PRUDENTIAL BANK, petitioner, From the aforequoted stipulation, it is obvious that the mortgagee (defendant Prudential Bank) was

requoted stipulation, it is obvious that the mortgagee (defendant Prudential Bank) was at the
vs. outset aware of the fact that the mortgagors (plaintiffs) have already filed a Miscellaneous Sales Application
HONORABLE DOMINGO D. PANIS, Presiding Judge of Branch III, Court of First Instance of Zambales over the lot, possessory rights over which, were mortgaged to it.
and Olongapo City; FERNANDO MAGCALE & TEODULA BALUYUT-MAGCALE, respondents.

Exhibit "A" (Real Estate Mortgage) was registered under the Provisions of Act 3344 with the Registry of Deeds
of Zambales on November 23, 1971.

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 vs. 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:
... 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:
l. 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
roofing 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:
A first class residential land Identffied 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 Duration No. 19595 issued by the Assessor of Olongapo City with
an assessed value of P1,860.00; bounded on the
NORTH: By No. 6, Ardoin Street
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.
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 as 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
SOUTH: By No. 2, Ardoin Street
required to submit simultaneously their respective memoranda. (Ibid., p. 114).

EAST: By 37 Canda Street, and

On July 18, 1979, petitioner filed its Memorandum (Ibid., pp. 116-144), while private respondents filed their
Memorandum on August 1, 1979 (Ibid., pp. 146-155).
WEST: By Ardoin Street.
In a Resolution dated August 10, 1979, this case was considered submitted for decision (Ibid., P. 158).
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).
In its Memorandum, petitioner raised the following issues:

Apart from the stipulations in the printed portion of the aforestated deed of mortgage, there appears a rider
1. WHETHER OR NOT THE DEEDS OF REAL ESTATE MORTGAGE ARE VALID; AND
typed at the bottom of the reverse side of the document under the lists of the properties mortgaged which
reads, as follows:
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
AND IT IS FURTHER AGREED that in the event the Sales Patent on the lot applied for by the Mortgagors as
COVERING ORIGINAL CERTIFICATE OF TITLE NO. P-2554 ON MAY 15,1972 HAVE THE EFFECT OF
herein stated is released or issued by the Bureau of Lands, the Mortgagors hereby authorize the Register of
INVALIDATING THE DEEDS OF REAL ESTATE MORTGAGE. (Memorandum for Petitioner, Rollo, p. 122).
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. 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.
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 vs. Orosa, Jr., et al., L-10817-18, Feb. 28,
1958; Associated Inc. and Surety Co., Inc. vs. Iya, et al., L-10837-38, May 30,1958).
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 vs. 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 vs. 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. vs. Meer, 96 Phil. 515; Director of Lands vs. De Leon,
110 Phil. 28; Director of Lands vs. Jurado, L-14702, May 23, 1961; Pena "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.
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 respondent's 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:
... 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 was to preserve
(Gonzalo Puyat & Sons, Inc. vs. De los Amas and Alino supra). ... (Arsenal vs. 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.
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.
L A D E R A V S. H O D G E S (G . R . N O . 8 0 2 7 -R , V O L . 4 8 , N O . 1 2 , O . G . 5 3 7 4 , S E P T E M B E R
23, 1952)
A PR I L 2 3 , 2 0 1 5 | Y U M M Y
FACTS:
1. Hodges entered into a contract promising to sell a lot to Ladera under certain terms and conditions. One of which
is that the contract may be rescinded and annulled in case Ladera failed to make the monthly payment 60 days
after it is due.
2. After the execution of the contract, Ladera built a house on the lot assessed at 4,500 pesos. However, Ladera failed
to pay the agreed installments so Hodges rescinded the contract and filed an action for ejectment.
3. The MTC ruled in favor of Hodges and issued an alias writ of execution. Pursuant thereto, the sheriff levied upon
all rights, interests and participation over the house. Notices of sale were posted, however, were not published in a
newspaper of general circulation.
4. An auction sale was then conducted but Ladera was not able to attend as she had gone to Manila. The house was
then sold to one Avelina Magno as the highest bidder. Meanwhile, Ladera sold the same lot to one Manuel Villa
and on the same day purchased the house from Magno for 200 pesos. This, however, was not recorded.
5. Ladera then returned to Iloilo and learned what happened. She went to see the sheriff and represented that the
property can still be redeemed and so she gave him 230 pesos. It does not appear, however, that it was turned over
to Hodges. Thereupon, Ladera filed an action against Hodges, the sheriff, Magno and Villa to set aside the sale
and recover the house.
6. The lower court ruled in favor of Ladera on the ground of non-compliance based on Rule 39 of the Rules of Court.
On appeal, Hodges contends that the house, built on a lot owned by another, should be regarded as movable or
personal property. The sale of the land was also made without proper publication required by law.
ISSUE: Was the house movable or immovable?
RULING: Immovable.
1. As enumerated in the Civil Code, immovable property includes lands, buildings, roads and constructions of all
kinds adhered to the soil. The law does not make any distinction whether or not the owner of the lot was the one
who built the construction.
2. Also, Ladera did not declare his house to be a chattel mortgage. The object of the levy or sale was real property
and its publication in a newspaper of general circulation was indespensible. Without it, the execution sale was
void.
