Ownership

Published on June 2016 | Categories: Documents | Downloads: 49 | Comments: 0 | Views: 554
of 16
Download PDF   Embed   Report

ownership of property

Comments

Content

Davao Sawmill Co. v. Castillo, 61 Phil. 709 Facts: Davao Saw Mill Co., Inc., a holder of a lumber concession, has operated sawmill in a land which it does not own. The company erected a building therein which housed the machinery used by it. In the lease contract between the sawmill company and the owner of the land, it has been agreed that after the lease period or in case the company should leave or abandon the land leased before the said period, ownership of all the improvements and buildings except machineries and accessories, made by the company shall pass to the owner of the land without any obligation on its part to pay any amount for said improvements and buildings. In another action, A writ of execution was issued against the company and the properties in question were levied upon. The company assailed the said writ contending that the machineries and accessories were personal in nature, hence, not subject to writ of execution. The trial judge ruled in favour of the company. Issue: Whether or not the subject properties are personal in nature. Held: The subject properties are personal in nature. Article 334, paragraph 5, of the [Old] Civil Code provides that real property consists of (5) Machinery, liquid containers, instruments or implements intended by the owner of any building or land for use in connection with any industry or trade being carried on therein and which are expressly adapted to meet the requirements of such trade of industry. Machinery which is movable in nature only becomes immovable when placed in a land by the owner of the property or land but not when so placed by a tenant or any person having only a temporary right, unless such person acted as the agent of the owner. In the case at bar, the machinery is intended not by the owner of the land but by the saw mill company for use in connection with its trade. In this sense, the machinery is not a real property.

Berkenkotter v. Cu Unjieng, 61 Phil 663 Facts: The Mabalacat Sugar Co., Inc., owner of the sugar central loaned from Cu Unjieng e Hijos, secured by a mortgage of two parcels of land "with all its buildings, improvements, sugar-cane mill and whatever forms part or is necessary complement of said sugar-cane mill.” Subsequently, Mabalacat Sugar Co., Inc. decided to increase the capacity of its sugar central by buying additional machinery and equipment. Consequently, A. Green, president of said corporation, proposed to the plaintiff, B.H. Berkenkotter, to advance the necessary amount for the purchase of said machinery and equipment. A. Green applied to Cu Unjieng e Hijos for an additional loan as security for the additional machinery and equipment acquired together with whatever additional equipment acquired with said loan and installed in the sugar central after the execution of the original mortgage deed. B.A. Green failed to obtain said loan, thus the mortgage is in effect, which includes the additional machinery and equipment as improvement. Issues: Whether or not the additional machinery and equipment as improvement can be permanently attached to a mortgage of the sugar central. Held: Article 334, paragraph 5, of the [Old] Civil Code provides that real property consists of (5) Machinery, liquid containers, instruments or implements intended by the owner of any building or land for use in connection with any industry or trade being carried on therein and which are expressly adapted to meet the requirements of such trade of industry. The installation of a machinery and equipment in a mortgaged sugar central, in lieu of another of less capacity, for the purpose of carrying out the industrial functions of the latter and increasing production, constitutes a permanent improvement on said sugar central and subjects said machinery and equipment to the mortgage constituted thereon.

Lopez v. Orosa [G.R. Nos. L-10817-18. February 28, 1958.] En Banc, Felix (J): 10 concur. Facts: Enrique Lopez is doing business as Lopez-Castelo Sawmill. Vicente Orosa, Jr. invited him to invest in the theatre business of the latter (Plaza Theatre, Inc.). Lopez is unwillingness to invest in the business, however, he agreed to supply the lumber necessary for the construction of the proposed theatre at Orosa's guarantee that the latter would be personally liable for any account that the said construction might incur. Lopez then delivered the lumber for the theatre. Lopez was partially paid. Orosa and Belarmino Rustia, corporation president, promised Lopez to obtain a bank loan to satisfy the balance. Lopez found out later that the corporation already got a loan from the PNB with the Luzon Surety Company as surety, and the corporation in turn executed a mortgage on the land and building in favor of said company as counter-security. The mortgage was registered under the Torrens System. Subsequently, when the corporation applied for the registration of the land under Act 496, such mortgage was not revealed. Due to the demands of Lopez, Orosa issued a deed of assignment over his shares of stock in the corporation. As there was still an unpaid balance, Lopez instituted an action against Orosa and Plaza Theatre, asking them to be held solidarily liable. The lower Court held that Orosa and the Plaza Theatre, Inc., were jointly liable for the unpaid balance of the cost of lumber used in the construction of the building and the plaintiff thus acquired the materialman's lien over the same; the lien being merely confined to the building and did not extend to the land on which the construction was made. Plaintiff tried to secure a modification of the decision in so far as the lien did not extend to the land, but same was denied by order of the court. Issue: Whether or not the materialmen’s lien for the value of the materials used in the construction of the building attaches to sai d structure alone and doesn’t extend to the land in which the building is adhered to. Held: While it is true that generally, real estate connotes the land and the building constructed thereon, it is obvious that the inclusion of the building, separate and distinct from the land, in the enumeration of what may constitute real properties could mean only one thing — that a building is by itself an immovable property. In the absence of any specific provision of law to the contrary, a building is an immovable property, irrespective of whether or not said structure and the land on which it is adhered to belong to the same owner. A close examination of Article 1923 (5) of the Civil Code reveals that the law gives preference to unregistered refectionary credits only with respect to the real estate upon which the refection or work was made. This being so, the inevitable conclusion must be that the lien so created attaches merely to the

immovable property for the construction or repair of which the obligation was incurred. In the case at bar, the lien for the unpaid value of the lumber used in the construction of the building attaches only to said structure and to no other property of the obligors.

Associated Insurance & Surety v. Iya [G.R. Nos. L-10837-38. May 30, 1958.] En Banc, Felix (J): 9 concur Facts: Spouses Adriano and Lucia A. Valino were the owners of a house payable on installment basis from the Philippine Realty Corporation. For her to purchase on credit rice from the NARIC, Lucia Valino filed a bond subscribed by the Associated Insurance & Surety Co. and executed an alleged chattel mortgage on the said house in favor of the surety company. At the time of the undertaking, the parcel of land on which the house is erected was still registered in the name of the Philippine Realty Corporation. After having completed the payment to the land and to secure payment of an indebtedness, the Valinos executed a real estate mortgage over the lot and the house in favor of Isabel Iya. The spouses were not able to satisfy obligation with NARIC, petitioner was compelled to pay. The spouses weren’t able to pay the surety company despite demands and thus, the company foreclosed the chattel mortgage. It later learned of the real estate mortgage over the house and lot secured by the spouses. This prompted the company to file an action against the spouses. Also, Iya filed another civil action against the spouses, asserting that she has a better right over the property. The trial court heard the two cases jointly and it held that the surety company had a preferred right over the building as since when the chattel mortgage was secured, the land wasn’t owned yet by the spouses making the building then a chattel and not a real property. Issue: Whether or not the building is a chattel and not a real property. Held: The building is not a chattel but a real property. A building certainly cannot be divested of its character of a realty by the fact that the land on which it is constructed belongs to another. To hold it the other way, the possibility is not remote that it would result in confusion, for to cloak the building with an uncertain status made dependent on the ownership of the land, would create a situation where a permanent fixture changes its nature or character as the ownership of the land changes hands. In the instant case, as personal properties could only be the subject of a chattel mortgage (Section 1, Act 3952), the execution of the chattel mortgage covering a building is clearly invalid and a nullity.

Tumalad vs Vicencio, 41 SCRA 143 Facts: Vicencio and Simeon executed a chattel mortgage in favor of the Tumalads over their house which were being rented from Madrigal & Company, Inc. The mortgage was executed to guarantee a loan received from the Tumalads. There was an agreement that default in the payment would cause the Chattel Mortgage enforceable. When Vicencio and Simeon defaulted in paying, the mortgage was extrajudicially foreclosed and the house was sold at public auction with the Tumalads as highest bidder. The corresponding certificate of sale was then issued. The Tumalads filed an ejectment against Vicencio praying that the latter vacate the house. The municipal court rule in favor of the Tumalads. Vicencio assailed the legality of the chattel mortgage claiming that they are still the owner of the house. Issues: WON the subject matter of the mortgage which is a house of strong material can be subject of real estate mortgage or a chattel mortgage. Held: The inclusion of the building separate and distinct from the land in the enumeration of what may constitute real property, that the building is by itself an immovable property. However deviations have been allowed such as when it is stipulated in the subject of contract. Hence if a house belonging to a person stands on a rented land belonging to another person, it may be mortgaged as a personal property as so stipulated in the document of mortgage. It should be noted that the principle is predicated on statements by the owner declaring his house to be chattel. Party in a chattel mortgage cannot question the validity of the chattel mortgage entered into. In the case at bar, although there is no specific statement referring to the subject house as a personal property, yet by ceding, selling or transferring a property by way of chattel mortgage, defendants-appellants could only have meant to convey the house as a chattel.

