Republic v. Bantigue

FACTS:

         On 17 July 1997, respondent Bantigue Point Development Corporation filed with the Regional Trial Court (RTC) of Rosario, Batangas an application for original registration of title over a parcel of land with an assessed value of ₱4,330, ₱1,920 and ₱8,670, or a total assessed value of ₱14,920 for the entire property, more particularly described as Lot 8060 of Cad 453-D, San Juan Cadastre, with an area of more or less 10,732 square meters, located at Barangay Barualte, San Juan, Batangas. [3]

                On 18 July 1997, the RTC issued an Order setting the case for initial hearing on 22 October 1997.[4] On 7 August 1997, it issued a second Order setting the initial hearing on 4 November 1997.[5]

         Petitioner Republic filed its Opposition to the application for registration on 8 January 1998 while the records were still with the RTC.[6]

          On 31 March 1998, the RTC Clerk of Court transmitted motu proprio the records of the case to the MTC of San Juan, because the assessed value of the property was allegedly less than   ₱100,000. [7]

         Thereafter, the MTC entered an Order of General Default [8]   and commenced with the reception of evidence.[9] Among the documents presented by respondent in support of its application are Tax Declarations,[10] a Deed of Absolute Sale in its favor,[11] and a Certification from the Department of Environment and Natural Resources (DENR) Community Environment and Natural Resources Office (CENRO) of Batangas City that the lot in question is within the alienable and disposable zone.[12] Thereafter, it awarded the land to respondent Corporation . [13]

         Acting on an appeal filed by the Republic,[14] the CA ruled that since the former had actively participated in the proceedings before the lower court, but failed to raise the jurisdictional challenge therein, petitioner is thereby estopped from questioning the jurisdiction of the lower court on appeal.[15] The CA further found that respondent Corporation had sufficiently established the latter’s registrable title over the subject property after

having proven open, continuous, exclusive and notorious possession and occupation of the subject land by itself and its predecessors-in-interest even before the outbreak of World War II.[16]

         Dissatisfied with the CA’s ruling, petitioner Republic filed this instant Rule 45 Petition.  ISSUE:

Is the CENRO certification a sufficient proof that the property in question is alienable and disposable land of the public domain?

HELD:

No. A certification from the CENRO is not sufficient proof that the property in question is alienable and disposable land of the public domain. Even as we affirm the propriety of the MTC’s exercise of its delegated jurisdiction, we find that the lower court erred in granting respondent Corporation’s application for original registration in the absence of sufficient proof that the property in question was alienable and disposable land of the public domain.

The Regalian doctrine dictates that all lands of the public domain belong to the State.[44] The applicant for land registration has the burden of overcoming the presumption of State ownership by establishing through incontrovertible evidence that the land sought to be registered is alienable or disposable based on a positive act of the government.[45] We held in Republic v. T.A.N. Properties, Inc.   that a CENRO certification is insufficient to prove the alienable and disposable character of the land sought to be registered. [46]  The applicant must also show sufficient proof that the DENR Secretary has approved the land classification and released the land in question as alienable and disposable.[47]

Thus, the present rule is that an application for original registration must be accompanied by (1) a CENRO or PENRO[48] Certification; and (2) a copy of the original classification approved by the DENR Secretary and certified as a true copy by the legal custodian of the official records.[49]

 Here, respondent Corporation only presented a

CENRO certification in support of its application.

[50] Clearly, this falls short of the requirements for original registration.We therefore remand this case to the court a quo for reception of further evidence to prove that the property in question forms part of the alienable and disposable land of the public domain. If respondent Bantigue Point Development Corporation presents a certified true copy of the original classification approved by the DENR Secretary, the application for original registration should be granted. If it fails to present sufficient proof that the land in question is alienable and disposable based on a positive act of the government, the application should be denied.

DENR v. YAPFACTS:There are two consolidated petitions. The first is G.R. No.167707, a petition for review on certiorari of the Decision1 of theCourt of Appeals (CA) affirming that2 of the Regional Trial Court (RTC) in Kalibo, Aklan, which granted the petition for declaratory relief filed by respondents-claimants Mayor Jose Yap, et al. and ordered the survey of Boracay for titling purposes. The second is G.R. No. 173775, a petition for prohibition, mandamus, and nullification of Proclamation No. 10645">[3] issued by President Gloria Macapagal-Arroyo classifying Boracay into reserved forest and agricultural land.

Boracay Island in the Municipality of Malay, Aklan, with its powdery white sand beaches and warm crystalline waters, is reputedly a premier Philippine tourist destination. The island is also home to 12,003 inhabitants4 who live in the bone-shaped island’s three barangays.

On April 14, 1976, the Department of Environment and Natural Resources (DENR) approved the National Reservation Survey of Boracay Island, which identified several lots as being occupied or claimed by named persons. On November 10, 1978, then President Ferdinand Marcos issued Proclamation No. 18018 declaring Boracay Island, among other islands, caves and peninsulas in the Philippines, as tourist zones and marine reserves under the administration of the Philippine Tourism Authority (PTA). President Marcos later approved the issuance of PTA Circular 3-829 dated September 3, 1982, to implement Proclamation No. 1801.

Claiming that Proclamation No. 1801 and PTA Circular No 3-82 precluded them from filing an application for judicial confirmation of imperfect title or survey of land for titling purposes, respondents-claimants Mayor Jose S. Yap, Jr., Libertad Talapian, Mila Y. Sumndad, and Aniceto Yap filed a petition for declaratory relief with the RTC in Kalibo, Aklan. In their petition, respondents-claimants alleged that Proclamation No. 1801 and PTA Circular No. 3-82 raised doubts on their right to secure titles over their occupied lands. They declared that they

themselves, or through their predecessors in-interest, had been in open, continuous, exclusive, and notorious possession and occupation in Boracay since June 12, 1945, or earlier since time immemorial. They declared their lands for tax purposes and paid realty taxes on them.

Respondents-claimants posited that Proclamation No. 1801 and its implementing Circular did not place Boracay beyond the commerce of man. Since the Island was classified as a tourist zone, it was susceptible of private ownership. Under Section 48(b) of Commonwealth Act (CA) No. 141, otherwise known as the Public Land Act, they had the right to have the lots registered in their names through judicial confirmation of imperfect titles.

The Republic, through the Office of the Solicitor General (OSG) opposed the petition for declaratory relief. The OSG countered that Boracay Island was an unclassified land of the public domain. It formed part of the mass of lands classified as "public forest," which was not available for disposition pursuant to Section 3(a) of Presidential Decree (PD) No. 705 or the Revised Forestry Code,11 as amended. The OSG maintained that respondents-claimants’ reliance on PD No. 1801 and PTA Circular No. 3-82 was misplaced. Their right to judicial confirmation of title was governed by CA No. 141 and PD No. 705. Since Boracay Island had not been classified as alienable and disposable, whatever possession they had cannot ripen into ownership.

During pre-trial, respondents-claimants and the OSG stipulated on the following facts: (1) respondents-claimants were presently in possession of parcels of land in Boracay Island; (2) these parcels of land were planted with coconut trees and other natural growing trees; (3) the coconut trees had heights of more or less twenty (20) meters and were planted more or less fifty (50) years ago; and (4) respondents-claimants declared the land they were occupying for tax purposes.The parties also agreed that the principal issue for resolution was purely legal: whether Proclamation No. 1801 posed any legal hindrance or impediment to the titling of the lands in Boracay. They decided to forego with the trial and to submit the case for resolution upon submission of their respective memoranda.

The RTC took judicial notice that certain parcels of land in Boracay Island, more particularly Lots 1 and 30, PlanPSU-5344, were covered by Original Certificate of Title No 19502 (RO 2222) in the name of the Heirs of Ciriaco S. Tirol. These lots were involved in Civil Case Nos. 5222 and 5262 filed before the RTC of Kalibo, Aklan.15 The titles were issued on August 7, 1933.

RTC and CA DispositionsOn July 14, 1999, the RTC rendered a decision in favor of respondents-claimants, with a fallo reading:

WHEREFORE, in view of the foregoing, the Court declares that Proclamation No. 1801 and PTA Circular

No. 3-82 pose no legal obstacle to the petitioners and those similarly situated to acquire title to their lands in Boracay, in accordance with the applicable laws and in the manner prescribed therein; and to have their lands surveyed and approved by respondent Regional Technical Director of Lands as the approved survey does not in itself constitute a title to the land.

SO ORDERED.

