 interest
 and

LEON
 SIBAL
 ,
 plaintiff‐appellant,
 
vs.
EMILIANO
 J.
 VALDEZ
 ET
 AL.,

costs.

defendants.

EMILIANO
J.
VALDEZ,
appellee.

On
 December
 27,
 1924,
 the
 court,
 after
 hearing
 both
 parties
 and
 upon

J.
 E.
 Blanco
 for
 appellant.
Felix
 B.
 Bautista
 and
 Santos
 and
 Benitez
 for

approval
 of
 the
 bond
 for
 P6,000
 filed
 by
 the
 plaintiff,
 issued
 the
 writ
 of

appellee.

preliminary
injunction
prayed
for
in
the
complaint.

JOHNSON,
J.:

The
defendant
Emiliano
J.
Valdez,
in
his
amended
answer,
denied
generally

The
action
was
commenced
in
the
Court
of
First
Instance
of
the
Province
of
 and
specifically
each
and
every
allegation
of
the
complaint
and
step
up
the

Tarlac
 on
 the
 14th
 day
 of
 December
 1924.
 The
 facts
 are
 about
 as
 following
defenses:

conflicting
as
it
is
possible
for
facts
to
be,
in
the
trial
causes.

(a)
 That
 the
 sugar
 cane
 in
 question
 had
 the
 nature
 of
 personal
 property

As
a
first
cause
of
action
the
plaintiff
alleged
that
the
defendant
Vitaliano
 and
was
not,
therefore,
subject
to
redemption;

Mamawal,
 deputy
 sheriff
 of
 the
 Province
 of
 Tarlac,
 by
 virtue
 of
 a
 writ
 of

(b)
That
he
was
the
owner
of
parcels
1,
2
and
7
described
in
the
first
cause

execution
issued
by
the
Court
of
First
Instance
of
Pampanga,
attached
and

of
action
of
the
complaint;

sold
 to
 the
 defendant
 Emiliano
 J.
 Valdez
 the
 sugar
 cane
 planted
 by
 the

plaintiff
 and
 his
 tenants
 on
 seven
 parcels
 of
 land
 described
 in
 the
 (c)
That
he
was
the
owner
of
the
palay
in
parcels
1,
2
and
7;
and

complaint
 in
 the
 third
 paragraph
 of
 the
 first
 cause
 of
 action;
 that
 within
 (d)
That
he
never
attempted
to
harvest
the
palay
in
parcels
4
and
5.

one
year
from
the
date
of
the
attachment
and
sale
the
plaintiff
offered
to

redeem
said
sugar
cane
and
tendered
to
the
defendant
Valdez
the
amount
 The
defendant
Emiliano
J.
Valdez
by
way
of
counterclaim,
alleged
that
by

sufficient
to
cover
the
price
paid
by
the
latter,
the
interest
thereon
and
any
 reason
 of
 the
 preliminary
 injunction
 he
 was
 unable
 to
 gather
 the
 sugar

assessments
or
taxes
which
he
may
have
paid
thereon
after
the
purchase,
 cane,
 sugar‐cane
 shoots
 (puntas
 de
 cana
 dulce)
 palay
 in
 said
 parcels
 of

and
the
interest
corresponding
thereto
and
that
Valdez
refused
to
accept
 land,
representing
a
loss
to
him
of
P8,375.20
and
that,
in
addition
thereto,

the
money
and
to
return
the
sugar
cane
to
the
plaintiff.
 he
suffered
damages
amounting
to
P3,458.56.
He
prayed,
for
a
judgment

(1)
absolving
him
from
all
liability
under
the
complaint;
(2)
declaring
him
to

As
 a
 second
 cause
 of
 action,
 the
 plaintiff
 alleged
 that
 the
 defendant
 be
 the
 absolute
 owner
 of
 the
 sugar
 cane
 in
 question
 and
 of
 the
 palay
 in

Emiliano
 J.
 Valdez
 was
 attempting
 to
 harvest
 the
 palay
 planted
 in
 four
 of
 parcels
1,
2
and
7;
and
(3)
ordering
the
plaintiff
to
pay
to
him
the
sum
of

the
 seven
 parcels
 mentioned
 in
 the
 first
 cause
 of
 action;
 that
 he
 had
 P11,833.76,
 representing
 the
 value
 of
 the
 sugar
 cane
 and
 palay
 in



 12

question,
including
damages.
 Instance
 of
 Manila
 (Macondray
 &
 Co.,
 Inc.
 vs.
 Leon
 Sibal),levied
 an

attachment
on
eight
parcels
of
land
belonging
to
said
Leon
Sibal,
situated

Upon
the
issues
thus
presented
by
the
pleadings
the
cause
was
brought
on

in
 the
 Province
 of
 Tarlac,
 designated
 in
 the
 second
 of
 attachment
 as

for
trial.
After
hearing
the
evidence,
and
on
April
28,
1926,
the
Honorable

parcels
1,
2,
3,
4,
5,
6,
7
and
8
(Exhibit
B,
Exhibit
2‐A).

Cayetano
Lukban,
judge,
rendered
a
judgment
against
the
plaintiff
and
in

favor
of
the
defendants
—
 (2)
That
on
July
30,
1923,
Macondray
&
Co.,
Inc.,
bought
said
eight
parcels

of
land,
at
the
auction
held
by
the
sheriff
of
the
Province
of
Tarlac,
for
the

(1)
Holding
that
the
sugar
cane
in
question
was
personal
property
and,
as

sum
 to
 P4,273.93,
 having
 paid
 for
 the
 said
 parcels
 separately
 as
 follows

such,
was
not
subject
to
redemption;

(Exhibit
C,
and
2‐A):

(2)
Absolving
the
defendants
from
all
liability
under
the
complaint;
and


(3)
 Condemning
 the
 plaintiff
 and
 his
 sureties
 Cenon
 de
 la
 Cruz,
 Juan

Sangalang
 and
 Marcos
 Sibal
 to
 jointly
 and
 severally
 pay
 to
 the
 defendant
 Parcel
 

Emiliano
J.
Valdez
the
sum
of
P9,439.08
as
follows:

1
.....................................................................
 P1.00

(a)
P6,757.40,
the
value
of
the
sugar
cane;

(b)
1,435.68,
the
value
of
the
sugar‐cane
shoots;
 2
.....................................................................
 2,000.00

(c)
646.00,
the
value
of
palay
harvested
by
plaintiff;
 3
.....................................................................
 120.93

(d)
600.00,
the
value
of
150
cavans
of
palay
which
the
defendant
was
not

able
to
raise
by
reason
of
the
injunction,
at
P4
cavan.
9,439.08
From
that
 4
.....................................................................
 1,000.00

judgment
 the
 plaintiff
 appealed
 and
 in
 his
 assignments
 of
 error
 contends

that
 the
 lower
 court
 erred:
 (1)
 In
 holding
 that
 the
 sugar
 cane
 in
 question
 5
.....................................................................
 1.00

was
personal
property
and,
therefore,
not
subject
to
redemption;

6
.....................................................................
 1.00

(2)
In
holding
that
parcels
1
and
2
of
the
complaint
belonged
to
Valdez,
as

well
as
parcels
7
and
8,
and
that
the
palay
therein
was
planted
by
Valdez;
 7
with
the
house
thereon
..........................
 150.00

(3)
In
holding
that
Valdez,
by
reason
of
the
preliminary
injunction
failed
to


realized
 P6,757.40
 from
 the
 sugar
 cane
 and
 P1,435.68
 from
 sugar‐cane

shoots
(puntas
de
cana
dulce);
 8
.....................................................................
 1,000.00

(4)
In
holding
that,
for
failure
of
plaintiff
to
gather
the
sugar
cane
on
time,
 ==========

the
 defendant
 was
 unable
 to
 raise
 palay
 on
 the
 land,
 which
 would
 have

netted
him
the
sum
of
P600;
and.
 4,273.93


(5)
In
condemning
the
plaintiff
and
his
sureties
to
pay
to
the
defendant
the
 (3)
 That
 within
 one
 year
 from
 the
 sale
 of
 said
 parcel
 of
 land,
 and
 on
 the

sum
of
P9,439.08.
 24th
 day
 of
 September,
 1923,
 the
 judgment
 debtor,
 Leon
 Sibal,
 paid

It
appears
from
the
record:
 P2,000
to
Macondray
&
Co.,
Inc.,
for
the
account
of
the
redemption
price

of
 said
 parcels
 of
 land,
 without
 specifying
 the
 particular
 parcels
 to
 which

(1)
That
on
May
11,
1923,
the
deputy
sheriff
of
the
Province
of
Tarlac,
by
 said
 amount
 was
 to
 applied.
 The
 redemption
 price
 said
 eight
 parcels
 was

virtue
 of
 writ
 of
 execution
 in
 civil
 case
 No.
 20203
 of
 the
 Court
 of
 First
 reduced,
 by
 virtue
 of
 said
 transaction,
 to
 P2,579.97
 including
 interest



 13

(Exhibit
C
and
2).
 The
foregoing
statement
of
facts
shows:

The
record
further
shows:
 (1)
The
Emilio
J.
Valdez
bought
the
sugar
cane
in
question,
located
in
the

seven
parcels
of
land
described
in
the
first
cause
of
action
of
the
complaint

(1)
 That
 on
 April
 29,
 1924,
 the
 defendant
 Vitaliano
 Mamawal,
 deputy

at
public
auction
on
May
9
and
10,
1924,
for
P600.

sheriff
of
the
Province
of
Tarlac,
by
virtue
of
a
writ
of
execution
in
civil
case

No.
1301
of
the
Province
of
Pampanga
(Emiliano
J.
Valdez
vs.
Leon
Sibal
1.º
 (2)
 That
 on
 July
 30,
 1923,
 Macondray
 &
 Co.
 became
 the
 owner
 of
 eight

—
the
same
parties
in
the
present
case),
attached
the
personal
property
of
 parcels
 of
 land
 situated
 in
 the
 Province
 of
 Tarlac
 belonging
 to
 Leon
 Sibal

said
Leon
Sibal
located
in
Tarlac,
among
which
was
included
the
sugar
cane
 and
 that
 on
 September
 24,
 1923,
 Leon
 Sibal
 paid
 to
 Macondray
 &
 Co.

now
 in
 question
 in
 the
 seven
 parcels
 of
 land
 described
 in
 the
 complaint
 P2,000
for
the
account
of
the
redemption
price
of
said
parcels.

(Exhibit
A).

(3)
That
on
June
25,
1924,
Emilio
J.
Valdez
acquired
from
Macondray
&
Co.

(2)
That
on
May
9
and
10,
1924,
said
deputy
sheriff
sold
at
public
auction
 all
of
its
rights
and
interest
in
the
said
eight
parcels
of
land.

said
personal
properties
of
Leon
Sibal,
including
the
sugar
cane
in
question

(4)
 That
 on
 June
 25,
 1924,
 Emilio
 J.
 Valdez
 also
 acquired
 all
 of
 the
 rights

to
 Emilio
 J.
 Valdez,
 who
 paid
 therefor
 the
 sum
 of
 P1,550,
 of
 which
 P600

and
interest
which
Leon
Sibal
had
or
might
have
had
on
said
eight
parcels

was
for
the
sugar
cane
(Exhibit
A).

by
virtue
of
the
P2,000
paid
by
the
latter
to
Macondray.

(3)
 That
 on
 April
 29,1924,
 said
 deputy
 sheriff,
 by
 virtue
 of
 said
 writ
 of

(5)
That
Emilio
J.
Valdez
became
the
absolute
owner
of
said
eight
parcels

execution,
 also
 attached
 the
 real
 property
 of
 said
 Leon
 Sibal
 in
 Tarlac,

of
land.

including
 all
 of
 his
 rights,
 interest
 and
 participation
 therein,
 which
 real

property
 consisted
 of
 eleven
 parcels
 of
 land
 and
 a
 house
 and
 camarin
 The
 first
 question
 raised
 by
 the
 appeal
 is,
 whether
 the
 sugar
 cane
 in

situated
in
one
of
said
parcels
(Exhibit
A).
 question
 is
 personal
 or
 real
 property.
 It
 is
 contended
 that
 sugar
 cane

comes
 under
 the
 classification
 of
 real
 property
 as
 "ungathered
 products"

(4)
That
on
June
25,
1924,
eight
of
said
eleven
parcels,
including
the
house

in
paragraph
2
of
article
334
of
the
Civil
Code.
Said
paragraph
2
of
article

and
 the
 camarin,
 were
 bought
 by
 Emilio
 J.
 Valdez
 at
 the
 auction
 held
 by

334
 enumerates
 as
 real
 property
 the
 following:
 Trees,
 plants,
 and

the
 sheriff
 for
 the
 sum
 of
 P12,200.
 Said
 eight
 parcels
 were
 designated
 in

ungathered
 products,
 while
 they
 are
 annexed
 to
 the
 land
 or
 form
 an

the
certificate
of
sale
as
parcels
1,
3,
4,
5,
6,
7,
10
and
11.
The
house
and

integral
 part
 of
 any
 immovable
 property."
 That
 article,
 however,
 has

camarin
were
situated
on
parcel
7
(Exhibit
A).

received
 in
 recent
 years
 an
 interpretation
 by
 the
 Tribunal
 Supremo
 de

(5)
 That
 the
 remaining
 three
 parcels,
 indicated
 in
 the
 certificate
 of
 the
 España,
which
holds
that,
under
certain
conditions,
growing
crops
may
be

sheriff
 as
 parcels
 2,
 12,
 and
 13,
 were
 released
 from
 the
 attachment
 by
 considered
as
personal
property.
(Decision
of
March
18,
1904,
vol.
97,
Civil

virtue
 of
 claims
 presented
 by
 Agustin
 Cuyugan
 and
 Domiciano
 Tizon
 Jurisprudence
of
Spain.)

(Exhibit
A).

Manresa,
 the
 eminent
 commentator
 of
 the
 Spanish
 Civil
 Code,
 in

(6)
 That
 on
 the
 same
 date,
 June
 25,
 1924,
 Macondray
 &
 Co.
 sold
 and
 discussing
section
334
of
the
Civil
Code,
in
view
of
the
recent
decisions
of

conveyed
 to
 Emilio
 J.
 Valdez
 for
 P2,579.97
 all
 of
 its
 rights
 and
 interest
 in
 the
 supreme
 Court
 of
 Spain,
 admits
 that
 growing
 crops
 are
 sometimes

the
eight
parcels
of
land
acquired
by
it
at
public
auction
held
by
the
deputy
 considered
and
treated
as
personal
property.
He
says:

sheriff
of
Tarlac
in
connection
with
civil
case
No.
20203
of
the
Court
of
First

No
 creemos,
 sin
 embargo,
 que
 esto
 excluya
 la
 excepcionque
 muchos

Instance
of
Manila,
as
stated
above.
Said
amount
represented
the
unpaid

autores
 hacen
 tocante
 a
 la
 venta
 de
 toda
 cosecha
 o
 de
 parte
 de
 ella

balance
 of
 the
 redemption
 price
 of
 said
 eight
 parcels,
 after
 payment
 by

cuando
aun
no
esta
cogida
(cosa
frecuente
con
la
uvay
y
la
naranja),
y
a
la

Leon
 Sibal
 of
 P2,000
 on
 September
 24,
 1923,
 fro
 the
 account
 of
 the

de
 lenas,
 considerando
 ambas
 como
 muebles.
 El
 Tribunal
 Supremo,
 en

redemption
price,
as
stated
above.
(Exhibit
C
and
2).

sentencia
 de
 18
 de
 marzo
 de
 1904,
 al
 entender
 sobre
 un
 contrato
 de



 14

arrendamiento
 de
 un
 predio
 rustico,
 resuelve
 que
 su
 terminacion
 por
 Tax
Collector
(106
La.,
418)
the
Supreme
Court
said:
"True,
by
article
465
of

desahucio
 no
 extingue
 los
 derechos
 del
 arrendario,
 para
 recolectar
 o
 the
Civil
Code
it
is
provided
that
'standing
crops
and
the
fruits
of
trees
not

percibir
 los
 frutos
 correspondientes
 al
 año
 agricola,
 dentro
 del
 que
 gathered
and
trees
before
they
are
cut
down
.
.
.
are
considered
as
part
of

nacieron
 aquellos
 derechos,
 cuando
 el
 arrendor
 ha
 percibido
 a
 su
 vez
 el
 the
land
to
which
they
are
attached,
but
the
immovability
provided
for
is

importe
de
la
renta
integra
correspondiente,
aun
cuando
lo
haya
sido
por
 only
 one
 in
 abstracto
 and
 without
 reference
 to
 rights
 on
 or
 to
 the
 crop

precepto
legal
durante
el
curso
del
juicio,
fundandose
para
ello,
no
solo
en
 acquired
 by
 others
 than
 the
 owners
 of
 the
 property
 to
 which
 the
 crop
 is

que
de
otra
suerte
se
daria
al
desahucio
un
alcance
que
no
tiene,
sino
en
 attached.
.
.
.
The
existence
of
a
right
on
the
growing
crop
is
a
mobilization

que,
 y
 esto
 es
 lo
 interesante
 a
 nuestro
 proposito,
 la
 consideracion
 de
 by
 anticipation,
 a
 gathering
 as
 it
 were
 in
 advance,
 rendering
 the
 crop

inmuebles
 que
 el
 articulo
 334
 del
 Codigo
 Civil
 atribuge
 a
 los
 frutos
 movable
 quoad
 the
 right
 acquired
 therein.
 Our
 jurisprudence
 recognizes

pendientes,
 no
 les
 priva
 del
 caracter
 de
 productos
 pertenecientes,
 como
 the
possible
mobilization
of
the
growing
crop."
(Citizens'
Bank
vs.
Wiltz,
31

tales,
 a
 quienes
 a
 ellos
 tenga
 derecho,
 Ilegado
 el
 momento
 de
 su
 La.
Ann.,
244;
Porche
vs.
Bodin,
28
La.,
Ann.,
761;
Sandel
vs.
Douglass,
27

recoleccion.
 La.
Ann.,
629;
Lewis
vs.
Klotz,
39
La.
Ann.,
267.)

x
x
x










x
x
x










x
x
x
 "It
is
true,"
as
the
Supreme
Court
of
Louisiana
said
in
the
case
of
Porche
vs.

Bodin
 (28
 La.
 An.,
 761)
 that
 "article
 465
 of
 the
 Revised
 Code
 says
 that

Mas
 actualmente
 y
 por
 virtud
 de
 la
 nueva
 edicion
 de
 la
 Ley
 Hipotecaria,

standing
 crops
 are
 considered
 as
 immovable
 and
 as
 part
 of
 the
 land
 to

publicada
en
16
de
diciembre
de
1909,
con
las
reformas
introducidas
por
la

which
 they
 are
 attached,
 and
 article
 466
 declares
 that
 the
 fruits
 of
 an

de
 21
 de
 abril
 anterior,
 la
 hipoteca,
 salvo
 pacto
 expreso
 que
 disponga
 lo

immovable
gathered
or
produced
while
it
is
under
seizure
are
considered

contrario,
y
cualquiera
que
sea
la
naturaleza
y
forma
de
la
obligacion
que

as
making
part
thereof,
and
incurred
to
the
benefit
of
the
person
making

garantice,
no
comprende
los
frutos
cualquiera
que
sea
la
situacion
en
que

the
seizure.
But
the
evident
meaning
of
these
articles,
is
where
the
crops

se
encuentre.
(3
Manresa,
5.
edicion,
pags.
22,
23.)

belong
 to
 the
 owner
 of
 the
 plantation
 they
 form
 part
 of
 the
 immovable,

From
the
foregoing
it
appears
(1)
that,
under
Spanish
authorities,
pending
 and
where
it
is
seized,
the
fruits
gathered
or
produced
inure
to
the
benefit

fruits
 and
 ungathered
 products
 may
 be
 sold
 and
 transferred
 as
 personal
 of
the
seizing
creditor.

property;
(2)
that
the
Supreme
Court
of
Spain,
in
a
case
of
ejectment
of
a

A
crop
raised
on
leased
premises
in
no
sense
forms
part
of
the
immovable.

lessee
 of
 an
 agricultural
 land,
 held
 that
 the
 lessee
 was
 entitled
 to
 gather

It
belongs
to
the
lessee,
and
may
be
sold
by
him,
whether
it
be
gathered
or

the
products
corresponding
to
the
agricultural
year,
because
said
fruits
did

not,
 and
 it
 may
 be
 sold
 by
 his
 judgment
 creditors.
 If
 it
 necessarily
 forms

not
 go
 with
 the
 land
 but
 belonged
 separately
 to
 the
 lessee;
 and
 (3)
 that

part
 of
 the
 leased
 premises
 the
 result
 would
 be
 that
 it
 could
 not
 be
 sold

under
the
Spanish
Mortgage
Law
of
1909,
as
amended,
the
mortgage
of
a

under
 execution
 separate
 and
 apart
 from
 the
 land.
 If
 a
 lessee
 obtain

piece
 of
 land
 does
 not
 include
 the
 fruits
 and
 products
 existing
 thereon,

supplies
to
make
his
crop,
the
factor's
lien
would
not
attach
to
the
crop
as

unless
the
contract
expressly
provides
otherwise.

a
 separate
 thing
 belonging
 to
 his
 debtor,
 but
 the
 land
 belonging
 to
 the

An
 examination
 of
 the
 decisions
 of
 the
 Supreme
 Court
 of
 Louisiana
 may
 lessor
 would
 be
 affected
 with
 the
 recorded
 privilege.
 The
 law
 cannot
 be

give
us
some
light
on
the
question
which
we
are
discussing.
Article
465
of
 construed
so
as
to
result
in
such
absurd
consequences.

the
 Civil
 Code
 of
 Louisiana,
 which
 corresponds
 to
 paragraph
 2
 of
 article

In
the
case
of
Citizen's
Bank
vs.
Wiltz
(31
La.
Ann.,
244)the
court
said:

334
of
our
Civil
Code,
provides:
"Standing
crops
and
the
fruits
of
trees
not

gathered,
and
trees
before
they
are
cut
down,
are
likewise
immovable,
and
 If
 the
 crop
 quoad
 the
 pledge
 thereof
 under
 the
 act
 of
 1874
 was
 an

are
considered
as
part
of
the
land
to
which
they
are
attached."
 immovable,
it
would
be
destructive
of
the
very
objects
of
the
act,
it
would

render
the
pledge
of
the
crop
objects
of
the
act,
it
would
render
the
pledge

The
 Supreme
 Court
 of
 Louisiana
 having
 occasion
 to
 interpret
 that

of
the
crop
impossible,
for
if
the
crop
was
an
inseparable
part
of
the
realty

provision,
held
that
in
some
cases
"standing
crops"
may
be
considered
and

possession
of
the
latter
would
be
necessary
to
that
of
the
former;
but
such

dealt
with
as
personal
property.
In
the
case
of
Lumber
Co.
vs.
Sheriff
and


 15

is
not
the
case.
True,
by
article
465
C.
C.
it
is
provided
that
"standing
crops
 the
 coming
 year;
 or
 the
 wool
 that
 shall
 thereafter
 grow
 upon
 sheep;
 or

and
the
fruits
of
trees
not
gathered
and
trees
before
they
are
cut
down
are
 what
may
be
taken
at
the
next
cast
of
a
fisherman's
net;
or
fruits
to
grow;

likewise
 immovable
 and
 are
 considered
 as
 part
 of
 the
 land
 to
 which
 they
 or
young
animals
not
yet
in
existence;
or
the
good
will
of
a
trade
and
the

are
 attached;"
 but
 the
 immovability
 provided
 for
 is
 only
 one
 in
 abstracto
 like.
The
thing
sold,
however,
must
be
specific
and
identified.
They
must
be

and
without
reference
to
rights
on
or
to
the
crop
acquired
by
other
than
 also
owned
at
the
time
by
the
vendor.
(Hull
vs.
Hull,
48
Conn.,
250
[40
Am.

the
 owners
 of
 the
 property
 to
 which
 the
 crop
 was
 attached.
 The
 Rep.,
165].)

immovability
of
a
growing
crop
is
in
the
order
of
things
temporary,
for
the

It
is
contended
on
the
part
of
the
appellee
that
paragraph
2
of
article
334

crop
passes
from
the
state
of
a
growing
to
that
of
a
gathered
one,
from
an

of
 the
 Civil
 Code
 has
 been
 modified
 by
 section
 450
 of
 the
 Code
 of
 Civil

immovable
to
a
movable.
The
existence
of
a
right
on
the
growing
crop
is
a

Procedure
 as
 well
 as
 by
 Act
 No.
 1508,
 the
 Chattel
 Mortgage
 Law.
 Said

mobilization
 by
 anticipation,
 a
 gathering
 as
 it
 were
 in
 advance,
 rendering

section
450
enumerates
the
property
of
a
judgment
debtor
which
may
be

the
crop
movable
quoad
the
right
acquired
thereon.
The
provision
of
our

subjected
 to
 execution.
 The
 pertinent
 portion
 of
 said
 section
 reads
 as

Code
 is
 identical
 with
 the
 Napoleon
 Code
 520,
 and
 we
 may
 therefore

follows:
 "All
 goods,
 chattels,
 moneys,
 and
 other
 property,
 both
 real
 and

obtain
light
by
an
examination
of
the
jurisprudence
of
France.

personal,
 *
 *
 *
 shall
 be
 liable
 to
 execution.
 Said
 section
 450
 and
 most
 of

The
 rule
 above
 announced,
 not
 only
 by
 the
 Tribunal
 Supremo
 de
 España
 the
other
sections
of
the
Code
of
Civil
Procedure
relating
to
the
execution

but
 by
 the
 Supreme
 Court
 of
 Louisiana,
 is
 followed
 in
 practically
 every
 of
judgment
were
taken
from
the
Code
of
Civil
Procedure
of
California.
The

state
of
the
Union.
 Supreme
 Court
 of
 California,
 under
 section
 688
 of
 the
 Code
 of
 Civil

Procedure
of
that
state
(Pomeroy,
p.
424)
has
held,
without
variation,
that

From
 an
 examination
 of
 the
 reports
 and
 codes
 of
 the
 State
 of
 California

growing
crops
were
personal
property
and
subject
to
execution.

and
other
states
we
find
that
the
settle
doctrine
followed
in
said
states
in

connection
with
the
attachment
of
property
and
execution
of
judgment
is,
 Act
 No.
 1508,
 the
 Chattel
 Mortgage
 Law,
 fully
 recognized
 that
 growing

that
 growing
 crops
 raised
 by
 yearly
 labor
 and
 cultivation
 are
 considered
 crops
 are
 personal
 property.
 Section
 2
 of
 said
 Act
 provides:
 "All
 personal

personal
 property.
 (6
 Corpuz
 Juris,
 p.
 197;
 17
 Corpus
 Juris,
 p.
 379;
 23
 property
shall
be
subject
to
mortgage,
agreeably
to
the
provisions
of
this

Corpus
Juris,
p.
329:
Raventas
vs.
Green,
57
Cal.,
254;
Norris
vs.
Watson,
55
 Act,
 and
 a
 mortgage
 executed
 in
 pursuance
 thereof
 shall
 be
 termed
 a

Am.
Dec.,
161;
Whipple
vs.
Foot,
3
Am.
Dec.,
442;
1
Benjamin
on
Sales,
sec.
 chattel
 mortgage."
 Section
 7
 in
 part
 provides:
 "If
 growing
 crops
 be

126;
 McKenzie
 vs.
 Lampley,
 31
 Ala.,
 526;
 Crine
 vs.
 Tifts
 and
 Co.,
 65
 Ga.,
 mortgaged
 the
 mortgage
 may
 contain
 an
 agreement
 stipulating
 that
 the

644;
 Gillitt
 vs.
 Truax,
 27
 Minn.,
 528;
 Preston
 vs.
 Ryan,
 45
 Mich.,
 174;
 mortgagor
 binds
 himself
 properly
 to
 tend,
 care
 for
 and
 protect
 the
 crop

Freeman
 on
 Execution,
 vol.
 1,
 p.
 438;
 Drake
 on
 Attachment,
 sec.
 249;
 while
growing.

Mechem
on
Sales,
sec.
200
and
763.)

