PRUDENTIAL BANK, Petitioner, v.

HONORABLE
DOMINGO D. PANIS, Presiding Judge of Branch
III, Court of First Instance of Zambales and
Olongapo City; FERNANDO MAGCALE and
TEODULA BALUYUT-MAGCALE, Respondents.
SYLLABUS
1. CIVIL LAW; CONTRACTS; REAL ESTATE MORTGAGE;
BUILDING ALONE MAY BE SUBJECT THEREOF. The
pivotal issue in this case is whether or not a valid real
estate mortgage can be constituted on the building
erected on the land belonging to another. The answer
is in the affirmative. In the enumeration of properties
under Article 415 of the Civil Code of the Philippines,
this Court ruled that, "it is obvious that the inclusion
of building separate and distinct from the land, in
said provision of law can only mean that a building is
by itself an immovable property." (Lopez v. Orosa, Jr.,
Et Al., L-10817-18, Feb. 28, 1958; Associated Inc. and
Surety Co., Inc. v. Iya, Et Al., L-10837-38, May 30,
1958). Thus, while it is true that a mortgage of land
necessarily includes, in the absence of stipulation of
the improvements thereon, buildings, still a building
by itself may be mortgaged apart from the land on
which it has been built. Such a mortgage would be
still a real estate mortgage for the building would still
be considered immovable property even if dealt with
separately and apart from the land (Leung Yee v.
Strong
Machinery
Co.,
37
Phil.
644).
2. ID.; ID.; ID.; ID.; POSSESSORY RIGHTS OVER A
BUILDING MAY BE VALIDLY MORTGAGED. In the

same manner, this Court has also established that

possessory rights over said properties before title is
vested on the grantee, may be validly transferred or
conveyed as in a deed of mortgage (Vda. de Bautista
v.
Marcos,
3
SCRA
438
[1961]).
3. ID.; ID.; ID.; ID.; CASE AT BAR. Coming back to
the case at bar, the records show, as aforestated that
the original mortgage deed on the 2-storey semiconcrete residential building with warehouse and on
the right of occupancy on the lot where the building
was erected, was executed on November 19, 1971
and registered under the provisions of Act 3344 with
the Register of Deeds of Zambales on November 23,
1971. Miscellaneous Sales Patent No. 4776 on the
land was issued on April 24, 1972, on the basis of
which OCT No. 2554 was issued in the name of
private respondent Fernando Magcale on May 15,
1972. It is therefore without question that the original
mortgage was executed before the issuance of the
final patent and before the government was divested
of its title to the land, an event which takes effect
only on the issuance of the sales patent and its
subsequent registration in the Office of the Register
of Deeds (Visayan Realty Inc. v. Meer, 96 Phil. 515;
Director of Lands v. De Leon, 110 Phil. 28; Director of
Lands v. Jurado, L-14702, May 23, 1961; Pea, "Law
on Natural Resources", p. 49). Under the foregoing
considerations, it is evident that the mortgage
executed by private respondent on his own building
which was erected on the land belonging to the
government is to all intents and purposes a valid
mortgage.
4. ID.; ID.; DOCTRINE OF ESTOPPEL CANNOT GIVE

VALIDITY TO A VOID CONTRACT. The Court, in

recently ruling on violations of Section 124 which
refers to sections 118, 120, 122 and 123 of
Commonwealth Act 141, has held: ". . . Nonetheless,
we apply our earlier rulings because we believe that
as in pari delicto may not be invoked to defeat the
policy of the State neither may the doctrine of
estoppel give a validating effect to a void contract.
Indeed, it is generally considered that as between
parties to a contract, validity cannot be given to it by
estoppel if it is prohibited by law or is against public
policy (19 Am. Jur. 802). It is not within the
competence of any citizen to barter away what public
policy by law seeks to preserve (Gonzalo Puyat &
Sons,
Inc.
v.
De
los
Amas
and
Alino,
supra). . . ." (Arsenal v. IAC, 143 SCRA 54 [1986]).
5. ID.; ID.; ID.; CASE AT BAR. This pronouncement
covers only the previous transaction already alluded
to and does not pass upon any new contract between
the parties as in the case at bar. It should not
preclude new contracts that may be entered into
between petitioner bank and private respondents
that are in accordance with the requirements of the
law. After all, private respondents themselves declare
that they are not denying the legitimacy of their
debts and appear to be open to new negotiations
under the law. Any new transaction, however, would
be subject to whatever steps the Government may
take for the reversion of the land in its favor.
DECISION

PARAS, J.:
This is a petition for review on certiorari of the
November 13, 1978 Decision * of the then Court of
First Instance of Zambales and Olongapo City in Civil
Case No. 2443-0 entitled "Spouses Fernando A.
Magcale and Teodula Baluyut-Magcale v. Hon. Ramon
Y. Pardo and Prudential Bank" declaring that the
deeds of real estate mortgage executed by
respondent spouses in favor of petitioner bank are
null
and
void.
The undisputed facts of this case by stipulation of the
parties are as follows:chanrobles.com : virtual law
library
". . . on November 19, 1971, plaintiffs-spouses
Fernando A. Magcale and Teodula Baluyut Magcale
secured a loan in the sum of P70,000.00 from the
defendant Prudential Bank. To secure payment of this
loan, plaintiffs executed in favor of defendant on the
aforesaid date a deed of Real Estate Mortgage over
the following described properties:chanrob1es virtual
1aw
library
1. A 2-STOREY, SEMI-CONCRETE, residential building
with warehouse spaces containing a total floor area of
263 sq. meters, more or less, generally constructed
of mixed hard wood and concrete materials, under a
rooming of cor. g.i. sheets; declared and assessed in
the name of FERNANDO MAGCALE under Tax
Declaration No. 21109, issued by the Assessor of
Olongapo City with an assessed value of P35,290.00.
This building is the only improvement of the lot.

2. THE PROPERTY hereby conveyed by way of

MORTGAGE includes the right of occupancy on the lot
where the above property is erected, and more
particularly
described
and
bounded,
as
follows:chanrob1es
virtual
1aw
library
A first class residential land identified as Lot No. 720,
(Ts-308, Olongapo Townsite Subdivision) Ardoin
Street, East Bajac-Bajac, Olongapo City, containing an
area of 465 sq. m., more or less, declared and
assessed in the name of FERNANDO MAGCALE under
Tax Declaration No. 19595 issued by the Assessor of
Olongapo City with an assessed value of P1,860.00;
bounded
on
the.
NORTH:
SOUTH:
EAST:
WEST:

By

No.

By
By

No.
37
By

6,
2,
Canda
Ardoin

Ardoin
Ardoin
Street,

Sales Patent on the lot applied for by the Mortgagors

as herein stated is released or issued by the Bureau
of Lands, the Mortgagors hereby authorize the
Register of Deeds to hold the Registration of same
until this Mortgage is cancelled, or to annotate this
encumbrance on the Title upon authority from the
Secretary of Agriculture and Natural Resources, which
title with annotation, shall be released in favor of the
herein
Mortgage.
From the aforequoted stipulation, it is obvious that
the mortgagee (defendant Prudential Bank) was at
the outset aware of the fact that the mortgagors
(plaintiffs) have already filed a Miscellaneous Sales
Application over the lot, possessory rights over which,
were
mortgaged
to
it.

Street
Street

Exhibit "A" (Real Estate Mortgage) was registered

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

and
Street.

All corners of the lot marked by conc. cylindrical

monuments of the Bureau of Lands as visible limits.
(Exhibit "A," also Exhibit "1" for defendant)
Apart from the stipulations in the printed portion of
the aforestated deed of mortgage, there appears a
rider typed at the bottom of the reverse side of the
document under the lists of the properties mortgaged
which reads, as follows:chanrob1es virtual 1aw library
AND IT IS FURTHER AGREED that in the event the

On May 2, 1973, plaintiffs secured an additional loan

from defendant Prudential Bank in the sum of
P20,000.00. To secure payment of this additional
loan, plaintiffs executed in favor of the said defendant
another deed of Real Estate Mortgage over the same
properties previously mortgaged in Exhibit "A."
(Exhibit "B;" also Exhibit "2" for defendant). This
second deed of Real Estate Mortgage was likewise
registered with the Registry of Deeds, this time in
Olongapo
City,
on
May
2,
1973.
On April 24, 1973, the Secretary of Agriculture issued
Miscellaneous Sales Patent No. 4776 over the parcel
of land, possessory rights over which were

mortgaged to defendant Prudential Bank, in favor of

plaintiffs. On the basis of the aforesaid Patent, and
upon its transcription in the Registration Book of the
Province of Zambales, Original Certificate of Title No.
P-2554 was issued in the name of Plaintiff Fernando
Magcale, by the Ex-Oficio Register of Deeds of
Zambales, on May 15, 1972.chanrobles virtual
lawlibrary
For failure of plaintiffs to pay their obligation to
defendant Bank after it became due, and upon
application of said defendant, the deeds of Real
Estate Mortgage (Exhibits "A" and "B") were
extrajudicially
foreclosed.
Consequent
to
the
foreclosure was the sale of the properties therein
mortgaged to defendant as the highest bidder in a
public auction sale conducted by the defendant City
Sheriff on April 12, 1978 (Exhibit "E"). The auction
sale aforesaid was held despite written request from
plaintiffs through counsel, dated March 29, 1978, for
the defendant City Sheriff to desist from going with
the scheduled public auction sale (Exhibit "D").
(Decision, Civil Case No. 2443-0, Rollo, pp. 29-31).
Respondent Court, in a Decision dated November 3,
1978 declared the deeds of Real Estate Mortgage us
null
and
void
(Ibid.,
p.
35).
On December 14, 1978, petitioner filed a Motion for
Reconsideration (Ibid., pp. 41-53), opposed by private
respondents on January 5, 1979 (Ibid., pp. 54-62),
and in an Order dated January 10, 1979 (Ibid., p. 63),
the Motion for Reconsideration was denied for lack of
merit. Hence, the instant petition (Ibid., pp. 5-28).

The first Division of this Court, in a Resolution dated

March 9, 1979, resolved to require the respondents to
comment (Ibid., p. 65), which order was complied
with the Resolution dated May 18, 1979, (Ibid., p.
100), petitioner filed its Reply on June 2, 1979 (Ibid.,
pp.
101-112).
Thereafter, in the Resolution dated June 13, 1979, the
petition was given due course and the parties were
required to submit simultaneously the irrespective
memoranda.
(Ibid.,
p.
114)
On July 18, 1979, petitioner filed its Memorandum
(Ibid., pp. 116-144), while private respondents filed
their Memorandum on August 1, 1979 (Ibid., pp. 146155).
In a Resolution dated August 10, 1979, this case was
considered submitted for decision (Ibid., p. 158).
In its Memorandum, petitioner raised the following
issues:chanrob1es
virtual
1aw
library
1. WHETHER OR NOT THE DEEDS OF REAL ESTATE
MORTGAGE
ARE
VALID;
AND
2. WHETHER OR NOT THE SUPERVENING ISSUANCE IN
FAVOR
OF
PRIVATE
RESPONDENTS
OF
MISCELLANEOUS SALES PATENT NO. 4776 ON APRIL
24, 1972 UNDER ACT NO. 730 AND THE COVERING
ORIGINAL CERTIFICATE OF TITLE NO. P-2554 ON MAY
15, 1972 HAVE THE EFFECT OF INVALIDATING THE
DEEDS OF REAL ESTATE MORTGAGE. (Memorandum
for
Petitioner,
Rollo,
p.
122).

This

petition

is

impressed

with

merit.

The pivotal issue in this case is whether or not a valid

real estate mortgage can be constituted on the
building erected on the land belonging to
another.chanrobles
virtual
lawlibrary
The

answer

is

in

the

affirmative.

In the enumeration of properties under Article 415 of

the Civil Code of the Philippines, this Court ruled that,
"it is obvious that the inclusion of building separate
and distinct from the land, in said provision of law can
only mean that a building is by itself an immovable
property." (Lopez v. Orosa, Jr., Et Al., L-10817-18, Feb.
28, 1958; Associated Inc. and Surety Co., Inc. v. Iya,
Et
Al.,
L-10837-38,
May
30,
1958).
Thus, while it is true that a mortgage of land
necessarily includes, in the absence of stipulation of
the improvements thereon, buildings, still a building
by itself may be mortgaged apart from the land on
which it has been built. Such a mortgage would be
still a real estate mortgage for the building would still
be considered immovable property even if dealt with
separately and apart from the land (Leung Yee v.
Strong Machinery Co., 37 Phil. 644). In the same
manner, this Court has also established that
possessory rights over said properties before title is
vested on the grantee, may be validly transferred or
conveyed as in a deed of mortgage (Vda. de Bautista
v.
Marcos,
3
SCRA
438
[1961]).
Coming back to the case at bar, the records show, as
aforestated that the original mortgage deed on the 2-

storey semi-concrete residential building with

warehouse and on the right of occupancy on the lot
where the building was erected, was executed on
November 19, 1971 and registered under the
provisions of Act 3344 with the Register of Deeds of
Zambales on November 23, 1971. Miscellaneous
Sales Patent No. 4776 on the land was issued on April
24, 1972, on the basis of which OCT No. 2554 was
issued in the name of private respondent Fernando
Magcale on May 15, 1972. It is therefore without
question that the original mortgage was executed
before the issuance of the final patent and before the
government was divested of its title to the land, an
event which takes effect only on the issuance of the
sales patent and its subsequent registration in the
Office of the Register of Deeds (Visayan Realty Inc. v.
Meer, 96 Phil. 515; Director of Lands v. De Leon, 110
Phil. 28; Director of Lands v. Jurado, L-14702, May 23,
1961; Pea, "Law on Natural Resources", p. 49).
Under the foregoing considerations, it is evident that
the mortgage executed by private respondent on his
own building which was erected on the land
belonging to the government is to all intents and
purposes a valid mortgage.chanrobles.com.ph :
virtual
law
library
As to restrictions expressly mentioned on the face of
respondents OCT No. P-2554, it will be noted that
Sections 121, 122 and 124 of the Public Land Act,
refer to land already acquired under the Public Land
Act, or any improvement thereon and therefore have
no application to the assailed mortgage in the case at
bar which was executed before such eventuality.
Likewise, Section 2 of Republic Act No. 730, also a
restriction appearing on the face of private

respondents title has likewise no application in the

instant case, despite its reference to encumbrance or
alienation before the patent is issued because it
refers specifically to encumbrance or alienation on
the land itself and does not mention anything
regarding the improvements existing thereon.
But it is a different matter, as regards the second
mortgage executed over the same properties on May
2, 1973 for an additional loan of P20,000.00 which
was registered with the Registry of Deeds of
Olongapo City on the same date. Relative thereto, it
is evident that such mortgage executed after the
issuance of the sales patent and of the Original
Certificate of Title, falls squarely under the
prohibitions stated in Sections 121, 122 and 124 of
the Public Land Act and Section 2 of Republic Act 730,
and
is
therefore
null
and
void.
Petitioner points out that private respondents, after
physically possessing the title for five years,
voluntarily surrendered the same to the bank in 1977
in order that the mortgaged may be annotated,
without requiring the bank to get the prior approval
of the Ministry of Natural Resources beforehand,
thereby implicitly authorizing Prudential Bank to
cause the annotation of said mortgage on their title.
However, the Court, in recently ruling on violations of
Section 124 which refers to sections 118, 120, 122
and 123 of Commonwealth Act
141, has
held:jgc:chanrobles.com.ph
". . . Nonetheless, we apply our earlier rulings
because we believe that as in pari delicto may not be

invoked to defeat the policy of the State neither may

the doctrine of estoppel give a validating effect to a
void contract. Indeed, it is generally considered that
as between parties to a contract, validity cannot be
given to it by estoppel if it is prohibited by law or is
against public policy (19 Am. Jur. 802). It is not within
the competence of any citizen to barter away what
public policy by law seeks to preserve (Gonzalo Puyat
& Sons, Inc. v. De los Amas and Alino, supra). . . ."
(Arsenal
v.
IAC,
143
SCRA
54
[1986]).
This pronouncement covers only the previous
transaction already alluded to and does not pass
upon any new contract between the parties (Ibid.), as
in the case at bar. It should not preclude new
contracts that may be entered into between
petitioner bank and private respondents that are in
accordance with the requirements of the law. After
all, private respondents themselves declare that they
are not denying the legitimacy of their debts and
appear to be open to new negotiations under the law
(Comment; Rollo, pp. 95-96). Any new transaction,
however, would be subject to whatever steps the
Government may take for the reversion of the land in
its
favor.chanrobles
lawlibrary
:
rednad
PREMISES CONSIDERED, the decision of the Court of
First Instance of Zambales & Olongapo City is hereby
MODIFIED, declaring that the Deed of Real Estate
Mortgage for P70,000.00 is valid but ruling that the
Deed of Real Estate Mortgage for an additional loan
of P20,000.00 is null and void, without prejudice to
any appropriate action the Government may take
against
private
respondents.