3. In addition, Magno, the alleged purchaser at the auction sale, was a mere employee of Hodges and the low bid
made by her as well as the fact that she sold the house to Villa on the same day Hodges sold him the land, proves
that she was merely acting for and in behalf of Hodges.
4. In the sale of immovables, the lack of title of the vendor taints the rights of the subsequent purchasers. Possession
in good faith is not equivalent to title.
5. The principles of accession regard buildings and constructions as mere accessories to the land on which it is built,
it is logical that said accessories should partake the nature of the principal thing.
ANTOS EVANGELISTA, petitioner,
vs.
ALTO SURETY & INSURANCE CO., INC., respondent.
Gonzalo D. David for petitioner.
Raul A. Aristorenas and Benjamin Relova for respondent.
CONCEPCION, J.:
This is an appeal by certiorari from a decision of the Court of Appeals.
Briefly, the facts are: On June 4, 1949, petitioner herein, Santos Evangelista, instituted Civil Case No. 8235 of
the Court of First, Instance of Manila entitled " Santos Evangelista vs. Ricardo Rivera," for a sum of money.
On the same date, he obtained a writ of attachment, which levied upon a house, built by Rivera on a land
situated in Manila and leased to him, by filing copy of said writ and the corresponding notice of attachment
with the Office of the Register of Deeds of Manila, on June 8, 1949. In due course, judgment was rendered in
favor of Evangelista, who, on October 8, 1951, bought the house at public auction held in compliance with the
writ of execution issued in said case. The corresponding definite deed of sale was issued to him on October
22, 1952, upon expiration of the period of redemption. When Evangelista sought to take possession of the
house, Rivera refused to surrender it, upon the ground that he had leased the property from the Alto Surety &
Insurance Co., Inc. respondent herein and that the latter is now the true owner of said property. It
appears that on May 10, 1952, a definite deed of sale of the same house had been issued to respondent, as
the highest bidder at an auction sale held, on September 29, 1950, in compliance with a writ of execution
issued in Civil Case No. 6268 of the same court, entitled "Alto Surety & Insurance Co., Inc. vs. Maximo
Quiambao, Rosario Guevara and Ricardo Rivera," in which judgment, for the sum of money, had been
rendered in favor respondent herein, as plaintiff therein. Hence, on June 13, 1953, Evangelista instituted the
present action against respondent and Ricardo Rivera, for the purpose of establishing his (Evangelista) title
over said house, securing possession thereof, apart from recovering damages.
In its answer, respondent alleged, in substance, that it has a better right to the house, because the sale made,
and the definite deed of sale executed, in its favor, on September 29, 1950 and May 10, 1952, respectively,
precede the sale to Evangelista (October 8, 1951) and the definite deed of sale in his favor (October 22,
1952). It, also, made some special defenses which are discussed hereafter. Rivera, in effect, joined forces
with respondent. After due trial, the Court of First Instance of Manila rendered judgment for Evangelista,
sentencing Rivera and respondent to deliver the house in question to petitioner herein and to pay him, jointly
and severally, forty pesos (P40.00) a month from October, 1952, until said delivery, plus costs.
On appeal taken by respondent, this decision was reversed by the Court of Appeals, which absolved said
respondent from the complaint, upon the ground that, although the writ of attachment in favor of Evangelista
had been filed with the Register of Deeds of Manila prior to the sale in favor of respondent, Evangelista did not
acquire thereby a preferential lien, the attachment having been levied as if the house in question were
immovable property, although in the opinion of the Court of Appeals, it is "ostensibly a personal property." As
such, the Court of Appeals held, "the order of attachment . . . should have been served in the manner provided
in subsection (e) of section 7 of Rule 59," of the Rules of Court, reading:
The property of the defendant shall be attached by the officer executing the order in the following manner:
(e) Debts and credits, and other personal property not capable of manual delivery, by leaving with the person
owing such debts, or having in his possession or under his control, such credits or other personal property, or
with, his agent, a copy of the order, and a notice that the debts owing by him to the defendant, and the credits
and other personal property in his possession, or under his control, belonging to the defendant, are attached
in pursuance of such order. (Emphasis ours.)
However, the Court of Appeals seems to have been of the opinion, also, that the house of Rivera should have
been attached in accordance with subsection (c) of said section 7, as "personal property capable of manual
delivery, by taking and safely keeping in his custody", for it declared that "Evangelists could not have . . .
validly purchased Ricardo Rivera's house from the sheriff as the latter was not in possession thereof at the
time he sold it at a public auction."
Evangelista now seeks a review, by certiorari, of this decision of the Court of Appeals. In this connection, it is
not disputed that although the sale to the respondent preceded that made to Evangelists, the latter would have
a better right if the writ of attachment, issued in his favor before the sale to the respondent, had been properly
executed or enforced. This question, in turn, depends upon whether the house of Ricardo Rivera is real
property or not. In the affirmative case, the applicable provision would be subsection (a) of section 7, Rule 59
of the Rules of Court, pursuant to which the attachment should be made "by filing with the registrar of deeds a
copy of the order, together with a description of the property attached, and a notice that it is attached, and by
leaving a copy of such order, description, and notice with the occupant of the property, if any there be."