It
is
clear
from
the
foregoing
provisions
that
Act
No.
1508
was
enacted
on

Mr.
Mechem
says
that
a
valid
sale
may
be
made
of
a
thing,
which
though
 the
 assumption
 that
 "growing
 crops"
 are
 personal
 property.
 This

not
yet
actually
in
existence,
is
reasonably
certain
to
come
into
existence
 consideration
 tends
 to
 support
 the
 conclusion
 hereinbefore
 stated,
 that

as
 the
 natural
 increment
 or
 usual
 incident
 of
 something
 already
 in
 paragraph
2
of
article
334
of
the
Civil
Code
has
been
modified
by
section

existence,
and
then
belonging
to
the
vendor,
and
then
title
will
vest
in
the
 450
 of
 Act
 No.
 190
 and
 by
 Act
 No.
 1508
 in
 the
 sense
 that
 "ungathered

buyer
the
moment
the
thing
comes
into
existence.
(Emerson
vs.
European
 products"
as
mentioned
in
said
article
of
the
Civil
Code
have
the
nature
of

Railway
 Co.,
 67
 Me.,
 387;
 Cutting
 vs.
 Packers
 Exchange,
 21
 Am.
 St.
 Rep.,
 personal
property.
In
other
words,
the
phrase
"personal
property"
should

63.)
Things
of
this
nature
are
said
to
have
a
potential
existence.
A
man
may
 be
understood
to
include
"ungathered
products."

sell
property
of
which
he
is
potentially
and
not
actually
possessed.
He
may

At
common
law,
and
generally
in
the
United
States,
all
annual
crops
which

make
a
valid
sale
of
the
wine
that
a
vineyard
is
expected
to
produce;
or
the

are
raised
by
yearly
manurance
and
labor,
and
essentially
owe
their
annual

gain
a
field
may
grow
in
a
given
time;
or
the
milk
a
cow
may
yield
during

existence
to
cultivation
by
man,
.
may
be
levied
on
as
personal
property."


 16

(23
 C.
 J.,
 p.
 329.)
 On
 this
 question
 Freeman,
 in
 his
 treatise
 on
 the
 Law
 of
 hectareas
 de
 superficie
 poco
 mas
 o
 menos."
 The
 description
 of
 parcel
 2

Executions,
says:
"Crops,
whether
growing
or
standing
in
the
field
ready
to
 given
in
the
certificate
of
sale
(Exhibit
A)
is
as
follows:

be
 harvested,
 are,
 when
 produced
 by
 annual
 cultivation,
 no
 part
 of
 the

2a.
 Terreno
 palayero
 situado
 en
 Culubasa,
 Bamban,
 Tarlac,
 de
 177,090

realty.
 They
 are,
 therefore,
 liable
 to
 voluntary
 transfer
 as
 chattels.
 It
 is

metros
 cuadrados
 de
 superficie,
 linda
 al
 N.
 con
 Canuto
 Sibal,
 Esteban

equally
 well
 settled
 that
 they
 may
 be
 seized
 and
 sold
 under
 execution.

Lazatin
 and
 Alejandro
 Dayrit;
 al
 E.
 con
 Francisco
 Dizon,
 Felipe
 Mañu
 and

(Freeman
on
Executions,
vol.
p.
438.)

others;
al
S.
con
Alejandro
Dayrit,
Isidro
Santos
and
Melecio
Mañu;
y
al
O.

We
 may,
 therefore,
 conclude
 that
 paragraph
 2
 of
 article
 334
 of
 the
 Civil
 con
Alejandro
Dayrit
and
Paulino
Vergara.
Tax
No.
2854,
vador
amillarado

Code
has
been
modified
by
section
450
of
the
Code
of
Civil
Procedure
and
 P4,200
pesos.

by
 Act
 No.
 1508,
 in
 the
 sense
 that,
 for
 the
 purpose
 of
 attachment
 and

On
the
other
hand
the
evidence
for
the
defendant
purported
to
show
that

execution,
and
for
the
purposes
of
the
Chattel
Mortgage
Law,
"ungathered

parcels
1
and
2
of
the
complaint
were
included
among
the
parcels
bought

products"
 have
 the
 nature
 of
 personal
 property.
 The
 lower
 court,

by
Valdez
from
Macondray
on
June
25,
1924,
and
corresponded
to
parcel
4

therefore,
 committed
 no
 error
 in
 holding
 that
 the
 sugar
 cane
 in
 question

in
 the
 deed
 of
 sale
 (Exhibit
 B
 and
 2),
 and
 were
 also
 included
 among
 the

was
personal
property
and,
as
such,
was
not
subject
to
redemption.

parcels
bought
by
Valdez
at
the
auction
of
the
real
property
of
Leon
Sibal

All
the
other
assignments
of
error
made
by
the
appellant,
as
above
stated,
 on
 June
 25,
 1924,
 and
 corresponded
 to
 parcel
 3
 in
 the
 certificate
 of
 sale

relate
to
questions
of
fact
only.
Before
entering
upon
a
discussion
of
said
 made
by
the
sheriff
(Exhibit
A).
The
description
of
parcel
4
(Exhibit
2)
and

assignments
of
error,
we
deem
it
opportune
to
take
special
notice
of
the
 parcel
3
(Exhibit
A)
is
as
follows:

failure
 of
 the
 plaintiff
 to
 appear
 at
 the
 trial
 during
 the
 presentation
 of

Parcels
 No.
 4.
 —
 Terreno
 palayero,
 ubicado
 en
 el
 barrio
 de

evidence
 by
 the
 defendant.
 His
 absence
 from
 the
 trial
 and
 his
 failure
 to

Culubasa,Bamban,
Tarlac,
I.
F.
de
145,000
metros
cuadrados
de
superficie,

cross‐examine
 the
 defendant
 have
 lent
 considerable
 weight
 to
 the

lindante
 al
 Norte
 con
 Road
 of
 the
 barrio
 of
 Culubasa
 that
 goes
 to

evidence
then
presented
for
the
defense.

Concepcion;
al
Este
con
Juan
Dizon;
al
Sur
con
Lucio
Maño
y
Canuto
Sibal
y

Coming
not
to
the
ownership
of
parcels
1
and
2
described
in
the
first
cause
 al
 Oeste
 con
 Esteban
 Lazatin,
 su
 valor
 amillarado
 asciende
 a
 la
 suma
 de

of
action
of
the
complaint,
the
plaintiff
made
a
futile
attempt
to
show
that
 P2,990.
Tax
No.
2856.

said
 two
 parcels
 belonged
 to
 Agustin
 Cuyugan
 and
 were
 the
 identical

As
will
be
noticed,
there
is
hardly
any
relation
between
parcels
1
and
2
of

parcel
2
which
was
excluded
from
the
attachment
and
sale
of
real
property

the
complaint
and
parcel
4
(Exhibit
2
and
B)
and
parcel
3
(Exhibit
A).
But,

of
Sibal
to
Valdez
on
June
25,
1924,
as
stated
above.
A
comparison
of
the

inasmuch
 as
 the
 plaintiff
 did
 not
 care
 to
 appear
 at
 the
 trial
 when
 the

description
 of
 parcel
 2
 in
 the
 certificate
 of
 sale
 by
 the
 sheriff
 (Exhibit
 A)

defendant
offered
his
evidence,
we
are
inclined
to
give
more
weight
to
the

and
 the
 description
 of
 parcels
 1
 and
 2
 of
 the
 complaint
 will
 readily
 show

evidence
 adduced
 by
 him
 that
 to
 the
 evidence
 adduced
 by
 the
 plaintiff,

that
they
are
not
the
same.

with
 respect
 to
 the
 ownership
 of
 parcels
 1
 and
 2
 of
 the
 compliant.
 We,

The
description
of
the
parcels
in
the
complaint
is
as
follows:
 therefore,
 conclude
 that
 parcels
 1
 and
 2
 of
 the
 complaint
 belong
 to
 the

defendant,
 having
 acquired
 the
 same
 from
 Macondray
 &
 Co.
 on
 June
 25,

1.
 La
 caña
 dulce
 sembrada
 por
 los
 inquilinos
 del
 ejecutado
 Leon
 Sibal
 1.º

1924,
and
from
the
plaintiff
Leon
Sibal
on
the
same
date.

en
una
parcela
de
terreno
de
la
pertenencia
del
citado
ejecutado,
situada

en
Libutad,
Culubasa,
Bamban,
Tarlac,
de
unas
dos
hectareas
poco
mas
o
 It
appears,
however,
that
the
plaintiff
planted
the
palay
in
said
parcels
and

menos
de
superficie.
 harvested
therefrom
190
cavans.
There
being
no
evidence
of
bad
faith
on

his
part,
he
is
therefore
entitled
to
one‐half
of
the
crop,
or
95
cavans.
He

2.
 La
 caña
 dulce
 sembrada
 por
 el
 inquilino
 del
 ejecutado
 Leon
 Sibal
 1.º,

should
 therefore
 be
 condemned
 to
 pay
 to
 the
 defendant
 for
 95
 cavans

Ilamado
Alejandro
Policarpio,
en
una
parcela
de
terreno
de
la
pertenencia

only,
 at
 P3.40
 a
 cavan,
 or
 the
 sum
 of
 P323,
 and
 not
 for
 the
 total
 of
 190

del
ejecutado,
situada
en
Dalayap,
Culubasa,
Bamban,
Tarlac
de
unas
dos

cavans
as
held
by
the
lower
court.


 17

As
to
the
ownership
of
parcel
7
of
the
complaint,
the
evidence
shows
that
 sugar‐cane
shoots
(puntas
de
cana)
and
not
1,170,000
as
computed
by
the

said
parcel
corresponds
to
parcel
1
of
the
deed
of
sale
of
Macondray
&
Co,
 lower
court.
During
the
season
the
shoots
were
selling
at
P1.20
a
thousand

to
 Valdez
 (Exhibit
 B
 and
 2),
 and
 to
 parcel
 4
 in
 the
 certificate
 of
 sale
 to
 (Exhibits
6
and
7).
The
defendant
therefore
would
have
netted
P1,220.40

Valdez
of
real
property
belonging
to
Sibal,
executed
by
the
sheriff
as
above
 from
sugar‐cane
shoots
and
not
P1,435.68
as
allowed
by
the
lower
court.

stated
 (Exhibit
 A).
 Valdez
 is
 therefore
 the
 absolute
 owner
 of
 said
 parcel,

As
 to
 the
 palay
 harvested
 by
 the
 plaintiff
 in
 parcels
 1
 and
 2
 of
 the

having
acquired
the
interest
of
both
Macondray
and
Sibal
in
said
parcel.

complaint,
 amounting
 to
 190
 cavans,
 one‐half
 of
 said
 quantity
 should

With
 reference
 to
 the
 parcel
 of
 land
 in
 Pacalcal,
 Tarlac,
 described
 in
 belong
 to
 the
 plaintiff,
 as
 stated
 above,
 and
 the
 other
 half
 to
 the

paragraph
3
of
the
second
cause
of
action,
it
appears
from
the
testimony
 defendant.
The
court
erred
in
awarding
the
whole
crop
to
the
defendant.

of
the
plaintiff
himself
that
said
parcel
corresponds
to
parcel
8
of
the
deed
 The
 plaintiff
 should
 therefore
 pay
 the
 defendant
 for
 95
 cavans
 only,
 at

of
 sale
 of
 Macondray
 to
 Valdez
 (Exhibit
 B
 and
 2)
 and
 to
 parcel
 10
 in
 the
 P3.40
a
cavan,
or
P323
instead
of
P646
as
allowed
by
the
lower
court.

deed
of
sale
executed
by
the
sheriff
in
favor
of
Valdez
(Exhibit
A).
Valdez
is

The
evidence
also
shows
that
the
defendant
was
prevented
by
the
acts
of

therefore
 the
 absolute
 owner
 of
 said
 parcel,
 having
 acquired
 the
 interest

the
plaintiff
from
cultivating
about
10
hectares
of
the
land
involved
in
the

of
both
Macondray
and
Sibal
therein.

litigation.
 He
 expected
 to
 have
 raised
 about
 600
 cavans
 of
 palay,
 300

In
this
connection
the
following
facts
are
worthy
of
mention:
 cavans
 of
 which
 would
 have
 corresponded
 to
 him
 as
 owner.
 The
 lower

court
has
wisely
reduced
his
share
to
150
cavans
only.
At
P4
a
cavan,
the

Execution
in
favor
of
Macondray
&
Co.,
May
11,
1923.
Eight
parcels
of
land

palay
would
have
netted
him
P600.

were
 attached
 under
 said
 execution.
 Said
 parcels
 of
 land
 were
 sold
 to

Macondray
 &
 Co.
 on
 the
 30th
 day
 of
 July,
 1923.
 Rice
 paid
 P4,273.93.
 On
 In
view
of
the
foregoing,
the
judgment
appealed
from
is
hereby
modified.

September
 24,
 1923,
 Leon
 Sibal
 paid
 to
 Macondray
 &
 Co.
 P2,000
 on
 the
 The
plaintiff
and
his
sureties
Cenon
de
la
Cruz,
Juan
Sangalang
and
Marcos

redemption
of
said
parcels
of
land.
(See
Exhibits
B
and
C
).
 Sibal
are
hereby
ordered
to
pay
to
the
defendant
jointly
and
severally
the

sum
 of
 P8,900.80,
 instead
 of
 P9,439.08
 allowed
 by
 the
 lower
 court,
 as

Attachment,
 April
 29,
 1924,
 in
 favor
 of
 Valdez.
 Personal
 property
 of
 Sibal

follows:

was
 attached,
 including
 the
 sugar
 cane
 in
 question.
 (Exhibit
 A)
 The
 said

personal
property
so
attached,
sold
at
public
auction
May
9
and
10,
1924.

P6,757.40
 for
the
sugar
cane;

April
29,
1924,
the
real
property
was
attached
under
the
execution
in
favor

of
 Valdez
 (Exhibit
 A).
 June
 25,
 1924,
 said
 real
 property
 was
 sold
 and
 1,220.40
 for
the
sugar
cane
shoots;

purchased
by
Valdez
(Exhibit
A).

June
 25,
 1924,
 Macondray
 &
 Co.
 sold
 all
 of
 the
 land
 which
 they
 had
 323.00
 for
the
palay
harvested
by
plaintiff
in
parcels
1
and
2;

purchased
at
public
auction
on
the
30th
day
of
July,
1923,
to
Valdez.

600.00
 for
the
palay
which
defendant
could
have
raised.

As
to
the
loss
of
the
defendant
in
sugar
cane
by
reason
of
the
injunction,

the
evidence
shows
that
the
sugar
cane
in
question
covered
an
area
of
22
 

hectares
 and
 60
 ares
 (Exhibits
 8,
 8‐b
 and
 8‐c);
 that
 said
 area
 would
 have

8,900.80
 

yielded
 an
 average
 crop
 of
 1039
 picos
 and
 60
 cates;
 that
 one‐half
 of
 the

quantity,
 or
 519
 picos
 and
 80
 cates
 would
 have
 corresponded
 to
 the
 ============

defendant,
as
owner;
that
during
the
season
the
sugar
was
selling
at
P13
a

pico
(Exhibit
5
and
5‐A).
Therefore,
the
defendant,
as
owner,
would
have
 In
all
other
respects,
the
judgment
appealed
from
is
hereby
affirmed,
with

netted
 P
 6,757.40
 from
 the
 sugar
 cane
 in
 question.
 The
 evidence
 also
 costs.
So
ordered.

shows
that
the
defendant
could
have
taken
from
the
sugar
cane
1,017,000
 Street,
Malcolm,
Villamor,
Romualdez
and
Villa‐Real.,
JJ.,
concur.


 18


 Meralco's
electric
power
is
generated
by
its
hydro‐electric
plant
located
at

Botocan
Falls,
Laguna
and
is
transmitted
to
the
City
of
Manila
by
means
of


electric
 transmission
 wires,
 running
 from
 the
 province
 of
 Laguna
 to
 the


 said
 City.
 These
 electric
 transmission
 wires
 which
 carry
 high
 voltage


 current,
are
fastened
to
insulators
attached
on
steel
towers
constructed
by

respondent
 at
 intervals,
 from
 its
 hydro‐electric
 plant
 in
 the
 province
 of


 Laguna
to
the
City
of
Manila.
The
respondent
Meralco
has
constructed
40


 of
 these
 steel
 towers
 within
 Quezon
 City,
 on
 land
 belonging
 to
 it.
 A

photograph
 of
 one
 of
 these
 steel
 towers
 is
 attached
 to
 the
 petition
 for


 review,
marked
Annex
A.
Three
steel
towers
were
inspected
by
the
lower


 court
and
parties
and
the
following
were
the
descriptions
given
there
of
by

said
court:


The
first
steel
tower
is
located
in
South
Tatalon,
España
Extension,
Quezon


City.
The
findings
were
as
follows:
the
ground
around
one
of
the
four
posts


 was
excavated
to
a
depth
of
about
eight
(8)
feet,
with
an
opening
of
about

one
 (1)
 meter
 in
 diameter,
 decreased
 to
 about
 a
 quarter
 of
 a
 meter
 as
 it


we
 deeper
 until
 it
 reached
 the
 bottom
 of
 the
 post;
 at
 the
 bottom
 of
 the


 post
 were
 two
 parallel
 steel
 bars
 attached
 to
 the
 leg
 means
 of
 bolts;
 the

G.R.
No.
L‐15334












January
31,
1964
 tower
proper
was
attached
to
the
leg
three
bolts;
with
two
cross
metals
to

prevent
mobility;
there
was
no
concrete
foundation
but
there
was
adobe

BOARD
 OF
 ASSESSMENT
 APPEALS,
 CITY
 ASSESSOR
 and
 CITY
 TREASURER
 stone
 underneath;
 as
 the
 bottom
 of
 the
 excavation
 was
 covered
 with

OF
 QUEZON
 CITY,
 petitioners,
 
vs.
MANILA
 ELECTRIC
 COMPANY,
 water
about
three
inches
high,
it
could
not
be
determined
with
certainty
to

respondent.
 whether
 said
 adobe
 stone
 was
 placed
 purposely
 or
 not,
 as
 the
 place

Assistant
 City
 Attorney
 Jaime
 R.
 Agloro
 for
 petitioners.
Ross,
 Selph
 and
 abounds
 with
 this
 kind
 of
 stone;
 and
 the
 tower
 carried
 five
 high
 voltage

Carrascoso
for
respondent.
 wires
without
cover
or
any
insulating
materials.


PAREDES,
J.:
 The
 second
 tower
 inspected
 was
 located
 in
 Kamuning
 Road,
 K‐F,
 Quezon

City,
 on
 land
 owned
 by
 the
 petitioner
 approximate
 more
 than
 one

From
the
stipulation
of
facts
and
evidence
adduced
during
the
hearing,
the
 kilometer
 from
 the
 first
 tower.
 As
 in
 the
 first
 tower,
 the
 ground
 around

following
appear:
 one
 of
 the
 four
 legs
 was
 excavate
 from
 seven
 to
 eight
 (8)
 feet
 deep
 and

On
 October
 20,
 1902,
 the
 Philippine
 Commission
 enacted
 Act
 No.
 484
 one
 and
 a
 half
 (1‐½)
 meters
 wide.
 There
 being
 very
 little
 water
 at
 the

which
 authorized
 the
 Municipal
 Board
 of
 Manila
 to
 grant
 a
 franchise
 to
 bottom,
it
was
seen
that
there
was
no
concrete
foundation,
but
there
soft

construct,
maintain
and
operate
an
electric
street
railway
and
electric
light,
 adobe
beneath.
The
leg
was
likewise
provided
with
two
parallel
steel
bars

heat
and
power
system
in
the
City
of
Manila
and
its
suburbs
to
the
person
 bolted
 to
 a
 square
 metal
 frame
 also
 bolted
 to
 each
 corner.
 Like
 the
 first

or
persons
making
the
most
favorable
bid.
Charles
M.
Swift
was
awarded
 one,
the
second
tower
is
made
up
of
metal
rods
joined
together
by
means

the
said
franchise
on
March
1903,
the
terms
and
conditions
of
which
were
 of
 bolts,
 so
 that
 by
 unscrewing
 the
 bolts,
 the
 tower
 could
 be
 dismantled

embodied
in
Ordinance
No.
44
approved
on
March
24,
1903.
Respondent
 and
reassembled.

Manila
Electric
Co.
(Meralco
for
short),
became
the
transferee
and
owner
 The
third
tower
examined
is
located
along
Kamias
Road,
Quezon
City.
As
in

of
the
franchise.


 19

the
 first
 two
 towers
 given
 above,
 the
 ground
 around
 the
 two
 legs
 of
 the
 taxes
 and
 assessments
 the
 grantee
 is
 hereby
 expressly
 exempted.
 (Par.
 9,

third
 tower
 was
 excavated
 to
 a
 depth
 about
 two
 or
 three
 inches
 beyond
 Part
Two,
Act
No.
484
Respondent's
Franchise;
emphasis
supplied.)

the
outside
level
of
the
steel
bar
foundation.
It
was
found
that
there
was

The
 word
 "pole"
 means
 "a
 long,
 comparatively
 slender
 usually
 cylindrical

no
 concrete
 foundation.
 Like
 the
 two
 previous
 ones,
 the
 bottom

piece
of
wood
or
timber,
as
typically
the
stem
of
a
small
tree
stripped
of
its

arrangement
 of
 the
 legs
 thereof
 were
 found
 to
 be
 resting
 on
 soft
 adobe,

branches;
also
by
extension,
a
similar
typically
cylindrical
piece
or
object
of

which,
 probably
 due
 to
 high
 humidity,
 looks
 like
 mud
 or
 clay.
 It
 was
 also

metal
or
the
like".
The
term
also
refers
to
"an
upright
standard
to
the
top

found
that
the
square
metal
frame
supporting
the
legs
were
not
attached

of
 which
 something
 is
 affixed
 or
 by
 which
 something
 is
 supported;
 as
 a

to
any
material
or
foundation.

dovecote
 set
 on
 a
 pole;
 telegraph
 poles;
 a
 tent
 pole;
 sometimes,

On
 November
 15,
 1955,
 petitioner
 City
 Assessor
 of
 Quezon
 City
 declared
 specifically
a
vessel's
master
(Webster's
New
International
Dictionary
2nd

the
aforesaid
steel
towers
for
real
property
tax
under
Tax
declaration
Nos.
 Ed.,
 p.
 1907.)
 Along
 the
 streets,
 in
 the
 City
 of
 Manila,
 may
 be
 seen

31992
 and
 15549.
 After
 denying
 respondent's
 petition
 to
 cancel
 these
 cylindrical
 metal
 poles,
 cubical
 concrete
 poles,
 and
 poles
 of
 the
 PLDT
 Co.

declarations,
 an
 appeal
 was
 taken
 by
 respondent
 to
 the
 Board
 of
 which
are
made
of
two
steel
bars
joined
together
by
an
interlacing
metal

Assessment
Appeals
of
Quezon
City,
which
required
respondent
to
pay
the
 rod.
 They
 are
 called
 "poles"
 notwithstanding
 the
 fact
 that
 they
 are
 no

amount
of
P11,651.86
as
real
property
tax
on
the
said
steel
towers
for
the
 made
of
wood.
It
must
be
noted
from
paragraph
9,
above
quoted,
that
the

years
1952
to
1956.
Respondent
paid
the
amount
under
protest,
and
filed
 concept
of
the
"poles"
for
which
exemption
is
granted,
is
not
determined

a
 petition
 for
 review
 in
 the
 Court
 of
 Tax
 Appeals
 (CTA
 for
 short)
 which
 by
 their
 place
 or
 location,
 nor
 by
 the
 character
 of
 the
 electric
 current
 it

rendered
 a
 decision
 on
 December
 29,
 1958,
 ordering
 the
 cancellation
 of
 carries,
nor
the
material
or
form
of
which
it
is
made,
but
the
use
to
which

the
said
tax
declarations
and
the
petitioner
City
Treasurer
of
Quezon
City
 they
 are
 dedicated.
 In
 accordance
 with
 the
 definitions,
 pole
 is
 not

to
 refund
 to
 the
 respondent
 the
 sum
 of
 P11,651.86.
 The
 motion
 for
 restricted
 to
 a
 long
 cylindrical
 piece
 of
 wood
 or
 metal,
 but
 includes

reconsideration
having
been
denied,
on
April
22,
1959,
the
instant
petition
 "upright
 standards
 to
 the
 top
 of
 which
 something
 is
 affixed
 or
 by
 which

for
review
was
filed.
 something
 is
 supported.
 As
 heretofore
 described,
 respondent's
 steel

supports
 consists
 of
 a
 framework
 of
 four
 steel
 bars
 or
 strips
 which
 are

In
 upholding
 the
 cause
 of
 respondents,
 the
 CTA
 held
 that:
 (1)
 the
 steel

bound
 by
 steel
 cross‐arms
 atop
 of
 which
 are
 cross‐arms
 supporting
 five

towers
 come
 within
 the
 term
 "poles"
 which
 are
 declared
 exempt
 from

high
voltage
transmission
wires
(See
Annex
A)
and
their
sole
function
is
to

taxes
 under
 part
 II
 paragraph
 9
 of
 respondent's
 franchise;
 (2)
 the
 steel

support
or
carry
such
wires.

towers
 are
 personal
 properties
 and
 are
 not
 subject
 to
 real
 property
 tax;

and
(3)
the
City
Treasurer
of
Quezon
City
is
held
responsible
for
the
refund
 The
 conclusion
 of
 the
 CTA
 that
 the
 steel
 supports
 in
 question
 are

of
the
amount
paid.
These
are
assigned
as
errors
by
the
petitioner
in
the
 embraced
in
the
term
"poles"
is
not
a
novelty.
Several
courts
of
last
resort

brief.
 in
 the
 United
 States
 have
 called
 these
 steel
 supports
 "steel
 towers",
 and

they
 denominated
 these
 supports
 or
 towers,
 as
 electric
 poles.
 In
 their

The
tax
exemption
privilege
of
the
petitioner
is
quoted
hereunder:

decisions
the
words
"towers"
and
"poles"
were
used
interchangeably,
and

PAR
 9.
 The
 grantee
 shall
 be
 liable
 to
 pay
 the
 same
 taxes
 upon
 its
 real
 it
is
well
understood
in
that
jurisdiction
that
a
transmission
tower
or
pole

estate,
 buildings,
 plant
 (not
 including
 poles,
 wires,
 transformers,
 and
 means
the
same
thing.

insulators),
machinery
and
personal
property
as
other
persons
are
or
may

In
 a
 proceeding
 to
 condemn
 land
 for
 the
 use
 of
 electric
 power
 wires,
 in

be
 hereafter
 required
 by
 law
 to
 pay
 ...
 Said
 percentage
 shall
 be
 due
 and

which
 the
 law
 provided
 that
 wires
 shall
 be
 constructed
 upon
 suitable

payable
 at
 the
 time
 stated
 in
 paragraph
 nineteen
 of
 Part
 One
 hereof,
 ...

poles,
this
term
was
construed
to
mean
either
wood
or
metal
poles
and
in

and
shall
be
in
lieu
of
all
taxes
and
assessments
of
whatsoever
nature
and

view
of
the
land
being
subject
to
overflow,
and
the
necessary
carrying
of

by
 whatsoever
 authority
 upon
 the
 privileges,
 earnings,
 income,
 franchise,

numerous
 wires
 and
 the
 distance
 between
 poles,
 the
 statute
 was

and
 poles,
 wires,
 transformers,
 and
 insulators
 of
 the
 grantee
 from
 which


 20

interpreted
 to
 include
 towers
 or
 poles.
 (Stemmons
 and
 Dallas
 Light
 Co.
 and
 narrow
 interpretation,
 as
 to
 defeat
 the
 very
 object
 for
 which
 the

(Tex)
212
S.W.
222,
224;
32‐A
Words
and
Phrases,
p.
365.)
 franchise
 was
 granted.
 The
 poles
 as
 contemplated
 thereon,
 should
 be

understood
 and
 taken
 as
 a
 part
 of
 the
 electric
 power
 system
 of
 the

The
 term
 "poles"
 was
 also
 used
 to
 denominate
 the
 steel
 supports
 or

respondent
 Meralco,
 for
 the
 conveyance
 of
 electric
 current
 from
 the

towers
used
by
an
association
used
to
convey
its
electric
power
furnished

source
 thereof
 to
 its
 consumers.
 If
 the
 respondent
 would
 be
 required
 to

to
subscribers
and
members,
constructed
for
the
purpose
of
fastening
high

employ
 "wooden
 poles",
 or
 "rounded
 poles"
 as
 it
 used
 to
 do
 fifty
 years

voltage
and
dangerous
electric
wires
alongside
public
highways.
The
steel

back,
then
one
should
admit
that
the
Philippines
is
one
century
behind
the

supports
 or
 towers
 were
 made
 of
 iron
 or
 other
 metals
 consisting
 of
 two

age
of
space.
It
should
also
be
conceded
by
now
that
steel
towers,
like
the

pieces
 running
 from
 the
 ground
 up
 some
 thirty
 feet
 high,
 being
 wider
 at

ones
 in
 question,
 for
 obvious
 reasons,
 can
 better
 effectuate
 the
 purpose

the
 bottom
 than
 at
 the
 top,
 the
 said
 two
 metal
 pieces
 being
 connected

for
which
the
respondent's
franchise
was
granted.