Makati Leasing v. Wearever Textiles [G.R. No. L-58469. May 16, 1983.] Second Division, de Castro (J): 5 concur, 1 concur in result Facts: To obtain financial accommodations from Makati Leasing and Finance Corporation, Wearever Textile Mills, discounted and assigned several receivables under a Receivable Purchase Agreement. To secure the collection of the receivables assigned, Wearever Textile executed a Chattel Mortgage over certain raw materials inventory as well as a machinery. Upon Wearever's default, the mortgage was extrajudicially foreclosed. The Sheriff was unable to seize the machinery, thus the application for replevin of Makati Leasing. The lower court issued an order lifting the restraining order for the enforcement of the writ of seizure and an order to break open the premises of Wearever to enforce said writ. the Court of Appeals however, set aside the Orders of the lower court and ordered the return of the drive motor seized by the sheriff after ruling that the machinery in suit cannot be the subject of replevin, much less of a chattel mortgage, because it is a real property pursuant to Article 415 of the new Civil Code. Issue: Whether or not the drive motor machinery is a real property, hence not subject to chattel mortgage. Held: There is no logical justification to exclude the rule out the present case from the application of the pronouncement in Tumalad v. Vicencio. If a house of strong materials may be considered as personal property for purposes of executing a chattel mortgage thereon as long as the parties to the contract so agree and no innocent third party will be prejudiced thereby, there is absolutely no reason why a machinery, which is movable in its nature and becomes immobilized only by destination or purpose, may not be likewise treated as such. The

characterization of the subject machinery as chattel is indicative of intention and impresses upon the property the character determined by the parties. As stated in Standard Oil v. Jaramillo, , it is undeniable that the parties to a contract may by agreement treat as personal property that which by nature would be real property, as long as no interest of third parties would be prejudiced thereby.

Board of Assessment v. Meralco, 10 scra 63 Facts: 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. 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. The City Assessor of Quezon City declared the aforesaid steel towers for real property tax under Tax. Respondent paid the amount under protest, and filed a petition for review in the Court of Tax Appeals. Issue: Whether or not the Meralco poles constitute real properties so as they can be subjected to a real property tax. Held: The SC ruled that 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 removable and merely attached to square metal frames by means of bolts and could be moved from place to place when unscrewed and dismantled. Furthermore, 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. Note: Poles - was used to denote the steel towers of an electric company engaged in the generation of hydro-electric power generated from its plant

Meralco Securities v. Board of Assessment Appeals, 114 SCRA 260 Facts: This 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. The storage tanks are made of steel plates welded and assembled on the spot. Their bottoms rest on a foundation consisting of compacted earth as the outermost layer. 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. Pipelines were installed on the sides of each tank and are connected to the pipelines of the Manila Enterprises Industrial Corporation. 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 and required Meralco to pay realty taxes on the two tanks. Issue: Whether or not the 2 oil tanks installed by Meralco in Batangas is a subject to a realty tax. Held: The SC ruled 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. Thus, the two tanks should be held subject to realty tax because they were considered real property. Henceforth, the petition is dismissed. The Board's questioned decision and resolution are affirmed.

Caltex v. Board of Assessment Appeals, 114 SCRA 296 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. The building or shed, the elevated water tank, the car hoist under a separate shed, the air compressor, the underground gasoline tank, neon lights signboard, concrete fence and pavement and the lot where they are all placed or erected, all of them used in the pursuance of the gasoline service station business formed the entire gasoline service-station. 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. Issue: Whether or not the pieces of gas station equipment and machinery enumerated are subject to realty tax. Held: The Assessment Law provides that the realty tax is due "on real property, including land, buildings, machinery, and other improvements". SC hold that the said equipment and machinery, as appurtenances to the gas station building or shed owned by Caltex (as to which it is subject to realty tax) and which fixtures are necessary to the operation of the gas station, for without them the gas station would be useless, and which have been attached or affixed permanently to the gas station site or embedded therein, are taxable improvements and machinery within the meaning of the Assessment Law and the Real Property Tax Code. Note:

Improvements — is a valuable addition made to property or an amelioration in its condition, amounting to more than mere repairs or replacement of waste, costing labor or capital and intended to enhance its value, beauty or utility or to adapt it for new or further purposes. Machinery — shall embrace machines, mechanical contrivances, instruments, appliances and apparatus attached to the real estate. It includes the physical facilities available for production, as well as the installations and appurtenant service facilities, together with all other equipment designed for or essential to its manufacturing, industrial or agricultural purposes.

Sibal v. Valdez [G.R. No. 26278. August 4, 1927.] Second Division, Johnson (J): 5 concur Facts: On 11 May 1923, the deputy-sheriff of the Province of Tarlac, by virtue of a writ of execution in civil case 20203 of the CFI Manila (Macondray & Co., Inc. vs. Leon Sibal), levied an attachment on Leon Sibal’s 8 parcels of land for the sum of P4,273.93. 2 mo nths later, or on 30 July 1923, Macondray & Co., Inc., bought said parcels of land, at the auction held by the sheriff of the Province of Tarlac. Within 1 year from the sale of said parcels of land, or on 24 September 1923, Sibal paid P2,000 to Macondray for the account of the redemption price of said parcels of land, without specifying which said amount was to be applied. The redemption price of the parcels was reduced to P2,579.97 including interest. On 29 April 1924, the deputy sheriff of the Province of Tarlac, by virtue of a writ of execution in civil case 1301 of the Province of Pampanga (Emiliano J. Valdez vs. Leon Sibal 1.º), attached the personal property of Sibal located in Tarlac, among which was included the sugar cane in question in the 7 parcels of land described in the complaint. He also attached Sibal’s real property in Tarlac, including rig hts, interest and participation therein, which consists of 11 parcels of land and a house and camarin situated in one of said parcels. On 9-10 May 1924, the deputy sheriff sold at public auction said personal properties to Emiliano J. Valdez, who paid therefor the sum of P1,550, of which P600 was for the sugar cane. On 25 June 1924, 8 of the 11 parcels, including the camarin and the house were bought by Valdez at the auction held by the sheriff for the sum of P12,200. The 3 remaining parcels were released from attachment by virtue of claims presented by Cayugan and Tizon. On the same date, Macondray sold and conveyed to Valdez for P2,579.97 all of its rights and interest in the 8 parcels of land acquired by it in connection with civil case 20203 of the CFI Manila. On 14 December 1924, action was commenced in the CFI of the Province of Tarlac. The plaintiff alleged that the deputy sheriff of Tarlac Province attached and sold to Valdez the sugar cane planted by the plaintiff and his tenants on 7 parcels of land, and that within 1 year from the date of the attachment and sale the plaintiff ordered to redeem said sugar cane and tendered to Valdez the amount sufficient to cover the price paid by the latter, with taxes and interests, and that Valdez refused to accept the money and return the sugar cane to the plaintiff. After hearing and on 28 April 1926, the judge (Lukban) rendered judgment in favor of the defendant holding that the sugar cane in question was personal property and, as such, was not subject to redemption; among others. Hence, the appeal. 1. Paragraph 2, Article 334 of the Civil Code interpreted by the Tribunal Supremo de Espana as that growing crops may be considered as personal property Sugar cane may come under the classification of real property as "ungathered products" in paragraph 2 of article 334 of the Civil Code, which enumerates as real property as "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.) Thus, under Spanish authorities, pending fruits and ungathered products may be sold and transferred as personal property. Also, 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 further, 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. 2. Manresa admits growing crops as personal property 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. 3. Paragraph 2, Article 344 of the Civil Code corresponds to Article 465 of the Civil Code of Louisiana Article 465 of the Civil Code of Louisiana, which corresponds to paragraph 2 of article 334 of the 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." 4. Louisiana jurisprudence: Growing crop’s mobilization by anticipation 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. 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.; as cited in Lumber Co. vs. Sheriff and Tax Collector [106 La., 418], c.f. Citizen’s Bank v. Wiltz *31 La. Ann., 244]) 5. Louisiana jurisprudence: Standing crops as immovable or movable based on owned and leased premises; seizure by creditors Standing crops are considered as immovable and as part of the land to which they are attached, and the fruits of an immovable gathered or produced while it is under seizure are considered as making part thereof, and inure 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. (Porche vs. Bodin [28 La. An., 761]) 6. Louisiana jurisprudence: Law cannot be interpreted result in absurd consequences If crop 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. 7. American jurisprudence: growing crops by yearly labor and cultivation personal property The settled doctrine followed in the State of California and other 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. 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. 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. 8. Valid sale of a thing not yet in existence; thing must be owned by the vendor 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 the 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.) 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].) 9. Source of provisions on execution of judgment in Code of Civil Procedure (Act 190); Growing crops are personal property Section 450 and most of the other sections of the Code of Civil Procedure relating to the execution of judgments were taken from the Code of Civil Procedure of California. Section 450 of the Code of Civil Procedure enumerates the property of a judgment debtor which may be subjected to execution, and reads as "All goods, chattels, moneys, and other property, both real and personal, shall be liable to execution." The Supreme Court of California, under section 688 of the Code of Civil Procedure of that state, to which the Code of Civil Procedure was pattered, has held, without variation, that growing crops were personal property and subject to execution. 10. Chattel Mortgage Law recognizes growing crops as personal property Act 1508, the Chattel Mortgage Law, fully recognizes that growing crops are personal property. Section 2 of said Act provides that "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 that "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." The above provisions of Act 1508 were enacted on the assumption that "growing crops" are personal property. 11. Personal property includes ungathered products; Paragraph 2, Article 334 of the Civil Code modified by Act 190 and 1508 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; or that in the sense that, for the purposes of attachment and execution, and for the purposes of the Chattel Mortgage Law, "ungathered products" have the nature of personal property. In other words, the phrase "personal property" should be understood to include "ungathered products." In the case at bar, the sugar cane in question was personal property and was not subject to redemption. 12. Absence from trial and failure to cross-examine lend weight to the evidence presented by the other party The absence of the plaintiff from the trial and his failure to cross-examine the defendant have lent considerable weight to the evidence then presented for the defense. The court has been inclined to to give more weight to the evidence adduced by him than to the evidence adduced by the plaintiff, with respect to the ownership of parcels of land. 13. Lack of evidence of bad faith in planting palay in questioned parcels entitles plaintiff to ½ of the crop There being no evidence of bad faith on the plaintiff’s part, in planting the palay in the disputed parcels of land and harve sted therefrom 190 cavans, he is therefore entitled to one-half of the crop, or 95 cavans, not 190 cavans as ordered by the lower court.

