Property Cases Art 415

P R O P E R T Y A r t i c l e 4 1 5 P a g e | 1
Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-11658 February 15, 1918
LEUNG YEE, plaintiff-appellant,
vs.
FRAN L. STRONG MAC!"NERY COMPANY a#$ %. G.
&"LL"AMSON, defendants-appellees.
Booram and Mahoney for appellant.
Williams, Ferrier and SyCip for appellees.
CARSON, J.'
1. The (Co)*a+,a A-r,.o/a F,/,*,#a( bou-01 a .o#2,$erab/e
3ua#1,1y o4 r,.e-./ea#,#- )a.0,#ery compan f!om the
defendant machine! compan, and e5e.u1e$ a .0a11e/
)or1-a-e 10ereo# 1o 2e.ure *ay)e#1 of the pu!chase
p!ice.
". #t ,#./u$e$ ,# 10e )or1-a-e $ee$ 10e bu,/$,#- o4 21ro#-
)a1er,a/2 ,# 60,.0 10e )a.0,#ery 6a2 ,#21a//e$, 6,10ou1
a#y re4ere#.e 1o 10e /a#$ o# 60,.0 ,1 21oo$.
$. The indebtedness secu!ed b this inst!ument #o1 0a7,#-
bee# *a,$ 60e# ,1 4e// $ue, 10e )or1-a-e$ *ro*er1y 6a2
2o/$ by 10e 20er,44, in pu!suance of the te!ms of the
mo!t%a%e inst!ument, and &as bou%ht in b the machine!
compan. The mo!t%a%e &as !e%iste!ed in the chattel
mo!t%a%e !e%ist!, and the sale of the p!ope!t to the
machine! compan in satisfaction of the mo!t%a%e &as
annotated in the same !e%ist! on 'ecembe! "(, 1(1$.
). A fe& &ee*s the!eafte!, on o! about the 1)th of +anua!,
1(1), the (Co)*a+,a A-r,.o/a F,/,*,#a( e5e.u1e$ a $ee$
o4 2a/e o4 10e /a#$ u*o# 60,.0 10e bu,/$,#- 21oo$ 1o 10e
)a.0,#ery .o)*a#y, bu1 10,2 $ee$ o4 2a/e, a/10ou-0
e5e.u1e$ ,# a *ub/,. $o.u)e#1, 6a2 #o1 re-,21ere$. This
deed ma*es no !efe!ence to the buildin% e!ected on the land
and &ould appea! to have been e,ecuted fo! the pu!pose of
cu!in% an defects &hich mi%ht be found to e,ist in the
machine! compan-s title to the buildin% unde! the she!iff-s
ce!tificate of sale. T0e )a.0,#ery .o)*a#y 6e#1 ,#1o
*o22e22,o# o4 10e bu,/$,#- a1 or abou1 10e 1,)e 60e#
10,2 2a/e 1oo8 */a.e, 10a1 ,2 1o 2ay, 10e )o#10 o4
9e.e)ber, 191:, a#$ ,1 0a2 .o#1,#ue$ ,# *o22e22,o#
e7er 2,#.e.
.. A1 or abou1 10e 1,)e 60e# 10e .0a11e/ )or1-a-e 6a2
e5e.u1e$ ,# 4a7or o4 10e )a.0,#ery .o)*a#y, 10e
)or1-a-or, 10e (Co)*a+,a A-r,.o/a F,/,*,#a( e5e.u1e$
a#o10er )or1-a-e 1o 10e */a,#1,44 u*o# 10e bu,/$,#-,
2e*ara1e a#$ a*ar1 4ro) 10e /a#$ o# 60,.0 ,1 21oo$, 1o
2e.ure *ay)e#1 o4 10e ba/a#.e o4 ,12 ,#$eb1e$#e22 1o
10e */a,#1,44 u#$er a .o#1ra.1 4or 10e .o#21ru.1,o# o4 10e
bu,/$,#-. U*o# 10e 4a,/ure o4 10e )or1-a-or 1o *ay 10e
a)ou#1 o4 10e ,#$eb1e$#e22 2e.ure$ by 10e )or1-a-e,
10e */a,#1,44 2e.ure$ ;u$-)e#1 4or 10a1 a)ou#1, /e7,e$
e5e.u1,o# u*o# 10e bu,/$,#-, bou-01 ,1 ,# a1 10e 20er,44<2
2a/e o# or abou1 10e 1810 o4 9e.e)ber, 191=, a#$ 0a$
10e 20er,44<2 .er1,4,.a1e o4 10e 2a/e $u/y re-,21ere$ ,# 10e
/a#$ re-,21ry o4 10e Pro7,#.e o4 Ca7,1e.
6. A1 10e 1,)e 60e# 10e e5e.u1,o# 6a2 /e7,e$ u*o# 10e
bu,/$,#-, 10e $e4e#$a#1 )a.0,#ery .o)*a#y, 60,.0 6a2
,# *o22e22,o#, 4,/e$ 6,10 10e 20er,44 a 26or# 21a1e)e#1
2e11,#- u* ,12 ./a,) o4 1,1/e a#$ $e)a#$,#- 10e re/ea2e o4
10e *ro*er1y 4ro) 10e /e7y. T0erea41er, u*o# $e)a#$ o4
10e 20er,44, 10e */a,#1,44 e5e.u1e$ a# ,#$e)#,1y bo#$ ,#
4a7or o4 10e 20er,44 ,# 10e 2u) o4 P1>,???, ,# re/,a#.e
u*o# 60,.0 10e 20er,44 2o/$ 10e *ro*er1y a1 *ub/,.
au.1,o# 1o 10e */a,#1,44, 60o 6a2 10e 0,-0e21 b,$$er a1
10e 20er,44<2 2a/e.
/. This a.1,o# 6a2 ,#21,1u1e$ by 10e */a,#1,44 1o re.o7er
*o22e22,o# o4 10e bu,/$,#- 4ro) 10e )a.0,#ery
.o)*a#y.
8. T0e 1r,a/ ;u$-e, re/y,#- u*o# 10e 1er)2 o4 ar1,./e 1=@: o4
10e C,7,/ Co$e, -a7e ;u$-)e#1 ,# 4a7or o4 10e )a.0,#ery
.o)*a#y, o# 10e -rou#$ 10a1 10e .o)*a#y 0a$ ,12 1,1/e
1o 10e bu,/$,#- re-,21ere$ *r,or 1o 10e $a1e o4 re-,21ry o4
10e */a,#1,44<2 .er1,4,.a1e.
(. A!ticle 1)/$ of the Civil Code is as follo&s0
#f the same thin% should have been sold to diffe!ent
vendees, the o&ne!ship shall be t!ansfe! to the pe!son &ho
ma have the fi!st ta*en possession the!eof in %ood faith, if it
should be pe!sonal p!ope!t.
1hould it be !eal p!ope!t, ,1 20a// be/o#- 1o 10e *er2o#
a.3u,r,#- ,1 60o 4,r21 re.or$e$ ,1 ,# 10e re-,21ry.
1hould the!e be no ent!, the p!ope!t shall belon% to the
pe!son &ho fi!st too* possession of it in %ood faith, and, in
the absence the!eof, to the pe!son &ho p!esents the oldest
title, p!ovided the!e is %ood faith.
12. The !e%ist! he! !efe!!ed to is of cou!se the !e%ist! of !eal
p!ope!t, and it must be appa!ent that the annotation o!
insc!iption of a deed of sale of !eal p!ope!t in a chattel
mo!t%a%e !e%ist! cannot be %iven the le%al effect of an
insc!iption in the !e%ist! of !eal p!ope!t. B its e,p!ess
te!ms, the Chattel Mo!t%a%e 3a& contemplates and ma*es
p!ovision fo! mo!t%a%es of pe!sonal p!ope!t4 and the sole
pu!pose and ob5ect of the chattel mo!t%a%e !e%ist! is to
p!ovide fo! the !e%ist! of 6Chattel mo!t%a%es,6 that is to sa,
mo!t%a%es of pe!sonal p!ope!t e,ecuted in the manne! and
fo!m p!esc!ibed in the statute. T0e bu,/$,#- o4 21ro#-
)a1er,a/2 ,# 60,.0 10e r,.e-./ea#,#- )a.0,#ery 6a2
,#21a//e$ by 10e (Co)*a+,a A-r,.o/a F,/,*,#a( 6a2 rea/
*ro*er1y, a#$ 10e )ere 4a.1 10a1 10e *ar1,e2 2ee) 1o 0a7e
$ea/1 6,10 ,1 2e*ara1e a#$ a*ar1 4ro) 10e /a#$ o# 60,.0 ,1
21oo$ ,# #o 6,2e .0a#-e$ ,12 .0ara.1er a2 rea/ *ro*er1y.
#t follo&s that neithe! the o!i%inal !e%ist! in the chattel
mo!t%a%e of the buildin% and the machine! installed the!ein,
not the annotation in that !e%ist! of the sale of the
mo!t%a%ed p!ope!t, had an effect &hateve! so fa! as the
buildin% &as conce!ned.
11. 7e conclude that the !ulin% in favo! of the machine!
compan cannot be sustained on the %!ound assi%ned b
the t!ial 5ud%e. 7e a!e of opinion, ho&eve!, that the
;u$-)e#1 )u21 be 2u21a,#e$ o# 10e -rou#$ 10a1 10e
a-ree$ 21a1e)e#1 o4 4a.12 ,# 10e .our1 be/o6 $,2./o2e2
10a1 #e,10er 10e *ur.0a2e o4 10e bu,/$,#- by 10e */a,#1,44
#or 0,2 ,#2.r,*1,o# o4 10e 20er,44<2 .er1,4,.a1e o4 2a/e ,#
0,2 4a7or 6a2 )a$e ,# -oo$ 4a,10, a#$ 10a1 10e
)a.0,#ery .o)*a#y )u21 be 0e/$ 1o be 10e o6#er o4 10e
*ro*er1y u#$er 10e 10,r$ *ara-ra*0 o4 10e abo7e .,1e$
ar1,./e o4 10e .o$e, ,1 a**ear,#- 10a1 10e .o)*a#y 4,r21
1oo8 *o22e22,o# o4 10e *ro*er1yA a#$ 4ur10er, 10a1 10e
bu,/$,#- a#$ 10e /a#$ 6ere 2o/$ 1o 10e )a.0,#ery
.o)*a#y /o#- *r,or 1o 10e $a1e o4 10e 20er,44<2 2a/e 1o
10e */a,#1,44.
1". #t has been su%%ested that since the p!ovisions of a!ticle
1)/$ of the Civil Code !e8ui!e 6%ood faith,6 in e,p!ess te!ms,
in !elation to 6possession6 and 6title,6 but contain no e,p!ess
!e8ui!ement as to 6%ood faith6 in !elation to the 6insc!iption6
of the p!ope!t on the !e%ist!, it must be p!esumed that
%ood faith is not an essential !e8uisite of !e%ist!ation in o!de!
that it ma have the effect contemplated in this a!ticle. 7e
cannot a%!ee &ith this contention. #t could not have been the
intention of the le%islato! to base the p!efe!ential !i%ht
secu!ed unde! this a!ticle of the code upon an insc!iption of
title in bad faith. 1uch an inte!p!etation placed upon the
lan%ua%e of this section &ould open &ide the doo! to f!aud
and collusion. The public !eco!ds cannot be conve!ted into
inst!uments of f!aud and opp!ession b one &ho secu!es an
insc!iption the!ein in bad faith. The fo!ce and effect %iven b
la& to an insc!iption in a public !eco!d p!esupposes the %ood
faith of him &ho ente!s such insc!iption4 and !i%hts c!eated
b statute, &hich a!e p!edicated upon an insc!iption in a
public !e%ist!, do not and cannot acc!ue unde! an
insc!iption 6in bad faith,6 to the benefit of the pe!son &ho
thus ma*es the insc!iption.
Const!uin% the second pa!a%!aph of this a!ticle of the code, the
sup!eme cou!t of 1pain held in its sentencia of the 1$th of Ma, 1(29,
that0
This !ule is al&as to be unde!stood on the basis of the %ood
faith mentioned in the fi!st pa!a%!aph4 the!efo!e, it havin%
been found that the second pu!chase!s &ho !eco!d thei!
pu!chase had *no&led%e of the p!evious sale, the 8uestion
is to be decided in acco!dance &ith the follo&in% pa!a%!aph.
:Note ", a!t. 1)/$, Civ. Code, Medina and Ma!anon ;1(11<
edition.=
Althou%h a!ticle 1)/$, in its second pa!a%!aph, p!ovides that
the title of conveance of o&ne!ship of the !eal p!ope!t that
is fi!st !eco!ded in the !e%ist! shall have p!efe!ence, this
p!ovision must al&as be unde!stood on the basis of the
%ood faith mentioned in the fi!st pa!a%!aph4 the le%islato!
could not have &ished to st!i*e it out and to sanction bad
faith, 5ust to compl &ith a me!e fo!malit &hich, in %iven
cases, does not obtain even in !eal disputes bet&een thi!d
pe!sons. :Note ", a!t. 1)/$, Civ. Code, issued b the
publishe!s of the La Revista de los Tribunales, 1$th edition.=
The a%!eed statement of facts clea!l discloses that the plaintiff, &hen
he bou%ht the buildin% at the she!iff-s sale and insc!ibed his title in the
land !e%ist!, &as dul notified that the machine! compan had
bou%ht the buildin% f!om plaintiff-s 5ud%ment debto!4 that it had %one
into possession lon% p!io! to the she!iff-s sale4 and that it &as in
possession at the time &hen the she!iff e,ecuted his lev. The
e,ecution of an indemnit bond b the plaintiff in favo! of the she!iff,
afte! the machine! compan had filed its s&o!n claim of o&ne!ship,
leaves no !oom fo! doubt in this !e%a!d. >avin% bou%ht in the buildin%
at the she!iff-s sale &ith full *no&led%e that at the time of the lev and
sale the buildin% had al!ead been sold to the machine! compan b
the 5ud%ment debto!, the plaintiff cannot be said to have been a
pu!chase! in %ood faith4 and of cou!se, the subse8uent insc!iption of
the she!iff-s ce!tificate of title must be held to have been tainted &ith
the same defect.
Pe!haps &e should ma*e it clea! that in holdin% that the insc!iption of
the she!iff-s ce!tificate of sale to the plaintiff &as not made in %ood
faith, &e should not be unde!stood as 8uestionin%, in an &a, the
%ood faith and %enuineness of the plaintiff-s claim a%ainst the
6Compa?ia A%!icola @ilipina.6 The t!uth is that both the plaintiff and the
defendant compan appea! to have had 5ust and !i%hteous claims
a%ainst thei! common debto!. No c!iticism can p!ope!l be made of the
e,e!cise of the utmost dili%ence b the plaintiff in asse!tin% and
e,e!cisin% his !i%ht to !ecove! the amount of his claim f!om the estate
of the common debto!. 7e a!e st!on%l inclined to believe that in
p!ocu!in% the lev of e,ecution upon the facto! buildin% and in buin%
it at the she!iff-s sale, he conside!ed that he &as doin% no mo!e than
he had a !i%ht to do unde! all the ci!cumstances, and it is hi%hl
possible and even p!obable that he thou%ht at that time that he &ould
be able to maintain his position in a contest &ith the machine!
compan. The!e &as no collusion on his pa!t &ith the common debto!,
and no thou%ht of the pe!pet!ation of a f!aud upon the !i%hts of
anothe!, in the o!dina! sense of the &o!d. >e ma have hoped, and
doubtless he did hope, that the title of the machine! compan &ould
not stand the test of an action in a cou!t of la&4 and if late!
developments had confi!med his unfounded hopes, no one could
8uestion the le%alit of the p!op!iet of the cou!se he adopted.
But it appea!in% that he had full *no&led%e of the machine!
compan-s claim of o&ne!ship &hen he e,ecuted the indemnit bond
and bou%ht in the p!ope!t at the she!iff-s sale, and it appea!in% fu!the!
that the machine! compan-s claim of o&ne!ship &as &ell founded, he
cannot be said to have been an innocent pu!chase! fo! value. >e too*
the !is* and must stand b the conse8uences4 and it is in this sense
that &e find that he &as not a pu!chase! in %ood faith.
Ane &ho pu!chases !eal estate &ith *no&led%e of a defect o! lac* of
title in his vendo! cannot claim that he has ac8ui!ed title the!eto in
%ood faith as a%ainst the t!ue o&ne! of the land o! of an inte!est
the!ein4 and the same !ule must be applied to one &ho has *no&led%e
of facts &hich should have put him upon such in8ui! and investi%ation
as mi%ht be necessa! to ac8uaint him &ith the defects in the title of
his vendo!. A pu!chase! cannot close his ees to facts &hich should
put a !easonable man upon his %ua!d, and then claim that he acted in
%ood faith unde! the belief that the!e &as no defect in the title of the
vendo!. >is me!e !efusal to believe that such defect e,ists, o! his &illful
closin% of his ees to the possibilit of the e,istence of a defect in his
vendo!-s title, &ill not ma*e him an innocent pu!chase! fo! value, if
afte!&a!ds develops that the title &as in fact defective, and it appea!s
that he had such notice of the defects as &ould have led to its
discove! had he acted &ith that measu!e of p!ecaution &hich ma
!easonabl be ac8ui!ed of a p!udent man in a li*e situation. Bood faith,
o! lac* of it, is in its analsis a 8uestion of intention4 but in asce!tainin%
the intention b &hich one is actuated on a %iven occasion, &e a!e
necessa!il cont!olled b the evidence as to the conduct and out&a!d
acts b &hich alone the in&a!d motive ma, &ith safet, be
dete!mined. 1o it is that 6the honest of intention,6 6the honest la&ful
intent,6 &hich constitutes %ood faith implies a 6f!eedom f!om
*no&led%e and ci!cumstances &hich ou%ht to put a pe!son on in8ui!,6
and so it is that p!oof of such *no&led%e ove!comes the p!esumption
of %ood faith in &hich the cou!ts al&as indul%e in the absence of p!oof
to the cont!a!. 6Bood faith, o! the &ant of it, is not a visible, tan%ible
fact that can be seen o! touched, but !athe! a state o! condition of mind
&hich can onl be 5ud%ed of b actual o! fancied to*ens o! si%ns.6
:7ilde! vs. Bilman, .. Ct., .2), .2.4 Cf. Ca!denas 3umbe!
Co. vs. 1hadel, ." 3a. Ann., "2()-"2(94 Pin*e!ton B!os.
Co. vs. B!omle, 11( Mich., 9, 12, 1/.=
7e conclude that upon the %!ounds he!ein set fo!th the disposin% pa!t
of the decision and 5ud%ment ente!ed in the cou!t belo& should be
affi!med &ith costs of this instance a%ainst the appellant. 1o o!de!ed.
Arellano, C.., ohnson, Araullo, Street and Mal!olm, ., concu!.
Torres, Avan!e"a and Fisher, ., too* no pa!t.
SUPREME COURT
Manila
EN BANC
G.R. No. L-=15?6 Mar.0 >5, 19:5
P!"L"PP"NE REF"N"NG CO., "NC., plaintiff-appellant,
vs.
FRANC"SCO %ARBUE, %OSE COROM"NAS, a#$ ACO"T"D E
CO., defendants.
%OSE COROM"NAS, ,# 0,2 .a*a.,1y a2 a22,-#ee o4 10e e21a1e o4
10e ,#2o/7e#1 Fra#.,2.o %ar3ue,appellee.
Thos. #. $n%alls, &i!ente 'elae( and )eWitt, 'er*ins and Brady for
appellant.
).#. M!&ean and &i!ente L. Faelnar for appellee.
MALCOLM, J.:
@i!st of all the !eason &h the case has been decided b the cou!t in
ban! needs e,planation. A motion &as p!esented b counsel fo! the
appellant in &hich it &as as*ed that the case be hea!d and dete!mined
b the cou!t sittin% in ban! because the admi!alt 5u!isdiction of the
cou!t &as involved, and this motion &as %!anted in !e%ula! cou!se. An
fu!the! investi%ation it appea!s that this &as e!!o!. The me!e mo!t%a%e
of a ship is a cont!act ente!ed into b the pa!ties to it &ithout !efe!ence
to navi%ation o! pe!ils of the sea, and does not, the!efo!e, confe!
admi!alt 5u!isdiction. :Bo%a!t vs. 1teamboat +ohn +a ;19.)<, 1/ >o&.,
$((.=
Comin% no& to the me!its, it appea!s that on va!in% dates the
Philippine Refinin% Co., #nc., and @!ancisco +a!8ue e,ecuted th!ee
mo!t%a%es on the moto! vessels 'andan and +ara%o(a. These
documents &e!e !eco!ded in the !eco!d of t!ansfe!s and incumb!ances
of vessels fo! the po!t of Cebu and each &as the!ein denominated a
6chattel mo!t%a%e6. Neithe! of the fi!st t&o mo!t%a%es had appended
an affidavit of %ood faith. The thi!d mo!t%a%e contained such an
affidavit, but this mo!t%a%e &as not !e%iste!ed in the customs house
until Ma 1/, 1($", o! &ithin the pe!iod of thi!t das p!io! to the
commencement of insolvenc p!oceedin%s a%ainst @!ancisco +a!8ue4
also, &hile the last mentioned mo!t%a%e &as subsc!ibed b @!ancisco
+a!8ue and M. N. B!in*, the!e &as nothin% to disclose in &hat capacit
the said M. N. B!in* si%ned. A fou!th mo!t%a%e &as e,ecuted b
@!ancisco +a!8ue and Ramon AboitiD on the moto!ship +ara%o(a and
&as ente!ed in the chattel mo!t%a%e !e%ist! of the !e%iste! of deeds on
Ma 1", 1($", o! a%ain &ithin the thi!t-da pe!iod befo!e the institution
of insolvenc p!oceedin%s. These p!oceedin%s &e!e be%un on +une ",
1($", &hen a petition &as filed &ith the Cou!t of @i!st #nstance of Cebu
in &hich it &as p!aed that @!ancisco +a!8ue be decla!ed an insolvent
debto!, &hich soon the!eafte! &as %!anted, &ith the !esult that an
assi%nment of all the p!ope!ties of the insolvent &as e,ecuted in favo!
of +ose Co!ominas.
An these facts, +ud%e +ose M. >ontive!os declined to o!de! the
fo!eclosu!e of the mo!t%a%es, but on the cont!a! sustained the special
defenses of fatal defectiveness of the mo!t%a%es. #n so doin% &e
believe that the t!ial 5ud%e acted advisedl.
Fe22e/2 are .o#2,$ere$ *er2o#a/ *ro*er1y u#$er 10e .,7,/ /a6.
:Code of Comme!ce, a!ticle .9..= S,),/ar/y u#$er 10e .o))o# /a6,
7e22e/2 are *er2o#a/ *ro*er1y a/10ou-0 o..a2,o#a//y re4erre$ 1o
a2 a *e.u/,ar 8,#$ o4 *er2o#a/ *ro*er1y. :Renolds vs. Nielson
;1(2$<, (E Am. Rep., 12224 Atlantic Ma!itime Co vs. Cit of Blouceste!
;1(1/<, 11/ N. E., (").= S,#.e 10e 1er) (*er2o#a/ *ro*er1y(
,#./u$e2 7e22e/2, 10ey are 2ub;e.1 1o )or1-a-e a-reeab/y 1o 10e
*ro7,2,o#2 o4 10e C0a11e/ Mor1-a-e La6. :Act No. 1.29, section ".=
#ndeed, ,1 0a2 0ere1o4ore bee# a..e*1e$ 6,10ou1 $,2.u22,o# 10a1 a
)or1-a-e o# a 7e22e/ ,2 ,# #a1ure a .0a11e/ )or1-a-e.
:McMic*in% vs. Banco Espa?ol-@ilipino ;1(2(<, 1$ Phil., )"(4 A!!oo vs.
Fu de 1ane ;1($2<, .) Phil., .11.= T0e o#/y $,44ere#.e be16ee# a
.0a11e/ )or1-a-e o4 a 7e22e/ a#$ a .0a11e/ )or1-a-e o4 o10er
*er2o#a/1y ,2 10a1 ,1 ,2 #o1 #o6 #e.e22ary 4or a .0a11e/ )or1-a-e
o4 a 7e22e/ 1o be #o1e$ # 10e re-,21ry o4 10e re-,21er o4 $ee$2, bu1
,1 ,2 e22e#1,a/ 10a1 a re.or$ o4 $o.u)e#12 a44e.1,#- 10e 1,1/e 1o a
7e22e/ be e#1ere$ ,# 10e re.or$ o4 10e Co//e.1or o4 Cu21o)2 a1 10e
*or1 o4 e#1ry. :Rubiso and Belito vs. Rive!a ;1(1/<, $/ Phil., /"4
A!!oo vs. Fu de 1ane, supra.G O10er6,2e a )or1-a-e o# a 7e22e/ ,2
-e#era//y /,8e o10er .0a11e/ )or1-a-e2 a2 1o ,12 re3u,2,1e2 a#$
7a/,$,1y. :.9 C.+., (".=
The Chattell Mo!t%a%e 3a& in its section ., in desc!ibin% &hat shall be
deemed sufficient to constitute a %ood chattel mo!t%a%e, includes the
!e8ui!ement of an affidavit of %ood faith appended to the mo!t%a%e and
!eco!ded the!e&ith. The absence of the affidavit vitiates a mo!t%a%e as
a%ainst c!edito!s and subse8uent encumb!ance!s. :Bibe!son vs. A. N.
+u!eidini B!os. ;1(""<, )) Phil., "1E4 Benedicto de Ta!!osa vs. @. M.
Fap Tico G Co. and P!ovincial 1he!iff of Accidental Ne%!os ;1("$<, )E
Phil., /.$.= As a conse8uence a chattel mo!t%a%e of a vessel &he!ein
the affidavit of %ood faith !e8ui!ed b the Chattel Mo!t%a%e 3a& is
lac*in%, is unenfo!ceable a%ainst thi!d pe!sons.
#n effect appellant as*s us to find that the documents appea!in% in the
!eco!d do not constitute chattel mo!t%a%es o! at least to %loss ove! the
failu!e to include the affidavit of %ood faith made a !e8uisite fo! a %ood
chattel mo!t%a%e b the Chattel Mo!t%a%e 3a&. Counsel &ould fu!the!
have us dis!e%a!d a!ticle .9. of the Code of Comme!ce, but no !eason
is sho&n fo! holdin% this a!ticle not in fo!ce. Counsel &ould fu!the!
have us !evise doct!ines he!etofo!e announced in a se!ies of cases,
&hich it is not desi!able to do since those p!inciples &e!e confi!med
afte! due libe!ation and constitute a pa!t of the comme!cial la& of the
Philippines. And finall counsel &ould have us ma*e !ulin%s on points
enti!el fo!ei%n to the issues of the case. As neithe! the facts no! the
la& !emains in doubt, the seven assi%ned e!!o!s &ill be ove!!uled.
+ud%ment affi!med, the costs of this instance to be paid b the
appellant.
Avan!e"a, C.., Street, &illa,Real, Abad Santos, -ull, &i!*ers,
$mperial, Butte, and #oddard, ., !on!ur.
SUPREME COURT
Manila
EN BANC
G.R. No. L-=16=: %u/y :1, 19:5
C.!. CERENOTTER, plaintiff-appellant,
vs.
CU UN%"ENG E !"%OS, YE TONG L"N F"RE AN9 MAR"NE
"NSURANCE COMPANY, MACALACAT SUGAR COMPANY a#$
T!E PROF"NCE S!ER"FF OF PAMPANGA, defendants-appellees.
Briones and Martine( for appellant.
Araneta, +ara%o(a and Araneta for appellees Cu .n/ien% e -i/os.
0o appearan!e for the other appellees.