with
criss‐cross
iron
running
from
the
bottom
to
the
top,
constructed
like

ladders
 and
 loaded
 with
 high
 voltage
 electricity.
 In
 form
 and
 structure,
 Granting
for
the
purpose
of
argument
that
the
steel
supports
or
towers
in

they
are
like
the
steel
towers
in
question.
(Salt
River
Valley
Users'
Ass'n
v.
 question
 are
 not
 embraced
 within
 the
 term
 poles,
 the
 logical
 question

Compton,
8
P.
2nd,
249‐250.)
 posited
 is
 whether
 they
 constitute
 real
 properties,
 so
 that
 they
 can
 be

subject
to
a
real
property
tax.
The
tax
law
does
not
provide
for
a
definition

The
 term
 "poles"
 was
 used
 to
 denote
 the
 steel
 towers
 of
 an
 electric

of
 real
 property;
 but
 Article
 415
 of
 the
 Civil
 Code
 does,
 by
 stating
 the

company
 engaged
 in
 the
 generation
 of
 hydro‐electric
 power
 generated

following
are
immovable
property:

from
 its
 plant
 to
 the
 Tower
 of
 Oxford
 and
 City
 of
 Waterbury.
 These
 steel

towers
are
about
15
feet
square
at
the
base
and
extended
to
a
height
of
 (1)
 Land,
 buildings,
 roads,
 and
 constructions
 of
 all
 kinds
 adhered
 to
 the

about
 35
 feet
 to
 a
 point,
 and
 are
 embedded
 in
 the
 cement
 foundations
 soil;

sunk
in
the
earth,
the
top
of
which
extends
above
the
surface
of
the
soil
in

x
x
x










x
x
x










x
x
x

the
tower
of
Oxford,
and
to
the
towers
are
attached
insulators,
arms,
and

other
equipment
capable
of
carrying
wires
for
the
transmission
of
electric
 (3)
Everything
attached
to
an
immovable
in
a
fixed
manner,
in
such
a
way

power
(Connecticut
Light
and
Power
Co.
v.
Oxford,
101
Conn.
383,
126
Atl.
 that
 it
 cannot
 be
 separated
 therefrom
 without
 breaking
 the
 material
 or

p.
1).
 deterioration
of
the
object;

In
 a
 case,
 the
 defendant
 admitted
 that
 the
 structure
 on
 which
 a
 certain
 x
x
x










x
x
x










x
x
x

person
 met
 his
 death
 was
 built
 for
 the
 purpose
 of
 supporting
 a
 (5)
 Machinery,
 receptacles,
 instruments
 or
 implements
 intended
 by
 the

transmission
 wire
 used
 for
 carrying
 high‐tension
 electric
 power,
 but
 owner
of
the
tenement
for
an
industry
or
works
which
may
be
carried
in
a

claimed
that
the
steel
towers
on
which
it
is
carried
were
so
large
that
their
 building
or
on
a
piece
of
land,
and
which
tends
directly
to
meet
the
needs

wire
 took
 their
 structure
 out
 of
 the
 definition
 of
 a
 pole
 line.
 It
 was
 held
 of
the
said
industry
or
works;

that
in
defining
the
word
pole,
one
should
not
be
governed
by
the
wire
or

material
 of
 the
 support
 used,
 but
 was
 considering
 the
 danger
 from
 any
 x
x
x










x
x
x










x
x
x

elevated
 wire
 carrying
 electric
 current,
 and
 that
 regardless
 of
 the
 size
 or
 The
steel
towers
or
supports
in
question,
do
not
come
within
the
objects

material
 wire
 of
 its
 individual
 members,
 any
 continuous
 series
 of
 mentioned
 in
 paragraph
 1,
 because
 they
 do
 not
 constitute
 buildings
 or

structures
 intended
 and
 used
 solely
 or
 primarily
 for
 the
 purpose
 of
 constructions
adhered
to
the
soil.
They
are
not
construction
analogous
to

supporting
 wires
 carrying
 electric
 currents
 is
 a
 pole
 line
 (Inspiration
 buildings
 nor
 adhering
 to
 the
 soil.
 As
 per
 description,
 given
 by
 the
 lower

Consolidation
Cooper
Co.
v.
Bryan
252
P.
1016).
 court,
they
are
removable
and
merely
attached
to
a
square
metal
frame
by

It
is
evident,
therefore,
that
the
word
"poles",
as
used
in
Act
No.
484
and
 means
 of
 bolts,
 which
 when
 unscrewed
 could
 easily
 be
 dismantled
 and

incorporated
in
the
petitioner's
franchise,
should
not
be
given
a
restrictive
 moved
from
place
to
place.
They
can
not
be
included
under
paragraph
3,



 21

as
they
are
not
attached
to
an
immovable
in
a
fixed
manner,
and
they
can
 RUBY
 L.
 TSAI,
 petitioner,
 
vs.
HON.
 COURT
 OF
 APPEALS,
 EVER
 TEXTILE

be
separated
without
breaking
the
material
or
causing
deterioration
upon
 MILLS,
INC.
and
MAMERTO
R
VILLALUZ,
respondents.

the
 object
 to
 which
 they
 are
 attached.
 Each
 of
 these
 steel
 towers
 or

x‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐x

supports
consists
of
steel
bars
or
metal
strips,
joined
together
by
means
of

bolts,
which
can
be
disassembled
by
unscrewing
the
bolts
and
reassembled
 [G.R.
No.
120109.
October
2,
2001.]

by
 screwing
 the
 same.
 These
 steel
 towers
 or
 supports
 do
 not
 also
 fall
 PHILIPPINE
BANK
OF
COMMUNICATIONS,
petitioner,

vs.
HON.
COURT
OF

under
paragraph
5,
for
they
are
not
machineries,
receptacles,
instruments
 APPEALS,
EVER
TEXTILE
MILLS
and
MAMERTO
R
VILLALUZ,
respondents.

or
implements,
and
even
if
they
were,
they
are
not
intended
for
industry

or
works
on
the
land.
Petitioner
is
not
engaged
in
an
industry
or
works
in
 QUISUMBING,
J.:

the
land
in
which
the
steel
supports
or
towers
are
constructed.
 These
consolidated
cases
assail
the
decision1
of
the
Court
of
Appeals
in
CA‐
It
is
finally
contended
that
the
CTA
erred
in
ordering
the
City
Treasurer
of
 G.R.
 CV
 No.
 32986,
 affirming
 the
 decision2
 of
 the
 Regional
 Trial
 Court
 of

Quezon
City
to
refund
the
sum
of
P11,651.86,
despite
the
fact
that
Quezon
 Manila,
 Branch
 7,
 in
 Civil
 Case
 No.
 89‐48265.
 Also
 assailed
 is
 respondent

City
is
not
a
party
to
the
case.
It
is
argued
that
as
the
City
Treasurer
is
not
 court's
resolution
denying
petitioners'
motion
for
reconsideration.

the
 real
 party
 in
 interest,
 but
 Quezon
 City,
 which
 was
 not
 a
 party
 to
 the
 On
 November
 26,
 1975,
 respondent
 Ever
 Textile
 Mills,
 Inc.
 (EVERTEX)

suit,
 notwithstanding
 its
 capacity
 to
 sue
 and
 be
 sued,
 he
 should
 not
 be
 obtained
 a
 three
 million
 peso
 (P3,000,000.00)
 loan
 from
 petitioner

ordered
to
effect
the
refund.
This
question
has
not
been
raised
in
the
court
 Philippine
 Bank
 of
 Communications
 (PBCom).
 As
 security
 for
 the
 loan,

below,
 and,
 therefore,
 it
 cannot
 be
 properly
 raised
 for
 the
 first
 time
 on
 EVERTEX
executed
in
favor
of
PBCom,
a
deed
of
Real
and
Chattel
Mortgage

appeal.
The
herein
petitioner
is
indulging
in
legal
technicalities
and
niceties
 over
 the
 lot
 under
 TCT
 No.
 372097,
 where
 its
 factory
 stands,
 and
 the

which
do
not
help
him
any;
for
factually,
it
was
he
(City
Treasurer)
whom
 chattels
 located
 therein
 as
 enumerated
 in
 a
 schedule
 attached
 to
 the

had
 insisted
 that
 respondent
 herein
 pay
 the
 real
 estate
 taxes,
 which
 mortgage
 contract.
 The
 pertinent
 portions
 of
 the
 Real
 and
 Chattel

respondent
paid
under
protest.
Having
acted
in
his
official
capacity
as
City
 Mortgage
are
quoted
below:

Treasurer
 of
 Quezon
 City,
 he
 would
 surely
 know
 what
 to
 do,
 under
 the

circumstances.
 MORTGAGE


IN
 VIEW
 HEREOF,
 the
 decision
 appealed
 from
 is
 hereby
 affirmed,
 with
 (REAL
AND
CHATTEL)

costs
against
the
petitioners.
 xxx










xxx










xxx

Bengzon,
C.J.,
Padilla,
Bautista
Angelo,
Labrador,
Concepcion,
Reyes,
J.B.L.,
 The
 MORTGAGOR(S)
 hereby
 transfer(s)
 and
 convey(s),
 by
 way
 of
 First

Barrera
and
Regala,
JJ.,
concur.
Makalintal,
J.,
concurs
in
the
result.
Dizon,
 Mortgage,
to
the
MORTGAGEE,
.
.
.
certain
parcel(s)
of
land,
together
with

J.,
took
no
part.
 all
 the
 buildings
 and
 improvements
 now
 existing
 or
 which
 may
 hereafter


 exist
thereon,
situated
in
.
.
.



 "Annex
A"


‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐
 (Real
 and
 Chattel
 Mortgage
 executed
 by
 Ever
 Textile
 Mills
 in
 favor
 of

PBCommunications
—
continued)


LIST
OF
MACHINERIES
&
EQUIPMENT


A.
 Forty
 Eight
 (48)
 units
 of
 Vayrow
 Knitting
 Machines‐Tompkins
 made
 in

G.R.
No.
120098











October
2,
2001
 Hongkong:



 22

Serial
Numbers
Size
of
Machines
 On
November
19,
1982,
due
to
business
reverses,
EVERTEX
filed
insolvency

proceedings
docketed
as
SP
Proc.
No.
LP‐3091‐P
before
the
defunct
Court

xxx










xxx










xxx

of
 First
 Instance
 of
 Pasay
 City,
 Branch
 XXVIII.
 The
 CFI
 issued
 an
 order
 on

B.
Sixteen
(16)
sets
of
Vayrow
Knitting
Machines
made
in
Taiwan.
 November
24,
1982
declaring
the
corporation
insolvent.
All
its
assets
were

xxx










xxx










xxx
 taken
into
the
custody
of
the
Insolvency
Court,
including
the
collateral,
real

and
personal,
securing
the
two
mortgages
as
abovementioned.

C.
Two
(2)
Circular
Knitting
Machines
made
in
West
Germany.

In
the
meantime,
upon
EVERTEX's
failure
to
meet
its
obligation
to
PBCom,

xxx










xxx










xxx
 the
 latter
 commenced
 extrajudicial
 foreclosure
 proceedings
 against

D.
Four
(4)
Winding
Machines.
 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

xxx










xxx










xxx
 Mortgages"
 and
 Act
 1506
 or
 "The
 Chattel
 Mortgage
 Law".
 A
 Notice
 of

SCHEDULE
"A"
 Sheriff's
Sale
was
issued
on
December
1,
1982.

I.
TCT
#
372097
‐
RIZAL
 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

xxx










xxx










xxx

in
 its
 favor
 on
 the
 same
 date.
 On
 December
 23,
 1982,
 another
 public

II.
 Any
 and
 all
 buildings
 and
 improvements
 now
 existing
 or
 hereafter
 to
 auction
 was
 held
 and
 again,
 PBCom
 was
 the
 highest
 bidder.
 The
 sheriff

exist
on
the
above‐mentioned
lot.
 issued
a
Certificate
of
Sale
on
the
same
day.

III.
 MACHINERIES
 &
 EQUIPMENT
 situated,
 located
 and/or
 installed
 on
 the
 On
March
7,
1984,
PBCom
consolidated
its
ownership
over
the
lot
and
all

above‐mentioned
lot
located
at
.
.
.
 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,

(a)
Forty
eight
sets
(48)
Vayrow
Knitting
Machines
.
.
.

1988,
 PBCom
 sold
 the
 factory,
 lock,
 stock
 and
 barrel
 to
 Tsai
 for

(b)
Sixteen
sets
(16)
Vayrow
Knitting
Machines
.
.
.
 P9,000,000.00,
including
the
contested
machineries.

(c)
Two
(2)
Circular
Knitting
Machines
.
.
.
 On
 March
 16,
 1989,
 EVERTEX
 filed
 a
 complaint
 for
 annulment
 of
 sale,

(d)
Two
(2)
Winding
Machines
.
.
.
 reconveyance,
and
damages
with
the
Regional
Trial
Court
against
PBCom,

alleging
 inter
 alia
 that
 the
 extrajudicial
 foreclosure
 of
 subject
 mortgage

(e)
Two
(2)
Winding
Machines
.
.
.
 was
 in
 violation
 of
 the
 Insolvency
 Law.
 EVERTEX
 claimed
 that
 no
 rights

IV.
 Any
 and
 all
 replacements,
 substitutions,
 additions,
 increases
 and
 having
 been
 transmitted
 to
 PBCom
 over
 the
 assets
 of
 insolvent
 EVERTEX,

accretions
to
above
properties.
 therefore
Tsai
acquired
no
rights
over
such
assets
sold
to
her,
and
should

reconvey
the
assets.

xxx










xxx










xxx3

Further,
 EVERTEX
 averred
 that
 PBCom,
 without
 any
 legal
 or
 factual
 basis,

On
 April
 23,
 1979,
 PBCom
 granted
 a
 second
 loan
 of
 P3,356,000.00
 to
 appropriated
 the
 contested
 properties,
 which
 were
 not
 included
 in
 the

EVERTEX.
 The
 loan
 was
 secured
 by
 a
 Chattel
 Mortgage
 over
 personal
 Real
 and
 Chattel
 Mortgage
 of
 November
 26,
 1975
 nor
 in
 the
 Chattel

properties
 enumerated
 in
 a
 list
 attached
 thereto.
 These
 listed
 properties
 Mortgage
of
April
23,
1979,
and
neither
were
those
properties
included
in

were
similar
to
those
listed
in
Annex
A
of
the
first
mortgage
deed.
 the
Notice
of
Sheriff's
Sale
dated
December
1,
1982
and
Certificate
of
Sale

After
 April
 23,
 1979,
 the
 date
 of
 the
 execution
 of
 the
 second
 mortgage
 .
.
.
dated
December
15,
1982.

mentioned
above,
EVERTEX
purchased
various
machines
and
equipments.
 The
 disputed
 properties,
 which
 were
 valued
 at
 P4,000,000.00,
 are:
 14



 23

Interlock
 Circular
 Knitting
 Machines,
 1
 Jet
 Drying
 Equipment,
 1
 Dryer
 from
 is
 hereby
 AFFIRMED,
 in
 all
 other
 respects.
 No
 pronouncement
 as
 to

Equipment,
1
Raisin
Equipment
and
1
Heatset
Equipment.
 costs.5

The
 RTC
 found
 that
 the
 lease
 and
 sale
 of
 said
 personal
 properties
 were
 Motion
 for
 reconsideration
 of
 the
 above
 decision
 having
 been
 denied
 in

irregular
and
illegal
because
they
were
not
duly
foreclosed
nor
sold
at
the
 the
 resolution
 of
 April
 28,
 1995,
 PBCom
 and
 Tsai
 filed
 their
 separate

December
 15,
 1982
 auction
 sale
 since
 these
 were
 not
 included
 in
 the
 petitions
for
review
with
this
Court.

schedules
attached
to
the
mortgage
contracts.
The
trial
court
decreed:

In
 G.R
 No.
 120098,
 petitioner
 Tsai
 ascribed
 the
 following
 errors
 to
 the

WHEREFORE,
judgment
is
hereby
rendered
in
favor
of
plaintiff
corporation
 respondent
court:

and
against
the
defendants:

I

1.
 Ordering
 the
 annulment
 of
 the
 sale
 executed
 by
 defendant
 Philippine

THE
HONORABLE
COURT
OF
APPEALS
(SECOND
DIVISION)
ERRED
IN
EFFECT

Bank
of
Communications
in
favor
of
defendant
Ruby
L.
Tsai
on
May
3,
1988

MAKING
A
CONTRACT
FOR
THE
PARTIES
BY
TREATING
THE
1981
ACQUIRED

insofar
 as
 it
 affects
 the
 personal
 properties
 listed
 in
 par.
 9
 of
 the

MACHINERIES
 AS
 CHATTELS
 INSTEAD
 OF
 REAL
 PROPERTIES
 WITHIN
 THEIR

complaint,
 and
 their
 return
 to
 the
 plaintiff
 corporation
 through
 its

EARLIER
1975
DEED
OF
REAL
AND
CHATTEL
MORTGAGE
OR
1979
DEED
OF

assignee,
 plaintiff
 Mamerto
 R.
 Villaluz,
 for
 disposition
 by
 the
 Insolvency

CHATTEL
MORTGAGE.

Court,
to
be
done
within
ten
(10)
days
from
finality
of
this
decision;

II

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
 THE
 HONORABLE
 COURT
 OF
 APPEALS
 (SECOND
 DIVISION)
 ERRED
 IN

possession
of
the
properties
in
question
from
November
1986
to
February
 HOLDING
 THAT
 THE
 DISPUTED
 1981
 MACHINERIES
 ARE
 NOT
 REAL

1991
 and
 P100,000.00
 every
 month
 thereafter,
 with
 interest
 thereon
 at
 PROPERTIES
 DEEMED
 PART
 OF
 THE
 MORTGAGE
 —
 DESPITE
 THE
 CLEAR

the
legal
rate
per
annum
until
full
payment;
 IMPORT
 OF
 THE
 EVIDENCE
 AND
 APPLICABLE
 RULINGS
 OF
 THE
 SUPREME

COURT.

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
 III

of
litigation;
 THE
 HONORABLE
 COURT
 OF
 APPEALS
 (SECOND
 DIVISION)
 ERRED
 IN

4.
 Ordering
 the
 defendants
 to
 pay
 jointly
 and
 severally
 the
 plaintiff
 DEEMING
PETITIONER
A
PURCHASER
IN
BAD
FAITH.

corporation
the
sum
of
P200,000.00
by
way
of
exemplary
damages;
 IV

5.
Ordering
the
dismissal
of
the
counterclaim
of
the
defendants;
and
 THE
 HONORABLE
 COURT
 OF
 APPEALS
 (SECOND
 DIVISION)
 ERRED
 IN

6.
Ordering
the
defendants
to
proportionately
pay
the
costs
of
suit.
 ASSESSING
 PETITIONER
 ACTUAL
 DAMAGES,
 ATTORNEY'S
 FEES
 AND

EXPENSES
 OF
 LITIGATION
 —
 FOR
 WANT
 OF
 VALID
 FACTUAL
 AND
 LEGAL

SO
ORDERED.4

BASIS.

Dissatisfied,
both
PBCom
and
Tsai
appealed
to
the
Court
of
Appeals,
which

V

issued
its
decision
dated
August
31,
1994,
the
dispositive
portion
of
which

reads:
 THE
 HONORABLE
 COURT
 OF
 APPEALS
 (SECOND
 DIVISION)
 ERRED
 IN

HOLDING
 AGAINST
 PETITIONER'S
 ARGUMENTS
 ON
 PRESCRIPTION
 AND

WHEREFORE,
 except
 for
 the
 deletion
 therefrom
 of
 the
 award;
 for

LACHES.6

exemplary
 damages,
 and
 reduction
 of
 the
 actual
 damages,
 from

P100,000.00
to
P20,000.00
per
month,
from
November
1986
until
subject
 In
G.R.
No.
120098,
PBCom
raised
the
following
issues:

personal
 properties
 are
 restored
 to
 appellees,
 the
 judgment
 appealed


 24

I.
 Tsai.
It
further
argued
that
the
Court
of
Appeals'
pronouncement
that
the

pieces
of
machinery
in
question
were
personal
properties
have
no
factual

DID
 THE
 COURT
 OF
 APPEALS
 VALIDLY
 DECREE
 THE
 MACHINERIES
 LISTED

and
 legal
 basis.
 Finally,
 it
 asserts
 that
 the
 Court
 of
 Appeals
 erred
 in

UNDER
 PARAGRAPH
 9
 OF
 THE
 COMPLAINT
 BELOW
 AS
 PERSONAL

assessing
damages
and
attorney's
fees
against
PBCom.

PROPERTY
OUTSIDE
OF
THE
1975
DEED
OF
REAL
ESTATE
MORTGAGE
AND

EXCLUDED
 THEM
 FROM
 THE
 REAL
 PROPERTY
 EXTRAJUDICIALLY
 In
 opposition,
 private
 respondents
 argue
 that
 the
 controverted
 units
 of

FORECLOSED
BY
PBCOM
DESPITE
THE
PROVISION
IN
THE
1975
DEED
THAT
 machinery
are
not
"real
properties"
but
chattels,
and,
therefore,
they
were

ALL
 AFTER‐ACQUIRED
 PROPERTIES
 DURING
 THE
 LIFETIME
 OF
 THE
 not
 part
 of
 the
 foreclosed
 real
 properties,
 rendering
 the
 lease
 and
 the

MORTGAGE
SHALL
FORM
PART
THEREOF,
AND
DESPITE
THE
UNDISPUTED
 subsequent
sale
thereof
to
Tsai
a
nullity.12

FACT
 THAT
 SAID
 MACHINERIES
 ARE
 BIG
 AND
 HEAVY,
 BOLTED
 OR

Considering
the
assigned
errors
and
the
arguments
of
the
parties,
we
find

CEMENTED
ON
THE
REAL
PROPERTY
MORTGAGED
BY
EVER
TEXTILE
MILLS

the
petitions
devoid
of
merit
and
ought
to
be
denied.

TO
PBCOM,
AND
WERE
ASSESSED
FOR
REAL
ESTATE
TAX
PURPOSES?

Well
 settled
 is
 the
 rule
 that
 the
 jurisdiction
 of
 the
 Supreme
 Court
 in
 a

II

petition
 for
 review
 on
 certiorari
 under
 Rule
 45
 of
 the
 Revised
 Rules
 of

CAN
PBCOM,
WHO
TOOK
POSSESSION
OF
THE
MACHINERIES
IN
QUESTION
 Court
 is
 limited
 to
 reviewing
 only
 errors
 of
 law,
 not
 of
 fact,
 unless
 the

IN
 GOOD
 FAITH,
 EXTENDED
 CREDIT
 FACILITIES
 TO
 EVER
 TEXTILE
 MILLS
 factual
 findings
 complained
 of
 are
 devoid
 of
 support
 by
 the
 evidence
 on

WHICH
 AS
 OF
 1982
 TOTALLED
 P9,547,095.28,
 WHO
 HAD
 SPENT
 FOR
 record
 or
 the
 assailed
 judgment
 is
 based
 on
 misapprehension
 of
 facts.13

MAINTENANCE
AND
SECURITY
ON
THE
DISPUTED
MACHINERIES
AND
HAD
 This
rule
is
applied
more
stringently
when
the
findings
of
fact
of
the
RTC
is

TO
 PAY
 ALL
 THE
 BACK
 TAXES
 OF
 EVER
 TEXTILE
 MILLS
 BE
 LEGALLY
 affirmed
by
the
Court
of
Appeals.14

COMPELLED
 TO
 RETURN
 TO
 EVER
 THE
 SAID
 MACHINERIES
 OR
 IN
 LIEU

The
following
are
the
facts
as
found
by
the
RTC
and
affirmed
by
the
Court

THEREOF
BE
ASSESSED
DAMAGES.
IS
THAT
SITUATION
TANTAMOUNT
TO
A

of
 Appeals
 that
 are
 decisive
 of
 the
 issues:
 (1)
 the
 "controverted

CASE
OF
UNJUST
ENRICHMENT?7

machineries"
 are
 not
 covered
 by,
 or
 included
 in,
 either
 of
 the
 two

The
 principal
 issue,
 in
 our
 view,
 is
 whether
 or
 not
 the
 inclusion
 of
 the
 mortgages,
 the
 Real
 Estate
 and
 Chattel
 Mortgage,
 and
 the
 pure
 Chattel

questioned
 properties
 in
 the
 foreclosed
 properties
 is
 proper.
 The
 Mortgage;
 (2)
 the
 said
 machineries
 were
 not
 included
 in
 the
 list
 of

secondary
issue
is
whether
or
not
the
sale
of
these
properties
to
petitioner
 properties
appended
to
the
Notice
of
Sale,
and
neither
were
they
included

Ruby
Tsai
is
valid.
 in
the
Sheriff's
Notice
of
Sale
of
the
foreclosed
properties.15

For
her
part,
Tsai
avers
that
the
Court
of
Appeals
in
effect
made
a
contract
 Petitioners
contend
that
the
nature
of
the
disputed
machineries,
i.e.,
that

for
the
parties
by
treating
the
1981
acquired
units
of
machinery
as
chattels
 they
were
heavy,
bolted
or
cemented
on
the
real
property
mortgaged
by

instead
of
real
properties
within
their
earlier
1975
deed
of
Real
and
Chattel
 EVERTEX
to
PBCom,
make
them
ipso
facto
immovable
under
Article
415
(3)

Mortgage
 or
 1979
 deed
 of
 Chattel
 Mortgage.8
 Additionally,
 Tsai
 argues
 and
(5)
of
the
New
Civil
Code.
This
assertion,
however,
does
not
settle
the

that
respondent
court
erred
in
holding
that
the
disputed
1981
machineries
 issue.
 Mere
 nuts
 and
 bolts
 do
 not
 foreclose
 the
 controversy.
 We
 have
 to

are
 not
 real
 properties.9
 Finally,
 she
 contends
 that
 the
 Court
 of
 Appeals
 look
at
the
parties'
intent.

erred
 in
 holding
 against
 petitioner's
 arguments
 on
 prescription
 and

While
it
is
true
that
the
controverted
properties
appear
to
be
immobile,
a

laches10
 and
 in
 assessing
 petitioner
 actual
 damages,
 attorney's
 fees
 and

perusal
 of
 the
 contract
 of
 Real
 and
 Chattel
 Mortgage
 executed
 by
 the

expenses
of
litigation,
for
want
of
valid
factual
and
legal
basis.11

parties
 herein
 gives
 us
 a
 contrary
 indication.
 In
 the
 case
 at
 bar,
 both
 the

Essentially,
PBCom
contends
that
respondent
court
erred
in
affirming
the
 trial
 and
 the
 appellate
 courts
 reached
 the
 same
 finding
 that
 the
 true

lower
court's
judgment
decreeing
that
the
pieces
of
machinery
in
dispute
 intention
 of
 PBCOM
 and
 the
 owner,
 EVERTEX,
 is
 to
 treat
 machinery
 and

were
not
duly
foreclosed
and
could
not
be
legally
leased
nor
sold
to
Ruby
 equipment
 as
 chattels.
 The
 pertinent
 portion
 of
 respondent
 appellate



 25

court's
ruling
is
quoted
below:
 the
 conclusion
 that
 the
 parties'
 intention
 is
 to
 treat
 these
 units
 of

machinery
 as
 chattels.
 A
 fortiori,
 the
 contested
 after‐acquired
 properties,

As
stressed
upon
by
appellees,
appellant
bank
treated
the
machineries
as

which
are
of
the
same
description
as
the
units
enumerated
under
the
title

chattels;
 never
 as
 real
 properties.
 Indeed,
 the
 1975
 mortgage
 contract,

"LIST
OF
MACHINERIES
&
EQUIPMENT,"
must
also
be
treated
as
chattels.

which
was
actually
real
and
chattel
mortgage,
militates
against
appellants'

posture.
 It
 should
 be
 noted
 that
 the
 printed
 form
 used
 by
 appellant
 bank
 Accordingly,
we
find
no
reversible
error
in
the
respondent
appellate
court's

was
mainly
for
real
estate
mortgages.
But
reflective
of
the
true
intention
of
 ruling
 that
 inasmuch
 as
 the
 subject
 mortgages
 were
 intended
 by
 the

appellant
 PBCOM
 and
 appellee
 EVERTEX
 was
 the
 typing
 in
 capital
 letters,
 parties
 to
 involve
 chattels,
 insofar
 as
 equipment
 and
 machinery
 were

immediately
following
the
printed
caption
of
mortgage,
of
the
phrase
"real
 concerned,
the
Chattel
Mortgage
Law
applies,
which
provides
in
Section
7

and
chattel."
So
also,
the
"machineries
and
equipment"
in
the
printed
form
 thereof
 that:
 "a
 chattel
 mortgage
 shall
 be
 deemed
 to
 cover
 only
 the

of
the
bank
had
to
be
inserted
in
the
blank
space
of
the
printed
contract
 property
 described
 therein
 and
 not
 like
 or
 substituted
 property
 thereafter

and
connected
with
the
word
"building"
by
typewritten
slash
marks.
Now,
 acquired
 by
 the
 mortgagor
 and
 placed
 in
 the
 same
 depository
 as
 the

then,
if
the
machineries
in
question
were
contemplated
to
be
included
in
 property
 originally
 mortgaged,
 anything
 in
 the
 mortgage
 to
 the
 contrary

the
 real
 estate
 mortgage,
 there
 would
 have
 been
 no
 necessity
 to
 ink
 a
 notwithstanding."

chattel
mortgage
specifically
mentioning
as
part
III
of
Schedule
A
a
listing

And,
since
the
disputed
machineries
were
acquired
in
1981
and
could
not

of
the
machineries
covered
thereby.
It
would
have
sufficed
to
list
them
as

have
 been
 involved
 in
 the
 1975
 or
 1979
 chattel
 mortgages,
 it
 was

immovables
in
the
Deed
of
Real
Estate
Mortgage
of
the
land
and
building

consequently
 an
 error
 on
 the
 part
 of
 the
 Sheriff
 to
 include
 subject

involved.

machineries
with
the
properties
enumerated
in
said
chattel
mortgages.