SO ORDERED.

LEUNG
YEE, Plaintiff-Appellant, v. FRANK
STRONG MACHINERY COMPANY and J.
WILLIAMSON, defendants-appellees.
Booram
and
Mahoney
for
Williams, Ferrier and SyCip for appellees.

L.
G.

appellant.

CARSON, J.:
The
"Compaia
Agricola
Filipina"
bought
a
considerable quantity of rice-cleaning machinery
company from the defendant machinery company,
and executed a chattel mortgage thereon to secure
payment of the purchase price. It included in the
mortgage deed the building of strong materials in
which the machinery was installed, without any
reference to the land on which it stood. The
indebtedness secured by this instrument not having
been paid when it fell due, the mortgaged property

was sold by the sheriff, in pursuance of the terms of

the mortgage instrument, and was bought in by the
machinery company. The mortgage was registered in
the chattel mortgage registry, and the sale of the
property to the machinery company in satisfaction of
the mortgage was annotated in the same registry on
December
29,
1913.chanroblesvirtualawlibrary chanrobles
virtual
law library
A few weeks thereafter, on or about the 14th of
January, 1914, the "Compaia Agricola Filipina"
executed a deed of sale of the land upon which the
building stood to the machinery company, but this
deed of sale, although executed in a public
document, was not registered. This deed makes no
reference to the building erected on the land and
would appear to have been executed for the purpose
of curing any defects which might be found to exist in
the machinery company's title to the building under
the sheriff's certificate of sale. The machinery
company went into possession of the building at or
about the time when this sale took place, that is to
say, the month of December, 1913, and it has
continued
in
possession
ever
since.chanroblesvirtualawlibrary chanrobles
virtual
law library
At or about the time when the chattel mortgage was
executed in favor of the machinery company, the

mortgagor, the "Compaia Agricola Filipina" executed

another mortgage to the plaintiff upon the building,
separate and apart from the land on which it stood,
to secure payment of the balance of its indebtedness
to the plaintiff under a contract for the construction
of the building. Upon the failure of the mortgagor to
pay the amount of the indebtedness secured by the
mortgage, the plaintiff secured judgment for that
amount, levied execution upon the building, bought it
in at the sheriff's sale on or about the 18th of
December, 1914, and had the sheriff's certificate of
the sale duly registered in the land registry of the
Province
of
Cavite.chanroblesvirtualawlibrary chanrobles virtual
law library
At the time when the execution was levied upon the
building, the defendant machinery company, which
was in possession, filed with the sheriff a sworn
statement setting up its claim of title and demanding
the release of the property from the levy. Thereafter,
upon demand of the sheriff, the plaintiff executed an
indemnity bond in favor of the sheriff in the sum of
P12,000, in reliance upon which the sheriff sold the
property at public auction to the plaintiff, who was
the
highest
bidder
at
the
sheriff's
sale.chanroblesvirtualawlibrary chanrobles virtual law
library

This action was instituted by the plaintiff to recover

possession of the building from the machinery
company.chanroblesvirtualawlibrary chanrobles
virtual law library
The trial judge, relying upon the terms of article 1473
of the Civil Code, gave judgment in favor of the
machinery company, on the ground that the company
had its title to the building registered prior to the
date
of
registry
of
the
plaintiff's
certificate.chanroblesvirtualawlibrary chanrobles
virtual law library
Article 1473 of the Civil Code is as follows:
If the same thing should have been sold to different
vendees, the ownership shall be transfer to the
person who may have the first taken possession
thereof in good faith, if it should be personal
property.chanroblesvirtualawlibrary chanrobles virtual
law library
Should it be real property, it shall belong to the
person acquiring it who first recorded it in the
registry.chanroblesvirtualawlibrary chanrobles virtual
law library
Should there be no entry, the property shall belong to
the person who first took possession of it in good
faith, and, in the absence thereof, to the person who
presents the oldest title, provided there is good faith.

The registry her referred to is of course the registry of

real property, and it must be apparent that the
annotation or inscription of a deed of sale of real
property in a chattel mortgage registry cannot be
given the legal effect of an inscription in the registry
of real property. By its express terms, the Chattel
Mortgage Law contemplates and makes provision for
mortgages of personal property; and the sole purpose
and object of the chattel mortgage registry is to
provide for the registry of "Chattel mortgages," that
is to say, mortgages of personal property executed in
the manner and form prescribed in the statute. The
building of strong materials in which the rice-cleaning
machinery was installed by the "Compaia Agricola
Filipina" was real property, and the mere fact that the
parties seem to have dealt with it separate and apart
from the land on which it stood in no wise changed its
character as real property. It follows that neither the
original registry in the chattel mortgage of the
building and the machinery installed therein, not the
annotation in that registry of the sale of the
mortgaged property, had any effect whatever so far
as
the
building
was
concerned.chanroblesvirtualawlibrary chanrobles
virtual law library
We conclude that the ruling in favor of the machinery
company cannot be sustained on the ground
assigned by the trial judge. We are of opinion,
however, that the judgment must be sustained on the

ground that the agreed statement of facts in the

court below discloses that neither the purchase of the
building by the plaintiff nor his inscription of the
sheriff's certificate of sale in his favor was made in
good faith, and that the machinery company must be
held to be the owner of the property under the third
paragraph of the above cited article of the code, it
appearing that the company first took possession of
the property; and further, that the building and the
land were sold to the machinery company long prior
to the date of the sheriff's sale to the
plaintiff.chanroblesvirtualawlibrary chanrobles virtual
law library

secures an inscription therein in bad faith. The force

and effect given by law to an inscription in a public
record presupposes the good faith of him who enters
such inscription; and rights created by statute, which
are predicated upon an inscription in a public registry,
do not and cannot accrue under an inscription "in bad
faith," to the benefit of the person who thus makes
the inscription.chanroblesvirtualawlibrary chanrobles
virtual law library

It has been suggested that since the provisions of

article 1473 of the Civil Code require "good faith," in
express terms, in relation to "possession" and "title,"
but contain no express requirement as to "good faith"
in relation to the "inscription" of the property on the
registry, it must be presumed that good faith is not
an essential requisite of registration in order that it
may have the effect contemplated in this article. We
cannot agree with this contention. It could not have
been the intention of the legislator to base the
preferential right secured under this article of the
code upon an inscription of title in bad faith. Such an
interpretation placed upon the language of this
section would open wide the door to fraud and
collusion. The public records cannot be converted into
instruments of fraud and oppression by one who

This rule is always to be understood on the basis of

the good faith mentioned in the first paragraph;
therefore, it having been found that the second
purchasers who record their purchase had knowledge
of the previous sale, the question is to be decided in
accordance with the following paragraph. (Note 2,
art. 1473, Civ. Code, Medina and Maranon [1911]
edition.) chanrobles virtual law library

Construing the second paragraph of this article of the

code, the supreme court of Spain held in its sentencia
of the 13th of May, 1908, that:

Although article 1473, in its second paragraph,

provides that the title of conveyance of ownership of
the real property that is first recorded in the registry
shall have preference, this provision must always be
understood on the basis of the good faith mentioned
in the first paragraph; the legislator could not have
wished to strike it out and to sanction bad faith, just

to comply with a mere formality which, in given

cases, does not obtain even in real disputes between
third persons. (Note 2, art. 1473, Civ. Code, issued by
the publishers of the La Revista de los Tribunales,
13th edition.)
The agreed statement of facts clearly discloses that
the plaintiff, when he bought the building at the
sheriff's sale and inscribed his title in the land
registry, was duly notified that the machinery
company had bought the building from plaintiff's
judgment debtor; that it had gone into possession
long prior to the sheriff's sale; and that it was in
possession at the time when the sheriff executed his
levy. The execution of an indemnity bond by the
plaintiff in favor of the sheriff, after the machinery
company had filed its sworn claim of ownership,
leaves no room for doubt in this regard. Having
bought in the building at the sheriff's sale with full
knowledge that at the time of the levy and sale the
building had already been sold to the machinery
company by the judgment debtor, the plaintiff cannot
be said to have been a purchaser in good faith; and
of course, the subsequent inscription of the sheriff's
certificate of title must be held to have been tainted
with
the
same
defect.chanroblesvirtualawlibrary chanrobles virtual
law library

Perhaps we should make it clear that in holding that

the inscription of the sheriff's certificate of sale to the
plaintiff was not made in good faith, we should not be
understood as questioning, in any way, the good faith
and genuineness of the plaintiff's claim against the
"Compaia Agricola Filipina." The truth is that both
the plaintiff and the defendant company appear to
have had just and righteous claims against their
common debtor. No criticism can properly be made of
the exercise of the utmost diligence by the plaintiff in
asserting and exercising his right to recover the
amount of his claim from the estate of the common
debtor. We are strongly inclined to believe that in
procuring the levy of execution upon the factory
building and in buying it at the sheriff's sale, he
considered that he was doing no more than he had a
right to do under all the circumstances, and it is
highly possible and even probable that he thought at
that time that he would be able to maintain his
position in a contest with the machinery company.
There was no collusion on his part with the common
debtor, and no thought of the perpetration of a fraud
upon the rights of another, in the ordinary sense of
the word. He may have hoped, and doubtless he did
hope, that the title of the machinery company would
not stand the test of an action in a court of law; and if
later developments had confirmed his unfounded
hopes, no one could question the legality of the
propriety
of
the
course
he

adopted.chanroblesvirtualawlibrary chanrobles virtual

law library
But it appearing that he had full knowledge of the
machinery company's claim of ownership when he
executed the indemnity bond and bought in the
property at the sheriff's sale, and it appearing further
that the machinery company's claim of ownership
was well founded, he cannot be said to have been an
innocent purchaser for value. He took the risk and
must stand by the consequences; and it is in this
sense that we find that he was not a purchaser in
good
faith.chanroblesvirtualawlibrary chanrobles
virtual law library
One who purchases real estate with knowledge of a
defect or lack of title in his vendor cannot claim that
he has acquired title thereto in good faith as against
the true owner of the land or of an interest therein;
and the same rule must be applied to one who has
knowledge of facts which should have put him upon
such inquiry and investigation as might be necessary
to acquaint him with the defects in the title of his
vendor. A purchaser cannot close his eyes to facts
which should put a reasonable man upon his guard,
and then claim that he acted in good faith under the
belief that there was no defect in the title of the
vendor. His mere refusal to believe that such defect
exists, or his willful closing of his eyes to the
possibility of the existence of a defect in his vendor's

title, will not make him an innocent purchaser for

value, if afterwards develops that the title was in fact
defective, and it appears that he had such notice of
the defects as would have led to its discovery had he
acted with that measure of precaution which may
reasonably be acquired of a prudent man in a like
situation. Good faith, or lack of it, is in its analysis a
question of intention; but in ascertaining the intention
by which one is actuated on a given occasion, we are
necessarily controlled by the evidence as to the
conduct and outward acts by which alone the inward
motive may, with safety, be determined. So it is that
"the honesty of intention," "the honest lawful intent,"
which constitutes good faith implies a "freedom from
knowledge and circumstances which ought to put a
person on inquiry," and so it is that proof of such
knowledge overcomes the presumption of good faith
in which the courts always indulge in the absence of
proof to the contrary. "Good faith, or the want of it, is
not a visible, tangible fact that can be seen or
touched, but rather a state or condition of mind which
can only be judged of by actual or fancied tokens or
signs." (Wilder vs. Gilman, 55 Vt., 504, 505; Cf.
Cardenas Lumber Co. vs. Shadel, 52 La. Ann., 20942098; Pinkerton Bros. Co. vs. Bromley, 119 Mich., 8,
10, 17.) chanrobles virtual law library
We conclude that upon the grounds herein set forth
the disposing part of the decision and judgment
entered in the court below should be affirmed with

costs of this instance against the appellant. So

ordered.chanrob

JULIAN S. YAP, Petitioner, v. HON. SANTIAGO O.

TAADA,
etc.,
and
GOULDS
PUMPS
INTERNATIONAL
(PHIL.),
INC., Respondents.
Paterno P. Natinga, for Private Respondent.
SYLLABUS
1. REMEDIAL LAW; CIVIL PROCEDURE; MOTION FOR
RECONSIDERATION BASED ON GROUNDS FOR NEW
TRIAL; MOTION SHOULD HAVE AFFIDAVIT OF MERITS;
REASON FOR REQUIREMENT Since petitioner
himself asserts that his motion for reconsideration is
grounded on Section 1 (a) of Rule 37, i.e., fraud,
accident, mistake or excusable negligence which
ordinary prudence could not have guarded against
and by reason of which . . . (the) aggrieved party has
probably been impaired in his rights" this being in
any event clear from a perusal of the motion which
theorizes that he had "been impaired in his rights"
because he was denied the right to present evidence
of his defenses (discrepancy as to price and breach of
warranty) it was a fatal omission to fail to attach to
his motion an affidavit of merits, i.e., an affidavit
"showing the facts (not conclusions) constituting the
valid . . . defense which the movant may prove in
case a new trial is granted." The requirement of such
an affidavit is essential because obviously "a new

trial would be a waste of the courts time if the

complaint turns out to be groundless or the defense
ineffective."cralaw
virtua1aw
library
2. ID.; ID.; ID.; ID.; PERIOD OF APPEAL NOT
INTERRUPTED IF MOTION IS WITHOUT REQUIRED
AFFIDAVIT OF MERITS Where the motion for
reconsideration grounded on Section 1(a) of Rule 37
is not accompanied by the required affidavit of
merits, it does not interrupt the running of the period
of appeal. In the case at bar, the time during which
the motion was pending before the court--from
September 16, 1969 when it was filed with the
respondent court until October 14, 1969 when notice
of the order denying the motion was received by the
movant--could not be deducted from the 30-day
period of appeal. This is clear from a consideration of
Section 3 of Rule 41 which in part declares that,"
[T]he time during which a motion to set aside the
judgment or order or for a new trial has been pending
shall be deducted, unless such motion fails to satisfy
the requirements of Rule 37."cralaw virtua1aw library
3. ID.; ID.; ID.; ID.; ID.; JUDGMENT BECOMES FINAL
AND EXECUTORY UPON EXPIRATION OF PERIOD OF
APPEAL AND EXECUTION SHOULD ISSUE AS A MATTER
OF RIGHT As the period of appeal was not
interrupted by the motion for reconsideration for lack
of the requisite affidavit of merits, such period
expired thirty days after receipt of the notice of
judgment on September 1, 1969, or on October 1,
1969, without an appeal being taken by Yap. The
judgment then became final and executory; Yap could
no longer take an appeal therefrom or from any other
subsequent orders; and execution of judgment

correctly issued on October 15, 1969, "as a matter of

right."cralaw
virtua1aw
library

buyer (Yap)
obligation,

4. ID.; ID.; MOTION FOR POSTPONEMENT; POSSIBILITY

OF SECURING COMPROMISE AS GROUND THEREFOR;
MOVANT MUST SHOW SINCERITY OF DESIRE TO
NEGOTIATE; BONA FIDES ABSENT IN CASE AT BAR
The bona fides of petitioners desire to compromise is
however
put
in
doubt
by
the
attendant
circumstances. It was manifested in an eleventh-hour
motion for postponement of the pre-trial which had
been scheduled with intransferable character since it
had already been earlier postponed at Yaps instance;
it had never been mentioned at any prior time since
commencement of the litigation; such a possible
compromise (at least in general or preliminary terms)
was certainly most appropriate for consideration at
the pre-trial; in fact Yap was aware that the matter
was indeed a proper subject of a pre-trial agenda, yet
he sought to avoid appearance at said pre-trial which
he knew to be intransferable in character. These
considerations and the dilatory tactics thus far
attributable to him seeking postponements of
hearings, or failing to appear therefor despite notice,
not only in the Court of First Instance but also in the
City Court proscribe belief in the sincerity of his
avowed desire to negotiate a compromise.