US v. Carlos, 21 Phil 543 Facts: Ignacio Carlos has been a consumer of electricity furnished by the Manila Electric Railroad and Light Company for a building containing the residence of the accused and 3 other residences. Representatives of the company believing that more light is consumed than what is shown in the meter installed an additional meter on the pole outside Carlos’ house to compare the actual consumption and found out that the latter used a jumper. Further, a jumper was found in a drawer of a small cabinet in the room of the defendant’s house were the meter was installed. In the absence of any explanation for Carlos’ possession of said device, the presumption raised was that Carlos was the owner of the device whose only use was to deflect the current from the meter. Thus he was charged with the crime of theft amounting to 2,273KW of electric power worth 909.20 pesos. Issue: Whether or not the court erred in declaring that the electrical energy may be stolen. Held: It is true that electricity is no longer, as formerly, regarded by electricians as a fluid, but its manifestation and effects, like those of gas, may be seen and felt. The true test of what is a proper subject of larceny seems to be not whether the subject is corporeal, but whether it is capable of appropriation by another than the owner. The court ruled that electricity, the same as gas, is a valuable article of merchandise,

bought and sold like other personal property and is capable of appropriation by another. It is also susceptible of being severed from a mass or larger quantity, and of being transported from place to place. So no error was committed by the trial court in holding that electricity is a subject of larceny.

Hongkong & Shanghai Banking v. Aldecoa & Co. [G.R. No. 8437. March 23, 1915.] En Banc, Trent (J): 3 concur, 1 concurs in result, 1 dissents. Facts: The defendants, Joaquin, Zoilo, and Cecilia (all Ibañez de Aldecoa), were born in the Philippines on 27 March 1884, 4 July 1885, and 1887, respectively, the legitimate children of Zoilo Ibañez de Aldecoa and Isabel Palet; the parents being natives of Spain but domiciled in Manila. The firm of Aldecoa & Co., of which Zoilo Ibañez de Aldecoa, the father who died on 4 October 1895, had been a member and managing director, was reorganized in December 1896, and the widow became one of the general or "capitalistic" partners of the firm. The 3 children appear in the articles of agreement as industrial partners. The widow, retaining her Manila domicile, left the Philippines and went to Spain in 1897 due to her health, and did not return until the latter part of 1902. On 31 July 1903, Isabel Palet went before a notary public and executed two instruments, whereby she emancipated her sons, who were 18 years old at that time, with their consent and acceptance. After the execution of said instruments, both Joaquin and Zoilo participated in the management of Aldecoa & Co. as partners by being present and voting at meetings of the partners of the company upon matters connected with its affairs. On 23 February 1906, Aldecoa & Co. obtained from the bank a credit in account current up to the sum of P450,000 upon the terms and conditions set forth in the instrument Exhibit A. Later it was agreed that Isabel Palet and her sons should mortgage, in addition to certain securities of Aldecoa & Co. certain of their real properties as additional security for the obligations of Aldecoa & Co. Thus, on 23 March 1906, the mortgage, Exhibit B, was executed wherein certain corrections in the description of some of the real property mortgaged to the bank by Exhibit A were made and the amount for which each of the mortgaged properties should be liable was set forth. These two mortgages, Exhibits A and B, were duly recorded in the registry of property of the city of Manila on 23 March 1906. The real property mortgaged by Isabel Palet was at her instance, registered under the provisions of the Land Registration, the property subject to the mortgage in favor of the bank, by decree of the land court 8 March 1907; while another property, on 6 November 1906 and at the instance of Isabel Palet and her 3 children, was applied for registration (the undivided ¾ of said property being subject to the mortgage in favor of the bank), the application of which was granted by decree of the land court 8 September 1907. On 31 December 1906, Aldecoa & Co. went into liquidation on account of the expiration of the term for which it had been organized, and the intervener, Urquhart, was duly elected by the parties as liquidator, and by resolution dated 24 January 1907, he was granted the authority expressed in that resolution. Additional security for the performance of the obligation in favor of the bank under the terms of contracts Exhibit A and B were made on various dates. On 22 December 1906, Aldecoa & co. mortgaged to the bank the right of mortgage upon real property in the Province of Albay mortgage to it by one Zubeldia. On 31 Mach 1907, Aldecoa & Co., already in liquidation, mortgaged to the bank the right of mortgage upon real estate in the province of Ambos Camarines mortgage to it by one Andres Garchitorena (P20,280.19). On the same date, Aldecoa & Co. further mortgaged the right of mortgage upon real property in the same province mortgage to it by Tremoya Hermanos (P43,117.40) and Liborio Tremoya (P75,463.54). Further, on 30 January 1907, Aldecoa & Co. duly authorized the bank to collect from certain persons and firms any and all debts owing by them to Aldecoa & Co. and to apply all amounts so collected to the satisfaction, pro tanto, of any indebtedness of Aldecoa & Co. to the bank. On the other hand, as the result of the litigation between Aldecoa & Co. and A. S. Macleod, wherein the injunction bond of P50,000 was made by the bank upon the condition that any liability incurred on the part of the bank upon this injunction bond would be covered by the mortgage of 23 February 1906, Aldecoa & Co. became the owner, through a compromise agreement executed on 14 August 1907, of the shares of the Pasay Estate Company Limited, and on 30 August 1907, Urquhart, as liquidator mortgaged to the bank, by way of additional security for the performance of the obligations set forth in Exhibits A and B, the 312 shares of the Pasay Estate Company, Limited, acquired by Aldecoa & Co. On 18 February 1907, Aldecoa & Co. acknowledged an indebtedness of P154,689,20 each to Joaquin and Zoilo Ibañez de Aldecoa, and another P89,177.07 to Cecilia Ibañez de Aldecoa. On 30 September 1908, Joaquin, Zoilo, and Cecilia recovered a judgment in the CFI Manila for the payment of the balance of P155,127.31. On 30 November 1907, Joaquin, Zoilo, and Cecilia instituted an action in the CFI Manila against the bank for the purpose of obtaining a judicial declaration to the effect that the contract whereby Aldecoa & Co. mortgaged to the bank the shares of the Pasay Estate Company recovered from Alejandro S. Macleod, was null and void, and for a judgment that these shares be sold and applied to the satisfaction of their judgment obtained on 30 September 1908. Judgment was rendered by the lower court in favor of the children, but upon appeal the Supreme Court reversed that judgment and declared that the mortgage of the shares of stock in the Pasay Estate Co. to the bank was valid. In 1908, Joaquin, Zoilo, and Cecilia commenced an action against their mother, Isabel Palet, and Aldecoa & Co., in which the bank was not a party, and in September of that year procured a judgment of the CFI annulling the articles of copartnership of Aldecoa & Co., in so far as they were concerned, and decreeing that they were creditors and not partners of that firm. In October 1908, Joaquin and Zoilo instituted an action against the bank for the purpose of obtaining a judgment annulling the mortgages created by them upon their interest in the properties described in Exhibits A and B, upon the ground that the emancipation by their mother was void and of no effect, and that, therefore, they were minors incapable of creating a valid mortgage upon their real property. The CFI dismissed the complaint as to Joaquin upon the ground that he had ratified those mortgages after becoming of age, but entered a judgment annulling said mortgages with respect to Zoilo. Both parties appealed from this decision and the case was given registry No. 6889 in the Supreme Court.