The RTC upheld respondents-claimants’ right to have their occupied lands titled in their name. It ruled that neither Proclamation No. 1801 nor PTA Circular No. 3-82 mentioned that lands in Boracay were inalienable or could not be the subject of disposition. The Circular itself recognized private ownership of lands. The trial court cited Sections 8720 and 5321 of the Public Land Act as basis for acknowledging private ownership of lands in Boracay and that only those forested areas in public lands were declared as part of the forest reserve.

The OSG moved for reconsideration but its motion was denied. The Republic then appealed to the CA.

On December 9, 2004, the appellate court affirmed in toto the RTC decision, disposing as follows:

WHEREFORE, in view of the foregoing premises, judgment is hereby rendered by us DENYING the appeal filed in this case and AFFIRMING the decision of the lower court. The CA held that respondents-claimants could not be prejudiced by a declaration that the lands they occupied since time immemorial were part of a forest reserve.

Again, the OSG sought reconsideration but it was similarly denied.25 Hence, the present petition under Rule 45.

ISSUE:

Whether Proclamation No. 1801 and PTA Circular No. 3-82 pose any legal obstacle for respondents, and all those similarly situated, to acquire title to their occupied lands in Boracay Island.

HELD:

The SC ruled against Yap et al and Sacay et al. The

Regalian Doctrine dictates that all lands of the public

domain belong to the State, that the State is the source

of any asserted right to ownership of land and charged

with the conservation of such patrimony. All lands that

have not been acquired from the government, either by

purchase or by grant, belong to the State as part of the

inalienable public domain.

In keeping with the presumption of State ownership,

there must be a positive act of the government, such

as an official proclamation, declassifying inalienable

public land into disposable land for agricultural or other

purposes. A positive act declaring land as alienable and disposable is required. In the case at bar, no such

proclamation, executive order, administrative action,

report, statute, or certification was presented. The

records are bereft of evidence showing that, prior to

2006, the portions of Boracay occupied by private

claimants were subject of a government proclamation

that the land is alienable and disposable. Absent such

well-nigh incontrovertible evidence, the Court cannot

accept the submission that lands occupied by private

claimants were already open to disposition before 2006.

Matters of land classification or reclassification cannot

be assumed.

Private claimants’ continued possession under Act No. 926 does not create a presumption that the land is alienable. It is plain error for petitioners to argue that under the Philippine Bill of 1902 and Public Land Act No. 926, mere possession by private individuals of lands creates the legal presumption that the lands are alienable and disposable.

Private claimants are not entitled to apply for judicial confirmation of imperfect title under CA No. 141. Neither do they have vested rights over the occupied lands under the said law. There are two requisites for

judicial confirmation of imperfect or incomplete title

under CA No. 141, namely:

(1) open, continuous, exclusive, and notorious

possession and occupation of the subject land by

himself or through his predecessors-in-interest under

a bona fide claim of ownership since time immemorial or

from June 12, 1945; and

(2) the classification of the land as alienable and

disposable land of the public domain.

The tax declarations in the name of private claimants are

insufficient to prove the first element of possession. The

SC noted that the earliest of the tax declarations in the

name of private claimants were issued in 1993. Being of

recent dates, the tax declarations are not sufficient to

convince this Court that the period of possession and

occupation commenced on June 12, 1945.

Yap et al and Sacay et al insist that they have a vested

right in Boracay, having been in possession of the island

for a long time. They have invested millions of pesos in

developing the island into a tourist spot. They say their

continued possession and investments give them a

vested right which cannot be unilaterally rescinded by

Proclamation No. 1064.

The continued possession and considerable investment

of private claimants do not automatically give them a

vested right in Boracay. Nor do these give them a right

to apply for a title to the land they are presently

occupying. As the law and jurisprudence stand, private claimants are ineligible to apply for a judicial confirmation of title over their occupied portions in Boracay even with their continued possession and considerable investment in the island.

Castillo Vs Escutin

Facts:

This is a Petition for Review on Certiorari by petitioner Dinah C. Castillo seeking the reversal and setting aside of the Decision of the Court of Appeal as well as the Resolution denying for Motion for reconsideration as it dismissed on her complaint for grave misconduct and violation of Section 3(e) of Republic Act No. 3019, the Anti-Graft and Corrupt Practices Act against respondent public officers Antonio M. Escutin (Escutin), Aquilina A. Mistas (Mistas) and Marietta L. Linatoc (Linatoc), together with private individuals Lauro S. Leviste II (Leviste) and Benedicto L. Orense (Orense), officers of Summit Realty.

Dinah Castillo, judgment creditor of a certain Raquel K. Moratilla. . In the course of her search for properties to satisfy the judgment in her favor, petitioner discovered that Raquel, her mother Urbana Kalaw (Urbana), and sister Perla K. Moratilla (Perla), co-owned Lot 13713, a parcel of land consisting of 15,000 square meters, situated at Brgy. Bugtongnapulo, Lipa City, Batangas, and covered by Tax Declaration No. 00449.

Petitioner proceed to levy on execution Lot 13713, and in a public auction, petitioner bought Raquel’s 1/3 pro-indiviso share. On 4 June 2002, petitioner had the following documents, on her acquisition of Raquel’s 1/3 pro-indiviso share in Lot 13713, recorded in the Primary Entry Book and Registration Book of the Register of Deeds of Lipa City in accordance with Act No. 3344[10]: (a) Notice of Levy; (b) Certificate of Sale; (c) Affidavit of Publication; and (d) Writ of Execution. Subsequently, petitioner was issued by the City Assessor of Lipa City Tax Declaration No. 00942-A, indicating that she owned 5,000 square meters of Lot 13713, while Urbana and Perla owned the other 10,000 square meters.

When petitioner attempted to pay real estate taxes for her 5,000-square-meter share in Lot 13713, she was shocked to find out that, without giving her notice, her Tax Declaration No. 00942-A was cancelled. Lot 13713 was said to be encompassed in and overlapping with the 105,648 square meter parcel of land known as Lot 1-B, covered by Transfer Certificate of Title No. 129642 Tax Declaration No. 00949-A, both in the name of Francisco Catigbac. The reverse side of TCT No. 129642 bore three entries, reflecting the supposed sale of Lot 1-B to Summit Realty.

Issue:

Whether or not the public officers as defendants in the case are while in the discharge of their administrative functions did then and there unlawfully, through evident bad faith, gross inexcusable negligence and with manifest partiality towards Summit Realty causing injury to the petitioner by cancelling TD #00942-A in the Office of the City Assessor of Lipa City.

Which serve as a better soured of right, a Tax Declaration Certificate or a Transfer Certificate of Title.

Held:

Petition for Review is hereby DENIED. Decision and Resolution made by the Court of Appeals are hereby AFFIRMED in toto.

The administrative case against public respondents ANTONIO M. ESCUTIN, AQUILINA A. MISTAS and MARIETA L. LINATOC be DISMISSED, for lack of substantial evidence and the criminal case against the same respondents including private respondent LAURO S. LEVISTE II and BENEDICTO L. ORENSE, be DISMISSED, for lack of probable cause.

The Court of Appeals finds no reason to administratively or criminally charge respondents. Without evidence showing that respondents received any gift, money or other pay-off or that they were induced by offers of such, the Court cannot impute any taint of direct corruption in the questioned acts of respondents. Thus, any indication of intent to violate the laws or of flagrant disregard of established rule may be negated by respondents’ honest belief that their acts were sanctioned under the provisions of existing law and regulations. Respondent Register of Deeds acted in the honest belief that the agency recognized by the court in LRC Case No. 00-0376 between the registered owner Francisco Catigbac and Leonardo Yagin subsisted with respect to the conveyance or sale of Lot 1 to Summit as the vendee, and that the Special Power of Attorney and Deed of Absolute Sale presented as evidence during said proceedings are valid and binding. Hence, respondent Escutin was justified in believing that there is no legal infirmity or defect in registering the documents and proceeding with the transfer of title of Lot 1 in the name of the new owner Summit. On the other hand, respondent Linatoc could not be held administratively liable for effecting the cancellation in the course of ordinary flow of work in the City Assessor’s Office after the documents have undergone the necessary evaluation and verification by her superiors. Hence, they are only acting upon there ministerial capacity.

Summit Realty acquired its title to Lot 1-B, not from the issuance of the new owner’s duplicate of TCT No. 181, but from its purchase of the same from Yagin, the attorney-in-fact of Catigbac, the registered owner of the said property. Summit Realty merely sought the issuance of a new owner’s duplicate of TCT No. 181 in the name of Catigbac so that it could accordingly register thereon the sale in its favor of a substantial portion of Lot 1 covered by said certificate, later identified as Lot 1-B. Catigbac’s title to Lot 1-B passed on by sale to Summit Realty, giving the latter the right to seek the separation of the said portion from the rest of Lot 1 and the issuance of a certificate of title specifically covering the same. This resulted in the issuance of TCT No. 129642 in the name of Catigbac, covering Lot 1-B, which was subsequently cancelled and replaced by TCT No. T-134609 in the name of Summit Realty.