F"LLA-REAL, J.:
This is an appeal ta*en b the plaintiff, B.>. Be!*en*otte!, f!om the
5ud%ment of the Cou!t of @i!st #nstance of Manila, dismissin% said
plaintiff-s complaint a%ainst Cu Hn5ien%s e >i5os et al., &ith costs.
#n suppo!t of his appeal, the appellant assi%ns si, alle%ed e!!o!s as
committed b the t!ial cou!t in its decision in 8uestion &hich &ill be
discussed in the cou!se of this decision.
The fi!st 8uestion to be decided in this appeal, &hich is !aised in the
fi!st assi%nment of alle%ed e!!o!, is &hethe! o! not the lo&e! cou!t e!!ed
in decla!in% that 10e a$$,1,o#a/ )a.0,#ery a#$ e3u,*)e#1, a2
,)*ro7e)e#1 ,#.or*ora1e$ 6,10 10e .e#1ra/ are 2ub;e.1 1o 10e
)or1-a-e $ee$ e,ecuted in favo! of the defendants Cu Hn5ien% e
>i5os.
#t is admitted b the pa!ties that on Ap!il "E, 1("E, the Mabalacat
1u%a! Co., #nc., o&ne! of the su%a! cent!al situated in Mabalacat,
Pampan%a, obtained f!om the defendants, Cu Hn5ien% e >i5os, a loan
secu!ed b a fi!st mo!t%a%e constituted on t&o pa!cels and land 6&ith
all its buildin%s, imp!ovements, su%a!-cane mill, steel !ail&a,
telephone line, appa!atus, utensils and &hateve! fo!ms pa!t o! is
necessa! complement of said su%a!-cane mill, steel !ail&a,
telephone line, no& e,istin% o! that ma in the futu!e e,ist is said lots.6
An Actobe! ., 1("E, sho!tl afte! said mo!t%a%e had been constituted,
the Mabalacat 1u%a! Co., #nc., decided to inc!ease the capacit of its
su%a! cent!al b buin% additional machine! and e8uipment, so that
instead of millin% 1.2 tons dail, it could p!oduce ".2. The estimated
cost of said additional machine! and e8uipment &as app!o,imatel
P122,222. #n o!de! to ca!! out this plan, B.A. B!een, p!esident of said
co!po!ation, p!oposed to the plaintiff, B.>. Be!*en*otte!, to advance
the necessa! amount fo! the pu!chase of said machine! and
e8uipment, p!omisin% to !eimbu!se him as soon as he could obtain an
additional loan f!om the mo!t%a%ees, the he!ein defendants Cu Hn5ien%
e >i5os. >avin% a%!eed to said p!oposition made in a lette! dated
Actobe! ., 1("E :E,hibit E=, B.>. Be!*en*otte!, on Actobe! (th of the
same ea!, delive!ed the sum of P1,/12 to B.A. B!een, p!esident of the
Mabalacat 1u%a! Co., #nc., the total amount supplied b him to said
B.A. B!een havin% been P".,/.2. @u!the!mo!e, B.>. Be!*en*otte! had
a c!edit of P"",222 a%ainst said co!po!ation fo! unpaid sala!. 7ith the
loan of P".,/.2 and said c!edit of P"",222, the Mabalacat 1u%a! Co.,
#nc., pu!chased the additional machine! and e8uipment no& in
liti%ation.
An +une 12, 1("/, B.A. B!een, p!esident of the Mabalacat 1u%a! Co.,
#nc., applied to Cu Hn5ien% e >i5os fo! an additional loan of P/.,222
offe!in% as secu!it the additional machine! and e8uipment ac8ui!ed
b said B.A. B!een and installed in the su%a! cent!al afte! the
e,ecution of the o!i%inal mo!t%a%e deed, on Ap!il "/, 1("/, to%ethe!
&ith &hateve! additional e8uipment ac8ui!ed &ith said loan. B.A.
B!een failed to obtain said loan.
A!ticle 19// of the Civil Code p!ovides as follo&s.
ART. 19//. A mo!t%a%e includes all natu!al accessions,
imp!ovements, %!o&in% f!uits, and !ents not collected &hen
the obli%ation falls due, and the amount of an indemnities
paid o! due the o&ne! b the insu!e!s of the mo!t%a%ed
p!ope!t o! b vi!tue of the e,e!cise of the po&e! of eminent
domain, &ith the decla!ations, amplifications, and limitations
established b la&, &hethe! the estate continues in the
possession of the pe!son &ho mo!t%a%ed it o! &hethe! it
passes into the hands of a thi!d pe!son.
#n the case of Bis!hoff vs. 'omar and Compa"ia #eneral de
Taba!os :1" Phil., E(2=, cited &ith app!oval in the case of Cea vs.
&illanueva :19 Phil., .$9=, this cou!t laid sho&n the follo&in% doct!ine0
1. REA3TF4 MARTBABE A@ REA3 E1TATE #NC3H'E1
#MPRACEMENT1 AN' @#ITHRE1. J #t is a !ule,
established b the Civil Code and also b the Mo!t%a%e 3a&,
&ith &hich the decisions of the cou!ts of the Hnited 1tates
a!e in acco!d, that in a mo!t%a%e of !eal estate, the
imp!ovements on the same a!e included4 the!efo!e, all
ob5ects pe!manentl attached to a mo!t%a%ed buildin% o!
land, althou%h the ma have been placed the!e afte! the
mo!t%a%e &as constituted, a!e also included. :A!ts. 112 and
111 of the Mo!t%a%e 3a&, and 19// of the Civil Code4
decision of H.1. 1up!eme Cou!t in the matte! of Roal
#nsu!ance Co. vs. R. Mille!, li8uidato!, and Amadeo ;"E 1up.
Ct. Rep., )E4 1(( H.1., $.$<.=
". $).4 $).4 #NC3H1#AN AR EIC3H1#AN A@ MAC>#NERF,
ETC. J #n o!de! that it ma be unde!stood that the
machine! and othe! ob5ects placed upon and used in
connection &ith a mo!t%a%ed estate a!e e,cluded f!om the
mo!t%a%e, &hen it &as stated in the mo!t%a%e that the
imp!ovements, buildin%s, and machine! that e,isted the!eon
&e!e also comp!ehended, it is indispensable that the
e,clusion the!eof be stipulated bet&een the cont!actin%
pa!ties.
T0e a**e//a#1 .o#1e#$2 10a1 10e ,#21a//a1,o# o4 10e )a.0,#ery a#$
e3u,*)e#1 ./a,)e$ by 0,) ,# 10e 2u-ar .e#1ra/ o4 10e Maba/a.a1
Su-ar Co)*a#y, "#.., 6a2 #o1 *er)a#e#1 ,# .0ara.1er inasmuch as
B.A. B!een, in p!oposin% to him to advance the mone fo! the
pu!chase the!eof, made it appea! in the lette!, E,hibit E, that in case
B.A. B!een should fail to obtain an additional loan f!om the defendants
Cu Hn5ien% e >i5os, said machine! and e8uipment &ould become
secu!it the!efo!, said B.A. B!een bindin% himself not to mo!t%a%e no!
encumbe! them to anbod until said plaintiff be full !eimbu!sed fo!
the co!po!ation-s indebtedness to him.
Hpon ac8ui!in% the machine! and e8uipment in 8uestion &ith mone
obtained as loan f!om the plaintiff-appellant b B.A. B!een, as
p!esident of the Mabalacat 1u%a! Co., #nc., the latte! became o&ne! of
said machine! and e8uipment, othe!&ise B.A. B!een, as such
p!esident, could not have offe!ed them to the plaintiff as secu!it fo! the
pament of his c!edit.
Ar1,./e ::=, *ara-ra*0 5, o4 10e C,7,/ Co$e -,7e2 10e .0ara.1er o4
rea/ *ro*er1y 1o ()a.0,#ery, /,3u,$ .o#1a,#er2, ,#21ru)e#12 or
,)*/e)e#12 ,#1e#$e$ by 10e o6#er o4 a#y bu,/$,#- or /a#$ 4or u2e
,# .o##e.1,o# 6,10 a#y ,#$u21ry or 1ra$e be,#- .arr,e$ o# 10ere,#
a#$ 60,.0 are e5*re22/y a$a*1e$ 1o )ee1 10e re3u,re)e#12 o4
2u.0 1ra$e or ,#$u21ry.
"4 10e ,#21a//a1,o# o4 10e )a.0,#ery a#$ e3u,*)e#1 ,# 3ue21,o# ,#
10e .e#1ra/ o4 10e Maba/a.a1 Su-ar Co., "#.., ,# /,eu o4 10e o10er o4
/e22 .a*a.,1y e5,21,#- 10ere,#, 4or ,12 2u-ar ,#$u21ry, .o#7er1e$
10e) ,#1o rea/ *ro*er1y by rea2o# o4 10e,r *ur*o2e, ,1 .a##o1 be
2a,$ 10a1 10e,r ,#.or*ora1,o# 10ere6,10 6a2 #o1 *er)a#e#1 ,#
.0ara.1er be.au2e, a2 e22e#1,a/ a#$ *r,#.,*a/ e/e)e#12 o4 a 2u-ar
.e#1ra/, 6,10ou1 10e) 10e 2u-ar .e#1ra/ 6ou/$ be u#ab/e 1o
4u#.1,o# or .arry o# 10e ,#$u21r,a/ *ur*o2e 4or 60,.0 ,1 6a2
e21ab/,20e$. "#a2)u.0 a2 10e .e#1ra/ ,2 *er)a#e#1 ,# .0ara.1er,
10e #e.e22ary )a.0,#ery a#$ e3u,*)e#1 ,#21a//e$ 4or .arry,#- o#
10e 2u-ar ,#$u21ry 4or 60,.0 ,1 0a2 bee# e21ab/,20e$ )u21
#e.e22ar,/y be *er)a#e#1.
Fur10er)ore, 10e 4a.1 10a1 C.A. Gree# bou#$ 0,)2e/4 1o 10e
*/a,#1,44 C.!. Cer8e#8o11er 1o 0o/$ 2a,$ )a.0,#ery a#$ e3u,*)e#1
a2 2e.ur,1y 4or 10e *ay)e#1 o4 10e /a11er<2 .re$,1 a#$ 1o re4ra,#
4ro) )or1-a-,#- or o10er6,2e e#.u)ber,#- 10e) u#1,/
Cer8e#8o11er 0a2 bee# 4u//y re,)bur2e$ 10ere4or, ,2 #o1
,#.o)*a1,b/e 6,10 10e *er)a#e#1 .0ara.1er o4 10e ,#.or*ora1,o# o4
2a,$ )a.0,#ery a#$ e3u,*)e#1 6,10 10e 2u-ar .e#1ra/ o4 10e
Maba/a.a1 Su-ar Co., "#.., a2 #o10,#- .ou/$ *re7e#1 C.A. Gree#
4ro) -,7,#- 10e) a2 2e.ur,1y a1 /ea21 u#$er a 2e.o#$ )or1-a-e.
As to the alle%ed sale of said machine! and e8uipment to the plaintiff
and appellant afte! the had been pe!manentl inco!po!ated &ith su%a!
cent!al of the Mabalacat 1u%a! Co., #nc., and &hile the mo!t%a%e
constituted on said su%a! cent!al to Cu Hn5ien% e >i5os !emained in
fo!ce, onl the !i%ht of !edemption of the vendo! Mabalacat 1u%a! Co.,
#nc., in the su%a! cent!al &ith &hich said machine! and e8uipment had
been inco!po!ated, &as t!ansfe!!ed the!eb, sub5ect to the !i%ht of the
defendants Cu Hn5ien% e >i5os unde! the fi!st mo!t%a%e.
For 10e 4ore-o,#- .o#2,$era1,o#2, 6e are o4 10e o*,#,o# a#$ 2o
0o/$' H1G T0a1 10e ,#21a//a1,o# o4 a )a.0,#ery a#$ e3u,*)e#1 ,# a
)or1-a-e$ 2u-ar .e#1ra/, ,# /,eu o4 a#o10er o4 /e22 .a*a.,1y, 4or
10e *ur*o2e o4 .arry,#- ou1 10e ,#$u21r,a/ 4u#.1,o#2 o4 10e /a11er
a#$ ,#.rea2,#- *ro$u.1,o#, .o#21,1u1e2 a *er)a#e#1 ,)*ro7e)e#1
o# 2a,$ 2u-ar .e#1ra/ a#$ 2ub;e.12 2a,$ )a.0,#ery a#$ e3u,*)e#1
1o 10e )or1-a-e .o#21,1u1e$ 10ereo# Har1,./e 18@@, C,7,/ Co$eGA H>G
10a1 10e 4a.1 10a1 10e *ur.0a2er o4 10e #e6 )a.0,#ery a#$
e3u,*)e#1 0a2 bou#$ 0,)2e/4 1o 10e *er2o# 2u**/y,#- 0,) 10e
*ur.0a2e )o#ey 1o 0o/$ 10e) a2 2e.ur,1y 4or 10e *ay)e#1 o4 10e
/a11er<2 .re$,1, a#$ 1o re4ra,# 4ro) )or1-a-,#- or o10er6,2e
e#.u)ber,#- 10e) $oe2 #o1 a/1er 10e *er)a#e#1 .0ara.1er o4 10e
,#.or*ora1,o# o4 2a,$ )a.0,#ery a#$ e3u,*)e#1 6,10 10e .e#1ra/4
and :$= that the sale of the machine! and e8uipment in 8uestion b
the pu!chase! &ho &as supplied the pu!chase mone, as a loan, to the
pe!son &ho supplied the mone, afte! the inco!po!ation the!eof &ith
the mo!t%a%ed su%a! cent!al, does not vest the c!edito! &ith o&ne!ship
of said machine! and e8uipment but simpl &ith the !i%ht of
!edemption.
7he!efo!e, findin% no e!!o! in the appealed 5ud%ment, it is affi!med in
all its pa!ts, &ith costs to the appellant. 1o o!de!ed.
Mal!olm, $mperial, Butte, and #oddard, ., !on!ur.
SUPREME COURT
Manila
EN BANC
G.R. No. L-=?=11 Au-u21 @, 19:5
9AFAO SA& M"LL CO., "NC., plaintiff-appellant,
vs.
APRON"ANO G. CAST"LLO a#$ 9AFAO L"G!T E PO&ER CO.,
"NC., defendants-appellees.
Arsenio Sua(o and ose L. 'alma #il and 'ablo Loren(o and )elfin
oven for appellant.
.W. Ferrier for appellees.
MALCOLM, J.:
The issue in this case, as announced in the openin% sentence of the
decision in the t!ial cou!t and as set fo!th b counsel fo! the pa!ties on
appeal, involves the dete!mination of the natu!e of the p!ope!ties
desc!ibed in the complaint. The t!ial 5ud%e found that those p!ope!ties
&e!e pe!sonal in natu!e, and as a conse8uence absolved the
defendants f!om the complaint, &ith costs a%ainst the plaintiff.
The 'avao 1a& Mill Co., #nc., is the holde! of a lumbe! concession
f!om the Bove!nment of the Philippine #slands. #t has ope!ated a
sa&mill in the sitio of Maa, ba!!io of Ti%atu, municipalit of 'avao,
P!ovince of 'avao. >o&eve!, the land upon &hich the business &as
conducted belon%ed to anothe! pe!son. O# 10e /a#$ 10e 2a6),//
.o)*a#y ere.1e$ a bu,/$,#- 60,.0 0ou2e$ 10e )a.0,#ery u2e$ by
,1. So)e o4 10e ,)*/e)e#12 10u2 u2e$ 6ere ./ear/y *er2o#a/
*ro*er1y, 10e .o#4/,.1 .o#.er#,#- )a.0,#e2 60,.0 6ere */a.e$
a#$ )ou#1e$ o# 4ou#$a1,o#2 o4 .e)e#1. #n the cont!act of lease
bet&een the sa&mill compan and the o&ne! of the land the!e
appea!ed the follo&in% p!ovision0
That on the e,pi!ation of the pe!iod a%!eed upon, all the
imp!ovements and buildin%s int!oduced and e!ected b the
pa!t of the second pa!t shall pass to the e,clusive
o&ne!ship of the pa!t of the fi!st pa!t &ithout an obli%ation
on its pa!t to pa an amount fo! said imp!ovements and
buildin%s4 also, in the event the pa!t of the second pa!t
should leave o! abandon the land leased befo!e the time
he!ein stipulated, the imp!ovements and buildin%s shall
li*e&ise pass to the o&ne!ship of the pa!t of the fi!st pa!t as
thou%h the time a%!eed upon had e,pi!ed0 P!ovided,
ho&eve!, That the machine!ies and accesso!ies a!e not
included in the imp!ovements &hich &ill pass to the pa!t of
the fi!st pa!t on the e,pi!ation o! abandonment of the land
leased.
#n anothe! action, &he!ein the 'avao 3i%ht G Po&e! Co., #nc., &as the
plaintiff and the 'avao, 1a&, Mill Co., #nc., &as the defendant, a
5ud%ment &as !ende!ed in favo! of the plaintiff in that action a%ainst the
defendant in that action4 a &!it of e,ecution issued the!eon, and the
p!ope!ties no& in 8uestion &e!e levied upon as pe!sonalt b the
she!iff. No thi!d pa!t claim &as filed fo! such p!ope!ties at the time of
the sales the!eof as is bo!ne out b the !eco!d made b the plaintiff
he!ein. #ndeed the bidde!, &hich &as the plaintiff in that action, and the
defendant he!ein havin% consummated the sale, p!oceeded to ta*e
possession of the machine! and othe! p!ope!ties desc!ibed in the
co!!espondin% ce!tificates of sale e,ecuted in its favo! b the she!iff of
'avao.
As connectin% up &ith the facts, it should fu!the! be e,plained that the
'avao 1a& Mill Co., #nc., has on a numbe! of occasions t!eated the
machine! as pe!sonal p!ope!t b e,ecutin% chattel mo!t%a%es in
favo! of thi!d pe!sons. Ane of such pe!sons is the appellee b
assi%nment f!om the o!i%inal mo!t%a%es.
A!ticle $$), pa!a%!aphs 1 and ., of the Civil Code, is in point.
Acco!din% to the Code, !eal p!ope!t consists of J
1. 3and, buildin%s, !oads and const!uctions of all *inds
adhe!in% to the soil4
, , , , , , , , ,
.. Machine!, li8uid containe!s, inst!uments o! implements
intended b the o&ne! of an buildin% o! land fo! use in
connection &ith an indust! o! t!ade bein% ca!!ied on
the!ein and &hich a!e e,p!essl adapted to meet the
!e8ui!ements of such t!ade of indust!.
Appellant emphasiDes the fi!st pa!a%!aph, and appellees the last
mentioned pa!a%!aph. 7e ente!tain no doubt that the t!ial 5ud%e and
appellees a!e !i%ht in thei! app!eciation of the le%al doct!ines flo&in%
f!om the facts.
#n the fi!st place, it must a%ain be pointed out that the appellant should
have !e%iste!ed its p!otest befo!e o! at the time of the sale of this
p!ope!t. #t must fu!the! be pointed out that &hile not conclusive, the
cha!acte!iDation of the p!ope!t as chattels b the appellant is
indicative of intention and imp!esses upon the p!ope!t the cha!acte!
dete!mined b the pa!ties. #n this connection the decision of this cou!t
in the case of 1tanda!d Ail Co. of Ne& Fo!*vs. +a!amillo : ;1("$<, ))
Phil., E$2=, &hethe! obiter di!ta o! not, fu!nishes the *e to such a
situation.
#t is, ho&eve! not necessa! to spend ove!l must time in the !esolution
of this appeal on side issues. #t is machine! &hich is involved4
mo!eove!, machine! not intended b the o&ne! of an buildin% o! land
fo! use in connection the!e&ith, but intended b a lessee fo! use in a
buildin% e!ected on the land b the latte! to be !etu!ned to the lessee
on the e,pi!ation o! abandonment of the lease.
A simila! 8uestion a!ose in Pue!to Rico, and on appeal bein% ta*en to
the Hnited 1tates 1up!eme Cou!t, it &as held that machine! &hich is
movable in its natu!e onl becomes immobiliDed &hen placed in a plant
b the o&ne! of the p!ope!t o! plant, but not &hen so placed b a
tenant, a usuf!uctua!, o! an pe!son havin% onl a tempo!a! !i%ht,
unless such pe!son acted as the a%ent of the o&ne!. #n the opinion
&!itten b Chief +ustice 7hite, &hose *no&led%e of the Civil 3a& is
&ell *no&n, it &as in pa!t said0
To dete!mine this 8uestion involves fi,in% the natu!e and
cha!acte! of the p!ope!t f!om the point of vie& of the !i%hts
of Caldes and its natu!e and cha!acte! f!om the point of vie&
of Neve!s G Calla%han as a 5ud%ment c!edito! of the
Alta%!acia Compan and the !i%hts de!ived b them f!om the
e,ecution levied on the machine! placed b the co!po!ation
in the plant. @ollo&in% the Code Napoleon, the Po!to Rican
Code t!eats as immovable :!eal= p!ope!t, not onl land and
buildin%s, but also att!ibutes immovabilit in some cases to
p!ope!t of a movable natu!e, that is, pe!sonal p!ope!t,
because of the destination to &hich it is applied. 6Thin%s,6
sas section $$) of the Po!to Rican Code, 6ma be
immovable eithe! b thei! o&n natu!e o! b thei! destination
o! the ob5ect to &hich the a!e applicable.6 Nume!ous
illust!ations a!e %iven in the fifth subdivision of section $$.,
&hich is as follo&s0 6Machine!, vessels, inst!uments o!
implements intended b the o&ne! of the tenements fo! the
indust!ial o! &o!*s that the ma ca!! on in an buildin% o!
upon an land and &hich tend di!ectl to meet the needs of
the said indust! o! &o!*s.6 :See also Code Nap., a!ticles
.1E, .19 et se1. to and inclusive of a!ticle .$), !ecapitulatin%
the thin%s &hich, thou%h in themselves movable, ma be
immobiliDed.= 1o fa! as the sub5ect-matte! &ith &hich &e a!e
dealin% J machine! placed in the plant J it is plain, both
unde! the p!ovisions of the Po!to Rican 3a& and of the Code
Napoleon, that machine! &hich is movable in its natu!e onl
becomes immobiliDed &hen placed in a plant b the o&ne! of
the p!ope!t o! plant. 1uch !esult &ould not be
accomplished, the!efo!e, b the placin% of machine! in a
plant b a tenant o! a usuf!uctua! o! an pe!son havin% onl
a tempo!a! !i%ht. :'emolombe, Tit. (, No. "2$4 Aub! et
Rau, Tit. ", p. 1", 1ection 1E)4 3au!ent, Tit. ., No. ))/4 and
decisions 8uoted in @uDie!->e!man ed. Code Napoleon
unde! a!ticles ."" et se1.= The distinction !ests, as pointed
out b 'emolombe, upon the fact that one onl havin% a
tempo!a! !i%ht to the possession o! en5oment of p!ope!t is
not p!esumed b the la& to have applied movable p!ope!t
belon%in% to him so as to dep!ive him of it b causin% it b
an act of immobiliDation to become the p!ope!t of anothe!. #t
follo&s that abst!actl spea*in% the machine! put b the
Alta%!acia Compan in the plant belon%in% to 1ancheD did
not lose its cha!acte! of movable p!ope!t and become
immovable b destination. But in the conc!ete immobiliDation
too* place because of the e,p!ess p!ovisions of the lease
unde! &hich the Alta%!acia held, since the lease in
substance !e8ui!ed the puttin% in of imp!oved machine!,
dep!ived the tenant of an !i%ht to cha!%e a%ainst the lesso!
the cost such machine!, and it &as e,p!essl stipulated that
the machine! so put in should become a pa!t of the plant
belon%in% to the o&ne! &ithout compensation to the lessee.
Hnde! such conditions the tenant in puttin% in the machine!
&as actin% but as the a%ent of the o&ne! in compliance &ith
the obli%ations !estin% upon him, and the immobiliDation of
the machine! &hich !esulted a!ose in le%al effect f!om the
act of the o&ne! in %ivin% b cont!act a pe!manent
destination to the machine!.
, , , , , , , , ,
The machine! levied upon b Neve!s G Calla%han, that is,
that &hich &as placed in the plant b the Alta%!acia
Compan, bein%, as !e%a!ds Neve!s G Calla%han, movable
p!ope!t, it follo&s that the had the !i%ht to lev on it unde!
the e,ecution upon the 5ud%ment in thei! favo!, and the
e,e!cise of that !i%ht did not in a le%al sense conflict &ith the
claim of Caldes, since as to him the p!ope!t &as a pa!t of
the !ealt &hich, as the !esult of his obli%ations unde! the
lease, he could not, fo! the pu!pose of collectin% his debt,
p!oceed sepa!atel a%ainst. :Caldes vs. Cent!al Alta%!acia
;1("<, "". H.1., .9.=
@indin% no !eve!sible e!!o! in the !eco!d, the 5ud%ment appealed f!om
&ill be affi!med, the costs of this instance to be paid b the appellant.
&illa,Real, $mperial, Butte, and #oddard, ., !on!ur.
SUPREME COURT
Manila
EN BANC
B.R. No. 3-/2./ Actobe! "(, 1(.)
MAC>#NERF G ENB#NEER#NB 1HPP3#E1, #NC., petitione!,
vs.
T!E !ONORACLE COURT OF APPEALS, !ON. POTENC"ANO
PECSON, %U9GE OF T!E COURT OF F"RST "NSTANCE OF
MAN"LA, "PO L"MESTONE CO., "NC., a#$ ANTON"O
F"LLARAMA, !espondents.
&i!ente . Fran!is!o for petitioner.
Capistrano and Capistrano for respondents.
CONCEPC"ON, J.'
This is an appeal b !ertiorari, ta*en b petitione! Machine! and
En%inee!in% 1upplies #nc., f!om a decision of the Cou!t of Appeals
denin% an o!i%inal petition fo! !ertiorari filed b said petitione! a%ainst
>on. Potenciano Pecson, #po 3imestone Co., #nc., and Antonio
Cilla!ama, the !espondents he!ein.
The pe!tinent facts a!e set fo!th in the decision of the Cou!t of Appeals,
f!om &hich &e 8uote0
An Ma!ch 1$, 1(.$, the he!ein petitione! filed a complaint fo!
!eplevin in the Cou!t of @i!st #nstance of Manila, Civil Case
No. 1(2E/, entitled 6Machine! and En%inee!in% 1upplies,
#nc., Plaintiff, vs. #po 3imestone Co., #nc., and '!. Antonio
Cilla!ama, defendants6, fo! the !ecove! of the machine!
and e8uipment sold and delive!ed to said defendants at thei!
facto! in ba!!io Bi%ti, No!Da%a!a, Bulacan. Hpon
application e,-pa!te of the petitione! compan, and upon
app!oval of petitione!-s bond in the sum of P1.,/E(.22, on
Ma!ch 1$,1(.$, !espondent 5ud%e issued an o!de!,
commandin% the P!ovincial 1he!iff of Bulacan to seiDe and
ta*e immediate possession of the p!ope!ties specified in the
o!de! :Appendi, #, Ans&e!=. An Ma!ch 1(, 1(.$, t&o deput
she!iffs of Bulacan, the said Ramon 1. Roco, and a c!e& of
technical men and labo!e!s p!oceeded to Bi%ti, fo! the
pu!pose of ca!!in% the cou!t-s o!de! into effect. 3eona!do
Cont!e!as, Mana%e! of the !espondent Compan, and Ped!o
To!!es, in cha!%e the!eof, met the deput she!iffs, and
Cont!e!as handed to them a lette! add!essed to Att.
3eopoldo C. Palad, e,-oficio P!ovincial 1he!iff of Bulacan,
si%ned b Att. Adolfo Ba!cia of the defendants the!ein,
p!otestin% a%ainst the seiDu!e of the p!ope!ties in 8uestion,
on the %!ound that the a!e not pe!sonal p!ope!ties.