On 31 January 1911, the Bank filed an action against the defendants for the purpose of recovering from Aldecoa & Co., an amount due from the latter as the balance to its debit in an account current with the Company, and to enforce the subsidiary liability of the other defendants for the payment of this indebtedness, as partners of the Company, and to foreclose certain mortgages executed by the defendants to secure the indebtedness sued upon. On 10 August 1912, judgment was entered in favor of the bank, ordering the defendants to pay the sum of P344,924.23 with interest of 7% per annum from date of judgment until fully paid, and the costs; and ordering the foreclosure of the mortgages. Judgment was also entered denying the relief sought by the intervener. All of the defendants and the intervener have appealed. The Supreme Court affirmed the judgment appealed from, and ordered the appellants whose appeals are determined to pay their respective portions of the cost. 1. Complaint not vague nor ambiguous The complaint alleges that a certain specific amount was due from the defendant firm as a balance of its indebtedness to the plaintiff, and this necessarily implies that there were no credits in favor of the defendant firm of any kind whatsoever which had not already been deducted from the original obligation. 2. No evidence supports claim that bank prejudiced Aldecoa by inducing the customers to cease commercial relations There is no evidence to show that there was any inducement made by the bank to prejudice Aldecoa & Co, for its customers to cease their commercial relations with Aldecoa & Co.. It may be possible that some of Aldecoa & Co.'s customers ceased doing business with that firm after it went into liquidation. This is the ordinary effect of a commercial firm going into liquidation. This is especially true for the reason that it was a well known fact that Aldecoa & Co. was insolvent. Furthermore, the bank was expressly empowered to take any steps which might be necessary, judicially or extrajudicially, for the collection of these credits. The real reason which caused the defendant's provincial customers to cease making shipments was due to the fact that the defendant, being out of funds, could not give its customers any further credit. It is therefore clear that the bank, having exercised the authority conferred upon it by the company in a legal manner, is not responsible for any damages which might have resulted from the failure of the defendant's provincial customers to continue doing business with that firm. 3. Court has jurisdiction as bank does not seek to exercise mortgage right on real properties in the provinces The bank is not seeking to exercise its mortgage rights upon the mortgages which the defendant firm holds upon certain real properties in the Provinces of Albay and Ambos Camarines and to sell these properties at public auction in these proceedings; nor does the judgment of the trial court directs that this be done. Before that property can be sold the original mortgagors will have to be made parties. The bank is not trying to foreclose any mortgages on real property executed by Aldecoa & Co. 4. Solidary obligation; Money judgment against the firm and foreclosure judgment against the others It is true that the bank sought and obtained a money judgment against that firm, and at the same time and in the same action obtained a foreclosure judgment against the other defendants. If two or more persons are in solidum the debtors of a third person, and one or more of such debtors mortgage any of their real property situate in the jurisdiction of the court, the creditor, in case his obligation is not paid at maturity, may include all of the solidary debtors in the same suit and secure a joint and several judgment against them, as well as judgments of foreclosure upon the respective mortgages. 5. Extensions does not extinguish the mortgages The contention that the extensions granted to Aldecoa & Co.'s debtors, with the consent and authority of that firm itself, has resulted in extinguishment of the mortgages created by Aldecoa & Co. or of the mortgages created by partners of that company to secure its liabilities to the bank, is untenable. The record shows that all the sureties were represented by Urquhart, the person elected by them as liquidator of the firm, when he agreed with the bank upon the extensions granted to those debtors. The authority to grant these extensions was conferred upon the bank by the liquidator, and he was given authority by all the sureties to authorize the bank to proceed in this manner. 6. Properties Isabel Palet mortgage were not security for performance of her solidary subsidiary obligation but part of the direct obligation of the firm itself Although the court recognized the subsidiary character of the personal liability of Doña Isabel Palet as a member of the firm of Aldecoa & Co. and decreed that as to any deficiency which might result after the sale of the mortgaged properties, execution should not issue against the properties of Doña Isabel Palet until all the property of Aldecoa & Co. shall have been exhausted. The properties mortgaged by Doña Isabel Palet were so mortgaged not merely as security for the performance of her own solidary subsidiary obligation as a partner bound for all the debts of Aldecoa & Co., but for the purpose of securing the direct obligation of the firm itself to the bank. 7. Isabel Palet a personal debtor in solidum with Aldecoa & Co., and not a mere surety The extension of the term which, in accordance with the provisions of article 1851 of the Civil Code produces the extinction of the liability of the surety must of necessity be based on some new agreement between the creditor and principal debtor, by virtue of which the creditor deprives himself of his right to immediately bring an action for the enforcement of his claim. The mere failure to bring an action upon a credit, as soon as the same or any part of it matures, does not constitute an extension of the term of the obligation. In the present case, Doña Isabel Palet is a personal debtor jointly and severally with Aldecoa & Co. for the whole indebtedness of the latter firm to the bank, and not a mere surety for the performance of the obligations of Aldecoa & Co. without any solidary liability. It is true that certain additional deeds of mortgage and pledge were executed by Aldecoa & Co. in favor of the bank as additional security after Aldecoa & Co. had failed to meet its obligation to pay the first installment due under the agreement of 23 February 1906, but there is no stipulation whatever in any of these documents or deeds which can in any way be interpreted in the sense of constituting an extension which would bind the bank to wait for the expiration of any new term before suing upon its claim against Aldecoa & Co. 8. Intervener is not a preferred creditor over the bank The intervener is seeking to have himself declared a preferred creditor over the bank; citing Section 121 of the Code of Civil Procedure which provides that "A person may, at any period of a trial, upon motion, be permitted by the court to intervene in an action or proceeding, if he has legal interest in the matter in litigation, or in the success of either of the parties, or an interest against both." The amount

(P21,000) to which the intervener is a creditor of Aldecoa & Co. is not evidenced by a public document, or any document for that matter, nor secured by pledge or mortgage, while the amount due the bank appears in a public instrument and is also secured by pledges and mortgages on the property of Aldecoa & Co., out of which the intervener seeks to have his indebtedness satisfied. It is, therefore, clear that the intervener is not entitled to the relief sought. Further, the amount (P14,000) sought by the intervener as salary represents his salary as liquidator of the firm and not to salary prior to liquidation. 9. Receiver appointed by the court preferred in payment of fees over creditors; Intervener was appointed by members of the Company without approval from the creditor-bank The ruling of the supreme court of Spain in 16 March 1897 was correct to the effect that the fees of a receiver, appointed by the court to preserve property in litigation, must be paid in preference to the cla ims of creditors. In said ruling the court said “that the expense of maintenance of property is bound to affect such persons as have an interest therein, whether they be the owners or creditors of the property; therefore payment for this object has preference over any other debt, since such other debts are recoverable to the extent that the property is preserved and maintained." In the present case, however, Urquhart was elected liquidator by the members of the firm of Aldecoa & Co. without the consent or approval of the bank or of any other creditor. He did not receive his employment by reason of any judicial act. Whatever may be due him for his services as liquidator is due under a contract of employment between himself and the members of the firm of Aldecoa & Co. 10. Intervener not preferred over creditors over the firm’s personal property; mortgage over real property not personal prope rty Article 1922 of the Civil Code provides that, with regard to specified the personal property of the debtor, the “cre dits for the construction, repair, preservation, or for the amount of the sale of personal property which may be in the possession of the debtor to the extent of the value of the same” are preferred. The only personal property of Aldecoa & Co. is 16 shares of the stock of the Banco EspañolFilipino; 450 shares of the stock of the Compañia Maritima (both items preceding were pledged before the liquidation); 330 shares of the stock of the Pasay Estate Co., Ltd. (which were in the possession of Aldecoa & co or its liquidator for only 1 day); and certain claims against debtors of Aldecoa & Co., mentioned in Exhibit G, which were assigned to the bank on 30 January 1907. As the intervener has been paid for his services up to January 1910, he cannot be declared a preferred creditor of the bank. The only property of Aldecoa & Co. which the liquidator had anything to do with after 1910 was the real estate mortgages mortgaged to the bank as additional security. These mortgages on real property cannot be regarded as personal property, and it is only of personal property that article 1922 speaks of. 11. Plea of another action pending is not sustained if its pendency is set up to defeat another The principle upon which a plea of another action pending is sustained is that the latter action is deemed unnecessary and vexatious (Williams vs. Gaston, 148 Ala., 214; 42 Sou., 552; 1 Cyc. 21; 1 RCL, sec. 1.) but when the pendency of such a suit is set up to defeat another, the case must be the same. There must be the same parties, or at least such as represent the same interest, there must be the same rights asserted, and the same relief prayed for. This relief must be founded on the same facts, and the title or essential basis of the relief sought must be the same. The identity in these particulars should be such that if the pending case had already been disposed of, it could be pleaded in bar as a former adjudication of the same matter between the same parties (Watson vs. Jones, 13 Wall., 679, 715; 20 L. ed., 666). In the present case, the case and the one pending in the Supreme Court are identical; thus the inquiry must therefore proceed to the other requisites demanded by the rule. The former suit is one to annul the mortgages. The present suit is one for the foreclosure of the mortgages. It may be conceded that if the final judgment in the former action is that the mortgages be annulled, such an adjudication will deny the right of the bank to foreclose the mortgages. 12. Test of identity The test of identity, stated in 1 Cyc., 28, is that "a plea of the pendency of a prior action is not available unless the prior action is of such a character that, had a judgment been rendered therein on the merits, such a judgment would be conclusive between the parties and could be pleaded in bar of the second action." This test has been approved, citing the quotation, in Williams vs. Gaston (148 Ala., 214; 42 Sou., 552); Van Vleck vs. Anderson (136 Iowa, 366; 113 N. W., 853); Wetzstein vs. Mining Co. (28 Mont., 451; 72 P., 865). It is applicable, between the same parties, only when the judgment to be rendered in the action first instituted will be such that, regardless of which party is successful, it will amount to res adjudicata against the second action. 13. Judgment declaring the children as creditors and not partners of Aldecoa not binding to the bank It appears that a certified copy of the judgment entered in the former case, wherein it was declared that the children, were creditors and partners of Aldecoa & Co., was offered in evidence. Such evidence was objected to by the bank on the ground that is was res inter alios acta and not competent evidence against the bank or binding upon it in any way because it was not a party to that action. This objection was sustained and the proffered evidence excluded. It was an action in personam and the bank was not a party. The judgment is binding only upon the parties to the suit and their successors in interest (sec. 306, Code of Civil Procedure, No. 2).

Involuntary insolvency of Paul Strochecker v. Ramirez [G.R. No. 18700. September 26, 1922.] First Division, Romualdez (J): 7 concur Facts: Half-interest in the business (Antigua Botica Ramirez) was mortgaged with Fidelity & Surety Co. on 10 March 1919, and registered in due time in the registry of property, while another mortgage was made with Ildefonso Ramirez on 22 September 1919 and registered also in the registry. Raised in the lower court, the trial court declared the mortgage of Fidelity & Surety Co. entitled to preference over that of Ildefonso Ramirez and another mortgage by Concepcion Ayala. Ayala did not appeal, but Ramirez did. The Supreme Court affirmed the judgment appealed from with costs against the appellant. 1. Interest in business may be subject of mortgage

With regard to the nature of the property mortgaged which is one-half interest in the business, such interest is a personal property capable of appropriation and not included in the enumeration of real properties in articles 335 of the Civil Code, and may be the subject of mortgage. All personal property may be mortgaged. (Sec. 7, Act 1508.) 2. Description of mortgage property sufficient The description contained in the document is sufficient. The law (sec. 7, Act 1508) requires only a description of the mortgaged property shall be such as to enable the parties to the mortgage, or any other person, after reasonable inquiry and investigation, to identify the same. In the case at bar, “his half interest in the drug business known as Antigua Botica Ramirez, located at Calle Real Nos. 123 and 125, District of Intramuros, Manila Philippine Islands" is sufficient. 3. Article 1922 (1-3) of the Civil Code applicable only to mortgage property in possession Numbers 1, 2, and 3 of the article 1922 of the Civil Code are not applicable as neither the debtor, nor himself, is in possession of the property mortgaged, which is, and since the registration of the mortgage has been, legally in possession of the surety company (Sec. 4, Act. 1508; Meyers vs. Thein, 15 Phil., 303) 4. Stipulation about personal property not a mortgage upon property In no way can the mortgage executed be given effect as of the date of the sale of the store in question; as there was a mere stipulation about personal security during said date, but not a mortgage upon property, and much less upon the property in question.