As
 regards
 the
 1979
 contract,
 the
 intention
 of
 the
 parties
 is
 clear
 and

As
the
auction
sale
of
the
subject
properties
to
PBCom
is
void,
no
valid
title

beyond
 question.
 It
 refers
 solely
 to
 chattels.
 The
 inventory
 list
 of
 the

passed
 in
 its
 favor.
 Consequently,
 the
 sale
 thereof
 to
 Tsai
 is
 also
 a
 nullity

mortgaged
 properties
 is
 an
 itemization
 of
 sixty‐three
 (63)
 individually

under
 the
 elementary
 principle
 of
 nemo
 dat
 quod
 non
 habet,
 one
 cannot

described
 machineries
 while
 the
 schedule
 listed
 only
 machines
 and

give
what
one
does
not
have.17

2,996,880.50
worth
of
finished
cotton
fabrics
and
natural
cotton
fabrics.16

Petitioner
 Tsai
 also
 argued
 that
 assuming
 that
 PBCom's
 title
 over
 the

In
the
absence
of
any
showing
that
this
conclusion
is
baseless,
erroneous

contested
 properties
 is
 a
 nullity,
 she
 is
 nevertheless
 a
 purchaser
 in
 good

or
 uncorroborated
 by
 the
 evidence
 on
 record,
 we
 find
 no
 compelling

faith
and
for
value
who
now
has
a
better
right
than
EVERTEX.

reason
to
depart
therefrom.

To
 the
 contrary,
 however,
 are
 the
 factual
 findings
 and
 conclusions
 of
 the

Too,
assuming
arguendo
that
the
properties
in
question
are
immovable
by

trial
court
that
she
is
not
a
purchaser
in
good
faith.
Well‐settled
is
the
rule

nature,
 nothing
 detracts
 the
 parties
 from
 treating
 it
 as
 chattels
 to
 secure

that
the
person
who
asserts
the
status
of
a
purchaser
in
good
faith
and
for

an
 obligation
 under
 the
 principle
 of
 estoppel.
 As
 far
 back
 as
 Navarro
 v.

value
 has
 the
 burden
 of
 proving
 such
 assertion.18
 Petitioner
 Tsai
 failed
 to

Pineda,
 9
 SCRA
 631
 (1963),
 an
 immovable
 may
 be
 considered
 a
 personal

discharge
this
burden
persuasively.

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
 Moreover,
 a
 purchaser
 in
 good
 faith
 and
 for
 value
 is
 one
 who
 buys
 the

in
the
case
at
bar.
 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

In
 the
 instant
 case,
 the
 parties
 herein:
 (1)
 executed
 a
 contract
 styled
 as

the
time
of
purchase,
or
before
he
has
notice
of
the
claims
or
interest
of

"Real
Estate
Mortgage
and
Chattel
Mortgage,"
instead
of
just
"Real
Estate

some
other
person
in
the
property.19
Records
reveal,
however,
that
when

Mortgage"
 if
 indeed
 their
 intention
 is
 to
 treat
 all
 properties
 included

Tsai
 purchased
 the
 controverted
 properties,
 she
 knew
 of
 respondent's

therein
 as
 immovable,
 and
 (2)
 attached
 to
 the
 said
 contract
 a
 separate

claim
 thereon.
 As
 borne
 out
 by
 the
 records,
 she
 received
 the
 letter
 of

"LIST
OF
MACHINERIES
&
EQUIPMENT".
These
facts,
taken
together,
evince


 26

respondent's
counsel,
apprising
her
of
respondent's
claim,
dated
February
 not
only
be
capable
of
proof
but
must
actually
be
proven
with
reasonable

27,
1987.20
She
replied
thereto
on
March
9,
1987.21
Despite
her
knowledge
 degree
 of
 certainty,
 premised
 upon
 competent
 proof
 or
 best
 evidence

of
 respondent's
 claim,
 she
 proceeded
 to
 buy
 the
 contested
 units
 of
 obtainable
 of
 the
 actual
 amount
 thereof.23
 However,
 the
 allegations
 of

machinery
 on
 May
 3,
 1988.
 Thus,
 the
 RTC
 did
 not
 err
 in
 finding
 that
 she
 respondent
company
as
to
the
amount
of
unrealized
rentals
due
them
as

was
not
a
purchaser
in
good
faith.
 actual
 damages
 remain
 mere
 assertions
 unsupported
 by
 documents
 and

other
 competent
 evidence.
 In
 determining
 actual
 damages,
 the
 court

Petitioner
Tsai's
defense
of
indefeasibility
of
Torrens
Title
of
the
lot
where

cannot
 rely
 on
 mere
 assertions,
 speculations,
 conjectures
 or
 guesswork

the
 disputed
 properties
 are
 located
 is
 equally
 unavailing.
 This
 defense

but
must
depend
on
competent
proof
and
on
the
best
evidence
obtainable

refers
 to
 sale
 of
 lands
 and
 not
 to
 sale
 of
 properties
 situated
 therein.

regarding
 the
 actual
 amount
 of
 loss.24
 However,
 we
 are
 not
 prepared
 to

Likewise,
 the
 mere
 fact
 that
 the
 lot
 where
 the
 factory
 and
 the
 disputed

disregard
the
following
dispositions
of
the
respondent
appellate
court:

properties
stand
is
in
PBCom's
name
does
not
automatically
make
PBCom

the
 owner
 of
 everything
 found
 therein,
 especially
 in
 view
 of
 EVERTEX's
 .
 .
 .
 In
 the
 award
 of
 actual
 damages
 under
 scrutiny,
 there
 is
 nothing
 on

letter
to
Tsai
enunciating
its
claim.
 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

Finally,
 petitioners'
 defense
 of
 prescription
 and
 laches
 is
 less
 than

the
additional
award
of
P100,000.00
per
month
thereafter.

convincing.
We
find
no
cogent
reason
to
disturb
the
consistent
findings
of

both
 courts
 below
 that
 the
 case
 for
 the
 reconveyance
 of
 the
 disputed
 As
 pointed
 out
 by
 appellants,
 the
 testimonial
 evidence,
 consisting
 of
 the

properties
was
filed
within
the
reglementary
period.
Here,
in
our
view,
the
 testimonies
 of
 Jonh
 (sic)
 Chua
 and
 Mamerto
 Villaluz,
 is
 shy
 of
 what
 is

doctrine
 of
 laches
 does
 not
 apply.
 Note
 that
 upon
 petitioners'
 adamant
 necessary
 to
 substantiate
 the
 actual
 damages
 allegedly
 sustained
 by

refusal
 to
 heed
 EVERTEX's
 claim,
 respondent
 company
 immediately
 filed
 appellees,
by
way
of
unrealized
rental
income
of
subject
machineries
and

an
action
to
recover
possession
and
ownership
of
the
disputed
properties.
 equipments.

There
 is
 no
 evidence
 showing
 any
 failure
 or
 neglect
 on
 its
 part,
 for
 an

The
 testimony
 of
 John
 Cua
 (sic)
 is
 nothing
 but
 an
 opinion
 or
 projection

unreasonable
 and
 unexplained
 length
 of
 time,
 to
 do
 that
 which,
 by

based
 on
 what
 is
 claimed
 to
 be
 a
 practice
 in
 business
 and
 industry.
 But

exercising
 due
 diligence,
 could
 or
 should
 have
 been
 done
 earlier.
 The

such
 a
 testimony
 cannot
 serve
 as
 the
 sole
 basis
 for
 assessing
 the
 actual

doctrine
of
stale
demands
would
apply
only
where
by
reason
of
the
lapse

damages
 complained
 of.
 What
 is
 more,
 there
 is
 no
 showing
 that
 had

of
time,
it
would
be
inequitable
to
allow
a
party
to
enforce
his
legal
rights.

appellant
Tsai
not
taken
possession
of
the
machineries
and
equipments
in

Moreover,
 except
 for
 very
 strong
 reasons,
 this
 Court
 is
 not
 disposed
 to

question,
 somebody
 was
 willing
 and
 ready
 to
 rent
 the
 same
 for

apply
the
doctrine
of
laches
to
prejudice
or
defeat
the
rights
of
an
owner.22

P100,000.00
a
month.

As
 to
 the
 award
 of
 damages,
 the
 contested
 damages
 are
 the
 actual

xxx










xxx










xxx

compensation,
 representing
 rentals
 for
 the
 contested
 units
 of
 machinery,

the
exemplary
damages,
and
attorney's
fees.
 Then,
 too,
 even
 assuming
 arguendo
 that
 the
 said
 machineries
 and

equipments
could
have
generated
a
rental
income
of
P30,000.00
a
month,

As
 regards
 said
 actual
 compensation,
 the
 RTC
 awarded
 P100,000.00

as
 projected
 by
 witness
 Mamerto
 Villaluz,
 the
 same
 would
 have
 been
 a

corresponding
to
the
unpaid
rentals
of
the
contested
properties
based
on

gross
 income.
 Therefrom
 should
 be
 deducted
 or
 removed,
 expenses
 for

the
testimony
of
John
Chua,
who
testified
that
the
P100,000.00
was
based

maintenance
and
repairs
.
.
.
Therefore,
in
the
determination
of
the
actual

on
the
accepted
practice
in
banking
and
finance,
business
and
investments

damages
 or
 unrealized
 rental
 income
 sued
 upon,
 there
 is
 a
 good
 basis
 to

that
the
rental
price
must
take
into
account
the
cost
of
money
used
to
buy

calculate
 that
 at
 least
 four
 months
 in
 a
 year,
 the
 machineries
 in
 dispute

them.
The
Court
of
Appeals
did
not
give
full
credence
to
Chua's
projection

would
have
been
idle
due
to
absence
of
a
lessee
or
while
being
repaired.
In

and
reduced
the
award
to
P20,000.00.

the
light
of
the
foregoing
rationalization
and
computation,
We
believe
that

Basic
is
the
rule
that
to
recover
actual
damages,
the
amount
of
loss
must
 a
 net
 unrealized
 rental
 income
 of
 P20,000.00
 a
 month,
 since
 November


 27

1986,
is
more
realistic
and
fair.25
 the
 use
 and
 possession
 of
 the
 properties
 in
 question
 from
 November

198631
 until
 subject
 personal
 properties
 are
 restored
 to
 respondent

As
 to
 exemplary
 damages,
 the
 RTC
 awarded
 P200,000.00
 to
 EVERTEX

corporation;
 (2)
 P100,000.00
 by
 way
 of
 exemplary
 damages,
 and
 (3)

which
the
Court
of
Appeals
deleted.
But
according
to
the
CA,
there
was
no

P50,000.00
 as
 attorney's
 fees
 and
 litigation
 expenses.
 Costs
 against

clear
 showing
 that
 petitioners
 acted
 malevolently,
 wantonly
 and

petitioners.

oppressively.
 The
 evidence,
 however,
 shows
 otherwise.It
 is
 a
 requisite
 to

award
exemplary
damages
that
the
wrongful
act
must
be
accompanied
by
 SO
ORDERED.

bad
 faith,26
 and
 the
 guilty
 acted
 in
 a
 wanton,
 fraudulent,
 oppressive,

Bellosillo,
Mendoza,
Buena
and
De
Leon,
Jr.,
JJ.,
concur.

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.

G.R.
No.
L‐41643












July
31,
1935

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
 B.H.
 BERKENKOTTER,
 plaintiff‐appellant,
 
vs.
CU
 UNJIENG
 E
 HIJOS,
 YEK

award
 of
 P50,000.00
 as
 attorney's
 fees
 and
 expenses
 of
 litigation
 is
 TONG
LIN
FIRE
AND
MARINE
INSURANCE
COMPANY,
MABALACAT
SUGAR

reasonable,
given
the
circumstances
in
these
cases.
 COMPANY
 and
 THE
 PROVINCE
 SHERIFF
 OF
 PAMPANGA,
 defendants‐
appellees.

WHEREFORE,
 the
 petitions
 are
 DENIED.
 The
 assailed
 decision
 and

resolution
of
the
Court
of
Appeals
in
CA‐G.R.
CV
No.
32986
are
AFFIRMED
 Briones
 and
 Martinez
 for
 appellant.
Araneta,
 Zaragoza
 and
 Araneta
 for

WITH
MODIFICATIONS.
Petitioners
Philippine
Bank
of
Communications
and
 appellees
Cu
Unjieng
e
Hijos.
No
appearance
for
the
other
appellees.

Ruby
 L.
 Tsai
 are
 hereby
 ordered
 to
 pay
 jointly
 and
 severally
 Ever
 Textile
 VILLA‐REAL,
J.:

Mills,
 Inc.
 the
 following:
 (1)
 P20,000.00
 per
 month,
 as
 compensation
 for


 28

This
 is
 an
 appeal
 taken
 by
 the
 plaintiff,
 B.H.
 Berkenkotter,
 from
 the
 On
June
10,
1927,
B.A.
Green,
president
of
the
Mabalacat
Sugar
Co.,
Inc.,

judgment
of
the
Court
of
First
Instance
of
Manila,
dismissing
said
plaintiff's
 applied
to
Cu
Unjieng
e
Hijos
for
an
additional
loan
of
P75,000
offering
as

complaint
against
Cu
Unjiengs
e
Hijos
et
al.,
with
costs.
 security
 the
 additional
 machinery
 and
 equipment
 acquired
 by
 said
 B.A.

Green
and
installed
in
the
sugar
central
after
the
execution
of
the
original

In
 support
 of
 his
 appeal,
 the
 appellant
 assigns
 six
 alleged
 errors
 as

mortgage
 deed,
 on
 April
 27,
 1927,
 together
 with
 whatever
 additional

committed
 by
 the
 trial
 court
 in
 its
 decision
 in
 question
 which
 will
 be

equipment
acquired
with
said
loan.
B.A.
Green
failed
to
obtain
said
loan.

discussed
in
the
course
of
this
decision.

Article
1877
of
the
Civil
Code
provides
as
follows.

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
 ART.
 1877.
 A
 mortgage
 includes
 all
 natural
 accessions,
 improvements,

declaring
 that
 the
 additional
 machinery
 and
 equipment,
 as
 improvement
 growing
 fruits,
 and
 rents
 not
 collected
 when
 the
 obligation
 falls
 due,
 and

incorporated
with
the
central
are
subject
to
the
mortgage
deed
executed
 the
 amount
 of
 any
 indemnities
 paid
 or
 due
 the
 owner
 by
 the
 insurers
 of

in
favor
of
the
defendants
Cu
Unjieng
e
Hijos.
 the
 mortgaged
 property
 or
 by
 virtue
 of
 the
 exercise
 of
 the
 power
 of

eminent
 domain,
 with
 the
 declarations,
 amplifications,
 and
 limitations

It
 is
 admitted
 by
 the
 parties
 that
 on
 April
 26,
 1926,
 the
 Mabalacat
 Sugar

established
by
law,
whether
the
estate
continues
in
the
possession
of
the

Co.,
 Inc.,
 owner
 of
 the
 sugar
 central
 situated
 in
 Mabalacat,
 Pampanga,

person
 who
 mortgaged
 it
 or
 whether
 it
 passes
 into
 the
 hands
 of
 a
 third

obtained
from
the
defendants,
Cu
Unjieng
e
Hijos,
a
loan
secured
by
a
first

person.

mortgage
 constituted
 on
 two
 parcels
 and
 land
 "with
 all
 its
 buildings,

improvements,
 sugar‐cane
 mill,
 steel
 railway,
 telephone
 line,
 apparatus,
 In
 the
 case
 of
 Bischoff
 vs.
 Pomar
 and
 Compañia
 General
 de
 Tabacos
 (12

utensils
 and
 whatever
 forms
 part
 or
 is
 necessary
 complement
 of
 said
 Phil.,
 690),
 cited
 with
 approval
 in
 the
 case
 of
 Cea
 vs.
 Villanueva
 (18
 Phil.,

sugar‐cane
mill,
steel
railway,
telephone
line,
now
existing
or
that
may
in
 538),
this
court
laid
shown
the
following
doctrine:

the
future
exist
is
said
lots."

1.
 REALTY;
 MORTGAGE
 OF
 REAL
 ESTATE
 INCLUDES
 IMPROVEMENTS
 AND

On
October
5,
1926,
shortly
after
said
mortgage
had
been
constituted,
the
 FIXTURES.
 —
 It
 is
 a
 rule,
 established
 by
 the
 Civil
 Code
 and
 also
 by
 the

Mabalacat
 Sugar
 Co.,
 Inc.,
 decided
 to
 increase
 the
 capacity
 of
 its
 sugar
 Mortgage
Law,
with
which
the
decisions
of
the
courts
of
the
United
States

central
by
buying
additional
machinery
and
equipment,
so
that
instead
of
 are
in
accord,
that
in
a
mortgage
of
real
estate,
the
improvements
on
the

milling
 150
 tons
 daily,
 it
 could
 produce
 250.
 The
 estimated
 cost
 of
 said
 same
 are
 included;
 therefore,
 all
 objects
 permanently
 attached
 to
 a

additional
 machinery
 and
 equipment
 was
 approximately
 P100,000.
 In
 mortgaged
 building
 or
 land,
 although
 they
 may
 have
 been
 placed
 there

order
 to
 carry
 out
 this
 plan,
 B.A.
 Green,
 president
 of
 said
 corporation,
 after
the
mortgage
was
constituted,
are
also
included.
(Arts.
110
and
111

proposed
 to
 the
 plaintiff,
 B.H.
 Berkenkotter,
 to
 advance
 the
 necessary
 of
the
Mortgage
Law,
and
1877
of
the
Civil
Code;
decision
of
U.S.
Supreme

amount
 for
 the
 purchase
 of
 said
 machinery
 and
 equipment,
 promising
 to
 Court
 in
 the
 matter
 of
 Royal
 Insurance
 Co.
 vs.
 R.
 Miller,
 liquidator,
 and

reimburse
 him
 as
 soon
 as
 he
 could
 obtain
 an
 additional
 loan
 from
 the
 Amadeo
[26
Sup.
Ct.
Rep.,
46;
199
U.S.,
353].)

mortgagees,
 the
 herein
 defendants
 Cu
 Unjieng
 e
 Hijos.
 Having
 agreed
 to

2.
ID.;
ID.;
INCLUSION
OR
EXCLUSION
OF
MACHINERY,
ETC.
—
In
order
that

said
 proposition
 made
 in
 a
 letter
 dated
 October
 5,
 1926
 (Exhibit
 E),
 B.H.

it
 may
 be
 understood
 that
 the
 machinery
 and
 other
 objects
 placed
 upon

Berkenkotter,
 on
 October
 9th
 of
 the
 same
 year,
 delivered
 the
 sum
 of

and
 used
 in
 connection
 with
 a
 mortgaged
 estate
 are
 excluded
 from
 the

P1,710
to
B.A.
Green,
president
of
the
Mabalacat
Sugar
Co.,
Inc.,
the
total

mortgage,
 when
 it
 was
 stated
 in
 the
 mortgage
 that
 the
 improvements,

amount
 supplied
 by
 him
 to
 said
 B.A.
 Green
 having
 been
 P25,750.

buildings,
and
machinery
that
existed
thereon
were
also
comprehended,
it

Furthermore,
 B.H.
 Berkenkotter
 had
 a
 credit
 of
 P22,000
 against
 said

is
 indispensable
 that
 the
 exclusion
 thereof
 be
 stipulated
 between
 the

corporation
for
unpaid
salary.
With
the
loan
of
P25,750
and
said
credit
of

contracting
parties.

P22,000,
 the
 Mabalacat
 Sugar
 Co.,
 Inc.,
 purchased
 the
 additional

machinery
and
equipment
now
in
litigation.
 The
 appellant
 contends
 that
 the
 installation
 of
 the
 machinery
 and



 29

equipment
 claimed
 by
 him
 in
 the
 sugar
 central
 of
 the
 Mabalacat
 Sugar
 appellant
after
they
had
been
permanently
incorporated
with
sugar
central

Company,
Inc.,
was
not
permanent
in
character
inasmuch
as
B.A.
Green,
in
 of
 the
 Mabalacat
 Sugar
 Co.,
 Inc.,
 and
 while
 the
 mortgage
 constituted
 on

proposing
to
him
to
advance
the
money
for
the
purchase
thereof,
made
it
 said
sugar
central
to
Cu
Unjieng
e
Hijos
remained
in
force,
only
the
right
of

appear
in
the
letter,
Exhibit
E,
that
in
case
B.A.
Green
should
fail
to
obtain
 redemption
 of
 the
 vendor
 Mabalacat
 Sugar
 Co.,
 Inc.,
 in
 the
 sugar
 central

an
additional
loan
from
the
defendants
Cu
Unjieng
e
Hijos,
said
machinery
 with
 which
 said
 machinery
 and
 equipment
 had
 been
 incorporated,
 was

and
 equipment
 would
 become
 security
 therefor,
 said
 B.A.
 Green
 binding
 transferred
 thereby,
 subject
 to
 the
 right
 of
 the
 defendants
 Cu
 Unjieng
 e

himself
not
to
mortgage
nor
encumber
them
to
anybody
until
said
plaintiff
 Hijos
under
the
first
mortgage.

be
fully
reimbursed
for
the
corporation's
indebtedness
to
him.

For
 the
 foregoing
 considerations,
 we
 are
 of
 the
 opinion
 and
 so
 hold:
 (1)

Upon
 acquiring
 the
 machinery
 and
 equipment
 in
 question
 with
 money
 That
the
installation
of
a
machinery
and
equipment
in
a
mortgaged
sugar

obtained
as
loan
from
the
plaintiff‐appellant
by
B.A.
Green,
as
president
of
 central,
in
lieu
of
another
of
less
capacity,
for
the
purpose
of
carrying
out

the
Mabalacat
Sugar
Co.,
Inc.,
the
latter
became
owner
of
said
machinery
 the
industrial
functions
of
the
latter
and
increasing
production,
constitutes

and
 equipment,
 otherwise
 B.A.
 Green,
 as
 such
 president,
 could
 not
 have
 a
 permanent
 improvement
 on
 said
 sugar
 central
 and
 subjects
 said

offered
them
to
the
plaintiff
as
security
for
the
payment
of
his
credit.
 machinery
 and
 equipment
 to
 the
 mortgage
 constituted
 thereon
 (article

1877,
Civil
Code);
(2)
that
the
fact
that
the
purchaser
of
the
new
machinery

Article
 334,
 paragraph
 5,
 of
 the
 Civil
 Code
 gives
 the
 character
 of
 real

and
 equipment
 has
 bound
 himself
 to
 the
 person
 supplying
 him
 the

property
 to
 "machinery,
 liquid
 containers,
 instruments
 or
 implements

purchase
 money
 to
 hold
 them
 as
 security
 for
 the
 payment
 of
 the
 latter's

intended
by
the
owner
of
any
building
or
land
for
use
in
connection
with

credit,
 and
 to
 refrain
 from
 mortgaging
 or
 otherwise
 encumbering
 them

any
 industry
 or
 trade
 being
 carried
 on
 therein
 and
 which
 are
 expressly

does
 not
 alter
 the
 permanent
 character
 of
 the
 incorporation
 of
 said

adapted
to
meet
the
requirements
of
such
trade
or
industry.

machinery
 and
 equipment
 with
 the
 central;
 and
 (3)
 that
 the
 sale
 of
 the

If
 the
 installation
 of
 the
 machinery
 and
 equipment
 in
 question
 in
 the
 machinery
and
equipment
in
question
by
the
purchaser
who
was
supplied

central
of
the
Mabalacat
Sugar
Co.,
Inc.,
in
lieu
of
the
other
of
less
capacity
 the
 purchase
 money,
 as
 a
 loan,
 to
 the
 person
 who
 supplied
 the
 money,

existing
 therein,
 for
 its
 sugar
 industry,
 converted
 them
 into
 real
 property
 after
the
incorporation
thereof
with
the
mortgaged
sugar
central,
does
not

by
 reason
 of
 their
 purpose,
 it
 cannot
 be
 said
 that
 their
 incorporation
 vest
 the
 creditor
 with
 ownership
 of
 said
 machinery
 and
 equipment
 but

therewith
 was
 not
 permanent
 in
 character
 because,
 as
 essential
 and
 simply
with
the
right
of
redemption.

principal
 elements
 of
 a
 sugar
 central,
 without
 them
 the
 sugar
 central

Wherefore,
finding
no
error
in
the
appealed
judgment,
it
is
affirmed
in
all

would
be
unable
to
function
or
carry
on
the
industrial
purpose
for
which
it

its
parts,
with
costs
to
the
appellant.
So
ordered.

was
 established.
 Inasmuch
 as
 the
 central
 is
 permanent
 in
 character,
 the

necessary
 machinery
 and
 equipment
 installed
 for
 carrying
 on
 the
 sugar
 Malcolm,
Imperial,
Butte,
and
Goddard,
JJ.,
concur.

industry
for
which
it
has
been
established
must
necessarily
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
 [G.R.
No.
137705.

August
22,
2000]

encumbering
them
until
Berkenkotter
has
been
fully
reimbursed
therefor,
 SERG’S
 PRODUCTS,
 INC.,
 and
 SERGIO
 T.
 GOQUIOLAY,

is
not
incompatible
with
the
permanent
character
of
the
incorporation
of
 petitioners,
 vs.
 PCI
 LEASING
 AND
 FINANCE,
 INC.,

said
 machinery
 and
 equipment
 with
 the
 sugar
 central
 of
 the
 Mabalacat
 respondent.

Sugar
 Co.,
 Inc.,
 as
 nothing
 could
 prevent
 B.A.
 Green
 from
 giving
 them
 as

security
at
least
under
a
second
mortgage.
 D
E
C
I
S
I
O
N


As
to
the
alleged
sale
of
said
machinery
and
equipment
to
the
plaintiff
and
 PANGANIBAN,
J.:


 30

After
 agreeing
 to
 a
 contract
 stipulating
 that
 a
 real
 or
 to
 petitioner’s
 factory,
 seized
 one
 machinery
 with
 [the]
 word
 that
 he

immovable
property
be
considered
as
personal
or
movable,
a
 [would]
return
for
the
other
machineries.

party
 is
 estopped
 from
 subsequently
 claiming
 otherwise.



“On
March
25,
1998,
petitioners
filed
a
motion
for
special
protective
order

Hence,
such
property
is
a
proper
subject
of
a
writ
of
replevin

(Annex
 ‘C’),
 invoking
 the
 power
 of
 the
 court
 to
 control
 the
 conduct
 of
 its

obtained
by
the
other
contracting
party.

officers
and
amend
and
control
its
processes,
praying
for
a
directive
for
the

The
Case
 sheriff
to
defer
enforcement
of
the
writ
of
replevin.

Before
us
is
a
Petition
for
Review
on
Certiorari
assailing
 
“This
motion
was
opposed
by
PCI
Leasing
(Annex
‘F’),
on
the
ground
that

the
January
6,
1999
Decision[1]
of
the
Court
of
Appeals
(CA)[2]
 the
 properties
 [were]
 still
 personal
 and
 therefore
 still
 subject
 to
 seizure

in
CA‐GR
SP
No.
47332
and
its
February
26,
1999
Resolution[3]
 and
a
writ
of
replevin.

denying
 reconsideration.