6. ID.; ID.; ID.; ABSENCE OF DISPOSITION ON

COUNTERCLAIM DOES NOT RENDER JUDGMENT
INCOMPLETE IF DEFENDANT HAS BEEN VALIDLY
DECLARED IN DEFAULT Where the defendant fails
to appear at the pre-trial without justification and
despite notice, which caused the declaration of his
default, the absence of any disposition in the
judgment regarding his counterclaim does not render
the judgment incomplete The failure to appear
despite notice was a waiver of his right to prove the
averments of his answer, inclusive of the
counterclaim
therein
pleaded.
Moreover,
the
conclusion in the judgment of the merit of the
plaintiffs cause of action was necessarily and at the
same time a determination of the absence of merit of
the defendants claim of untenability of the complaint
and
of
malicious
prosecution.

5. ID.; JUDGMENTS; RENDITION OF JUDGMENTS;

JUDGMENT IS NOT VAGUE IF MATTER NOT FIXED IN
DECISION IS DETERMINABLE FROM THE OPINION It
is true that the decision does not fix the starting time
of the computation of interest on the judgment debt,
but this is inconsequential since that time is easily
determinable from the opinion, i.e., from the day the

defaulted
on

in the
May

payment
31,

of his
1968.

7. CIVIL LAW; PROPERTY; IMMOVABLE PROPERTY;

WATER PUMP INSTALLED IN RESIDENCE BUT
REMOVABLE
WITHOUT
DETERIORATION,
NOT
IMMOVABLE PROPERTY The Civil Code considers as
immovable property, among others, anything
"attached to an immovable in a fixed manner, in such
a way that it cannot be separated therefrom without
breaking the material or deterioration of the object."
The pump does not fit this description. It could be,
and was in fact separated from Yaps premises
without being broken or suffering deterioration.
Obviously the separation or removal of the pump
involved nothing more complicated than the
loosening of bolts or dismantling of other fasteners.

8. ID.; DAMAGES; LOSS RESULTING FROM LEGITIMATE

ACT OF ENFORCING EXECUTORY JUDGMENT; NOT
RECOVERABLE AS DAMAGES As to the loss of his
water supply, since this arose from acts legitimately
done, the seizure on execution of the water pump in
enforcement of a final and executory judgment, Yap
most certainly is not entitled to claim moral or any
other form of damages therefor.

price and installation cost of a water pump in the

latters premises. 4 The case resulted in a judgment
by the City Court on November 25, 1968, reading as
follows:jgc:chanrobles.com.ph
"When this case was called for trial today, Atty.
Paterno Natinga appeared for the plaintiff (Goulds)
and informed the court that he is ready for trial.
However, none of the defendants appeared despite
notices
having
been
served
upon
them.

DECISION

"Upon petition of Atty. Natinga, the plaintiff is hereby

allowed
to
present
its
evidence
ex-parte.

NARVASA, J.:

"After considering the evidence of the plaintiff, the

court hereby renders judgment in favor of the plaintiff
and against the defendant (Yap), ordering the latter
to pay to the former the sum of P1,459.30 with
interest at the rate of 12% per annum until fully paid,
computed from August 12, 1968, date of the filing of
the complaint; to pay the sum of P364.80 as
reasonable attorneys fees, which is equivalent to
25% of the unpaid principal obligation; and to pay the
costs,
if
any."cralaw
virtua1aw
library

The petition for review on certiorari at bar involves

two (2) Orders of respondent Judge Taada 1 in Civil
Case No. 10984. The first, dated September 16, 1970,
denied petitioner Yaps motion to set aside execution
sale and to quash alias writ of execution. The second,
dated November 21, 1970, denied Yaps motion for
reconsideration. The issues concerned the propriety
of execution of a judgment claimed to be
"incomplete, vague and non-final," and the denial of
petitioners application to prove and recover
damages resulting from alleged irregularities in the
process
of
execution.
The antecedents will take some time in the telling.
The case began in the City Court of Cebu with the
filing by Goulds Pumps International (Phil.), Inc. of a
complaint 2 against Yap and his wife, 3 seeking
recovery of P1,459.30 representing the balance of the

Yap appealed to the Court of First Instance. The

appeal was assigned to the sala of respondent Judge
Taada. For failure to appear for pre-trial on August
28, 1968, this setting being intransferable since the
pre-trial had already been once postponed at his
instance, 5 Yap was declared in default by Order of
Judge Taada dated August 28, 1969, 6 reading as
follows:jgc:chanrobles.com.ph
"When this case was called for pre-trial this morning,

the plaintiff and counsel appeared, but neither the

defendants nor his counsel appeared despite the fact
that they were duly notified of the pre-trial set this
morning. Instead he filed an Ex-Parte Motion for
Postponement which this Court received only this
morning, and on petition of counsel for the plaintiff
that the Ex-Parte Motion for Postponement was not
filed in accordance with the Rules of Court he asked
that the same be denied and the defendants be
declared in default; . . . the motion for the plaintiff
being well-grounded, the defendants are hereby
declared in default and the Branch Clerk of Court . . .
is hereby authorized to receive evidence for the
plaintiff and . . . submit his report within ten (10) days
after reception of evidence."cralaw virtua1aw library
Goulds presented evidence ex parte; and judgment
by default was rendered the following day by Judge
Taada requiring Yap to pay to Goulds (1) P1,459.30
representing the unpaid balance of the pump
purchased by him; (2) interest of 12% per annum
thereon until fully paid; and (3) a sum equivalent to
25% of the amount due as attorneys fees and costs
and other expenses in prosecuting the action. Notice
of the judgment was served on Yap on September 1,
1969.
7
On September 16, 1969 Yap filed a motion for
reconsideration. 8 In it he insisted that his motion for
postponement should have been granted since it
expressed his desire to explore the possibility of an
amicable settlement; that the court should give the
parties time to arrive at an amicable settlement
failing which, he should be allowed to present
evidence in support of his defenses (discrepancy as

to the price and breach of warranty). The motion was

not verified or accompanied by any separate
affidavit. Goulds opposed the motion. Its opposition 9
drew attention to the eleventh-hour motion for
postponement of Yap which had resulted in the
cancellation of the prior hearing of June 30, 1969
despite Goulds vehement objection, and the resetting
thereof
on
August
28,
1969
with
intransferable character; it averred that Yap had
again sought postponement of this last hearing by
another eleventh-hour motion on the plea that an
amicable settlement would be explored, yet he had
never up to that time ever broached the matter, 10
and that this pattern of seeking to obtain last-minute
postponements was discernible also in the
proceedings before the City Court. In its opposition,
Goulds also adverted to the examination made by it
of the pump, on instructions of the City Court, with a
view to remedying the defects claimed to exist by
Yap; but the examination had disclosed the pumps
perfect condition. Yaps motion for reconsideration
was denied by Order dated October 10, 1969, notice
of which was received by Yap on October 4, 1969. 11
On October 15, 1969 Judge Taada issued an Order
granting Goulds Motion for Issuance of Writ of
Execution dated October 14, 1969, declaring the
reasons therein alleged to be meritorious. 12 Yap
forthwith filed an "Urgent Motion for Reconsideration
of Order" dated October 17, 1969, 13 contending that
the judgment had not yet become final, since
contrary
to
Goulds
view,
his
motion
for
reconsideration was not pro forma for lack of an
affidavit of merit, this not being required under
Section 1(a) of Rule 37 of the Rules of Court upon

which his motion was grounded. Goulds presented an

opposition dated October 22, 1969. 14 It pointed out
that in his motion for reconsideration Yap had claimed
to have a valid defense to the action, i.e.,." . .
discrepancy as to price and breach of sellers
warranty," in effect, that there was fraud on Goulds
part; Yaps motion for reconsideration should
therefore have been supported by an affidavit of
merit respecting said defenses; the absence thereof
rendered the motion for reconsideration fatally
defective with the result that its filing did not
interrupt the running of the period of appeal. The
opposition also drew attention to the failure of the
motion for reconsideration to specify the findings or
conclusions in the judgment claimed to be contrary to
law or not supported by the evidence, making it a pro
forma motion also incapable of stopping the running
of the appeal period. On October 23, 1969, Judge
Taada denied Yaps motion for reconsideration and
authorized execution of the judgment. 15 Yap sought
reconsideration of this order, by another motion
dated October 29, 1969. 16 This motion was denied
by Order dated January 26, 1970. 17 Again Yap
moved for reconsideration, and again was rebuffed,
by
Order
dated
April
28,
1970.
18
In the meantime the Sheriff levied on the water pump
in question, 19 and by notice dated November 4,
1969, scheduled the execution sale there of on
November 14, 1969. 20 But in view of the pendency
of Yaps motion for reconsideration of October 28,
1969, suspension of the sale was directed by Judge
Taada in an order dated November 6, 1969. 21
"Counsel for the plaintiff is hereby given 10 days time

to answer the Motion, dated October 29, 1969, from

receipt of this Order and in the meantime, the Order
of October 23, 1969, insofar as it orders the sheriff to
enforce
the
writ
of
execution
is
hereby
suspended."cralaw
virtua1aw
library
It appears however that a copy of this Order was not
transmitted to the Sheriff "through oversight,
inadvertence and pressure of work" of the Branch
Clerk of Court. 22 So the Deputy Provincial Sheriff
went ahead with the scheduled auction sale and sold
the property levied on to Goulds as the highest
bidder. 23 He later submitted the requisite report to
the Court dated November 17, 1969, 24 as well as
the "Sheriffs Return of Service" dated February 13,
1970, 25 in both of which it was stated that execution
had been "partially satisfied." It should be observed
that up to this time, February, 1970, Yap had not
bestirred himself to take an appeal from the
judgment
of
August
29,
1969.
On May 9, 1970 Judge Taada ordered the issuance of
an alias writ of execution on Goulds ex parte motion
therefor. 26 Yap received notice of the Order on June
11. Twelve (12) days later, he filed a "Motion to Set
Aside Execution Sale and to Quash Alias Writ of
Execution." 27 As regards the original partial
execution of the judgment, he argued that
1) "the issuance of the writ of execution on October
16, 1969 was contrary to law, the judgment sought to
be executed not being final and executory;" and
2) "the sale was made without the notice required by
Sec. 18, Rule 39, of the New Rules of Court," i.e.,

notice by publication in case of execution sale of real

property, the pump and its accessories being
immovable because attached to the ground with
character of permanency (Art. 415, Civil Code).
And with respect to the alias writ, he argued that it
should
not
have
issued
because

1) "the judgment sought to be executed is null and

void" as "it deprived the defendant of his day in
court"
and
"of
due
process;"
2) "said judgment is incomplete and vague" because
there is no starting point for computation of the
interest imposed, or a specification of the "other
expenses incurred in prosecuting this case" which Yap
had
also
been
ordered
to
pay;
3) "said judgment is defective because it contains no
statement of facts but a mere recital of the evidence;
and
4) "there has been a change in the situation of the
parties
which
makes
execution
unjust
and
inequitable" because Yap suffered damages by
reason
of
the
illegal
execution.
Goulds filed an opposition on July 6, 1970. Yaps
motion was thereafter denied by Order dated
September 16, 1970. Judge Taada pointed out that
the motion had "become moot and academic" since
the decision of August 29, 1969, "received by the
defendant on September 1, 1969 had long become
final when the Order for the Issuance of a Writ of
Execution was promulgated on October 15, 1969."

His

Honor

also

stressed

that

"The defendants Motion for Reconsideration of the

Courts decision was in reality one for new trial
Regarded as motion for new trial it should allege the
grounds for new trial, provided for in the Rules of
Court, to be supported by affidavit of merits; and this
the defendant failed to do. If the defendant sincerely
desired for an opportunity to submit to an amicable
settlement, which he failed to do extra-judicially
despite the ample time before him, he should have
appeared in the pre-trial to achieve the same
purpose."cralaw
virtua1aw
library
Judge Taada thereafter promulgated another Order
dated September 21, 1970 granting a motion of
Goulds for completion of execution of the judgment of
August 29, 1969 to be undertaken by the City Sheriff
of Cebu. Once more, Yap sought reconsideration. He
submitted a "Motion for Reconsideration of Two
Orders" dated October 13, 1970, 28 seeking the
setting aside not only of this Order of September 21,
1970 but also that dated September 16, 1970,
denying his motion to set aside execution dated June
23, 1970. He contended that the Order of September
21, 1970 (authorizing execution by the City Sheriff)
was premature, since the 30-day period to appeal
from the earlier order of September 16, 1970
(denying his motion to set aside) had not yet expired.
He also reiterated his view that his motion for
reconsideration dated September 15, 1969 did not
require that it be accompanied by an affidavit of
merits. This last motion was also denied for "lack of
merits," by Order dated November 21, 1970. 29

On December 3, 1970, Yap filed a "Notice of Appeal"

manifesting his intention to appeal to the Supreme
Court on certiorari only on questions of law, "from the
Order . . . of September 16, 1970 . . . and from the
Order . . . of November 21, 1970, . . . pursuant to
sections 2 and 3 of Republic Act No. 5440." He filed
his petition for review with this Court on January 5,
1971, after obtaining an extension therefor. 30
The errors of law he attributes to the Court a quo are
the
following:
31
1) refusing to invalidate the execution pursuant to its
Order of October 16, 1969 although the judgment
had not then become final and executory and despite
its
being
incomplete
and
vague;
2) ignoring the fact that the execution sale was
carried out although it (the Court) had itself ordered
suspension of execution on November 6, 1969;
3) declining to annul the execution sale of the pump
and accessories subject of the action although made
without the requisite notice prescribed for the sale of
immovables;
and
4) refusing to allow the petitioner to prove
irregularities in the process of execution which had
resulted
in
damages
to
him.
Notice of the Trial Courts judgment was served on
Yap on September 1, 1969. His motion for
reconsideration thereof was filed 15 days thereafter,
on September 16, 1969. Notice of the Order denying
the motion was received by him on October 14, 1969.