US v. Tambunting [G.R. No. 16513. January 18, 1921.] En Banc, Street (J): 4 concur Facts: On January 1918, Manuel Tambunting and his wife became occupants of the upper floor of the house situated at 443, Calle Evangelista, Manila. In this house the Manila Gas Corporation had previously installed apparatus for the delivery of gas on both the upper and lower floors, consisting of the necessary piping and a gas meter, which last mentioned apparatus was installed below. When the occupants at whose request this installation had been made vacated the premises, the gas company disconnected the gas pipe and removed the meter, thus cutting off the supply of gas from said premises. Upon 2 June 1919, one of the inspectors of the gas company visited the house in question, while Manuel Tambunting was not home, and found that gas was being used, without the knowledge and consent of the gas company, for cooking in the quarters occupied by the Tambuntings. Upon arrival, Tambunting admitted that he was using gas without knowledge of the company for 2-3 months but denied making the connection where the meter used to be installed. Before the institution of the case in the CFI, the accused had been unsuccessfully prosecuted for an infraction of section 504 of the Revised Ordinances of the city of Manila, under a complaint charging that the accused, not being a registered installer of gas equipment, had placed a gas installation in the house at 443, Calle Evangelista. Later, the gas company sued Manuel Tambunting at the CFI Manila; which later found the accused guilty of stealing a quantity of gas belonging to the Manila Gas Corporation, and sentencing him to undergo imprisonment for 2 months and 1 day (arresto mayor) with the accessories prescribed by law; to indemnify the said corporation in the sum of P2, with subsidiary imprisonment in case of insolvency; and to pay the costs. Tambunting appealed. The Supreme Court affirmed the judgment with modification, it being understood that the amount of the indemnity which the accused shall pay to the gas company is P4, instead of P2, with subsidiary imprisonment for one day in case of insolvency; with costs against the appellant. 1. Right of ownership of electric current, gas, fluid used for lighting The right of the ownership of electric current is secured by articles 517 and 518 of the Penal Code; the application of these articles in cases of substraction of gas, a fluid used for lighting, and in some respects resembling electricity, is confirmed by the rule laid down in the decisions of the supreme court of Spain of January 20, 1887, and April 1, 1897, construing and enforcing the provisions of articles 530 and 531 of the Penal Code of Spain, articles identical with above articles 517 and 518. These expressions were used in a case which involved the substraction and appropriation of electrical energy and the court held, in accordance with the analogy of the case involving the theft of gas, that electrical energy could also be the subject of theft (see US v. Genato, 15 Phil., 170, 175; US v. Carlos, 21 Phil., 553) 2. Landmark case as to issue whether taking of gas constitute larceny The taking of gas may constitute larceny has never before been the subject of adjudication in the Supreme Court, but the decisions of Spanish, English, and American courts all answer the question in the affirmative. (See US vs. Carlos, 21 Phil., 553, 560.) 3. Gas has character of personal property, and may be subject of larceny There is nothing in the nature of gas used for illuminating purposes which renders it incapable of being feloniously taken and carried away. It is a valuable article of merchandise, bought and sold like other personal property, susceptible of being severed from a mass or larger quantity and of being transported from place to place. Likewise water which is confined in pipes and electricity which is conveyed by wires are subjects of larceny (Ruling Case Law, Vol. 17, p. 34). 4. Justification of the P2 per month charge The court was justified in fixing the value of the gas at P2 per month, which is the minimum charge for gas made by the gas company, however small the amount consumed. Presumably, no person desiring to use gas at all for domestic purposes can purchase the commodity at a lower rate per month than P2. There was evidence, however, before the court showing that the general average of the monthly bills paid by consumers throughout the city for the use of gas in a kitchen equipped like that used by the accused is from P18 to P20, while the average minimum is about P8 per month. We think that the facts above stated are competent evidence; and the conclusion is inevitable that the accused is at least liable to the extent of the minimum charge of P2 per month. Absolute certainty as to the full amount taken is of course

impossible, because no meter was used; but absolute certainty upon this point is not necessary, when it is certain that the minimum that could have been taken was worth a determinable amount. 5. Acquittal in prosecution for violation of city ordinance not bar to prosecution for same offense under the general law of the land Acquittal of the charge of illegal gas installation in violation of Section 504 of the Revised Ordinances of Manila does not bar his prosecution for the offense of theft, since the two offenses are of totally distinct nature. Furthermore, a prosecution for violation of a city ordinance is not ordinarily a bar to a subsequent prosecution for the same offense under the general law of the land. (US vs. Garcia Gavieres, 10 Phil., 694.)

Rubiso v. Rivera [G.R. No. L-11407. October 30, 1917.] First Division, Torres (J): 5 concur, 1 took no part Facts: Bonifacio Gelito sold his share in the pilot boat Valentina, consisting of 2/3 interest therein, to the Chinaman Sy Qui, the co-owner of the other 1/3 interest in said vessel; wherefore this vendor is no longer entitled to exercise any action whatever in respect to the boat in question. Gelito was one of the partnership owners of the Valentina, as in fact his name appears in the certificate of protection issued by the Bureau of Customs, and the rights he held are evidenced by the articles of partnership; but, the whole ownership in the vessel having been consolidated in behalf of the Chinaman Sy Qui, this latter, in the use of his right as the sole owner of the Valentina, sold this boat to Florentino E. Rivera for P2,500, on 4 January 1915, which facts are set forth in a deed ratified on the same date before a notary. This document was registered in the Bureau of Customs on 17 March 1915. After the sale of the boat to the defendant Rivera, suit having been brought in the justice of the peace court against the Chinaman Sy Qui to enforce payment of a certain sum of money, the latter's creditor Fausto Rubiso. Rubiso later acquired said vessel at a public auction sale and for the sum of P55.45. The certificate of sale and adjudication of the boat in question was issued by the sheriff on behalf of Fausto Rubiso, in the office of the Collector of Customs, on 27 January 1915 and was also entered in the commercial registry on 14 March 1915. On 10 April 1915, the plaintiffs brought suit in the CFI and alleged in the complaint that his clients were the owners of the pilot boat named Valentina, which had been in bad condition since 1914 and was stranded in Tingloy, Bauan, Batangas; and that Florentino E. Rivera took charge or possession of said vessel without the knowledge or consent of the plaintiffs and refused to deliver it to them, under claim that he was the owner thereof. After the hearing of the case and the introduction of documentary evidence, the judgment of 6 September 1915, was rendered, , in which the defendant and appellant was ordered to place at the disposal of the Fausto Rubiso the pilot boat in litigation. No special finding was made for costs. The defendant appealed and moved for a new trial. This motion was denied and appellant excepted. The Supreme Court affirmed the judgment, with the costs against the appellant. 1. Inscription in registry is necessary and indispensable Article 573 of the Code of Commerce provides in its first paragraph that merchant vessels constitute property which may be acquired an transferred by any of the means recognized by law. The acquisition of a vessel must be included in a written instrument, which shall not produce any effect with regard to third persons if not recorded in the commercial registry. With the enactment of Act 1900 on 18 May 1909, said article was amended and appears as Section 2 of that Act; amending solely in charging the Insular Collector of Customs with the fulfillment of the duties of the commercial register concerning the registering of vessels. In both laws, Inscription in the commercial registry is necessary and indispensable in order that the purchaser's rights may be maintained against a claim filed by a third person. The legal rule set down in the Mercantile Code subsists, inasmuch as the amendment solely refers to the official who shall make the entry; but, with respect to the rights of two purchases, whichever of them first registered his acquisition of the vessel in the one entitled to enjoy the protection of the law. 2. Even if public auction is subsequent to private purchase, right of first to register is primary Florentino E. Rivera's rights cannot prevail over those acquired by Fausto Rubiso in the ownership of the pilot boat Valentina, inasmuch as, though the latter's acquisition of the vessel at public auction, on 23 January 1915, was subsequent to its purchase by Rivera, nevertheless the sale at public auction was antecedently record in the office of the Collector of Customs, on January 27, and entered in the commercial registry (an unnecessary proceeding) on March 4; while the private and voluntary purchase made by Rivera on a prior date was not recorded in the office of the Collector of Customs until 17 March 1915. Rubiso, who was careful to record his acquisition, opportunely and on prior date, has, according to the law, a better right than the defendant Rivera who subsequently recorded his purchase. The latter is a third person, who was directly affected by the registration which the plaintiff made of the acquisition. 3. Effects of registration to liabilities of a vessel When the absolute owner of the purchased boat, declaring the latter to be free of all encumbrance and all claims by strangers for, pursuant to article 582 of the Mercantile Code, after the bill of the judicial sale at auction has been executed and recorded in the commercial registry, all the other liabilities of the vessel in favor of the creditors shall be considered canceled. 4. Ships or vessels are of the nature and condition of real property; Article 573 of Code of Commerce vis-à-vis Article 1473 of the Civil Code Ships or vessels, whether moved by steam or by sail, partake, to a certain extent, of the nature and conditions of real property, on account of their value and importance in the world commerce; and for this reason the provisions of article 573 of the Code of Commerce are nearly identical with article 1473 of the Civil Code. 5. No indemnity for losses and damages Aside from the fact that, subsequent to the date when the judgment appealed from was rendered, the vessel in question emerged unharmed from the place where it was stranded, and was, at the time of the trial, anchored in the port of Maricaban, the record certainly does not furnish any positive evidence of the losses and damages alleged to have been occasioned. On the other hand, it cannot be affirmed that

the defendant acted in bad faith specifically because he acquired the vessel on a date prior to that of its acquisition at public auction by the plaintiff Rubiso, who, for the reasons aforestated, is true and sole owner of said pilot boat.

