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Star Two (SPV-AMC), Inc., vs Paper City Corporation of the Philippines, G.R. No. 169211, March 6, 2013

Facts:

From 1990-1991, Paper City applied for and was granted four (4) loans and credit accommodations by Rizal

Commercial Banking Corporation (RCBC), now substituted by Star Two (SPV-AMC), Inc by virtue of Republic

Act No. 9182. The loans were secured by four (4) Deeds of Continuing Chattel Mortgages on its machineries and

equipments found inside its paper plants. However, RCBC eventually executed a unilateral Cancellation of Deed

of Contining Chattel Mortgage. In 1992, RCBC, as the trustee bank, together with Metrobank and Union Bank,

entered into a Mortgage Trust Indenture (MTI), with Paper City. In the said MTI, Paper City acquired additional

loans secured by five (5) Deed of Real Estate Mortgage, plus real and personal properties in an annex to the MTI,

which covered the machineries and equipment of Paper City. The MTI was later on amended and supplemented

three (3) times, wherein the loan was increased and included the same mortgages with an additional building and

other improvements inthe plant site. Paper City was able to comply with the loans but only until 1997 due to an

economic crisis. RCBC filed a petition for extra-judicial foreclosure against the real estate executed by Paper City

including all the improvements because of payment default. The property was foreclosed and subjected to public

acution. The three banks and the highest bidder were issued a Certificate of Sale. Paper City filed a complaint

alleging that the sale was null and void due to lack of prior notice. During the pendency of the complaint, Paper

City filed a motion to remove machinery out of the foreclosed land and building, that the same were not included in

the foreclosure of the real estate mortgage. The trial court denied the motion, ruling that the machineries and

equipment were included. Thereafter, Paper City's Motion for Reconsideration, the trial court granted the same andjustified the reversal by finding that the machineries and equipment are chattels by agreement thru the four Deeds of

Continuing Chattel Mortgages; and that the deed of cancellation executed by RCBC of said mortgage was not valid

because it was one unilaterally. RCBC's Motion for Reconsideration was denied. The case was petitioned at CA

that 1. That Paper City gave its consent to consider the disputedmachineries and equipment as real properties when

they signed the MTI's and all its amendments; 2. That the machineries and equipment are the same as inthe MTI's,

hence treated by agreement of the parties as real properties. The CA affirmed the orders of the trial court because it

relied on the plain language of the MTI's stating that nowhere from any of the MTIs executed by the parties can we

find the alleged "express" agreement adverted to by petitioner. There is no provision in any of the parties MTI,

which expressly states to the effect that the parties shall treat the equipments and machineries as real property. On

the contrary, the plain and unambiguous language of the aforecited MTIs, which described the same as personal

properties, contradicts petitioners claims.

Issue:

Whether the subsequent contracts of the parties such as Mortgage Trust Indenture as well as the subsequent

supplementary amendments included in its coverage of mortgaged properties the subject machineries and

equipment; and

Whether or not the subject machineries and equipment were considered real properties and should therefore be

included in the extra-judicial foreclosure which in turn were sold to the banks.

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Ruling:

Petition was granted.

1. Repeatedly, the parties stipulated that the properties mortgaged by Paper City to RCBC are various parcels ofland including the buildings and existing improvements thereon as well as the machineries and equipments,which as stated in the granting clause of the original mortgage, are "more particularly described and listed that

is to say, the real and personal properties listed in Annexes A and B x x x of which the Paper City is the

lawful and registered owner." Significantly, Annexes "A" and "B" are itemized listings of the buildings,

machineries and equipments typed single spaced in twenty-seven pages of the document made part of the

records. As held in Gateway Electronics Corp. v. Land Bank of the Philippines,49the rule in this jurisdiction is

that the contracting parties may establish any agreement, term, and condition they may deem advisable,

provided they are not contrary to law, morals or public policy. The right to enter into lawful contracts

constitutes one of the liberties guaranteed by the Constitution.

2. Contrary to the finding of the CA, the Extra-Judicial Foreclosure of Mortgage includes the machineries andequipments of respondent. Considering that the Indenture which is the instrument of the mortgage that was

foreclosed exactly states through the Deed of Amendment that the machineries and equipments listed inAnnexes "A" and "B" form part of the improvements listed and located on the parcels of land subject of the

mortgage, such machineries and equipments are surely part of the foreclosure of the "real estate properties,

including all improvements thereon" as prayed for in the petition. The real estate mortgages which specifically

included the machineries and equipments were subsequent to the chattel mortgages. Without doubt, the real

estate mortgages superseded the earlier chattel mortgages.