The question is whether or not the motion for

reconsideration which was not verified, or
accompanied by an affidavit of merits (setting forth
facts constituting his meritorious defenses to the suit)
or other sworn statement (stating facts excusing his
failure to appear at the pre-trial) was pro forma and
consequently had not interrupted the running of the
period of appeal. It is Yaps contention that his motion
was not pro forma for lack of an affidavit of merits,
such a document not being required by Section 1 (a)
of Rule 37 of the Rules of Court upon which his
motion
was
based.
This
is
incorrect.
Section 2, Rule 37 precisely requires that when the
motion for new trial is founded on Section 1 (a), it
should be accompanied by an affidavit of merit.
x

"When the motion is made for the causes mentioned

in subdivisions (a) and (b) of the preceding section, it
shall be proved in the manner provided for proof of
motions. Affidavit or affidavits of merits shall also be
attached to a motion for the cause mentioned in
subdivision (a) which may be rebutted by counteraffidavits.
x

x"

32

Since Yap himself asserts that his motion for

reconsideration is grounded on Section 1 (a) of Rule
37, 33 i.e., fraud, accident, mistake or excusable
negligence which ordinary prudence could not have
guarded against and by reason of which . . . (the)

aggrieved party has probably been impaired in his

rights" this being in any event clear from a perusal
of the motion which theorizes that he had "been
impaired in his rights" because he was denied the
right to present evidence of his defenses
(discrepancy as to price and breach of warranty) it
was a fatal omission to fail to attach to his motion an
affidavit of merits, i.e., an affidavit "showing the facts
(not conclusions) constituting the valid . . . defense
which the movant may prove in case a new trial is
granted." 34 The requirement of such an affidavit is
essential because obviously "a new trial would be a
waste of the courts time if the complaint turns out to
be groundless or the defense ineffective." 35
In his motion for reconsideration, Yap also contended
that since he had expressed a desire to explore the
possibility of an amicable settlement, the Court
should have given him time to do so, instead of
declaring him in default and thereafter rendering
judgment by default on Goulds ex parte evidence.
The bona fides of this desire to compromise is
however
put
in
doubt
by
the
attendant
circumstances. It was manifested in an eleventh-hour
motion for postponement of the pre-trial which had
been scheduled with intransferable character since it
had already been earlier postponed at Yaps instance;
it had never been mentioned at any prior time since
commencement of the litigation; such a possible
compromise (at least in general or preliminary terms)
was certainly most appropriate for consideration at
the pre-trial; in fact Yap was aware that the matter
was indeed a proper subject of a pre-trial agenda, yet
he sought to avoid appearance at said pre-trial which

he knew to be intransferable in character. These

considerations and the dilatory tactics thus far
attributable to him seeking postponements of
hearings, or failing to appear therefor despite notice,
not only in the Court of First Instance but also in the
City Court proscribe belief in the sincerity of his
avowed desire to negotiate a compromise. Moreover,
the disregard by Yap of the general requirement that"
(n)otice of a motion shall be served by the applicant
to all parties concerned at least three (3) days before
the hearing thereof, together with a copy of the
motion, and of any affidavits and other papers
accompanying it," 36 for which no justification
whatever has been offered, also militates against the
bona fides of Yaps expressed wish for an amicable
settlement. The relevant circumstances do not
therefore justify condemnation, as a grave abuse of
discretion, or a serious mistake, of the refusal of the
Trial Judge to grant postponement upon this proferred
ground.
The motion for reconsideration did not therefore
interrupt the running of the period of appeal. The
time during which it was pending before the court
from September 16, 1969 when it was filed with the
respondent Court until October 14, 1969 when notice
of the order denying the motion was received by the
movant could not be deducted from the 30-day
period of appeal. 37 This is the inescapable
conclusion from a consideration of Section 3 of Rule
41 which in part declares that, "The time during
which a motion to set aside the judgment or order or
for a new trial has been pending shall be deducted,
unless such motion fails to satisfy the requirements of
Rule
37,"
38

Notice of the judgment having been received by Yap

on September 1, 1969, and the period of appeal
therefrom not having been interrupted by his motion
for reconsideration filed on September 16, 1969, the
reglementary period of appeal expired thirty (30)
days after September 1, 1969, or on October 1, 1969,
without an appeal being taken by Yap. The judgment
then became final and executory; Yap could no longer
take an appeal therefrom or from any other
subsequent orders; and execution of judgment
correctly issued on October 15, 1969, "as a matter of
right."
39
The next point discussed by Yap, that the judgment is
incomplete and vague, is not well taken. It is true that
the decision does not fix the starting time of the
computation of interest on the judgment debt, but
this is inconsequential since that time is easily
determinable from the opinion, i.e., from the day the
buyer (Yap) defaulted in the payment of his
obligation, 40 on May 31, 1968. 41 The absence of
any disposition regarding his counterclaim is also
immaterial and does not render the judgment
incomplete. Yaps failure to appear at the pre-trial
without justification and despite notice, which caused
the declaration of his default, was a waiver of his
right to controvert the plaintiffs proofs and of his
right to prove the averments of his answer, inclusive
of the counterclaim therein pleaded. Moreover, the
conclusion in the judgment of the merit of the
plaintiffs cause of action was necessarily and at the
same time a determination of the absence of merit of
the defendants claim of untenability of the complaint
and
of
malicious
prosecution.

Yaps next argument that the water pump had

become immovable property by its being installed in
his residence is also untenable. The Civil Code
considers as immovable property, among others,
anything "attached to an immovable in a fixed
manner, in such a way that it cannot be separated
therefrom without breaking the material or
deterioration of the object." 42 The pump does not fit
this description. It could be, and was in fact
separated from Yaps premises without being broken
or suffering deterioration. Obviously the separation or
removal of the pump involved nothing more
complicated than the loosening of bolts or
dismantling
of
other
fasteners.
Yaps last claim is that in the process of the removal
of the pump from his house, Goulds men had
trampled on the plants growing there, destroyed the
shed over the pump, plugged the exterior casings
with rags and cut the electrical and conduit pipes;
that he had thereby suffered actual damages in an
amount of not less than P2,000.00, as well as moral
damages in the sum of P10,000.00 resulting from his
deprivation of the use of his water supply; but the
Court had refused to allow him to prove these acts
and recover the damages rightfully due him. Now, as
to the loss of his water supply, since this arose from
acts legitimately done, the seizure on execution of
the water pump in enforcement of a final and
executory judgment, Yap most certainly is not entitled
to claim moral or any other form of damages therefor.
WHEREFORE, the petition is DENIED and the appeal
DISMISSED, and the Orders of September 16, 1970

and November 21, 1970 subject thereof, AFFIRMED in

toto. Costs against petitioner.

CONRADO
P.
NAVARRO, Plaintiff-Appellee,
vs. RUFINO G. PINEDA, RAMONA REYES, ET
AL., Defendants-Appellants.
Deogracias
Taedo,
Jr.
for
plaintiff-appellee.
Renato A. Santos for defendants-appellants.
PAREDES, J.:
On December 14, 1959, defendants Rufino G. Pineda
and his mother Juana Gonzales (married to Gregorio
Pineda), borrowed from plaintiff Conrado P. Navarro,
the sum of P2,500.00, payable 6 months after said
date or on June 14, 1959. To secure the indebtedness,
Rufino executed a document captioned "DEED OF
REAL ESTATE and CHATTEL MORTGAGES", whereby
Juana
Gonzales,
by
way
of Real
Estate
Mortgagehypothecated a parcel of land, belonging to
her, registered with the Register of Deeds of Tarlac,
under Transfer Certificate of Title No. 25776, and
Rufino G. Pineda, by way of Chattel Mortgage,
mortgaged his two-story residential house, having a

floor area of 912 square meters, erected on a lot

belonging to Atty. Vicente Castro, located at Bo. San
Roque, Tarlac, Tarlac; and one motor truck, registered
in his name, under Motor Vehicle Registration
Certificate No. A-171806. Both mortgages were
contained in one instrument, which was registered in
both the Office of the Register of Deeds and the
Motor
Vehicles
Office
of
Tarlac.chanroblesvirtualawlibrarychanrobles
virtual
law library
When the mortgage debt became due and payable,
the defendants, after demands made on them, failed
to pay. They, however, asked and were granted
extension up to June 30, 1960, within which to pay.
Came June 30, defendants again failed to pay and, for
the second time, asked for another extension, which
was given, up to July 30, 1960. In the second
extension, defendant Pineda in a document entitled
"Promise", categorically stated that in the remote
event he should fail to make good the obligation on
such date (July 30, 1960), the defendant would no
longer ask for further extension and there would be
no need for any formal demand, and plaintiff could
proceed to take whatever action he might desire to
enforce his rights, under the said mortgage contract.
In spite of said promise, defendants, failed and
refused
to
pay
the
obligation.chanroblesvirtualawlibrarychanrobles
virtual law library

On August 10, 1960, plaintiff filed a complaint for

foreclosure of the mortgage and for damages, which
consisted of liquidated damages in the sum of
P500.00 and 12% per annum interest on the
principal, effective on the date of maturity, until fully
paid.chanroblesvirtualawlibrarychanrobles virtual law
library
Defendants, answering the complaint, among others,
stated Defendants admit that the loan is overdue but deny
that portion of paragraph 4 of the First Cause of
Action which states that the defendants unreasonably
failed and refuse to pay their obligation to the
plaintiff the truth being the defendants are hard up
these days and pleaded to the plaintiff to grant them
more time within which to pay their obligation and
the plaintiff refused;chanrobles virtual law library
WHEREFORE, in view of the foregoing it is most
respectfully prayed that this Honorable Court render
judgment granting the defendants until January 31,
1961, within which to pay their obligation to the
plaintiff.
On September 30, 1960, plaintiff presented a Motion
for summary Judgment, claiming that the Answer
failed to tender any genuine and material issue. The
motion was set for hearing, but the record is not clear
what ruling the lower court made on the said motion.

On November 11, 1960, however, the parties

submitted a Stipulation of Facts, wherein the
defendants
admitted
the
indebtedness,
the
authenticity and due execution of the Real Estate and
Chattel Mortgages; that the indebtedness has been
due and unpaid since June 14, 1960; that a liability of
12% per annum as interest was agreed, upon failure
to pay the principal when due and P500.00 as
liquidated damages; that the instrument had been
registered in the Registry of Property and Motor
Vehicles Office, both of the province of Tarlac; that
the only issue in the case is whether or not the
residential house, subject of the mortgage therein,
can be considered a Chattel and the propriety of the
attorney's fees.chanroblesvirtualawlibrarychanrobles
virtual law library
On February 24, 1961, the lower court held ... WHEREFORE, this Court renders decision in this
Case:chanrobles virtual law library
(a) Dismissing the complaint with regard to defendant
Gregorio Pineda;chanrobles virtual law library
(b) Ordering defendants Juana Gonzales and the
spouses Rufino Pineda and Ramon Reyes, to pay
jointly and severally and within ninety (90) days from
the receipt of the copy of this decision to the plaintiff
Conrado P. Navarro the principal sum of P2,550.00
with 12% compounded interest per annum from June

14, 1960, until said principal sum and interests are

fully paid, plus P500.00 as liquidated damages and
the costs of this suit, with the warning that in default
of said payment of the properties mentioned in the
deed of real estate mortgage and chattel mortgage
(Annex "A" to the complaint) be sold to realize said
mortgage debt, interests, liquidated damages and
costs, in accordance with the pertinent provisions of
Act 3135, as amended by Act 4118, and Art. 14 of the
Chattel Mortgage Law, Act 1508; andchanrobles
virtual law library
(c) Ordering the defendants Rufino Pineda and
Ramona Reyes, to deliver immediately to the
Provincial Sheriff of Tarlac the personal properties
mentioned in said Annex "A", immediately after the
lapse of the ninety (90) days above-mentioned, in
default of such payment.
The above judgment was directly appealed to this
Court, the defendants therein assigning only a single
error, allegedly committed by the lower court, to wit In holding that the deed of real estate and chattel
mortgages appended to the complaint is valid,
notwithstanding the fact that the house of the
defendant Rufino G. Pineda was made the subject of
the chattel mortgage, for the reason that it is erected
on a land that belongs to a third person.

Appellants contend that article 415 of the New Civil

Code, in classifying a house as immovable property,
makes no distinction whether the owner of the land is
or not the owner of the building; the fact that the
land belongs to another is immaterial, it is enough
that the house adheres to the land; that in case of
immovables by incorporation, such as houses, trees,
plants, etc; the Code does not require that the
attachment or incorporation be made by the owner of
the land, the only criterion being the union or
incorporation with the soil. In other words, it is
claimed that "a building is an immovable property,
irrespective of whether or not said structure and the
land on which it is adhered to, belong to the same
owner" (Lopez v. Orosa, G.R. Nos. L-10817-8, Feb. 28,
1958). (See also the case of Leung Yee v. Strong
Machinery Co., 37 Phil. 644). Appellants argue that
since only movables can be the subject of a chattel
mortgage (sec. 1, Act No. 3952) then the mortgage in
question which is the basis of the present action,
cannot give rise to an action for foreclosure, because
it is nullity. (Citing Associated Ins. Co., et al. v. Isabel
Iya v. Adriano Valino, et al., L-10838, May 30,
1958.)chanrobles virtual law library
The trial court did not predicate its decision declaring
the deed of chattel mortgage valid solely on the
ground that the house mortgaged was erected on the
land which belonged to a third person, but also and
principally on the doctrine of estoppel, in that "the

parties have so expressly agreed" in the mortgage to

consider the house as chattel "for its smallness and
mixed materials of sawali and wood". In construing
arts. 334 and 335 of the Spanish Civil Code
(corresponding to arts. 415 and 416, N.C.C.), for
purposes of the application of the Chattel Mortgage
Law, it was held that under certain conditions, "a
property may have a character different from that
imputed to it in said articles. It is undeniable that the
parties to a contract may by agreement, treat as
personal property that which by nature would be real
property" (Standard Oil Co. of N.Y. v. Jaranillo, 44 Phil.
632-633)."There can not be any question that a
building of mixed materials may be the subject of a
chattel mortgage, in which case, it is considered as
between the parties as personal property. ... The
matter depends on the circumstances and the
intention of the parties". "Personal property may
retain its character as such where it is so agreed by
the parties interested even though annexed to the
realty ...". (42 Am. Jur. 209-210, cited in Manarang, et
al. v. Ofilada, et al., G.R. No. L-8133, May 18, 1956;
52 O.G. No. 8, p. 3954.) The view that parties to a
deed of chattel mortgagee may agree to consider a
house as personal property for the purposes of said
contract, "is good only insofar as the contracting
parties are concerned. It is based partly, upon the
principles of estoppel ..." (Evangelista v. Alto Surety,
No. L-11139, Apr. 23, 1958). In a case, a mortgage
house built on a rented land, was held to be a

personal property, not only because the deed of

mortgage considered it as such, but also because it
did not form part of the land (Evangelista v. Abad
[CA];36 O.G. 2913), for it is now well settled that an
object placed on land by one who has only a
temporary right to the same, such as a lessee or
usufructuary, does not become immobilized by
attachment (Valdez v. Central Altagracia, 222 U.S. 58,
cited in Davao Sawmill Co., Inc. v. Castillo, et al., 61
Phil. 709). Hence, if a house belonging to a person
stands on a rented land belonging to another person,
it may be mortgaged as a personal property is so
stipulated in the document of mortgage. (Evangelista
v. Abad, supra.) It should be noted, however, that the
principle is predicated on statements by the owner
declaring his house to be a chattel, a conduct that
may conceivably estop him from subsequently
claiming otherwise (Ladera, et al.. v. C. N. Hodges, et
al., [CA]; 48 O.G. 5374). The doctrine, therefore,
gathered from these cases is that although in some
instances, a house of mixed materials has been
considered as a chattel between them, has been
recognized, it has been a constant criterion
nevertheless that, with respect to third persons, who
are not parties to the contract, and specially in
execution proceedings, the house is considered as an
immovable
property
(Art.
1431,
New
Civil
Code).chanroblesvirtualawlibrarychanrobles
virtual
law library

In the case at bar, the house in question was treated

as personal or movable property, by the parties to
the contract themselves. In the deed of chattel
mortgage, appellant Rufino G. Pineda conveyed by
way of "Chattel Mortgage" "my personal properties",
a residential house and a truck. The mortgagor
himself grouped the house with the truck, which is,
inherently a movable property. The house which was
not even declared for taxation purposes was small
and made of light construction materials: G.I. sheets
roofing, sawali and wooden walls and wooden posts;
built
on
land
belonging
to
another.chanroblesvirtualawlibrarychanrobles virtual
law library
The cases cited by appellants are not applicable to
the present case. The Iya cases (L-10837-38, supra),
refer to a building or a house of strong materials,
permanently adhered to the land, belonging to the
owner of the house himself. In the case of Lopez v.
Orosa, (L-10817-18), the subject building was a
theatre, built of materials worth more than P62,000,
attached permanently to the soil. In these cases and
in the Leung Yee case, supra, third persons assailed
the validity of the deed of chattel mortgages; in the
present case, it was one of the parties to the contract
of
mortgages
who
assailed
its
validity.chanroblesvirtualawlibrarychanrobles virtual
law library

CONFORMABLY WITH ALL THE FOREGOING, the

decision appealed from, should be, as it is hereby
affirmed,
with
costs
against
appellants.chanroblesvirtualawlibrarychanrobles
virtual law library

JOSE A. LUNA, Petitioner, vs. DEMETRIO B.