Contendin% that the 1he!iff-s dut is me!el ministe!ial, the
deput she!iffs, Roco, the latte!-s c!e& of technicians and
labo!e!s, Cont!e!as and To!!es, &ent to the facto!. Roco-s
attention &as called to the fact that the e8uipment could not
possibl be dismantled &ithout causin% dama%es o! in5u!ies
to the &ooden f!ames attached to them. As Roco insisted in
dismantlin% the e8uipment on his o&n !esponsibilit, alle%in%
that the bond &as posted fo! such eventualit, the deput
she!iffs di!ected that some of the suppo!ts the!eof be cut
:Appendi, "=. An Ma!ch "2, 1(.$, the defendant Compan
filed an u!%ent motion, &ith a counte!-bond in the amount of
P1.,/E(, fo! the !etu!n of the p!ope!ties seiDed b the deput
she!iffs. An the same da, the t!ial cou!t issued an o!de!,
di!ectin% the P!ovincial 1he!iff of Bulacan to !etu!n the
machine! and e8uipment to the place &he!e the &e!e
installed at the time of the seiDu!e :Appendi, $=. An Ma!ch
"1, 1(.$, the deput she!iffs !etu!ned the p!ope!ties seiDed,
b depositin% them alon% the !oad, nea! the 8ua!!, of the
defendant Compan, at Bi%ti, &ithout the benefit of invento!
and &ithout !e-installin% hem in thei! fo!me! position and
!eplacin% the dest!oed posts, &hich !ende!ed thei! use
imp!acticable. An Ma!ch "$, 1(.$, the defendants- counsel
as*ed the p!ovincial 1he!iff if the machine! and e8uipment,
dumped on the !oad &ould be !e-installed tom thei! fo!me!
position and condition :lette!, Appendi, )=. An Ma!ch "),
1(.$, the P!ovincial 1he!iff filed an u!%ent motion in cou!t,
manifestin% that Roco had been as*ed to fu!nish the 1he!iff-s
office &ith the e,penses, labo!e!s, technical men and
e8uipment, to ca!! into effect the cou!t-s o!de!, to !etu!n the
seiDed p!ope!ties in the same &a said Roco found them on
the da of seiDu!e, but said Roco absolutel !efused to do
so, and as*in% the cou!t that the Plaintiff the!ein be o!de!ed
to p!ovide the !e8ui!ed aid o! !elieve the said 1he!iff of the
dut of complin% &ith the said o!de! dated Ma!ch "2, 1(.$
:Appendi, .=. An Ma!ch $2, 1(.$, the t!ial cou!t o!de!ed the
P!ovincial 1he!iff and the Plaintiff to !einstate the machine!
and e8uipment !emoved b them in thei! o!i%inal condition in
&hich the &e!e found befo!e thei! !emoval at the e,pense
of the Plaintiff :Appendi, /=. An u!%ent motion of the
P!ovincial 1he!iff dated Ap!il 1., 1(.$, p!ain% fo! an
e,tension of "2 das &ithin &hich to compl &ith the o!de! of
the Cou!t :appendi, 12= &as denied4 and on Ma ), 1(.$,
the t!ial cou!t o!de!ed the Plaintiff the!ein to fu!nish the
P!ovincial 1he!iff &ithin . das &ith the necessa! funds,
technical men, labo!e!s, e8uipment and mate!ials to effect
the !epeatedl mentioned !e-installation :Appendi, 1$=.
:Petitione!-s b!ief, Appendi, A, pp. #-#C.=
The!eupon petitione! instituted in the Cou!t of Appeals civil case B.R.
No. 11")9-R, entitled 6Machine! and En%inee!in% 1upplies, #nc. vs.
>ono!able Potenciano Pecson, P!ovincial 1he!iff of Bulacan, #po
3imestone Co., #nc., and Antonio Cilla!ama.6 #n the petition the!ein
filed, it &as alle%ed that, in o!de!in% the petitione! to fu!nish the
p!ovincial she!iff of Bulacan 6&ith necessa! funds, technical men,
labo!e!s, e8uipment and mate!ials, to effect the installation of the
machine! and e8uipment6 in 8uestion, the Cou!t of @i!s #nstance of
Bulacan had committed a %!ave abuse if disc!etion and acted in
e,cess of its 5u!isdiction, fo! &hich !eason it &as p!aed that its o!de!
to this effect be nullified, and that, mean&hile, a &!it of p!elimina!
in5unction be issued to !est!ain the enfo!cement o said o!de! of ma ),
1(.$. Althou%h the afo!ementioned &!it &as issued b the Cou!t of
Appeals, the same subse8uentl dismissed b the case fo! lac* of
me!it, &ith costs a%ainst the petitione!, upon the follo&in% %!ounds0
7hile the seiDu!e of the e8uipment and pe!sonal p!ope!ties
&as o!de!ed b the !espondent Cou!t, it is, ho&eve!, lo%ical
to p!esume that said cou!t did not autho!iDe the petitione! o!
its a%ents to dest!o, as the did, said machine! and
e8uipment, b dismantlin% and unboltin% the same f!om thei!
conc!ete basements, and cuttin% and sa&in% thei! &ooden
suppo!ts, the!eb !ende!in% them unse!viceable and beond
!epai!, unless those pa!ts !emoved, cut and sa&ed be
!eplaced, &hich the petitione!, not &ithstandin% the
!espondent Cou!t-s o!de!, adamantl !efused to do. The
P!ovincial 1he!iff- s to!tious act, in obedience to the insistent
p!oddin%s of the p!esident of the Petitione!, Ramon 1. Roco,
had no 5ustification in la&, not&ithstandin% the 1he!iffs- claim
that his dut &as ministe!ial. #t &as the bounden dut of the
!espondent +ud%e to %ive !ed!ess to the !espondent
Compan, fo! the unla&ful and &!on%ful acts committed b
the petitione! and its a%ents. And as this &as the t!ue ob5ect
of the o!de! of Ma!ch $2, 1(.$, &e cannot hold that same
&as &ithin its 5u!isdiction to issue. The ministe!ial dut of the
1he!iff should have its limitations. The 1he!iff *ne& o! must
have *no&n &hat is inhe!entl !i%ht and inhe!entl &!on%,
mo!e so &hen, as in this pa!ticula! case, the deput she!iffs
&e!e sho&n a lette! of !espondent Compan-s atto!ne, that
the machine! &e!e not pe!sonal p!ope!ties and, the!efo!e,
not sub5ect to seiDu!e b the te!ms of the o!de!. 7hile it ma
be conceded that this &as a 8uestion of la& too technical to
decide on the spot, it &ould not have costs the 1he!iff much
time and difficult to b!in% the lette! to the cou!t-s attention
and have the e8uipment and machine! %ua!ded, so as not
to f!ust!ate the o!de! of seiDu!e issued b the t!ial cou!t. But
actin% upon the di!ectives of the p!esident of the Petitione!,
to seiDe the p!ope!ties at an costs, in issuin% the o!de!
sou%ht to be annulled, had not committed abuse of
disc!etion at all o! acted in an a!bit!a! o! despotic manne!,
b !eason of passion o! pe!sonal hostilit4 on the cont!a!, it
issued said o!de!, %uided b the &ell *no&n p!inciple that of
the p!ope!t has to be !etu!ned, it should be !etu!ned in as
%ood a condition as &hen ta*en :Bach!ach Moto! Co.,
#nc., vs. Bona, )) Phil., $/9=. #f an one had %one beond
the scope of his autho!it, it is the !espondent P!ovincial
1he!iff. But conside!in% that fact that he acted unde! the
p!essu!e of Ramon 1. Roco, and that the o!de! impu%ned
&as issued not b him, but b the !espondent +ud%e, 7e
simpl decla!e that said 1he!iff- act &as most unusual and
the !esult of a poo! 5ud%ment. Mo!eove!, the 1he!iff not
bein% an office! e,e!cisin% 5udicial functions, the &!it ma not
!each him, fo!!ertiorari lies onl to !evie& 5udicial actions.
The Petitione! complains that the !espondent +ud%e had
completel dis!e%a!ded his manifestation that the machine!
and e8uipment seiDed &e!e and still a!e the Petitione!-s
p!ope!t until full paid fo! and such neve! became
immovable. The 8uestion of o&ne!ship and the applicabilit
of A!t. )1. of the ne& Civil Code a!e immate!ial in the
dete!mination of the onl issue involved in this case. #t is a
matte! of evidence &hich should be decided in the hea!in% of
the case on the me!its. The 8uestion as to &hethe! the
machine! o! e8uipment in liti%ation a!e immovable o! not is
li*e&ise immate!ial, because the onl issue !aised befo!e the
t!ial cou!t &as &hethe! the P!ovincial 1he!iff of Bulacan, at
the Petitione!-s instance, &as 5ustified in dest!oin% the
machine! and in !efusin% to !esto!e them to thei! o!i%inal
fo!m , at the e,pense of the Petitione!. 7hateve! mi%ht be
the le%al cha!acte! of the machine! and e8uipment, &ould
not be in an &a 5ustif thei! 5ustif thei! dest!uction b the
1he!iff-s and the said Petitione!-s. :Petitione!-s b!ief,
Appendi, A, pp. #C-C##.=
A motion fo! !econside!ation of this decision of the Cou!t of Appeals
havin% been denied , petitione! has b!ou%ht the case to Hs fo! !evie&
b &!it of !ertiorari. Hpon e,amination of the !eco!d, 7e a!e satisfied,
ho&eve! that the Cou!t of Appeals &as 5ustified in dismissin% the case.
The special civil action *no&n as !eplevin, %ove!ned b Rule E" of
Cou!t, is applicable onl to 6pe!sonal p!ope!t6.
A!dina!il !eplevin ma be b!ou%ht to !ecove! an specific
pe!sonal p!ope!t unla&full ta*en o! detained f!om the
o&ne! the!eof, p!ovided such p!ope!t is capable of
identification and delive!4 but replevin 2ill not lie for the
re!overy of real property o! inco!po!eal pe!sonal p!ope!t.
:// C. +. 1. 1/= :Emphasis supplied.=
7hen the she!iff !epai!ed to the p!emises of !espondent, #po
3imestone Co., #nc., machine! and e8uipment in 8uestion appea!ed to
be attached to the land, pa!ticula!l to the conc!ete foundation of said
p!emises, in a fi,ed manne!, in such a &a that the fo!me! could not be
sepa!ated f!om the latte! 6&ithout b!ea*in% the mate!ial o! dete!io!ation
of the ob5ect.6 >ence, in o!de! to !emove said outfit, it became
necessa!, not onl to unbolt the same, but , also, to cut some of its
&ooden suppo!ts. Mo!eove!, said machine! and e8uipment &e!e
6intended b the o&ne! of the tenement fo! an indust!6 ca!!ied on said
immovable and tended.6 @o! these !easons, the &e!e al!ead
immovable p!ope!t pu!suant to pa!a%!aphs $ and . of A!ticle )1. of
Civil Code of the Philippines, &hich a!e substantiall identical to
pa!a%!aphs $ and . of A!ticle $$) of the Civil Code of 1pain. As such
immovable p!ope!t, the &e!e not sub5ect to !eplevin.
#n so fa! as an a!ticle, includin% a fi,tu!e anne,ed b a
tenant, is !e%a!ded as pa!t of the !ealt, it is not the sub5ect
fo! pe!sonalit4 . . . .
. . . the action of !eplevin does not lie fo! a!ticles so anne,ed
to the !ealt as to be pa!t as to be pa!t the!eof, as, fo!
e,ample, a house o! a tu!bine pump constitutin% pa!t of a
buildin%-s coolin% sstem4 . . . :$E C. +. 1. 1222 G 1221=
Mo!eove!, as the p!ovincial she!iff hesitated to !emove the p!ope!t in
8uestion, petitione!-s a%ent and p!esident, M!. Ramon Roco, insisted
6on the dismantlin% at his o2n responsibility,6 statin% that., p!ecisel,
6that is the !eason &h plaintiff posted a bond .6 #n this manne!,
petitione! clea!l assumed the co!!espondin% !is*s.
1uch assumption of !is* becomes mo!e appa!ent &hen &e conside!
that, pu!suant to 1ection . of Rule E" of the Rules of Cou!t, the
defendant in an action fo! !eplevin is entitled to the !etu!n of the
p!ope!t in dispute upon the filin% of a counte!bond, as p!ovided
the!ein. #n othe! &o!ds, petitione! *ne& that the !estitution of said
p!ope!t to !espondent compan mi%ht be o!de!ed unde! said p!ovision
of the Rules of Cou!t, and that, conse8uentl, it ma become
necessa! fo! petitione! to meet the liabilities incident to such !etu!n.
3astl, althou%h the pa!ties have not cited, and 7e have not found,
an autho!it s8ua!el in point J obviousl !eal p!ope!t a!e not
sub5ect to !eplevin J it is &ell settled that, &hen the !estitution of &hat
has been o!de!ed, the %oods in 8uestion shall be !etu!ned in
substantiall the same condition as &hen ta*en :.) C.+., .(2-E22, E)2-
E)1=. #nasmuch as the machine! and e8uipment involved in this case
&e!e dul installed and affi,ed in the p!emises of !espondent compan
&hen petitione!-s !ep!esentative caused said p!ope!t to be dismantled
and then !emoved, it follo&s that petitione! must also do eve!thin%
necessa! to the !einstallation of said p!ope!t in confo!mit &ith its
o!i%inal condition.
7he!efo!e, the decision of the Cou!t of Appeals is he!eb affi!med,
&ith costs a%ainst the petitione!. 1o o!de!ed.
'ablo, Ben%(on, 'adilla, Montemayor, Reyes, A., u%o, Bautista
An%elo and Reyes, .B.L., ., concu!.
'aras, C.., concu!s in the !esult.
SUPREME COURT
Manila
EN BANC
G.R. No. L-18=56 No7e)ber :?, 196:
CONRA9O P. NAFARRO, plaintiff-appellee,
vs.
RUF"NO G. P"NE9A, RAMONA REYES, ET AL., defendants-
appellants.
)eo%ra!ias Ta"edo, r. for plaintiff,appellee.
Renato A. Santos for defendants,appellants.
PARE9ES, J.:
An 'ecembe! 1), 1(.(, defendants Rufino B. Pineda and his mothe!
+uana BonDales :ma!!ied to B!e%o!io Pineda=, bo!!o&ed f!om plaintiff
Con!ado P. Nava!!o, the sum of P",.22.22, paable E months afte!
said date o! on +une 1), 1(.(. To secu!e the indebtedness, Rufino
e,ecuted a document captioned 6'EE' A@ REA3 E1TATE and
C>ATTE3 MARTBABE16, &he!eb +uana BonDales, b &a of Real
3state Mort%a%e hpothecated a pa!cel of land, belon%in% to he!,
!e%iste!ed &ith the Re%iste! of 'eeds of Ta!lac, unde! T!ansfe!
Ce!tificate of Title No. ".//E, and Rufino B. Pineda, by 2ay of Chattel
Mort%a%e, mo!t%a%ed his t&o-sto! !esidential house, havin% a floo!
a!ea of (1" s8ua!e mete!s, e!ected on a lot belon%in% to Att. Cicente
Cast!o, located at Bo. 1an Ro8ue, Ta!lac, Ta!lac4 and one moto! t!uc*,
!e%iste!ed in his name, unde! Moto! Cehicle Re%ist!ation Ce!tificate
No. A-1/192E. Both mo!t%a%es &e!e contained in one inst!ument,
&hich &as !e%iste!ed in both the Affice of the Re%iste! of 'eeds and
the Moto! Cehicles Affice of Ta!lac.
7hen the mo!t%a%e debt became due and paable, the defendants,
afte! demands made on them, failed to pa. The, ho&eve!, as*ed and
&e!e %!anted e,tension up to +une $2, 1(E2, &ithin &hich to pa.
Came +une $2, defendants a%ain failed to pa and, fo! the second
time, as*ed fo! anothe! e,tension, &hich &as %iven, up to +ul $2,
1(E2. #n the second e,tension, defendant Pineda in a document
entitled 6P!omise6, cate%o!icall stated that in the !emote event he
should fail to ma*e %ood the obli%ation on such date :+ul $2, 1(E2=,
the defendant &ould no lon%e! as* fo! fu!the! e,tension and the!e
&ould be no need fo! an fo!mal demand, and plaintiff could p!oceed
to ta*e &hateve! action he mi%ht desi!e to enfo!ce his !i%hts, unde! the
said mo!t%a%e cont!act. #n spite of said p!omise, defendants, failed and
!efused to pa the obli%ation.
An Au%ust 12, 1(E2, plaintiff filed a complaint fo! fo!eclosu!e of the
mo!t%a%e and fo! dama%es, &hich consisted of li8uidated dama%es in
the sum of P.22.22 and 1"K pe! annum inte!est on the p!incipal,
effective on the date of matu!it, until full paid.
'efendants, ans&e!in% the complaint, amon% othe!s, stated J
'efendants admit that the loan is ove!due but den that
po!tion of pa!a%!aph ) of the @i!st Cause of Action &hich
states that the defendants un!easonabl failed and !efuse to
pa thei! obli%ation to the plaintiff the t!uth bein% the
defendants a!e ha!d up these das and pleaded to the
plaintiff to %!ant them mo!e time &ithin &hich to pa thei!
obli%ation and the plaintiff !efused4
7>ERE@ARE, in vie& of the fo!e%oin% it is most !espectfull
p!aed that this >ono!able Cou!t !ende! 5ud%ment %!antin%
the defendants until +anua! $1, 1(E1, &ithin &hich to pa
thei! obli%ation to the plaintiff.
An 1eptembe! $2, 1(E2, plaintiff p!esented a Motion fo! summa!
+ud%ment, claimin% that the Ans&e! failed to tende! an %enuine and
mate!ial issue. The motion &as set fo! hea!in%, but the !eco!d is not
clea! &hat !ulin% the lo&e! cou!t made on the said motion. An
Novembe! 11, 1(E2, ho&eve!, the pa!ties submitted a 1tipulation of
@acts, &he!ein the defendants admitted the indebtedness, the
authenticit and due e,ecution of the Real Estate and Chattel
Mo!t%a%es4 that the indebtedness has been due and unpaid since +une
1), 1(E24 that a liabilit of 1"K pe! annum as inte!est &as a%!eed,
upon failu!e to pa the p!incipal &hen due and P.22.22 as li8uidated
dama%es4 that the inst!ument had been !e%iste!ed in the Re%ist! of
P!ope!t and Moto! Cehicles Affice, both of the p!ovince of Ta!lac4 that
the onl issue in the case is &hethe! o! not the !esidential house,
sub5ect of the mo!t%a%e the!ein, can be conside!ed a Chattel and the
p!op!iet of the atto!ne-s fees.
An @eb!ua! "), 1(E1, the lo&e! cou!t held J
... 7>ERE@ARE, this Cou!t !ende!s decision in this Case0
:a= 'ismissin% the complaint &ith !e%a!d to defendant
B!e%o!io Pineda4
:b= A!de!in% defendants +uana BonDales and the spouses
Rufino Pineda and Ramon Rees, to pa 5ointl and
seve!all and &ithin ninet :(2= das f!om the !eceipt of the
cop of this decision to the plaintiff Con!ado P. Nava!!o the
p!incipal sum of P",..2.22 &ith 1"K compounded inte!est
pe! annum f!om +une 1), 1(E2, until said p!incipal sum and
inte!ests a!e full paid, plus P.22.22 as li8uidated dama%es
and the costs of this suit, &ith the &a!nin% that in default of
said pament of the p!ope!ties mentioned in the deed of !eal
estate mo!t%a%e and chattel mo!t%a%e :Anne, 6A6 to the
complaint= be sold to !ealiDe said mo!t%a%e debt, inte!ests,
li8uidated dama%es and costs, in acco!dance &ith the
pe!tinent p!ovisions of Act $1$., as amended b Act )119,
and A!t. 1) of the Chattel Mo!t%a%e 3a&, Act 1.294 and
:c= A!de!in% the defendants Rufino Pineda and Ramona
Rees, to delive! immediatel to the P!ovincial 1he!iff of
Ta!lac the pe!sonal p!ope!ties mentioned in said Anne, 6A6,
immediatel afte! the lapse of the ninet :(2= das above-
mentioned, in default of such pament.
The above 5ud%ment &as di!ectl appealed to this Cou!t, the
defendants the!ein assi%nin% onl a sin%le e!!o!, alle%edl committed
b the lo&e! cou!t, to &it J
#n holdin% that the deed of !eal estate and chattel mo!t%a%es
appended to the complaint is valid, not&ithstandin% the fact
that the house of the defendant Rufino B. Pineda &as made
the sub5ect of the chattel mo!t%a%e, fo! the !eason that it is
e!ected on a land that belon%s to a thi!d pe!son.
Appellants contend that a!ticle )1. of the Ne& Civil Code, in classifin%
a house as immovable p!ope!t, ma*es no distinction &hethe! the
o&ne! of the land is o! not the o&ne! of the buildin%4 the fact that the
land belon%s to anothe! is immate!ial, it is enou%h that the house
adhe!es to the land4 that in case of immovables b inco!po!ation, such
as houses, t!ees, plants, etc4 the Code does not !e8ui!e that the
attachment o! inco!po!ation be made b the o&ne! of the land, the onl
c!ite!ion bein% the union o! inco!po!ation &ith the soil. #n othe! &o!ds, it
is claimed that 6a buildin% is an immovable p!ope!t, i!!espective of
&hethe! o! not said st!uctu!e and the land on &hich it is adhe!ed to,
belon% to the same o&ne!6 :3opeD v. A!osa, B.R. Nos. 3-1291/-9,
@eb. "9, 1(.9=. :1ee also the case of 3eun% Fee v. 1t!on% Machine!
Co., $/ Phil. E))=. Appellants a!%ue that since onl movables can be
the sub5ect of a chattel mo!t%a%e :sec. 1, Act No. $(."= then the
mo!t%a%e in 8uestion &hich is the basis of the p!esent action, cannot
%ive !ise to an action fo! fo!eclosu!e, because it is nullit. :Citin%
Associated #ns. Co., et al. v. #sabel #a v. Ad!iano Calino, et al., 3-
129$9, Ma $2, 1(.9.=
The t!ial cou!t did not p!edicate its decision decla!in% the deed of
chattel mo!t%a%e valid solel on the %!ound that the house mo!t%a%ed
&as e!ected on the land &hich belon%ed to a thi!d pe!son, but also and
p!incipall on the doct!ine of estoppel, in that 6the pa!ties have
so e4pressly a%reed6 in the mo!t%a%e to conside! the house as chattel
6fo! its smallness and mi,ed mate!ials of sa2ali and &ood6. #n
const!uin% a!ts. $$) and $$. of the 1panish Civil Code :co!!espondin%
to a!ts. )1. and )1E, N.C.C.=, fo! pu!poses of the application of the
Chattel Mo!t%a%e 3a&, it &as held that unde! ce!tain conditions, 6a
p!ope!t ma have a cha!acte! diffe!ent f!om that imputed to it in said
a!ticles. #t is undeniable that the pa!ties to a cont!act ma by
a%reement, treat as personal property that 2hi!hb natu!e &ould be
!eal p!ope!t6 :1tanda!d Ail Co. of N.F. v. +a!anillo, )) Phil. E$"-
E$$=.6The!e can not be an 8uestion that a buildin% of mi,ed mate!ials
ma be the sub5ect of a chattel mo!t%a%e, in &hich case, it is
conside!ed as bet&een the pa!ties as pe!sonal p!ope!t. ... The matte!
depends on the ci!cumstances and the intention of the pa!ties6.
6Pe!sonal p!ope!t ma !etain its cha!acte! as such &he!e it is so
a%!eed b the pa!ties inte!ested even thou%h anne,ed to the !ealt ...6.
:)" Am. +u!. "2(-"12, cited in Mana!an%, et al. v. Afilada, et al., B.R.
No. 3-91$$, Ma 19, 1(.E4 ." A.B. No. 9, p. $(.).= The vie& that
pa!ties to a deed of chattel mo!t%a%ee ma a%!ee to conside! a house
as pe!sonal p!ope!t fo! the pu!poses of said cont!act, 6is %ood onl
insofa! as the cont!actin% pa!ties a!e conce!ned. #t is based pa!tl,
upon the p!inciples of estoppel ...6 :Evan%elista v. Alto 1u!et, No. 3-
111$(, Ap!. "$, 1(.9=. #n a case, a mo!t%a%e house built on a rented
land, &as held to be a pe!sonal p!ope!t, not onl because the deed of
mo!t%a%e conside!ed it as such, but also because it did not fo!m pa!t of
the land :Evan%elista v. Abad ;CA<4$E A.B. "(1$=, fo! it is no& &ell
settled that an ob5ect placed on land b one &ho has onl a tempo!a!
!i%ht to the same, such as a lessee o! usuf!uctua!, does not become
immobiliDed b attachment :CaldeD v. Cent!al Alta%!acia, """ H.1. .9,
cited in 'avao 1a&mill Co., #nc. v. Castillo, et al., E1 Phil. /2(=. >ence,
if a house belon%in% to a pe!son stands on a !ented land belon%in% to
anothe! pe!son, it ma be mo!t%a%ed as a pe!sonal p!ope!t is so
stipulated in the document of mo!t%a%e. :Evan%elista v. Abad, supra.=
#t should be noted, ho&eve!, that the p!inciple is p!edicated on
statements b the o&ne! decla!in% his house to be a chattel, a conduct
that ma conceivabl estop him f!om subse8uentl claimin% othe!&ise
:3ade!a, et al.. v. C. N. >od%es, et al., ;CA<4 )9 A.B. .$/)=. The
doct!ine, the!efo!e, %athe!ed f!om these cases is that althou%h in some
instances, a house of mi,ed mate!ials has been conside!ed as a
chattel bet&een them, has been !eco%niDed, it has been a constant
c!ite!ion neve!theless that, &ith !espect to thi!d pe!sons, &ho a!e not
pa!ties to the cont!act, and speciall in e,ecution p!oceedin%s, the
house is conside!ed as an immovable p!ope!t :A!t. 1)$1, Ne& Civil
Code=.
#n the case at ba!, the house in 8uestion &as t!eated as pe!sonal o!
movable p!ope!t, b the pa!ties to the cont!act themselves. #n the
deed of chattel mo!t%a%e, appellant Rufino B. Pineda conveed b
&a of 6Chattel Mo!t%a%e6 6m pe!sonal p!ope!ties6, a !esidential
house and a t!uc*. The mo!t%a%o! himself %!ouped the house &ith the
t!uc*, &hich is, inhe!entl a movable p!ope!t. The house &hich &as
not even decla!ed fo! ta,ation pu!poses &as small and made of li%ht
const!uction mate!ials0 B.#. sheets !oofin%, sa2ali and &ooden &alls
and &ooden posts4 built on land belon%in% to anothe!.
The cases cited b appellants a!e not applicable to the p!esent case.
The #a cases :3-129$/-$9, supra=, !efe! to a buildin% o! a house of
st!on% mate!ials, pe!manentl adhe!ed to the land, belon%in% to the
o&ne! of the house himself. #n the case of Lope( v. 5rosa, :3-1291/-
19=, the sub5ect buildin% &as a theat!e, built of mate!ials &o!th mo!e
than PE",222, attached pe!manentl to the soil. #n these cases and in
the 3eun% Fee case, supra, thi!d pe!sons assailed the validit of the
deed of chattel mo!t%a%es4 in the p!esent case, it &as one of the
pa!ties to the cont!act of mo!t%a%es &ho assailed its validit.
CAN@ARMAB3F 7#T> A33 T>E @AREBA#NB, the decision
appealed f!om, should be, as it is he!eb affi!med, &ith costs a%ainst
appellants.
Ben%(on, C.., 'adilla, Bautista An%elo, Labrador, Barrera, )i(on,
Re%ala, and Ma*alintal, ., concu!.