Respondent maintains, however, and the Court of Appeals held, that Rivera's house is personal property, the
levy upon which must be made in conformity with subsections (c) and (e) of said section 7 of Rule 59. Hence,
the main issue before us is whether a house, constructed the lessee of the land on which it is built, should be
dealt with, for purpose, of attachment, as immovable property, or as personal property.
It is, our considered opinion that said house is not personal property, much less a debt, credit or other
personal property not capable of manual delivery, but immovable property. As explicitly held, in
Laddera vs. Hodges (48 Off. Gaz., 5374), "a true building (not merely superimposed on the soil) is immovable
or real property, whether it is erected by the owner of the land or by usufructuary or lessee. This is the doctrine
of our Supreme Court in Leung Yee vs. Strong Machinery Company, 37 Phil., 644. And it is amply supported
by the rulings of the French Court. . . ."
It is true that the parties to a deed of chattel mortgage may agree to consider a house as personal property for
purposes of said contract (Luna vs. Encarnacion, * 48 Off. Gaz., 2664; Standard Oil Co. of New
York vs. Jaramillo, 44 Phil., 630; De Jesus vs. Juan Dee Co., Inc., 72 Phil., 464). However, this view is good
only insofar as the contracting parties are concerned. It is based, partly, upon the principle of estoppel. Neither
this principle, nor said view, is applicable to strangers to said contract. Much less is it in point where there has
been no contract whatsoever, with respect to the status of the house involved, as in the case at bar. Apart
from this, in Manarang vs. Ofilada (99 Phil., 108; 52 Off. Gaz., 3954), we held:
The question now before us, however, is: Does the fact that the parties entering into a contract regarding a
house gave said property the consideration of personal property in their contract, bind the sheriff in advertising
the property's sale at public auction as personal property? It is to be remembered that in the case at bar the
action was to collect a loan secured by a chattel mortgage on the house. It is also to be remembered that in
practice it is the judgment creditor who points out to the sheriff the properties that the sheriff is to levy upon in
execution, and the judgment creditor in the case at bar is the party in whose favor the owner of the house had
conveyed it by way of chattel mortgage and, therefore, knew its consideration as personal property.
These considerations notwithstanding, we hold that the rules on execution do not allow, and, we
should not interpret them in such a way as to allow, the special consideration that parties to a contract may
have desired to impart to real estate, for example, as personal property, when they are, not ordinarily
so. Sales on execution affect the public and third persons. The regulation governing sales on execution are for
public officials to follow. The form of proceedings prescribed for each kind of property is suited to its character,
not to the character, which the parties have given to it or desire to give it. When the rules speak of personal
property, property which is ordinarily so considered is meant; and when real property is spoken of, it means
property which is generally known as real property. The regulations were never intended to suit the
consideration that parties may have privately given to the property levied upon. Enforcement of regulations
would be difficult were the convenience or agreement of private parties to determine or govern the nature of
the proceedings. We therefore hold that the mere fact that a house was the subject of the chattel mortgage
and was considered as personal property by the parties does not make said house personal property for
purposes of the notice to be given for its sale of public auction. This ruling is demanded by the need for a
definite, orderly and well defined regulation for official and public guidance and would prevent confusion and
misunderstanding.
We, therefore, declare that the house of mixed materials levied upon on execution, although subject of a
contract of chattel mortgage between the owner and a third person, is real property within the purview of Rule
39, section 16, of the Rules of Court as it has become a permanent fixture of the land, which, is real property.
(42 Am. Jur. 199-200; Leung Yee vs. Strong Machinery Co., 37 Phil., 644; Republic vs. Ceniza, et al., 90 Phil.,
544; Ladera,, et al. vs. Hodges, et al., [C.A.] Off. Gaz. 5374.)" (Emphasis ours.)
The foregoing considerations apply, with equal force, to the conditions for the levy of attachment, for it
similarly affects the public and third persons.
It is argued, however, that, even if the house in question were immovable property, its attachment by
Evangelista was void or ineffective, because, in the language of the Court of Appeals, "after presenting a Copy
of the order of attachment in the Office of the Register of Deeds, the person who might then be in possession
of the house, the sheriff took no pains to serve Ricardo Rivera, or other copies thereof." This finding of the
Court of Appeals is neither conclusive upon us, nor accurate.
The Record on Appeal, annexed to the petition for Certiorari, shows that petitioner alleged, in paragraph 3 of
the complaint, that he acquired the house in question "as a consequence of the levy of an attachment and
execution of the judgment in Civil Case No. 8235" of the Court of First Instance of Manila. In his answer
(paragraph 2), Ricardo Rivera admitted said attachment execution of judgment. He alleged, however, by way
a of special defense, that the title of respondent "is superior to that of plaintiff because it is based on a public
instrument," whereas Evangelista relied upon a "promissory note" which "is only a private instrument"; that
said Public instrument in favor of respondent "is superior also to the judgment in Civil Case No. 8235"; and
that plaintiff's claim against Rivera amounted only to P866, "which is much below the real value" of said
house, for which reason it would be "grossly unjust to acquire the property for such an inadequate
consideration." Thus, Rivera impliedly admitted that his house had been attached, that the house had been
sold to Evangelista in accordance with the requisite formalities, and that said attachment was valid, although
allegedly inferior to the rights of respondent, and the consideration for the sale to Evangelista was claimed to
be inadequate.