ENCARNACION, Judge of First Instance of Rizal,
TRINIDAD REYES and THE PROVINCIAL SHERIFF
OF RIZAL, Respondents.
Jose S. Fineza for petitioner.
BAUTISTA ANGELO, J.:
On September 25, 1948, a deed designated as
chattel mortgage was executed by Jose A. Luna in
favor of Trinidad Reyes whereby the former conveyed
by way of first mortgage to the latter a certain house
of mixed materials stated in barrio San Nicolas,
municipality of Pasig, Province of Rizal, to secure the
payment of a promissory note in the amount of

P1,500, with interest at 12 per cent per annum. The

document was registered in the office of the register
of deeds for the Province of Rizal. The mortgagor
having filed to pay the promissory note when it fell
due, the mortgage requested the sheriff of said
province to sell the house at public auction so that
with its proceeds the amount indebted may be paid
notifying the mortgagor in writing of the time and
place of the sale as required by law. The sheriff
acceded to the request and sold the property to the
mortgagee for the amount covering the whole
indebtedness with interest and costs. The certificate
of sale was issued by the sheriff on May 28, 1949.
After the period for the redemption of the property
had expired without the mortgagor having exercised
his right to repurchase, the mortgagee demanded
from the mortgagor the surrender of the possession
of the property, but the later refused and so on
October 13, 1950, she filed a petition in the Court of
First Instance of Rizal praying that the provincial
sheriff be authorized to place her in possession of the
property invoking in her favor the provisions of Act
No.
3135,
as
amended
by
Act
No.
4118.chanroblesvirtualawlibrary chanrobles
virtual
law library
When the petition came up for hearing before the
court on October 25, 1950, Jose A. Luna, the
mortgagor, opposed the petition on the following
grounds: (1) that Act No. 3135 as amended by Act No.

4118 is applicable only to a real estate mortgage; (2)

that the mortgage involved herein is a chattel
mortgage; and (3) that even if the mortgage
executed by the parties herein be considered as real
estate mortgage, the extra-judicial sale made by the
sheriff of the property in question was valid because
the mortgage does not contain an express stipulation
authorizing the extra-judicial sale of the property.
After hearing, at which both parties have expressed
their views in support of their respective contentions,
respondent judge, then presiding the court, overruled
the opposition and granted the petition ordering the
provincial sheriff of Rizal, or any of this disputives, to
immediately place petitioner in possession of the
property in question while at the same time directing
the mortgagor Jose A. Luna to vacate it and relinquish
it in favor of petitioner. It is from this order that Jose
A. Luna desires now to obtain relief by filing this
petition for certiorari contending that the respondent
judge
has
acted
in
excess
of
his
jurisdiction.chanroblesvirtualawlibrary chanrobles
virtual law library
The first question which petitioner poses in his
petition for certiorari is that which relates to the
validity of the extra-judicial sale made by the
provincial sheriff of Rizal of the property in question
in line with the request of the mortgagee Trinidad
Reyes. It is contended that said extra-judicial sale
having been conducted under the provisions of Act

No. 3135, as amended by Act No. 4118, is invalid

because the mortgage in question is not a real estate
mortgage and, besides, it does not contain an
express stipulation authorizing the mortgagee to
foreclose
the
mortgage
extrajudicially.chanroblesvirtualawlibrary chanrobles
virtual law library
There is merit in this claim. As may be gleaned from a
perusal of the deed signed by the parties (Annex "C"),
the understanding executed by them is a chattel
mortgage, as the parties have so expressly
designated, and not a real estate mortgage, specially
when it is considered that the property given as
security is a house of mixed materials which by its
very nature is considered as personal property. Such
being the case, it is indeed a mistake for the
mortgagee to consider this transaction in the light of
Act No. 3135, as amended by Act No. 4118, as was so
considered by her when she requested to provincial
sheriff to sell it extra-judicially in order to secure full
satisfaction of the indebtedness still owed her by the
mortgagor. It is clear that Act No. 3135, as amended,
only covers real estate mortgages and is intended
merely to regulate the extra-judicial sale of the
property mortgaged if and when the mortgagee is
given a special power or express authority to do so in
the deed itself, or in a document annexed thereto.
These conditions do not here obtain. The mortgage
before us is not a real estate mortgage nor does it

contain an express authority or power to sell the

property
extrajudicially.chanroblesvirtualawlibrary chanrobles
virtual law library

But regardless of what we have heretofore stated, we

find that the validity of the sale in question may be
maintained, it appearing that the mortgage in
question is a chattel mortgage and as such it is
covered and regulated by the Chattel Mortgage Law,
Act No. 1508. Section 14 of this Act allows the
mortgagee through a public officer in almost the
same manner as that allowed by Act No. 3135, as
amended by Act No. 4118, provided that the
requirements of the law relative to notice and
registration are complied with. We are not prepared
to state if these requirements of the law had been
complied with in the case for the record before us is
not complete and there is no showing to that effect.
At any rate, this issue is not how important because
the same can be treshed out when the opportunity
comes for its determination, nor is it necessary for us
to consider it in reaching a decision in the present
case. Suffice it to state that for the present we are
not expressing any opinion on this matter which
concerns the validity of the sale in question for the
reason that this opinion will only be limited to a
matter of procedure relative to the step taken by the
mortgagee in securing the possession of the property
involved.chanroblesvirtualawlibrary chanrobles
virtual law library
In the supposition that the sale of the property made
by the sheriff has been made in accordance with law,
and the question he is confronted is how to deliver

the possession of the property to the purchaser in

case of refusal to surrender its possession on the part
of the debtor or mortgagor, the remedy of the
purchaser according to the authorities, is to bring an
ordinary
action
for
recovery
of
possession
(Continental Gin Co. vs. Pannell, 160 P., 598; 61 Okl.,
102; 14 C.J.S., pp. 1027, 1028). The purchaser cannot
take possession of the property by force either
directly or through the sheriff. And the reason for this
is "that the creditor's right of possession is
conditioned upon the fact of default, and the
existence of this fact may naturally be the subject of
controversy" (Bachrah Motor Co. vs. Summers, 42
Phil., 3, 6). The creditor cannot merely file a petition
for a writ of possession as was done by Trinidad
Reyes in this case. Her remedy is to file an ordinary
action for recovery of possession in ordered that the
debtor may be given an opportunity to be heard not
only in regarding possession but also regarding the
obligation covered by the mortgage. The petition she
has filed in the lower court, which was not even
docketed, is therefore improper and should be
regarded.chanroblesvirtualawlibrary chanrobles
virtual law library
Wherefore, the order subject of the present petition
for certiorari is hereby set aside, with costs against
respondent
Trinidad
Reyes.chanroblesvirtualawlibrary chanrobles
virtual
law library

and

Barot

for Petitioner.

Acting Solicitor General Vicente V . Mendoza,

Assistant Solicitor General Nathanael P. de
Pano, Jr. and Solicitor Jesus P. Mapuno
for Respondents.
SYNOPSIS
Petitioner installed two storage tanks on a lot it
leased from Caltex (Phil.) for storing fuel oil for its
power plants. The tanks are made of steel plates
welded and assembled on the spot and pipelines
installed on the sides of each tank. They are not
attached to the land but merely sit on concrete
foundations. On assessment made by the Provincial
Assessor in 1970, the Municipal Treasurer of Bauan,
Batangas required petitioner to pay realty taxes on
the two tanks. Payment of the realty taxes was
upheld by the Batangas Board of Assessment Appeals
and subsequently by the Central Board of
Assessment Appeals. A motion for reconsideration
was filed with the Board but the same was denied
Hence, the present petition. Petitioner claims that
said oil storage tanks do not fall within any of the
kinds of real property enumerated in Article 415 of
the
Civil
Code.
MANILA ELECTRIC COMPANY, Petitioner, v.
CENTRAL BOARD OF ASSESSMENT APPEALS,
BOARD
OF
ASSESSMENT
APPEALS
OF
BATANGAS and PROVINCIAL ASSESSOR OF
BATANGAS, Respondents.
Quiason, De Guzman, Makalintal, Veneracion

On review, the Supreme Court held that while the two

storage tanks are not embedded in the land, they
may be considered as improvements on the land,
enhancing its utility and rendering it useful to the oil
industry, which are taxable under the provisions of
the Real Property Tax Code.

SYLLABUS
1. ADMINISTRATIVE LAW; TAXATION; REALTY TAX;
PROPERTIES SUBJECT THERETO. Section 2 of the
Assessment Law provides that the realty tax is due
on "real property, including land, buildings,
machinery, and other improvements" not specifically
exempted in Section 3 thereof. This provision is
reproduced with some modification in the Real
Property Tax Code which provides in Section 38
thereof that "There shall be levied, assessed and
collected in all provinces, cities and municipalities an
annual ad valorem tax on real property such as land,
buildings, machinery and other improvements affixed
or attached to real property not hereinafter
specifically exempted."cralaw virtua1aw library
2. ID.; ID.; ID.; ID.; STORAGE TANKS NOT EMBEDDED
IN THE LAND CONSIDERED TAXABLE IMPROVEMENTS
UNDER SECTION 3(k) OF THE REAL PROPERTY TAX
CODE. While the two storage tanks are not
embedded in the land, they may, nevertheless, be
considered as taxable improvements on the land,
enhancing its utility and rendering it useful to the oil
industry as defined under Section 3 (k) of the Real
Property Tax Code. It is undeniable that the two tanks
have been installed with some degree of permanence
at receptacles for the considerable qualities of oil
needed by Meralco for its operations. Oil storage
tanks were held to be taxable realty in Standard Oil
Co. of New Jersy versus Atlantic City, 15 Atl. 2nd 271.
3. ID.; ID.; REAL PROPERTY FOR PURPOSES OF
TAXATION
MAY
INCLUDE
THINGS
GENERALLY

REGARDED AS PERSONAL PROPERTY. For purposes

of taxation, the term "real property" may include
things which generally should be regarded as
personal property (84 C.J.S. 171, Note 8). It is a
familiar phenomenon to see things classed as real
property for purposes of taxation which on general
principle might be considered personal property
(Standard Oil Co. of New York v. Jaramillo. 44 Phil.
630, 633).
DECISION
AQUINO, J.:
This case is about the imposition of the realty tax on
two oil storage tanks installed in 1969 by Manila
Electric Company on a lot in San Pascual, Batangas
which it leased in 1968 from Caltex (Phil.), Inc. The
tanks are within the Caltex refinery compound. They
have a total capacity of 566,000 barrels. They are
used for storing fuel oil for Meralcos power
plants.chanroblesvirtuallawlibrary
According to Meralco, the storage tanks are made of
steel plates welded and assembled on the spot. Their
bottoms rest on a foundation consisting of compacted
earth as the outermost layer, a sand pad as the
intermediate layer and a two-inch thick bituminous
asphalt stratum as the top layer. The bottom of each
tank is in contact with the asphalt layer.
The steel sides of the tank are directly supported

underneath by a circular wall made of concrete,

eighteen inches thick, to prevent the tank from
sliding. Hence, according to Meralco, the tank is not
attached to its foundation. It is not anchored or
welded to the concrete circular wall. Its bottom plate
is not attached to any part of the foundation by bolts,
screws or similar devices. The tank merely sits on its
foundation. Each empty tank can be floated by
flooding its dike-inclosed location with water four feet
deep. (pp. 29-30, Rollo.)chanrobles virtual lawlibrary
On the other hand, according to the hearing
commissioners of the Central Board of Assessment
Appeals, the area where the two tanks are located is
enclosed with earthen dikes with electric steel poles
on top thereof and is divided into two parts as the
site of each tank. The foundation of the tanks is
elevated from the remaining area. On both sides of
the earthen dikes are two separate concrete steps
leading
to
the
foundation
of
each
tank.
Tank No. 2 is supported by a concrete foundation with
an asphalt lining about an inch thick. Pipelines were
installed on the sides of each tank and are connected
to the pipelines of the Manila Enterprises Industrial
Corporation whose buildings and pumping station are
near
Tank
No.
2.
The Board concludes that while the tanks rest or sit
on their foundation, the foundation itself and the
walls, dikes and steps, which are integral parts of the
tanks, are affixed to the land while the pipelines are
attached to the tanks. (pp. 60-61, Rollo.)
In 1970, the municipal treasurer of Bauan, Batangas,

on the basis of an assessment made by the provincial

assessor, required Meralco to pay realty taxes on the
two tanks. For the five-year period from 1970 to
1974, the tax and penalties amounted to
P431,703.96 (p. 27, Rollo). The Board required
Meralco to pay the tax and penalties as a condition
for entertaining its appeal from the adverse decision
of the Batangas board of assessment appeals.
The Central Board of Assessment Appeals (composed
of Acting Secretary of Finance Pedro M. Almanzor as
chairman and Secretary of Justice Vicente Abad
Santos and Secretary of Local Government and
Community Development Jose Roo as members) in
its decision dated November 5, 1976 ruled that the
tanks together with the foundation, walls, dikes,
steps, pipelines and other appurtenances constitute
taxable
improvements.
Meralco received a copy of that decision on February
28, 1977. On the fifteenth day, it filed a motion for
reconsideration which the Board denied in its
resolution of November 25, 1977, a copy of which
was received by Meralco on February 28, 1978.
On March 15, 1978, Meralco filed this special civil
action of certiorari to annul the Boards decision and
resolution. It contends that the Board acted without
jurisdiction and committed a grave error of law in
holding that its storage tanks are taxable real
property.
Meralco contends that the said oil storage tanks do
not fall within any of the kinds of real property
enumerated in article 415 of the Civil Code and,

therefore, they cannot be categorized as realty by

nature, by incorporation, by destination nor by
analogy. Stress is laid on the fact that the tanks are
not attached to the land and that they were placed
on leased land, not on the land owned by Meralco.

property or an amelioration in its condition,

amounting to more than mere repairs or replacement
of waste, costing labor or capital and intended to
enhance its value, beauty or utility or to adapt it for
new or further purposes."cralaw virtua1aw library

This is one of those highly controversial, borderline or

penumbral cases on the classification of property
where strong divergent opinions are inevitable. The
issue raised by Meralco has to be resolved in the light
of the provisions of the Assessment Law,
Commonwealth Act No. 470, and the Real Property
Tax Code, Presidential Decree No. 464 which took
effect on June 1, 1974.chanrobles lawlibrary : rednad

We hold that while the two storage tanks are not

embedded in the land, they may, nevertheless, be
considered as improvements on the land, enhancing
its utility and rendering it useful to the oil industry. It
is undeniable that the two tanks have been installed
with some degree of permanence as receptacles for
the considerable quantities of oil needed by Meralco
for
its
operations.

Section 2 of the Assessment Law provides that the

realty tax is due "on real property, including land,
buildings, machinery, and other improvements" not
specifically exempted in section 3 thereof. This
provision is reproduced with some modification in the
Real
Property
Tax
Code
which
provides:jgc:chanrobles.com.ph

Oil storage tanks were held to be taxable realty in

Standard Oil Co. of New Jersey v. Atlantic City, 15 Atl.
2nd
271.