SUPREME COURT
Manila
1ECAN' '#C#1#AN
G.R. No. L-5?=66 May :1, 198>
CALTEI HP!"L"PP"NESG "NC., petitione!,
vs.
CENTRAL COAR9 OF ASSESSMENT APPEALS a#$ C"TY
ASSESSOR OF PASAY, !espondents.

ABU"NO, J.:
This case is about the !ealt ta, on machine! and e8uipment installed
b Calte, :Philippines= #nc. in its %as stations located on leased land.
The machines and e8uipment consists of unde!%!ound tan*s, elevated
tan*, elevated &ate! tan*s, &ate! tan*s, %asoline pumps, computin%
pumps, &ate! pumps, ca! &ashe!, ca! hoists, t!uc* hoists, ai!
comp!esso!s and ti!eflato!s. The cit assesso! desc!ibed the said
e8uipment and machine! in this manne!0
A %asoline se!vice station is a piece of lot &he!e a
buildin% o! shed is e!ected, a &ate! tan* if the!e is
an is placed in one co!ne! of the lot, ca! hoists
a!e placed in an ad5acent shed, an ai! comp!esso!
is attached in the &all of the shed o! at the
conc!ete &all fence.
The cont!ove!sial unde!%!ound tan*, deposito! of
%asoline o! c!ude oil, is du% deep about si, feet
mo!e o! less, a fe& mete!s a&a f!om the shed.
This is done to p!event confla%!ation because
%asoline and othe! combustible oil a!e ve!
inflammable.
This unde!%!ound tan* is connected &ith a steel
pipe to the %asoline pump and the %asoline pump
is commonl placed o! const!ucted unde! the
shed. The footin% of the pump is a cement pad
and this cement pad is imbedded in the pavement
unde! the shed, and evidence that the %asoline
unde!%!ound tan* is attached and connected to
the shed o! buildin% th!ou%h the pipe to the pump
and the pump is attached and affi,ed to the
cement pad and pavement cove!ed b the !oof of
the buildin% o! shed.
The buildin% o! shed, the elevated &ate! tan*, the
ca! hoist unde! a sepa!ate shed, the ai!
comp!esso!, the unde!%!ound %asoline tan*, neon
li%hts si%nboa!d, conc!ete fence and pavement
and the lot &he!e the a!e all placed o! e!ected, all
of them used in the pu!suance of the %asoline
se!vice station business fo!med the enti!e %asoline
se!vice-station.
As to &hethe! the sub5ect p!ope!ties a!e attached
and affi,ed to the tenement, it is clea! the a!e, fo!
the tenement &e conside! in this pa!ticula! case
a!e :is= the pavement cove!in% the enti!e lot &hich
&as const!ucted b the o&ne! of the %asoline
station and the imp!ovement &hich holds all the
p!ope!ties unde! 8uestion, the a!e attached and
affi,ed to the pavement and to the imp!ovement.
The pavement cove!in% the enti!e lot of the
%asoline se!vice station, as &ell as all the
imp!ovements, machines, e8uipments and
appa!atus a!e allo&ed b Calte, :Philippines=
#nc. ...
The unde!%!ound %asoline tan* is attached to the
shed b the steel pipe to the pump, so &ith the
&ate! tan* it is connected also b a steel pipe to
the pavement, then to the elect!ic moto! &hich
elect!ic moto! is placed unde! the shed. 1o to sa
that the %asoline pumps, &ate! pumps and
unde!%!ound tan*s a!e outside of the se!vice
station, and to conside! onl the buildin% as the
se!vice station is %!ossl e!!oneous. :pp. .9-E2,
Rollo=.
The said machines and e8uipment a!e loaned b Calte, to %as station
ope!ato!s unde! an app!op!iate lease a%!eement o! !eceipt. #t is
stipulated in the lease cont!act that the ope!ato!s, upon demand, shall
!etu!n to Calte, the machines and e8uipment in %ood condition as
&hen !eceived, o!dina! &ea! and tea! e,cepted.
The lesso! of the land, &he!e the %as station is located, does not
become the o&ne! of the machines and e8uipment installed the!ein.
Calte, !etains the o&ne!ship the!eof du!in% the te!m of the lease.
The cit assesso! of Pasa Cit cha!acte!iDed the said items of %as
station e8uipment and machine! as ta,able !ealt. The !ealt ta, on
said e8uipment amounts to P),.)1.12 annuall :p. .", Rollo=. The cit
boa!d of ta, appeals !uled that the a!e pe!sonalt. The assesso!
appealed to the Cent!al Boa!d of Assessment Appeals.
The Boa!d, &hich &as composed of 1ec!eta! of @inance Cesa! Ci!ata
as chai!man, Actin% 1ec!eta! of +ustice Catalino Maca!ai%, +!. and
1ec!eta! of 3ocal Bove!nment and Communit 'evelopment +ose
Ro?o, held in its decision of +une $, 1(// that the said machines and
e8uipment a!e !eal p!ope!t &ithin the meanin% of sections $:*= G :m=
and $9 of the Real P!ope!t Ta, Code, P!esidential 'ec!ee No. )E),
&hich too* effect on +une 1, 1(/), and that the definitions of !eal
p!ope!t and pe!sonal p!ope!t in a!ticles )1. and )1E of the Civil
Code a!e not applicable to this case.
The decision &as !eite!ated b the Boa!d :Ministe! Cicente Abad
1antos too* Maca!ai%-s place= in its !esolution of +anua! 1", 1(/9,
denin% Calte,-s motion fo! !econside!ation, a cop of &hich &as
!eceived b its la&e! on Ap!il ", 1(/(.
An Ma ", 1(/( Calte, filed this ce!tio!a!i petition &he!ein it p!aed fo!
the settin% aside of the Boa!d-s decision and fo! a decla!ation that t he
said machines and e8uipment a!e pe!sonal p!ope!t not sub5ect to
!ealt ta, :p. 1E, Rollo=.
The 1olicito! Bene!al-s contention that the Cou!t of Ta, Appeals has
e,clusive appellate 5u!isdiction ove! this case is not co!!ect. 7hen
Republic act No. 11". c!eated the Ta, Cou!t in 1(.), the!e &as as et
no Cent!al Boa!d of Assessment Appeals. 1ection /:$= of that la& in
p!ovidin% that the Ta, Cou!t had 5u!isdiction to !evie& b appeal
decisions of p!ovincial o! cit boa!ds of assessment appeals had in
mind the local boa!ds of assessment appeals but not the Central Boa!d
of Assessment Appeals &hich unde! the Real P!ope!t Ta, Code has
appellate 5u!isdiction ove! decisions of the said local boa!ds of
assessment appeals and is, the!efo!e, in the same cate%o! as the Ta,
Cou!t.
1ection $E of the Real P!ope!t Ta, Code p!ovides that the decision of
the Cent!al Boa!d of Assessment Appeals shall become final and
e,ecuto! afte! the lapse of fifteen das f!om the !eceipt of its decision
b the appellant. 7ithin that fifteen-da pe!iod, a petition fo!
!econside!ation ma be filed. The Code does not p!ovide fo! the !evie&
of the Boa!d-s decision b this Cou!t.
Conse8uentl, the onl !emed available fo! see*in% a !evie& b this
Cou!t of the decision of the Cent!al Boa!d of Assessment Appeals is
the special civil action of ce!tio!a!i, the !ecou!se !eso!ted to he!ein b
Calte, :Philippines=, #nc.
The issue is &hethe! the pieces of %as station e8uipment and
machine! al!ead enume!ated a!e sub5ect to !ealt ta,. This issue has
to be !esolved p!ima!il unde! the p!ovisions of the Assessment 3a&
and the Real P!ope!t Ta, Code.
1ection " of the Assessment 3a& p!ovides that the !ealt ta, is due 6on
!eal p!ope!t, includin% land, buildin%s, machine!, and othe!
imp!ovements6 not specificall e,empted in section $ the!eof. This
p!ovision is !ep!oduced &ith some modification in the Real P!ope!t
Ta, Code &hich p!ovides0
1EC. $9. $n!iden!e of Real 'roperty Ta4.J The!e
shall be levied, assessed and collected in all
p!ovinces, cities and municipalities an annual ad
valorem ta4 on !eal p!ope!t, such as land,
buildin%s, machine! and othe! imp!ovements
affi,ed o! attached to !eal p!ope!t not he!einafte!
specificall e,empted.
The Code contains the follo&in% definitions in its section $0
*= $mprovements J is a valuable addition made to
p!ope!t o! an amelio!ation in its condition,
amountin% to mo!e than me!e !epai!s o!
!eplacement of &aste, costin% labo! o! capital and
intended to enhance its value, beaut o! utilit o!
to adapt it fo! ne& o! fu!the! pu!poses.
m= Ma!hinery J shall emb!ace machines,
mechanical cont!ivances, inst!uments, appliances
and appa!atus attached to the !eal estate. #t
includes the phsical facilities available fo!
p!oduction, as &ell as the installations and
appu!tenant se!vice facilities, to%ethe! &ith all
othe! e8uipment desi%ned fo! o! essential to its
manufactu!in%, indust!ial o! a%!icultu!al pu!poses
:1ee sec. $;f<, Assessment 3a&=.
7e hold that the said e8uipment and machine!, as appu!tenances to
the %as station buildin% o! shed o&ned b Calte, :as to &hich it is
sub5ect to !ealt ta,= and &hich fi,tu!es a!e necessa! to the ope!ation
of the %as station, fo! &ithout them the %as station &ould be useless,
and &hich have been attached o! affi,ed pe!manentl to the %as
station site o! embedded the!ein, a!e ta,able imp!ovements and
machine! &ithin the meanin% of the Assessment 3a& and the Real
P!ope!t Ta, Code.
Calte, invo*es the !ule that machine! &hich is movable in its natu!e
onl becomes immobiliDed &hen placed in a plant b the o&ne! of the
p!ope!t o! plant but not &hen so placed b a tenant, a usuf!uctua!, o!
an pe!son havin% onl a tempo!a! !i%ht, unless such pe!son acted as
the a%ent of the o&ne! :'avao 1a& Mill Co. vs. Castillo, E1 Phil /2(=.
That !ulin% is an inte!p!etation of pa!a%!aph . of a!ticle )1. of the Civil
Code !e%a!din% machine! that becomes !eal p!ope!t b destination.
#n the )avao Sa2 Mills !ase the 8uestion &as &hethe! the machine!
mounted on foundations of cement and installed b the lessee on
leased land should be !e%a!ded as !eal p!ope!t fo!purposes of
e4e!ution of a /ud%ment a%ainst the lessee. The she!iff t!eated the
machine! as pe!sonal p!ope!t. This Cou!t sustained the she!iff-s
action. :Compa!e &ith Machine! G En%inee!in% 1upplies, #nc. vs.
Cou!t of Appeals, (E Phil. /2, &he!e in a !eplevin case machine! &as
t!eated as !ealt=.
>e!e, the 8uestion is &hethe! the %as station e8uipment and
machine! pe!manentl affi,ed b Calte, to its %as station and
pavement :&hich a!e indubitabl ta,able !ealt= should be sub5ect to
the !ealt ta,. This 8uestion is diffe!ent f!om the issue !aised in
the )avao Sa2 Mill case.
#mp!ovements on land a!e commonl ta,ed as !ealt even thou%h fo!
some pu!poses the mi%ht be conside!ed pe!sonalt :9) C.+.1. 191-",
Notes )2 and )1=. 6#t is a familia! phenomenon to see thin%s classed
as !eal p!ope!t fo! pu!poses of ta,ation &hich on %ene!al p!inciple
mi%ht be conside!ed pe!sonal p!ope!t6 :1tanda!d Ail Co. of Ne& Fo!*
vs. +a!amillo, )) Phil. E$2, E$$=.
This case is also easil distin%uishable f!om Boa!d of Assessment
Appeals vs. Manila Elect!ic Co., 11( Phil. $"9, &he!e Me!alco-s steel
to&e!s &e!e conside!ed poles &ithin the meanin% of pa!a%!aph ( of its
f!anchise &hich e,empts its poles f!om ta,ation. The steel to&e!s &e!e
conside!ed pe!sonalt because the &e!e attached to s8ua!e metal
f!ames b means of bolts and could be moved f!om place to place
&hen unsc!e&ed and dismantled.
No! a!e Calte,-s %as station e8uipment and machine! the same as
tools and e8uipment in the !epai! shop of a bus compan &hich &e!e
held to be pe!sonal p!ope!t not sub5ect to !ealt ta, :Mindanao Bus
Co. vs. Cit Assesso!, 11E Phil. .21=.
The Cent!al Boa!d of Assessment Appeals did not commit a %!ave
abuse of disc!etion in upholdin% the cit assesso!-s is imposition of the
!ealt ta, on Calte,-s %as station and e8uipment.
7>ERE@ARE, the 8uestioned decision and !esolution of the Cent!al
Boa!d of Assessment Appeals a!e affi!med. The petition fo! ce!tio!a!i is
dismissed fo! lac* of me!it. No costs.
1A AR'ERE'.
Barredo 6Chairman7, #uerrero, )e Castro and 3s!olin, ., !on!ur.
Con!ep!ion, r. and Abad Santos, ., too* no part.
SUPREME COURT
Manila
EN BANC

G.R. No. 1?6?=1 %a#uary >9, 199:
CENGUET CORPORAT"ON, petitione!,
vs.
CENTRAL COAR9 OF ASSESSMENT APPEALS, COAR9 OF
ASSESSMENT APPEALS OF DAMCALES, PROF"NC"AL
ASSESSOR OF DAMCALES, PROF"NCE OF DAMCALES, a#$
MUN"C"PAL"TY OF SAN MARCEL"NO, !espondents.
Romulo, Mabanta, Buenaventura, Sayo! 8 )e los An%eles for
petitioner.

CRUD, J.:
The !ealt ta, assessment involved in this case amounts to
P11,$1(,$2).22. #t has been imposed on the petitione!-s tailin%s dam
and the land the!eunde! ove! its p!otest.
The cont!ove!s a!ose in 1(9. &hen the P!ovincial Assesso! of
Lambales assessed the said p!ope!ties as ta,able imp!ovements. The
assessment &as appealed to the Boa!d of Assessment Appeals of the
P!ovince of Lambales. An Au%ust "), 1(99, the appeal &as dismissed
mainl on the %!ound of the petitione!-s 6failu!e to pa the !ealt ta,es
that fell due du!in% the pendenc of the appeal.6
The petitione! seasonabl elevated the matte! to the Cent!al Boa!d of
Assessment Appeals,
1
one of the he!ein !espondents. #n its decision
dated Ma!ch "", 1((2, the Boa!d !eve!sed the dismissal of the appeal
but, on the me!its, a%!eed that 6the tailin%s dam and the lands
subme!%ed the!eunde! :&e!e= sub5ect to !ealt ta,.6
@o! pu!poses of ta,ation the dam is conside!ed as
!eal p!ope!t as it comes &ithin the ob5ect
mentioned in pa!a%!aphs :a= and :b= of A!ticle )1.
of the Ne& Civil Code. #t is a const!uction adhe!ed
to the soil &hich cannot be sepa!ated o! detached
&ithout b!ea*in% the mate!ial o! causin%
dest!uction on the land upon &hich it is attached.
The immovable natu!e of the dam as an
imp!ovement dete!mines its cha!acte! as !eal
p!ope!t, hence ta,able unde! 1ection $9 of the
Real P!ope!t Ta, Code. :P.'. )E)=.
Althou%h the dam is pa!tl used as an anti-
pollution device, this Boa!d cannot accede to the
!e8uest fo! ta, e,emption in the absence of a la&
autho!iDin% the same.
,,, ,,, ,,,
7e find the app!aisal on the land subme!%ed as a
!esult of the const!uction of the tailin%s dam,
cove!ed b Ta, 'ecla!ation Nos.
22"-2"E2 and 22"-2"EE, to be in acco!dance &ith
the 1chedule of Ma!*et Calues fo! Lambales
&hich &as !evie&ed and allo&ed fo! use b the
Minist! :'epa!tment= of @inance in the 1(91-1(9"
%ene!al !evision. No se!ious attempt &as made b
Petitione!-Appellant Ben%uet Co!po!ation to
impu%n its !easonableness, i.e., that the P.2.22
pe! s8ua!e mete! applied b Respondent-Appellee
P!ovincial Assesso! is indeed e,cessive and
unconscionable. >ence, &e find no cause to
distu!b the ma!*et value applied b Respondent
Appellee P!ovincial Assesso! of Lambales on the
p!ope!ties of Petitione!-Appellant Ben%uet
Co!po!ation cove!ed b Ta, 'ecla!ation Nos. 22"-
2"E2 and 22"-2"EE.
This petition fo! !ertiorari no& see*s to !eve!se the above !ulin%.
The p!incipal contention of the petitione! is that the tailin%s dam is not
sub5ect to !ealt ta, because it is not an 6imp!ovement6 upon the land
&ithin the meanin% of the Real P!ope!t Ta, Code. Mo!e pa!ticula!l, it
is claimed J
:1= as !e%a!ds the tailin%s dam as an
6imp!ovement60
:a= that the tailin%s dam has
no value sepa!ate f!om and
independent of the mine4
hence, b itself it cannot be
conside!ed an imp!ovement
sepa!atel assessable4
:b= that it is an inte%!al pa!t of
the mine4
:c= that at the end of the
minin% ope!ation of the
petitione! co!po!ation in the
a!ea, the tailin%s dam &ill
benefit the local communit b
se!vin% as an i!!i%ation facilit4
:d= that the buildin% of the
dam has st!ipped the p!ope!t
of an comme!cial value as
the p!ope!t is subme!%ed
unde! &ate! &astes f!om the
mine4
:e= that the tailin%s dam is an
envi!onmental pollution
cont!ol device fo! &hich
petitione! must be
commended !athe! than
penaliDed &ith a !ealt ta,
assessment4
:f= that the installation and
utiliDation of the tailin%s dam
as a pollution cont!ol device is
a !e8ui!ement imposed b
la&4
:"= as !e%a!ds the valuation of the tailin%s dam
and the subme!%ed lands0
:a= that the sub5ect p!ope!ties
have no ma!*et value as the
cannot be sold independentl
of the mine4
:b= that the valuation of the
tailin%s dam should be based
on its incidental use b
petitione! as a &ate! !ese!voi!
and not on the alle%ed cost of
const!uction of the dam and
the annual build-up e,pense4
:c= that the 6!esidual value
fo!mula6 used b the
P!ovincial Assesso! and
adopted b !espondent CBAA
is a!bit!a! and e!!oneous4
and
:$= as !e%a!ds the petitione!-s liabilit fo! penalties
fo!
non-decla!ation of the tailin%s dam and the
subme!%ed lands fo! !ealt ta, pu!poses0
:a= that &he!e a ta, is not paid
in an honest belief that it is
not due, no penalt shall be
collected in addition to the
basic ta,4
:b= that no othe! minin%
companies in the Philippines
ope!atin% a tailin%s dam have
been made to decla!e the
dam fo! !ealt ta, pu!poses.
The petitione! does not dispute that the tailin%s dam ma be
conside!ed !ealt &ithin the meanin% of A!ticle )1.. #t insists, ho&eve!,
that the dam cannot be sub5ected to !ealt ta, as a sepa!ate and
independent p!ope!t because it does not constitute an 6assessable
imp!ovement6 on the mine althou%h a conside!able sum ma have
been spent in const!uctin% and maintainin% it.
To suppo!t its theo!, the petitione! cites the follo&in% cases0
1. Muni!ipality of Cotabato v. Santos 69:; 'hil. <=>7, &he!e this Cou!t
conside!ed the di*es and %ates const!ucted b the ta,pae! in
connection &ith a fishpond ope!ation as inte%!al pa!ts of the fishpond.
". Bisli% Bay Lumber Co. v. 'rovin!ial #overnment of Suri%ao 69::
'hil. >:>7, involvin% a !oad const!ucted b the timbe! concessionai!e in
the a!ea, &he!e this Cou!t did not impose a !ealt ta, on the !oad
p!ima!il fo! t&o !easons0
#n the fi!st place, it cannot be disputed that the
o&ne!ship of the !oad that &as const!ucted b
appellee belon%s to the %ove!nment b !i%ht of
accession not onl because it is inhe!entl
inco!po!ated o! attached to the timbe! land . . . but
also because upon the e,pi!ation of the
concession said !oad &ould ultimatel pass to the
national %ove!nment. . . . #n the second place,
&hile the !oad &as const!ucted b appellee
p!ima!il fo! its use and benefit, the p!ivile%e is not
e,clusive, fo! . . . appellee cannot p!event the use
of po!tions of the concession fo! homesteadin%
pu!poses. #t is also dut bound to allo& the f!ee
use of fo!est p!oducts &ithin the concession fo!
the pe!sonal use of individuals !esidin% in o! &ithin
the vicinit of the land. . . . #n othe! &o!ds, the
%ove!nment has p!acticall !ese!ved the !i%hts to
use the !oad to p!omote its va!ied activities. 1ince,
as above sho&n, the !oad in 8uestion cannot be
conside!ed as an imp!ovement &hich belon%s to
appellee, althou%h in pa!t is fo! its benefit, it is
clea! that the same cannot be the sub5ect of
assessment &ithin the meanin% of 1ection " of
C.A.
No. )/2.
Appa!entl, the !ealt ta, &as not imposed not because the !oad &as
an inte%!al pa!t of the lumbe! concession but because the %ove!nment
had the !i%ht to use the !oad to p!omote its va!ied activities.
$. ?endri!* v. T2in La*es Reservoir Co. 69@@ 'a!ifi! AA@7, an
Ame!ican case, &he!e it &as decla!ed that the !ese!voi! dam &ent &ith
and fo!med pa!t of the !ese!voi! and that the dam &ould be 6&o!thless
and useless e,cept in connection &ith the outlet canal, and the &ate!
!i%hts in the !ese!voi! !ep!esent and include &hateve! utilit o! value
the!e is in the dam and head%ates.6
). 5ntario Silver Minin% Co. v. -i4on 69=@ 'a!ifi! @<A7, also f!om the
Hnited 1tates. This case involved d!ain tunnels const!ucted b plaintiff
&hen it e,panded its minin% ope!ations do&n&a!d, !esultin% in a
constantl inc!easin% flo& of &ate! in the said mine. #t &as held that0
7hateve! value the have is connected &ith and
in fact is an inte%!al pa!t of the mine itself. +ust as
much so as an shaft &hich descends into the
ea!th o! an unde!%!ound incline, tunnel, o! d!ift
&ould be &hich &as used in connection &ith the
mine.
An the othe! hand, the 1olicito! Bene!al a!%ues that the dam is an
assessable imp!ovement because it enhances the value and utilit of
the mine. The p!ima! function of the dam is to !eceive, !etain and hold
the &ate! comin% f!om the ope!ations of the mine, and it also enables
the petitione! to impound &ate!, &hich is then !eccled fo! use in the
plant.
The!e is also ample 5u!isp!udence to suppo!t this vie&, thus0
. . . The said e8uipment and machine!, as
appu!tenances to the %as station buildin% o! shed
o&ned b Calte, :as to &hich it is sub5ect to !ealt
ta,= and &hich fi,tu!es a!e necessa! to the
ope!ation of the %as station, fo! &ithout them the
%as station &ould be useless and &hich have
been attached o! affi,ed pe!manentl to the %as
station site o! embedded the!ein, a!e ta,able
imp!ovements and machine! &ithin the meanin%
of the Assessment 3a& and the Real P!ope!t Ta,
Code. :Calte, ;Phil.< #nc. v. CBAA, 11) 1CRA
"(E=.
7e hold that &hile the t&o sto!a%e tan*s a!e not
embedded in the land, the ma, neve!theless, be
conside!ed as imp!ovements on the land,
enhancin% its utilit and !ende!in% it useful to the
oil indust!. #t is undeniable that the t&o tan*s
have been installed &ith some de%!ee of
pe!manence as !eceptacles fo! the conside!able
8uantities of oil needed b MERA3CA fo! its
ope!ations. :Manila Elect!ic Co. v. CBAA, 11)
1CRA "/$=.
The pipeline sstem in 8uestion is indubitabl a
const!uction adhe!in% to the soil. #t is attached to
the land in such a &a that it cannot be sepa!ated
the!ef!om &ithout dismantlin% the steel pipes
&hich &e!e &elded to fo!m the pipeline.
:MERA3CA 1ecu!ities #ndust!ial Co!p. v. CBAA,
11) 1CRA "E1=.
The ta, upon the dam &as p!ope!l assessed to
the plaintiff as a ta, upon !eal estate. :@la,-Pond
7ate! Co. v. Cit of 3nn, 1E N.E. /)"=.
The oil tan*s a!e st!uctu!es &ithin the statute, that
the a!e desi%ned and used b the o&ne! as
pe!manent imp!ovement of the f!ee hold, and that
fo! such !easons the &e!e p!ope!l assessed b
the !espondent ta,in% dist!ict as imp!ovements.
:1tanda!d Ail Co. of Ne& +e!se v. Atlantic Cit,
1. A "d. "/1=
The Real P!ope!t Ta, Code does not ca!! a definition of 6!eal
p!ope!t6 and simpl sas that the !ealt ta, is imposed on 6!eal
p!ope!t, such as lands, buildin%s, machine! and othe! imp!ovements
affi,ed o! attached to !eal p!ope!t.6 #n the absence of such a
definition, &e appl A!ticle )1. of the Civil Code, the pe!tinent po!tions
of &hich state0
A!t. )1.. The follo&in% a!e immovable p!ope!t.
:1= 3ands, buildin%s and const!uctions of all *inds
adhe!ed to the soil4
,,, ,,, ,,,
:$= Eve!thin% attached to an immovable in a fi,ed
manne!, in such a &a that it cannot be sepa!ated
the!ef!om &ithout b!ea*in% the mate!ial o!
dete!io!ation of the ob5ect.
1ection " of C.A. No. )/2, othe!&ise *no&n as the Assessment 3a&,
p!ovides that the !ealt ta, is due 6on the !eal p!ope!t, includin% land,
buildin%s, machine! and othe! imp!ovements6 not specificall
e,empted in 1ection $ the!eof. A !eadin% of that section sho&s that the
tailin%s dam of the petitione! does not fall unde! an of the classes of
e,empt !eal p!ope!ties the!ein enume!ated.
#s the tailin%s dam an imp!ovement on the mineM 1ection $:*= of the
Real P!ope!t Ta, Code defines imp!ovement as follo&s0
:*= #mp!ovements J is a valuable addition made
to p!ope!t o! an amelio!ation in its condition,
amountin% to mo!e than me!e !epai!s o!
!eplacement of &aste, costin% labo! o! capital and
intended to enhance its value, beaut o! utilit o!
to adopt it fo! ne& o! fu!the! pu!poses.
The te!m has also been inte!p!eted as 6a!tificial alte!ations of the
phsical condition of the %!ound that a!ereasonably permanent in
!hara!ter.6
>
The Cou!t notes that in the Anta!io case the plaintiff admitted that the
mine involved the!ein could not be ope!ated &ithout the aid of the d!ain
tunnels, &hich &e!e indispensable to the successful development and
e,t!action of the mine!als the!ein. This is not t!ue in the p!esent case.
Even &ithout the tailin%s dam, the petitione!-s minin% ope!ation can still
be ca!!ied out because the p!ima! function of the dam is me!el to
!eceive and !etain the &astes and &ate! comin% f!om the mine. The!e
is no alle%ation that the &ate! comin% f!om the dam is the sole sou!ce
of &ate! fo! the minin% ope!ation so as to ma*e the dam an inte%!al
pa!t of the mine. #n fact, as a !esult of the const!uction of the dam, the
petitione! can no& impound and !eccle &ate! &ithout havin% to spend
fo! the buildin% of a &ate! !ese!voi!. And as the petitione! itself points
out, even if the petitione!-s mine is shut do&n o! ceases ope!ation, the
dam ma still be used fo! i!!i%ation of the su!!oundin% a!eas, a%ain
unli*e in the Anta!io case.