The cancellation of petitioner’s Tax Declaration No. 00942-A was not because of the issuance of a new owner’s duplicate of TCT No. 181, but of the fact that Lot 1-B, which encompassed the 5,000 square meters petitioner lays claim to, was already covered by TCT No. 181 (and subsequently by TCT No. 129642) in the name of Catigbac. A certificate of title issued is an absolute and indefeasible evidence of ownership of the property

in favor of the person whose name appears therein. It is binding and conclusive upon the whole world. As between Catigbac’s title, covered by a certificate of title, and petitioner’s title, evidenced only by a tax declaration, the former is evidently far superior and is, in the absence of any other certificate of title to the same property, conclusive and indefeasible as to Catigbac’s ownership of Lot 1-B. Catigbac’s certificate of title is binding upon the whole world, including respondent public officers and even petitioner herself.

Doctrine:

Court clarify that a title is different from a certificate of title. Title is generally defined as the lawful cause or ground of possessing that which is ours. It is that which is the foundation of ownership of property, real or personal. Title, therefore, may be defined briefly as that which constitutes a just cause of exclusive possession, or which is the foundation of ownership of property. Certificate of title, on the other hand, is a mere evidence of ownership; it is not the title to the land itself. Under the Torrens system, a certificate of title may be an Original Certificate of Title, which constitutes a true copy of the decree of registration; or a Transfer Certificate of Title, issued subsequent to the original registration.

MINDANAO BUS COMPANY vs.THE CITY ASSESSOR & TREASURER and the BOARD OF TAX APPEALS of Cagayan de Oro City

Facts:

Petitioner, Mindanao Bus Company, is a public utility solely engaged in transporting passengers and cargoes by motor trucks, over its authorized lines in the Island of Mindanao, collecting rates approved by the Public Service Commission. Its main office and shop is at Cagayan de Oro City and maintains Branch Offices and/or stations at Iligan City, Lanao; Pagadian, Zamboanga del Sur, Davao City and Kibawe, Bukidnon Province. The petitioner likewise owned a land where it maintains and operates a garage for its TPU motor trucks; a repair shop; blacksmith and carpentry shops, and with these machineries which are placed therein, its TPU trucks are made; body constructed; and same are repaired in a condition to be serviceable in the TPU land transportation business it operates.

The machineries that the respondent assessed as real properties are sitting on cement or wooden platforms and have never been or were never used as industrial equipments to produce finished products for sale, nor to repair machineries, parts and the like offered to the general public indiscriminately for business or commercial purposes for which petitioner has never engaged in.

Respondent City Assessor of Cagayan de Oro City assessed at P4,400 petitioner's equipment. Petitioner appealed the assessment to the respondent Board of Tax Appeals on the ground that the same are not realty. The Board of Tax Appeals of the City sustained the city assessor, so petitioner herein filed with the Court of Tax Appeals a petition for the review of the assessment.

Issue:

Whether or not the machineries and equipments are considered immobilized and thus subject to a realty tax.

Held:

The Supreme Court decided otherwise and held that said machineries and equipments are not subject to the assessment of real estate tax.

Said equipments are not considered immobilized as they are merely incidental, not esential and principal to the business of the petitioner. The transportation business could be carried on without repair or service shops of its rolling equipment as they can be repaired or services in another shop belonging to another, so said equipment may not be considered real estate within the meaning of Article 415 (c) of the Civil Code.

Sibal v. Valdez

FACTS:

As a first cause of action the plaintiff alleged that the defendant Vitaliano Mamawal, deputy sheriff of the Province of Tarlac, by virtue of a writ of execution issued by the Court of First Instance of Pampanga, attached and 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 complaint in the third paragraph of the first cause of action; that within 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 sufficient to cover the price paid by the latter, the interest thereon and any assessments or taxes which he may have paid thereon after the purchase, and the interest corresponding thereto and that Valdez refused to accept the money and to return the sugar cane to the plaintiff.

As a second cause of action, the plaintiff alleged that the defendant Emiliano J. Valdez was attempting to harvest the palay planted in four of the seven parcels mentioned in the first cause of action; that he had 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 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 costs.

On December 27, 1924, the court, after hearing both parties and upon approval of the bond for P6,000 filed by the plaintiff, issued the writ of preliminary injunction prayed for in the complaint.

The defendant Emiliano J. Valdez, in his amended answer, denied generally and specifically each and every allegation of the complaint and step up the following defenses:

( a ) That the sugar cane in question had the nature of personal property and was not, therefore, subject to redemption;

X X X X

The defendant Emiliano J. Valdez by way of counterclaim, alleged that by reason of the preliminary injunction he was unable to gather the sugar cane, sugar-cane shoots (puntas de cana dulce) palay in said parcels of land, representing a loss to him of P8,375.20 and that, in addition thereto, 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 be the absolute owner of the sugar cane in question and of the palay in parcels 1, 2 and 7; and (3) ordering the plaintiff to pay to him the sum of P11,833.76, representing the value of the sugar cane and palay in question, including damages.

Upon the issues thus presented by the pleadings the cause was brought on for trial. After hearing the evidence, and on April 28, 1926, the Honorable Cayetano Lukban, judge, rendered a judgment against the plaintiff and in favor of the defendants —

(1) Holding that the sugar cane in question was personal property and, as such, was not subject to redemption;

X X X X

(3) Condemning the plaintiff and his sureties Cenon de la Cruz, Juan Sangalang and Marcos Sibal to jointly and severally pay to the

defendant Emiliano J. Valdez the sum of P9,439.08.

The record show that:

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

(2) That on July 30, 1923, Macondray & Co. became the owner of eight parcels of land situated in the Province of Tarlac belonging to Leon Sibal and that on September 24, 1923, Leon Sibal paid to Macondray & Co. P2,000 for the account of the redemption price of said parcels.

(3) That on June 25, 1924, Emilio J. Valdez acquired from Macondray & Co. all of its rights and interest in the said eight parcels of land.

(4) That on June 25, 1924, Emilio J. Valdez also acquired all of the rights and interest which Leon Sibal had or might have had on said eight parcels by virtue of the P2,000 paid by the latter to Macondray.

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

ISSUE:

WON the sugar cane in question is personal or real property.

It is contended that sugar cane comes under the classification of real property as "ungathered products" in paragraph 2 of article 334 of the Civil Code. Said paragraph 2 of article 334 enumerates as real property the following: Trees, plants, and ungathered products, while they are annexed to the land or form an integral part of any immovable property." That article, however, has received in recent years an interpretation by the   Tribunal Supremo de España , which holds that, under certain conditions, growing crops may be considered as personal property. (Decision of March 18, 1904, vol. 97, Civil Jurisprudence of Spain.)

Manresa, the eminent commentator of the Spanish Civil Code, in discussing section 334 of the Civil Code, in view of the recent decisions of the supreme Court of Spain, admits that growing crops are sometimes considered and treated as personal property.

From the foregoing it appears (1) that, under Spanish authorities, pending fruits and ungathered products may be sold and transferred as personal property; (2) that the Supreme Court of Spain, in a case of ejectment of a

lessee of an agricultural land, held that the lessee was entitled to gather the products corresponding to the agricultural year, because said fruits did not go with the land but belonged separately to the lessee; and (3) that under the Spanish Mortgage Law of 1909, as amended, the mortgage of a piece of land does not include the fruits and products existing thereon, unless the contract expressly provides otherwise.

An examination of the decisions of the Supreme Court of Louisiana may give us some light on the question which we are discussing. Article 465 of the Civil Code of Louisiana, which corresponds to paragraph 2 of article 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 are considered as part of the land to which they are attached."

The Supreme Court of Louisiana having occasion to interpret that provision, held that in some cases "standing crops" may be considered and dealt with as personal property. In the case of Lumber Co. vs. Sheriff and Tax Collector (106 La., 418) the Supreme Court said: "True, by article 465 of the Civil Code it is provided that 'standing crops and the fruits of trees not gathered and trees before they are cut down . . . are considered as part of the land to which they are attached, but the immovability provided for is only one in abstracto and without reference to rights on or to the crop acquired by others than the owners of the property to which the crop is attached. . . . The existence of a right on the growing crop is a mobilization by anticipation, a gathering as it were in advance, rendering the crop movable quoad the right acquired therein. Our jurisprudence recognizes the possible mobilization of the growing crop." (Citizens' Bank vs. Wiltz, 31 La. Ann., 244; Porche vs. Bodin, 28 La., Ann., 761; Sandel vs. Douglass, 27 La. Ann., 629; Lewis vs. Klotz, 39 La. Ann., 267.)