 The
 decretal
 portion
 of
 the
 CA


“In
 their
 Reply,
 petitioners
 asserted
 that
 the
 properties
 sought
 to
 be

Decision
reads
as
follows:

seized
 [were]
 immovable
 as
 defined
 in
 Article
 415
 of
 the
 Civil
 Code,
 the


“WHEREFORE,
premises
considered,
the
assailed
Order
dated
February
18,
 parties’
 agreement
 to
 the
 contrary
 notwithstanding.

 They
 argued
 that
 to

1998
 and
 Resolution
 dated
 March
 31,
 1998
 in
 Civil
 Case
 No.
 Q‐98‐33500
 give
 effect
 to
 the
 agreement
 would
 be
 prejudicial
 to
 innocent
 third

are
 hereby
 AFFIRMED.

 The
 writ
 of
 preliminary
 injunction
 issued
 on
 June
 parties.

They
further
stated
that
PCI
Leasing
[was]
estopped
from
treating

15,
1998
is
hereby
LIFTED.”[4]
 these
machineries
as
personal
because
the
contracts
in
which
the
alleged

agreement
[were]
embodied
[were]
totally
sham
and
farcical.

In
 its
 February
 18,
 1998
 Order,[5]
 the
 Regional
 Trial

Court
 (RTC)
 of
 Quezon
 City
 (Branch
 218)[6]
 issued
 a
 Writ
 of
 “On
 April
 6,
 1998,
 the
 sheriff
 again
 sought
 to
 enforce
 the
 writ
 of
 seizure

Seizure.[7]
 The
 March
 18,
 1998
 Resolution[8]
 denied
 and
take
possession
of
the
remaining
properties.

He
was
able
to
take
two

petitioners’
 Motion
 for
 Special
 Protective
 Order,
 praying
 that
 more,
but
was
prevented
by
the
workers
from
taking
the
rest.

the
 deputy
 sheriff
 be
 enjoined
 “from
 seizing
 immobilized
 or


“On
 April
 7,
 1998,
 they
 went
 to
 [the
 CA]
 via
 an
 original
 action
 for

other
 real
 properties
 in
 (petitioners’)
 factory
 in
 Cainta,
 Rizal

certiorari.”

and
 to
 return
 to
 their
 original
 place
 whatever
 immobilized

machineries
or
equipments
he
may
have
removed.”[9]
 Ruling
of
the
Court
of
Appeals

The
Facts
 Citing
the
Agreement
of
the
parties,
the
appellate
court

held
 that
 the
 subject
 machines
 were
 personal
 property,
 and

The
 undisputed
 facts
 are
 summarized
 by
 the
 Court
 of

that
they
had
only
been
leased,
not
owned,
by
petitioners.

It

Appeals
as
follows:[10]

also
ruled
that
the
“words
of
the
contract
are
clear
and
leave

“On
 February
 13,
 1998,
 respondent
 PCI
 Leasing
 and
 Finance,
 Inc.
 (“PCI
 no
doubt
upon
the
true
intention
of
the
contracting
parties.”


Leasing”
for
short)
filed
with
the
RTC‐QC
a
complaint
for
[a]
sum
of
money
 Observing
 that
 Petitioner
 Goquiolay
 was
 an
 experienced

(Annex
‘E’),
with
an
application
for
a
writ
of
replevin
docketed
as
Civil
Case
 businessman
 who
 was
 “not
 unfamiliar
 with
 the
 ways
 of
 the

No.
Q‐98‐33500.
 trade,”

 it
 ruled
 that
 he
 “should
 have
 realized
 the
 import
 of

the
document
he
signed.”

The
CA
further
held:


“On
 March
 6,
 1998,
 upon
 an
 ex‐parte
 application
 of
 PCI
 Leasing,

respondent
judge
issued
a
writ
of
replevin
(Annex
‘B’)
directing
its
sheriff
 
“Furthermore,
 to
 accord
 merit
 to
 this
 petition
 would
 be
 to
 preempt
 the

to
seize
and
deliver
the
machineries
and
equipment
to
PCI
Leasing
after
5
 trial
 court
 in
 ruling
 upon
 the
 case
 below,
 since
 the
 merits
 of
 the
 whole

days
and
upon
the
payment
of
the
necessary
expenses.
 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


“On
March
24,
1998,
in
implementation
of
said
writ,
the
sheriff
proceeded


 31

[RTC]
in
issuing
the
assailed
Order
and
Resolution.

The
issues
raised
herein
 present
case.

are
 proper
 subjects
 of
 a
 full‐blown
 trial,
 necessitating
 presentation
 of

Main
Issue:
Nature
of
the
Subject
Machinery

evidence
by
both
parties.

The
contract
is
being
enforced
by
one,
and
[its]

validity
is
attacked
by
the
other
–
a
matter
x
x
x
which
respondent
court
is
 Petitioners
 contend
 that
 the
 subject
 machines
 used
 in

in
the
best
position
to
determine.”
 their
 factory
 were
 not
 proper
 subjects
 of
 the
 Writ
 issued
 by

the
 RTC,
 because
 they
 were
 in
 fact
 real
 property.

 Serious

Hence,
this
Petition.[11]

policy
 considerations,
 they
 argue,
 militate
 against
 a
 contrary

The
Issues
 characterization.

In
their
Memorandum,
petitioners
submit
the
following
 Rule
 60
 of
 the
 Rules
 of
 Court
 provides
 that
 writs
 of

issues
for
our
consideration:
 replevin
 are
 issued
 for
 the
 recovery
 of
 personal
 property

only.[15]
Section
3
thereof
reads:


“A.
 Whether
 or
 not
 the
 machineries
 purchased
 and
 imported
 by
 SERG’S

became
real
property
by
virtue
of
immobilization.
 “SEC.
 3.

 Order.

 ‐‐
 Upon
 the
 filing
 of
 such
 affidavit
 and
 approval
 of
 the

bond,
the
court
shall
issue
an
order
and
the
corresponding
writ
of
replevin

B.
 Whether
 or
 not
 the
 contract
 between
 the
 parties
 is
 a
 loan
 or
 a

describing
 the
 personal
 property
 alleged
 to
 be
 wrongfully
 detained
 and

lease.”[12]

requiring
the
sheriff
forthwith
to
take
such
property
into
his
custody.”

In
 the
 main,
 the
 Court
 will
 resolve
 whether
 the
 said

On
 the
 other
 hand,
 Article
 415
 of
 the
 Civil
 Code

machines
 are
 personal,
 not
 immovable,
 property
 which
 may

enumerates
immovable
or
real
property
as
follows:

be
 a
 proper
 subject
 of
 a
 writ
 of
 replevin.

 As
 a
 preliminary

matter,
 the
 Court
 will
 also
 address
 briefly
 the
 procedural
 
“ART.
415.

The
following
are
immovable
property:

points
raised
by
respondent.

x
x
x....................................x
x
x....................................x
x
x

The
Court’s
Ruling


(5)
 Machinery,
 receptacles,
 instruments
 or
 implements
 intended
 by
 the

The
Petition
is
not
meritorious.
 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

Preliminary
Matter:Procedural
Questions

needs
of
the
said
industry
or
works;

Respondent
contends
that
the
Petition
failed
to
indicate

x
x
x....................................x
x
x....................................x
x
x”

expressly
whether
it
was
being
filed
under
Rule
45
or
Rule
65

of
 the
 Rules
 of
 Court.

 It
 further
 alleges
 that
 the
 Petition
 In
 the
 present
 case,
 the
 machines
 that
 were
 the

erroneously
impleaded

Judge
Hilario
Laqui
as
respondent.
 subjects
 of
 the
 Writ
 of
 Seizure
 were
 placed
 by
 petitioners
 in

the
 factory
 built
 on
 their
 own
 land.

 Indisputably,
 they
 were

There
is
no
question
that
the
present
recourse
is
under

essential
 and
 principal
 elements
 of
 their
 chocolate‐making

Rule
45.

This
conclusion
finds
support
in
the
very
title
of
the

industry.

 Hence,
 although
 each
 of
 them
 was
 movable
 or

Petition,
which
is
“Petition
for
Review
on
Certiorari.”[13]

personal
 property
 on
 its
 own,
 all
 of
 them
 have
 become

While
Judge
Laqui
should
not
have
been
impleaded
as
a
 “immobilized
 by
 destination
 because
 they
 are
 essential
 and

respondent,[14]
substantial
justice
requires
that
such
lapse
by
 principal
 elements
 in
 the
 industry.”[16]
 In
 that
 sense,

itself
should
not
warrant
the
dismissal
of
the
present
Petition.

 petitioners
 are
 correct
 in
 arguing
 that
 the
 said
 machines
 are

In
 this
 light,
 the
 Court
 deems
 it
 proper
 to
 remove,
 motu
 real,
not
personal,
property
pursuant
to
Article
415
(5)
of
the

proprio,
 the
 name
 of
 Judge
 Laqui
 from
 the
 caption
 of
 the
 Civil
Code.[17]



 32

Be
 that
 as
 it
 may,
 we
 disagree
 with
 the
 submission
 of
 as
 personal
 property.

 Specifically,
 Section
 12.1
 of
 the

the
petitioners
that
the
said
machines
are
not
proper
subjects
 Agreement
reads
as
follows:[21]

of
the
Writ
of
Seizure.



“12.1

 The
 PROPERTY
 is,
 and
 shall
 at
 all
 times
 be
 and
 remain,
 personal

The
Court
has
held
that
contracting
parties
may
validly
 property
notwithstanding
that
the
PROPERTY
or
any
part
thereof
may
now

stipulate
 that
 a
 real
 property
 be
 considered

 as
 personal.[18]
 be,
 or
 hereafter
 become,
 in
 any
 manner
 affixed
 or
 attached
 to
 or

After
 agreeing
 to
 such
 stipulation,
 they
 are
 consequently
 embedded
 in,
 or
 permanently
 resting
 upon,
 real
 property
 or
 any
 building

estopped
 from
 claiming
 otherwise.

 Under
 the
 principle
 of
 thereon,
or
attached
in
any
manner
to
what
is
permanent.”

estoppel,
 a
 party
 to
 a
 contract
 is
 ordinarily
 precluded
 from

Clearly
then,
petitioners
are
estopped
from
denying
the

denying
the
truth
of
any
material
fact
found
therein.



characterization
 of
 the
 subject
 machines
 as
 personal

Hence,
in
Tumalad
v.
Vicencio,[19]
the
Court
upheld
the
 property.


Under
the
circumstances,
they
are
proper
subjects

intention
 of
 the
 parties
 to
 treat
 a
 house
 as
 a
 personal
 of
the
Writ
of
Seizure.

property

 because
 it
 had
 been
 made
 the
 subject
 of
 a
 chattel

It
should
be
stressed,
however,
that
our
holding
‐‐
that

mortgage.

The
Court
ruled:

the
 machines
 should
 be
 deemed
 personal
 property
 pursuant


“x
 x
 x.

 Although
 there
 is
 no
 specific
 statement
 referring
 to
 the
 subject
 to
 the
 Lease
 Agreement
 –
 is
 good
 only
 insofar
 as
 the

house
 as
 personal
 property,
 yet
 by
 ceding,
 selling
 or
 transferring
 a
 contracting
 parties
 are
 concerned.[22]
 Hence,
 while
 the

property
 by
 way
 of
 chattel
 mortgage
 defendants‐appellants
 could
 only
 parties
 are
 bound
 by
 the
 Agreement,
 third
 persons
 acting
 in

have
meant
to
convey
the
house
as
chattel,
or
at
least,
intended
to
treat
 good
faith
are
not
affected
by
its
stipulation
characterizing
the

the
 same
 as
 such,
 so
 that
 they
 should
 not
 now
 be
 allowed
 to
 make
 an
 subject
 machinery
 as
 personal.[23]
 In
 any
 event,
 there
 is
 no

inconsistent
stand
by
claiming
otherwise.”
 showing
 that
 any
 specific
 third
 party
 would
 be
 adversely

affected.

Applying
 Tumalad,
 the
 Court
 in
 Makati
 Leasing
 and

Finance
 Corp.
 v.
 Wearever
 Textile
 Mills[20]
 also
 held
 that
 the
 Validity
of
the
Lease
Agreement

machinery
used
in
a
factory
and
essential
to
the
industry,
as
in

In
 their
 Memorandum,
 petitioners
 contend
 that
 the

the
 present
 case,
 was
 a
 proper
 subject
 of
 a
 writ
 of
 replevin

Agreement
 is
 a
 loan
 and
 not
 a
 lease.[24]
 Submitting

because
 it
 was
 treated
 as
 personal
 property
 in
 a
 contract.


documents
 supposedly
 showing
 that
 they
 own
 the
 subject

Pertinent
 portions
 of
 the
 Court’s
 ruling
 are
 reproduced

machines,
 petitioners
 also
 argue
 in
 their
 Petition
 that
 the

hereunder:

Agreement
 suffers
 from
 “intrinsic
 ambiguity
 which
 places
 in


“x
x
x.

If
a
house
of
strong
materials,
like
what
was
involved
in
the
above
 serious
 doubt
 the
 intention
 of
 the
 parties
 and
 the
 validity
 of

Tumalad
 case,
 may
 be
 considered
 as
 personal
 property
 for
 purposes
 of
 the
lease
agreement
itself.”[25]
In
their
Reply
to
respondent’s

executing
a
chattel
mortgage
thereon
as
long
as
the
parties
to
the
contract
 Comment,
 they
 further
 allege
 that
 the
 Agreement
 is

so
 agree
 and
 no
 innocent
 third
 party
 will
 be
 prejudiced
 thereby,
 there
 is
 invalid.[26]

absolutely
no
reason
why
a
machinery,
which
is
movable
in
its
nature
and

These
arguments
are
unconvincing.

The
validity
and
the

becomes
immobilized
only
by
destination
or
purpose,
may
not
be
likewise

nature
 of
 the
 contract
 are
 the
 lis
 mota
 of
 the
 civil
 action

treated
as
such.

This
is
really
because
one
who
has
so
agreed
is
estopped

pending
 before
 the
 RTC.

 A
 resolution
 of
 these
 questions,

from
denying
the
existence
of
the
chattel
mortgage.”

therefore,
is
effectively
a
resolution
of
the
merits
of
the
case.


In
 the
 present
 case,
 the
 Lease
 Agreement
 clearly
 Hence,
 they
 should
 be
 threshed
 out
 in
 the
 trial,
 not
 in
 the

provides
that
the
machines
in
question
are
to
be
considered

 proceedings
involving
the
issuance
of
the
Writ
of
Seizure.



 33

Indeed,
 in

 La
 Tondeña
 Distillers
 v.
 CA,[27]
 the
 Court
 
“x
 x
 x.

 Moreover,
 even
 granting
 that
 the
 charge
 is
 true,
 such
 fact
 alone

explained
 that
 the
 policy
 under
 Rule
 60
 was
 that
 questions
 does
 not
 render
 a
 contract
 void
 ab
 initio,
 but
 can
 only
 be
 a
 ground
 for

involving
 title
 to
 the
 subject
 property
 –
 questions
 which
 rendering
said
contract
voidable,
or
annullable
pursuant
to
Article
1390
of

petitioners
 are
 now
 raising
 ‐‐


 should
 be
 determined
 in
 the
 the
new
Civil
Code,
by
a
proper
action
in
court.

There
is
nothing
on
record

trial.

 In
 that
 case,
 the
 Court
 noted
 that
 the
 remedy
 of
 to
show
that
the
mortgage
has
been
annulled.

Neither
is
it
disclosed
that

defendants
 under
 Rule
 60
 was
 either
 to
 post
 a
 counter‐bond
 steps
were
taken
to
nullify
the
same.
x
x
x”

or
 to
 question
 the
 sufficiency
 of
 the
 plaintiff’s
 bond.

 They

Alleged
Injustice
Committed
on
the
Part
of
Petitioners

were
not
allowed,
however,
to
invoke
the
title
to
the
subject

property.

The
Court
ruled:

 Petitioners
 contend
 that
 “if
 the
 Court
 allows
 these

machineries
 to
 be
 seized,
 then
 its
 workers
 would
 be
 out
 of


“In
other
words,
the
law
does
not
allow
the
defendant
to
file
a
motion
to

work
 and
 thrown
 into
 the
 streets.”[31]
 They
 also
 allege
 that

dissolve
 or
 discharge
 the
 writ
 of
 seizure
 (or
 delivery)
 on
 ground
 of

the
 seizure
 would
 nullify
 all
 efforts
 to
 rehabilitate
 the

insufficiency
of
the
complaint
or
of
the
grounds
relied
upon
therefor,
as
in

corporation.


proceedings
 on
 preliminary
 attachment
 or
 injunction,
 and
 thereby
 put
 at

issue
the
matter
of
the
title
or
right
of
possession
over
the
specific
chattel
 Petitioners’
 arguments
 do
 not
 preclude
 the

being
 replevied,
 the
 policy
 apparently
 being
 that
 said
 matter
 should
 be
 implementation
 of
 the
 Writ.

 As
 earlier
 discussed,
 law
 and

ventilated
and
determined
only
at
the
trial
on
the
merits.”[28]
 jurisprudence
 support
 its
 propriety.

 Verily,
 the
 above‐
mentioned
 consequences,
 if
 they
 come
 true,
 should
 not
 be

Besides,
 these
 questions
 require
 a
 determination
 of

blamed
on
this
Court,
but
on
the
petitioners
for
failing
to
avail

facts
 and
 a
 presentation
 of
 evidence,
 both
 of
 which
 have
 no

themselves
 of
 the
 remedy
 under
 Section
 5
 of
 Rule
 60,
 which

place
in
a
petition
for
certiorari
in
the
CA
under
Rule
65
or
in
a

allows
the
filing
of
a
counter‐bond.

The
provision
states:

petition
for
review
in
this
Court
under
Rule
45.[29]


“SEC.
 5.

 Return
 of
 property.
 ‐‐

 If
 the
 adverse
 party
 objects
 to
 the

Reliance
on
the
Lease
Agreement

sufficiency
of
the
applicant’s
bond,
or
of
the
surety
or
sureties
thereon,
he

It
should
be
pointed
out
that
the
Court
in
this
case
may
 cannot
immediately
require
the
return
of
the
property,
but
if
he
does
not

rely
 on
 the
 Lease
 Agreement,
 for

 nothing
 on
 record
 shows
 so
object,
he
may,
at
any
time
before
the
delivery
of
the
property
to
the

that
 it
 has
 been
 nullified
 or
 annulled.

 In
 fact,
 petitioners
 applicant,
 require
 the
 return
 thereof,
 by
 filing
 with
 the
 court
 where
 the

assailed
 it
 first
 only
 in
 the
 RTC
 proceedings,
 which
 had
 action
is
pending
a
bond
executed
to
the
applicant,
in
double
the
value
of

ironically
been
instituted
by
respondent.

Accordingly,
it
must
 the
 property
 as
 stated
 in
 the
 applicant’s
 affidavit
 for
 the
 delivery
 thereof

be
 presumed
 valid
 and
 binding
 as
 the
 law
 between
 the
 to
the
applicant,
if
such
delivery
be
adjudged,
and
for
the
payment
of
such

parties.
 sum
to
him
as
may
be
recovered
against
the
adverse
party,
and
by
serving

a
copy
bond
on
the
applicant.”

Makati
 Leasing
 and
 Finance
 Corporation[30]
 is
 also

instructive
 on
 this
 point.

 In
 that
 case,
 the
 Deed
 of
 Chattel
 WHEREFORE,
 the
 Petition
 is
 DENIED
 and
 the
 assailed

Mortgage,
 which
 characterized
 the
 subject
 machinery
 as
 Decision
 of
 the
 Court
 of
 Appeals
 AFFIRMED.

 Costs
 against

personal
property,
was
also
assailed
because
respondent
had
 petitioners.

allegedly
 been
 required
 “to
 sign
 a
 printed
 form
 of
 chattel

SO
ORDERED.

mortgage
 which
 was
 in
 a
 blank
 form
 at
 the
 time
 of
 signing.”


The
 Court
 rejected
 the
 argument
 and
 relied
 on
 the
 Deed,
 Melo,
 (Chairman),
 Vitug,
 Purisima,
 and
 Gonzaga‐Reyes,
 JJ.,

ruling
as
follows:

 concur.



 34


 equity
 of
 redemption
 under
 prior
 transfers,
 held
 that
 a
 transfer
 of
 all
 the

property
of
a
corporation
to
one
advancing
money
to
enable
it
to
continue

‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐

its
 business
 was
 not
 a
 conditional
 sale
 of
 the
 property,
 but
 a
 contract


 creating
 security
 for
 the
 money
 advanced,
 and,
 on
 liquidation
 of
 the

VALDES
V.
CENTRAL
ALTAGRACIA,
INC.,
225
U.
S.
58
(1912)
 assets,
the
transferee
stood
merely
as
a
secured
creditor



 The
mere
form
of
an
instrument
transferring
property
of
a
debtor
cannot

exclude
the
power
of
creditors
to
inquire
into
the
reality
and
substance
of

U.S.
Supreme
Court
 a
contract
unrecorded,
although
required
by
law
to
be
recorded
in
order
to

Valdes
v.
Central
Altagracia,
Inc.,
225
U.S.
58
(1912)
 be
effective
against
third
parties.


Valdes
v.
Central
Altagracia,
Incorporated
 Under
 the
 general
 law
 of
 Porto
 Rico,
 machinery
 placed
 on
 property
 by
 a

tenant
 does
 not
 become
 immobilized;
 when,
 however,
 a
 tenant
 places
 it

Nos.
193,
196
 there
 pursuant
 to
 contract
 that
 it
 shall
 belong
 to
 the
 owner,
 it
 becomes

Submitted
March
6,
1912
 immobilized
as
to
that
tenant
and
his
assigns
with
notice,
although
it
does

not
become
so
as
to
creditors
not
having
legal
notice
of
the
lease.

Decided
May
13,
1912

In
this
case,
held
that
the
lien
of
the
attachment
of
a
creditor
of
the
tenant

225
U.S.
58

on
 machinery
 placed
 by
 the
 tenant
 on
 a
 sugar
 Central
 in
 Porto
 Rico
 is


 superior
to
the
claim
of
the
transferee
of
an
unrecorded

APPEALS
FROM
THE
DISTRICT
COURT
OF
THE
 Page
225
U.
S.
59

UNITED
STATES
FOR
PORTO
RICO
 lease,
 even
 though
 the
 lease
 required
 the
 tenant
 to
 place
 the
 machinery

on
the
property.

Syllabus

5
P.R.
155
affirmed.

The
record
in
this
case
shows
that
the
court
below
did
not
err
in
bringing

this
 case
 to
 a
 speedy
 conclusion
 and
 avoiding
 the
 loss
 occasioned
 by
 the
 The
facts
are
stated
in
the
opinion.

litigation
to
all
concerned.

MR.
CHIEF
JUSTICE
WHITE
delivered
the
opinion
of
the
Court.

A
litigant
cannot,
after
all
parties
have
acquiesced
in
the
order
setting
the

These
 cases
 were
 consolidated
 below,
 tried
 together,
 a
 like
 statement
 of

case
for
trial
and
the
court
has
denied
his
request
for
continuance,
refuse

facts
was
made
applicable
to
both,
and
the
court
disposed
of
them
in
one

to
 proceed
 with
 the
 trial
 on
 the
 ground
 that
 the
 time
 to
 plead
 has
 not

opinion.
We
shall
do
likewise.
Stating
only
things
deemed
to
be
essential
as

expired,
 and
 when
 such
 refusal
 to
 proceed
 is
 inconsistent
 with
 his
 prior

shown
by
the
pleadings
and
documents
annexed
to
them
and
the
finding

attitude
in
the
case.

of
facts
made
below,
the
case
is
this:
Joaquin
Sanchez
owned
in
Porto
Rico

The
 granting
 of
 a
 continuance
 is
 within
 the
 sound
 discretion
 of
 the
 trial
 a
 tract
 of
 land
 of
 about
 22
 acres
 (cuerdas)
 on
 which
 was
 a
 sugar
 house

court,
 and
 not
 subject
 to
 be
 reviewed
 on
 appeal
 except
 in
 cases
 of
 clear
 containing
 a
 mill
 for
 crushing
 cane
 and
 an
 evaporating
 apparatus
 for

error
and
abuse;
in
this
case,
the
record
shows
that
the
refusal
to
continue
 manufacturing
 the
 juice
 of
 the
 cane
 into
 sugar.
 All
 of
 the
 machinery
 was

on
account
of
absence
of
witness
was
not
an
abuse,
but
a
just
exercise,
of
 antiquated
and
of
a
limited
capacity.
The
establishment
was
known
as
the

discretion.
 Central
 Altagracia,
 and
 Sanchez,
 while
 not
 a
 cane
 grower,
 carried
 on
 the

business
 of
 a
 central
 ‐‐
 that
 is,
 of
 acquiring
 cane
 grown
 by
 others
 and

Under
 the
 circumstances
 of
 this
 case,
 and
 in
 view
 of
 the
 existence
 of
 an

manufacturing
 it
 into
 sugar
 at
 his
 factory.
 On
 the
 eighteenth
 day
 of


 35

January,
1905,
Sanchez
leased
his
land
and
plant
to
Salvador
Castello
for
a
 place,

period
 of
 ten
 years.
 The
 lease
 gave
 to
 the
 tenant
 (Castello)
 the
 right
 to

"and
be
a
contracting
party
if
he
so
desired.
Otherwise,
the
plantation,
in

install
in
the
plant

such
a
condition
at
it
may
be
at
his
death,
shall
immediately
pass
into
the

"such
machinery
as
he
may
deem
convenient,
which
said
machinery
at
the
 possession
of
its
owner,
Don
Joaquin
Sanchez."

end

In
June,

Page
225
U.
S.
60

Page
225
U.
S.
61

of
the
years
mentioned
(the
term
of
the
lease)
shall
become
the
exclusive

1905,
 by
 a
 supplementary
 contract,
 the
 lease
 was
 extended
 without

property"

change
 of
 its
 terms
 and
 conditions
 for
 an
 additional
 period
 of
 ten
 years,

of
the
lessor,
Sanchez.
The
tenant
was
given
one
year
in
which
to
begin
the
 making
 the
 total
 term
 twenty
 years.
 Although
 executed
 under
 private

work
of
repairing
and
improving
the
plant,
and
it
was
provided
that,
 signature,
this
lease,
conformably
to
the
laws
of
Porto
Rico,
was
produced

before
a
notary
and
made
authentic,
and
in
such
form
was
duly
registered

"upon
the
expiration
of
this
term,
if
the
necessary
improvements
shall
not

on
the
public
records,
as
required
by
the
Porte
Rican
laws.

have
 been
 begun
 by
 him
 (Castello),
 then
 this
 contract
 shall
 be
 null
 and

void,
and
no
cause
of
action
shall
accrue
to
any
of
the
contracting
parties
 On
the
first
day
of
July,
1905,
Salvador
and
Gerardo
Castello
transferred
all

by
reason
thereof."
 their
 rights
 acquired
 under
 the
 lease,
 as
 above
 stated,
 to
 Frederick
 L.

Cornwell
for
"the
corporation
to
be
organized
under
the
name
of
Central

Further
agreeing
on
the
subject
of
the
improved
machinery
which
was
to

Altagracia,
of
which
he
is
the
trustee."
This
transfer
bound
the
corporation

be
placed
in
the
plant,
the
contract
provided:

to
all
the
obligations
in
favor
of
the
original
lessor,
Sanchez,
provided
that

"Upon
 the
 expiration
 of
 the
 term
 agreed
 on
 under
 this
 contract,
 any
 the
 corporation
 should
 issue
 to
 Castello
 a
 certain
 number
 of
 paid‐up

improvement
or
machinery
installed
in
the
said
central
shall
remain
for
the
 shares
of
its
capital
stock
and
a
further
number
of
shares
as
the
output
of

benefit
 of
 Don
 Joaquin
 Sanchez,
 and
 Don
 Salvador
 Castello
 shall
 have
 no
 sugar
 from
 the
 plant
 increased
 as
 the
 result
 of
 its
 enlarged
 capacity

right
to
claim
anything
for
the
improvements
made."
 consequent
 upon
 the
 improvement
 of
 the
 machinery
 by
 the
 corporation.