As co!!ectl obse!ved b the CBAA, the Nend!ic* case is also not
applicable because it involved &ate! !ese!voi! dams used fo! diffe!ent
pu!poses and fo! the benefit of the su!!oundin% a!eas. B cont!ast, the
tailin%s dam in 8uestion is bein% used e4!lusively fo! the benefit of the
petitione!.
Cu!iousl, the petitione!, &hile vi%o!ousl a!%uin% that the tailin%s dam
has no sepa!ate e,istence, 5ust as vi%o!ousl contends that at the end
of the minin% ope!ation the tailin%s dam &ill se!ve the local communit
as an i!!i%ation facilit, the!eb implin% that it can e,ist independentl
of the mine.
@!om the definitions and the cases cited above, it &ould appea! that
&hethe! a st!uctu!e constitutes an imp!ovement so as to pa!ta*e of the
status of !ealt &ould depend upon the de%!ee of permanen!e
intended in its !onstru!tion and use. The e,p!ession 6pe!manent6 as
applied to an imp!ovement does not impl that the imp!ovement must
be used pe!petuall but onl until the pu!pose to &hich the p!incipal
!ealt is devoted has been accomplished. #t is sufficient that the
imp!ovement is intended to !emain as lon% as the land to &hich it is
anne,ed is still used fo! the said pu!pose.
The Cou!t is convinced that the sub5ect dam falls &ithin the definition of
an 6imp!ovement6 because it is pe!manent in cha!acte! and it
enhances both the value and utilit of petitione!-s mine. Mo!eove!, the
immovable natu!e of the dam defines its cha!acte! as !eal p!ope!t
unde! A!ticle )1. of the Civil Code and thus ma*es it ta,able unde!
1ection $9 of the Real P!ope!t Ta, Code.
The Cou!t &ill also !e5ect the contention that the app!aisal at P.2.22
pe! s8ua!e mete! made b the P!ovincial Assesso! is e,cessive and
that his use of the 6!esidual value fo!mula6 is a!bit!a! and e!!oneous.
Respondent P!ovincial Assesso! e,plained the use of the 6!esidual
value fo!mula6 as follo&s0
A .2K !esidual value is applied in the computation
because, &hile it is t!ue that &hen slime fills the
di*e, it &ill then be cove!ed b anothe! di*e o!
sta%e, the sta%e cove!ed is still the!e and still
e,ists and since onl one face of the di*e is filled,
.2K o! the othe! face is unutiliDed.
#n sustainin% this fo!mula, the CBAA %ave the follo&in% 5ustification0
7e find the app!aisal on the land subme!%ed as a
!esult of the const!uction of the tailin%s dam,
cove!ed b Ta, 'ecla!ation Nos.
22"-2"E2 and 22"-2"EE, to be in acco!dance &ith
the 1chedule of Ma!*et Calues fo! 1an Ma!celino,
Lambales, &hich is fift :.2.22= pesos pe! s8ua!e
mete! fo! thi!d class indust!ial land :T1N, pa%e 1/,
+ul ., 1(9(= and 1chedule of Ma!*et Calues fo!
Lambales &hich &as !evie&ed and allo&ed fo!
use b the Minist! :'epa!tment= of @inance in the
1(91-1(9" %ene!al !evision. No se!ious attempt
&as made b Petitione!-Appellant Ben%uet
Co!po!ation to impu%n its !easonableness, i.e, that
the P.2.22 pe! s8ua!e mete! applied b
Respondent-Appellee P!ovincial Assesso! is
indeed e,cessive and unconscionable. >ence, &e
find no cause to distu!b the ma!*et value applied
b Respondent-Appellee P!ovincial Assesso! of
Lambales on the p!ope!ties of Petitione!-Appellant
Ben%uet Co!po!ation cove!ed b Ta, 'ecla!ation
Nos. 22"-2"E2 and 22"-2"EE.
#t has been the lon%-standin% polic of this Cou!t to !espect the
conclusions of 8uasi-5udicial a%encies li*e the CBAA, &hich, because
of the natu!e of its functions and its f!e8uent e,e!cise the!eof, has
developed e,pe!tise in the !esolution of assessment p!oblems. The
onl e,ception to this !ule is &he!e it is clea!l sho&n that the
administ!ative bod has committed %!ave abuse of disc!etion callin% fo!
the inte!vention of this Cou!t in the e,e!cise of its o&n po&e!s of
!evie&. The!e is no such sho&in% in the case at ba!.
7e disa%!ee, ho&eve!, &ith the !ulin% of !espondent CBAA that it
cannot ta*e co%niDance of the issue of the p!op!iet of the penalties
imposed upon it, &hich &as !aised b the petitione! fo! the fi!st time
onl on appeal. The CBAA held that this 6is an enti!el ne& matte! that
petitione! can ta*e up &ith the P!ovincial Assesso! :and= can be the
sub5ect of anothe! p!otest befo!e the 3ocal Boa!d o! a ne%otiation &ith
the local san%%unian . . ., and in case of an adve!se decision b eithe!
the 3ocal Boa!d o! the local san%%unian, :it can= elevate the same to
this Boa!d fo! app!op!iate action.6
The!e is no need fo! this time-&astin% p!ocedu!e. The Cou!t ma
!esolve the issue in this petition instead of !efe!!in% it bac* to the local
autho!ities. 7e have studied the facts and ci!cumstances of this case
as above discussed and find that the petitione! has acted in %ood faith
in 8uestionin% the assessment on the tailin%s dam and the land
subme!%ed the!eunde!. #t is clea! that it has not done so fo! the
pu!pose of evadin% o! delain% the pament of the 8uestioned ta,.
>ence, &e hold that the petitione! is not sub5ect to penalt fo! its
non-decla!ation of the tailin%s dam and the subme!%ed lands fo! !ealt
ta, pu!poses.
7>ERE@ARE, the petition is '#1M#11E' fo! failu!e to sho& that the
8uestioned decision of !espondent Cent!al Boa!d of Assessment
Appeals is tainted &ith %!ave abuse of disc!etion e,cept as to the
imposition of penalties upon the petitione! &hich is he!eb 1ET A1#'E.
Costs a%ainst the petitione!. #t is so o!de!ed.
0arvasa, C.., #utierre(, r., 'adilla, Bidin, #ri"o,A1uino, Re%alado,
)avide, r., Romero, 0o!on, Bellosillo, Melo and Campos, r., .,
!on!ur.
Feli!iano, ., too* no part.
SUPREME COURT
Manila
T>#R' '#C#1#AN
G.R. No. 1:@@?5 Au-u21 >>, >???
SERG<S PRO9UCTS, "NC., a#$ SERG"O T.
GOBU"OLAY, petitione!s,
vs.
PC" LEAS"NG AN9 F"NANCE, "NC., !espondent.
' E C # 1 # A N
PANGAN"CAN, J.:
Afte! a%!eein% to a cont!act stipulatin% that a !eal o! immovable
p!ope!t be conside!ed as pe!sonal o! movable, a pa!t is estopped
f!om subse8uentl claimin% othe!&ise. >ence, such p!ope!t is a
p!ope! sub5ect of a &!it of !eplevin obtained b the othe! cont!actin%
pa!t.
The Case
Befo!e us is a Petition fo! Revie& on Ce!tio!a!i assailin% the +anua! E,
1((( 'ecision
1
of the Cou!t of Appeals :CA=
"
in CA-BR 1P No. )/$$"
and its @eb!ua! "E, 1((( Resolution
$
denin% !econside!ation. The
dec!etal po!tion of the CA 'ecision !eads as follo&s0
67>ERE@ARE, p!emises conside!ed, the assailed A!de! dated
@eb!ua! 19, 1((9 and Resolution dated Ma!ch $1, 1((9 in Civil Case
No. O-(9-$$.22 a!e he!eb AFF"RME9. The &!it of p!elimina!
in5unction issued on +une 1., 1((9 is he!eb L"FTE9.6
)
#n its @eb!ua! 19, 1((9 A!de!,
.
the Re%ional T!ial Cou!t :RTC= of
OueDon Cit :B!anch "19=
E
issued a 7!it of 1eiDu!e.
/
The Ma!ch 19,
1((9 Resolution
9
denied petitione!sP Motion fo! 1pecial P!otective
A!de!, p!ain% that the deput she!iff be en5oined 6f!om seiDin%
immobiliDed o! othe! !eal p!ope!ties in :petitione!sP= facto! in Cainta,
RiDal and to !etu!n to thei! o!i%inal place &hateve! immobiliDed
machine!ies o! e8uipments he ma have !emoved.6
(
The @acts
The undisputed facts a!e summa!iDed b the Cou!t of Appeals as
follo&s0
12
6An @eb!ua! 1$, 1((9, !espondent PC# 3easin% and @inance, #nc.
:6PC# 3easin%6 fo! sho!t= filed &ith the RTC-OC a complaint fo! ;a< sum
of mone :Anne, QEP=, &ith an application fo! a &!it of !eplevin doc*eted
as Civil Case No. O-(9-$$.22.
6An Ma!ch E, 1((9, upon an e,-pa!te application of PC# 3easin%,
!espondent 5ud%e issued a &!it of !eplevin :Anne, QBP= di!ectin% its
she!iff to seiDe and delive! the machine!ies and e8uipment to PC#
3easin% afte! . das and upon the pament of the necessa!
e,penses.
6An Ma!ch "), 1((9, in implementation of said &!it, the she!iff
p!oceeded to petitione!Ps facto!, seiDed one machine! &ith ;the< &o!d
that he ;&ould< !etu!n fo! the othe! machine!ies.
6An Ma!ch "., 1((9, petitione!s filed a motion fo! special p!otective
o!de! :Anne, QCP=, invo*in% the po&e! of the cou!t to cont!ol the
conduct of its office!s and amend and cont!ol its p!ocesses, p!ain% fo!
a di!ective fo! the she!iff to defe! enfo!cement of the &!it of !eplevin.
6This motion &as opposed b PC# 3easin% :Anne, Q@P=, on the %!ound
that the p!ope!ties ;&e!e< still pe!sonal and the!efo!e still sub5ect to
seiDu!e and a &!it of !eplevin.
6#n thei! Repl, petitione!s asse!ted that the p!ope!ties sou%ht to be
seiDed ;&e!e< immovable as defined in A!ticle )1. of the Civil Code,
the pa!tiesP a%!eement to the cont!a! not&ithstandin%. The a!%ued
that to %ive effect to the a%!eement &ould be p!e5udicial to innocent
thi!d pa!ties. The fu!the! stated that PC# 3easin% ;&as< estopped f!om
t!eatin% these machine!ies as pe!sonal because the cont!acts in &hich
the alle%ed a%!eement ;&e!e< embodied ;&e!e< totall sham and
fa!cical.
6An Ap!il E, 1((9, the she!iff a%ain sou%ht to enfo!ce the &!it of seiDu!e
and ta*e possession of the !emainin% p!ope!ties. >e &as able to ta*e
t&o mo!e, but &as p!evented b the &o!*e!s f!om ta*in% the !est.
6An Ap!il /, 1((9, the &ent to ;the CA< via an o!i%inal action fo!
ce!tio!a!i.6
Rulin% of the Cou!t of Appeals
Citin% the A%!eement of the pa!ties, the appellate cou!t held that the
sub5ect machines &e!e pe!sonal p!ope!t, and that the had onl been
leased, not o&ned, b petitione!s. #t also !uled that the 6&o!ds of the
cont!act a!e clea! and leave no doubt upon the t!ue intention of the
cont!actin% pa!ties.6 Abse!vin% that Petitione! Bo8uiola &as an
e,pe!ienced businessman &ho &as 6not unfamilia! &ith the &as of the
t!ade,6 it !uled that he 6should have !ealiDed the impo!t of the
document he si%ned.6 The CA fu!the! held0
6@u!the!mo!e, to acco!d me!it to this petition &ould be to p!eempt the
t!ial cou!t in !ulin% upon the case belo&, since the me!its of the &hole
matte! a!e laid do&n befo!e us via a petition &hose sole pu!pose is to
in8ui!e upon the e,istence of a %!ave abuse of disc!etion on the pa!t of
the ;RTC< in issuin% the assailed A!de! and Resolution. The issues
!aised he!ein a!e p!ope! sub5ects of a full-blo&n t!ial, necessitatin%
p!esentation of evidence b both pa!ties. The cont!act is bein%
enfo!ced b one, and ;its< validit is attac*ed b the othe! R a matte! ,
, , &hich !espondent cou!t is in the best position to dete!mine.6
>ence, this Petition.
11
The #ssues
#n thei! Memo!andum, petitione!s submit the follo&in% issues fo! ou!
conside!ation0
6A. 7hethe! o! not the machine!ies pu!chased and impo!ted b
1ERBP1 became !eal p!ope!t b vi!tue of immobiliDation.
B. 7hethe! o! not the cont!act bet&een the pa!ties is a loan o! a
lease.
61"
#n the main, the Cou!t &ill !esolve &hethe! the said machines a!e
pe!sonal, not immovable, p!ope!t &hich ma be a p!ope! sub5ect of a
&!it of !eplevin. As a p!elimina! matte!, the Cou!t &ill also add!ess
b!iefl the p!ocedu!al points !aised b !espondent.
The Cou!tPs Rulin%
The Petition is not me!ito!ious.
P!elimina! Matte!0 'ro!edural Buestions
Respondent contends that the Petition failed to indicate e,p!essl
&hethe! it &as bein% filed unde! Rule ). o! Rule E. of the Rules of
Cou!t. #t fu!the! alle%es that the Petition e!!oneousl impleaded +ud%e
>ila!io 3a8ui as !espondent.
The!e is no 8uestion that the p!esent !ecou!se is unde! Rule ).. This
conclusion finds suppo!t in the ve! title of the Petition, &hich is
6Petition fo! Revie& on Ce!tio!a!i.6
1$
7hile +ud%e 3a8ui should not have been impleaded as a
!espondent,
1)
substantial 5ustice !e8ui!es that such lapse b itself
should not &a!!ant the dismissal of the p!esent Petition. #n this li%ht,
the Cou!t deems it p!ope! to !emove, motu proprio, the name of +ud%e
3a8ui f!om the caption of the p!esent case.
Main #ssue0 0ature of the Sub/e!t Ma!hinery
Petitione!s contend that the sub5ect machines used in thei! facto!
&e!e not p!ope! sub5ects of the 7!it issued b the RTC, because the
&e!e in fact !eal p!ope!t. 1e!ious polic conside!ations, the a!%ue,
militate a%ainst a cont!a! cha!acte!iDation.
Rule E2 of the Rules of Cou!t p!ovides that &!its of !eplevin a!e issued
fo! the !ecove! of pe!sonal p!ope!t onl.
1.
1ection $ the!eof !eads0
61EC. $. 5rder. -- Hpon the filin% of such affidavit and app!oval of the
bond, the cou!t shall issue an o!de! and the co!!espondin% &!it of
!eplevin desc!ibin% the pe!sonal p!ope!t alle%ed to be &!on%full
detained and !e8ui!in% the she!iff fo!th&ith to ta*e such p!ope!t into
his custod.6
An the othe! hand, A!ticle )1. of the Civil Code enume!ates
immovable o! !eal p!ope!t as follo&s0
6ART. )1.. The follo&in% a!e immovable p!ope!t0
, , , , , , , , ,
:.= Machine!, !eceptacles, inst!uments o! implements intended b the
o&ne! of the tenement fo! an indust! o! &o!*s &hich ma be ca!!ied
on in a buildin% o! on a piece of land, and &hich tend di!ectl to meet
the needs of the said indust! o! &o!*s4
, , , , , , , , ,6
#n the p!esent case, the machines that &e!e the sub5ects of the 7!it of
1eiDu!e &e!e placed b petitione!s in the facto! built on thei! o&n
land. #ndisputabl, the &e!e essential and p!incipal elements of thei!
chocolate-ma*in% indust!. >ence, althou%h each of them &as
movable o! pe!sonal p!ope!t on its o&n, all of them have become
6immobiliDed b destination because the a!e essential and p!incipal
elements in the indust!.6
1E
#n that sense, petitione!s a!e co!!ect in
a!%uin% that the said machines a!e !eal, not pe!sonal, p!ope!t
pu!suant to A!ticle )1. :.= of the Civil Code.
1/
Be that as it ma, &e disa%!ee &ith the submission of the petitione!s
that the said machines a!e not p!ope! sub5ects of the 7!it of 1eiDu!e.
The Cou!t has held that cont!actin% pa!ties ma validl stipulate that a
!eal p!ope!t be conside!ed as pe!sonal.
19
Afte! a%!eein% to such
stipulation, the a!e conse8uentl estopped f!om claimin% othe!&ise.
Hnde! the p!inciple of estoppel, a pa!t to a cont!act is o!dina!il
p!ecluded f!om denin% the t!uth of an mate!ial fact found the!ein.
>ence, in Tumalad v. &i!en!io,
1(
the Cou!t upheld the intention of the
pa!ties to t!eat a house as a pe!sonal p!ope!t because it had been
made the sub5ect of a chattel mo!t%a%e. The Cou!t !uled0
6, , ,. Althou%h the!e is no specific statement !efe!!in% to the sub5ect
house as pe!sonal p!ope!t, et b cedin%, sellin% o! t!ansfe!!in% a
p!ope!t b &a of chattel mo!t%a%e defendants-appellants could onl
have meant to conve the house as chattel, o! at least, intended to
t!eat the same as such, so that the should not no& be allo&ed to
ma*e an inconsistent stand b claimin% othe!&ise.6
Applin% Tumalad, the Cou!t in Ma*ati Leasin% and Finan!e Corp. v.
Wearever Te4tile Mills
"2
also held that the machine! used in a facto!
and essential to the indust!, as in the p!esent case, &as a p!ope!
sub5ect of a &!it of !eplevin because it &as t!eated as pe!sonal
p!ope!t in a cont!act. Pe!tinent po!tions of the Cou!tPs !ulin% a!e
!ep!oduced he!eunde!0
6, , ,. #f a house of st!on% mate!ials, li*e &hat &as involved in the
above Tumalad case, ma be conside!ed as pe!sonal p!ope!t fo!
pu!poses of e,ecutin% a chattel mo!t%a%e the!eon as lon% as the
pa!ties to the cont!act so a%!ee and no innocent thi!d pa!t &ill be
p!e5udiced the!eb, the!e is absolutel no !eason &h a machine!,
&hich is movable in its natu!e and becomes immobiliDed onl b
destination o! pu!pose, ma not be li*e&ise t!eated as such. This is
!eall because one &ho has so a%!eed is estopped f!om denin% the
e,istence of the chattel mo!t%a%e.6
#n the p!esent case, the 3ease A%!eement clea!l p!ovides that the
machines in 8uestion a!e to be conside!ed as pe!sonal p!ope!t.
1pecificall, 1ection 1".1 of the A%!eement !eads as follo&s0
"1
61".1 The PRAPERTF is, and shall at all times be and !emain,
pe!sonal p!ope!t not&ithstandin% that the PRAPERTF o! an pa!t
the!eof ma no& be, o! he!eafte! become, in an manne! affi,ed o!
attached to o! embedded in, o! pe!manentl !estin% upon, !eal p!ope!t
o! an buildin% the!eon, o! attached in an manne! to &hat is
pe!manent.6
Clea!l then, petitione!s a!e estopped f!om denin% the
cha!acte!iDation of the sub5ect machines as pe!sonal p!ope!t. Hnde!
the ci!cumstances, the a!e p!ope! sub5ects of the 7!it of 1eiDu!e.
#t should be st!essed, ho&eve!, that ou! holdin% -- that the machines
should be deemed pe!sonal p!ope!t pu!suant to the 3ease A%!eement
R is %ood onl insofa! as the cont!actin% pa!ties a!e
conce!ned.
""
>ence, &hile the pa!ties a!e bound b the A%!eement,
thi!d pe!sons actin% in %ood faith a!e not affected b its stipulation
cha!acte!iDin% the sub5ect machine! as pe!sonal.
"$
#n an event, the!e
is no sho&in% that an specific thi!d pa!t &ould be adve!sel affected.
&alidity of the Lease A%reement
#n thei! Memo!andum, petitione!s contend that the A%!eement is a loan
and not a lease.
")
1ubmittin% documents supposedl sho&in% that the
o&n the sub5ect machines, petitione!s also a!%ue in thei! Petition that
the A%!eement suffe!s f!om 6int!insic ambi%uit &hich places in se!ious
doubt the intention of the pa!ties and the validit of the lease
a%!eement itself.6
".
#n thei! Repl to !espondentPs Comment, the
fu!the! alle%e that the A%!eement is invalid.
"E
These a!%uments a!e unconvincin%. The validit and the natu!e of the
cont!act a!e the lis mota of the civil action pendin% befo!e the RTC. A
!esolution of these 8uestions, the!efo!e, is effectivel a !esolution of
the me!its of the case. >ence, the should be th!eshed out in the t!ial,
not in the p!oceedin%s involvin% the issuance of the 7!it of 1eiDu!e.
#ndeed, in La Tonde"a )istillers v. CA,
"/
the Cou!t e,plained that the
polic unde! Rule E2 &as that 8uestions involvin% title to the sub5ect
p!ope!t R 8uestions &hich petitione!s a!e no& !aisin% -- should be
dete!mined in the t!ial. #n that case, the Cou!t noted that the !emed of
defendants unde! Rule E2 &as eithe! to post a counte!-bond o! to
8uestion the sufficienc of the plaintiffPs bond. The &e!e not allo&ed,
ho&eve!, to invo*e the title to the sub5ect p!ope!t. The Cou!t !uled0
6#n othe! &o!ds, the la& does not allo& the defendant to file a motion to
dissolve o! discha!%e the &!it of seiDu!e :o! delive!= on %!ound of
insufficienc of the complaint o! of the %!ounds !elied upon the!efo!, as
in p!oceedin%s on p!elimina! attachment o! in5unction, and the!eb put
at issue the matte! of the title o! !i%ht of possession ove! the specific
chattel bein% !eplevied, the polic appa!entl bein% that said matte!
should be ventilated and dete!mined onl at the t!ial on the me!its.6
"9
Besides, these 8uestions !e8ui!e a dete!mination of facts and a
p!esentation of evidence, both of &hich have no place in a petition fo!
ce!tio!a!i in the CA unde! Rule E. o! in a petition fo! !evie& in this
Cou!t unde! Rule )..
"(
Relian!e on the Lease A%reement
#t should be pointed out that the Cou!t in this case ma !el on the
3ease A%!eement, fo! nothin% on !eco!d sho&s that it has been
nullified o! annulled. #n fact, petitione!s assailed it fi!st onl in the RTC
p!oceedin%s, &hich had i!onicall been instituted b !espondent.
Acco!din%l, it must be p!esumed valid and bindin% as the la& bet&een
the pa!ties.
Ma*ati Leasin% and Finan!e Corporation
$2
is also inst!uctive on this
point. #n that case, the 'eed of Chattel Mo!t%a%e, &hich cha!acte!iDed
the sub5ect machine! as pe!sonal p!ope!t, &as also assailed
because !espondent had alle%edl been !e8ui!ed 6to si%n a p!inted
fo!m of chattel mo!t%a%e &hich &as in a blan* fo!m at the time of
si%nin%.6 The Cou!t !e5ected the a!%ument and !elied on the 'eed,
!ulin% as follo&s0
6, , ,. Mo!eove!, even %!antin% that the cha!%e is t!ue, such fact alone
does not !ende! a cont!act void ab initio, but can onl be a %!ound fo!
!ende!in% said cont!act voidable, o! annullable pu!suant to A!ticle 1$(2
of the ne& Civil Code, b a p!ope! action in cou!t. The!e is nothin% on
!eco!d to sho& that the mo!t%a%e has been annulled. Neithe! is it
disclosed that steps &e!e ta*en to nullif the same. , , ,6
Alle%ed $n/usti!e Committed on the 'art of 'etitioners
Petitione!s contend that 6if the Cou!t allo&s these machine!ies to be
seiDed, then its &o!*e!s &ould be out of &o!* and th!o&n into the
st!eets.6
$1
The also alle%e that the seiDu!e &ould nullif all effo!ts to
!ehabilitate the co!po!ation.
Petitione!sP a!%uments do not p!eclude the implementation of the
7!it.9C2phi9 As ea!lie! discussed, la& and 5u!isp!udence suppo!t its
p!op!iet. Ce!il, the above-mentioned conse8uences, if the come
t!ue, should not be blamed on this Cou!t, but on the petitione!s fo!
failin% to avail themselves of the !emed unde! 1ection . of Rule E2,
&hich allo&s the filin% of a counte!-bond. The p!ovision states0
61EC. .. Return of property. -- #f the adve!se pa!t ob5ects to the
sufficienc of the applicantPs bond, o! of the su!et o! su!eties the!eon,
he cannot immediatel !e8ui!e the !etu!n of the p!ope!t, but if he does
not so ob5ect, he ma, at an time befo!e the delive! of the p!ope!t to
the applicant, !e8ui!e the !etu!n the!eof, b filin% &ith the cou!t &he!e
the action is pendin% a bond e,ecuted to the applicant, in double the
value of the p!ope!t as stated in the applicantPs affidavit fo! the
delive! the!eof to the applicant, if such delive! be ad5ud%ed, and fo!
the pament of such sum to him as ma be !ecove!ed a%ainst the
adve!se pa!t, and b se!vin% a cop bond on the applicant.6
&!EREFORE, the Petition is )30$3) and the assailed 'ecision of
the Cou!t of Appeals AFF$RM3). Costs a%ainst petitione!s.
1A AR'ERE'.
Melo, :Chai!man=, Citu%, Pu!isima, and BonDa%a-Rees, ++., concu!.
@#R1T '#C#1#AN
;B.R. No. 1.E"(.. 1eptembe! "$, "22$<
MARCE3A R. 1AR#ANA, petitioner, vs. 1PAH1E1 R#CAR'A and
RA1A3#NA BA3#T, respondents.
' E C # 1 # A N
FNARE1-1ANT#ABA, .0
Petitione! &as issued a &!it of possession in Civil Case No. EE)$
1
;1<
fo! 1um of Mone b the Re%ional T!ial Cou!t of Balan%a, Bataan,
B!anch 1. The &!it of possession &as, ho&eve!, nullified b the Cou!t
of Appeals in CA-B.R. 1P No. E.9(1
"
;"< because it included a pa!cel
of land &hich &as not amon% those e,plicitl enume!ated in the
Ce!tificate of 1ale issued b the 'eput 1he!iff, but on &hich stand the
immovables cove!ed b the said Ce!tificate. Petitione! contends that
the sale of these immovables necessa!il encompasses the land on
&hich the stand.
'issatisfied, petitione! filed the instant petition fo! !evie& on !ertiorari.
Respondent Rica!do Balit cont!acted a loan f!om petitione! Ma!celo
1o!iano, in the total sum of P)92,222.22, evidenced b fou! p!omisso!
notes in the amount of P1"2,222.22 each dated Au%ust ", 1((E4
$
;$<
Au%ust 1., 1((E4
)
;)< 1eptembe! ), 1((E
.
;.< and 1eptembe! 1), 1((E.
E
;E< This loan &as secu!ed b a !eal estate mo!t%a%e ove! a pa!cel of
land cove!ed b A!i%inal Ce!tificate of Title No. .E(.
/
;/< Afte! he failed
to pa his obli%ation, 1o!iano filed a complaint fo! sum of mone
a%ainst him &ith the Re%ional T!ial Cou!t of Balan%a Cit, B!anch 1,
&hich &as doc*eted as Civil Case No. EE)$.
9
;9<
1
2
3
4
5
6
7
8
Respondents, the 1pouses Rica!do and Rosalina Balit, failed to file
thei! ans&e!. >ence, upon motion of Ma!celo 1o!iano, the t!ial cou!t
decla!ed the spouses in default and p!oceeded to !eceive evidence fo!
petitione! 1o!iano e4 parte.