Respondent, in turn, denied the allegation in said paragraph 3 of the complaint, but only " for the reasons
stated in its special defenses" namely: (1) that by virtue of the sale at public auction, and the final deed
executed by the sheriff in favor of respondent, the same became the "legitimate owner of the house" in
question; (2) that respondent "is a buyer in good faith and for value"; (3) that respondent "took possession and
control of said house"; (4) that "there was no valid attachment by the plaintiff and/or the Sheriff of Manila of the
property in question as neither took actual or constructive possession or control of the property at any time";
and (5) "that the alleged registration of plaintiff's attachment, certificate of sale and final deed in the Office of
Register of Deeds, Manila, if there was any, is likewise, not valid as there is no registry of transactions
covering houses erected on land belonging to or leased from another." In this manner, respondent claimed a
better right, merely under the theory that, in case of double sale of immovable property, the purchaser who
first obtains possession in good faith, acquires title, if the sale has not been "recorded . . . in the Registry of
Property" (Art. 1544, Civil Code of the Philippines), and that the writ of attachment and the notice of
attachment in favor of Evangelista should be considered unregistered, "as there is no registry of transactions
covering houses erected on land belonging to or leased from another." In fact, said article 1544 of the Civil
Code of the Philippines, governing double sales, was quoted on page 15 of the brief for respondent in the
Court of Appeals, in support of its fourth assignment of error therein, to the effect that it "has preference or
priority over the sale of the same property" to Evangelista.
In other words, there was no issue on whether copy of the writ and notice of attachment had been served on
Rivera. No evidence whatsoever, to the effect that Rivera had not been served with copies of said writ and
notice, was introduced in the Court of First Instance. In its brief in the Court of Appeals, respondent did not
aver, or even, intimate, that no such copies were served by the sheriff upon Rivera. Service thereof on Rivera
had been impliedly admitted by the defendants, in their respective answers, and by their behaviour throughout
the proceedings in the Court of First Instance, and, as regards respondent, in the Court of Appeals. In fact,
petitioner asserts in his brief herein (p. 26) that copies of said writ and notice were delivered to Rivera,
simultaneously with copies of the complaint, upon service of summons, prior to the filing of copies of said writ
and notice with the register deeds, and the truth of this assertion has not been directly and positively
challenged or denied in the brief filed before us by respondent herein. The latter did not dare therein to go
beyond making a statement for the first time in the course of these proceedings, begun almost five (5)
years ago (June 18, 1953) reproducing substantially the aforementioned finding of the Court of Appeals
and then quoting the same.
Considering, therefore, that neither the pleadings, nor the briefs in the Court of Appeals, raised an issue on
whether or not copies of the writ of attachment and notice of attachment had been served upon Rivera; that
the defendants had impliedly admitted-in said pleadings and briefs, as well as by their conduct during the
entire proceedings, prior to the rendition of the decision of the Court of Appeals that Rivera had received
copies of said documents; and that, for this reason, evidently, no proof was introduced thereon, we, are of the
opinion, and so hold that the finding of the Court of Appeals to the effect that said copies had not been served
upon Rivera is based upon a misapprehension of the specific issues involved therein and goes beyond the
range of such issues, apart from being contrary to the aforementioned admission by the parties, and that,
accordingly, a grave abuse of discretion was committed in making said finding, which is, furthermore,
inaccurate.
Wherefore, the decision of the Court of Appeals is hereby reversed, and another one shall be entered
affirming that of the Court of First Instance of Manila, with the costs of this instance against respondent, the
Alto Surety and Insurance Co., Inc. It is so ordered.
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
Mortgage hypothecated 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.
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.
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.
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;
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.
On February 24, 1961, the lower court held
... WHEREFORE, this Court renders decision in this Case:
(a) Dismissing the complaint with regard to defendant Gregorio Pineda;
(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; and
(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.)
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).
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.
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.
CONFORMABLY WITH ALL THE FOREGOING, the decision appealed from, should be, as it is hereby
affirmed, with costs against appellants.
GAVINO A. TUMALAD and GENEROSA R. TUMALAD, plaintiffs-appellees,
vs.
ALBERTA VICENCIO and EMILIANO SIMEON, defendants-appellants.
Castillo & Suck for plaintiffs-appellees.
Jose Q. Calingo for defendants-appellants.
REYES, J.B.L., J.:
Case certified to this Court by the Court of Appeals (CA-G.R. No. 27824-R) for the reason that only questions
of law are involved.
This case was originally commenced by defendants-appellants in the municipal court of Manila in Civil Case
No. 43073, for ejectment. Having lost therein, defendants-appellants appealed to the court a quo (Civil Case
No. 30993) which also rendered a decision against them, the dispositive portion of which follows:
WHEREFORE, the court hereby renders judgment in favor of the plaintiffs and against the defendants,
ordering the latter to pay jointly and severally the former a monthly rent of P200.00 on the house, subject-
matter of this action, from March 27, 1956, to January 14, 1967, with interest at the legal rate from April 18,
1956, the filing of the complaint, until fully paid, plus attorney's fees in the sum of P300.00 and to pay the
costs.