"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 standing crops are considered as immovable and as part of the land to which they are attached, and article 466 declares that the fruits of an immovable gathered or produced while it is under seizure are considered as making part thereof, and incurred to the benefit of the person making the seizure. But the evident meaning of these articles, is where the crops belong to the owner of the plantation they form part of the immovable, and where it is seized, the fruits gathered or produced inure to the benefit of the seizing creditor.

A crop raised on leased premises in no sense forms part of the immovable. It belongs to the lessee, and may be sold by him, whether it be gathered or not, and it may be sold by his judgment creditors. If it necessarily forms part of the leased premises the result would be that it could not be sold

under execution separate and apart from the land. If a lessee obtain supplies to make his crop, the factor's lien would not attach to the crop as a separate thing belonging to his debtor, but the land belonging to the lessor would be affected with the recorded privilege. The law cannot be construed so as to result in such absurd consequences.

From an examination of the reports and codes of the State of California 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, that growing crops raised by yearly labor and cultivation are considered personal property. (6 Corpuz Juris, p. 197; 17 Corpus Juris, p. 379; 23 Corpus Juris, p. 329: Raventas vs. Green, 57 Cal., 254; Norris vs. Watson, 55 Am. Dec., 161; Whipple vs. Foot, 3 Am. Dec., 442; 1 Benjamin on Sales, sec. 126; McKenzie vs. Lampley, 31 Ala., 526; Crine vs. Tifts and Co., 65 Ga., 644; Gillitt vs. Truax, 27 Minn., 528; Preston vs. Ryan, 45 Mich., 174; Freeman on Execution, vol. 1, p. 438; Drake on Attachment, sec. 249; Mechem on Sales, sec. 200 and 763.)

Mr. Mechem says that a valid sale may be made of a thing, which though not yet actually in existence, is reasonably certain to come into existence as the natural increment or usual incident of something already in existence, and then belonging to the vendor, and then title will vest in the buyer the moment the thing comes into existence. (Emerson vs. European Railway Co., 67 Me., 387; Cutting vs. Packers Exchange, 21 Am. St. Rep., 63.) Things of this nature are said to have a potential existence. A man may sell property of which he is potentially and not actually possessed. He may make a valid sale of the wine that a vineyard is expected to produce; or the gain a field may grow in a given time; or the milk a cow may yield during the coming year; or the wool that shall thereafter grow upon sheep; or what may be taken at the next cast of a fisherman's net; or fruits to grow; or young animals not yet in existence; or the good will of a trade and the like. The thing sold, however, must be specific and identified. They must be also owned at the time by the vendor. (Hull vs. Hull, 48 Conn., 250 [40 Am. Rep., 165].)

It is contended on the part of the appellee that paragraph 2 of article 334 of the Civil Code has been modified by section 450 of the Code of Civil Procedure as well as by Act No. 1508, the Chattel Mortgage Law. Said section 450 enumerates the property of a judgment debtor which may be subjected to execution. The pertinent portion of said section reads as follows: "All goods, chattels, moneys, and other property, both real and personal, * * * shall be liable to execution. Said section 450 and most of the other sections of the Code of Civil Procedure relating to the execution of judgment were taken from the Code of Civil Procedure of California. The Supreme Court of California, under

section 688 of the Code of Civil Procedure of that state (Pomeroy, p. 424) has held, without variation, that growing crops were personal property and subject to execution.

Act No. 1508, the Chattel Mortgage Law, fully recognized that growing crops are personal property. Section 2 of said Act provides: "All personal property shall be subject to mortgage, agreeably to the provisions of this Act, and a mortgage executed in pursuance thereof shall be termed a chattel mortgage." Section 7 in part provides: "If growing crops be mortgaged the mortgage may contain an agreement stipulating that the mortgagor binds himself properly to tend, care for and protect the crop while growing.

It is clear from the foregoing provisions that Act No. 1508 was enacted on the assumption that "growing crops" are personal property. This consideration tends to support the conclusion hereinbefore stated, that paragraph 2 of article 334 of the Civil Code has been modified by section 450 of Act No. 190 and by Act No. 1508 in the sense that "ungathered products" as mentioned in said article of the Civil Code have the nature of personal property. In other words, the phrase "personal property" should be understood to include "ungathered products."

At common law, and generally in the United States, all annual crops which are raised by yearly manurance and labor, and essentially owe their annual existence to cultivation by man, . may be levied on as personal property." (23 C. J., p. 329.) On this question Freeman, in his treatise on the Law of Executions, says: "Crops, whether growing or standing in the field ready to be harvested, are, when produced by annual cultivation, no part of the realty. They are, therefore, liable to voluntary transfer as chattels. It is equally well settled that they may be seized and sold under execution. (Freeman on Executions, vol. p. 438.)

We may, therefore, conclude that paragraph 2 of article 334 of the Civil Code has been modified by section 450 of the Code of Civil Procedure and by Act No. 1508, in the sense that, for the purpose of attachment and execution, and for the purposes of the Chattel Mortgage Law, "ungathered products" have the nature of personal property. The lower court, therefore, committed no error in holding that the sugar cane in question was personal property and, as such, was not subject to redemption.

STANDARD OIL COMPANY v. JARAMILLO

FACTS:This cause is before us upon demurrer interposed by the respondent, Joaquin Jaramillo, register of deeds of the City of Manila, to an original petition of the Standard Oil Company of New York, seeking a

peremptory mandamusto compel the respondent to record in the proper register a document purporting to be a chattel mortgage executed in the City of Manila by Gervasia de la Rosa, Vda. de Vera, in favor of the Standard Oil Company of New York.

On November 27, 1922, Gervasia de la Rosa, Vda. de Vera, was the lessee of a parcel of land situated in the City of Manila and owner of the house of strong materials built thereon, upon which date she executed a document in the form of a chattel mortgage, purporting to convey to the petitioner by way of mortgage both the leasehold interest in said lot and the building which stands thereon.The clauses in said document describing the property intended to be thus mortgage are expressed in the following words:

Now, therefore, the mortgagor hereby conveys and transfer to the mortgage, by way of mortgage, the following described personal property, situated in the City of Manila, and now in possession of the mortgagor, to wit: (1) All of the right, title, and interest of the mortgagor in and to the contract of lease hereinabove referred to, and in and to the premises the subject of the said lease; (2) The building, property of the mortgagor, situated on the aforesaid leased premises.After said document had been duly acknowledge and delivered, the petitioner caused the same to be presented to the respondent, Joaquin Jaramillo, as register of deeds of the City of Manila, for the purpose of having the same recorded in the book of record of chattel mortgages. Upon examination of the instrument, the respondent was of the opinion that it was not a chattel mortgage, for the reason that the interest therein mortgaged did not appear to be personal property, within the meaning of the Chattel Mortgage Law, and registration was refused on this ground only.

ISSUE:Whether or not a register of deeds has authority to deny the registration of a document purporting to be a chattel mortgage and executed in the manner and form prescribed by the Chattel Mortgage Law.

HELD:

No. The duties of a register of deeds in respect to the registration of chattel mortgage are of a purely ministerial character; and no provision of law can be cited which confers upon him any judicial or quasi-judicial power to determine the nature of any document of which registration is sought as a chattel mortgage.

It is undeniable that the parties to a contract may by agreement treat as personal property that which by nature would be real property; and it is a familiar phenomenon to see things classed as real property for purposes of taxation which on general principle might be considered personal property. Of course, if the mortgaged property is real instead of personal the

chattel mortgage would no doubt be held ineffective as against third parties, but this is a question to be determined by the courts of justice and not by the register of deeds.

The court declare it to be the duty of the register of deeds to accept the estimate placed upon the document by the petitioner and to register it, upon payment of the proper fee.

The demurrer is overruled; and unless within the period of five days from the date of the notification hereof, the respondent shall interpose a sufficient answer to the petition, the writ of mandamus will be issued, as prayed, but without costs. So ordered.

Leung Yee Vs Strong Machinery

Facts:

In 1913, Compania Agricola Filipina (CAF) was indebted to two personalities: Leung Yee and Frank L. Strong Machinery Co. CAF bought a considerable quantity of rice-cleaning machinery company from Frank L. Strong Machinery Co, and executed a chattel mortgage thereon to secure payment of the purchase price. It included in the mortgage deed the building of strong materials in which the machinery was installed, without any reference to the land on which it stood. Due to non-payment, the mortgaged property was sold by the sheriff, in pursuance of the terms of the mortgage instrument, and was bought in by the machinery company. . The mortgage was registered in the chattel mortgage registry, and the sale of the property to the machinery company in satisfaction of the mortgage was annotated in the same registry on December 29, 1913.