Mindanao Bus v. City Assessor [G.R. No. L-17870. September 29, 1962.] En Banc, Labrador (J): 7 concur, 3 took no part. Facts: Mindanao Bus Company is a public utility engaged in transporting passengers and cargoes by motor trucks in Mindanao; having its main offices in Cagayan de Oro. The company is also owner to the land where it maintains and operates a garafe, a repair shop, blacksmith and carpentry shops; the machineries are place therein on wooden and cement platforms. The City Assessor of Cagayan de Oro City assessed at P4,400 said maintenance and repair equipment. The company appealed the assessment to the 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 the company filed with the Court of Tax Appeals a petition for the review of the assessment. The Court of Tax Appeal (CTA Case 710) held that the Company was liable to the payment of the realty tax on its maintenance and repair equipment. Hence, the company filed a petition for review with the Supreme Court. The Supreme Court set aside the decision subject of the petition for review and the equipment in question declared not subject to assessment as real estate for the purposes of the real estate tax. Without costs. 1. Machinery made immovable must be essential and principal elements of an industry or works Paragraph 5 of Article 415 of the New Civil Code (previously Article 344, paragraph 5, of the old Civil Code) which provides machinery, receptacles, instruments or implements intended by the owner of the tenement for an industry or works which may be carried on in a building or on a piece of land, and which tend directly to meet the needs of the said industry or works are immovable properties. Movable equipments to be immobilized in contemplation of the law must first be "essential and principal elements" of an industry or works without which such industry or works would be "unable to function or carry on the industrial purpose for which it was established." 2. Machinery essential to industry in Berkenkotter v. Cu Unjieng; Machinery incidental in present case It cannot be said that the incorporation of the machinery and equipment in the central of the Mabalacat Sugar Company was not permanent in character because, as essential and principal elements of a sugar central, without them the sugar central would be unable to function or carry on the industrial purpose for which it was established. Inasmuch as the central is permanent in character, the necessary machinery and equipment installed for carrying on the sugar industry for which it has been established must necessarily be permanent. In contrast, the transportation business could be carried on without the repair or service shop if its rolling equipment is repaired or serviced in another shop belonging to another. 3. Machinery incidental to industry are not immobilized; examples Movables which become immobilized by destination because they are essential and principal elements in the industry are distinguished from those which may not be so considered immobilized because they are merely incidental, not essential and principal. Thus, cash registers, typewriters, etc., usually found and used in hotels, restaurants, theaters, etc. are merely incidentals and are not and should not be considered immobilized by destination, for these businesses can continue or carry on their functions without these equipments. Airline companies use forklifts, jeep-wagons, pressure pumps, IMB machines, etc. which are incidentals, not essentials, and thus retain their movable nature. On the other hand, machineries of breweries used in the manufacture of liquor and soft drinks, though movable in nature, are immobilized because they are essential to said industries; but the delivery trucks and adding machines which they usually own and use and are found within their industrial compounds are merely incidentals and retain their movable nature. 4. Transportation business not carried on in a building, tenement or specified land; equipment thus are not real estate Aside from the element of essentiality, Article 415 (5) also requires that the industry or works be carried on in a building or on a piece of land. In the case of Berkenkotter vs. Cu Unjieng, the "machinery, liquid containers, and instruments or implements" are found in a building constructed on the land. A sawmill would also be installed in a building on land more or less permanently, and the sawing is conducted in the land or building. In contrast, Mindanao Bus Company’s transportation business is not carried on in a buildin g, tenement or on a specified land, so said equipment may not be considered real estate within the meaning of Article 415 (c) of the Civil Code. TSAI V. COURT OF APPEALS 336 SCRA 324 FACTS: EVERTEX secured a loan from PBC, guaranteed by a real estate and chattel mortgage over a parcel of land where the factory stands, and the chattels located therein, as included in schedule attached to the mortgage contract. Another loan was obtained secured by a chattel mortgage over properties with similar descriptions listed in the first schedule. During the date of execution of the second mortgage, EVERTEX purchased machineries and equipment. Due to business reverses, EVERTEX filed for insolvency proceedings. It failed to pay its obligation and thus, PBC initiated extrajudicial foreclosure of the mortgages. PBC was the highest bidder in the public auctions, making it the owner of the properties. It then leased the factory premises to Tsai. Afterwards, EVERTEX sought the annulment of the sale and conveyance of the properties to PBC as it was allegedly a violation of the INSOLVENCY LAW. The RTC held that the lease and sale were irregular as it involved properties not included in the schedule of the mortgage contract. HELD: While it is true that the controverted properties appear to be immobile, a perusal of the contract of REM and CM executed by the parties gives a contrary indication. In the case at bar, both the trial and appellate courts show that the intention was to treat the machineries as movables or personal property. Assuming that the properties were considered immovables, nothing detracts the parties from treating it as chattels to secure an obligation under the principle of estoppel.

Navarro v. Pineda [G.R. No. L-18456. November 30, 1963.] En Banc, Paredes (J): 8 concur Facts: On 14 December 1959, Rufino G. Pineda and his mother Juana Gonzales (married to Gregorio Pineda), borrowed from Conrado P. Navarro, the sum of P2,550.00, payable 6 months after said date or on 14 June 1959. To secure the indebtedness, Rufino executed a document captioned "Deed of Real Estate and Chattel Mortgages ", whereby Juana Gonzales, by way of Real Estate Mortgage hypothecated a parcel of land, belonging to her, registered with, the register of Deeds of Tarlac, under TCT 25776, and Rufino G. Pineda, by way of Chattel Mortgage, mortgaged his 2-story residential house, having a floor area of 912 sq.m., erected on a lot belonging to Atty. Vicente Castro, located at San Roque, Tarlac, Tarlac; and 1 motor truck, registered in his name, under Motor Vehicle Registration Certificate A-171805. Both mortgages were contained in one instrument, which was registered in both the Office of the Register of Deeds and the Motor Vehicles Office of Tarlac. The Pinedas failed to pay the mortgage debt when it became due. They were granted an extension up to 30 June 1960, but they likewise failed to pay on the said day. They were granted another extension up to 30 July 1960, but they likewise failed and refused to pay. On 10 August 1960, Navarro filed a complaint for foreclosure of the mortgage and for damages, which consisted of liquidated damages in the sum of P500.00 and 12% per annum interest on the principal, effective on the date of maturity, until fully paid. On 24 February 1961, the lower court dismissed the complaint with regards to Gregorio Pineda; ordering Juana Gonzales and spouses Rufino Pineda and Ramona Reyes to pay Conrado Navarro the sum of P2,550 with 12% compounded interest plus P500 as liquidated damages and the cost of the suit from 14 June 1960 within 90 days from receipt of the copy of the decision, else the properties mentioned in the deed of real estate and chattel mortgage be sold to realize said mortgage debt in accordance with the pertinent provisions of Act 3135 and Article 14 of Act 1508; and ordering Rufino Pineda and Ramona Reyes to deliver the personal properties to the Provincial Sheriff of Tarlac immediately after the lapse of 90 days in default of such payment. The judgment was appealed directly to the Supreme Court, questioning the lower court’s decision in holding the deed of real estate and chattel mortgages appended to the complaint valid, notwithstanding that the house of Rufino Pineda was made subject of the chattel mortgage for the reason that it is erected on a land that belongs to a third person. The Supreme Court affirmed the decision appealed from, with costs against appellants. 1. Building is immovable property Article 415 of the New Civil Code, in classifying a house as immovable property, makes no distinctions whether the owner of the land is or is not the owner of the building; the fact that the land belongs to another is immaterial, it is enough that the house adheres to the land; that in case of immovables by incorporation, such as houses, trees, plants, etc; the Code does not require that the attachment or incorporation be made by the owner of the land, the only criterion being the union or incorporation with the soil. A building is an immovable property, irrespective of whether or not said structure and the land on which it is adhered to, belong to the same owner (Lopez vs. Orosa, Leung Yee vs. Strong Machinery Co.). 2. Lower Court’s Decision predicated on the doctrine of estoppel and not only on the ground that the house mortgaged was erected on the land which belonged to a third person The trial court did not predicate its decision declaring the deed of chattel mortgage valid solely on the ground that the house mortgaged was erected on the land which belonged to a third person, but also and principally on the doctrine of estoppel, in that "the parties have so expressly agreed" in the mortgage to consider the house as a chattel "for its smallness and mixed materials of sawali and wood". In the present case, Rufino Pineda grouped the house with the truck which is inherently a movable property. The house which was not even declared for taxation purposes was small and made of light construction materials: G.I. sheets roofing, sawali and wooden walls and wooden posts; built on land belonging to another. Clearly, the house in question was treated as personal or movable property, by the parties to the contract themselves. 3. Property may have a character different from that imputed to it by parties in a contract, but such property remains in its actual character as regards third persons who are not parties in the contract; Summary of relevant cases In construing Arts. 334 and 335 of the Spanish Civil Code (corresponding to Arts. 415 and 416, N.C.C.), for purposes of the application of the Chattel Mortgage Law, it was held that under certain conditions, a property may have a character different from that imputed to it in said articles. It is undeniable that the parties to a contract may by agreement, treat as personal property that which by nature would be real property (Standard Oil vs. Jaranillo). "There can not be any question that a building of mixed materials may be the subject of a chattel mortgage, in which case, it is considered as between the parties as personal property. The matter depends on the circumstances and the intention of the parties. Personal property may retain its character as such where it is so agreed by the parties interested even though annexed to the realty". (42 Am. Jur. 209-210, cited in Manarang, et al. vs. Ofilada, et al.). The view that parties to a deed of chattel mortgage may agree to consider a house as personal property for the purposes of said contract, is good only insofar as the contracting parties are concerned. It is based, partly, upon the principles of estoppel (Evangelista vs. Alto Surety). In a case, a mortgaged house built on a rented land, was held to be a personal property not only because the deed of mortgage considered. it as such, but also because it did not form an integral part of the land (Evangelista vs. Abad, [CA]), for it is now well settled that an object placed on land by one who has only a temporary right to the same, such as a lessee or usufructuary, does not become immobilized by attachment (Valdez vs. Central Altagracia, cited in Davao Sawmill vs. Castillo). Hence, if a house belonging to a person stands on a rented land belonging to another person, it may be mortgaged as a personal property if so stipulated in the document of mortgage. It should be noted, however, that the principle is predicated on statements by the owner declaring his house to be a chattel, a conduct that may conceivably estop him from subsequent claiming otherwise (Ladera, et al. vs. C.W. Hodges, et al., [CA]). The doctrine, therefore, gathered from these cases is that although in some instances, a house of mixed materials has been considered as a chattel between the parties and that the validity of the contract between them, has been recognized, it has been a constant criterion nevertheless that, with respect to third persons, who are not parties to the contract, and specially in execution proceedings, the house is considered as an immovable property (Art. 1431, New Civil Code). 4. Cases cited are not applicable