It appears on the records that on 1 September 1955 defendants-appellants executed a chattel mortgage in
favor of plaintiffs-appellees over their house of strong materials located at No. 550 Int. 3, Quezon Boulevard,
Quiapo, Manila, over Lot Nos. 6-B and 7-B, Block No. 2554, which were being rented from Madrigal &
Company, Inc. The mortgage was registered in the Registry of Deeds of Manila on 2 September 1955. The
herein mortgage was executed to guarantee a loan of P4,800.00 received from plaintiffs-appellees, payable
within one year at 12% per annum. The mode of payment was P150.00 monthly, starting September, 1955, up
to July 1956, and the lump sum of P3,150 was payable on or before August, 1956. It was also agreed that
default in the payment of any of the amortizations, would cause the remaining unpaid balance to
becomeimmediately due and Payable and
the Chattel Mortgage will be enforceable in accordance with the provisions of Special Act No. 3135, and for
this purpose, the Sheriff of the City of Manila or any of his deputies is hereby empowered and authorized to
sell all the Mortgagor's property after the necessary publication in order to settle the financial debts of
P4,800.00, plus 12% yearly interest, and attorney's fees... 2
When defendants-appellants defaulted in paying, the mortgage was extrajudicially foreclosed, and on 27
March 1956, the house was sold at public auction pursuant to the said contract. As highest bidder, plaintiffs-
appellees were issued the corresponding certificate of sale. 3 Thereafter, on 18 April 1956, plaintiffs-appellant
commenced Civil Case No. 43073 in the municipal court of Manila, praying, among other things, that the
house be vacated and its possession surrendered to them, and for defendants-appellants to pay rent of
P200.00 monthly from 27 March 1956 up to the time the possession is surrendered. 4 On 21 September 1956,
the municipal court rendered its decision
... ordering the defendants to vacate the premises described in the complaint; ordering further to pay monthly
the amount of P200.00 from March 27, 1956, until such (time that) the premises is (sic) completely vacated;
plus attorney's fees of P100.00 and the costs of the suit. 5
Defendants-appellants, in their answers in both the municipal court and court a quo impugned the legality of
the chattel mortgage, claiming that they are still the owners of the house; but they waived the right to introduce
evidence, oral or documentary. Instead, they relied on their memoranda in support of their motion to dismiss,
predicated mainly on the grounds that: (a) the municipal court did not have jurisdiction to try and decide the
case because (1) the issue involved, is ownership, and (2) there was no allegation of prior possession; and (b)
failure to prove prior demand pursuant to Section 2, Rule 72, of the Rules of Court. 6
During the pendency of the appeal to the Court of First Instance, defendants-appellants failed to deposit the
rent for November, 1956 within the first 10 days of December, 1956 as ordered in the decision of the municipal
court. As a result, the court granted plaintiffs-appellees' motion for execution, and it was actually issued on 24
January 1957. However, the judgment regarding the surrender of possession to plaintiffs-appellees could not
be executed because the subject house had been already demolished on 14 January 1957 pursuant to the
order of the court in a separate civil case (No. 25816) for ejectment against the present defendants for non-
payment of rentals on the land on which the house was constructed.
The motion of plaintiffs for dismissal of the appeal, execution of the supersedeas bond and withdrawal of
deposited rentals was denied for the reason that the liability therefor was disclaimed and was still being
litigated, and under Section 8, Rule 72, rentals deposited had to be held until final disposition of the appeal. 7
On 7 October 1957, the appellate court of First Instance rendered its decision, the dispositive portion of which
is quoted earlier. The said decision was appealed by defendants to the Court of Appeals which, in turn,
certified the appeal to this Court. Plaintiffs-appellees failed to file a brief and this appeal was submitted for
decision without it.
Defendants-appellants submitted numerous assignments of error which can be condensed into two questions,
namely: .
(a) Whether the municipal court from which the case originated had jurisdiction to adjudicate the same;
(b) Whether the defendants are, under the law, legally bound to pay rentals to the plaintiffs during the period of
one (1) year provided by law for the redemption of the extrajudicially foreclosed house.
We will consider these questions seriatim.
(a) Defendants-appellants mortgagors question the jurisdiction of the municipal court from which the case
originated, and consequently, the appellate jurisdiction of the Court of First Instance a quo, on the theory that
the chattel mortgage is void ab initio; whence it would follow that the extrajudicial foreclosure, and necessarily
the consequent auction sale, are also void. Thus, the ownership of the house still remained with defendants-
appellants who are entitled to possession and not plaintiffs-appellees. Therefore, it is argued by defendants-
appellants, the issue of ownership will have to be adjudicated first in order to determine possession. lt is
contended further that ownership being in issue, it is the Court of First Instance which has jurisdiction and not
the municipal court.
Defendants-appellants predicate their theory of nullity of the chattel mortgage on two grounds, which are: (a)
that, their signatures on the chattel mortgage were obtained through fraud, deceit, or trickery; and (b) that the
subject matter of the mortgage is a house of strong materials, and, being an immovable, it can only be the
subject of a real estate mortgage and not a chattel mortgage.