At or about the time when the chattel mortgage was executed in favor of the machinery company, which company went into possession of the building at or about the time when this sale took place, the mortgagor, the "Compañia Agricola Filipina" executed another mortgage to Leung Yee upon the building, separate and apart from the land on which it stood, to secure payment of the balance of its indebtedness to the plaintiff under a contract for the construction of the building. Upon the failure of the the CAF to pay the amount of the indebtedness secured by the mortgage, Leung Yee secured judgment for that amount, levied execution upon the building, bought it in at the sheriff's sale on or about the 18th of December, 1914, and had the sheriff's certificate of the sale duly registered in the land registry, the sheriff sold the property at public auction to the plaintiff, who was the highest bidder

This action was instituted by the plaintiff to recover possession of the building from the machinery company

Issue:

Who is owner of the building?

Held:

The trial judge, relying upon the terms of article 1473 of the Civil Code, gave judgment in favor of the machinery company was affirmed. Machinery company must be held to be the owner of the property under 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 building and the land were sold to the machinery company long prior to the date of the sheriff's sale to the Leung Yee. The provisions of article 1473 of the Civil Code require "good faith," in express terms, therefore, it having been found that the second purchasers who record their purchase had knowledge of the previous sale. It appeared that Leung Yee had full knowledge of the machinery company's claim of ownership when he executed the indemnity bond and bought in the property at the sheriff's sale, and it appearing further that the machinery company's claim of ownership was well founded, he cannot be said to have been an innocent purchaser for value.

Doctrine:

Article 1473 of the Civil Code is as follows:

If the same thing should have been sold to different vendees, the ownership shall be transfer to the person who may have the first taken possession thereof in good faith, if it should be personal property.

Should it be real property, it shall belong to the person acquiring it who first recorded it in the registry.

Should there be no entry, the property shall belong to the person who first took possession of it in good faith, and, in the absence thereof, to the person who presents the oldest title, provided there is good faith.

PRUDENTIAL BANKvs.HONORABLE DOMINGO D. PANIS, Presiding Judge of Branch III, Court of First Instance of Zambales and Olongapo City; FERNANDO MAGCALE & TEODULA BALUYUT-MAGCALE

Facts:

On November 19, 1971, spouses Fernando A. Magcale and Teodula Baluyut Magcale secured a loan in

the sum of P70,000.00 from Prudential Bank. To secure payment, they executed deed of Real Estate Mortgage over a residential building. The mortgage also included the right to occupy the lot and the information about the sales patent applied for by the spouses for the lot to which the building stood.

On May 2, 1973, after securing the first loan, the spouses secured another from the same bank. To secure payment, another real estate mortgage was executed over the same properties. The Secretary of Agriculture then issued a Miscellaneous Sales Patent over the land which was later on mortgaged to the bank.

The spouses then failed to pay for the loan and the Real Estate Mortgage was extra judicially foreclosed and sold in public auction despite the opposition from the spouses. The court held that the Real Estate Mortgage was null and void.

The petitioner, Prudential Bank then filed for review on certiorari of the November 13, 1978 Decision.

Issues: 

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

WHETHER OR NOT THE SUPERVENING ISSUANCE IN FAVOR OF PRIVATE RESPONDENTS OF MISCELLANEOUS SALES PATENT NO. 4776 ON APRIL 24, 1972 UNDER ACT NO. 730 AND THE COVERING ORIGINAL CERTIFICATE OF TITLE NO. P-2554 ON MAY 15,1972 HAVE THE EFFECT OF INVALIDATING THE DEEDS OF REAL ESTATE MORTGAGE.

Held:

A real estate mortgage can be constituted on the building erected on the land belonging to another. In the enumeration of properties under Article 415 of the Civil Code of the Philippines, this Court ruled that, "it is obvious that the inclusion of "building" separate and distinct from the land, in said provision of law can only mean that a building is by itself an immovable property. While it is true that a mortgage of land necessarily includes in the absence of stipulation of the improvements thereon, buildings, still a building in itself may be mortgaged by itself apart from the land on which it is built. Such a mortgage would still be considered as a REM for the building would still be considered as immovable property even if dealt with separately and apart from the land. The original mortgage on the building and right to occupancy of the land was executed before the issuance of the sales patent and before the government was divested of title to the land. Under the foregoing, it is evident that the mortgage executed by private respondent on his own building was a valid mortgage. As to the second mortgage, it was done after

the sales patent was issued and thus prohibits pertinent provisions of the Public Land Act.

Tsai v. CA

FACTS:

On November 26, 1975, respondent Ever Textile Mills, Inc. (EVERTEX) obtained a three million peso (P3,000,000.00) loan from petitioner Philippine Bank of Communications (PBCom). As security for the loan, EVERTEX executed in favor of PBCom, a deed of Real and Chattel Mortgage over the lot under TCT No. 372097, where its factory stands, and the chattels located therein as enumerated in a schedule attached to the mortgage contract.

On April 23, 1979, PBCom granted a second loan of P3,356,000.00 to EVERTEX. The loan was secured by a Chattel Mortgage over personal properties enumerated in a list attached thereto. These listed properties were similar to those listed in Annex A of the first mortgage deed.

After April 23, 1979, the date of the execution of the second mortgage mentioned above, EVERTEX purchased various machines and equipments.

On November 19, 1982, due to business reverses, EVERTEX filed insolvency proceedings docketed as SP Proc. No. LP-3091-P before the defunct Court of First Instance of Pasay City, Branch XXVIII. The CFI issued an order on November 24, 1982 declaring the corporation insolvent. All its assets were taken into the custody of the Insolvency Court, including the collateral, real and personal, securing the two mortgages as abovementioned.

In the meantime, upon EVERTEX's failure to meet its obligation to PBCom, the latter commenced extrajudicial foreclosure proceedings against EVERTEX under Act 3135, otherwise known as "An Act to Regulate the Sale of Property under Special Powers Inserted in or Annexed to Real Estate Mortgages" and Act 1506 or "The Chattel Mortgage Law". A Notice of Sheriff's Sale was issued on December 1, 1982.

On December 15, 1982, the first public auction was held where petitioner PBCom emerged as the highest bidder and a Certificate of Sale was issued in its favor on the same date. On December 23, 1982, another public auction was held and again, PBCom was the highest bidder. The sheriff issued a Certificate of Sale on the same day.

On March 7, 1984, PBCom consolidated its ownership over the lot and all the properties in it. In November 1986, it leased the entire factory premises to petitioner Ruby L. Tsai for P50,000.00 a month. On May 3, 1988, PBCom sold the factory, lock, stock

and barrel to Tsai for P9,000,000.00, including the contested machineries.

On March 16, 1989, EVERTEX filed a complaint for annulment of sale, reconveyance, and damages with the Regional Trial Court against PBCom, alleging inter alia that the extrajudicial foreclosure of subject mortgage was in violation of the Insolvency Law. EVERTEX claimed that no rights having been transmitted to PBCom over the assets of insolvent EVERTEX, therefore Tsai acquired no rights over such assets sold to her, and should reconvey the assets.

Further, EVERTEX averred that PBCom, without any legal or factual basis, appropriated the contested properties, which were not included in the Real and Chattel Mortgage of November 26, 1975 nor in the Chattel Mortgage of April 23, 1979, and neither were those properties included in the Notice of Sheriff's Sale dated December 1, 1982 and Certificate of Sale . . . dated December 15, 1982.

The disputed properties, which were valued at P4,000,000.00, are: 14 Interlock Circular Knitting Machines, 1 Jet Drying Equipment, 1 Dryer Equipment, 1 Raisin Equipment and 1 Heatset Equipment.

The RTC found that the lease and sale of said personal properties were irregular and illegal because they were not duly foreclosed nor sold at the December 15, 1982 auction sale since these were not included in the schedules attached to the mortgage contracts. The trial court decreed:

WHEREFORE, judgment is hereby rendered in favor of plaintiff corporation and against the defendants:

X X X X

Dissatisfied, both PBCom and Tsai appealed to the Court of Appeals, which issued its decision dated August 31, 1994, the dispositive portion of which reads:

WHEREFORE, except for the deletion therefrom of the award; for exemplary damages, and reduction of the actual damages, from P100,000.00 to P20,000.00 per month, from November 1986 until subject personal properties are restored to appellees, the judgment appealed from is hereby AFFIRMED, in all other respects. No pronouncement as to costs.5

Motion for reconsideration of the above decision having been denied in the resolution of April 28, 1995, PBCom and Tsai filed their separate petitions for review with this Court.