An +ul /, 1((/, the Re%ional T!ial Cou!t of Balan%a Cit, B!anch 1
!ende!ed 5ud%ment
(
;(< in favo! of petitione! 1o!iano, the dispositive
po!tion of &hich !eads0
7>ERE@ARE, 5ud%ment is he!eb !ende!ed in favo! of the plaintiff
and a%ainst the defendant o!de!in% the latte! to pa0
1. the plaintiff the amount of P$.2,222.22 plus 1"K
inte!est to be computed f!om the dates of matu!it
of the p!omisso! notes until the same a!e full
paid4
". the plaintiff P"2,222.22, as atto!nePs fees4 and
$. the costs of suit.
1A AR'ERE'.
12
;12<
The 5ud%ment became final and e,ecuto!. Acco!din%l, the t!ial cou!t
issued a &!it of e,ecution in due cou!se, b vi!tue of &hich, 'eput
1he!iff Renato E. Robles levied on the follo&in% !eal p!ope!ties of the
Balit spouses0
1. A pa!cel of land cove!ed b A!i%inal Ce!tificate of
Title No. T-.E( :>omestead Patent No. 1)E("=
situated in the Bo. of Tapulac, A!ani, Bataan.
Bounded on the 17, alon% line 1-" b 3ot No. $,
Cad. 1).4 containin% an a!ea of T>#RTF @#CE
T>AH1AN' 1ECEN >HN'RE' @#@TF N#NE
:$.,/.(= 1OHARE METER1, mo!e o! less , , ,4
". 1TARES>AH1E R CAN1TRHCTE' on 3ot No.
112$ made of st!on% mate!ials B.#. !oofin%
situated at Cent!o #, A!ani, Bataan, , , ,
containin% an a!ea of $2 s8. mete!s, mo!e o! less
, , , :const!ucted on TCT No. T)2/9.=4
$. BA'EBA R const!ucted on 3ot 112$, made of
st!on% mate!ials, B.#. !oofin%, situated in Cent!o #,
A!ani, Bataan, , , , &ith a floo! a!ea of )"./. s8.
m. mo!e o! less , , ,.
11
;11<
At the sale of the above-enume!ated p!ope!ties at public auction held
on 'ecembe! "$, 1((9, petitione! &as the hi%hest and onl bidde! &ith
a bid p!ice of P)9$,222.22. Acco!din%l, on @eb!ua! ), 1(((, 'eput
1he!iff Robles issued a Ce!tificate of 1ale of E,ecution of Real
P!ope!t,
1"
;1"< &hich !eads0
CERT"F"CATE OF SALE ON EIECUT"ON OF REAL PROPERTY
TA A33 7>A MAF 1EE T>E1E PRE1ENT10
BREET#NB10
9
10
11
12
# >EREBF that :si!= b vi!tue of the &!it of e,ecution dated Actobe! 1E,
1((9, issued in the above-entitled case b the >AN. BEN+AM#N T.
C#ANLAN, o!de!in% the P!ovincial 1he!iff of Bataan o! he! autho!iDed
'eput 1he!iff to cause to be made :si!= the sum of P$.2,222.22 plus
1"K inte!est to be computed f!om the date of matu!it of the
p!omisso! notes until the same a!e full paid4 P"2,222.22 as
atto!nePs fees plus le%al e,penses in the implementation of the &!it of
e,ecution, the unde!si%ned 'eput 1he!iff sold at public auction on
'ecembe! "$, 1((9 the !i%hts and inte!ests of defendants 1ps.
Rica!do and Rosalina Balit, to the plaintiff Ma!celo 1o!iano, the hi%hest
and onl bidde! fo! the amount of @AHR >N'RE' E#B>TF T>REE
T>AH1AN' PE1A1 :P)9$,222.22, Philippine Cu!!enc=, the follo&in%
!eal estate p!ope!ties mo!e pa!ticula!l desc!ibed as follo&s 0
OR"G"NAL CERT"F"CATE OF T"TLE NO. T-569
A pa!cel of land :>omestead Patent No. 1)E("= situated in the Bo. of
Tapulac, A!ani, Bataan, , , ,. Bounded on the 17., alon% line 1-" b
3ot No. $, Cad. 1)., containin% an a!ea of T>#RTF @#CE T>AH1AN'
1ECEN >HN'RE' @#@TF N#NE :$.,/.(= 1OHARE METER1, mo!e o!
less , , ,
TAI 9EC. NO. J PROPERTY "N9EI NO. ?18-?9-??1-?>
1TARE>AH1E R const!ucted on 3ot 112$, made of st!on% mate!ials
B.#. !oofin% situated at Cent!o #, A!ani, Bataan , , , containin% an a!ea
of $2 s8. mete!s, mo!e o! less , , :const!ucted on TCT No. )2/9.=
TAI 9EC. NO. 86 J PROPERTY "N9EI No. ?18-?9-??1-?>
BA'EBA R const!ucted on 3ot 112$, made of st!on% mate!ials B.#.
!oofin% situated in Cent!o #, A!ani, Bataan, , , , &ith a floo! a!ea of
)"./. s8. m. mo!e o! less , , ,
#T #1 @HRT>ER CERT#@#E', that the afo!esaid hi%hest and lone
bidde!, Ma!celo 1o!iano, bein% the plaintiff did not pa to the P!ovincial
1he!iff of Bataan the amount of P)9$,222.22, the sale p!ice of the
above-desc!ibed p!ope!t &hich amount &as c!edited to pa!tialSfull
satisfaction of the 5ud%ment embodied in the &!it of e,ecution.
The pe!iod of !edemption of the above desc!ibed !eal p!ope!ties
to%ethe! &ith all the imp!ovements the!eon &ill e,pi!e Ane :1= ea!
f!om and afte! the !e%ist!ation of this Ce!tificate of 1ale &ith the
Re%iste! of 'eeds.
This Ce!tificate of 1he!iffPs 1ale is issued to the hi%hest and lone
bidde!, Ma!celo 1o!iano, unde! %ua!antees p!esc!ibed b la&.
Balan%a, Bataan, @eb!ua! ), 1(((.
An Ap!il "$, 1(((, petitione! caused the !e%ist!ation of the TCe!tificate
of 1ale on E,ecution of Real P!ope!tU &ith the Re%ist! of 'eeds.
The said Ce!tificate of 1ale !e%iste!ed &ith the Re%iste! of 'eeds
includes at the do!sal po!tion the!eof the follo&in% ent!, not found in
the Ce!tificate of 1ale on file &ith 'eput 1he!iff Renato E. Robles0
1$
;1$<
OR"G"NAL CERT"F"CATE OF T"TLE NO. T-=?@85
A pa!cel of land :3ot No. 112$ of the Cadast!al 1u!ve of A!ani= , &ith
the imp!ovements the!eon, situated in the Municipalit of A!ani,
Bounded on the NE4 b Calle P. BomeD4 on the E. b 3ot No. 112)4 on
the 1E b Calle 7ashin%ton4 and on the 7. b 3ot )12", containin% an
a!ea of ANE >HN'RE' T>#RTF N#NE :1$(= 1OHARE METER1,
mo!e o! less. All points !efe!!ed to a!e indicated on the plan4 bea!in%
13
t!ue4 declination 2 de%. )2PE., date of su!ve, @eb!ua! 1(1-Ma!ch
1("2.
An @eb!ua! "$, "221, ten months f!om the time the Ce!tificate of 1ale
on E,ecution &as !e%iste!ed &ith the Re%ist! of 'eeds, petitione!
moved
1)
;1)< fo! the issuance of a &!it of possession. >e ave!!ed that
the one-ea! pe!iod of !edemption had elapsed &ithout the
!espondents havin% !edeemed the p!ope!ties sold at public auction4
thus, the sale of said p!ope!ties had al!ead become final. >e also
a!%ued that afte! the lapse of the !edemption pe!iod, the titles to the
p!ope!ties should be conside!ed, fo! all le%al intents and pu!poses, in
his name and favo!.
1.
;1.<
An +une ), "221, the Re%ional T!ial Cou!t of Balan%a Cit, B!anch 1
%!anted the motion fo! issuance of &!it of possession.
1E
;1E<
1ubse8uentl, on +ul 19, "221, a &!it of possession
1/
;1/< &as issued
in petitione!Ps favo! &hich !eads0
&R"T OF POSSESS"ON
M!. Renato E. Robles
'eput 1he!iff
RTC, B!. 1, Balan%a Cit
B!eetin%s 0
7>EREA1 on @eb!ua! $, "221, the counsel fo! plaintiff filed Motion
fo! the #ssuance of 7!it of Possession4
7>EREA1 on +une ), "221, this cou!t issued an o!de! %!antin% the
issuance of the 7!it of Possession4
7>ERE@ARE, ou a!e he!eb commanded to place the he!ein plaintiff
Ma!celo 1o!iano in possession of the p!ope!t involved in this case
situated :si!= mo!e pa!ticula!l desc!ibed as0
1. 1TARE >AH1E const!ucted on 3ot No. 112$
situated at Cent!o 1, A!ani, Bataan cove!ed b
TCT No. )2/9.4
". BA'EBA const!ucted on 3ot No. 112$ &ith an
a!ea of )"./. s8ua!e mete!s unde! Ta,
'ecla!ation No. 9E situated at Cent!o 1, A!ani,
Bataan4
$. A!i%inal Ce!tificate of Title No. )2/9. &ith an a!ea
of 1$) s8ua!e mete!s *no&n as 3ot No. 112$ of
the Cadast!al 1u!ve of A!aniV
a%ainst the mo!t%a%o!Sfo!me! o&ne!s 1ps. Rica!do and Rosalinda :si!=
Balit, he! :si!= hei!s, successo!s, assi%ns and all pe!sons claimin%
!i%hts and inte!ests adve!se to the petitione! and ma*e a !etu!n of this
&!it eve! thi!t :$2= das f!om !eceipt he!eof to%ethe! &ith all the
p!oceedin%s the!eon until the same has been full satisfied.
7#TNE11 T>E >ANARAB3E BEN+AM#N T. C#ANLAN, P!esidin%
+ud%e, this 19
th
da of +ul "221, at Balan%a Cit.
14
15
16
17
:
1%d=
B#3BERT 1.
ARBANLA
#C
Respondents filed a petition fo! ce!tio!a!i &ith the Cou!t of Appeals,
&hich &as doc*eted as CA-B.R. 1P No. E.9(1, assailin% the inclusion
of the pa!cel of land cove!ed b T!ansfe! Ce!tificate of Title No. T-
)2/9. amon% the list of !eal p!ope!ties in the &!it of possession.
19
;19<
Respondents a!%ued that said p!ope!t &as not amon% those sold on
e,ecution b 'eput 1he!iff Renato E. Robles as !eflected in the
Ce!tificate of 1ale on E,ecution of Real P!ope!t.
#n opposition, petitione! p!aed fo! the dismissal of the petition
because !espondent spouses failed to move fo! the !econside!ation of
the assailed o!de! p!io! to the filin% of the petition. Mo!eove!, the
p!ope! !emed a%ainst the assailed o!de! of the t!ial cou!t is an appeal,
o! a motion to 8uash the &!it of possession.
An Ma 1$, "22", the Cou!t of Appeals !ende!ed 5ud%ment as follo&s0
7>ERE@ARE, the instant petition is he!eb BRANTE'. Acco!din%l,
the &!it of possession issued b the Re%ional T!ial Cou!t of Balan%a
Cit, B!anch 1, on 19 +ul "221 is decla!ed 0.LL and &5$).
#n the event that the 8uestioned &!it of possession has al!ead been
implemented, the 'eput 1he!iff of the Re%ional T!ial Cou!t of Balan%a
Cit, B!anch 1, and p!ivate !espondent Ma!celo 1o!iano a!e he!eb
o!de!ed to cause the !edelive! of T!ansfe! Ce!tificate of Title No. T-
)2/9. to the petitione!s.
1A AR'ERE'.
1(
;1(<
A%%!ieved, petitione! no& comes to this Cou!t maintainin% thatR
1.= T>E 1PEC#A3 C#C#3 ACT#AN A@ CERT#ARAR#
HN'ER RH3E E. #1 NAT T>E P3A#N, 1PEE'F
AN' A'EOHATE REME'F A@ T>E
RE1PAN'ENT1 #N A11A#3#NB T>E 7R#T A@
PA11E11#AN #11HE' BF T>E 3A7ER CAHRT
BHT T>ERE 7ERE 1T#33 AT>ER REME'#E1
ACA#3AB3E TA T>EM AN' 7>#C> 7ERE NAT
RE1ARTE' TA 3#NE T>E @#3#NB A@ A MAT#AN
@AR RECAN1#'ERAT#AN AR MAT#AN TA
OHA1> AR ECEN APPEA3.
".= T>E >ANARAB3E CAHRT A@ APPEA31
BRACE3F ERRE' #N 'EC3ARA#NB T>E
CERT#@#CATE A@ 1A3E AN EIECHT#AN A@
REA3 PRAPERTF A1 NH33 AN' CA#' AN'
1HB1EOHENT3F T>E 7R#T A@ PA11E11#AN
BECAH1E T>E 1AME #1 A PHB3#C 'ACHMENT
7>#C> EN+AF1 T>E PRE1HMPT#AN A@
REBH3AR#TF AN' #T CANNAT BE ACERCAME
BF A MERE 1TRANBE @EE3#NB T>AT
1AMET>#NB #1 AM#11 AN #T1 1HR@ACE
1#MP3F BECAH1E T>E TFPE7R#TTEN
7AR'1 AN T>E @RANT PABE AN' AT T>E
'AR1A3 PART#AN T>EREA@ #1 '#@@ERENT
AR T>AT #T #1 HN3#NE3F @AR T>E 1>ER#@@
TA H1E T>E 'AR1A3 PART#AN A@ T>E @#R1T
PABE BECAH1E T>E 1ECAN' PABE #1
MERE3F >A3@ @#33E' AN' T>E NATAT#AN
AN T>E 'AR1A3 PART#AN CAH3' 1T#33 BE
MA'E AT T>E 1ECAN' PABE.
18
19
An the fi!st %!ound, petitione! contends that !espondents &e!e not
&ithout !emed befo!e the t!ial cou!t. >e points out that !espondents
could have filed a motion fo! !econside!ation of the A!de! dated +une
), 1(((, but the did not do so. Respondents could also have filed an
appeal but the, li*e&ise, did not do so. 7hen the &!it of possession
&as issued, !espondents could have filed a motion to 8uash the &!it.
A%ain the did not. Respondents cannot no& avail of the special civil
action fo! ce!tio!a!i as a substitute fo! these !emedies. The should
suffe! the conse8uences fo! sleepin% on thei! !i%hts.
7e disa%!ee.
Concededl, those &ho see* to avail of the p!ocedu!al !emedies
p!ovided b the !ules must adhe!e to the !e8ui!ements the!eof, failin%
&hich the !i%ht to do so is lost. #t is, ho&eve!, e8uall settled that the
Rules of Cou!t see* to eliminate undue !eliance on technical !ules and
to ma*e liti%ation as ine,pensive as p!acticable and as convenient as
can be done.
"2
;"2< This is in acco!dance &ith the p!ima! pu!pose of
the 1((/ Rules of Civil P!ocedu!e as p!ovided in Rule 1, 1ection E,
&hich !eads0
1ection E. Constru!tion. D These !ules shall be libe!all const!ued in
o!de! to p!omote thei! ob5ective of secu!in% a 5ust, speed and
ine,pensive dete!mination of eve! action and p!oceedin%.
"1
;"1<
The !ules of p!ocedu!e a!e not to be applied in a ve! !i%id, technical
sense and a!e used onl to help secu!e substantial 5ustice. #f a
technical and !i%id enfo!cement of the !ules is made, thei! aim &ould
be defeated.
""
;""< The should be libe!all const!ued so that liti%ants
can have ample oppo!tunit to p!ove thei! claims and thus p!event a
denial of 5ustice due to technicalities.
"$
;"$< Thus, in China Ban*in%
Corporation v. Members of the Board of Trustees of -ome
)evelopment Mutual Fund,
")
;")< it &as held0
V&hile ce!tio!a!i as a !emed ma not be used as a substitute fo! an
appeal, especiall fo! a lost appeal, this rule should not be stri!tly
enfor!ed if the petition is %enuinely meritorious.
E;
[25] It has been said
that where the rigid application of the rules would frustrate
substantial justice, or bar the vindication of a legitimate
grievance, the courts are justified in eempting a particular case
from the operation of the rules.
"E
;"E< :Emphasis ou!s=
#ndeed, &ell-*no&n is the !ule that depa!tu!es f!om p!ocedu!e ma be
fo!%iven &he!e the do not appea! to have impai!ed the substantial
!i%hts of the pa!ties.
"/
;"/< Ap!opos in this !e%a!d is Cometa v. CA ,
"9
;"9<
&he!e &e said that R
The!e is no 8uestion that petitione!s &e!e !emiss in attendin% &ith
dispatch to the p!otection of thei! inte!ests as !e%a!ds the sub5ect lots,
and fo! that !eason the case in the lo&e! cou!t &as dismissed on a
20
21
22
23
24
25
26
27
28
technicalit and no definitive p!onouncement on the inade8uac of the
p!ice paid fo! the levied p!ope!ties &as eve! made. #n this !e%a!d, it
bears stressin% that pro!edural rules are not to be belittled or
dismissed simply be!ause their non,observan!e may have resulted in
pre/udi!e to a partyFs substantive ri%hts as in this case. 3i*e all !ules,
the a!e !e8ui!ed to be follo&ed ecept when onl! for the most
persuasive of reasons the! ma! be relaed to relieve a litigant of
an injustice not commensurate with the degree of his
thoughtlessness in not compl!ing with the procedure
prescribed.
"(
;"(< :emphasis and italics supplied.=
#n sho!t, since !ules of p!ocedu!e a!e me!e tools desi%ned to facilitate
the attainment of 5ustice, thei! st!ict and !i%id application &hich &ould
!esult in technicalities that tend to f!ust!ate !athe! than p!omote
substantial 5ustice must al&as be avoided.
$2
;$2< Technicalit should
not be allo&ed to stand in the &a of e8uitabl and completel
!esolvin% the !i%hts and obli%ations of the pa!ties.
$1
;$1<
Esche&in%, the!efo!e, the p!ocedu!al ob5ections !aised b petitione!, it
behooves us to add!ess the issue of &hethe! o! not the 8uestioned &!it
of possession is in fact a nullit conside!in% that it includes !eal
p!ope!t not e,p!essl mentioned in the Ce!tificate of 1ale of Real
P!ope!t.
Petitione!, in sum, d&ells on the %ene!al p!oposition that since the
ce!tificate of sale is a public document, it en5os the p!esumption of
!e%ula!it and all ent!ies the!ein a!e p!esumed to be done in the
pe!fo!mance of !e%ula! functions.
The a!%ument is not pe!suasive.
The!e a!e actuall t2o :"= !opies of the Ce!tificate of 1ale on
E,ecution of Real P!ope!ties issued on @eb!ua! ), 1((( involved,
namel0 :a= cop &hich is on file &ith the deput she!iff4 and :b= cop
!e%iste!ed &ith the Re%ist! of 'eeds. The ob5ect of sc!utin, ho&eve!,
is not the cop of the Ce!tificate of 1ale on E,ecution of Real
P!ope!ties issued b the deput she!iff on @eb!ua! ), 1(((,
$"
;$"< but
the cop the!eof subse1uently !e%iste!ed b petitione! &ith the Re%ist!
of 'eeds on Ap!il "$, 1(((,
$$
;$$< &hich included an ent! on the dorsal
portion of the fi!st pa%e the!eof desc!ibin% a pa!cel of land cove!ed b
ACT No. T-)2/9. not found in the Ce!tificate of 1ale of Real
P!ope!ties on file &ith the she!iff.
T!ue, public documents b themselves ma be ade8uate to establish
the p!esumption of thei! validit. >o&eve!, thei! p!obative &ei%ht must
be evaluated not in isolation but in con5unction &ith othe! evidence
adduced b the pa!ties in the cont!ove!s, much mo!e so in this case
&he!e the !ontents of a cop the!eof subse8uentl !e%iste!ed fo!
documentation pu!poses is bein% contested. No !eason has been
offe!ed ho& and &h the 8uestioned ent! &as subse8uentl
inte!calated in the cop of the ce!tificate of sale subse8uentl
!e%iste!ed &ith the Re%ist! of 'eeds. Absent an satisfacto!
e,planation as to &h said ent! &as belatedl inse!ted, the
su!!eptitiousness of its inclusion coupled &ith the fu!tive manne! of its
inte!calation casts se!ious doubt on the authenticit of petitione!Ps cop
of the Ce!tificate of 1ale. Thus, it has been held that &hile a public
document li*e a nota!iDed deed of sale is vested &ith the p!esumption
of !e%ula!it, this is not a %uarantee of the validity of its !ontents.
$)
;$)<
29
30
31
32
33
34
#t must be pointed out in this !e%a!d that the issuance of a Ce!tificate of
1ale is an end !esult of 5udicial fo!eclosu!e &he!e statuto!
!e8ui!ements a!e st!ictl adhe!ed to4 &he!e even the sli%htest
deviations the!ef!om &ill invalidate the p!oceedin%
$.
;$.< and the sale.
$E
;$E< Amon% these !e8ui!ements is an e,plicit enume!ation and co!!ect
desc!iption of &hat p!ope!ties a!e to be sold stated in the notice. The
st!in%ence in the obse!vance of these !e8ui!ements is such that an
inco!!ect title numbe! to%ethe! &ith a co!!ect technical desc!iption of
the p!ope!t to be sold and vi!e versa is deemed a substantial and
fatal e!!o! &hich !esults in the invalidation of the sale.
$/
;$/<
The ce!tificate of sale is an accu!ate !eco!d of &hat p!ope!ties &e!e
actuall sold to satisf the debt. The st!ictness in the obse!vance of
accu!ac and co!!ectness in the desc!iption of the p!ope!ties !ende!s
the enume!ation in the ce!tificate e,clusive. Thus, subse8uentl
includin% p!ope!ties &hich have not been e,plicitl mentioned the!ein
fo! !e%ist!ation pu!poses unde! suspicious ci!cumstances smac*s of
f!aud. The e,planation that the land on &hich the p!ope!ties sold is
necessa!il included and, hence, &as belatedl tped on the do!sal
po!tion of the cop of the ce!tificate subse8uentl !e%iste!ed is at best
a lame e,cuse un&o!th of belief.
The appellate cou!t co!!ectl obse!ved that the!e &as a ma!*ed
diffe!ence in the appea!ance of the tpe&!itten &o!ds appea!in% on the
fi!st pa%e of the cop of the Ce!tificate of 1ale !e%iste!ed &ith the
Re%ist! of 'eeds
$9
;$9< and those appea!in% at the do!sal po!tion
the!eof. Hnde!sco!in% the i!!e%ula!it of the inte!calation is the clea!l
devious attempt to let such an inse!tion pass unnoticed b tpin% the
same at the bac* of the fi!st pa%e instead of on the second pa%e &hich
&as me!el half-filled and could accommodate the ent! &ith !oom to
spa!e.
The a!%ument that the land on &hich the buildin%s levied upon in
e,ecution is necessa!il included is, li*e&ise, tenuous. A!ticle )1. of
the Civil Code p!ovides0
ART. )1.. The follo&in% a!e immovable p!ope!t0
:1= Land, buildin%s, !oads and const!uctions of all *inds adhe!ed
to the soil.
, , , , , , , , ,
:$= Eve!thin% atta!hed to an immovable in a fi,ed manne!, in
such a &a that it cannot be sepa!ated the!ef!om &ithout b!ea*in%
them mate!ial o! dete!io!ation of the ob5ect4
:)= 1tatues, !eliefs, paintin%s o! othe! ob5ects fo! use o!
o!namentation, placed in buildin%s o! on lands b the o&ne! of the
immovable in such a manne! that it !eveals the intention to attach them
pe!manentl to the tenements4
:.= Machine!, !eceptacles, inst!uments o! implements intended
b the o&ne! of the tenement fo! an indust! o! &o!*s &hich ma be
ca!!ied on in a buildin% o! on a piece of land, and &hich tend di!ectl to
meet the needs of the said indust! o! &o!*s4
:E= Animal houses, pi%eon houses, beehives, fish ponds o!
b!eedin% places of simila! natu!e, in case thei! o&ne! has placed them
o! p!ese!ves them &ith the intention to have them pe!manentl
35
36
37
38
attached to the land, and fo!min% a pe!manent pa!t of it4 the animals in
these places a!e also included4
, , , , , , , , ,
:(= 'oc*s and st!uctu!es &hich, thou%h floatin%, a!e intended b
thei! natu!e and ob5ect to !emain at a fi,ed place on a !ive!, la*e o!
coast4
, , , , , , , , ,.
The fo!e%oin% p!ovision of the Civil Code enume!ates land and
buildin%s separately. This can onl mean that a buildin% is, by itself,
conside!ed immovable.
$(
;$(< Thus, it has been held that R
. . . &hile it is t!ue that a mo!t%a%e of land necessa!il includes, in the
absence of stipulation of the imp!ovements the!eon, buildin%s, still a
building b! itself ma! be mortgaged apart from the land on which
it has been built. 1uch mo!t%a%e &ould be still a !eal estate mo!t%a%e
fo! the building would still be considered immovable propert!
even if dealt with separatel! and apart from the land.
)2
;)2<
:emphasis and italics supplied=
#n this case, conside!in% that &hat &as sold b vi!tue of the &!it of
e,ecution issued b the t!ial cou!t &as me!el the sto!ehouse and
bode%a const!ucted on the pa!cel of land cove!ed b T!ansfe!
Ce!tificate of Title No. T-)2/9., &hich b themselves a!e !eal
p!ope!ties of !espondents spouses, the same should be !e%a!ded as
sepa!ate and distinct f!om the conveance of the lot on &hich the
stand.
&!EREFORE, in vie& of all the fo!e%oin%, the petition is he!eb
'EN#E' fo! lac* of me!it. The 'ecision dated Ma 1$, "22" of the
Cou!t of Appeals in CA-B.R. 1P No. E.9(1, &hich decla!ed the &!it of
possession issued b the Re%ional T!ial Cou!t of Balan%a Cit, B!anch
1, on +ul 19, "221, null and void, is A@@#RME' in toto.
1A AR'ERE'.
SUPREME COURT
Manila
1PEC#A3 @#R1T '#C#1#AN
G.R. No. 1>=>9: %a#uary :1, >??5
%.G. SUMM"T !OL9"NGS, "NC., petitione!,
vs.
COURT OF APPEALSA COMM"TTEE ON PR"FAT"DAT"ON, ,12
C0a,r)a# a#$ Me)ber2A ASSET PR"FAT"DAT"ON TRUSTA a#$
P!"LYAR9S !OL9"NGS, "NC., respondents.
R E 1 A 3 H T # A N
PUNO, J.:
@o! !esolution befo!e this Cou!t a!e t&o motions filed b the petitione!,
+.B. 1ummit >oldin%s, #nc. fo! !econside!ation of ou! Resolution dated
39
40
1eptembe! "), "22$ and to elevate this case to the Cou!t 3n Ban!.
The petitione! 8uestions the Resolution &hich !eve!sed ou! 'ecision of
Novembe! "2, "222, &hich in tu!n !eve!sed and set aside a 'ecision of
the Cou!t of Appeals p!omul%ated on +ul 19, 1((..