On the charge of fraud, deceit or trickery, the Court of First Instance found defendants-appellants' contentions
as not supported by evidence and accordingly dismissed the charge, 8 confirming the earlier finding of the
municipal court that "the defense of ownership as well as the allegations of fraud and deceit ... are mere
allegations." 9
It has been held in Supia and Batiaco vs. Quintero and Ayala 10 that "the answer is a mere statement of the
facts which the party filing it expects to prove, but it is not evidence; 11 and further, that when the question to
be determined is one of title, the Court is given the authority to proceed with the hearing of the cause until this
fact is clearly established. In the case of Sy vs. Dalman, 12 wherein the defendant was also a successful bidder
in an auction sale, it was likewise held by this Court that in detainer cases the aim of ownership "is a matter of
defense and raises an issue of fact which should be determined from the evidence at the trial." What
determines jurisdiction are the allegations or averments in the complaint and the relief asked for. 13
Moreover, even granting that the charge is true, fraud or deceit does not render a contract void ab initio, and
can only be a ground for rendering the contract voidable or annullable pursuant to Article 1390 of the New
Civil Code, by a proper action in court. 14 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. Hence, defendants-appellants' claim
of ownership on the basis of a voidable contract which has not been voided fails.
It is claimed in the alternative by defendants-appellants that even if there was no fraud, deceit or trickery, the
chattel mortgage was still null and void ab initio because only personal properties can be subject of a chattel
mortgage. The rule about the status of buildings as immovable property is stated in Lopez vs. Orosa, Jr. and
Plaza Theatre Inc., 15cited in Associated Insurance Surety Co., Inc. vs. Iya, et al. 16 to the effect that
... it is obvious that the inclusion of the building, separate and distinct from the land, in the enumeration of
what may constitute real properties (art. 415, New Civil Code) could only mean one thing that a building is
by itself an immovable property irrespective of whether or not said structure and the land on which it is
adhered to belong to the same owner.
Certain deviations, however, have been allowed for various reasons. In the case of Manarang and Manarang
vs. Ofilada, 17 this Court stated that "it is undeniable that the parties to a contract may by agreement treat as
personal property that which by nature would be real property", citing Standard Oil Company of New York vs.
Jaramillo. 18 In the latter case, the mortgagor conveyed and transferred to the mortgagee by way of mortgage
"the following described personal property." 19 The "personal property" consisted of leasehold rights and a
building. Again, in the case of Luna vs. Encarnacion, 20 the subject of the contract designated as Chattel
Mortgage was a house of mixed materials, and this Court hold therein that it was a valid Chattel mortgage
because it was so expressly designated and specifically that the property given as security "is a house of
mixed materials, which by its very nature is considered personal property." In the later case of Navarro vs.
Pineda,21 this Court stated that
The view that parties to a deed of chattel mortgage may agree to consider a house as personal property for
the purposes of said contract, "is good only insofar as the contracting parties are concerned. It is based,
partly, upon the principle of estoppel" (Evangelista vs. Alto Surety, No. L-11139, 23 April 1958). In a case, a
mortgaged house built on a rented land was held to be a personal property, not only because the deed of
mortgage considered it as such, but also because it did not form part of the land (Evangelists vs. Abad, [CA]; tenants, although they may be collected by the purchaser during the redemption period, do not belong to the
36 O.G. 2913), for it is now settled that an object placed on land by one who had only a temporary right to the latter but still pertain to the debtor of mortgagor. The rationale for the Rule, it seems, is to secure for the
same, such as the lessee or usufructuary, does not become immobilized by attachment (Valdez vs. Central benefit of the debtor or mortgagor, the payment of the redemption amount and the consequent return to him of
Altagracia, 222 U.S. 58, cited in Davao Sawmill Co., Inc. vs. Castillo, et al., 61 Phil. 709). Hence, if a house his properties sold at public auction. (Emphasis supplied)
belonging to a person stands on a rented land belonging to another person, it may be mortgaged as a
personal property as so stipulated in the document of mortgage. (Evangelista vs. Abad, Supra.) It should be
noted, however that the principle is predicated on statements by the owner declaring his house to be a chattel, The Hamada case reiterates the previous ruling in Chan vs. Espe. 36
a conduct that may conceivably estop him from subsequently claiming otherwise. (Ladera vs. C.N. Hodges,
[CA] 48 O.G. 5374): 22
Since the defendants-appellants were occupying the house at the time of the auction sale, they are entitled to
remain in possession during the period of redemption or within one year from and after 27 March 1956, the
In the contract now before Us, the house on rented land is not only expressly designated as Chattel Mortgage; date of the auction sale, and to collect the rents or profits during the said period.
it specifically provides that "the mortgagor ... voluntarily CEDES, SELLS and TRANSFERS by way of Chattel
Mortgage 23 the property together with its leasehold rights over the lot on which it is constructed and
It will be noted further that in the case at bar the period of redemption had not yet expired when action was
participation ..." 24Although there is no specific statement referring to the subject house as personal property,
instituted in the court of origin, and that plaintiffs-appellees did not choose to take possession under Section 7,
yet by ceding, selling or transferring a property by way of chattel mortgage defendants-appellants could only
Act No. 3135, as amended, which is the law selected by the parties to govern the extrajudicial foreclosure of
have meant to convey the house as chattel, or at least, intended to treat the same as such, so that they should
the chattel mortgage. Neither was there an allegation to that effect. Since plaintiffs-appellees' right to possess
not now be allowed to make an inconsistent stand by claiming otherwise. Moreover, the subject house stood
was not yet born at the filing of the complaint, there could be no violation or breach thereof. Wherefore, the
on a rented lot to which defendats-appellants merely had a temporary right as lessee, and although this can
original complaint stated no cause of action and was prematurely filed. For this reason, the same should be
not in itself alone determine the status of the property, it does so when combined with other factors to sustain
ordered dismissed, even if there was no assignment of error to that effect. The Supreme Court is clothed with
the interpretation that the parties, particularly the mortgagors, intended to treat the house as personalty.