ISSUE:

WON the properties in question are chattels or real properties.

HELD:

Petitioners contend that the nature of the disputed machineries, i.e., that they were heavy, bolted or cemented on the real property mortgaged by EVERTEX to PBCom, make them ipso facto immovable under Article 415 (3) and (5) of the New Civil Code. This assertion, however, does not settle the issue. Mere nuts and bolts do not foreclose the controversy. We have to look at the parties' intent.

While it is true that the controverted properties appear to be immobile, a perusal of the contract of Real and Chattel Mortgage executed by the parties herein gives us a contrary indication. In the case at bar, both the trial and the appellate courts reached the same finding that the true intention of PBCOM and the owner, EVERTEX, is to treat machinery and equipment as chattels. The pertinent portion of respondent appellate court's ruling is quoted below:

As stressed upon by appellees, appellant bank treated the machineries as chattels; never as real properties. Indeed, the 1975 mortgage contract, which was actually real and chattel mortgage, militates against appellants' posture. It should be noted that the printed form used by appellant bank was mainly for real estate mortgages. But reflective of the true intention of appellant PBCOM and appellee EVERTEX was the typing in capital letters, immediately following the printed caption of mortgage, of the phrase "real and chattel." So also, the "machineries and equipment" in the printed form of the bank had to be inserted in the blank space of the printed contract and connected with the word "building" by typewritten slash marks. Now, then, if the machineries in question were contemplated to be included in the real estate mortgage, there would have been no necessity to ink a chattel mortgage specifically mentioning as part III of Schedule A a listing of the machineries covered thereby. It would have sufficed to list them as immovables in the Deed of Real Estate Mortgage of the land and building involved.

As regards the 1979 contract, the intention of the parties is clear and beyond question. It refers solely to chattels. The inventory list of the mortgaged properties is an itemization of sixty-

three (63) individually described machineries while the schedule listed only machines and 2,996,880.50 worth of finished cotton fabrics and natural cotton fabrics.16

In the absence of any showing that this conclusion is baseless, erroneous or uncorroborated by the evidence on record, we find no compelling reason to depart therefrom.

Too, assuming   arguendo   that the properties in question are immovable by nature, nothing detracts the parties from treating it as chattels to secure an obligation under the principle of estoppel. As far back as Navarro v. Pineda, 9 SCRA 631 (1963), an immovable may be considered a personal property if there is a stipulation as when it is used as security in the payment of an obligation where a chattel mortgage is executed over it, as in the case at bar.

In the instant case, the parties herein: (1) executed a contract styled as "Real Estate Mortgage and Chattel Mortgage," instead of just "Real Estate Mortgage" if indeed their intention is to treat all properties included therein as immovable, and (2) attached to the said contract a separate "LIST OF MACHINERIES & EQUIPMENT". These facts, taken together, evince the conclusion that the parties' intention is to treat these units of machinery as chattels. A fortiori, the contested after-acquired properties, which are of the same description as the units enumerated under the title "LIST OF MACHINERIES & EQUIPMENT," must also be treated as chattels.

Accordingly, we find no reversible error in the respondent appellate court's ruling that inasmuch as the subject mortgages were intended by the parties to involve chattels, insofar as equipment and machinery were concerned, the Chattel Mortgage Law applies, which provides in Section 7 thereof that: "a chattel mortgage shall be deemed to cover   only the property described therein and not like or substituted property thereafter acquired by the mortgagor and placed in the same depository as the property originally mortgaged , anything in the mortgage to the contrary notwithstanding."

And, since the disputed machineries were acquired in 1981 and could not have been involved in the 1975 or 1979 chattel mortgages, it was consequently an error on the part of the Sheriff to include subject machineries with the properties enumerated in said chattel mortgages.

As the auction sale of the subject properties to PBCom is void, no valid title passed in its favor. Consequently, the sale thereof to Tsai is also a nullity under the elementary principle of nemo dat quod non habet, one cannot give what one does not have.17

CONCLUSION:

WHEREFORE, the petitions are DENIED. The assailed decision and resolution of the Court of Appeals in CA-G.R. CV No. 32986 are AFFIRMED WITH MODIFICATIONS. Petitioners Philippine Bank of Communications and Ruby L. Tsai are hereby ordered to

pay jointly and severally Ever Textile Mills, Inc. the following: (1) P20,000.00 per month, as compensation for the use and possession of the properties in question from November 198631 until subject personal properties are restored to respondent.

DAVAO SAWMILL CO. VS. CASTILLO

FACTS:

The Davao Saw Mill Co., Inc., is the holder of a lumber concession from the Government of the Philippine Islands. It has operated a sawmill in the sitio of Maa, barrio of Tigatu, municipality of Davao, Province of Davao. However, the land upon which the business was conducted belonged to another person. On the land the sawmill company erected a building which housed the machinery used by it. Some of the implements thus used were clearly personal property, the conflict concerning machines which were placed and mounted on foundations of cement. In the contract of lease between the sawmill company and the owner of the land there appeared the following provision: That on the expiration of the period agreed upon, all the improvements and buildings introduced and erected by the party of the second part shall pass to the exclusive ownership of the party of the first part without any obligation on its part to pay any amount for said improvements and buildings; also, in the event the party of the second part should leave or abandon the land leased before the time herein stipulated, the improvements and buildings shall likewise pass to the ownership of the party of the first part as though the time agreed upon had expired: Provided, however, That the machineries and accessories are not included in the improvements which will pass to the party of the first part on the expiration or abandonment of the land leased.

In another action, wherein the Davao Light & Power Co., Inc., was the plaintiff and the Davao, Saw, Mill Co., Inc., was the defendant, a judgment was rendered in favor of the plaintiff in that action against the defendant in that action; a writ of execution issued thereon, and the properties now in question were levied upon as personalty by the sheriff. No third party claim was filed for such properties at the time of the sales thereof as is borne out by the record made by the plaintiff herein.

ISSUE:Whether or not the machineries and equipments were personal in nature.

HELD:YES. The Supreme Court affirmed the decision of the lower court.

Machinery which is movable in its nature only becomes immobilized when placed in a plant by the owner of the property or plant, but not when so placed by a tenant, a usufructuary, or any person having only a temporary

right, unless such person acted as the agent of the owner.

PHILIPPINE REFINING CO., INC., vs FRANCISCO JARQUE, JOSE COROMINAS, and ABOITIZ & CO., defendants.

Facts:

On varying dates the Philippine Refining Co., Inc., and Francisco Jarque executed three mortgages on the motor vessels Pandan and Zaragoza. These documents were recorded in the record of transfers and incumbrances of vessels for the port of Cebu and each was therein denominated a "chattel mortgage". Neither of the first two mortgages had appended an affidavit of good faith. The third mortgage contained such an affidavit, but this mortgage was not registered in the customs house. A fourth mortgage was executed by Francisco Jarque and Ramon Aboitiz on the motorship Zaragoza and was entered in the chattel mortgage registry of the register of deeds.

Within the thirty-day period after the mortgage registration, an insolvency proceeding against Francisco Jarque happened and was granted with the result that an assignment of all the properties of the insolvent was executed in favor of Jose Corominas.

On these facts, Judge Jose M. Hontiveros declined to order the foreclosure of the mortgages, but on the contrary sustained the special defenses of fatal defectiveness of the mortgages.

Issue:

Whether or not the vessel is a personal property. And Whether or not an affidavit of good faith is needed to enforce a chattel mortgage on a vessel.

Held:

Judgment affirmed.

Vessels are considered personal property under the civil law. Similarly under the common law, vessels are personal property although occasionally referred to as a peculiar kind of personal property. Since the term "personal property" includes vessels, they are subject to mortgage agreeably to the provisions of the Chattel Mortgage Law. The only difference between a chattel mortgage of a vessel and a chattel mortgage of other personality is that it is not now necessary for a chattel mortgage of a vessel to be noted in the registry of the register of deeds, but it is essential that a record of documents affecting the title to a vessel be entered in

the record of the Collector of Customs at the port of entry. Otherwise a mortgage on a vessel is generally like other chattel mortgages as to its requisites and validity.

The Chattel Mortgage Law in its section 5, in describing what shall be deemed sufficient to constitute a good chattel mortgage, includes the requirement of an affidavit of good faith appended to the mortgage and recorded therewith. The absence of the affidavit vitiates a mortgage as against creditors and subsequent encumbrancers make it unenforceable against third persons.

CALTEX (PHILIPPINES) INC.vs.CENTRAL BOARD OF ASSESSMENT APPEALS and CITY ASSESSOR OF PASAY

Facts:

This case is about the realty tax on machinery and equipment installed by Caltex (Philippines) Inc. in its gas stations located on leased land.