"Sec. 38. Incidence of Real Property Tax. They shall

be levied, assessed and collected in all provinces,
cities and municipalities an annual ad valorem tax on
real property, such as land, buildings, machinery and
other improvements affixed or attached to real
property
not
hereinafter
specifically
exempted."cralaw
virtua1aw
library
The Code contains the following definition in its
section
3:jgc:chanrobles.com.ph
"k) Improvements is a valuable addition made to

For purposes of taxation, the term "real property"

may include things which should generally be
regarded as personal property (84 C.J.S. 171, Note 8).
It is a familiar phenomenon to see things classed as
real property for purposes of taxation which on
general principle might be considered personal
property (Standard Oil Co. of New York v. Jaramillo, 44
Phil.
630,
633).
The case of Board of Assessment Appeals v. Manila
Electric Company, 119 Phil. 328, wherein Meralcos
steel towers were held not to be subject to realty tax,
is not in point because in that case the steel towers
were regarded as poles and under its franchise
Meralcos poles are exempt from taxation. Moreover,
the steel towers were not attached to any land or

building. They were removable from their metal

frames.chanrobles
virtual
lawlibrary
Nor is there any parallelism between this case and
Mindanao Bus Co. v. City Assessor, 116 Phil. 501,
where the tools and equipment in the repair,
carpentry and blacksmith shops of a transportation
company were held not subject to realty tax because
they
were
personal
property.
WHEREFORE, the petition is dismissed. The Boards
questioned decision and resolution are affirmed. No
costs.
SO ORDERED.

DAVAO SAW MILL CO., INC., plaintiff-appellant,

vs.
APRONIANO G. CASTILLO and DAVAO LIGHT &
POWER CO., INC., defendants-appellees.
Arsenio Suazo and Jose L. Palma Gil and Pablo
Lorenzo
and
Delfin
Joven
for
appellant.
J.W. Ferrier for appellees.
MALCOLM, J.:

The issue in this case, as announced in the opening

sentence of the decision in the trial court and as set
forth by counsel for the parties on appeal, involves
the determination of the nature of the properties
described in the complaint. The trial judge found that
those properties were personal in nature, and as a
consequence absolved the defendants from the
complaint, with costs against the plaintiff.
The Davao Saw Mill Co., Inc., is the holder of a lumber
concession from the Government of the Philippine
Islands. It has operated a sawmill in the sitio of Maa,
barrio of Tigatu, municipality of Davao, Province of
Davao. However, the land upon which the business
was conducted belonged to another person. On the
land the sawmill company erected a building which
housed the machinery used by it. Some of the
implements thus used were clearly personal property,
the conflict concerning machines which were placed
and mounted on foundations of cement. In the
contract of lease between the sawmill company and
the owner of the land there appeared the following
provision:
That on the expiration of the period agreed
upon, all the improvements and buildings
introduced and erected by the party of the
second part shall pass to the exclusive
ownership of the party of the first part without
any obligation on its part to pay any amount for

said improvements and buildings; also, in the

event the party of the second part should leave
or abandon the land leased before the time
herein stipulated, the improvements and
buildings shall likewise pass to the ownership of
the party of the first part as though the time
agreed upon had expired: Provided, however,
That the machineries and accessories are not
included in the improvements which will pass to
the party of the first part on the expiration or
abandonment of the land leased.
In another action, wherein the Davao Light & Power
Co., Inc., was the plaintiff and the Davao, Saw, Mill
Co., Inc., was the defendant, a judgment was
rendered in favor of the plaintiff in that action against
the defendant in that action; a writ of execution
issued thereon, and the properties now in question
were levied upon as personalty by the sheriff. No
third party claim was filed for such properties at the
time of the sales thereof as is borne out by the record
made by the plaintiff herein. Indeed the bidder, which
was the plaintiff in that action, and the defendant
herein having consummated the sale, proceeded to
take possession of the machinery and other
properties described in the corresponding certificates
of sale executed in its favor by the sheriff of Davao.
As connecting up with the facts, it should further be
explained that the Davao Saw Mill Co., Inc., has on a

number of occasions treated the machinery as

personal property by executing chattel mortgages in
favor of third persons. One of such persons is the
appellee by assignment from the original mortgages.
Article 334, paragraphs 1 and 5, of the Civil Code, is
in point. According to the Code, real property consists
of
1. Land, buildings, roads and constructions of
all kinds adhering to the soil;
xxx

xxx

xxx

5. Machinery, liquid containers, instruments or

implements intended by the owner of any
building or land for use in connection with any
industry or trade being carried on therein and
which are expressly adapted to meet the
requirements of such trade of industry.
Appellant emphasizes the first paragraph, and
appellees the last mentioned paragraph. We
entertain no doubt that the trial judge and appellees
are right in their appreciation of the legal doctrines
flowing from the facts.
In the first place, it must again be pointed out that
the appellant should have registered its protest
before or at the time of the sale of this property. It
must further be pointed out that while not conclusive,

the characterization of the property as chattels by

the appellant is indicative of intention and impresses
upon the property the character determined by the
parties. In this connection the decision of this court in
the case of Standard Oil Co. of New Yorkvs. Jaramillo (
[1923], 44 Phil., 630), whether obiter dicta or not,
furnishes the key to such a situation.
It is, however not necessary to spend overly must
time in the resolution of this appeal on side issues. It
is machinery which is involved; moreover, machinery
not intended by the owner of any building or land for
use in connection therewith, but intended by a lessee
for use in a building erected on the land by the latter
to be returned to the lessee on the expiration or
abandonment of the lease.
A similar question arose in Puerto Rico, and on appeal
being taken to the United States Supreme Court, it
was held that machinery which is movable in its
nature only becomes immobilized when placed in a
plant by the owner of the property or plant, but not
when so placed by a tenant, a usufructuary, or any
person having only a temporary right, unless such
person acted as the agent of the owner. In the
opinion written by Chief Justice White, whose
knowledge of the Civil Law is well known, it was in
part said:

To determine this question involves fixing the

nature and character of the property from the
point of view of the rights of Valdes and its
nature and character from the point of view of
Nevers & Callaghan as a judgment creditor of
the Altagracia Company and the rights derived
by them from the execution levied on the
machinery placed by the corporation in the
plant. Following the Code Napoleon, the Porto
Rican Code treats as immovable (real) property,
not only land and buildings, but also attributes
immovability in some cases to property of a
movable nature, that is, personal property,
because of the destination to which it is
applied. "Things," says section 334 of the Porto
Rican Code, "may be immovable either by their
own nature or by their destination or the object
to which they are applicable." Numerous
illustrations are given in the fifth subdivision of
section 335, which is as follows: "Machinery,
vessels, instruments or implements intended by
the owner of the tenements for the industrial or
works that they may carry on in any building or
upon any land and which tend directly to meet
the needs of the said industry or works." (See
also Code Nap., articles 516, 518 et seq. to and
inclusive of article 534, recapitulating the
things which, though in themselves movable,
may be immobilized.) So far as the subjectmatter with which we are dealing machinery

placed in the plant it is plain, both under the

provisions of the Porto Rican Law and of the
Code Napoleon, that machinery which is
movable
in
its
nature
only
becomes
immobilized when placed in a plant by the
owner of the property or plant. Such result
would not be accomplished, therefore, by the
placing of machinery in a plant by a tenant or a
usufructuary or any person having only a
temporary right. (Demolombe, Tit. 9, No. 203;
Aubry et Rau, Tit. 2, p. 12, Section 164;
Laurent, Tit. 5, No. 447; and decisions quoted in
Fuzier-Herman ed. Code Napoleon under
articles 522 et seq.) The distinction rests, as
pointed out by Demolombe, upon the fact that
one only having a temporary right to the
possession or enjoyment of property is not
presumed by the law to have applied movable
property belonging to him so as to deprive him
of it by causing it by an act of immobilization to
become the property of another. It follows that
abstractly speaking the machinery put by the
Altagracia Company in the plant belonging to
Sanchez did not lose its character of movable
property
and
become
immovable
by
destination. But in the concrete immobilization
took place because of the express provisions of
the lease under which the Altagracia held, since
the lease in substance required the putting in of
improved machinery, deprived the tenant of

any right to charge against the lessor the cost

such machinery, and it was expressly stipulated
that the machinery so put in should become a
part of the plant belonging to the owner
without compensation to the lessee. Under
such conditions the tenant in putting in the
machinery was acting but as the agent of the
owner in compliance with the obligations
resting upon him, and the immobilization of the
machinery which resulted arose in legal effect
from the act of the owner in giving by contract
a permanent destination to the machinery.
xxx

xxx

xxx

The machinery levied upon by Nevers &

Callaghan, that is, that which was placed in the
plant by the Altagracia Company, being, as
regards Nevers & Callaghan, movable property,
it follows that they had the right to levy on it
under the execution upon the judgment in their
favor, and the exercise of that right did not in a
legal sense conflict with the claim of Valdes,
since as to him the property was a part of the
realty which, as the result of his obligations
under the lease, he could not, for the purpose
of collecting his debt, proceed separately
against. (Valdes vs. Central Altagracia [192],
225 U.S., 58.)

Finding no reversible error in the record, the

judgment appealed from will be affirmed, the costs of
this instance to be paid by the appellant.

PASTOR D. AGO, Petitioner, vs. THE HON. COURT

OF APPEALS, HON. MONTANO A. ORTIZ, Judge
of the Court of First Instance of Agusan, THE
PROVINCIAL SHERIFF OF SURIGAO and GRACE
PARK ENGINEERING, INC., Respondents.
Jose
M.
Luison
for
petitioner.
Norberto J. Quisumbing for respondent Grace Park
Engineering,
Inc.
The Provincial Fiscal of Surigao for respondent Sheriff
of Surigao.
LABRABOR, J.:
Appeal by certiorari to review the decision of
respondent Court of Appeals in CA-G.R. No. 26723-R
entitled "Pastor D. Ago vs. The Provincial Sheriff of
Surigao, et al." which in part reads:

In this case for certiorari and prohibition with

preliminary injunction, it appears from the records
that the respondent Judge of the Court of First
Instance of Agusan rendered judgment (Annex "A") in
open court on January 28, 1959, basing said
judgment on a compromise agreement between the
parties.chanroblesvirtualawlibrarychanrobles virtual
law library
On August 15, 1959, upon petition, the Court of First
Instance
issued
a
writ
of
execution.chanroblesvirtualawlibrarychanrobles
virtual law library
Petitioner's motion for reconsideration dated October
12, 1959 alleges that he, or his counsel, did not
receive a formal and valid notice of said decision,
which motion for reconsideration was denied by the
court below in the order of November 14,
1959.chanroblesvirtualawlibrarychanrobles
virtual
law library
Petitioner now contends that the respondent Judge
exceeded in his jurisdiction in rendering the execution
without
valid
and
formal
notice
of
the
decision.chanroblesvirtualawlibrarychanrobles virtual
law library
A compromise agreement is binding between the
parties and becomes the law between them.
(Gonzales vs. Gonzales G.R. No. L-1254, May 21,

1948, 81 Phil. 38; Martin vs. Martin, G.R. No. L-12439,

May 22, 1959) .chanroblesvirtualawlibrarychanrobles
virtual law library
It is a general rule in this jurisdiction that a judgment
based on a compromise agreement is not appealable
and is immediately executory, unless a motion is filed
on the ground fraud, mistake or duress. (De los Reyes
vs. Ugarte, 75 Phil. 505; Lapena vs. Morfe, G.R. No. L10089, July 31, 1957)chanrobles virtual law library
Petitioner's claim that he was not notified or served
notice of the decision is untenable. The judgment on
the compromise agreement rendered by the court
below dated January 28, 1959, was given in open
court. This alone is a substantial compliance as to
notice. (De los Reyes vs. Ugarte, supra)chanrobles
virtual law library
IN VIEW THEREOF, we believe that the lower court did
not exceed nor abuse its jurisdiction in ordering the
execution
of
the
judgment.
The
petition
forcertiorari is hereby dismissed and the writ of
preliminary injunction heretofore dissolved, with costs
against
the
petitioner.chanroblesvirtualawlibrarychanrobles
virtual law library
IT IS

The facts of the case may be briefly stated as follows:

In 1957, petitioner Pastor D. Ago bought sawmill
machineries and equipments from respondent Grace
Park Engineer domineering, Inc., executing a chattel
mortgage over said machineries and equipments to
secure the payment of balance of the price remaining
unpaid of P32,000.00, which petitioner agreed to pay
on
installment
basis.chanroblesvirtualawlibrarychanrobles
virtual
law library
Petitioner Ago defaulted in his payment and so, in
1958 respondent Grace Park Engineering, Inc.
instituted extra-judicial foreclosure proceedings of the
mortgage. To enjoin said foreclosure, petitioner herein
instituted Special Civil Case No. 53 in the Court of
First Instance of Agusan. The parties to the case
arrived at a compromise agreement and submitted
the same in court in writing, signed by Pastor D. Ago
and the Grace Park Engineering, Inc. The Hon.
Montano A. Ortiz, Judge of the Court of First Instance
of Agusan, then presiding, dictated a decision in open
court
on
January
28,
1959.chanroblesvirtualawlibrarychanrobles
virtual
law library
Petitioner continued to default in his payments as
provided in the judgment by compromise, so Grace
Park Engineering, Inc. filed with the lower court a
motion for execution, which was granted by the court

on August 15, 1959. A writ of execution, dated

September
23,
1959,
later
followed.chanroblesvirtualawlibrarychanrobles virtual
law library
The herein respondent, Provincial Sheriff of Surigao,
acting upon the writ of execution issued by the lower
court, levied upon and ordered the sale of the sawmill
machineries and equipments in question. These
machineries and equipments had been taken to and
installed in a sawmill building located in Lianga,
Surigao del Sur, and owned by the Golden Pacific
Sawmill, Inc., to whom, petitioner alleges, he had sold
them on February 16, 1959 (a date after the decision
of the lower court but before levy by the
Sheriff).chanroblesvirtualawlibrarychanrobles virtual
law library
Having been advised by the sheriff that the public
auction sale was set for December 4, 1959,
petitioner, on December 1, 1959, filed the petition
for certiorari and
prohibition
with
preliminary
injunction with respondent Court of Appeals, alleging
that a copy of the aforementioned judgment given in
open court on January 28, 1959 was served upon
counsel for petitioner only on September 25, 1959
(writ of execution is dated September 23, 1959); that
the order and writ of execution having been issued by
the lower court before counsel for petitioner received
a copy of the judgment, its resultant last order that

the "sheriff may now proceed with the sale of the

properties levied constituted a grave abuse of
discretion and was in excess of its jurisdiction; and
that the respondent Provincial Sheriff of Surigao was
acting illegally upon the allegedly void writ of
execution by levying the same upon the sawmill
machineries and equipments which have become real
properties of the Golden Pacific sawmill, Inc., and is
about to proceed in selling the same without prior
publication of the notice of sale thereof in some
newspaper of general circulation as required by the
Rules of Court.chanroblesvirtualawlibrarychanrobles
virtual law library
The Court of Appeals, on December 8, 1959, issued a
writ of preliminary injunction against the sheriff but it
turned out that the latter had already sold at public
auction the machineries in question, on December 4,
1959, as scheduled. The respondent Grace Park
Engineering, Inc. was the only bidder for P15,000.00,
although the certificate sale was not yet executed.
The Court of Appeals constructed the sheriff to
suspend the issuance of a certificate of sale of the
said sawmill machineries and equipment sold by him
on December 4, 1959 until the final decision of the
case. On November 9, 1960 the Court of Appeals
rendered
the
aforequoted
decision.chanroblesvirtualawlibrarychanrobles virtual
law library