ample authority to review palpable errors not assigned as such if it finds that their consideration is necessary
Finally unlike in the Iya cases, Lopez vs. Orosa, Jr. and Plaza Theatre, Inc. 25 and Leung Yee vs. F. L. Strong
in arriving at a just decision of the cases. 37
Machinery and Williamson, 26 wherein third persons assailed the validity of the chattel mortgage, 27 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 It follows that the court below erred in requiring the mortgagors to pay rents for the year following the
treated the subject house as personalty. foreclosure sale, as well as attorney's fees.

(b) Turning to the question of possession and rentals of the premises in question. The Court of First Instance FOR THE FOREGOING REASONS, the decision appealed from is reversed and another one entered,
noted in its decision that nearly a year after the foreclosure sale the mortgaged house had been demolished dismissing the complaint. With costs against plaintiffs-appellees.
on 14 and 15 January 1957 by virtue of a decision obtained by the lessor of the land on which the house
stood. For this reason, the said court limited itself to sentencing the erstwhile mortgagors to pay plaintiffs a
monthly rent of P200.00 from 27 March 1956 (when the chattel mortgage was foreclosed and the house sold) THE STANDARD OIL COMPANY OF NEW YORK, petitioner,
until 14 January 1957 (when it was torn down by the Sheriff), plus P300.00 attorney's fees. vs.
JOAQUIN JARAMILLO, as register of deeds of the City of Manila, respondent.

Appellants mortgagors question this award, claiming that they were entitled to remain in possession without
any obligation to pay rent during the one year redemption period after the foreclosure sale, i.e., until 27 March Ross, Lawrence and Selph for petitioner.
1957. On this issue, We must rule for the appellants. City Fiscal Revilla and Assistant City Fiscal Rodas for respondent.

Chattel mortgages are covered and regulated by the Chattel Mortgage Law, Act No. 1508. 28 Section 14 of this STREET, J.:
Act allows the mortgagee to have the property mortgaged sold at public auction 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. 29 In the instant case, the parties This cause is before us upon demurrer interposed by the respondent, Joaquin Jaramillo, register of deeds of
specifically stipulated that "the chattel mortgage will be enforceable in accordance with the provisions of the City of Manila, to an original petition of the Standard Oil Company of New York, seeking a
Special Act No. 3135 ... ." 30 (Emphasis supplied). peremptory mandamus to compel the respondent to record in the proper register a document purporting to be
a chattel mortgage executed in the City of Manila by Gervasia de la Rosa, Vda. de Vera, in favor of the
Standard Oil Company of New York.
Section 6 of the Act referred to 31 provides that the debtor-mortgagor (defendants-appellants herein) may, at
any time within one year from and after the date of the auction sale, redeem the property sold at the extra
judicial foreclosure sale. Section 7 of the same Act 32 allows the purchaser of the property to obtain from the It appears from the petition that on November 27, 1922, Gervasia de la Rosa, Vda. de Vera, was the lessee of
court the possession during the period of redemption: but the same provision expressly requires the filing of a a parcel of land situated in the City of Manila and owner of the house of strong materials built thereon, upon
petition with the proper Court of First Instance and the furnishing of a bond. It is only upon filing of the proper which date she executed a document in the form of a chattel mortgage, purporting to convey to the petitioner
motion and the approval of the corresponding bond that the order for a writ of possession issues as a matter by way of mortgage both the leasehold interest in said lot and the building which stands thereon.
of course. No discretion is left to the court. 33 In the absence of such a compliance, as in the instant case, the
purchaser can not claim possession during the period of redemption as a matter of right. In such a case, the
The clauses in said document describing the property intended to be thus mortgage are expressed in the
governing provision is Section 34, Rule 39, of the Revised Rules of Court 34 which also applies to properties
following words:
purchased in extrajudicial foreclosure proceedings. 35 Construing the said section, this Court stated in the
aforestated case of Reyes vs. Hamada.
Now, therefore, the mortgagor hereby conveys and transfer to the mortgage, by way of mortgage, the
following described personal property, situated in the City of Manila, and now in possession of the mortgagor,
In other words, before the expiration of the 1-year period within which the judgment-debtor or mortgagor may to wit:
redeem the property, the purchaser thereof is not entitled, as a matter of right, to possession of the same.
Thus, while it is true that the Rules of Court allow the purchaser to receive the rentals if the purchased
property is occupied by tenants, he is, nevertheless, accountable to the judgment-debtor or mortgagor as the (1) All of the right, title, and interest of the mortgagor in and to the contract of lease hereinabove referred to,
case may be, for the amount so received and the same will be duly credited against the redemption price and in and to the premises the subject of the said lease;
when the said debtor or mortgagor effects the redemption. Differently stated, the rentals receivable from
(2) The building, property of the mortgagor, situated on the aforesaid leased premises.