The machines and equipment consists of underground tanks, elevated tank, elevated water tanks, water tanks, gasoline pumps, computing pumps, water pumps, car washer, car hoists, truck hoists, air compressors and tireflators which are loaned by Caltex to gas station operators under an appropriate lease agreement or receipt. It is stipulated in the lease contract that the operators, upon demand, shall return to Caltex the machines and equipment in good condition as when received, ordinary wear and tear excepted.

The lessor of the land, where the gas station is located, does not become the owner of the machines and equipment installed therein. Caltex retains the ownership thereof during the term of the lease.

The city assessor of Pasay City characterized the said items of gas station equipment and machinery as taxable realty. The city board of tax appeals ruled that they are personalty. The assessor appealed to the Central Board of Assessment Appeals.

On June 3, 1977, the Board, held in its decision that the said machines and equipment are real property within the meaning of sections 3(k) & (m) and 38 of the Real Property Tax Code, Presidential Decree No. 464 and that the definitions of real property and personal property in articles 415 and 416 of the Civil Code are not applicable to this case.

On January 12, 1978, the decision was reiterated by the Board denying Caltex's motion for reconsideration.

On May 2, 1979 Caltex filed this certiorari petition wherein it prayed for the setting aside of the Board's decision and for a declaration that the said machines and equipment are personal property not subject to realty tax. It also invokes the rule that machinery which is movable in its nature only becomes immobilized when placed in a plant by the owner of the property or plant but not when so placed by a tenant, a usufructuary, or any person having only a temporary right, unless such person acted as the agent of the owner.

Issue:

Whether or not the pieces of gas station equipment and machinery permanently affixed by Caltex to its gas station and pavement should be subject to realty tax.

Held:

It was held that the said equipment and machinery, as accessories to the gas station building or shed owned by Caltex (as to which it is subject to realty tax) and which fixtures are necessary to the operation of the gas station, for without them the gas station would be useless, and which have been attached or affixed permanently to the gas station site or embedded therein, are taxable improvements and machinery within the meaning of the Assessment Law and the Real Property Tax Code. Improvements on land are commonly taxed as realty even though they might be considered personalty. “It is a familiar phenomenon to see things classified as real property for purposes of taxation which on general principle might be considered personal property” (Standard Oil Co., vs Jaramillo, 44 PHIL 630).

The case is also easily distinguishable from Board of Assessment Appeals vs. Manila Electric Co., 119 Phil. 328, where Meralco's steel towers were considered poles within the meaning of paragraph 9 of its franchise which exempts its poles from taxation. The steel towers were considered personalty because they were attached to square metal frames by means of bolts and could be moved from place to place when unscrewed and dismantled.

Nor are Caltex's gas station equipment and machinery the same as tools and equipment in the repair shop of a bus company which were held to be personal property not subject to realty tax (Mindanao Bus Co. vs. City Assessor, 116 Phil. 501).

The Central Board of Assessment Appeals did not commit a grave abuse of discretion in upholding the city assessor's is imposition of the realty tax on Caltex's gas station and equipment.

The questioned decision and resolution of the Central Board of Assessment Appeals are affirmed. The petition for certiorari is dismissed for lack of merit.

Board of Assessment Appeals v. MERALCO

FACTS:

On October 20, 1902, the Philippine Commission enacted Act No. 484 which authorized the Municipal Board of Manila to grant a franchise to construct, maintain and operate an electric street railway and electric light, heat and power system in the City of Manila and its suburbs to the person or persons making the most favorable bid. Charles M. Swift was awarded the said franchise on March 1903, the terms and conditions of which were embodied in Ordinance No. 44 approved on March 24, 1903. Respondent Manila Electric Co. (Meralco for short), became the transferee and owner of the franchise.

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 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 stone underneath; as the bottom of the excavation was covered with water about three inches high, it could not be determined with certainty to whether said adobe stone was placed purposely or not, as the place abounds with this kind of stone; and the tower carried five high voltage wires without cover or any insulating materials.

The second tower inspected was located in Kamuning Road, K-F, Quezon City, on land owned by the petitioner approximate more than one kilometer from the first tower. As in the first tower, the ground around one of the four legs was excavate from seven to eight (8) feet deep and one and a half (1-½) meters wide. There being very little water at the bottom, it was seen that there was no concrete foundation, but there soft adobe beneath. The leg was likewise provided with two parallel steel bars bolted to a square metal frame also bolted to each corner. Like the first one, the second tower is made up of metal rods joined together by means of bolts, so that by unscrewing the bolts, the tower could be dismantled and reassembled.

The third tower examined is located along Kamias Road, Quezon City. As in the first two towers given above, the ground around the two legs of the third tower was excavated to a depth about two or three inches beyond the outside level of the steel bar foundation. It was found that there was no concrete foundation. Like the two previous ones, the bottom arrangement of the legs thereof were found to be resting on soft adobe, which, probably due to high humidity, looks like mud or clay. It was also found that the square metal frame supporting the legs were not attached to any material or foundation.

On November 15, 1955, petitioner City Assessor of Quezon City declared the aforesaid steel towers for real property tax under Tax declaration Nos. 31992 and 15549. After denying respondent's petition to cancel these declarations, an appeal was taken by respondent to the Board of Assessment Appeals of Quezon City, which required respondent to pay the amount of P11,651.86 as real property tax on the said steel towers for the years 1952 to 1956. Respondent paid the amount under protest, and filed a petition for review in the Court of Tax Appeals (CTA for short) which rendered a decision on December 29, 1958, ordering the cancellation of the said tax declarations and the petitioner City Treasurer of Quezon City to refund to the respondent the sum of P11,651.86. The motion for reconsideration having been denied, on April 22, 1959, the instant petition for review was filed.

In upholding the cause of respondents, the CTA held that: (1) the steel towers come within the term "poles" which are declared exempt from taxes under part II paragraph 9 of respondent's franchise; (2) the steel 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 of the amount paid.

ISSUE:

WON electric poles of Meralco are real property and are therefore subject to real property tax.

HELD:

Granting for the purpose of argument that the steel supports or towers in question are not embraced within the term poles, the logical question 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 of real property; but Article 415 of the Civil Code does, by stating the following are immovable property:

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

x x x           x x x           x x x

(3) Everything attached to an immovable in a fixed manner, in such a way that it cannot be separated therefrom without breaking the material or deterioration of the object;

x x x           x x x           x x x

(5) Machinery, receptacles, instruments or implements intended by the owner of the tenement for an industry or works which may be carried in a building or on a piece of land, and which tends directly to meet the needs of the said industry or works;

x x x           x x x           x x x

The steel towers or supports in question, do not come within the objects mentioned in paragraph 1, because they do not constitute buildings or constructions adhered to the soil. They are not construction analogous to buildings nor adhering to the soil. As per description, given by the lower court, they are removable and merely attached to a square metal frame by means of bolts, which when unscrewed could easily be dismantled and moved from place to place. They can not be included under paragraph 3, as they are not attached to an immovable in a fixed manner, and they can be separated without breaking the material or causing deterioration upon the object to which they are attached. Each of these steel towers or supports consists of steel bars or metal strips, joined together by means of bolts, which can be disassembled by unscrewing the bolts and reassembled by screwing the same. These steel towers or supports do not also fall under paragraph 5, for they are not machineries, receptacles, instruments 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 the land in which the steel supports or towers are constructed.

SERG’S PRODUCTS, INC. vs. PCI

FACTS:

“On February 13, 1998, respondent PCI Leasing and Finance, Inc. (“PCI Leasing” for short) filed with the RTC-QC a complaint for [a] sum of money (Annex ‘E’), with an application for a writ of replevin docketed as Civil Case No. Q-98-33500.

 “On March 6, 1998, upon an ex-parte application of PCI Leasing, respondent judge issued a writ of replevin (Annex ‘B’) directing its sheriff to seize and deliver the machineries and equipment to PCI Leasing after 5 days and upon the payment of the necessary expenses.

 “On March 24, 1998, in implementation of said writ, the sheriff proceeded to petitioner’s factory, seized one machinery with [the] word that he [would] return for the other machineries.

 “On March 25, 1998, petitioners filed a motion for special protective order (Annex ‘C’), invoking the power of the court to control the conduct of its officers and amend and control its processes, praying for a directive for the sheriff to defer enforcement of the writ of replevin.

 “This motion was opposed by PCI Leasing (Annex ‘F’), on the ground that the properties [were] still personal and therefore still subject to seizure and a writ of replevin.