The
rental
was
thus
provided
for:
 The
 lease
 further
 provided
 for
 the
 employment
 of
 Castello
 as

superintendent
 at
 a
 salary,
 for
 a
 substitution
 of
 Gerardo
 Castello,
 in
 the

"After
each
crop,
such
profits
as
may
be
produced
by
the
Central
Altagracia
 event
of
the
absence
or
death
of
his
brother
Salvador,
and,
for
this
reason,

shall
 be
 distributed,
 and
 twenty‐five
 percent
 (25%)
 thereof
 shall
 be
 it
 is
 to
 be
 assumed
 Gerardo
 made
 himself
 a
 party
 to
 the
 transfer
 of
 the

immediately
 paid
 to
 Don
 Joaquin
 Sanchez
 as
 equivalent
 for
 the
 rental
 of
 lease.
This
transfer
of
the
lease
to
the
corporation
was
never
put
upon
the

said
 central
 and
 of
 the
 twenty‐two
 (22)
 cuerdas
 of
 land
 surrounding
 the
 public
records.
The
corporation
was
organized
under
the
laws
of
the
State

same.
 The
 remaining
 seventy‐five
 percent
 (75%)
 shall
 belong
 to
 Don
 of
Maine,
and,
under
the
transfer,
took
charge
of
the
plant.
The
season
for

Salvador
 Castello,
 who
 may
 interest
 therein
 whomsoever
 he
 may
 wish,
 grinding
 cane
 and
 the
 manufacture
 of
 sugar
 in
 Porto
 Rico
 usually

either
for
the
whole
or
part
thereof."
 commences

It
was
stipulated,
however,
that,
in
fixing
the
profits,
no
charge
should
be
 "about
 the
 month
 of
 December
 of
 each
 year,
 and
 terminates
 in
 the

made
for
repairs
of
the
existing
machinery
or
for
new
machinery
put
in,
as
 months
 of
 May,
 June,
 or
 July
 of
 the
 year
 following,
 according
 to
 the

the
 entire
 cost
 of
 these
 matters
 was
 to
 be
 borne
 by
 the
 lessee,
 Castello.
 amount
of
cane
to
be
ground."

The
 lease
 provided,
 moreover,
 that,
 in
 case
 of
 the
 death
 of
 Sanchez,
 the

obligations
of
the
contract
should
be
binding
on
his
heirs,
and
in
the
case
 Central
factories
in
Porto
Rico
usually

of
 the
 death
 of
 Castello,
 his
 brother,
 Gerardo
 Castello,
 should
 take
 his
 "make
contracts
with
the
people
(colonos)
growing
cane,
so
that
growers



 36

of
cane
will
deliver
the
same
to
be
ground,
and
such
contracts
 immediately
upon
being
required
to
do
so
by
the
former."

Page
225
U.
S.
62
 This
sale
was
made
subject
to
a
right
to
redeem
the
property
within
a
year

on
 paying
 Valdes
 the
 entire
 amount
 of
 his
 debt.
 There
 was
 a
 stipulation

are
 usually
 made
 and
 entered
 into
 in
 the
 months
 of
 June,
 July,
 and

that
Valdes
assumed
all
the
obligations
of
the
lease
transferred
by
Castello

August."

to
the
company.

In
other
words,
on
the
termination
of
one
grinding
season,
in
the
months

The
 undoubted
 purpose
 was
 not
 to
 interfere
 with
 the
 operation
 of
 the

of
June
or
July,
it
is
usual
in
the
ensuing
August
to
make
new
contracts
for

plant
 by
 the
 corporation,
 since
 there
 was
 a
 provision
 in
 the
 contract

the
 cane
 to
 be
 delivered
 in
 the
 following
 grinding
 season,
 which,
 as
 we

binding
Valdes
to
lease
the
property
to
the
corporation
pending
the
period

have
said,
commences
in
December.
The
contract
transferring
the
lease
to

of
redemption.
This
sale
was
passed
in
Porto
Rico
before
a
notary
public,

the
 Central
 Altagracia,
 Incorporated,
 was
 made
 in
 July,
 1905,
 at
 the
 end,

but
was
never
put
upon
the
public
records.
At
the
time
it
was
made,
there

therefore,
 of
 the
 grinding
 season
 of
 that
 year.
 To
 what
 extent
 the

was
 a
 very
 considerable
 sum
 unpaid
 on
 the
 debt
 of
 Nevers
 &
 Callaghan.

corporation
 contracted
 for
 cane
 to
 be
 delivered
 to
 it
 for
 grinding
 during

This
 fact,
 joined
 with
 the
 period
 when
 the
 sale
 with
 the
 right
 to
 redeem

the
season
of
1905‐06,
which
began
in
December,
1905,
does
not
appear.

was
 made
 ‐‐
 that
 is,
 the
 approaching
 end
 of
 the
 sugar‐making
 season
 of

It
is
inferable,
however,
that
the
corporation
began
the
work
of
installing

1906
 and
 1907
 ‐‐
 coupled
 with
 other
 facts
 to
 which
 we
 shall
 hereafter

new
 machinery
 to
 give
 the
 plant
 a
 larger
 capacity
 within
 the
 year

make
 reference,
 all
 tend
 to
 establish
 that,
 at
 that
 time,
 either
 because

stipulated
in
the
lease
from
Sanchez
to
Castello.
We
say
this
because
it
is

insufficient
capital
had
been
put
into
the
venture
or
because
the
business

certain
that,
in
the
fall
of
1906
(October),
the
corporation
borrowed
from

had
 been
 carried
 on
 at
 a
 loss,
 the
 affairs
 of
 the
 corporation
 were

the
 commercial
 firm
 of
 Nevers
 &
 Callaghan
 in
 New
 York
 City
 the
 sum
 of

embarrassed,
 if
 it
 was
 not
 insolvent.
 A
 short
 while
 before
 the

twenty‐five
 thousand
 dollars
 ($25,000)
 to
 enable
 the
 corporation
 to
 pay

commencement
of
the
grinding
season
of
1907‐1908
in
October,
1907,
in

for
 new
 and
 enlarged
 machinery
 which
 it
 had
 ordered,
 and
 which
 was

the
 City
 of
 New
 York,
 the
 corporation,
 through
 its
 president,
 declaring

placed
in
the
factory
in
time
to
be
used
in
the
grinding
season
of
1906‐07,

himself
to
be
authorized
by
the
board
of
directors,
sanctioned
by
a
vote
of

which
 began
 in
 December,
 1906.
 While
 such
 grinding
 season
 was

the
stockholders,
apparently
made
an
absolute
sale
of
all
the
rights
of
the

progressing,
 on
 April
 11,
 1907,
 the
 corporation,
 through
 its
 president,

corporation
 under
 the
 lease,
 and
 all
 its
 title
 to
 the
 machinery
 which
 the

under
the
authority
of
its
board
of
directors,
sold
to
one
Ramon
Valdes
all

corporation
 had
 put
 into
 the
 plant.
 This
 sale
 was
 declared
 to
 be
 for
 a

its
 rights
 acquired
 under
 the
 lease
 transferred
 by
 Castello.
 This
 transfer

consideration
 of
 sixty‐five
 thousand
 ($65,000)
 dollars
 which
 the
 company

expressly
included
all
the
machinery
previously
placed
by
the
corporation

acknowledged
to
have
received
from
Valdes,
first,
by
the
payment
of
the

in
 the
 sugar
 house,
 as
 well
 as
 machinery
 which
 might
 be
 thereafter

thirty‐five

installed
 during
 the
 term
 of
 redemption
 hereafter
 to
 be
 referred
 to,
 and

which,
it
was
declared,
conformably
to
the
original
lease,
"shall
be
a
part
of
 Page
225
U.
S.
64

said
factory
for
the
manufacture
of
sugar."
The
consideration
for
the
sale

($35,000)
dollars
cash,
as
stated
in
the
previous
sale
made
subject
to
the

was
stated
in
the
contract
to
be

equity
 of
 redemption,
 and
 thirty
 thousand
 ($30,000)
 dollars
 which
 "the

"thirty‐five
 thousand
 dollars
 ($35,000)
 received
 by
 the
 corporation,
 company
 has
 received
 afterwards
 in
 cash
 from
 Valdes."
 There
 was
 a

twenty‐five
thousand
four
hundred
dollars
 provision
in
the
contract
to
the
effect
that,
as
the
purpose
of
the
previous

contract
 of
 sale,
 which
 had
 been
 made
 subject
 to
 the
 equity
 of

Page
225
U.
S.
63

redemption,
 was
 accomplished
 by
 the
 new
 sale,
 the
 previous
 sale
 was

($25,400)
whereof
had
been
paid
prior
to
this
act
[of
sale],
and
to
its
entire
 declared
to
be
no
longer
operative.

satisfaction,
and
the
balance
of
nine
thousand
six
hundred
dollars
($9,600)

A
few
days
afterwards,
likewise
in
the
City
of
New
York
(on
November
2,

shall
 be
 turned
 over
 to
 the
 vendor
 corporation
 by
 Senor
 Valdes

1907),
 Valdes
 sold
 to
 the
 company
 all
 the
 rights
 which
 he
 had
 acquired


 37

from
it
by
the
previous
sale,
the
price
being
sixty‐five
thousand
($65,000)
 the
conditional
sale,
the
right
to
the
relief
prayed
had
arisen.
On
the
same

dollars,
 payable
 in
 installments
 falling
 due
 in
 the
 years
 1908,
 1909,
 1910,
 day,
 Valdes
 commenced
 a
 suit
 in
 equity
 against
 the
 corporation
 in
 aid
 of

and
 1911,
 respectively.
 This
 transfer
 was
 put
 in
 the
 form
 of
 a
 conditional
 the
suit
at
law.
The
bill
alleged
the
default
of
the
corporation,
the
bringing

sale
 which
 reserved
 the
 title
 in
 Valdes
 until
 the
 payment
 of
 the
 deferred
 of
 the
 suit
 at
 law,
 the
 confusion
 in
 the
 affairs
 of
 the
 corporation,
 the

price,
and
upon
the
stipulation
that
any
default
by
the
corporation
entitled
 judgment
 and
 levy
 of
 the
 execution
 by
 Nevers
 and
 Callaghan,
 and
 the

Valdes
 ipso
 facto
 to
 take
 possession
 of
 the
 property.
 Neither
 this
 act
 of
 threat
 to
 sell
 the
 machinery
 under
 such
 execution,
 the
 refusal
 of
 the

sale
from
Valdes
to
the
corporation
nor
the
one
made
by
the
corporation
 corporation
 to
 deliver
 possession
 of
 the
 property,
 the
 waste
 and

to
Valdes
were
ever
put
upon
the
public
records.
 destruction
of
the
value
of
the
property
which
would
result
if
there
was
no

one
representing
the
corporation
having
power
to
contract
for
cane
to
be

Prior
 to
 the
 making
 of
 the
 sales
 just
 stated,
 or
 about
 that
 time,
 the

delivered
during
the
next
grinding
season,
etc.,
etc.
The
prayer
was
for
the

corporation
defaulted
in
the
payment
of
a
note
held
by
Nevers
&
Callaghan

appointment
of
a
receiver
to
take
charge
of
the
property,
with
authority

for
a
portion
of
the
money
which
they
had
loaned
the
corporation
under

the
circumstances
which
we
have
previously
stated,
and
that
firm
sued
in
 Page
225
U.
S.
66

the
court
below
the
corporation
to
recover
the
debt.

to
carry
on
the
same,
make
the
necessary
contracts
for
cane
for
the
future,

The
 grinding
 season
 of
 1907‐1908
 commenced
 in
 December,
 1907,
 and
 it
being
prayed
that
the
receiver
should
be
empowered
to
issue
receiver's

was
obviously
not
a
successful
one,
for
the
debt
of
Nevers
&
Callaghan
was
 certificates
to
the
extent
necessary
to
the
accomplishment
of
the
purposes

not
paid,
and
in
May,
1908,
a
judgment
was
recovered
by
them
against
the
 which
the
bill
had
in
view.

corporation
 for
 about
 $17,000,
 with
 interest,
 and
 in
 the
 same
 month

On
 the
 same
 day,
 a
 bill
 was
 filed
 on
 behalf
 of
 the
 corporation
 against

execution
 was
 issued
 and
 levied
 upon
 the
 machinery
 in
 the
 sugar
 house.

Valdes.
 This
 bill
 attacked
 the
 sale
 made
 to
 Valdes
 and
 by
 him
 to
 the

Previous
to,
or
not
long
subsequent
to,
the
time
Nevers
&
Callaghan

corporation.
 It
 was
 charged
 that
 the
 price
 stated
 to
 have
 been
 paid
 by

Page
225
U.
S.
65
 Valdes
 as
 a
 consideration
 of
 the
 conditional
 sale
 was
 fictitious,
 and
 that

the
only
sum
he
had
advanced
at
that
time
was
the
$35,000
which
it
was

commenced
their
suit,
the
precise
date
not
being
stated
in
the
record,
the

the
purpose
to
secure
by
means
of
the
sale
with
the
equity
of
redemption.

heirs
 of
 Sanchez,
 the
 original
 lessor,
 brought
 a
 suit
 in
 the
 court
 below

That,
at
that
time,
Valdes
exacted
as
a
consideration
for
his
loan
that
he
be

against
the
corporation.
The
nature
of
the
suit
and
the
relief
sought
is
not

made
 a
 director
 and
 vice‐president
 of
 the
 company.
 The
 bill
 then
 stated

disclosed,
 but
 it
 is
 inferable
 from
 the
 facts
 stated
 that
 the
 suit
 either

that,
 it
 having
 become
 evident
 in
 the
 following
 autumn
 that
 the

sought
to
recover
the
property
on
the
ground
that
there
was
no
power
in

corporation
would
require
more
money
to
increase
its
plant,
to
pay
off
the

Castello
 to
 transfer
 the
 lease
 or
 upon
 the
 ground
 of
 default
 in
 the

sum
 due
 Nevers
 &
 Callaghan,
 and
 for
 the
 operation
 of
 the
 plant,
 Valdes

conditions
as
to
payment
of
profits
as
rental
which
the
lease
stipulated.
It

agreed
to
advance
the
money
if
he
were
made
president
of
the
company

would
 seem
 also,
 at
 about
 the
 same
 time,
 either
 one
 or
 both
 of
 the

at
a
stipulated
salary,
given
a
bonus
in
the
stock
of
the
company,
and
upon

Castellos
brought
a
suit
against
the
company,
presumably
upon
the
theory

the
condition
that
the
papers
be
executed
embodying
the
so‐called
sale
of

that
there
had
been
a
default
in
the
obligations
assumed
in
their
favor
by

the
company
to
Valdes
and
the
practically
simultaneous
conditional
sale
by

the
 corporation
 at
 the
 time
 it
 took
 the
 transfer
 of
 the
 lease.
 In
 the

Valdes
 to
 the
 company.
 The
 bill
 then
 alleged
 that
 Valdes,
 having
 thus

meanwhile
 also,
 probably
 as
 the
 result
 of
 the
 want
 of
 success
 of
 the

become
the
president
of
the
company,
failed
to
carry
out
his
agreement
to

corporation,
 discord
 arose
 between
 its
 stockholders,
 and
 a
 suit
 growing

advance
the
money,
failed
to
provide
for
the
debt
of
Nevers
&
Callaghan,

out
of
that
state
of
things
was
brought
in
the
lower
court.

mismanaged
 the
 affairs
 of
 the
 property
 in
 many
 alleged
 particulars,
 and

This
litigation
was
commenced
in
June,
1908,
by
the
bringing
by
Valdes
of
 did
various
acts
to
the
prejudice
of
the
company
and
to
his
own
wrongful

an
 action
 at
 law
 in
 the
 court
 below
 to
 recover
 the
 plant
 on
 the
 ground
 enrichment,
 which
 it
 is
 unnecessary
 to
 recapitulate.
 The
 necessity
 of

that,
by
the
default
in
paying
one
of
the
installments
of
the
price
stated
in


 38

contracting
 for
 cane
 during
 the
 contract
 season
 in
 order
 that
 the
 plant
 attorneys
for
both
parties
should
be
in
Porto
Rico.

might
 continue
 during
 the
 next
 operating
 season
 to
 be
 a
 going
 concern,

The
 hope
 of
 a
 beneficial
 result
 from
 the
 operation
 of
 the
 plant
 by
 the

and
the
waste
and
loss
which
would
otherwise

receiver
 proved
 delusive.
 As
 a
 result
 of
 such
 operation,
 there
 was
 a

Page
225
U.
S.
67
 considerable
 loss
 represented
 by
 outstanding
 receiver's
 certificates,
 with

no
means
of
paying
except
out
of
the
property.
Obviously
for
this
reason,

be
 occasioned,
 were
 fully
 alleged.
 Valdes
 and
 the
 firm
 of
 Nevers
 &

the
record
contains
a
statement
that,
on
July
12,
1909,
a
conference
was

Callaghan
and
the
individual
members
of
that
firm
were
made
defendants.

had
between
the
court
and
all
parties
concerned
to
determine
what
steps

The
prayer
was
for
the
appointment
of
a
receiver
and
with
power
to
carry

should
be
taken
to
meet
the
situation.
It
appears
that,
at
that
conference,

on
 the
 business
 of
 the
 central,
 with
 power,
 for
 that
 purpose,
 to
 contract

the
 counsel
 representing
 the
 heirs
 of
 Sanchez
 and
 of
 Nevers
 &
 Callaghan

for
 cane
 for
 the
 coming
 season,
 with
 authority
 to
 issue
 receiver's

stated
their
opposition
to
a
continuance
of
the
receivership.

certificates
 for
 the
 purpose
 of
 borrowing
 the
 money
 which
 might
 be

required.
 On
July
17,
1909,
the
court
placed
a
memorandum
on
the
files,
indicating

its
 purpose
 to
 bring
 the
 litigation,
 receivership,
 etc.,
 to
 an
 end,
 and
 to

The
judge,
being
about
to
leave
Porto
Rico
for
a
brief
period,
declined
to

cause
 "immediate
 issue
 to
 be
 raised
 on
 the
 pleadings
 for
 that
 purpose."

appoint
 a
 permanent
 receiver,
 but
 named
 a
 temporary
 one
 to
 keep
 the

This
 memorandum
 was
 entitled
 in
 all
 the
 pending
 causes
 concerning
 the

property
together
until
a
further
hearing
could
be
had,
interference
in
the

property.
 It
 directed
 that
 demurrers
 which
 had
 been
 filed
 in
 the

meanwhile
with
the
custodian
being
enjoined.
Shortly
thereafter,
creditors

consolidated
 cause
 of
 Valdes
 against
 the
 corporation
 and
 of
 the

of
 the
 corporation
 intervened
 and
 joined
 in
 the
 prayer
 made
 by
 both
 of

corporation
 against
 Valdes
 be
 overruled,
 and
 the
 defendants
 were

the
complainants
for
the
appointment
of
a
receiver.
In
July,
the
two
suits

required
to
answer
on
or
before
Monday,
July
26,
in
order
that,
upon
the

were
by
order
consolidated,
and,
after
a
hearing,
a
receiver
was
appointed

following
day,
the
27th
of
July,
the
issues
raised
might
be
tried
before
the

and
authority
given
him
to
continue
the
property
as
a
going
concern
and
to

court
 without
 the
 intervention
 of
 a
 master.
 It
 was
 provided
 in
 the
 order,

borrow
a
limited
amount
of
money
on
receiver's
certificates,
if
necessary,

however,
 that
 nothing
 in
 this
 direction
 should
 prevent
 the
 parties
 from

to
secure
contracts
for
cane
for
the
coming
crop
season.
The
execution
of

filing
such
additional
pleadings
as
it
is
deemed
necessary
for
the
protection

the
Nevers
&
Callaghan
judgment
was
stayed
pending
an
appeal
which
had

of
their
rights
by
way
of
cross
bill
or
amendment,
etc.
To
make
the
order

been
taken
to
this
Court.
The
only
difference
which
seems
to
have
arisen

efficacious,
it
was
declared
that
nothing
would
be
done
in
the
suit
of
the

concerning
 the
 appointment
 of
 the
 receiver
 grew
 out
 of
 the
 fact
 that
 a

heirs
of
Sanchez
against
Castello
and
the
Altagracia,

prayer
of
the
Central
Altagracia,
asking
the
court
to
appoint
as
receiver
Mr.

Pettingill,
a
member
of
the
bar
and
one
of
the
counsel
of
the
corporation,
 Page
225
U.
S.
69

and
who
was
also
its
treasurer,
was
denied.
Despite
this,
the
fair
inference

which
 was
 pending
 on
 appeal,
 and
 that
 a
 demurrer
 filed
 to
 the
 suit
 of

is
 that
 the
 ultimate
 action
 of
 the
 court
 was
 not
 objected
 to
 by
 anyone,

Castello
against
the
Central
would
be
overruled;
that
the
demurrer
in
the

because
of
the
hope
that
the
result
of
a
successful
operation
of
the
plant

suit
at
law
of
Valdes
would
remain
in
abeyance
to
await
the
final
action
of

during
 the
 coming
 crop
 season
 might
 ameliorate
 the
 affairs
 of
 the

the
court
on
the
trial
of
all
the
issues
in
the
equity
causes,
and
that
a
stay

corporation,
and
thus
prevent
further
controversies.
We
say
this
not
only

of
the
Nevers
&
Callaghan
execution
would
be
also
disposed
of
when
the

because
 of
 the
 conduct
 of
 the
 parties
 prior
 to
 the
 order
 appointing
 the

equity
 cases
 came
 to
 be
 decided.
 This
 order
 was
 followed
 by
 a

receiver,
but
because,

memorandum
opinion
filed
on
July
the
21st
stating
very
fully
the
position

Page
225
U.
S.
68
 of
 the
 respective
 suits,
 the
 necessity
 for
 action
 in
 order
 to
 preserve
 the

property
from
waste,
and
reiterating
the
view
that,
whatever
might
be
the

after
that
order,
the
solicitors
of
the
Altagracia
Company
and
Valdes
put
a

rights
 of
 the
 Central
 Altagracia
 or
 of
 Valdes
 under
 the
 lease,
 those
 rights

stipulation
 of
 record
 that,
 until
 the
 following
 October,
 no
 steps
 whatever

would
be
subordinate
to
the
ultimate
determination
of
the
suit
brought
by

should
 be
 taken
 in
 the
 proceedings,
 and
 not
 even
 then
 unless
 the


 39

the
 heirs
 of
 Sanchez.
 To
 the
 action
 of
 the
 court
 as
 above
 stated
 no
 wished,
 treat
 them
 as
 filed,
 and
 proceed
 with
 the
 cause
 and
 file
 them
 at

objection
appears
to
have
been
made.
On
the
contrary,
between
the
time
 any
convenient
time
thereafter.
Thereupon,
the
record
states:

of
that
order
and
the
period
fixed
for
the
commencement
of
a
hearing,
the

"Said
counsel
for
the
Central
Altagracia
stated
that
he
desired
time
to
file

Central
 Altagracia,
 Valdes,
 and
 Nevers
 &
 Callaghan
 modified
 their

exceptions
 to
 the
 answer
 and
 an
 answer
 to
 the
 cross‐bill
 in
 suit
 No.
 565,

pleadings
to
the
extent
deemed
by
them
necessary
to
present
for
trial
the

and
the
court
granted
until
the
morning
of
July
28
for
such
purpose.
Later

issues
 upon
 which
 they
 relied.
 In
 the
 case
 of
 the
 Central
 Altagracia,
 this

in
the
day
of
July
27,
one
of
the
counsel
for
Valdes
having
requested
the

was
 done
 by
 filing,
 on
 July
 22,
 an
 amended
 bill
 of
 complaint
 in
 its
 suit

court
to
postpone
the
hearing
of
the
cause
until
the
morning
of
the
29th

against
 Valdes,
 and
 on
 July
 26
 its
 answer
 in
 the
 suit
 of
 Valdes.
 The

because
 of
 an
 unexpected
 professional
 engagement
 elsewhere,
 the

acceptance
by
Valdes
of
the
terms
of
the
order
was
shown
by
an
answer

request
 was
 communicated
 by
 the
 court
 to
 the
 other
 counsel
 in
 the

filed
 to
 the
 bill
 in
 the
 suit
 of
 the
 company
 and
 the
 cross‐bill
 in
 the
 same

cause."

cause,
and
Nevers
&
Callaghan
manifested
their
acquiescence
by
obtaining

leave
 to
 make
 themselves
 parties
 and
 asserting
 their
 rights
 by
 cross‐bill
 Thereupon
the
record
again
recites:

and
answers
which
it
is
unnecessary
to
detail.
 "Messrs.
Pettingill
&

When
the
consolidated
cause
was
called
for
trial
on
the
morning
of
July
27,
 Page
225
U.
S.
71

the
 counsel
 for
 the
 Central
 Altagracia
 moved
 a
 continuance
 in
 order
 to

take
 the
 testimony
 of
 certain
 witnesses
 in
 Philadelphia
 and
 New
 York
 for
 Cornwell,
 attorneys
 for
 the
 Central
 Altagracia,
 stated
 that
 they
 withdrew

the
purpose
of
proving
some
of
the
allegations
of
the
complaint
 any
 statement
 they
 have
 hitherto
 made
 in
 the
 cause
 in
 that
 regard,
 and

desired
to
be
understood
that
they
would
not
except
to
the
answer
in
suit

Page
225
U.
S.
70
 No.
565,
or
plead
or
answer
to
the
cross‐bill
therein
save
and
except
within

as
 to
 the
 wrongdoing
 of
 Valdes
 in
 administering
 the
 affairs
 of
 the
 the
 time
 which
 they
 contended
 the
 rules
 governing
 this
 Court
 of
 equity

corporation.
 This
 application
 was
 supported
 by
 the
 affidavit
 of
 Mr.
 gave
them,
and
would
stand
upon
what
they
considered
their
rights
in
that

Pettingill,
 the
 counsel
 of
 the
 corporation.
 The
 record
 states
 that
 the
 regard."

request
 for
 continuance
 was
 opposed
 by
 all
 the
 other
 counsel,
 and
 the
 When
 the
 court
 assembled
 the
 next
 day,
 on
 the
 morning
 of
 the
 28th,
 a

application
was
denied.
In
doing
so,
the
court
stated:
 statement
 concerning
 the
 occurrence
 of
 the
 previous
 day
 as
 to
 the

"That
the
matter
has
been
pending
for
more
than
a
year,
and
that
counsel
 continuance,
etc.,
just
reviewed,
was
read
by
the
court
in
the
presence
of

had
 full
 notice
 of
 the
 court's
 intention
 to
 press
 the
 matters
 to
 issue
 and
 all
the
counsel,
whereupon
the
record
recites:

trial,
 and
 that
 it
 is
 not
 disposed
 to
 delay
 matters
 at
 this
 time,
 when
 the
 "N.
 B.
 Pettingill,
 counsel
 for
 the
 Central
 Altagracia,
 in
 response
 to
 the

admissions
of
the
pleadings
are
so
broad
that
the
proofs
available
here
in
 same,
stated
that
he
objected
to
proceeding
to
take
any
evidence
in
any
of

Porto
Rico
are
probably
sufficient,
and
the
amended
complaint
already
on
 the
 causes
 at
 that
 time,
 or
 the
 testimony
 of
 any
 witnesses,
 because
 the

file
in
suit
No.
565,
‐‐
Valdes
v.
Central
Altagracia
‐‐
and
the
answer
thereto
 same
 was
 not
 at
 issue
 or
 in
 condition
 for
 the
 taking
 of
 evidence,
 and

and
 the
 answer
 recently
 filed
 in
 suit
 No.
 564
 ‐‐
 Altagracia
 v.
 Valdes
 ‐‐
 as
 objected
to
the
taking
of
such
evidence
until
the
issues
of
said
causes
are

well
 as
 the
 cross‐bill
 also
 recently
 filed
 in
 suit
 No.
 465,
 make
 so
 many
 made
 up
 in
 accordance
 with
 the
 rules
 of
 practice
 applicable
 to
 equity

allegations
and
admissions
as
that
the
real
issue
between
the
parties
can
 causes."

be
 plainly
 seen,
 and
 that,
 in
 the
 opinion
 of
 the
 court,
 enough
 proof
 is

available
here
in
Porto
Rico."
 The
record
further
recites:


The
 court
 thereupon
 declared
 that
 the
 Altagracia
 Company
 might
 by
 the
 "Which
objection
was
overruled
by
the
court
on
the
ground
that
the
action

next
day,
if
it
so
desired,
file
exceptions
to
the
answer
in
suit
565
and
an
 called
for
thereby
is
not
necessary.
That
the
bill
was
amended
within
three

answer
 to
 the
 cross‐complaint
 ‐‐
 indeed,
 that
 the
 corporation
 might,
 if
 it
 days;
an
answer
was
immediately
filed
to
it
and
a
cross‐bill
also
filed,
the


 40

said
cross‐bill
making
only
the
same
claims
as
were
made
in
suit
No.
563
at
 the
affidavit
as
to
the
absence
of
material
witnesses.

law,
 and
 that,
 anyway,
 the
 issue
 could
 be
 tried
 on
 the
 bill
 and
 answer
 in

We
think
all
the
contentions
on
this
subject
are
demonstrated
to
be
devoid

both
suits.
.
.
."

of
 merit
 by
 the
 statement
 of
 the
 case
 which
 we
 have
 made.
 In
 the
 first

This
ruling
of
the
court
having
been
excepted
to,
the
trial
proceeded
from
 place,
it
is
manifest

day
 to
 day,
 the
 counsel
 for
 the
 Central
 Altagracia
 taking
 no
 part
 in
 the

Page
225
U.
S.
73

same
and
virtually
treating
the
proceedings
as
though
they
did
not
concern

that
corporation.
 from
that
statement
that
the
proceeding
leading
up
to
the
appointment
of

a
receiver
and
the
power
given
to
administer
the
property
was
largely
the

In
 substance,
 the
 court
 decided:
 first,
 that
 as
 the
 result
 of
 the
 contracts

result
 of
 the
 assent
 of
 the
 corporation.
 In
 the
 second
 place,
 when
 the

between
 Valdes
 and
 the
 Central
 Altagracia,
 he
 was
 not
 the
 owner
 of
 the

unsuccessful
 financial
 issue
 of
 the
 receivership
 had
 become
 manifest,
 we

rights
of
that
corporation
under
the
lease,
or
of
the
machinery
which

think
 the
 statement
 makes
 it
 perfectly
 clear
 that
 the
 steps
 taken
 by
 the

Page
225
U.
S.
72
 court
for
the
purpose
of
bringing
the
case
to
a
speedy
conclusion,
and
thus

avoiding
 the
 further
 loss
 which
 would
 result
 to
 all
 interests
 concerned,

had
been
placed
in
the
sugar
house
by
the
Altagracia
Company,
or
of
the

were
also
acquiesced
in
by
all
the
parties
in
interest
who
complied
with
the

other
assets
of
the
corporation,
but
that
he
was
merely
a
secured
creditor.

terms
 of
 that
 order
 and
 took
 advantage
 of
 the
 rights
 which
 it
 conferred.