#. @acts
The undisputed facts of the case, as set fo!th in ou! Resolution of
1eptembe! "), "22$, a!e as follo&s0
An +anua! "/, 1((/, the National #nvestment and 'evelopment
Co!po!ation :N#'C=, a %ove!nment co!po!ation, ente!ed into a +oint
Centu!e A%!eement :+CA= &ith Na&asa*i >eav #ndust!ies, 3td. of
Nobe, +apan :NA7A1AN#= fo! the const!uction, ope!ation and
mana%ement of the 1ubic National 1hipa!d, #nc. :1N1= &hich
subse8uentl became the Philippine 1hipa!d and En%inee!in%
Co!po!ation :P>#31ECA=. Hnde! the +CA, the N#'C and NA7A1AN#
&ill cont!ibute P$$2 million fo! the capitaliDation of P>#31ECA in the
p!opo!tion of E2K-)2K !espectivel. Ane of its salient featu!es is the
%!ant to the pa!ties of the r,-01 o4 4,r21 re4u2a/ should eithe! of them
decide to sell, assi%n o! t!ansfe! its inte!est in the 5oint ventu!e, viD0
1.) Neithe! pa!t shall sell, t!ansfe! o! assi%n all o! an pa!t of its
inte!est in 1N1 ;P>#31ECA< to an thi!d pa!t &ithout %ivin% the othe!
unde! the same te!ms the !i%ht of fi!st !efusal. This p!ovision shall not
appl if the t!ansfe!ee is a co!po!ation o&ned o! cont!olled b the
BACERNMENT o! b a NA7A1AN# affiliate.
An Novembe! "., 1(9E, N#'C t!ansfe!!ed all its !i%hts, title and inte!est
in P>#31ECA to the Philippine National Ban* :PNB=. 1uch inte!ests
&e!e subse8uentl t!ansfe!!ed to the National Bove!nment pu!suant to
Administ!ative A!de! No. 1). An 'ecembe! 9, 1(9E, P!esident
Co!aDon C. A8uino issued P!oclamation No. .2 establishin% the
Committee on P!ivatiDation :CAP= and the Asset P!ivatiDation T!ust
:APT= to ta*e title to, and possession of, conse!ve, mana%e and
dispose of non-pe!fo!min% assets of the National Bove!nment.
The!eafte!, on @eb!ua! "/, 1(9/, a t!ust a%!eement &as ente!ed into
bet&een the National Bove!nment and the APT &he!ein the latte! &as
named the t!ustee of the National Bove!nment-s sha!e in P>#31ECA.
#n 1(9(, as a !esult of a 8uasi-!eo!%aniDation of P>#31ECA to settle its
hu%e obli%ations to PNB, the National Bove!nment-s sha!eholdin%s in
P>#31ECA inc!eased to (/.)1K the!eb !educin% NA7A1AN#-s
sha!eholdin%s to "..(K.
#n the inte!est of the national econom and the %ove!nment, the CAP
and the APT deemed it best to sell the National Bove!nment-s sha!e in
P>#31ECA to p!ivate entities. Afte! a se!ies of ne%otiations bet&een
the APT and NA7A1AN#, the a%!eed that the latte!-s !i%ht of fi!st
!efusal unde! the +CA be 6e,chan%ed6 fo! the !i%ht to top b five
pe!cent :.K= the hi%hest bid fo! the said sha!es. The fu!the! a%!eed
that NA7A1AN# &ould be entitled to name a compan in &hich it &as
a stoc*holde!, &hich could e,e!cise the !i%ht to top. An 1eptembe! /,
1((2, NA7A1AN# info!med APT that Phila!ds >oldin%s, #nc.
:P>#=
1
&ould e,e!cise its !i%ht to top.
At the p!e-biddin% confe!ence held on 1eptembe! 19, 1(($, inte!ested
bidde!s &e!e %iven copies of the +CA bet&een N#'C and NA7A1AN#,
and of the Asset 1pecific Biddin% Rules :A1BR= d!afted fo! the
National Bove!nment-s 9/.EK e8uit sha!e in P>#31ECA. The
p!ovisions of the A1BR &e!e e,plained to the inte!ested bidde!s &ho
&e!e notified that the biddin% &ould be held on 'ecembe! ", 1(($. A
po!tion of the A1BR !eads0
1.2 The sub5ect of this Asset P!ivatiDation T!ust :APT= sale th!ou%h
public biddin% is the National Bove!nment-s e8uit in P>#31ECA
consistin% of 9(E,9E(,()" sha!es of stoc* :!ep!esentin% 9/.E/K of
P>#31ECA-s outstandin% capital stoc*=, &hich &ill be sold as a &hole
bloc* in acco!dance &ith the !ules he!ein enume!ated.
,,, ,,, ,,,
".2 The hi%hest bid, as &ell as the bue!, shall be sub5ect to the final
app!oval of both the APT Boa!d of T!ustees and the Committee on
P!ivatiDation :CAP=.
".1 APT !ese!ves the !i%ht in its sole disc!etion, to !e5ect an o! all bids.
$.2 This public biddin% shall be on an #ndicative P!ice Biddin% basis.
The #ndicative p!ice set fo! the National Bove!nment-s 9/.E/K e8uit in
P>#31ECA is PE1A10 ANE B#33#AN T>REE >HN'RE' M#33#AN
:P1,$22,222,222.22=.
,,, ,,, ,,,
E.2 The hi%hest 8ualified bid &ill be submitted to the APT Boa!d of
T!ustees at its !e%ula! meetin% follo&in% the biddin%, fo! the pu!pose of
dete!minin% &hethe! o! not it should be endo!sed b the APT Boa!d of
T!ustees to the CAP, and the latte! app!oves the same. The APT shall
advise Na&asa*i >eav #ndust!ies, #nc. andSo! its nominee,
;P>#3FAR'1< >oldin%s, #nc., that the hi%hest bid is acceptable to the
National Bove!nment. Na&asa*i >eav #ndust!ies, #nc. andSo!
;P>#3FAR'1< >oldin%s, #nc. shall then have a pe!iod of thi!t :$2=
calenda! das f!om the date of !eceipt of such advice f!om APT &ithin
&hich to e,e!cise thei! 6Aption to Top the >i%hest Bid6 b offe!in% a bid
e8uivalent to the hi%hest bid plus five :.K= pe!cent the!eof.
E.1 1hould Na&asa*i >eav #ndust!ies, #nc. andSo! ;P>#3FAR'1<
>oldin%s, #nc. e,e!cise thei! 6Aption to Top the >i%hest Bid,6 the shall
so notif the APT about such e,e!cise of thei! option and deposit &ith
APT the amount e8uivalent to ten pe!cent :12K= of the hi%hest bid plus
five pe!cent :.K= the!eof &ithin the thi!t :$2=-da pe!iod mentioned in
pa!a%!aph E.2 above. APT &ill then se!ve notice upon Na&asa*i >eav
#ndust!ies, #nc. andSo! ;P>#3FAR'1< >oldin%s, #nc. decla!in% them as
the p!efe!!ed bidde! and the shall have a pe!iod of ninet :(2= das
f!om the !eceipt of the APT-s notice &ithin &hich to pa the balance of
thei! bid p!ice.
E." 1hould Na&asa*i >eav #ndust!ies, #nc. andSo! ;P>#3FAR'1<
>oldin%s, #nc. fail to e,e!cise thei! 6Aption to Top the >i%hest Bid6
&ithin the thi!t :$2=-da pe!iod, APT &ill decla!e the hi%hest bidde! as
the &innin% bidde!.
,,, ,,, ,,,
1".2 The bidde! shall be solel !esponsible fo! e,aminin% &ith
app!op!iate ca!e these !ules, the official bid fo!ms, includin% an
addenda o! amendments the!eto issued du!in% the biddin% pe!iod. The
bidde! shall li*e&ise be !esponsible fo! info!min% itself &ith !espect to
an and all conditions conce!nin% the P>#31ECA 1ha!es &hich ma,
in an manne!, affect the bidde!-s p!oposal. @ailu!e on the pa!t of the
bidde! to so e,amine and info!m itself shall be its sole !is* and no !elief
fo! e!!o! o! omission &ill be %iven b APT o! CAP. . . .
At the public biddin% on the said date, petitione! +.B. 1ummit >oldin%s,
#nc.
"
submitted a bid of T&o Billion and Thi!t Million Pesos
:P",2$2,222,222.22= &ith an ac*no&led%ment of NA7A1AN#S
;P>#3FAR'1-< !i%ht to top, viD0
). #S7e unde!stand that the Committee on P!ivatiDation :CAP= has up
to thi!t :$2= das to act on APT-s !ecommendation based on the !esult
of this biddin%. 1hould the CAP app!ove the hi%hest bid, APT shall
advise Na&asa*i >eav #ndust!ies, #nc. andSo! its nominee,
;P>#3FAR'1< >oldin%s, #nc. that the hi%hest bid is acceptable to the
National Bove!nment. Na&asa*i >eav #ndust!ies, #nc. andSo!
;P>#3FAR'1< >oldin%s, #nc. shall then have a pe!iod of thi!t :$2=
calenda! das f!om the date of !eceipt of such advice f!om APT &ithin
&hich to e,e!cise thei! 6Aption to Top the >i%hest Bid6 b offe!in% a bid
e8uivalent to the hi%hest bid plus five :.K= pe!cent the!eof.
As petitione! &as decla!ed the hi%hest bidde!, the CAP app!oved the
sale on 'ecembe! $, 1(($ 6sub5ect to the !i%ht of Na&asa*i >eav
#ndust!ies, #nc.S;P>#3FAR'1< >oldin%s, #nc. to top +B1M#-s bid b .K
as specified in the biddin% !ules.6
An 'ecembe! "(, 1(($, petitione! info!med APT that it &as p!otestin%
the offe! of P># to top its bid on the %!ounds that0 :a= the
NA7A1AN#SP># conso!tium composed of NA7A1AN#, ;P>#3FAR'1<,
Mitsui, Neppel, 1M B!oup, #CT1# and #nsula! 3ife violated the A1BR
because the last fou! :)= companies &e!e the losin% bidde!s the!eb
ci!cumventin% the la& and p!e5udicin% the &ea* &innin% bidde!4 :b=
onl NA7A1AN# could e,e!cise the !i%ht to top4 :c= %ivin% the same
option to top to P># constituted un&a!!anted benefit to a thi!d pa!t4 :d=
no !i%ht of fi!st !efusal can be e,e!cised in a public biddin% o! auction
sale4 and :e= the +B 1ummit conso!tium &as not estopped f!om
8uestionin% the p!oceedin%s.
An @eb!ua! ", 1((), petitione! &as notified that P># had full paid the
balance of the pu!chase p!ice of the sub5ect biddin%. An @eb!ua! /,
1((), the APT notified petitione! that P># had e,e!cised its option to
top the hi%hest bid and that the CAP had app!oved the same on
+anua! E, 1((). An @eb!ua! "), 1((), the APT and P># e,ecuted a
1toc* Pu!chase A%!eement. Conse8uentl, petitione! filed &ith this
Cou!t a Petition fo! Mandamus unde! B.R. No. 11)2./. An Ma 11,
1((), said petition &as !efe!!ed to the Cou!t of Appeals. An +ul 19,
1((., the Cou!t of Appeals denied the same fo! lac* of me!it. #t !uled
that the petition fo! mandamus &as not the p!ope! !emed to 8uestion
the constitutionalit o! le%alit of the !i%ht of fi!st !efusal and the !i%ht to
top that &as e,e!cised b NA7A1AN#SP>#, and that the matte! must
be b!ou%ht 6b the p!ope! pa!t in the p!ope! fo!um at the p!ope! time
and th!eshed out in a full blo&n t!ial.6 The Cou!t of Appeals fu!the!
!uled that the !i%ht of fi!st !efusal and the !i%ht to top a!e p!ima facie
le%al and that the petitione!, 6b pa!ticipatin% in the public biddin%, &ith
full *no&led%e of the !i%ht to top %!anted to NA7A1AN#S;P>#3FAR'1<
isVestopped f!om 8uestionin% the validit of the a&a!d %iven to
;P>#3FAR'1< afte! the latte! e,e!cised the !i%ht to top and had paid in
full the pu!chase p!ice of the sub5ect sha!es, pu!suant to the A1BR.6
Petitione! filed a Motion fo! Reconside!ation of said 'ecision &hich
&as denied on Ma!ch 1., 1((E. Petitione! thus filed a Petition fo!
Ce!tio!a!i &ith this Cou!t alle%in% %!ave abuse of disc!etion on the pa!t
of the appellate cou!t.
An Novembe! "2, "222, this Cou!t !ende!ed , , , ;a< 'ecision !ulin%
amon% othe!s that the Cou!t of Appeals e!!ed &hen it dismissed the
petition on the sole %!ound of the imp!op!iet of the special civil action
of mandamus because the petition &as also one of ce!tio!a!i. #t fu!the!
!uled that a shipa!d li*e P>#31ECA is a public utilit &hose
capitaliDation must be si,t pe!cent :E2K= @ilipino-o&ned.
Conse8uentl, the !i%ht to top %!anted to NA7A1AN# unde! the Asset
1pecific Biddin% Rules :A1BR= d!afted fo! the sale of the 9/.E/K
e8uit of the National Bove!nment in P>#31ECA is ille%al J not onl
because it violates the !ules on competitive biddin% J but mo!e so,
because it allo&s fo!ei%n co!po!ations to o&n mo!e than )2K e8uit in
the shipa!d. #t also held that 6althou%h the petitione! had the
oppo!tunit to e,amine the A1BR befo!e it pa!ticipated in the biddin%, it
cannot be estopped f!om 8uestionin% the unconstitutional, ille%al and
ine8uitable p!ovisions the!eof.6 Thus, this Cou!t voided the t!ansfe! of
the national %ove!nment-s 9/.E/K sha!e in P>#31ECA to Phila!d;s<
>oldin%s, #nc., and upheld the !i%ht of +B 1ummit, as the hi%hest
bidde!, to ta*e title to the said sha!es, viD0
7>ERE@ARE, the instant petition fo! !evie& on ce!tio!a!i is
BRANTE'. The assailed 'ecision and Resolution of the Cou!t of
Appeals a!e RECER1E' and 1ET A1#'E. Petitione! is o!de!ed to pa
to APT its bid p!ice of T&o Billion Thi!t Million Pesos
:P",2$2,222,222.22=, less its bid deposit plus inte!ests upon the finalit
of this 'ecision. #n tu!n, APT is o!de!ed to0
:a= accept the said amount of P",2$2,222,222.22 less bid
deposit and inte!ests f!om petitione!4
:b= e,ecute a 1toc* Pu!chase A%!eement &ith petitione!4
:c= cause the issuance in favo! of petitione! of the ce!tificates
of stoc*s !ep!esentin% 9/.EK of P>#31ECA-s total
capitaliDation4
:d= !etu!n to p!ivate !espondent P>B# the amount of T&o
Billion Ane >und!ed Thi!t-Ane Million @ive >und!ed
Thousand Pesos :P",1$1,.22,222.22=4 and
:e= cause the cancellation of the stoc* ce!tificates issued to
P>#.
1A AR'ERE'.
#n sepa!ate Motions fo! Reconside!ation, !espondents submit;ted<
th!ee basic issues fo! , , , !esolution0 :1= 7hethe! P>#31ECA is a
public utilit4 :"= 7hethe! unde! the 1(// +CA, NA7A1AN# can
e,e!cise its !i%ht of fi!st !efusal onl up to )2K of the total capitaliDation
of P>#31ECA4 and :$= 7hethe! the !i%ht to top %!anted to NA7A1AN#
violates the p!inciples of competitive biddin%.
$
:citations omitted=
#n a Resolution dated 1eptembe! "), "22$, this Cou!t !uled in favo! of
the !espondents. An the fi!st issue, &e held that Philippine 1hipa!d
and En%inee!in% Co!po!ation :P>#31ECA= is not a public utilit, as b
natu!e, a shipa!d is not a public utilit
)
and that no la& decla!es a
shipa!d to be a public utilit.
.
An the second issue, &e found nothin%
in the 1(// +oint Centu!e A%!eement :+CA= &hich p!events Na&asa*i
>eav #ndust!ies, 3td. of Nobe, +apan :NA7A1AN#= f!om ac8ui!in%
mo!e than )2K of P>#31ECAPs total capitaliDation.
E
An the final issue,
&e held that the !i%ht to top %!anted to NA7A1AN# in e,chan%e fo! its
!i%ht of fi!st !efusal did not violate the p!inciples of competitive biddin%.
/
An Actobe! "2, "22$, the petitione! filed a Motion fo!
Reconside!ation
9
and a Motion to Elevate This Case to the Cou!t 3n
Ban!.
(
Public !espondents Committee on P!ivatiDation :CAP= and
Asset P!ivatiDation T!ust :APT=, and p!ivate !espondent Phila!ds
>oldin%s, #nc. :P>#3FAR'1= filed thei! Comments on +.B. 1ummit
>oldin%s, #nc.Ps :+B 1ummitPs= Motion fo! Reconside!ation and Motion
to Elevate This Case to the Cou!t 3n Ban! on +anua! "(, "22) and
@eb!ua! $, "22), !espectivel.
"". "22ue2
Based on the fo!e%oin%, the !elevant issues to !esolve to end this
liti%ation a!e the follo&in%0
1. 7hethe! the!e a!e sufficient bases to elevate the case at
ba! to the Cou!t en ban!.
". 7hethe! the motion fo! !econside!ation !aises an ne&
matte! o! co%ent !eason to &a!!ant a !econside!ation of this
Cou!tPs Resolution of 1eptembe! "), "22$.
Motion to 3levate this Case to the
Court 3n Ban!
The petitione! p!as fo! the elevation of the case to the Cou!t en
ban! on the follo&in% %!ounds0
1. The main issue of the p!op!iet of the biddin% p!ocess
involved in the p!esent case has been confused &ith the
polic issue of the supposed fate of the shippin% indust!
&hich has neve! been an issue that is dete!minative of this
case.
12
". The p!esent case ma be conside!ed unde! the 1up!eme
Cou!t Resolution dated @eb!ua! "$, 1(9) &hich included
amon% en ban! cases those involvin% a novel 8uestion of
la& and those &he!e a doct!ine o! p!inciple laid do&n b the
Cou!t en ban! o! in division ma be modified o! !eve!sed.
11
$. The!e &as clea! e,ecutive inte!fe!ence in the 5udicial
functions of the Cou!t &hen the >ono!able +ose #sid!o
Camacho, 1ec!eta! of @inance, fo!&a!ded to Chief +ustice
'avide, a memo!andum dated Novembe! ., "221, attachin%
a cop of the @o!ei%n Chambe!s Repo!t dated Actobe! 1/,
"221, &hich matte! &as placed in the a%enda of the Cou!t
and noted b it in a fo!mal !esolution dated Novembe! "9,
"221.
1"
Apposin% +.B. 1ummitPs motion to elevate the case en ban!,
P>#3FAR'1 points out the petitione!Ps inconsistenc in
p!eviousl o**o2,#- P>#3FAR'1P Motion to Refe! the Case to the
Cou!t 3n Ban!. P>#3FAR'1 contends that +.B. 1ummit should no&
be estopped f!om as*in% that the case be !efe!!ed to the Cou!t en
ban!. P>#3FAR'1 fu!the! contends that the 1up!eme Cou!t en ban! is
not an appellate cou!t to &hich decisions o! !esolutions of its divisions
ma be appealed citin% 1up!eme Cou!t Ci!cula! No. "-9( dated
@eb!ua! /, 1(9(.
1$
P>#3FAR'1 also alle%es that the!e is no novel
8uestion of la& involved in the p!esent case as the assailed Resolution
&as based on &ell-settled 5u!isp!udence. 3i*e&ise, P>#3FAR'1
st!esses that the Resolution &as me!el an outcome of the motions fo!
!econside!ation filed b it and the CAP and APT and is 6consistent &ith
the inhe!ent po&e! of cou!ts to Qamend and cont!ol its p!ocess and
o!de!s so as to ma*e them confo!mable to la& and 5ustice.P :Rule 1$.,
sec. .=6
1)
P!ivate !espondent belittles the petitione!Ps alle%ations
!e%a!din% the chan%e in ponente and the alle%ed e,ecutive
inte!fe!ence as sho&n b fo!me! 1ec!eta! of @inance +ose #sid!o
CamachoPs memo!andum dated Novembe! ., "221 a!%uin% that these
do not 5ustif a !efe!!al of the p!esent case to the Cou!t en ban!.
#n insistin% that its Motion to Elevate This Case to the Cou!t 3n
Ban! should be %!anted, +.B. 1ummit fu!the! a!%ued that0 its
Apposition to the Affice of the 1olicito! Bene!alPs Motion to Refe! is
diffe!ent f!om its o&n Motion to Elevate4 diffe!ent %!ounds a!e invo*ed
b the t&o motions4 the!e &as un&a!!anted 6e,ecutive inte!fe!ence64
and the chan%e in ponente is me!el noted in asse!tin% that this case
should be decided b the Cou!t en ban!.
1.
7e find no me!it in petitione!Ps contention that the p!op!iet of the
biddin% p!ocess involved in the p!esent case has been confused &ith
the polic issue of the fate of the shippin% indust! &hich, petitione!
maintains, has neve! been an issue that is dete!minative of this case.
The Cou!tPs Resolution of 1eptembe! "), "22$ !eveals a clea! and
definitive !ulin% on the p!op!iet of the biddin% p!ocess. #n discussin%
&hethe! the !i%ht to top %!anted to NA7A1AN# in e,chan%e fo! its !i%ht
of fi!st !efusal violates the p!inciples of competitive biddin%, &e made
an e,haustive discou!se on the !ules and p!inciples of public biddin%
and &hethe! the &e!e complied &ith in the case at ba!.
1E
This Cou!t
cate%o!icall !uled on the petitione!Ps a!%ument that P>#31ECA, as a
shipa!d, is a public utilit &hich should maintain a E2K-)2K @ilipino-
fo!ei%n e8uit !atio, as it &as a pivotal issue. #n doin% so, &e
!eco%niDed the impact of ou! !ulin% on the shipbuildin% indust! &hich
&as beond avoidance.
1/
7e !e5ect petitione!Ps a!%ument that the p!esent case ma be
conside!ed unde! the 1up!eme Cou!t Resolution dated @eb!ua! "$,
1(9) &hich included amon% en ban! cases those involvin% a novel
8uestion of la& and those &he!e a doct!ine o! p!inciple laid do&n b
the cou!t en ban! o! in division ma be modified o! !eve!sed. The case
&as !esolved based on basic p!inciples of the !i%ht of fi!st !efusal in
comme!cial la& and estoppel in civil la&. Cont!actual obli%ations
a!isin% f!om !i%hts of fi!st !efusal a!e not ne& in this 5u!isdiction and
have been !eco%niDed in nume!ous cases.
19
Estoppel is too *no&n a
civil la& concept to !e8ui!e an elon%ated discussion. @undamental
p!inciples on public biddin% &e!e li*e&ise used to !esolve the issues
!aised b the petitione!. To be su!e, petitione! leans on the !i%ht to top
in a public biddin% in a!%uin% that the case at ba! involves a novel
issue. 7e a!e not s&aed. The !i%ht to top &as me!el a condition o! a
!ese!vation made in the biddin% !ules &hich &as full disclosed to all
biddin% pa!ties. #n Cureau Fer,1a2, re*re2e#1e$ by T0eo$or !.
!u#er)a## 7. O44,.e o4 10e Pre2,$e#1, e1 a/.,
1(
&e dealt &ith this
conditionalit, vi(G
, , , #t must be st!essed, as held in the case of A.C. Es%ue!!a G 1ons
v. Atona, et al., :3-19/.1, "9 Ap!il 1(E", ) 1CRA 1").=, that in an
6invitation to bid, the!e is a .o#$,1,o# ,)*o2e$ u*o# 10e b,$$er2 1o
10e e44e.1 10a1 10e b,$$,#- 20a// be 2ub;e.1 1o 10e r,-01 o4 10e
-o7er#)e#1 1o re;e.1 a#y a#$ a// b,$2 2ub;e.1 1o ,12 $,2.re1,o#. "#
10e .a2e a1 bar, 10e -o7er#)e#1 0a2 )a$e ,12 .0o,.e a#$ u#/e22
a# u#4a,r#e22 or ,#;u21,.e ,2 20o6#, 10e /o2,#- b,$$er2 0a7e #o
.au2e 1o .o)*/a,# #or r,-01 1o $,2*u1e 10a1 .0o,.e. T0,2 ,2 a 6e//-
2e11/e$ $o.1r,#e ,# 10,2 ;ur,2$,.1,o# a#$ e/2e60ere.6
The disc!etion to accept o! !e5ect a bid and a&a!d cont!acts is vested
in the Bove!nment a%encies ent!usted &ith that function. The
disc!etion %iven to the autho!ities on this matte! is of such &ide latitude
that the Cou!ts &ill not inte!fe!e the!e&ith, unless it is appa!ent that it is
used as a shield to a f!audulent a&a!d :+alandoni v. NARRA, 129 Phil.
)9E ;1(E2<=. , , , The e,e!cise of this disc!etion is a polic decision
that necessitates p!io! in8ui!, investi%ation, compa!ison, evaluation,
and delibe!ation. This tas* can best be discha!%ed b the Bove!nment
a%encies conce!ned, not b the Cou!ts. The !ole of the Cou!ts is to
asce!tain &hethe! a b!anch o! inst!umentalit of the Bove!nment has
t!ans%!essed its constitutional bounda!ies. But the Cou!ts &ill not
inte!fe!e &ith e,ecutive o! le%islative disc!etion e,e!cised &ithin those
bounda!ies. Athe!&ise, it st!as into the !ealm of polic decision-
ma*in%.
#t is onl upon a clea! sho&in% of %!ave abuse of disc!etion that the
Cou!ts &ill set aside the a&a!d of a cont!act made b a %ove!nment
entit. B!ave abuse of disc!etion implies a cap!icious, a!bit!a! and
&himsical e,e!cise of po&e! :@ilinvest C!edit Co!p. v. #nte!mediate
Appellate Cou!t, No. E.($., $2 1eptembe! 1(99, 1EE 1CRA 1..=. The
abuse of disc!etion must be so patent and %!oss as to amount to an
evasion of positive dut o! to a vi!tual !efusal to pe!fo!m a dut
en5oined b la&, as to act at all in contemplation of la&, &he!e the
po&e! is e,e!cised in an a!bit!a! and despotic manne! b !eason of
passion o! hostilit :3itton Mills, #nc. v. Balleon T!ade!, #nc., et al;.<, 3-
)29E/, "E +ul 1(99, 1E$ 1CRA )9(=.
The facts in this case do not indicate an such %!ave abuse of
disc!etion on the pa!t of public !espondents &hen the a&a!ded the
C#11 cont!act to Respondent 1B1. #n the 6#nvitation to P!e8ualif and
Bid6 :Anne, 6C,6 sup!a=, the C#11 Committee )a$e a# e5*re22
re2er7a1,o# o4 10e r,-01 o4 10e Go7er#)e#1 1o (re;e.1 a#y or a//
b,$2 or a#y *ar1 10ereo4 or 6a,7e a#y $e4e.12 .o#1a,#e$ 10ereo#
a#$ a..e*1 a# o44er )o21 a$7a#1a-eou2 1o 10e Go7er#)e#1.( "1 ,2
a 6e//-2e11/e$ ru/e 10a1 60ere 2u.0 re2er7a1,o# ,2 )a$e ,# a#
"#7,1a1,o# 1o C,$, 10e 0,-0e21 or /o6e21 b,$$er, a2 10e .a2e )ay be,
,2 #o1 e#1,1/e$ 1o a# a6ar$ a2 a )a11er o4 r,-01 :C G C Comme!cial
Co!p. v. Meno!, 3-"9$E2, "/ +anua! 1(9$, 1"2 1CRA 11"=. Even the
lo&est Bid o! an Bid ma be !e5ected o!, in the e,e!cise of sound
disc!etion, the a&a!d ma be made to anothe! than the lo&est bidde!
:A.C. Es%ue!!a G 1ons v. Atona, sup!a, citin% )$ Am. +u!., /99=.