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

Prudential Bank v. Panis [G.R. No. L-50008. August 31, 1987.] First Division, Paras (J): 4 concur. Facts: On 19 November 1971, Fernando A. Magcale and Teodula Baluyut Magcale secured a loan of P70,000.00 from Prudential Bank. To secure payment of this loan, the Magcales executed in favor of Prudential Bank a deed of Real Estate Mortgage over a 2-storey, semi-concrete residential building with warehouse space (total area of 263 sq.m.); and granting upon the mortgagee the right of occupancy on the lot where the property is erected. A rider is also included in the deed that in the event the Sales Patent on the lot is issued of Bureau of Lands, the Register of Deeds is authorized to hold the Registration until the mortgage is cancelled or annotate the encumbrance on the title upon authority from the Secretary of Agriculture and Natural Resources, which title with annotation release in favor of the mortgage. The Real Estate Mortgage was registered under the Provisions of Act 3344 with the Registry of Deeds of Zambales on 23 November 1971. Subsequently, the Magcales secured an additional loan from Prudential Bank, secured by another deed of Real Estate Mortgage registeed with the Registry of Deeds in Olongapo City, on 2 May 1973. On 24 April 1973, the Secretary of Agriculture issued Miscellaneous Sales Patent 4776 over the parcel of land, possessory rights over which were mortgaged to rudential Bank, in favor of the Magcales. On the basis of the Patent, and upon its transcription in the Registration Book of the Province of Zambales, OCT P-2554 was issued in the name of Fernando Magcale, by the Ex-Oficio Register of Deeds of Zambales, on 15 May 1972. For failure of the Magcales to pay their obligation to the Bank after it became due, the deeds of Real Estate Mortgage were extrajudicially foreclosed. Consequent to the foreclosure was the sale of the properties mortgaged to the bank as the highest bidder in a public auction sale conducted by the City Sheriff on 12 April 1978. The auction sale was held despite written request from the Magcales through counsel, dated 29 March 1978, for the City Sheriff to desist from going with the scheduled public auction sale. The issue was raised to the CF Zambales and Olongapo City which, on 3 November 1978, declared the deeds of Real Estate Mortgage as null and void. The bank filed a motion for reconsideration on 14 December 1978, which the court denied on 10 January 1979 for lack of merit. Hence, the petition. The Supreme Court modified the decision of the CFI Zambales & Olongapo, declaring that the Deed of Real Estate Mortgage for P70,000.00 is valid but ruling that the Deed of Real Estate Mortgage for an additional loan of P20,000.00 is null and void, without prejudice to any appropriate action the Government may take against private respondents. 1. Building separate and distinct from the land In the enumeration of properties under Article 415 of the Civil Code of the Philippines, it is obvious that the inclusion of 'building' separate and distinct from the land, in said provision of law can only mean that a building is by itself an immovable property. (Lopez vs. Orosa, Jr., et al., L-10817-18, Feb. 28, 1958; Associated Inc. and Surety Co., Inc. vs. Iya, et al., L-10837-38, May 30, 1958). 2. Building can be mortgaged apart from the land it is built; possessory rights may be validly transferred in a deed of mortgage While a mortgage of land necessarily includes, in the absence of stipulation of the improvements thereon, buildings; still a building by itself may be mortgaged apart from the land on which it has been built. Such a mortgage would be still a real estate mortgage for the building would still be considered immovable property even if dealt with separately and apart from the land (Leung Yee vs. Strong Machinery Co., 37 Phil. 644). Possessory rights over said properties before title is vested on the grantee, may be validly transferred or conveyed as in a deed of mortgage (Vda. de Bautista vs. Marcos, 3 SCRA 438 [1961]). 3. A valid real estate mortgage may be constituted on the building erected on the land belonging to another The original mortgage was executed (19 November 1971) before the issuance of the final patent (24 April 1972) and before the government was divested of its title to the land (15 May 1972), an event which takes effect only on the issuance of the sales patent and its subsequent registration in the Office of the Register of Deeds (Visayan Realty Inc. vs. Meer, 96 Phil. 515; Director of Lands vs. De Leon, 110 Phil. 28; Director of Lands vs. Jurado, L-14702, May 23, 1961; Peña, "Law on Natural Resources", p. 49). In the case at bar, it is evident that the mortgage executed by Magcale on his own building which was erected on the land belonging to the government is to all intents and purposes a valid mortgage. 4. Public land act and RA 730 not violated in first mortgage As to restrictions appearing to the Magcales’ title; Sections 121, 122 and 124 of the Public Land Act refer to land already acquired under the Public Land Act or any improvement thereon. Section 2 of RA 730 refers to encumbrance or alienation before the patent is issued because it refers specifically to encumbrance or alienation on the land itself and does not mention anything regarding the improvements existing thereon. Both have no application to the assailed mortgage in the case at bar; as the former, the mortgage was executed before such eventuality, and the latter, it does not encumber nor alienate the land. 5. Mortgage made after issuance of Sales Patent an OCT prohibited; Estoppel does not give validating effect to a void contract As regards the second mortgage executed, such mortgage executed after the issuance of the sales patent and of the Original Certificate of Title, falls squarely under the prohibitions stated in Sections 121, 122 and 124 of the Public Land Act and Section 2 of RA 730, and is therefore null and void. Even if the title was voluntary surrendered to the bank for the mortgage to be annotated without the prior approval of the Ministry of Natural Resources; in pari delicto may not be invoked to defeat the policy of the State neither may the doctrine of estoppel give a validating effect to a void contract. Indeed, it is generally considered that as between parties to a contract, validity cannot be given to it

by estoppel if it is prohibited by law or is against public policy (19 Am. Jur. 802). It is not within the competence of any citizen to barter away what public policy by law seeks to preserve (Gonzalo Puyat & Sons, Inc. vs. De los Amas and Alino, supra; Arsenal vs. IAC, 143 SCRA 54 [1986]). Such does not, however, preclude new contracts that may be entered into in accordance with the requirements of the law. Any new transaction, however, would be subject to whatever steps the Government may take for the reversion of the land in its favor.

Punsalan v. vda. De Lacsamana [G.R. No. L-55729. March 28, 1983.] First Division, Melencio-Herrera (J): 5 concur Facts: Antonio Punsalan, Jr., was the former registered owner of a parcel of land consisting of 340 m2 situated in Bamban, Tarlac. In 1963, Punsalan mortgaged the land to PNB (Tarlac Branch) for P10,000.00, but for failure to pay said amount, the property was foreclosed on 16 December 1970. PNB (Tarlac Branch) was the highest bidder in said foreclosure proceedings. However, the bank secured title thereto only on 14 December 1977. In the meantime, in 1974, while the property was still in the alleged possession of Punsalan and with the alleged acquiescence of PNB (Tarlac Branch), and upon securing a permit from the Municipal Mayor, Punsalan constructed a warehouse on said property. Punsalan declared said warehouse for tax purposes for which he was issued Tax Declaration 5619. Punsalan then leased the warehouse to one Hermogenes Sibal for a period of 10 years starting January 1975. On 26 July 1978, a Deed of Sale was executed between PNB (Tarlac Branch) and Lacsamana over the property. This contract was amended on 31 July 1978, particularly to include in the sale, the building and improvement thereon. By virtue of said instruments, Lacsamana secured title over the property in her name (TCT 173744) as well as separate tax declarations for the land and building. On 22 November 1979, Punsalan commenced suit for "Annulment of Deed of Sale with Damages" against PNB and Lacsamana before the CFI Rizal, Branch XXXI, Quezon City, essentially impugning the validity of the sale of the building as embodied in the Amended Deed of Sale. The CFI dismissed the case on the ground of improper venue on 25 April 1980, finding that the “warehouse allegedly owned and construct ed by the plaintiff on the land of the PNB situated in the Municipality of Bamban, Province of Tarlac, which warehouse is an immovable property pursuant to Article 415 (1) of the New Civil Code; and, as such the action of the plaintiff is a real action affecting title to real property which, under Section 2, Rule 4 of the New Rules of Court, must be tried in the province where the pro perty or any part thereof lies.” Punsalan filed a Motion for Reconsideration of the Order, which the Court denied on 1 September 1980. Hence, the petition for Certiorari. The Supreme Court denied the petition without prejudice to the refilling of the case by Punsalan in the proper forum; with cost against the petitioner. 1. Buildings are always immovable under the Code Buildings are always immovable under the Code. A building treated separately from the land on which it stood is immovable property and the mere fact that the parties to a contract seem to have dealt with it separate and apart from the land on which it stood in no wise changed its character as immovable property. 2. Annulment or rescission of sale of real property does not operate to efface the objective of recovering real property Even if one does not directly seek the recovery of title or possession of the property, his action for annulment of sale and his claim for damages are closely intertwined with the issue of ownership of the building which, under the law, is considered immovable property, the recovery of which is petitioner's primary objective. The prevalent doctrine is that an action for the annulment or rescission of a sale of real property does not operate to efface the fundamental and prime objective and nature of the case, which is to recover said real property. It is a real action. 3. Lack of allegation of improper venue does not warrant case to proceed as it also require other indispensable party The contention that the case should proceed as the respondent failed to allege improper venue and, therefore, issues had already been joined, is untenable. An indispensable party exist besides the parties in the Amended Contract of Sale, the validity of which is being questioned. It would be futile to proceed with the case against one respondent alone.