The real estate mortgage over the machineries and equipments is even in full accord with the classification of

such properties by the Civil Code of the Philippines as immovable property. Thus:

Article 415. The following are immovable property:

(1) Land, buildings, roads and constructions of all kinds adhered to the soil;

xxxx

(5) Machinery, receptacles, instruments or implements intended by the owner of the tenement for an industry or

works which may be carried on in a building or on a piece of land, and which tend directly to meet the needs of the

said industry or works;

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Casimiro Development Corporation vs. Renato L. Mateo

G.R. No. 175485, July 17, 2011

FACTS:

Casimiro Development Corporation (CDC) purchased a parcel of land (property) with an area of 6,693 square

meters, more or less, located in Barrio Pulang Lupa, Las Pias City from China Bank. The subject property was

originally owned by Isaias Lara, the respondents maternal grandfather. Upon the death of Isaias Lara in 1930, the

property passed on to his children, which later effected the transfer of the full and exclusive ownership to Felicidad

Lara-Mateo by the co-heirs under an agreement. Felicidad Lara-Mateo had five children, namely: Laura, respondent

Renato, Cesar, Candido, Jr. and Leonardo. With the agreement of the entire Lara-Mateo family, a deed of sale

covering the property was executed in favor of Laura, who, in 1967, applied for land registration. In due course, the

property was used as collateral to secure a succession of loans. The first loan was obtained from Bacoor Rural Bank

(Bacoor Bank). To repay the loan to Bacoor Bank and secure the release of the mortgage, Laura borrowed funds

from Parmenas Perez, who, however, required that the title be meanwhile transferred to his name. Subsequently,

Laura recovered the property by repaying the obligation with the proceeds of another loan obtained from Rodolfo Pe

(Pe). She later executed a deed of sale in favor of Pe, who in turn constituted a mortgage on the property in favor of

China Banking Corporation (China Bank) as security for a loan. In the end, China Bank foreclosed the mortgage,

and consolidated its ownership of the property in 1985 after Pe failed to redeem. Thus, TCT No. (99527) T-11749-A

was issued in the name of China Bank. On February 28, 1991, Felicidad died intestate. On June 6, 1991, CDC

brought an action for unlawful detainer in the Metropolitan Trial Court (MeTC) in Las Pias City against therespondents siblings, namely: Cesar, Candido, Jr., and Leonardo, and the other occupants of the property. Therein,

the defendants maintained that the MeTC did not have jurisdiction over the action because the land was classified as

agricultural; that the jurisdiction belonged to the Department of Agrarian Reform Adjudication Board (DARAB);

that they had been in continuous and open possession of the land even before World War II and had presumed

themselves entitled to a government grant of the land; and that CDCs title was invalid, considering that the land had

been registered before its being declared alienable.

ISSUE:

CDC argues that it was a buyer in good faith; and that the CA did not rule on matters that fortified its title in the

property, namely: (a) the incontrovertibility of the title of Laura; (b) the action being barred by laches and res

judicata; and (c) the property having been conveyed to third parties who had then claimed adverse title.

Ruling:

The land in question has been covered by a Torrens certificate of title (OCT No. 6386 in the name of Laura, and its

derivative certificates) before CDC became the registered owner by purchase from China Bank. In all that time,

neither the respondent nor his siblings opposed the transactions causing the various transfers. In fact, the respondent

admitted in his complaint that the registration of the land in the name of Laura alone had been with the knowledge

and upon the agreement of the entire Lara-Mateo family. It is unthinkable, therefore, that the respondent, fully aware

of the exclusive registration in her sister Lauras name, allowed more than 20 years to pass before asserting his

claim of ownership for the first time through this case in mid-1994. Making it worse for him is that he did so only

after CDC had commenced the ejectment case against his own siblings. Registration of land under the Torrens

System, aside from perfecting the title and rendering it indefeasible after the lapse of the period allowed by law, also

renders the title immune from collateral attack.

One who deals with property registered under the Torrens system need not go beyond the certificate of

title, but only has to rely on the certificate of title. He is charged with notice only of such burdens and

claims as are annotated on the title. In short, considering that China Banks TCT No. 99527 was a clean

title, that is, it was free from any lien or encumbrance, CDC had the right to rely, when it purchased the

property, solely upon the face of the certificate of title in the name of China Bank.

Wherefore, the name of Casimiro Development Corporation valid and subsisting.