Before this Court, petitioner alleges that the Court of

Appeals erred (1) in holding that the rendition of
judgment on compromise in open court on January
1959 was a sufficient notice; and (2) in not resolving
the other issues raised before it, namely, (a) the
legality of the public auction sale made by the sheriff,
and (b) the nature of the machineries in question,
whether
they
are
movables
or
immovables.chanroblesvirtualawlibrarychanrobles
virtual law library
The Court of Appeals held that as a judgment was
entered by the court below in open court upon the
submission of the compromise agreement, the parties
may be considered as having been notified of said
judgment and this fact constitutes due notice of said
judgment. This raises the following legal question: Is
the order dictated in open court of the judgment of
the court, and is the fact the petitioner herein was
present in open court was the judgment was dictated,
sufficient notice thereof? The provisions of the Rules
of Court decree otherwise. Section 1 of Rule 35
describes the manner in which judgment shall be
rendered, thus:
SECTION 1. How judgment rendered. - All judgments
determining the merits of cases shall be in writing
personally and directly prepared by the judge, and
signed by him, stating clearly and distinctly the facts

and the law on which it is based, filed with the clerk

of the court.
The court of first instance being a court of record, in
order that a judgment may be considered as
rendered, must not only be in writing, signed by the
judge, but it must also be filed with the clerk of court.
The mere pronouncement of the judgment in open
court with the stenographer taking note thereof does
not, therefore, constitute a rendition of the judgment.
It is the filing of the signed decision with the clerk of
court that constitutes rendition. While it is to be
presumed that the judgment that was dictated in
open court will be the judgment of the court, the
court may still modify said order as the same is being
put into writing. And even if the order or judgment
has already been put into writing and signed, while it
has not yet been delivered to the clerk for filing it is
still subject to amendment or change by the judge. It
is only when the judgment signed by the judge is
actually filed with the clerk of court that it becomes a
valid and binding judgment. Prior thereto, it could still
be subject to amendment and change and may not,
therefore, constitute the real judgment of the
court.chanroblesvirtualawlibrarychanrobles
virtual
law library
Regarding the notice of judgment, the mere fact that
a party heard the judge dictating the judgment in
open court, is not a valid notice of said judgment. If

rendition thereof is constituted by the filing with the

clerk of court of a signed copy (of the judgment), it is
evident that the fact that a party or an attorney
heard the order or judgment being dictated in court
cannot be considered as notice of the real judgment.
No judgment can be notified to the parties unless it
has previously been rendered. The notice, therefore,
that a party has of a judgment that was being
dictated is of no effect because at the time no
judgment has as yet been signed by the judge and
filed
with
the
clerk.chanroblesvirtualawlibrarychanrobles virtual law
library
Besides, the Rules expressly require that final orders
or judgments be served personally or by registered
mail. Section 7 of Rule 27 provides as follows:
SEC. 7. Service of final orders or judgments. - Final
orders or judgments shall be served either personally
or by registered mail.
In accordance with this provision, a party is not
considered as having been served with the judgment
merely because he heard the judgment dictating the
said judgment in open court; it is necessary that he
be served with a copy of the signed judgment that
has been filed with the clerk in order that he may
legally be considered as having been served with the

judgment.chanroblesvirtualawlibrarychanrobles
virtual law library
For all the foregoing, the fact that the petitioner
herein heard the trial judge dictating the judgment in
open court, is not sufficient to constitute the service
of judgement as required by the above-quoted
section 7 of Rule 2 the signed judgment not having
been served upon the petitioner, said judgment could
not be effective upon him (petitioner) who had not
received it. It follows as a consequence that the
issuance of the writ of execution null and void, having
been issued before petitioner her was served,
personally or by registered mail, a copy of the
decision.chanroblesvirtualawlibrarychanrobles virtual
law library
The second question raised in this appeal, which has
been passed upon by the Court of Appeals, concerns
the validity of the proceedings of the sheriff in selling
the sawmill machineries and equipments at public
auction with a notice of the sale having been
previously
published.chanroblesvirtualawlibrarychanrobles
virtual law library
The record shows that after petitioner herein Pastor
D. Ago had purchased the sawmill machineries and
equipments he assigned the same to the Golden
Pacific Sawmill, Inc. in payment of his subscription to

the shares of stock of said corporation. Thereafter the

sawmill machinery and equipments were installed in
a building and permanently attached to the ground.
By reason of such installment in a building, the said
sawmill machineries and equipment became real
estate properties in accordance with the provision of
Art. 415 (5) of the Civil Code, thus:
ART. 415. The following are immovable property:
xxx

xxx

xxxchanrobles virtual law library

(5)
Machinery,
receptacles,
instruments
or
implements tended by the owner of the tenement for
an industry or works which may be carried on in a
building or on a piece of land, and which tend directly
to meet the needs of the said industry or works;
This Court in interpreting a similar question raised
before it in the case of Berkenkotter vs. Cu Unjieng e
Hijos, 61 Phil. 683, held that the installation of the
machine and equipment in the central of the
Mabalacat Sugar Co., Inc. for use in connection with
the industry carried by the company, converted the
said machinery and equipment into real estate by
reason of their purpose. Paraphrasing language of
said decision we hold that by the installment of the
sawmill machineries in the building of the Gold Pacific
Sawmill, Inc., for use in the sawing of logs carried on
in said building, the same became a necessary and
permanent part of the building or real estate on

which the same was constructed, converting the said

machineries and equipments into real estate within
the meaning of Article 415(5) above-quoted of the
Civil
Code
of
the
Philippines.chanroblesvirtualawlibrarychanrobles
virtual law library
Considering that the machineries and equipments in
question valued at more than P15,000.00 appear to
have been sold without the necessary advertisement
of sale by publication in a newspaper, as required in
Sec. 16 of Rule 39 of the Rules of Court, which is as
follows:
SEC. 16. Notice of sale of property on execution. Before the sale of property on execution, notice
thereof must be given as follows:
xxx

xxx

xxxchanrobles virtual law library

(c) In case of real property, by posting a similar notice

particularly describing the property for twenty days in
three public places in the municipality or city where
the property is situated, and also where the property
is to be sold, and, if the assessed value of the
property exceeds four hundred pesos, by publishing a
copy of the notice once a week, for the same period,
in some newspaper published or having general
circulation in the province, if there be one. If there are
newspapers published in the province in both the
English and Spanish languages, then a like

publication for a like period shall be made in one

newspaper published in the English language, and in
one published in the Spanish language.
the sale made by the sheriff must be declared null
and void.chanroblesvirtualawlibrarychanrobles virtual
law library
WHEREFORE, the decision of the Court of Appeals
sought to be reviewed is hereby set aside and We
declare that the issuance of the writ of execution in
this case against the sawmill machineries and
equipments purchased by petitioner Pastor D. Ago
from the Grace Park Engineering, Inc., as well as the
sale of the same by the Sheriff of Surigao, are null
and void. Costs shall be against the respondent Grace
Park
Engineering,
Inc.chanroblesvirtualawlibrarychanrobles virtual law
library

On October 20, 1902, the Philippine Commission

enacted Act No. 484 which authorized the Municipal
Board of Manila to grant a franchise to construct,
maintain and operate an electric street railway and
electric light, heat and power system in the City of
Manila and its suburbs to the person or persons
making the most favorable bid. Charles M. Swift was
awarded the said franchise on March 1903, the terms
and conditions of which were embodied in Ordinance
No. 44 approved on March 24, 1903. Respondent
Manila Electric Co. (Meralco for short), became the
transferee
and
owner
of
the
franchise.chanroblesvirtualawlibrarychanrobles
virtual law library
BOARD
OF
ASSESSMENT
APPEALS,
CITY
ASSESSOR and CITY TREASURER OF QUEZON
CITY Petitioners,
vs. MANILA
ELECTRIC
COMPANY, Respondent.
Assistant City Attorney Jaime R. Agloro
petitioners.
Ross, Selph and Carrascoso for appellee.

for

PAREDES, J.:chanrobles virtual law library

From the stipulation of facts and evidence adduced
during the hearing, the following appear:chanrobles
virtual law library

Meralco's electric power is generated by its hydroelectric plant located at Botocan Falls, Laguna and is
transmitted to the City of Manila by means of electric
transmission wires, running from the province of
Laguna to the said City. These electric transmission
wires which carry high voltage current, are fastened
to insulators attached on steel towers constructed by
respondent at intervals, from its hydro-electric plant
in the province of Laguna to the City of Manila. The
respondent Meralco has constructed 40 of these steel
towers within Quezon City, on land belonging to it. A
photograph of one of these steel towers is attached
to the petition for review, marked Annex A. Three
steel towers were inspected by the lower court and

parties and the following were the descriptions given

there of by said court:
The first steel tower is located in South Tatalon,
Espaa Extension, Quezon City. The findings were as
follows: the ground around one of the four posts was
excavated to a depth of about eight (8) feet, with an
opening of about one (1) meter in diameter,
decreased to about a quarter of a meter as it we
deeper until it reached the bottom of the post; at the
bottom of the post were two parallel steel bars
attached to the leg means of bolts; the tower proper
was attached to the leg three bolts; with two cross
metals to prevent mobility; there was no concrete
foundation but there was adobe stone underneath; as
the bottom of the excavation was covered with water
about three inches high, it could not be determined
with certainty to whether said adobe stone was
placed purposely or not, as the place abounds with
this kind of stone; and the tower carried five high
voltage wires without cover or any insulating
materials.chanroblesvirtualawlibrarychanrobles
virtual law library
The second tower inspected was located in Kamuning
Road, K-F, Quezon City, on land owned by the
petitioner approximate more than one kilometer from
the first tower. As in the first tower, the ground
around one of the four legs was excavate from seven
to eight (8) feet deep and one and a half (1-)

meters wide. There being very little water at the

bottom, it was seen that there was no concrete
foundation, but there soft adobe beneath. The leg
was likewise provided with two parallel steel bars
bolted to a square metal frame also bolted to each
corner. Like the first one, the second tower is made
up of metal rods joined together by means of bolts,
so that by unscrewing the bolts, the tower could be
dismantled
and
reassembled.chanroblesvirtualawlibrarychanrobles
virtual law library
The third tower examined is located along Kamias
Road, Quezon City. As in the first two towers given
above, the ground around the two legs of the third
tower was excavated to a depth about two or three
inches beyond the outside level of the steel bar
foundation. It was found that there was no concrete
foundation. Like the two previous ones, the bottom
arrangement of the legs thereof were found to be
resting on soft adobe, which, probably due to high
humidity, looks like mud or clay. It was also found
that the square metal frame supporting the legs were
not attached to any material or foundation.
On November 15, 1955, petitioner City Assessor of
Quezon City declared the aforesaid steel towers for
real property tax under Tax declaration Nos. 31992
and 15549. After denying respondent's petition to
cancel these declarations, an appeal was taken by

respondent to the Board of Assessment Appeals of

Quezon City, which required respondent to pay the
amount of P11,651.86 as real property tax on the
said steel towers for the years 1952 to 1956.
Respondent paid the amount under protest, and filed
a petition for review in the Court of Tax Appeals (CTA
for short) which rendered a decision on December 29,
1958, ordering the cancellation of the said tax
declarations and the petitioner City Treasurer of
Quezon City to refund to the respondent the sum of
P11,651.86. The motion for reconsideration having
been denied, on April 22, 1959, the instant petition
for
review
was
filed.chanroblesvirtualawlibrarychanrobles virtual law
library

PAR 9. The grantee shall be liable to pay the same

taxes upon its real estate, buildings, plant (not
including poles, wires, transformers, and insulators),
machinery and personal property as other persons
are or may be hereafter required by law to pay ...
Said percentage shall be due and payable at the time
stated in paragraph nineteen of Part One
hereof, ... and shall be in lieu of all taxes and
assessments of whatsoever nature and by
whatsoever authority upon the privileges, earnings,
income, franchise, and poles, wires, transformers,
and insulators of the grantee from which taxes and
assessments the grantee is hereby expressly
exempted. (Par. 9, Part Two, Act No. 484 Respondent's
Franchise; emphasis supplied.)

In upholding the cause of respondents, the CTA held

that: (1) the steel towers come within the term
"poles" which are declared exempt from taxes under
part II paragraph 9 of respondent's franchise; (2) the
steel towers are personal properties and are not
subject to real property tax; and (3) the City Treasurer
of Quezon City is held responsible for the refund of
the amount paid. These are assigned as errors by the
petitioner
in
the
brief.chanroblesvirtualawlibrarychanrobles virtual law
library

The word "pole" means "a long, comparatively

slender usually cylindrical piece of wood or timber, as
typically the stem of a small tree stripped of its
branches; also by extension, a similar typically
cylindrical piece or object of metal or the like". The
term also refers to "an upright standard to the top of
which something is affixed or by which something is
supported; as a dovecote set on a pole; telegraph
poles; a tent pole; sometimes, specifically a vessel's
master (Webster's New International Dictionary 2nd
Ed., p. 1907.) Along the streets, in the City of Manila,
may be seen cylindrical metal poles, cubical concrete
poles, and poles of the PLDT Co. which are made of
two steel bars joined together by an interlacing metal

The tax exemption privilege of the petitioner is

quoted hereunder:

rod. They are called "poles" notwithstanding the fact

that they are no made of wood. It must be noted from
paragraph 9, above quoted, that the concept of the
"poles" for which exemption is granted, is not
determined by their place or location, nor by the
character of the electric current it carries, nor the
material or form of which it is made, but the use to
which they are dedicated. In accordance with the
definitions, pole is not restricted to a long cylindrical
piece of wood or metal, but includes "upright
standards to the top of which something is affixed or
by which something is supported. As heretofore
described, respondent's steel supports consists of a
framework of four steel bars or strips which are
bound by steel cross-arms atop of which are crossarms supporting five high voltage transmission wires
(See Annex A) and their sole function is to support or
carry
such
wires.chanroblesvirtualawlibrarychanrobles
virtual
law library
The conclusion of the CTA that the steel supports in
question are embraced in the term "poles" is not a
novelty. Several courts of last resort in the United
States have called these steel supports "steel
towers", and they denominated these supports or
towers, as electric poles. In their decisions the words
"towers" and "poles" were used interchangeably, and
it is well understood in that jurisdiction that a
transmission tower or pole means the same

thing.chanroblesvirtualawlibrarychanrobles
law library

virtual

In a proceeding to condemn land for the use of

electric power wires, in which the law provided that
wires shall be constructed upon suitable poles, this
term was construed to mean either wood or metal
poles and in view of the land being subject to
overflow, and the necessary carrying of numerous
wires and the distance between poles, the statute
was
interpreted
to
include towers or poles.
(Stemmons and Dallas Light Co. (Tex) 212 S.W. 222,
224; 32-A Words and Phrases, p. 365.)chanrobles
virtual law library
The term "poles" was also used to denominate the
steel supports or towers used by an association used
to convey its electric power furnished to subscribers
and members, constructed for the purpose of
fastening high voltage and dangerous electric wires
alongside public highways. The steel supports or
towers were made of iron or other metals consisting
of two pieces running from the ground up some thirty
feet high, being wider at the bottom than at the top,
the said two metal pieces being connected with crisscross iron running from the bottom to the top,
constructed like ladders and loaded with high voltage
electricity. In form and structure, they are like the
steel towers in question. (Salt River Valley Users'