Leung Yee v. Strong Machinery [G.R. No. L-11658. February 15, 1918.] First Division, Carson (J): 5 concur, 3 took no part. Facts: The "Compañia Agricola Filipina" bought rice-cleaning machinery from the machinery company, 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. The indebtedness secured by this instrument not having been paid when it fell due, 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 29 December 1913. On 14 January 1914, the "Compañia Agricola Filipina" executed a deed of sale of the land upon which the building stood to the machinery company, but this deed of sale, although executed in a public document, was not registered and made no reference to the building erected on the land and would appear to have been executed for the purpose of curing any defects which might be found to exist in the machinery company's title to the building under the sheriff's certificate of sale. The machinery company went into possession of the building at or about the time when this sale took place, that is to say, the month of December 1913, and it has continued in possession ever since. At or about the time when the chattel mortgage was executed in favor of the machinery company, 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 Leung Yee under a contract for the construction of the building. Upon the failure of the mortgagor 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 18 December 1914, and had the sheriff's certificate of sale duly registered in the land registry of the Province of Cavite. At the time when the execution was levied upon the building, the machinery company, which was in possession, filed with the sheriff a sworn statement setting up its claim of title and demanding the release of the property from the levy. Thereafter, upon demand of the sheriff, Leung Yee executed an indemnity bond in favor of the sheriff in the sum of P12,000, in reliance upon which the sheriff sold the property at public auction to the plaintiff, who was the highest bidder at the sheriff's sale. The current action was instituted to recover possession of the building from the machinery company. The Court gave judgment in favor of the machinery company, relying upon Article 1473 and the fact that the company had its title to the building registered prior to the date of the registry of plaintiff’s certificate. Hence the appeal. The Supreme Court affirmed the judgment with costs against the appellant. 1. Building separate from land does not affect character as real property; Registry of chattel mortgage does not affect character of the building and the machineries installed therein The Chattel Mortgage Law contemplates and makes provision for mortgages of personal property; and the sole purpose and object of the chattel mortgage registry is to provide for the registry of "Chattel mortgages," mortgages of personal property executed in the manner and form prescribed in the statute. The building of strong materials in which the machinery was installed was real property, and the mere fact that the parties seem to have dealt with it separate and apart from the land on which it stood in no wise changed its character as real property. It follows that neither the original registry in the chattel mortgage registry of the instrument purporting to be a chattel mortgage of the building and the machinery installed therein, nor the annotation in that registry of the sale of the mortgaged property, had any effect whatever so far as the building was concerned. 2. Possession before sheriff’s sale, not Article 1473 (on good faith), controlling as to ownership of property The ruling cannot be sustained on the ground of Article 1473, second paragraph, but on the ground that the agreed statement of facts discloses that neither the purchase of the building by plaintiff nor his inscription of the sheriff's certificate of sale in his favor was made in good faith, and that the 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 plaintiff. 3. Good faith an essential requisite of “inscription” of property in registry, even if not mentioned unlike in “possession” and “title”; Construction should not defeat the purpose of law Even if Article 1473 of the Civil Code require "good faith," in express terms, in relation to "possession" and "title," but contain no express requirement as to "good faith" in relation to the "inscription" of the property in the registry, it remains an essential requisite of registration as it could not have been the intention of the legislator to base the preferential right secured this article of the code upon an inscription of title in bad faith. Such an interpretation placed upon the language of this section would open wide the door to fraud and collusion. The public records cannot be converted into instruments of fraud and oppression by one who secures an inscription therein in bad faith. The force and effect given by law to an inscription in a public record presupposes the good faith of him who enters such inscription; and rights created by statute, which are predicated upon an inscription in a public registry, do not and cannot accrue under an inscription "in bad faith," to the benefit of the person who thus makes the inscription. 4. Construction of Article 1473 as to issue of good faith It is always to be understood on the basis of the good faith mentioned in the first paragraph; therefore, it having been found that the second purchasers who record their purchase had knowledge of the precious sale, the question is to be decided in accordance with the following paragraph. Although article 1473, in its second paragraph, provides that the title of conveyance of ownership of the real property that is first recorded in the registry shall have preference, this provision must always be understood on the basis of the good faith mentioned in the first paragraph; the legislator could not have wished to strike it out and to sanction bad faith, just to comply with a mere formality which, in given cases, does not obtain even in real disputes between third persons. 5. Bad faith: One cannot claim acquisition of title in good faith if knowledgeable of defect or lack of title One who purchases real estate with knowledge of a defect or lack of title in his vendor cannot claim that he has acquired title thereto in good faith as against the true owner of the land or of an interest therein; and the same rule must be applied to one who has knowledge of facts which should have put him upon such inquiry and investigation as might be necessary to acquaint him with the defects in the title of his vendor. A purchaser cannot close his eyes to facts which should put a reasonable man upon his guard, and then claim that he acted in good faith under the belief that there was no defect in the title of the vendor. His mere refusal to believe that such defect exists, or his willful closing of his eyes to the possibility of the existence of a defect in his vendor's title, will not make him an innocent purchaser for value, if it afterwards develops that the title was in fact defective, and it appears that he had such notice of the defect as would have led to its discovery had he acted with that measure of precaution which may reasonably be required of a prudent man in a like situation. 6. Test of good faith Good faith, or the lack of it, is in its last analysis a question of intention; but in ascertaining the intention by which one is actuated on a given occasion, the Court is necessarily controlled by the evidence as to the conduct and outward acts by which alone the inward motive may, with safety, be determined. So it is that "the honesty of intention," "the honest lawful intent," which constitutes good faith implies a "freedom from knowledge and circumstances which ought to put a person on inquiry," and so it is that proof of such knowledge overcomes the presumption of good faith in which the courts always indulge in the absence of proof to the contrary. "Good faith, or the want of it, is not a visible, tangible fact that can be seen or touched, but rather a state or condition of mind which can only be judged of by actual or fancied tokens or signs." (Wilder vs. Gilman, 55 Vt., 504, 505; Cf. Cardenas vs. Miller, 108 Cal., 250; Breaux-Renoudet, Cypress Lumber Co. vs. Shadel, 52 La. Ann., 2094-2098; Pinkerton Bros. Co. vs. Bromley, 119 Mich., 8, 10, 17.)

Bicerra v. Teneza [G.R. No. L-16218. November 29, 1962.] En Banc, Makalintal (J): 10 concur. Facts: The Bicerras are supposedly the owners of the house (PhP 20,000) built on a lot owned by them in Lagangilang, Abra; which the Tenezas forcibly demolished in January 1957, claiming to the owners thereof. The materials of the house were placed in the custody of the barrio lieutenant. The Bicerras filed a complaint claiming actual damages of P200, moral and consequential damages amounting to P600, and the costs. The CFI Abra dismissed the complaint claiming that the action was within the exclusive (original) jurisdiction of the Justice of the Peace Court of Lagangilang, Abra. The Supreme Court affirmed the order appealed. Having been admitted in forma pauperis, no costs were adjudged. 1. House is immovable property even if situated on land belonging to a different owner; Exception, when demolished A house is classified as immovable property by reason of its adherence to the soil on which it is built (Article 415, paragraph 1, Civil Code). This classification holds true regardless of the fact that the house may be situated on land belonging to a different owner. But once the house is demolished, as in this case, it ceases to exist as such and hence its character as an immovable likewise ceases. 2. Recovery of damages not exceeding P2,000 and involving no real property belong to the Justice of the Peace Court The complaint is for recovery of damages, the only positive relief prayed for. Further, a declaration of being the owners of the dismantled house and/or of the materials in no wise constitutes the relief itself which if granted by final judgment could be enforceable by execution, but is only incidental to the real cause of action to recover damages. As this is a case for recovery of damages where the demand does not exceed PhP 2,000 and that there is no real property litigated as the house has ceased to exist, the case is within the jurisdiction of the Justice of the Peace Court (as per Section 88, RA 296 as amended) and not the CFI (Section 44, id.)

Sponsor Documents

Or use your account on DocShare.tips

Hide

Forgot your password?

Or register your new account on DocShare.tips

Hide

Lost your password? Please enter your email address. You will receive a link to create a new password.

Back to log-in

Close