:emphases supplied=9a2phi9.nHt
3i*e the condition in the Cureau Fer,1a2 case, the !i%ht to top &as a
condition imposed b the %ove!nment in the biddin% !ules &hich &as
made *no&n to all pa!ties. "1 6a2 a .o#$,1,o# ,)*o2e$ o# a// b,$$er2
e3ua//y, ba2e$ o# 10e APTK2 e5er.,2e o4 ,12 $,2.re1,o# ,# $e.,$,#-
o# 0o6 be21 1o *r,7a1,Le 10e -o7er#)e#1K2 20are2 ,# P!"LSECO. #t
&as not a &himsical o! a!bit!a! condition pluc*ed f!om the ethe! and
inse!ted in the biddin% !ules but a condition &hich the APT app!oved
as the best &a the %ove!nment could compl &ith its cont!actual
obli%ations to NA7A1AN# unde! the +CA and its mandate of %ettin% the
most advanta%eous deal fo! the %ove!nment. The !i%ht to top had its
histo! in the mutual !i%ht of fi!st !efusal in the +CA and &as !eached
b a%!eement of the %ove!nment and NA7A1AN#.
@u!the!, the!e is no 6e,ecutive inte!fe!ence6 in the functions of this
Cou!t b the me!e filin% of a memo!andum b 1ec!eta! of @inance
+ose #sid!o Camacho. The memo!andum &as me!el 6noted6 to
ac*no&led%e its filin%. #t had no fu!the! le%al si%nificance. Notabl
too, 10e a22a,/e$ Re2o/u1,o# $a1e$ Se*1e)ber >=, >??: 6a2
$e.,$e$ u#a#,)ou2/y by 10e S*e.,a/ F,r21 9,7,2,o# ,# 4a7or o4 10e
re2*o#$e#12.
A%ain, &e emphasiDe that a decision o! !esolution of a 'ivision is that
of the 1up!eme Cou!t
"2
and the Cou!t en ban! is not an appellate cou!t
to &hich decisions o! !esolutions of a 'ivision ma be appealed.
"1
@o! all the fo!e%oin% !easons, &e find no basis to elevate this case to
the Cou!t en ban!.
Motion for Re!onsideration
Th!ee p!incipal a!%uments &e!e !aised in the petitione!Ps Motion fo!
Reconside!ation. @i!st, that a fai! !esolution of the case should be
based on cont!act la&, not on polic conside!ations4 the cont!acts do
not autho!iDe the !i%ht to top to be de!ived f!om the !i%ht of fi!st
!efusal.
""
1econd, that neithe! the !i%ht of fi!st !efusal no! the !i%ht to
top can be le%all e,e!cised b the conso!tium &hich is not the p!ope!
pa!t %!anted such !i%ht unde! eithe! the +CA o! the Asset 1pecific
Biddin% Rules :A1BR=.
"$
Thi!d, that the maintenance of the E2K-)2K
!elationship bet&een the National #nvestment and 'evelopment
Co!po!ation :N#'C= and NA7A1AN# a!ises f!om cont!act and f!om the
Constitution because P>#31ECA is a landholdin% co!po!ation and
need not be a public utilit to be bound b the E2K-)2K constitutional
limitation.
")
An the othe! hand, p!ivate !espondent P>#3FAR'1 asse!ts that +.B.
1ummit has not been able to sho& compellin% !easons to &a!!ant a
!econside!ation of the 'ecision of the Cou!t.
".
P>#3FAR'1 denies that
the 'ecision is based mainl on polic conside!ations and points out
that it is p!emised on p!inciples %ove!nin% obli%ations and cont!acts
and co!po!ate la& such as the !ule !e8ui!in% !espect fo! cont!actual
stipulations, upholdin% !i%hts of fi!st !efusal, and !eco%niDin% the
assi%nable natu!e of cont!acts !i%hts.
"E
Also, the !ulin% that shipa!ds
a!e not public utilities !elies on established case la& and fundamental
!ules of statuto! const!uction. P>#3FAR'1 st!esses that NA7A1AN#Ps
!i%ht of fi!st !efusal o! even the !i%ht to top is not limited to the )2K
e8uit of the latte!.
"/
An the landholdin% issue !aised b +.B. 1ummit,
P>#3FAR'1 emphasiDes that this is a non-issue and even involves a
8uestion of fact. Even assumin% that this Cou!t can ta*e co%niDance of
such 8uestion of fact even &ithout the benefit of a t!ial, P>#3FAR'1
opines that landholdin% b P>#31ECA at the time of the biddin% is
i!!elevant because &hat is essential is that ultimatel a 8ualified entit
&ould eventuall hold P>#31ECAPs !eal estate p!ope!ties.
"9
@u!the!,
%iven the assi%nable natu!e of the !i%ht of fi!st !efusal, an applicable
nationalit !est!ictions, includin% landholdin% limitations, &ould not
affect the !i%ht of fi!st !efusal itself, but onl the manne! of its
e,e!cise.
"(
Also, P>#3FAR'1 a!%ues that if this Cou!t ta*es
co%niDance of +.B. 1ummitPs alle%ations of fact !e%a!din% P>#31ECAPs
landholdin%, it must also !eco%niDe P>#3FAR'1P asse!tions that
P>#31ECAPs landholdin%s &e!e sold to anothe! co!po!ation.
$2
As
!e%a!ds the !i%ht of fi!st !efusal, p!ivate !espondent e,plains that
NA7A1AN#Ps !educed sha!eholdin%s :f!om )2K to "..(K= did not
t!anslate to a dep!ivation o! loss of its cont!actuall %!anted !i%ht of fi!st
!efusal.
$1
Also, the biddin% &as valid because P>#3FAR'1 e,e!cised
the !i%ht to top and it &as of no moment that losin% bidde!s late! 5oined
P>#3FAR'1 in !aisin% the pu!chase p!ice.
$"
#n cadence &ith the p!ivate !espondent P>#3FAR'1, public
!espondents CAP and APT contend0
1. The conve!sion of the !i%ht of fi!st !efusal into a !i%ht to top
b .K does not violate an p!ovision in the +CA bet&een
N#'C and NA7A1AN#.
". P>#31ECA is not a public utilit and the!efo!e not
%ove!ned b the constitutional !est!iction on fo!ei%n
o&ne!ship.
$. The petitione! is le%all estopped f!om assailin% the
validit of the p!oceedin%s of the public biddin% as it
volunta!il submitted itself to the te!ms of the A1BR &hich
included the p!ovision on the !i%ht to top.
). The !i%ht to top &as e,e!cised b P>#3FAR'1 as the
nominee of NA7A1AN# and the fact that P>#3FAR'1
fo!med a conso!tium to !aise the !e8ui!ed amount to
e,e!cise the !i%ht to top the hi%hest bid b .K does not
violate the +CA o! the A1BR.
.. The E2K-)2K @ilipino-fo!ei%n constitutional !e8ui!ement
fo! the ac8uisition of lands does not appl to P>#31ECA
because as admitted b petitione! itself, P>#31ECA no
lon%e! o&ns !eal p!ope!t.
E. Petitione!Ps motion to elevate the case to the Cou!t en
banc is baseless and &ould onl dela the te!mination of this
case.
$$
#n a Consolidated Comment dated Ma!ch 9, "22), +.B. 1ummit
counte!ed the a!%uments of the public and p!ivate !espondents in this
&ise0
1. The a&a!d b the APT of 9/.E/K sha!es of P>#31ECA to
P>#3FAR'1 &ith losin% bidde!s th!ou%h the e,e!cise of a
!i%ht to top, &hich is cont!a! to la& and the constitution is
null and void fo! bein% violative of substantive due p!ocess
and the abuse of !i%ht p!ovision in the Civil Code.
a. The bidde!s;P< !i%ht to top &as actuall e,e!cised
b losin% bidde!s.
b. The !i%ht to top o! the !i%ht of fi!st !efusal cannot
co-e,ist &ith a %enuine competitive biddin%.
c. The benefits de!ived f!om the !i%ht to top &e!e
un&a!!anted.
". The landholdin% issue has been a le%itimate issue since
the sta!t of this case but is shamelessl i%no!ed b the
!espondents.
a. The landholdin% issue is not a non-issue.
b. The landholdin% issue does not pose 8uestions
of fact.
c. That P>#31ECA o&ned land at the time that the
!i%ht of fi!st !efusal &as a%!eed upon and at the
time of the biddin% a!e most !elevant.
d. 7hethe! a shipa!d is a public utilit is not the
co!e issue in this case.
$. @!aud and bad faith attend the alle%ed conve!sion of an
ine,istent !i%ht of fi!st !efusal to the !i%ht to top.
a. The histo! behind the bi!th of the !i%ht to top
sho&s f!aud and bad faith.
b. The !i%ht of fi!st !efusal &as, indeed, 6effectivel
useless.6
). Petitione! is not le%all estopped to challen%e the !i%ht to
top in this case.
a. Estoppel is unavailin% as it &ould stamp validit
to an act that is p!ohibited b la& o! a%ainst public
polic.
b. 'eception &as patent4 the !i%ht to top &as an
att!active nuisance.
c. The 12K bid deposit &as placed in esc!o&.
+.B. 1ummitPs insistence that the !i%ht to top cannot be sou!ced f!om
the !i%ht of fi!st !efusal is not ne& and &e have al!ead !uled on the
issue in ou! Resolution of 1eptembe! "), "22$. 7e upheld the mutual
!i%ht of fi!st !efusal in the +CA.
$)
7e also !uled that nothin% in the +CA
p!events NA7A1AN# f!om ac8ui!in% mo!e than )2K of P>#31ECAPs
total capitaliDation.
$.
3i*e&ise, nothin% in the +CA o! A1BR ba!s the
conve!sion of the !i%ht of fi!st !efusal to the !i%ht to top. #n sum, nothin%
ne& and of si%nificance in the petitione!Ps pleadin% &a!!ants a
!econside!ation of ou! !ulin%.
3i*e&ise, &e al!ead disposed of the a!%ument that neithe! the !i%ht of
fi!st !efusal no! the !i%ht to top can le%all be e,e!cised b the
conso!tium &hich is not the p!ope! pa!t %!anted such !i%ht unde!
eithe! the +CA o! the A1BR. Thus, &e held0
The fact that the losin% bidde!, Neppel Conso!tium :composed of
Neppel, 1M B!oup, #nsula! 3ife Assu!ance, Mitsui and #CT1#=, has
5oined P>#3FAR'1 in the latte!-s effo!t to !aise P".1$1 billion
necessa! in e,e!cisin% the !i%ht to top is not cont!a! to la&, public
polic o! public mo!als. The!e is nothin% in the A1BR that ba!s the
losin% bidde!s f!om 5oinin% eithe! the &innin% bidde! :should the !i%ht to
top is not e,e!cised= o! NA7A1AN#SP># :should it e,e!cise its !i%ht to
top as it did=, to !aise the pu!chase p!ice. The petitione! did not alle%e,
no! &as it sho&n b competent evidence, that the pa!ticipation of the
losin% bidde!s in the public biddin% &as done &ith f!audulent intent.
Absent an p!oof of f!aud, the fo!mation b ;P>#3FAR'1< of a
conso!tium is le%itimate in a f!ee ente!p!ise sstem. The appellate
cou!t is thus co!!ect in holdin% the petitione! estopped f!om 8uestionin%
the validit of the t!ansfe! of the National Bove!nment-s sha!es in
P>#31ECA to !espondent.
$E
@u!the!, &e see no inhe!ent ille%alit on P>#3FAR'1P act in see*in%
fundin% f!om pa!ties &ho &e!e losin% bidde!s. This is a pu!el
comme!cial decision ove! &hich the 1tate should not inte!fe!e absent
an le%al infi!mit. #t is emphasiDed that the case at ba! involves the
disposition of sha!es in a co!po!ation &hich the %ove!nment sou%ht to
p!ivatiDe. As such, the pe!sons &ith &hom P>#3FAR'1 desi!ed to
ente! into business &ith in o!de! to !aise funds to pu!chase the sha!es
a!e basicall its business. This is in cont!ast to a case involvin% a
cont!act fo! the ope!ation of o! const!uction of a %ove!nment
inf!ast!uctu!e &he!e the identit of the bue!Sbidde! o! financie!
constitutes an impo!tant conside!ation. #n such cases, the %ove!nment
&ould have to ta*e utmost p!ecaution to p!otect public inte!est b
ensu!in% that the pa!ties &ith &hich it is cont!actin% have the abilit to
satisfacto!il const!uct o! ope!ate the inf!ast!uctu!e.
An the landholdin% issue, +.B. 1ummit submits that since P>#31ECA
is a landholdin% compan, NA7A1AN# could e,e!cise its !i%ht of fi!st
!efusal onl up to )2K of the sha!es of P>#31ECA due to the
constitutional p!ohibition on landholdin% b co!po!ations &ith mo!e than
)2K fo!ei%n-o&ned e8uit. #t fu!the! a!%ues that since NA7A1AN#
al!ead held at least )2K e8uit in P>#31ECA, the !i%ht of fi!st !efusal
&as inutile and as such, could not subse8uentl be conve!ted into the
!i%ht to top.
$/
Petitione! also asse!ts that, at p!esent, P>#31ECA
continues to violate the constitutional p!ovision on landholdin%s as its
sha!es a!e mo!e than )2K fo!ei%n-o&ned.
$9
P>#3FAR'1 admits that it
ma have p!eviousl held land but had al!ead divested such
landholdin%s.
$(
#t contends, ho&eve!, that even if P>#31ECA o&ned
land, this &ould not affect the !i%ht of fi!st !efusal but onl the e,e!cise
the!eof. #f the land is !etained, the !i%ht of fi!st !efusal, bein% a p!ope!t
!i%ht, could be assi%ned to a 8ualified pa!t. #n the alte!native, the land
could be divested befo!e the e,e!cise of the !i%ht of fi!st !efusal. #n the
case at ba!, !espondents asse!t that since the !i%ht of fi!st !efusal &as
validl conve!ted into a !i%ht to top, &hich &as e,e!cised not b
NA7A1AN#, but b P>#3FAR'1 &hich is a @ilipino co!po!ation :i.e.,
E2K of its sha!es a!e o&ned b @ilipinos=, then the!e is no violation of
the Constitution.
)2
At fi!st, it &ould seem that 8uestions of fact beond
co%niDance b this Cou!t &e!e involved in the issue. >o&eve!, the
!eco!ds sho& that P!"LYAR9S a$),12 ,1 0a$ o6#e$ /a#$ u* u#1,/
10e 1,)e o4 10e b,$$,#-.
)1
!e#.e, 10e o#/y ,22ue ,2 60e10er
A&ASA" 0a$ a 7a/,$ r,-01 o4 4,r21 re4u2a/ o7er P!"LSECO
20are2 u#$er 10e %FA .o#2,$er,#- 10a1 P!"LSECO o6#e$ /a#$
u#1,/ 10e 1,)e o4 10e b,$$,#- a#$ A&ASA" a/rea$y 0e/$ =?M o4
P!"LSECOK2 e3u,1y.
7e uphold the validit of the mutual !i%hts of fi!st !efusal unde! the +CA
bet&een NA7A1AN# and N#'C. @i!st of all, the !i%ht of fi!st !efusal is a
p!ope!t !i%ht of P>#31ECA sha!eholde!s, NA7A1AN# and N#'C,
unde! the te!ms of thei! +CA. This !i%ht allo&s them to pu!chase the
sha!es of thei! co-sha!eholde! befo!e the a!e offe!ed to a thi!d
pa!t. T0e a-ree)e#1 o4 .o-20are0o/$er2 1o )u1ua//y -ra#1 10,2
r,-01 1o ea.0 o10er, by ,12e/4, $oe2 #o1 .o#21,1u1e a 7,o/a1,o# o4 10e
*ro7,2,o#2 o4 10e Co#21,1u1,o# /,),1,#- /a#$ o6#er20,* 1o F,/,*,#o2
a#$ F,/,*,#o .or*ora1,o#2. As P>#3FAR'1 co!!ectl puts it, if
P>#31ECA still o&ns land, the !i%ht of fi!st !efusal can be validl
assi%ned to a 8ualified @ilipino entit in o!de! to maintain the E2K-)2K
!atio. This t!ansfe!, b itself, does not amount to a violation of the Anti-
'umm 3a&s, absent p!oof of an f!audulent intent. The t!ansfe! could
be made eithe! to a nominee o! such othe! pa!t &hich the holde! of
the !i%ht of fi!st !efusal feels it can comfo!tabl do business &ith.
Alte!nativel, P>#31ECA ma divest of its landholdin%s, in &hich case
NA7A1AN#, in e,e!cisin% its !i%ht of fi!st !efusal, can e,ceed )2K of
P>#31ECAPs e8uit. "# 4a.1, ,1 .a# e7e# be 2a,$ 10a1 ,4 10e 4ore,-#
20are0o/$,#-2 o4 a /a#$0o/$,#- .or*ora1,o# e5.ee$2 =?M, ,1 ,2 #o1
10e 4ore,-# 21o.80o/$er2K o6#er20,* o4 10e 20are2 60,.0 ,2
a$7er2e/y a44e.1e$ bu1 10e .a*a.,1y o4 10e .or*ora1,o# 1o o6#
/a#$ R that is, the co!po!ation becomes dis8ualified to o&n land. This
finds suppo!t unde! the basic co!po!ate la& p!inciple that the
co!po!ation and its stoc*holde!s a!e sepa!ate 5u!idical entities. #n this
vein, the !i%ht of fi!st !efusal ove! sha!es pe!tains to the sha!eholde!s
&he!eas the capacit to o&n land pe!tains to the co!po!ation. >ence,
the fact that P>#31ECA o&ns land cannot dep!ive stoc*holde!s of thei!
!i%ht of fi!st !efusal. No /a6 $,23ua/,4,e2 a *er2o# 4ro) *ur.0a2,#-
20are2 ,# a /a#$0o/$,#- .or*ora1,o# e7e# ,4 10e /a11er 6,// e5.ee$
10e a//o6e$ 4ore,-# e3u,1y, 60a1 10e /a6 $,23ua/,4,e2 ,2 10e
.or*ora1,o# 4ro) o6#,#- /a#$. This is the clea! impo!t of the
follo&in% p!ovisions in the Constitution0
1ection ". All lands of the public domain, &ate!s, mine!als, coal,
pet!oleum, and othe! mine!al oils, all fo!ces of potential ene!%,
fishe!ies, fo!ests o! timbe!, &ildlife, flo!a and fauna, and othe! natu!al
!esou!ces a!e o&ned b the 1tate. 7ith the e,ception of a%!icultu!al
lands, all othe! natu!al !esou!ces shall not be alienated. The
e,plo!ation, development, and utiliDation of natu!al !esou!ces shall be
unde! the full cont!ol and supe!vision of the 1tate. The 1tate ma
di!ectl unde!ta*e such activities, o! it ma ente! into co-p!oduction,
5oint ventu!e, o! p!oduction-sha!in% a%!eements 6,10 F,/,*,#o .,1,Le#2,
or .or*ora1,o#2 or a22o.,a1,o#2 a1 /ea21 2,51y *er .e#1u) o4
60o2e .a*,1a/ ,2 o6#e$ by 2u.0 .,1,Le#2. 1uch a%!eements ma be
fo! a pe!iod not e,ceedin% t&ent-five ea!s, !ene&able fo! not mo!e
than t&ent-five ea!s, and unde! such te!ms and conditions as ma
be p!ovided b la&. #n cases of &ate! !i%hts fo! i!!i%ation, &ate! suppl,
fishe!ies, o! indust!ial uses othe! than the development of &ate! po&e!,
beneficial use ma be the measu!e and limit of the %!ant.
,,, ,,, ,,,
1ection /. 1ave in cases of he!edita! succession, #o *r,7a1e /a#$2
20a// be 1ra#24erre$ or .o#7eye$ e5.e*1 1o ,#$,7,$ua/2,
.or*ora1,o#2, or a22o.,a1,o#2 3ua/,4,e$ 1o a.3u,re or 0o/$ /a#$2 o4
10e *ub/,. $o)a,#.
)"
:emphases supplied=
The petitione! fu!the! a!%ues that 6an option to bu land is void in itself
:Philippine Ban*in% Co!po!ation v. 3ui 1he, "1 1CRA ." ;1(E/<=. The
!i%ht of fi!st !efusal %!anted to NA7A1AN#, a +apanese co!po!ation, is
simila!l void. >ence, the !i%ht to top, sou!ced f!om the !i%ht of fi!st
!efusal, is also void.6
)$
Cont!a! to the contention of petitione!, the case
of Lu, S0e did not that sa 6an option to bu land is void in itself,6 fo!
&e !uled as follo&s0
5 5 5 To be 2ure, a /ea2e 1o a# a/,e# 4or a rea2o#ab/e *er,o$ ,2
7a/,$. So ,2 a# o*1,o# -,7,#- a# a/,e# 10e r,-01 1o buy rea/
*ro*er1y o# .o#$,1,o# 10a1 0e ,2 -ra#1e$ P0,/,**,#e .,1,Le#20,*. A2
10,2 Cour1 2a,$ ,# r,7e#8o 72. Re-,21er o4 9ee$2'
;A<liens a!e not completel e,cluded b the Constitution f!om the use
of lands fo! !esidential pu!poses. 1ince thei! !esidence in the
Philippines is tempo!a!, the ma be %!anted tempo!a! !i%hts such
as a lease cont!act &hich is not fo!bidden b the Constitution. 1hould
the desi!e to !emain he!e fo!eve! and sha!e ou! fo!tunes and
misfo!tunes, @ilipino citiDenship is not impossible to ac8ui!e.
Cu1 ,4 a# a/,e# ,2 -,7e# #o1 o#/y a /ea2e o4, bu1 a/2o a# o*1,o# 1o
buy, a *,e.e o4 /a#$, by 7,r1ue o4 60,.0 10e F,/,*,#o o6#er .a##o1
2e// or o10er6,2e $,2*o2e o4 0,2 *ro*er1y, 10,2 1o /a21 4or 5? year2,
10e# ,1 be.o)e2 ./ear 10a1 10e arra#-e)e#1 ,2 a 7,r1ua/ 1ra#24er o4
o6#er20,* 60ereby 10e o6#er $,7e212 0,)2e/4 ,# 21a-e2 #o1 o#/y
o4 10e r,-01 1o e#;oy 10e /a#$ "jus possidendi, jus utendi, jus
fruendi and jus abutendiG bu1 a/2o o4 10e r,-01 1o $,2*o2e o4 ,1 Hjus
disponendiG N r,-012 10e 2u) 1o1a/ o4 60,.0 )a8e u* o6#er20,*.
"1 ,2 ;u21 a2 ,4 1o$ay 10e *o22e22,o# ,2 1ra#24erre$, 1o)orro6, 10e
u2e, 10e #e51 $ay, 10e $,2*o2,1,o#, a#$ 2o o#, u#1,/ u/1,)a1e/y a//
10e r,-012 o4 60,.0 o6#er20,* is made up a!e consolidated in an
alien. And et this is 5ust e,actl &hat the pa!ties in this case did &ithin
this pace of one ea!, &ith the !esult that +ustina 1antos-;s< o&ne!ship
of he! p!ope!t &as !educed to a hollo& concept. #f this can be done,
then the Constitutional ban a%ainst alien landholdin% in the Philippines,
as announced in r,7e#8o 72. Re-,21er o4 9ee$2, is indeed in %!ave
pe!il.
))
:emphases suppliedI Citations omitted=
#n Lu, S0e, the option to bu &as invalidated because it amounted to a
vi!tual t!ansfe! of o&ne!ship as the o&ne! could not sell o! dispose of
his p!ope!ties. The cont!act in Lu, S0e p!ohibited the o&ne! of the land
f!om sellin%, donatin%, mo!t%a%in%, o! encumbe!in% the p!ope!t du!in%
the .2-ea! pe!iod of the option to bu. This is not so in the case at ba!
&he!e the mutual !i%ht of fi!st !efusal in favo! of N#'C and NA7A1AN#
does not amount to a vi!tual t!ansfe! of land to a non-@ilipino. #n fact,
the case at ba! involves a r,-01 o4 4,r21 re4u2a/ o7er 20are2 o4
21o.8&hile the Lu, S0e case involves an o*1,o# 1o buy 10e /a#$
,12e/4. As discussed ea!lie!, the!e is a distinction bet&een the
sha!eholde!Ps o&ne!ship of sha!es and the co!po!ationPs o&ne!ship of
land a!isin% f!om the sepa!ate 5u!idical pe!sonalities of the co!po!ation
and its sha!eholde!s.
7e note that in its Motion fo! Reconside!ation, +.B. 1ummit alle%es
that P>#31ECA continues to violate the Constitution as its fo!ei%n
e8uit is above )2K and ye1 o6#2 /o#--1er) /ea2e0o/$ r,-012 60,.0
are rea/ r,-012.
).
#t cites A!ticle )1. of the Civil Code &hich includes in
the definition of immovable p!ope!t, 6cont!acts fo! public &o!*s, and
se!vitudes and othe! !eal !i%hts ove! immovable p!ope!t.6
)E
An
e,istin% landholdin%, ho&eve!, is denied b P>#3FAR'1 citin% its
!ecent financial statements.
)/
@i!st, these a!e 8uestions of fact, the
ve!acit of &hich &ould !e8ui!e int!oduction of evidence. The Cou!t
needs to validate these factual alle%ations based on competent and
!eliable evidence. As such, the Cou!t cannot !esolve the 8uestions the
pose. 1econd, +.B. 1ummit mis!eads the p!ovisions of the Constitution
cited in its o&n pleadin%s, to &it0
"(." Petitione! has consistentl pointed out in the past that p!ivate
!espondent is not a E2K-)2K co!po!ation, and this violates the
Constitution , , , The violation continues to this da because unde!
the la&, ,1 .o#1,#ue2 1o o6# rea/ *ro*er1yO
,,, ,,, ,,,
$". To !evie& the constitutional p!ovisions involved, 1ection 1), A!ticle
I#C of the 1(/$ Constitution :the +CA &as si%ned in 1(//=, p!ovided0
61ave in cases of he!edita! succession, #o *r,7a1e /a#$2 shall be
t!ansfe!!ed o! conveed e,cept to individuals, co!po!ations, o!
associations 8ualified to ac8ui!e o! hold lands of the public domain.6
$".1 This p!ovision is the same as 1ection /, A!ticle I## of the 1(9/
Constitution.
$"." Hnde! the Public 3and Act, co!po!ations 8ualified to ac8ui!e o!
hold /a#$2 o4 10e *ub/,. $o)a,# a!e co!po!ations at least E2K of
&hich is o&ned b @ilipino citiDens :1ec. "", Common&ealth Act 1)1,
as amended=. :emphases supplied=
As co!!ectl obse!ved b the public !espondents, the p!ohibition in the
Constitution applies onl to o&ne!ship of land.
)9
"1 $oe2 #o1 e51e#$ 1o
,))o7ab/e or rea/ *ro*er1y a2 $e4,#e$ u#$er Ar1,./e =15 o4 10e
C,7,/ Co$e.Athe!&ise, &e &ould have a st!an%e situation &he!e the
o&ne!ship of immovable p!ope!t such as t!ees, plants and %!o&in%
f!uit attached to the land
)(
&ould be limited to @ilipinos and @ilipino
co!po!ations onl.
###.
&!EREFORE, in vie& of the fo!e%oin%, the petitione!Ps Motion fo!
Reconside!ation is 'EN#E' 7#T> @#NA3#TF and the decision
appealed f!om is A@@#RME'. The Motion to Elevate This Case to the
Cou!t 3n Ban! is li*e&ise 'EN#E' fo! lac* of me!it.
1A AR'ERE'.
'avide, +!., C.+., :Chai!man=, Fna!es-1antia%o, Co!ona, and Tin%a,
++., concu!.

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