 “In their Reply, petitioners asserted that the properties sought to be seized [were] immovable as defined in Article 415 of the Civil Code, the parties’ agreement to the contrary notwithstanding.  They argued that to give effect to the agreement would be prejudicial to innocent third parties.  They further stated that PCI Leasing [was] estopped from treating these machineries as personal because the contracts in which the alleged agreement [were] embodied [were] totally sham and farcical.

“On April 6, 1998, the sheriff again sought to enforce the writ of seizure and take possession of the remaining properties.  He was able to take two more, but was prevented by the workers from taking the rest.

 “On April 7, 1998, they went to [the CA] via an original action for certiorari.”

Citing the Agreement of the parties, the appellate court held that the subject machines were personal property, and that they had only

been leased, not owned, by petitioners.  It also ruled that the “words of the contract are clear and leave no doubt upon the true intention of the contracting parties.”  Observing that Petitioner Goquiolay was an experienced businessman who was “not unfamiliar with the ways of the trade,”  it ruled that he “should have realized the import of the document he signed.”  The CA further held:

 “Furthermore, to accord merit to this petition would be to preempt the trial court in ruling upon the case below, since the merits of the whole matter are laid down before us via a petition whose sole purpose is to inquire upon the existence of a grave abuse of discretion on the part of the [RTC] in issuing the assailed Order and Resolution.  The issues raised herein are proper subjects of a full-blown trial, necessitating presentation of evidence by both parties.  The contract is being enforced by one, and [its] validity is attacked by the other – a matter x x x which respondent court is in the best position to determine.”

Hence, this Petition.

ISSUE:Whether or not the machineries became real property by virtue of immobilization.

HELD:The machines are personal property and they are proper subjects of the Writ of Replevin. Petitioners contend that the subject machines used in their factory were not proper subjects of the Writ issued by the RTC, because they were in fact real property.  Serious policy considerations, they argue, militate against a contrary characterization.

Rule 60 of the Rules of Court provides that writs of replevin are issued for the recovery of personal property only.[15] Section 3 thereof reads:

“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 describing the personal property alleged to be wrongfully detained and requiring the sheriff forthwith to take such property into his custody.”

In the present case, the machines that were the subjects of the Writ of Seizure were placed by petitioners in the factory built on their own land.  Indisputably, they were essential and principal elements of their chocolate-making industry.  Hence, although each of them was movable or personal property on its own, all of them have become “immobilized by destination because they are essential and principal elements in the industry.”

Section 12.1 of the Agreement reads as follows:[21]

 “12.1  The PROPERTY is, and shall at all times be and remain, personal property notwithstanding that the PROPERTY or any part thereof may now be, or hereafter become, in any manner affixed or attached to or embedded in, or permanently resting upon, real property or any building thereon, or attached in any manner to what is permanent.”

WHEREFORE, the Petition is DENIED and the assailed Decision of the Court of Appeals AFFIRMED.  Costs against petitioners.

MANILA ELECTRIC COMPANY, petitioner, vs. CENTRAL BOARD OF ASSESSMENT APPEALS, BOARD OF ASSESSMENT APPEALS OF BATANGAS and PROVINCIAL ASSESSOR OF BATANGAS, respondents

Facts:

The case is about the imposition of the realty tax on two oil storage tanks installed in 1969 by Manila Electric Company on a lot in San Pascual, Batangas which it leased in 1968 from Caltex (Phil.), Inc. They have a total capacity of 566,000 barrelsused for storing fuel oil for Meralco's power plants.

According to Meralco, the storage tanks are made of steel plates welded and assembled on the spot. The steel sides of the tank are directly supported underneath by a circular wall made of concrete, eighteen inches thick, to prevent the tank from sliding. Hence, according to Meralco, the tank is not attached to its foundation. It is not anchored or welded to the concrete circular wall. Its bottom plate is not attached to any part of the foundation by bolts, screws or similar devices. The tank merely sits on its foundation.

On the other hand, according to the hearing commissioners of the Central Board of Assessment Appeals, the area where the two tanks are located is enclosed with earthen dikes with electric steel poles on top thereof and is divided into two parts as the site of each tank. The foundation of the tanks is elevated from the remaining area. On both sides of the earthen dikes are two separate concrete steps leading to the foundation of each tank. The Board concludes that while the tanks rest or sit on their foundation, the foundation itself and the walls, dikes and steps, which are integral parts of the tanks, are affixed to the land while the pipelines are attached to the tanks.

The municipal treasurer of Bauan, Batangas, on the basis of an assessment made by the provincial assessor, required Meralco to pay realty taxes on the

two tanks for the five-year period from 1970 to 1974, the tax and penalties amounted to P431,703.96.

Issue:

Whether the 2 Oil Storage tanks are considered as real or personal property and were it subject to tax

Held:

Petition is dismissed. The Board's questioned decision and resolution are affirmed

The tanks are personal property indeed.

However, it was held that while the two storage tanks are not embedded in the land, they may, nevertheless, be considered as improvements on the land, enhancing its utility and rendering it useful to the oil industry. It is undeniable that the two tanks have been installed with some degree of permanence as receptacles for the considerable quantities of oil needed by Meralco for its operations.

For purposes of taxation, the term "real property" may include things which should generally be regarded as personal property. It is a familiar phenomenon to see things classed as real property for purposes of taxation which on general principle might be considered personal property.

GAVINO A. TUMALAD and GENEROSA R. TUMALADvs.ALBERTA VICENCIO and EMILIANO SIMEON

Facts:

The case was originally commenced by defendants-appellants in the municipal court of Manila in Civil Case No. 43073, for ejectment.

On September 1, 1955, Vicencio and Simeon executed a chattel mortgage in favor of which were being rented from Madrigal & Company, Inc. The mortgage was registered in the Registry of Deeds of Manila on 2 September 1955. The herein mortgage was executed to guarantee a loan of P4,800.00 received from plaintiffs-appellees (Tumalad), payable within one year at 12% per annum. It was also agreed that default in the payment of any of the amortizations, would cause the remaining unpaid balance to become immediately due and payable.

On 27 March 1956, when defendants-appellants defaulted in paying, the mortgage was extrajudicially foreclosed and the house was sold at public auction pursuant to the said contract. As highest bidder,

plaintiffs-appellees (Tumalad) were issued the corresponding certificate of sale.

On 18 April 1956, plaintiffs-appellant (Tumalad) commenced Civil Case No. 43073 in the municipal court of Manila, praying, among other things, that the house be vacated and its possession surrendered to them, and for defendants-appellants to pay rent of P200.00 monthly from 27 March 1956 up to the time the possession is surrendered. 

On 21 September 1956, the municipal court rendered.

Vicencios appealed to the court a quo which also rendered a decision against them. On appeal, the case was elevated to the Supreme Court by the Court of Appeals for the reason that only questions of law are involved. Tumalads failed to file a brief and this appeal was submitted for decision without it. Nearly a year after the foreclosure sale the mortgaged house had been demolished on January 1957, by virtue of a decision obtained by the lessor of the land on which the house stood.

Issue:

Whether or not the chattel mortgage was null and void ab initio because only personal properties can be subject of a chattel mortgage?

Held:

The inclusion of the building, separate and distinct from the land, in the enumeration of what may constitute real properties (art. 415, New Civil Code) could only mean one thing — that a building is by itself an immovable property irrespective of whether or not said structure and the land on which it is adhered to belong to the same owner. Certain deviations, however, have been allowed for various reasons; if parties to a contract by agreement treat as personal property that which by nature would be real property. In the contract, the house on rented land is not only expressly designated as Chattel Mortgage; it specifically provides that "the mortgagor ... voluntarily CEDES, SELLS and TRANSFERS by way of Chattel Mortgage the property together with its leasehold rights over the lot on which it is constructed and participation ..."Although there is no specific statement referring to the subject house as personal property, yet by ceding, selling or transferring a property by way of chattel mortgage Vicencios could only have meant to convey the house as chattel, or at least, intended to treat the same as such, so that they should not now be allowed to make an inconsistent stand by claiming otherwise. Moreover, the subject house stood on a rented lot to which Vicencios merely had a temporary right as lessee, and although this can not in itself alone determine the status of the property, it does so when combined with other factors to sustain the interpretation that the parties, particularly the

mortgagors, intended to treat the house as personalty. Finally unlike other jurisprudence wherein third persons assailed the validity of the chattel mortgage, it is the Vicencios themselves, as debtors-mortgagors, who are attacking the validity of the chattel mortgage in this case. The doctrine of estoppel therefore applies to the herein defendants-appellants, having treated the subject house as personalty.

FOR THE FOREGOING REASONS, the decision appealed from is reversed and another one entered, dismissing the complaint.