The
sum
of
the
secured
debt
was
fixed
after
making
allowances
for
some

We
think
also
the
statement
makes
it
apparent
that
the
refusal
on
the
part

not
very
material
credits
which
the
corporation
was
held
to
be
entitled
to.

of
the
corporation
to
proceed
with
the
trial,
upon
the
theory
that
the
time

Second,
 that
 the
 judgment
 in
 favor
 of
 Nevers
 &
 Callaghan
 was
 valid,
 and

to
plead
allowed
by
the
equity
rules
had
not
elapsed,
was
the
result
of
a

that
that
firm,
by
virtue
of
its
execution
and
levy
upon
the
machinery,
had

change
 of
 view
 because
 of
 the
 action
 of
 the
 court
 in
 refusing
 the

a
 prior
 right
 to
 Valdes.
 Third,
 the
 sums
 due
 to
 various
 creditors
 of
 the

continuance
on
account
of
the
absent
witnesses
‐‐
a
change
of
front
which

corporation
 were
 fixed
 and
 the
 equities
 or
 priorities
 were
 classified
 as

was
 inconsistent
 with
 the
 rights
 which
 the
 corporation
 had
 exercised
 in

follows:
 (a)
 taxes
 due
 by
 the
 corporation
 and
 the
 sum
 of
 the
 receiver's

accord
with
the
order
setting
the
cause
for
trial,
and
with
the
rights
of
all

certificates
and
certain
costs;
(b)
the
judgment
of
Nevers
&
Callaghan,
and

the
other
parties
to
the
cause
which
had
arisen
from
that
order
and
from

(c)
 the
 debt
 of
 Valdes;
 (d)
 debts
 due
 the
 other
 creditors.
 Without
 going

the
virtual
approval
of
it,
or
at
least
acquiescence
in
it,
by
all
concerned.

into
 details,
 it
 suffices
 to
 say
 that,
 for
 the
 purpose
 of
 enforcing
 these

conclusions,
 the
 decree
 directed
 a
 sale
 of
 all
 the
 rights
 of
 the
 Central
 Considering
 the
 assignments
 of
 error
 insofar
 as
 they
 relate
 alone
 to

Altagracia
in
and
to
the
lease,
machinery,
contract,
etc.,
and
imposed
the
 overruling
 of
 the
 application
 for
 continuance,
 based
 upon
 the
 absence
 of

duty
 upon
 Valdes,
 if
 he
 became
 the
 purchaser,
 to
 pay
 enough
 cash
 to
 witnesses,
it
suffices
to
say
that
the
elementary
rule
is
that
the
granting
of

discharge
the
costs,
taxes,
receiver's
certificates,
and
the
claim
of
Nevers
&
 a
 continuance
 of
 the
 cause
 was
 peculiarly
 within
 the
 sound
 discretion
 of

Callaghan.
 the
court
below
‐‐
a
discretion
not
subject
to
be
reviewed
on
appeal
except

in
case
of
such
clear
error
as
to
amount
to
a
plain
abuse
springing
from
an

These
appeals
were
then
prosecuted,
the
one
by
the
Central
Altagracia
and

arbitrary
exercise
of
power.
Instead
of
coming
within
this
latter
category,

the
other
by
Valdes.
We
shall
endeavor
as
briefly
as
may
be
to
dispose
of

we
 think
 the
 facts
 as
 to
 the
 refusal
 to
 continue
 and
 the
 conduct
 of
 the

the
contentions
relied
upon
to
secure
a
reversal.

parties
make
it
clear
that
there
was
not
only
no
abuse,
but
a
just
exercise,

I.
The
Central
Altagracia
appeal.
‐‐
The
alleged
errors
insisted
on
in
behalf
 of
discretion.

of
 that
 company
 relate
 to
 the
 asserted
 arbitrary
 action
 of
 the
 court
 in

Page
225
U.
S.
74

forcing
the
cause
to
trial
without
affording
the
time
which
it
is
insisted
the

corporation
 was
 entitled
 to
 under
 the
 equity
 rules
 applicable
 to
 the
 

subject,
and
second,
the
refusal
of
the
court
to
grant
a
continuance
upon

II.
 As
 to
 the
 Appeal
 of
 Valdes.
 ‐‐
 Two
 propositions
 are
 relied
 upon:
 first,


 41

that
error
was
committed
in
treating
Valdes
merely
as
a
secured
creditor,
 excluded
 the
 power
 of
 creditors
 to
 inquire
 into
 its
 reality
 and
 substance,

and
in
not
holding
him
to
be
the
absolute
owner
of
the
rights
and
property
 even
although
the
contract
was
never
inscribed
upon
the
public
records
so

alleged
to
have
been
transferred
by
the
so‐called
conditional
sale.
Second,
 as
 to
 bind
 third
 parties.
 That
 its
 character
 was
 such
 as
 to
 require

that,
in
any
event,
error
was
committed
in
awarding
to
Nevers
&
Callaghan
 inscription
we
shall
in
a
few
moments
demonstrate
in
coming
to
consider

priority
over
Valdes.
 the
second
proposition
‐‐
that
is,
upon
the
hypothesis
that
Valdes
was
but

a
secured
creditor,
was
error
committed
in
subordinating
his
claim
to
the

The
first
proposition
is
supported
by
a
reference
to
the
Porto
Rican
Code

prior
claim
of
Nevers
&
Callaghan
under
their
judgment
and
execution?

and
decisions
of
the
Supreme
Court
of
Spain
and
the
opinions
of
Spanish

law
writers.
But
the
contention
is
not
relevant,
and
the
authorities
cited
to
 To
determine
this
question
involves
fixing
the
nature
and
character
of
the

sustain
 it
 are
 inapposite
 to
 the
 case
 to
 be
 here
 decided,
 because
 the
 property
from
the
point
of
view
of
the
rights
of
Valdes,
and
its
nature
and

argument
rests
upon
an
imaginary
premise
‐‐
that
is,
that
the
ruling
of
the
 character
 from
 the
 point
 of
 view
 of
 Nevers
 &
 Callaghan
 as
 a
 judgment

court
below
denied
that
right
under
the
Spanish
law
to
make
a
conditional
 creditor
 of
 the
 Altagracia
 Company,
 and
 the
 rights
 derived
 by
 them
 from

sale,
or
held
that
such
a
sale,
if
made,
would
not
have
the
effect
which
the
 the
 execution
 levied
 on
 the
 machinery
 placed
 by
 the
 corporation
 in
 the

argument
 insists
 it
 was
 entitled
 to.
 This
 is
 true
 because
 the
 action
 of
 the
 plant.
 Following
 the
 Code
 Napoleon,
 the
 Porto
 Rican
 Code
 treats
 as

court
 was
 solely
 based
 upon
 a
 premise
 of
 fact,
 viz.,
 that,
 under
 the
 immovable
(real)
property
not
only
land
and
buildings,
but
also
attributes

circumstances
of
the
case
and
in
view
of
the
prior
sale
with
the
equity
of
 immovability
 in
 some
 cases
 to
 property
 of
 a
 movable
 nature
 ‐‐
 that
 is,

redemption,
 the
 cancellation
 of
 that
 sale,
 and
 the
 transfer
 made
 by
 the
 personal
 property
 ‐‐
 because
 of
 the
 destination
 to
 which
 it
 is
 applied.

corporation
 to
 Valdes,
 and
 the
 immediate
 transfer
 of
 the
 same
 rights
 by
 "Things,"
says
§
334
of
the
Porto
Rican
Code,
"may
be
immovable
either
by

him
 to
 the
 corporation
 in
 the
 form
 of
 a
 conditional
 sale,
 the
 failure
 to
 their
 own
 nature
 or
 by
 their
 destination,
 or
 the
 object
 to
 which
 they
 are

register
any
of
the
contracts,
and
the
relation
of
Valdes
to
the
corporation
 applicable."
 Numerous
 illustrations
 are
 given
 in
 the
 fifth
 subdivision
 of

at
 the
 time
 the
 contracts
 were
 made,
 it
 resulted
 that
 whatever
 might
 be
 section
335,
which
is
as
follows:

the
mere
form,
in
substance
and
effect,
no
conditional
sale
was
made,
but

"Machinery,
vessels,
instruments,
or

a
mere
contract
was
entered
into
which
the
parties
intended
to
be
a
mere

security
 to
 Valdes
 for
 money
 advanced
 and
 to
 be
 advanced
 by
 him.
 This
 Page
225
U.
S.
76

being
the
case,
it
is
manifest
that
it
is
wholly
irrelevant
to
argue
that
error
 implements
 intended
 by
 the
 owner
 of
 the
 tenements
 for
 the
 industry
 or

was
committed
in
not
applying
the
assumed
principles
of
the
Porto
Rican
 works
that
they
may
carry
on
in
any
building
or
upon
any
land,
and
which

and
 Spanish
 law
 governing
 in
 the
 case
 of
 a
 conditional
 sale,
 when
 the
 tend
directly
to
meet
the
needs
of
the
said
industry
or
works."

ruling
 which
 the
 court
 made
 proceeded
 upon
 the
 conclusion
 that
 there

was
no
conditional
sale.
 See
 also
 Code
 Nap.,
 articles
 516,
 518,
 et
 seq.,
 to
 and
 inclusive
 of
 article

534,
 recapitulating
 the
 things
 which,
 though
 in
 themselves
 movable,
 may

Page
225
U.
S.
75
 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

The
contention
that,
under
the
Porto
Rican
law,
the
form
was
controlling

movable
in
its
nature
only
becomes
immobilized
when
placed
in
a
plant
by

because
 proof
 of
 the
 substance
 was
 not
 admissible
 seems
 not
 to
 have

the
 owner
 of
 the
 property
 or
 plant.
 Such
 result
 would
 not
 be

been
 raised
 below,
 but,
 if
 it
 had
 been,
 is
 obviously
 without
 merit,
 as
 the

accomplished,
therefore,
by
the
placing
of
machinery
in
a
plant
by
a
tenant

case
as
presented
involved
not
a
controversy
alone
between
the
parties
to

or
 a
 usufructuary
 or
 any
 person
 having
 only
 a
 temporary
 right.

the
 contract,
 but
 the
 effect
 and
 operation
 of
 the
 contract
 upon
 third

Demolombe,
Tit.
9,
No.
203;
Aubry
et
Rau,
Tit.
2,
p.
12,
§
164;
Laurent,
Tit.

parties,
 the
 creditors
 of
 the
 corporation.
 The
 contention
 is
 additionally

5,
 No.
 447,
 and
 decisions
 quoted
 in
 Fuzier‐Herman
 ed.,
 Code
 Napoleon,

without
 merit
 since
 it
 assumes
 that
 the
 mere
 form
 of
 the
 contract

under
 article
 522
 et
 seq.
 The
 distinction
 rests,
 as
 pointed
 out
 by


 42

Demolombe,
upon
the
fact
that
one
only
having
a
temporary
right
to
the
 which
alone
it
arose
that
machinery
put
in
the
premises
by
the
Altagracia

possession
or
enjoyment
of
property
is
not
presumed
by
the
law
to
have
 became
immovable
property.
The
want
of
notice
arose
from
the
failure
to

applied
 movable
 property
 belonging
 to
 him
 so
 as
 to
 deprive
 him
 of
 it
 by
 record
the
transfer
from
Castello
to
the
Altagracia,
or
from
the
Altagracia

causing
it,
by
an
act
of
immobilization,
to
become
the
property
of
another.
 to
 Valdes,
 and
 from
 Valdes
 apparently
 conditionally
 back
 to
 the

It
 follows
 that,
 abstractly
 speaking,
 the
 machinery
 put
 by
 the
 Altagracia
 corporation
 ‐‐
 a
 clear
 result
 of
 §
 613
 of
 the
 Civil
 Code
 of
 Porto
 Rico,

Company
 in
 the
 plant
 belonging
 to
 Sanchez
 did
 not
 lose
 its
 character
 of
 providing,

movable
 property
 and
 become
 immovable
 by
 destination.
 But,
 in
 the

"The
titles
of
ownership
or
of
other
real
rights
relating

concrete,
 immobilization
 took
 place
 because
 of
 the
 express
 provisions
 of

the
 lease
 under
 which
 the
 Altagracia
 held,
 since
 the
 lease
 in
 substance
 Page
225
U.
S.
78

required
the
putting
in
of
improved
machinery,
deprived
the
tenant
of
any
 to
 immovables
 which
 are
 not
 properly
 inscribed
 or
 annotated
 in
 the

right
 to
 charge
 against
 the
 lessor
 the
 cost
 of
 such
 machinery,
 and
 it
 was
 registry
of
property
shall
not
be
prejudicial
to
third
parties."

expressly
stipulated
that
the
machinery
so
put
in
should
become
a
part
of

the
plant
belonging
to
the
owner
without
compensation
to
the
lessee.
 It
 is
 not
 disputable
 that
 the
 duty
 to
 inscribe
 the
 lease
 by
 necessary

implication
 resulted
 from
 the
 general
 provisions
 of
 article
 2
 of
 the

Page
225
U.
S.
77
 mortgage
 law
 of
 Porto
 Rico,
 as
 stated
 in
 paragraphs
 1,
 2,
 and
 3
 thereof,

Under
such
conditions,
the
tenant,
in
putting
in
the
machinery,
was
acting
 and
 explicitly
 also
 arose
 from
 the
 express
 requirement
 of
 paragraph
 6,

but
as
the
agent
of
the
owner,
in
compliance
with
the
obligations
resting
 relating
 to
 the
 registry
 of
 "contracts
 for
 the
 lease
 of
 real
 property
 for
 a

upon
 him,
 and
 the
 immobilization
 of
 the
 machinery
 which
 resulted
 arose
 period
 exceeding
 six
 years.
 .
 .
 ."
 It
 is
 true
 that,
 in
 a
 strict
 sense,
 the

in
legal
effect
from
the
Act
of
the
owner
in
giving
by
contract
a
permanent
 contracts
 between
 Castello
 and
 the
 Altagracia
 Company
 and
 with
 Valdes

destination
to
the
machinery.
It
is
true,
says
Aubry
and
Rau,
vol.
2,
§
164,
 were
 not
 contracts
 of
 lease,
 but
 for
 the
 transfer
 of
 a
 contract
 of
 that

par.
2,
p.
12,
that
 character.
But
such
a
transfer
was
clearly
a
contract
concerning
real
rights

to
immovable
property
within
the
purview
of
article
613
of
the
Civil
Code,

"the
immobilization
with
which
the
article
is
concerned
can
only
arise
from

just
previously
quoted.
Especially
is
this
the
case
in
view
of
the
stipulations

an
act
of
the
owner
himself
or
his
representative.
Hence,
the
objects
which

of
 the
 lease
 as
 to
 the
 immobilization
 of
 movable
 property
 placed
 in
 the

are
dedicated
to
the
use
of
a
piece
of
land
or
a
building
by
a
lessee
cannot

plant,
and
the
other
obligations
imposed
upon
the
lessee.

be
 considered
 as
 having
 become
 immovable
 by
 destination
 except
 in
 the

case
 where
 they
 have
 been
 applied
 for
 account
 of
 the
 proprietor,
 or
 in
 "The
sale
which
a
lessee
makes
to
a
third
person
to
whom
he
transfers
his

execution
of
an
obligation
imposed
by
the
lease."
 right
of
lease
is
the
sale
of
an
immovable
right,
and
not
simply
a
sale
of
a

movable
one."

It
follows
that
the
machinery
placed
by
the
corporation
in
the
plant,
by
the

fact
 of
 its
 being
 so
 placed,
 lost
 its
 character
 as
 a
 movable,
 and
 became
 See
 numerous
 decisions
 of
 the
 courts
 of
 France,
 beginning
 with
 the

united
with
and
a
part
of
the
plant
as
an
immovable
by
destination.
It
also
 decision
on
February
2,
1842,
of
the
Court
of
Cassation
(Journal
du
Palais

follows
 that,
 as
 to
 Valdes,
 who
 claimed
 under
 the
 lease,
 and
 who
 had
 [1842]
 vol.
 1,
 171).
 See
 also
 numerous
 authorities
 collected
 under
 the

expressly
assumed
the
obligations
of
the
lease,
the
machinery,
for
all
the
 heading
above
stated
in
paragraph
21,
under
articles
516,
517,
and
518
of

purposes
of
the
exercise
of
his
rights,
was
but
a
part
of
the
real
estate
‐‐
a
 the
Code
Napoleon.
Fuzier‐Herman
ed.
of
that
Code,
p.
643.

conclusion
 which
 cannot
 be
 avoided
 without
 saying
 that
 Valdes
 could
 at
 The
machinery
levied
upon
by
Nevers
&
Callaghan
‐‐
that
is,
that
which
was

one
 and
 the
 same
 time
 assert
 the
 existence
 in
 himself
 of
 rights
 and
 yet
 placed
in
the
plant
by
the
Altagracia
Company,
being,
as
regards
Nevers
&

repudiate
the
obligations
resulting
from
the
rights
thus
asserted.
 Callaghan,
movable
property,
it
follows
that
they
had
the
right
to
levy
on
it

Nevers
 &
 Callaghan
 were
 creditors
 of
 the
 corporation.
 They
 were
 not
 under
the
execution
upon
the
judgment
in
their
favor,
and
the
exercise
of

parties
 to
 nor
 had
 they
 legal
 notice
 of
 the
 lease
 and
 its
 conditions
 from
 that
right
did
not
in
a
legal
sense
conflict
with
the
claim
of
Valdes,
since,
as


 43

to
him,
the
property
was
a
part
of
the
realty,
which
as
the
result
 









Petitioner
and
respondents,
thru
their
respective
counsels
agreed
to

the
following
stipulation
of
facts:

Page
225
U.
S.
79

1.
 That
 petitioner
 is
 a
 public
 utility
 solely
 engaged
 in
 transporting

of
 his
 obligations
 under
 the
 lease,
 he
 could
 not,
 for
 the
 purpose
 of

passengers
 and
 cargoes
 by
 motor
 trucks,
 over
 its
 authorized
 lines
 in
 the

collecting
his
debt,
proceed
separately
against.

Island
 of
 Mindanao,
 collecting
 rates
 approved
 by
 the
 Public
 Service

As
 a
 matter
 of
 precaution,
 we
 say
 that
 nothing
 we
 have
 said
 affects
 the
 Commission;

rights,
whatever
they
may
be,
of
the
heirs
of
Sanchez,
the
original
lessor.

2.
 That
 petitioner
 has
 its
 main
 office
 and
 shop
 at
 Cagayan
 de
 Oro
 City.
 It

Affirmed.
 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";

G.R.
No.
L‐17870












September
29,
1962
 (b)
Storm
Boring
Machine,
appearing
in
the
attached
photograph,
marked

MINDANAO
 BUS
 COMPANY,
 petitioner,
 
vs.
THE
 CITY
 ASSESSOR
 &
 Annex
"B";

TREASURER
 and
 the
 BOARD
 OF
 TAX
 APPEALS
 of
 Cagayan
 de
 Oro
 City,
 (c)
 Lathe
 machine
 with
 motor,
 appearing
 in
 the
 attached
 photograph,

respondents.
 marked
Annex
"C";

Binamira,
 Barria
 and
 Irabagon
 for
 petitioner.
Vicente
 E.
 Sabellina
 for
 (d)
 Black
 and
 Decker
 Grinder,
 appearing
 in
 the
 attached
 photograph,

respondents.
 marked
Annex
"D";


 (e)
PEMCO
Hydraulic
Press,
appearing
in
the
attached
photograph,
marked

LABRADOR,
J.:
 Annex
"E";












This
is
a
petition
for
the
review
of
the
decision
of
the
Court
of
Tax
 (f)
 Battery
 charger
 (Tungar
 charge
 machine)
 appearing
 in
 the
 attached

Appeals
 in
 C.T.A.
 Case
 No.
 710
 holding
 that
 the
 petitioner
 Mindanao
 Bus
 photograph,
marked
Annex
"F";
and

Company
is
liable
to
the
payment
of
the
realty
tax
on
its
maintenance
and
 (g)
 D‐Engine
 Waukesha‐M‐Fuel,
 appearing
 in
 the
 attached
 photograph,

repair
equipment
hereunder
referred
to.
 marked
Annex
"G".











Respondent
City
Assessor
of
Cagayan
de
Oro
City
assessed
at
P4,400
 4.
 That
 these
 machineries
 are
 sitting
 on
 cement
 or
 wooden
 platforms
 as

petitioner's
 above‐mentioned
 equipment.
 Petitioner
 appealed
 the
 may
be
seen
in
the
attached
photographs
which
form
part
of
this
agreed

assessment
 to
 the
 respondent
 Board
 of
 Tax
 Appeals
 on
 the
 ground
 that
 stipulation
of
facts;

the
same
are
not
realty.
The
Board
of
Tax
Appeals
of
the
City
sustained
the

5.
That
petitioner
is
the
owner
of
the
land
where
it
maintains
and
operates

city
 assessor,
 so
 petitioner
 herein
 filed
 with
 the
 Court
 of
 Tax
 Appeals
 a

a
garage
for
its
TPU
motor
trucks;
a
repair
shop;
blacksmith
and
carpentry

petition
for
the
review
of
the
assessment.

shops,
and
with
these
machineries
which
are
placed
therein,
its
TPU
trucks



 

 

 

 

 In
 the
 Court
 of
 Tax
 Appeals
 the
 parties
 submitted
 the
 following
 are
 made;
 body
 constructed;
 and
 same
 are
 repaired
 in
 a
 condition
 to
 be

stipulation
of
facts:
 serviceable
in
the
TPU
land
transportation
business
it
operates;



 44

6.
 That
 these
 machineries
 have
 never
 been
 or
 were
 never
 used
 as
 character
of
real
property
to
"machinery,
liquid
containers,
instruments
or

industrial
equipments
to
produce
finished
products
for
sale,
nor
to
repair
 implements
 intended
 by
 the
 owner
 of
 any
 building
 or
 land
 for
 use
 in

machineries,
 parts
 and
 the
 like
 offered
 to
 the
 general
 public
 connection
with
any
industry
or
trade
being
carried
on
therein
and
which

indiscriminately
for
business
or
commercial
purposes
for
which
petitioner
 are
expressly
adapted
to
meet
the
requirements
of
such
trade
or
industry."

has
never
engaged
in,
to
date.1awphîl.nèt











If
the
installation
of
the
machinery
and
equipment
in
question
in
the



 

 

 

 

 The
 Court
 of
 Tax
 Appeals
 having
 sustained
 the
 respondent
 city
 central
of
the
Mabalacat
Sugar
Co.,
Inc.,
in
lieu
of
the
other
of
less
capacity

assessor's
 ruling,
 and
 having
 denied
 a
 motion
 for
 reconsideration,
 existing
 therein,
 for
 its
 sugar
 and
 industry,
 converted
 them
 into
 real

petitioner
brought
the
case
to
this
Court
assigning
the
following
errors:
 property
 by
 reason
 of
 their
 purpose,
 it
 cannot
 be
 said
 that
 their

incorporation
 therewith
 was
 not
 permanent
 in
 character
 because,
 as

1.
 The
 Honorable
 Court
 of
 Tax
 Appeals
 erred
 in
 upholding
 respondents'

essential
and
principle
elements
of
a
sugar
central,
without
them
the
sugar

contention
that
the
questioned
assessments
are
valid;
and
that
said
tools,

central
would
be
unable
to
function
or
carry
on
the
industrial
purpose
for

equipments
or
machineries
are
immovable
taxable
real
properties.

which
 it
 was
 established.
 Inasmuch
 as
 the
 central
 is
 permanent
 in

2.
The
Tax
Court
erred
in
its
interpretation
of
paragraph
5
of
Article
415
of
 character,
 the
 necessary
 machinery
 and
 equipment
 installed
 for
 carrying

the
 New
 Civil
 Code,
 and
 holding
 that
 pursuant
 thereto
 the
 movable
 on
the
sugar
industry
for
which
it
has
been
established
must
necessarily
be

equipments
 are
 taxable
 realties,
 by
 reason
 of
 their
 being
 intended
 or
 permanent.
(Emphasis
ours.)

destined
for
use
in
an
industry.











So
that
movable
equipments
to
be
immobilized
in
contemplation
of

3.
 The
 Court
 of
 Tax
 Appeals
 erred
 in
 denying
 petitioner's
 contention
 that
 the
 law
 must
 first
 be
 "essential
 and
 principal
 elements"
 of
 an
 industry
 or

the
respondent
City
Assessor's
power
to
assess
and
levy
real
estate
taxes
 works
without
which
such
industry
or
works
would
be
"unable
to
function

on
 machineries
 is
 further
 restricted
 by
 section
 31,
 paragraph
 (c)
 of
 or
 carry
 on
 the
 industrial
 purpose
 for
 which
 it
 was
 established."
 We
 may

Republic
Act
No.
521;
and
 here
distinguish,
therefore,
those
movable
which
become
immobilized
by

4.
The
Tax
Court
erred
in
denying
petitioner's
motion
for
reconsideration.
 destination
 because
 they
 are
 essential
 and
 principal
 elements
 in
 the

industry
 for
 those
 which
 may
 not
 be
 so
 considered
 immobilized
 because



 

 

 

 

 Respondents
 contend
 that
 said
 equipments,
 tho
 movable,
 are
 they
are
merely
incidental,
not
essential
and
principal.
Thus,
cash
registers,

immobilized
by
destination,
in
accordance
with
paragraph
5
of
Article
415
 typewriters,
 etc.,
 usually
 found
 and
 used
 in
 hotels,
 restaurants,
 theaters,

of
the
New
Civil
Code
which
provides:
 etc.
 are
 merely
 incidentals
 and
 are
 not
 and
 should
 not
 be
 considered











Art.
415.
—
The
following
are
immovable
properties:
 immobilized
by
destination,
for
these
businesses
can
continue
or
carry
on

their
 functions
 without
 these
 equity
 comments.
 Airline
 companies
 use

x
x
x










x
x
x










x
x
x
 forklifts,
 jeep‐wagons,
 pressure
 pumps,
 IBM
 machines,
 etc.
 which
 are

(5)
 Machinery,
 receptacles,
 instruments
 or
 implements
 intended
 by
 the
 incidentals,
 not
 essentials,
 and
 thus
 retain
 their
 movable
 nature.
 On
 the

owner
of
the
tenement
for
an
industry
or
works
which
may
be
carried
on
 other
 hand,
 machineries
 of
 breweries
 used
 in
 the
 manufacture
 of
 liquor

in
 a
 building
 or
 on
 a
 piece
 of
 land,
 and
 which
 tend
 directly
 to
 meet
 the
 and
soft
drinks,
though
movable
in
nature,
are
immobilized
because
they

needs
of
the
said
industry
or
works.
(Emphasis
ours.)
 are
 essential
 to
 said
 industries;
 but
 the
 delivery
 trucks
 and
 adding

machines
 which
 they
 usually
 own
 and
 use
 and
 are
 found
 within
 their



 

 

 

 

 Note
 that
 the
 stipulation
 expressly
 states
 that
 the
 equipment
 are

industrial
 compounds
 are
 merely
 incidental
 and
 retain
 their
 movable

placed
 on
 wooden
 or
 cement
 platforms.
 They
 can
 be
 moved
 around
 and

nature.

about
 in
 petitioner's
 repair
 shop.
 In
 the
 case
 of
 B.
 H.
 Berkenkotter
 vs.
 Cu

Unjieng,
61
Phil.
663,
the
Supreme
Court
said:
 

 

 

 

 

 Similarly,
 the
 tools
 and
 equipments
 in
 question
 in
 this
 instant
 case

are,
 by
 their
 nature,
 not
 essential
 and
 principle
 municipal
 elements
 of











Article
344
(Now
Art.
415),
paragraph
(5)
of
the
Civil
Code,
gives
the


 45

petitioner's
 business
 of
 transporting
 passengers
 and
 cargoes
 by
 motor
 costs.

trucks.
They
are
merely
incidentals
—
acquired
as
movables
and
used
only











So
ordered.

for
expediency
to
facilitate
and/or
improve
its
service.
Even
without
such

tools
 and
 equipments,
 its
 business
 may
 be
 carried
 on,
 as
 petitioner
 has
 Bengzon,
 C.J.,
 Padilla,
 Bautista
 Angelo,
 Reyes,
 J.B.L.,
 Paredes,
 Dizon
 and

carried
 on,
 without
 such
 equipments,
 before
 the
 war.
 The
 transportation
 Makalintal,
JJ.,
concur.
Regala,
Concepcion
and
Barrera
JJ.,
took
no
part.