Ass'n v. Compton, 8 P. 2nd, 249-250.)chanrobles

virtual law library
The term "poles" was used to denote the steel towers
of an electric company engaged in the generation of
hydro-electric power generated from its plant to the
Tower of Oxford and City of Waterbury. These steel
towers are about 15 feet square at the base and
extended to a height of about 35 feet to a point, and
are embedded in the cement foundations sunk in the
earth, the top of which extends above the surface of
the soil in the tower of Oxford, and to the towers are
attached insulators, arms, and other equipment
capable of carrying wires for the transmission of
electric power (Connecticut Light and Power Co. v.
Oxford,
101
Conn.
383,
126
Atl.
p.
1).chanroblesvirtualawlibrarychanrobles virtual law
library
In a case, the defendant admitted that the structure
on which a certain person met his death was built for
the purpose of supporting a transmission wire used
for carrying high-tension electric power, but claimed
that the steel towers on which it is carried were so
large that their wire took their structure out of the
definition of a pole line. It was held that in defining
the word pole, one should not be governed by the
wire or material of the support used, but was
considering the danger from any elevated wire
carrying electric current, and that regardless of the

size or material wire of its individual members, any

continuous series of structures intended and used
solely or primarily for the purpose of supporting wires
carrying electric currents is a pole line (Inspiration
Consolidation Cooper Co. v. Bryan 252 P.
1016).chanroblesvirtualawlibrarychanrobles
virtual
law library
It is evident, therefore, that the word "poles", as used
in Act No. 484 and incorporated in the petitioner's
franchise, should not be given a restrictive and
narrow interpretation, as to defeat the very object for
which the franchise was granted. The poles as
contemplated thereon, should be understood and
taken as a part of the electric power system of the
respondent Meralco, for the conveyance of electric
current from the source thereof to its consumers. If
the respondent would be required to employ "wooden
poles", or "rounded poles" as it used to do fifty years
back, then one should admit that the Philippines is
one century behind the age of space. It should also
be conceded by now that steel towers, like the ones
in question, for obvious reasons, can better
effectuate the purpose for which the respondent's
franchise
was
granted.chanroblesvirtualawlibrarychanrobles virtual
law library
Granting for the purpose of argument that the steel
supports or towers in question are not embraced

within the term poles, the logical question posited is

whether they constitute real properties, so that they
can be subject to a real property tax. The tax law
does not provide for a definition of real property; but
Article 415 of the Civil Code does, by stating the
following are immovable property:
(1) Land, buildings, roads, and constructions of all
kinds adhered to the soil;
x x x
library

x x x

x x xchanrobles virtual law

(3) Everything attached to an immovable in a fixed

manner, in such a way that it cannot be separated
therefrom without breaking the material or
deterioration of the object;
x x x
library

x x x

x x xchanrobles virtual law

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

xxx

xxx

The steel towers or supports in question, do not come

within the objects mentioned in paragraph 1, because
they do not constitute buildings or constructions
adhered to the soil. They are not construction
analogous to buildings nor adhering to the soil. As per
description, given by the lower court, they are
removable and merely attached to a square metal
frame by means of bolts, which when unscrewed
could easily be dismantled and moved from place to
place. They can not be included under paragraph 3,
as they are not attached to an immovable in a fixed
manner, and they can be separated without breaking
the material or causing deterioration upon the object
to which they are attached. Each of these steel
towers or supports consists of steel bars or metal
strips, joined together by means of bolts, which can
be disassembled by unscrewing the bolts and
reassembled by screwing the same. These steel
towers or supports do not also fall under paragraph 5,
for
they
are
not
machineries,
receptacles,
instruments or implements, and even if they were,
they are not intended for industry or works on the
land. Petitioner is not engaged in an industry or works
in the land in which the steel supports or towers are
constructed.chanroblesvirtualawlibrarychanrobles
virtual law library
It is finally contended that the CTA erred in ordering
the City Treasurer of Quezon City to refund the sum of
P11,651.86, despite the fact that Quezon City is not a

party to the case. It is argued that as the City

Treasurer is not the real party in interest, but Quezon
City, which was not a party to the suit,
notwithstanding its capacity to sue and be sued, he
should not be ordered to effect the refund. This
question has not been raised in the court below, and,
therefore, it cannot be properly raised for the first
time on appeal. The herein petitioner is indulging in
legal technicalities and niceties which do not help
him any; for factually, it was he (City Treasurer)
whom had insisted that respondent herein pay the
real estate taxes, which respondent paid under
protest. Having acted in his official capacity as City
Treasurer of Quezon City, he would surely know what
to
do,
under
the
circumstances.chanroblesvirtualawlibrarychanrobles
virtual law library
IN VIEW HEREOF, the decision appealed from is
hereby affirmed, with costs against the petitioners.
MAKATI
LEASING
and
FINANCE
CORPORATION, Petitioner,
v.
WEAREVER
TEXTILE MILLS, INC., and HONORABLE COURT
OF
APPEALS, Respondents.
Loreto

C.

Baduan

for Petitioner.

Ramon D. Bagatsing & Assoc. (collaborating

counsel)
for Petitioner.
Jose V. Mancella for Respondent.

SYLLABUS
1. REMEDIAL LAW; PETITION FOR REVIEW; NOT
RENDERED MOOT AND ACADEMIC; WHERE RIGHT TO
QUESTION DECISION, TIMELY RESERVED. The
contention of private respondent is without merit.
When petitioner returned the subject motor drive, it
made itself unequivocably clear that said action was
without prejudice to a motion for reconsideration of
the Court of Appeals decision, as shown by the
receipt duly signed by respondents representative.
Considering that petitioner has reserved its right to
question the propriety of the Court of Appeals
decision, the contention of private respondent that
this petition has been mooted by such return may not
be
sustained.
2. CIVIL LAW; PROPERTY; MACHINERY THOUGH
IMMOBILIZED BY DESTINATION IF TREATED BY THE
PARTIES AS A PERSONALTY FOR PURPOSES OF A
CHATTEL MORTGAGE LEGAL, WHERE NO THIRD PARTY
IS PREJUDICED. The next and the more crucial
question to be resolved in this petition is whether the
machinery in suit is real or personal property from the
point of view of the parties. Examining the records of
the instance case, the Supreme Court found no
logical justification to exclude and rule out, as the
appellate court did, the present case from the
application of the pronouncement in the TUMALAD v.
VICENCIO CASE (41 SCRA 143) where a similar, if not
identical issue was raised. If a house of strong
materials, like what was involved in the Tumalad case
may be considered as personal property for purposes
of executing a chattel mortgage thereon as long as

the parties to the contract so agree and no innocent

third party will be prejudiced thereby, there is
absolutely no reason why a machinery, which is
movable in its nature and becomes immobilized only
by destination or purpose, may not be likewise
treated as such. This is really because one who has
so agreed is estopped from denying the existence of
the
chattel
mortgage.
3. ID.; ID.; ID.; COURT SHOULD NOT MAKE
DISTINCTIONS, WHERE THE LAW DOES NOT. In
rejecting petitioners assertion on the applicability of
the Tumalad doctrine, the Court of Appeals lays stress
on the fact that the house involved therein was built
on a land that did not belong to the owner of such
house. But the law makes no distinction with respect
to the ownership of the land on which the house is
built and the Supreme Court should not lay down
distinctions
not
contemplated
by
law.
4. ID.; ID.; ID.; CHARACTERIZATION OF PROPERTY,
INDICATIVE OF THE INTENTION OF THE PARTIES. It
must be pointed out that the characterization of the
subject machinery as chattel by the private
respondent is indicative of intention and impresses
upon the property the character determined by the
parties. As stated in Standard Oil Co. of New York v.
Jaramillo, 44 Phil. 630, it is undeniable that the
parties to a contract may by agreement treat as
personal property that which by nature would be real
property, as long as no interest of third parties would
be
prejudiced
thereby.
5. CIVIL LAW; ESTOPPEL; REPRESENTING OR
AGREEING ON THE CONSTITUTION OF A PROPERTY AS

CHATTEL; A CASE THEREOF. Private respondent

contends that estoppel cannot apply against it
because it had never represented nor agreed that the
machinery in suit he considered as personal property
but was merely required and dictated on by herein
petitioner to sign a printed form of chattel mortgage
which was in a blank format the time of signing. This
contention lacks persuasiveness. As aptly pointed out
by petitioner and not denied by the respondent, the
status of the subject machine as movable or
immovable was never placed in issue before the
lower court and the Court of Appeals except ins
supplemental memorandum in support of the petition
filed
in
the
appellate
court.
6. ID.; CONTRACT; TREATING A MACHINERY AS A
CHATTEL; AGREEMENT DEEMED VALID UNLESS
ANNULLED OR VOIDED IN A PROPER ACTION.
Moreover, even granting that the charge is true, such
fact alone does not render a contract void ab initio,
but can only be a ground for rendering said contract
voidable or annullable pursuant to Article 1390 of the
new Civil Code, by a proper action in court. There is
nothing on record to show that the mortgage has
been annulled. Neither is it disclosed that steps were
taken
to
nullify
the
same.
7. ID.; ID.; UNDUE BENEFIT OVER A CONTRACT AT
THE EXPENSE OF ANOTHER NOT COUNTENANCED BY
EQUITY. On the other hand, as pointed out by
petitioner and again not refuted by respondent, the
latter has indubitably benefited from said contract.
Equity dictates that one should not benefit at the
expense of another. Private respondent could not now
therefore, he allowed to impugn the efficacy of the

chattel mortgage after it has benefited therefrom.

DECISION
DE CASTRO, J.:
Petition for review on certiorari of the decision of the
Court of Appeals (now Intermediate Appellate Court)
promulgation August 27, 1981 in CA-G.R. No. SP12731, setting aside certain Orders later specified
herein, of Judge Ricardo J. Francisco, as Presiding
Judge of the Court of First Instance of Rizal, Branch VI,
issued in Civil Case No. 36040, as well as the
resolution dated September 22, 1981 of the said
appellate court, denying petitioners motion for
reconsideration.
It appears that in order to obtain financial
accommodations from herein petitioner Makati
Leasing and Finance Corporation, the private
respondent Wearever Textile Mills, Inc., discounted
and assigned several receivables with the former
under a Receivable Purchase Agreement. To secure
the collection of the receivables assigned, private
respondent executed a Chattel Mortgage over certain
raw materials inventory as well as a machinery
described as an Artos Aero Dryer Stentering Range.
Upon private respondents default, petitioner filed a
petition for extrajudicial foreclosure of the properties
mortgage to it. However, the Deputy Sheriff assigned
to implement the foreclosure failed to gain entry into

private respondents premises and was not able to

effect the seizure of the aforedescribed machinery.
Petitioner thereafter filed a complaint for judicial
foreclosure with the Court of First Instance of Rizal,
Branch VI, docketed as Civil Case No. 36040, the case
before
the
lower
court.cralawnad
Acting on petitioners application for replevin, the
lower court issued a writ of seizure, the enforcement
of which was however subsequently restrained upon
private respondents filing of a motion for
reconsideration. After several incidents, the lower
court finally issued on February 11, 1981, an order
lifting the restraining order for the enforcement of the
writ of seizure and an order to break open the
premises of private respondent to enforce said writ.
The lower court reaffirmed its stand upon private
respondents filing of a further motion for
reconsideration.
On July 13, 1981, the sheriff enforcing the seizure
order, repaired to the premises of private respondent
and removed the main drive motor of the subject
machinery.
The Court of Appeals, in certiorari and prohibition
proceedings subsequently filed by herein private
respondent, set aside the Orders of the lower court
and ordered the return of the drive motor seized by
the sheriff pursuant to said Orders, after ruling that
the machinery in suit cannot be the subject of
replevin, much less of a chattel mortgage, because it
is a real property pursuant to Article 415 of the new
Civil Code, the same being attached to the ground by
means of bolts and the only way to remove it from

respondents plant would be to drill out or destroy the

concrete floor, the reason why all that the sheriff
could do to enforce the writ was to take the main
drive motor of said machinery. The appellate court
rejected
petitioners
argument
that
private
respondent is estopped from claiming that the
machine is real property by constituting a chattel
mortgage
thereon.
A motion for reconsideration of this decision of the
Court of Appeals having been denied, petitioner has
brought the case to this Court for review by writ
of certiorari. It is contended by private respondent,
however, that the instant petition was rendered moot
and academic by petitioners act of returning the
subject motor drive of respondents machinery after
the Court of Appeals decision was promulgated.
The contention of private respondent is without merit.
When petitioner returned the subject motor drive, it
made itself unequivocably clear that said action was
without prejudice to a motion for reconsideration of
the Court of Appeals decision, as shown by the
receipt duly signed by respondents representative. 1
Considering that petitioner has reserved its right to
question the propriety of the Court of Appeals
decision, the contention of private respondent that
this petition has been mooted by such return may not
be
sustained.
The next and the more crucial question to be
resolved in this petition is whether the machinery in
suit is real or personal property from the point of view
of the parties, with petitioner arguing that it is a
personalty, while the respondent claiming the

contrary, and was sustained by the appellate court,

which accordingly held that the chattel mortgage
constituted thereon is null and void, as contended by
said Respondent.chanrobles
law
library
:
red
A similar, if not identical issue was raised in Tumalad
v. Vicencio, 41 SCRA 143 where this Court, speaking
through
Justice
J.B.L.
Reyes,
ruled:jgc:chanrobles.com.ph
"Although there is no specific statement referring to
the subject house as personal property, yet by
ceding, selling or transferring a property by way of
chattel mortgage defendants-appellants could only
have meant to convey the house as chattel, or at
least, intended to treat the same as such, so that
they should not now be allowed to make an
inconsistent stand by claiming otherwise. Moreover,
the subject house stood on a rented lot to which
defendants-appellants merely had a temporary right
as lessee, and although this can not in itself alone
determine the status of the property, it does so when
combined with other factors to sustain the
interpretation that the parties, particularly the
mortgagors, intended to treat the house as
Personalty. Finally, unlike in the Iya cases, Lopez v.
Orosa, Jr. & Plaza Theatre, Inc. & Leung Yee v. F.L.
Strong Machinery & Williamson, wherein third persons
assailed the validity of the chattel mortgage, it is the
defendants-appellants
themselves,
as
debtors
mortgagors, who are attacking the validity of the
chattel mortgage in this case. The doctrine of
estoppel therefore applies to the herein defendants
appellants, having treated the subject house as
personalty."cralaw
virtua1aw
library

Examining the records of the instant case, We find no

logical justification to exclude the rule out, as the
appellate court did, the present case from the
application of the abovequoted pronouncement. If a
house of strong materials, like what was involved in
the above Tumalad case, may be considered as
personal property for purposes of executing a chattel
mortgage thereon as long as the parties to the
contract so agree and no innocent third party will be
prejudiced thereby, there is absolutely no reason why
a machinery, which is movable in its nature and
becomes immobilized only by destination or purpose,
may not be likewise treated as such. This is really
because one who has so agreed is estopped from
denying the existence of the chattel mortgage.
In rejecting petitioners assertion on the applicability
of the Tumalad doctrine, the Court of Appeals lays
stress on the fact that the house involved therein was
built on a land that did not belong to the owner of
such house. But the law makes no distinction with
respect to the ownership of the land on which the
house is built and We should not lay down distinctions
not
contemplated
by
law.
It must be pointed out that the characterization of the
subject machinery as chattel by the private
respondent is indicative of intention and impresses
upon the property the character determined by the
parties. As stated in Standard Oil Co. of New York v.
Jaramillo, 44 Phil. 630, it is undeniable that the
parties to a contract may by agreement treat as
personal property that which by nature would be real
property, as long as no interest of third parties would

be

prejudiced

thereby.

Private respondent contends that estoppel cannot

apply against it because it had never represented nor
agreed that the machinery in suit be considered as
personal property but was merely required and
dictated on by herein petitioner to sign a printed form
of chattel mortgage which was in a blank form at the
time of signing. This contention lacks persuasiveness.
As aptly pointed out by petitioner and not denied by
the respondent, the status of the subject machinery
as movable or immovable was never placed in issue
before the lower court and the Court of Appeals
except in a supplemental memorandum in support of
the petition filed in the appellate court. Moreover,
even granting that the charge is true, such fact alone
does not render a contract void ab initio, but can only
be a ground for rendering said contract voidable, or
annullable pursuant to Article 1390 of the new Civil
Code, by a proper action in court. There is nothing on
record to show that the mortgage has been annulled.
Neither is it disclosed that steps were taken to nullify
the same. On the other hand, as pointed out by
petitioner and again not refuted by respondent, the
latter has indubitably benefited from said contract.
Equity dictates that one should not benefit at the

expense of another. Private respondent could not now

therefore, be allowed to impugn the efficacy of the
chattel
mortgage
after
it
has
benefited
therefrom.cralawnad
From what has been said above, the error of the
appellate court in ruling that the questioned
machinery is real, not personal property, becomes
very apparent. Moreover, the case of Machinery and
Engineering Supplies, Inc. v. CA, 96 Phil. 70, heavily
relied upon by said court is not applicable to the case
at bar, the nature of the machinery and equipment
involved therein as real properties never having been
disputed nor in issue, and they were not the subject
of a Chattel Mortgage. Undoubtedly, the Tumalad
case bears more nearly perfect parity with the instant
case to be the more controlling jurisprudential
authority.
WHEREFORE, the questioned decision and resolution
of the Court of Appeals are hereby reversed and set
aside, and the Orders of the lower court are hereby
reinstated, with costs against the privateRespondent.
SO ORDERED.