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:
 G.R.
No.
141970











September
10,
2001


x
x
x










x
x
x










x
x
x
 METROPOLITAN
BANK,
&
TRUST
COMPANY,
petitioner,

vs.
Hon.
FLORO

(5)
 Machinery,
 receptacles,
 instruments
 or
 implements
 intended
 by
 the
 T.
ALEJO,
in
His
Capacity
as
Presiding
Judge
of
Branch
172
of
the
Regional

owner
of
the
tenement
for
an
industry
or
works
which
may
be
carried
on
 Trial
Court
of
Valenzuela;
and
SY
TAN
SE,
represented
by
his
Attorney‐in‐
in
 a
 building
 or
 on
 a
 piece
 of
 land,
 and
 which
 tend
 directly
 to
 meet
 the
 Fact,
SIAN
SUAT
NGO,
respondents.

needs
of
the
said
industry
or
works;
(Civil
Code
of
the
Phil.)

PANGANIBAN,
J.:



 

 

 

 

 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

In
 a
 suit
 to
 nullify
 an
 existing
 Torrens
 Certificate
 of
 Title
 (TCT)
 in
 which
 a

piece
 of
 land.
 Thus
 in
 the
 case
 of
 Berkenkotter
 vs.
 Cu
 Unjieng,
 supra,
 the

real
 estate
 mortgage
 is
 annotated,
 the
 mortgagee
 is
 an
 indispensable

"machinery,
 liquid
 containers,
 and
 instruments
 or
 implements"
 are
 found

party.
 In
 such
 suit,
 a
 decision
 canceling
 the
 TCT
 and
 the
 mortgage

in
a
building
constructed
on
the
land.
A
sawmill
would
also
be
installed
in
a

annotation
is
subject
to
a
petition
for
annulment
of
judgment,
because
the

building
on
land
more
or
less
permanently,
and
the
sawing
is
conducted
in

non‐joinder
 of
 the
 mortgagee
 deprived
 the
 court
 of
 jurisdiction
 to
 pass

the
land
or
building.

upon
the
controversy.











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
 The
Case

building
or
permanently
on
a
piece
of
land,
as
demanded
by
the
law.
Said

equipments
may
not,
therefore,
be
deemed
real
property.
 Before
 this
 Court
 is
 a
 Petition
 for
 Review
 on
 Certiorari1
 under
 Rule
 45
 of



 

 

 

 

 Resuming
 what
 we
 have
 set
 forth
 above,
 we
 hold
 that
 the
 the
Rules
of
Court,
assailing
the
March
25,
1999
Resolution
of
the
Court
of

equipments
 in
 question
 are
 not
 absolutely
 essential
 to
 the
 petitioner's
 Appeals
(CA)
in
CA‐GR
SP
No.
50638,
which
states
in
full:

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
 "This
 resolves
 the
 petition
 for
 annulment
 of
 judgment
 based
 on
 ‘external

considered
 real
 estate
 within
 the
 meaning
 of
 Article
 415
 (c)
 of
 the
 Civil
 (sic)
 fraud’
 filed
 by
 petitioner
 Metropolitan
 Bank
 and
 Trust
 Company

Code.
 seeking
 to
 annul
 the
 Decision
 dated
 August
 12,
 1998
 rendered
 by

respondent
 judge,
 Honorable
 Floro
 T.
 Alejo,
 Presiding
 Judge
 of
 the











WHEREFORE,
the
decision
subject
of
the
petition
for
review
is
hereby
 Regional
 Trial
 Court,
 Branch
 172,
 Valenzuela,
 Metro
 Manila,
 in
 Civil
 Case

set
 aside
 and
 the
 equipment
 in
 question
 declared
 not
 subject
 to
 No.
4930‐V‐96
entitled
‘Sy
Tan
Se,
represented
by
his
attorney‐in‐fact
Sian

assessment
as
real
estate
for
the
purposes
of
the
real
estate
tax.
Without
 Suat
Ngo
v.
Raul
Acampado,
et
al.


 46

"This
Court
has
observed
that
petitioner
knew
of
the
questioned
Decision
 bid.10
On
July
15,
1997,
a
Certificate
of
Sale
was
issued
in
its
favor.11
This

sometime
 [i]n
 October
 1998
 (Petition,
 Rollo,
 p.
 3).
 This
 being
 the
 case,
 sale
was
entered
in
the
Registry
of
Deeds
of
Valenzuela
on
July
28,
1997.

petitioner
 should
 have
 first
 sought
 recourse
 by
 way
 of
 petition
 for
 relief

from
 judgment
 under
 Rule
 38
 of
 the
 1997
 Rules
 of
 Civil
 Procedure.
 When
the
redemption
period
lapsed
exactly
a
year
after,
on
July
28,
1998,

Accordingly,
 the
 petition
 for
 annulment
 of
 judgment
 is
 DENIED
 DUE
 petitioner
 executed
 an
 Affidavit
 of
 Consolidation
 of
 Ownership
 to
 enable

COURSE
 and
 DISMISSED
 outright
 for
 being
 insufficient
 in
 form
 and
 the
Registry
of
Deeds
of
Valenzuela
to
issue
a
new
TCT
in
its
name.

substance
(Section
2,
Rule
47,
1997
Rules
of
Civil
Procedure)."

Upon
 presentation
 to
 the
 Register
 of
 Deeds
 of
 the
 Affidavit
 of

Also
challenged
is
the
January
27,
2000
CA
Resolution2
denying
petitioner’s
 Consolidation
 of
 Ownership,
 petitioner
 was
 informed
 of
 the
 existence
 of

Motion
for
Reconsideration.
 the
 August
 12,
 1998
 RTC
 Decision
 in
 Civil
 Case
 No.
 4930‐V‐96,
 annulling

TCT
No.
V‐41319.
The
dispositive
portion
of
the
Decision12
stated:

The
Facts

"WHEREFORE,
 judgment
 is
 hereby
 rendered
 declaring
 as
 null
 and
 void

On
November
21,
19953
and
January
30,
1996,4
Spouses
Raul
and
Cristina
 Transfer
 Certificate
 of
 Title
 No.V‐41319
 in
 the
 name
 of
 defendant
 Raul

Acampado
 obtained
 loans
 from
 petitioner
 in
 the
 amounts
 of
 P5,000,000
 Acampado
 for
 having
 proceeded
 from
 an
 illegitimate
 source.
 With
 costs

and
 P2,000,000,
 respectively.
 As
 security
 for
 the
 payment
 of
 these
 credit
 against
the
defendant.

accommodations,
 the
 Acampados
 executed
 in
 favor
 of
 petitioner
 a
 Real

Estate
 Mortgage5
 and
 an
 Amendment
 of
 Real
 Estate
 Mortgage6
 over
 a
 SO
ORDERED."

parcel
of
land
registered
in
their
names.
The
land
was
covered
by
TCT
No.

V‐41319
 in
 the
 Registry
 of
 Deeds
 of
 Valenzuela
 City,
 where
 the
 contracts
 On
January
27,
1999,
petitioner
filed
with
the
Court
of
Appeals
a
Petition

were
 also
 registered
 on
 November
 20,
 1995
 and
 January
 23,
 1996,
 for
Annulment
of
the
RTC
Decision.

respectively.7

Ruling
of
the
Court
of
Appeals

On
June
3,
1996,
a
Complaint
for
Declaration
of
Nullity
of
TCT
No.
V‐41319

was
 filed
 by
 Respondent
 Sy
 Tan
 Se
 against
 Spouses
 Acampado.
 In
 the
 For
 being
 insufficient
 in
 form
 and
 substance,
 the
 Petition
 for
 Annulment

Regional
 Trial
 Court
 (RTC)
 of
 Valenzuela,
 Branch
 172,
 it
 was
 docketed
 as
 was
outrightly
dismissed
by
the
CA.
It
ruled
that
petitioner
ought
to
have

Civil
Case
No.
4930‐V‐96,8
the
progenitor
of
the
present
controversy.
 filed,
instead,
a
petition
for
relief
from
judgment
or
an
action
for
quieting

of
title.

Despite
 being
 the
 registered
 mortgagee
 of
 the
 real
 property
 covered
 by

the
 title
 sought
 to
 be
 annulled,
 petitioner
 was
 not
 made
 a
 party
 to
 Civil
 Hence,
this
Petition.13

Case
No.
4930‐V‐96,9
nor
was
she
notified
of
its
existence.

Issues

Because
 the
 spouses
 defaulted
 in
 the
 payment
 of
 their
 loan,
 extrajudicial

foreclosure
 proceedings
 over
 the
 mortgaged
 property
 were
 initiated
 on
 In
its
Memorandum,
petitioner
presents
the
following
issues:

April
19,
1997.

"I

On
 June
 17,
 1997,
 the
 sheriff
 of
 Valenzuela
 conducted
 an
 auction
 sale
 of

the
 property,
 during
 which
 petitioner
 submitted
 the
 highest
 and
 winning
 x
x
x
[W]hether
or
not
a
petition
for
annulment
of
judgment
under
Rule
47



 47

of
 the
 1997
 Rules
 of
 Civil
 Procedure
 is
 the
 proper
 remedy
 available
 to
 Second,
in
denying
petitioner’s
Motion
for
Reconsideration
of
the
Decision

petitioner
under
the
circumstances."
 dismissing
 the
 Petition
 for
 Annulment
 of
 Judgment,
 the
 Court
 of
 Appeals

reasoned
 that
 another
 remedy,
 an
 action
 for
 quieting
 of
 title,
 was
 also

"II
 available
to
petitioner.


x
 x
 x
 [W]hether
 or
 not
 the
 judgment
 of
 the
 trial
 court
 in
 Civil
 Case
 No.
 We
do
not
agree.
It
should
be
stressed
that
this
case
was
instituted
to
ask

4930‐V‐96
should
be
annulled."14
 for
 relief
 from
 the
 peremptory
 declaration
 of
 nullity
 of
 TCT
 No.
 V‐41319,

which
had
been
issued
without
first
giving
petitioner
an
opportunity
to
be

The
Court’s
Ruling
 heard.
 Petitioner
 focused
 on
 the
 judgment
 in
 Civil
 Case
 No.
 4930‐V‐96

which
adversely
affected
it,
and
which
it
therefore
sought
to
annul.
Filing

The
Petition
is
meritorious.
 an
 action
 for
 quieting
 of
 title
 will
 not
 remedy
 what
 it
 perceived
 as
 a

disregard
of
due
process;
it
is
therefore
not
an
appropriate
remedy.

First
Issue:
Proper
Remedy

Equally
important,
an
action
for
quieting
of
title
is
filed
only
when
there
is

Respondents
 aver
 that
 a
 petition
 for
 annulment
 is
 not
 proper,
 because
 a
 cloud
 on
 title
 to
 real
 property
 or
 any
 interest
 therein.
 As
 defined,
 a

there
were
three
different
remedies
available
but
they
were
not
resorted
 "cloud
on
title
is
a
semblance
of
title
which
appears
in
some
legal
form
but

to
by
petitioner.
 which
is
in
fact
unfounded."16
In
this
case,
the
subject
judgment
cannot
be

considered
as
a
cloud
on
petitioner’s
title
or
interest
over
the
real
property

We
are
not
persuaded.
First,
a
petition
for
relief,
the
remedy
pointed
to
by
 covered
 by
 TCT
 No.
 V‐41319,
 which
 does
 not
 even
 have
 a
 semblance
 of

the
Court
of
Appeals,
was
not
available
to
petitioner.
Section
1,
Rule
38
of
 being
a
title.

the
Rules
of
Court,
states:

It
 would
 not
 be
 proper
 to
 consider
 the
 subject
 judgment
 as
 a
 cloud
 that

"Petition
 for
 relief
 from
 judgment,
 order,
 or
 other
 proceedings.‐When
 a
 would
warrant
the
filing
of
an
action
for
quieting
of
title,
because
to
do
so

judgment
 or
 final
 order
 is
 entered,
 or
 any
 other
 proceeding
 is
 thereafter
 would
require
the
court
hearing
the
action
to
modify
or
interfere
with
the

taken
 against
 a
 party
 in
 any
 court
 through
 fraud,
 accident,
 mistake,
 or
 judgment
 or
 order
 of
 another
 co‐equal
 court.
 Well‐entrenched
 in
 our

excusable
negligence,
he
may
file
a
petition
in
such
court
and
in
the
same
 jurisdiction
 is
 the
 doctrine
 that
 a
 court
 has
 no
 power
 to
 do
 so,
 as
 that

case
praying
that
the
judgment,
order
or
proceeding
be
set
aside."
(Italics
 action
 may
 lead
 to
 confusion
 and
 seriously
 hinder
 the
 administration
 of

supplied)
 justice.17
 Clearly,
 an
 action
 for
 quieting
 of
 title
 is
 not
 an
 appropriate

remedy
in
this
case.

It
must
be
emphasized
that
petitioner
was
never
a
party
to
Civil
Case
No.

4930‐V‐96.
 In
 Lagula
 et
 al.
 v.
 Casimiro
 et
 al.,15
 the
 Court
 held
 that
 ‐‐
 Third,
 private
 respondent
 cites
 a
 last
 remedy:
 the
 intervention
 by

relative
to
a
motion
for
relief
on
the
ground
of
fraud,
accident,
mistake,
or
 petitioner
 in
 Civil
 Case
 No.
 4930‐V‐96.
 The
 availability
 of
 this
 remedy

excusable
 negligence
 ‐‐
 Rule
 38
 of
 the
 Rules
 of
 Court
 "only
 applies
 when
 hinges
 on
 petitioner’s
 knowledge
 of
 the
 pendency
 of
 that
 case,
 which

the
 one
 deprived
 of
 his
 right
 is
 a
 party
 to
 the
 case."
 Since
 petitioner
 was
 would
 have
 otherwise
 been
 alerted
 to
 the
 need
 to
 intervene
 therein.

never
a
party
to
the
case
or
even
summoned
to
appear
therein,
then
the
 Though
 presumed
 by
 private
 respondent,
 any
 such
 knowledge
 prior
 to

remedy
 of
 relief
 from
 judgment
 under
 Rule
 38
 of
 the
 Rules
 of
 Court
 was
 October
1998
is,
however,
emphatically
denied
by
petitioner.

not
 proper.
 This
 is
 plainly
 provided
 in
 the
 italicized
 words
 of
 the
 present

provision
just
quoted.
 The
 Petition
 for
 Annulment
 before
 the
 Court
 of
 Appeals
 precisely
 alleged

that
 private
 respondent
 purposely
 concealed
 the
 case
 by
 excluding


 48

petitioner
as
a
defendant
in
Civil
Case
No.
4930‐V‐96,
even
if
the
latter
was
 not
only
an
interest
in
the
subject
matter
of
the
controversy,
but
also
has

an
 indispensable
 party.
 Without
 due
 process
 of
 law,
 the
 former
 intended
 an
 interest
 of
 such
 nature
 that
 a
 final
 decree
 cannot
 be
 made
 without

to
deprive
petitioner
of
the
latter’s
duly
registered
property
right.
Indeed,
 affecting
his
interest
or
leaving
the
controversy
in
such
a
condition
that
its

the
 execution
 of
 the
 Decision
 in
 Civil
 Case
 No.
 4930‐V‐96
 necessarily
 final
 determination
 may
 be
 wholly
 inconsistent
 with
 equity
 and
 good

entailed
its
enforcement
against
petitioner,
even
though
it
was
not
a
party
 conscience.
 It
 has
 also
 been
 considered
 that
 an
 indispensable
 party
 is
 a

to
that
case.
Hence,
the
latter
concludes
that
annulment
of
judgment
was
 person
 in
 whose
 absence
 there
 cannot
 be
 a
 determination
 between
 the

the
only
effective
remedy
open
to
it.
 parties
already
before
the
court
which
is
effective,
complete,
or
equitable.

Further,
an
indispensable
party
is
one
who
must
be
included
in
an
action

The
allegation
of
extrinsic
fraud,
if
fully
substantiated
by
a
preponderance
 before
it
may
properly
go
forward.

of
 evidence,
 may
 be
 the
 basis
 for
 annulling
 a
 judgment.18
 The
 resort
 to

annulment
 becomes
 proper
 because
 of
 such
 allegation,
 coupled
 with
 the
 "A
 person
 is
 not
 an
 indispensable
 party,
 however,
 if
 his
 interest
 in
 the

unavailability
of
the
other
remedies
pointed
to
by
respondents.
 controversy
 or
 subject
 matter
 is
 separable
 from
 the
 interest
 of
 the
 other

parties,
so
that
it
will
not
necessarily
be
directly
or
injuriously
affected
by
a

Second
Issue:
Lack
of
Jurisdiction
 decree
which
does
complete
justice
between
them."20


It
 is
 undisputed
 that
 the
 property
 covered
 by
 TCT
 No.
 V‐41319
 was
 The
joinder
of
indispensable
parties
to
an
action
is
mandated
by
Section
7,

mortgaged
to
petitioner,
and
that
the
mortgage
was
annotated
on
TCT
No.
 Rule
3
of
the
Revised
Rules
of
Civil
Procedures,
which
we
quote:

V‐41319
 before
 the
 institution
 of
 Civil
 Case
 No.
 4930‐V‐96.
 It
 is
 also

undisputed
 that
 all
 subsequent
 proceedings
 pertaining
 to
 the
 foreclosure
 "SEC
 7.
 Compulsory
 joinder
 of
 indispensable
 parties.
 –
 Parties
 in
 interest

of
 the
 mortgage
 were
 entered
 in
 the
 Registry
 of
 Deeds.
 The
 nullification
 without
 whom
 no
 final
 determination
 can
 be
 had
 of
 an
 action
 shall
 be

and
 cancellation
 of
 TCT
 No.
 V‐41319
 carried
 with
 it
 the
 nullification
 and
 joined
either
as
plaintiffs
or
defendants."

cancellation
of
the
mortgage
annotation.

Aside
from
the
above
provision,
jurisprudence
requires
such
joinder,
as
the

Although
 a
 mortgage
 affects
 the
 land
 itself
 and
 not
 merely
 the
 TCT
 following
excerpts
indicate:

covering
 it,
 the
 cancellation
 of
 the
 TCT
 and
 the
 mortgage
 annotation

exposed
petitioner
to
real
prejudice,
because
its
rights
over
the
mortgaged
 "Indispensable
 parties
 must
 always
 be
 joined
 either
 as
 plaintiffs
 or

property
 would
 no
 longer
 be
 known
 and
 respected
 by
 third
 parties.
 defendants,
 for
 the
 court
 cannot
 proceed
 without
 them.
 x
 x
 x.

Necessarily,
 therefore,
 the
 nullification
 of
 TCT
 No.
 V‐41319
 adversely
 Indispensable
 parties
 are
 those
 with
 such
 an
 interest
 in
 the
 controversy

affected
its
property
rights,
considering
that
a
real
mortgage
is
a
real
right
 that
a
final
decree
would
necessarily
affect
their
rights,
so
that
the
courts

and
a
real
property
by
itself.19
 cannot
proceed
without
their
presence."21


Evidently,
 petitioner
 is
 encompassed
 within
 the
 definition
 of
 an
 "x
 x
 x.
 Without
 the
 precence
 of
 indispensable
 parties
 to
 a
 suit
 or

indispensable
party;
thus,
it
should
have
been
impleaded
as
a
defendant
in
 proceeding,
a
judgment
of
a
Court
cannot
attain
real
finality."22

Civil
Case
No.
4930‐V‐96.

"Whenever
 it
 appears
 to
 the
 court
 in
 the
 course
 of
 a
 proceeding
 that
 an

"An
 indispensable
 party
 is
 a
 party
 who
 has
 such
 an
 interest
 in
 the
 indispensable
party
has
not
been
joined,
it
is
the
duty
of
the
court
to
stop

controversy
or
subject
matter
that
a
final
adjudication
cannot
be
made,
in
 the
 trial
 and
 to
 order
 the
 inclusion
 of
 such
 party.
 (The
 Revised
 Rules
 of

his
 absence,
 without
 injuring
 or
 affecting
 that
 interest[;]
 a
 party
 who
 has
 Court,
Annotated
&
Commented
by
Senator
Vicente
J.
Francisco,
Vol.
I,
p.



 49

271,
 1973
 ed.,
 See
 also
 Cortez
 vs.
 Avila,
 101
 Phil.
 705.)
 Such
 an
 order
 is
 the
party
concerned
has
actual
knowledge
of
facts
and
circumstances
that

unavoidable,
for
the
‘general
rule
with
reference
to
the
making
of
parties
 would
impel
a
reasonably
cautious
man
to
make
such
inquiry.

in
 a
 civil
 action
 requires
 the
 joinder
 of
 all
 necessary
 parties
 wherever

possible,
 and
 the
 joinder
 of
 all
 indispensable
 parties
 under
 any
 and
 all
 x
x
x










x
x
x










x
x
x

conditions,
the
presence
of
those
latter
parties
being
a
sine
qua
non
of
the

exercise
of
judicial
power.’
(Borlasa
vs.
Polistico,
47
Phil.
345,
at
p.
347.)
It
 "Thus,
 where
 innocent
 third
 persons
 relying
 on
 the
 correctness
 of
 the

is
precisely
‘when
an
indispensable
party
is
not
before
the
court
(that)
the
 certificate
of
title
issued,
acquire
rights
over
the
property,
the
court
cannot

action
 should
 be
 dismissed.’
 (People
 vs.
 Rodriguez,
 106
 Phil.
 325.
 at
 p.
 disregard
such
rights
and
order
the
total
cancellation
of
the
certificate
for

327.)
 The
 absence
 of
 an
 indispensable
 party
 renders
 all
 subsequent
 that
 would
 impair
 public
 confidence
 in
 the
 certificate
 of
 title;
 otherwise

actuations
of
the
court
null
and
void,
for
want
of
authority
to
act,
not
only
 everyone
 dealing
 with
 property
 registered
 under
 the
 Torrens
 system

as
 to
 the
 absent
 parties
 but
 even
 as
 to
 those
 present."23
 (emphasis
 would
have
to
inquire
in
every
instance
as
to
whether
the
title
ha[s]
been

supplied)
 regularly
 or
 irregularly
 issued
 by
 the
 court.
 Indeed
 this
 is
 contrary
 to
 the

evident
purpose
of
the
law."

"The
 evident
 aim
 and
 intent
 of
 the
 Rules
 regarding
 the
 joinder
 of

indispensable
 and
 necessary
 parties
 is
 a
 complete
 determination
 of
 all
 The
 peremptory
 disregard
 of
 the
 annotations
 registered
 and
 entered
 in

possible
 issues,
 not
 only
 between
 the
 parties
 themselves
 but
 also
 as
 TCT
No.
V‐41319
constituted
a
deprivation
of
private
property
without
due

regards
 to
 other
 persons
 who
 may
 be
 affected
 by
 the
 judgment.
 A
 valid
 process
 of
 law
 and
 was
 therefore
 unquestionably
 unjust
 and
 iniquitous.

judgment
 cannot
 even
 be
 rendered
 where
 there
 is
 want
 of
 indispensable
 This,
we
cannot
countenance.

parties."24

Clearly,
 it
 was
 the
 trial
 court’s
 duty
 to
 order
 petitioner’s
 inclusion
 as
 a

From
 the
 above,
 it
 is
 clear
 that
 the
 presence
 of
 indispensable
 parties
 is
 party
to
Civil
Case
No.
4930‐V‐96.
This
was
not
done.
Neither
the
court
nor

necessary
 to
 vest
 the
 court
 with
 jurisdiction,
 which
 is
 "the
 authority
 to
 private
respondents
bothered
to
implead
petitioner
as
a
party
to
the
case.

hear
and
determine
a
cause,
the
right
to
act
in
a
case."25
We
stress
that
the
 In
the
absence
of
petitioner,
an
indispensable
party,
the
trial
court
had
no

absence
of
indispensable
parties
renders
all
subsequent
actuations
of
the
 authority
to
act
on
the
case.
Its
judgment
therein
was
null
and
void
due
to

court
 null
 and
 void,
 because
 of
 that
 court’s
 want
 of
 authority
 to
 act,
 not
 lack
of
jurisdiction
over
an
indispensable
party.

only
as
to
the
absent
parties
but
even
as
to
those
present.

In
Leonor
v.
Court
of
Appeals28
and
Arcelona
v.
Court
of
Appeals,29
we
held

It
is
argued
that
petitioner
cannot
possibly
be
an
indispensable
party,
since
 thus:

the
 mortgage
 may
 not
 even
 be
 valid
 because
 of
 the
 possible
 absence
 of

compliance
 with
 the
 requirement26
 that
 the
 mortgagor
 be
 the
 absolute
 "A
void
judgment
for
want
of
jurisdiction
is
no
judgment
at
all.
It
cannot
be

owner
of
the
thing
mortgaged.
It
should
be
emphasized,
however,
that
at
 the
 source
 of
 any
 right
 nor
 the
 creator
 of
 any
 obligation.
 All
 acts

the
time
the
mortgage
was
constituted,
there
was
an
existing
TCT
(No.
V‐ performed
 pursuant
 to
 it
 and
 all
 claims
 emanating
 from
 it
 have
 no
 legal

41319),
 which
 named
 the
 mortgagors,
 the
 Acampado
 spouses,
 as
 the
 effect.
 Hence,
 it
 can
 never
 become
 final
 and
 any
 writ
 of
 execution
 based

registered
 owners
 of
 the
 property.
 In
 Seno
 v.
 Mangubat27
 this
 Court
 held
 on
it
is
void:"x
x
x
it
may
be
said
to
be
a
lawless
thing
which
can
be
treated

as
follows:
 as
 an
 outlaw
 and
 slain
 at
 sight,
 or
 ignored
 wherever
 and
 whenever
 it

exhibits
its
head."

"The
 well‐known
 rule
 in
 this
 jurisdiction
 is
 that
 a
 person
 dealing
 with
 a

registered
land
has
a
right
to
rely
upon
the
face
of
the
Torrens
Certificate
 WHEREFORE,
the
Petition
is
GRANTED
and
the
assailed
Resolutions
of
the

of
 Title
 and
 to
 dispense
 with
 the
 need
 of
 inquiring
 further,
 except
 when


 50

Court
of
Appeals
are
REVERSED.
The
Decision
of
the
Regional
Trial
Court
in

Civil
Case
No.
4930‐V‐41319
is
hereby
NULLIFIED
and
SET
ASIDE.
No
costs.


SO
ORDERED.


Melo,
Vitug,
Gonzaga‐Reyes,
and
Sandoval‐Gutierrez,
JJ.,
concur.



 51


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