After said document had been duly acknowledge and delivered, the petitioner caused the same to be
presented to the respondent, Joaquin Jaramillo, as register of deeds of the City of Manila, for the purpose of
having the same recorded in the book of record of chattel mortgages. Upon examination of the instrument, the
respondent was of the opinion that it was not a chattel mortgage, for the reason that the interest therein
mortgaged did not appear to be personal property, within the meaning of the Chattel Mortgage Law, and
registration was refused on this ground only.
In the light of what has been said it becomes unnecessary for us to pass upon the point whether the interests
conveyed in the instrument now in question are real or personal; and we declare it to be the duty of the
register of deeds to accept the estimate placed upon the document by the petitioner and to register it, upon
payment of the proper fee.
The demurrer is overruled; and unless within the period of five days from the date of the notification hereof,
the respondent shall interpose a sufficient answer to the petition, the writ of mandamus will be issued, as
prayed, but without costs. So ordered.

We are of the opinion that the position taken by the respondent is untenable; and it is his duty to accept the LEON SIBAL , plaintiff-appellant,
proper fee and place the instrument on record. The duties of a register of deeds in respect to the registration vs.
of chattel mortgage are of a purely ministerial character; and no provision of law can be cited which confers EMILIANO J. VALDEZ ET AL., defendants.
upon him any judicial or quasi-judicial power to determine the nature of any document of which registration is EMILIANO J. VALDEZ, appellee.
sought as a chattel mortgage.

J. E. Blanco for appellant.

The original provisions touching this matter are contained in section 15 of the Chattel Mortgage Law (Act No. Felix B. Bautista and Santos and Benitez for appellee.
1508), as amended by Act No. 2496; but these have been transferred to section 198 of the Administrative
Code, where they are now found. There is nothing in any of these provisions conferring upon the register of
deeds any authority whatever in respect to the "qualification," as the term is used in Spanish law, of chattel JOHNSON, J.:
mortgage. His duties in respect to such instruments are ministerial only. The efficacy of the act of recording a
chattel mortgage consists in the fact that it operates as constructive notice of the existence of the contract,
The action was commenced in the Court of First Instance of the Province of Tarlac on the 14th day of
and the legal effects of the contract must be discovered in the instrument itself in relation with the fact of
December 1924. The facts are about as conflicting as it is possible for facts to be, in the trial causes.
notice. Registration adds nothing to the instrument, considered as a source of title, and affects nobody's rights
except as a specifies of notice.
As a first cause of action the plaintiff alleged that the defendant Vitaliano Mamawal, deputy sheriff of the
Province of Tarlac, by virtue of a writ of execution issued by the Court of First Instance of Pampanga, attached
Articles 334 and 335 of the Civil Code supply no absolute criterion for discriminating between real property
and sold to the defendant Emiliano J. Valdez the sugar cane planted by the plaintiff and his tenants on seven
and personal property for purpose of the application of the Chattel Mortgage Law. Those articles state rules
parcels of land described in the complaint in the third paragraph of the first cause of action; that within one
which, considered as a general doctrine, are law in this jurisdiction; but it must not be forgotten that under
year from the date of the attachment and sale the plaintiff offered to redeem said sugar cane and tendered to
given conditions property may have character different from that imputed to it in said articles. It is undeniable
the defendant Valdez the amount sufficient to cover the price paid by the latter, the interest thereon and any
that the parties to a contract may by agreement treat as personal property that which by nature would be real
assessments or taxes which he may have paid thereon after the purchase, and the interest corresponding
property; and it is a familiar phenomenon to see things classed as real property for purposes of taxation which
thereto and that Valdez refused to accept the money and to return the sugar cane to the plaintiff.
on general principle might be considered personal property. Other situations are constantly arising, and from
time to time are presented to this court, in which the proper classification of one thing or another as real or
personal property may be said to be doubtful. As a second cause of action, the plaintiff alleged that the defendant Emiliano J. Valdez was attempting to
harvest the palay planted in four of the seven parcels mentioned in the first cause of action; that he had
harvested and taken possession of the palay in one of said seven parcels and in another parcel described in
The point submitted to us in this case was determined on September 8, 1914, in an administrative ruling
the second cause of action, amounting to 300 cavans; and that all of said palay belonged to the plaintiff.
promulgated by the Honorable James A. Ostrand, now a Justice of this Court, but acting at that time in the
capacity of Judge of the fourth branch of the Court of First Instance of the Ninth Judicial District, in the City of
Manila; and little of value can be here added to the observations contained in said ruling. We accordingly Plaintiff prayed that a writ of preliminary injunction be issued against the defendant Emiliano J. Valdez his
quote therefrom as follows: attorneys and agents, restraining them (1) from distributing him in the possession of the parcels of land
described in the complaint; (2) from taking possession of, or harvesting the sugar cane in question; and (3)
from taking possession, or harvesting the palay in said parcels of land. Plaintiff also prayed that a judgment be
It is unnecessary here to determine whether or not the property described in the document in question is real
rendered in his favor and against the defendants ordering them to consent to the redemption of the sugar
or personal; the discussion may be confined to the point as to whether a register of deeds has authority to
cane in question, and that the defendant Valdez be condemned to pay to the plaintiff the sum of P1,056 the
deny the registration of a document purporting to be a chattel mortgage and executed in the manner and form
value of palay harvested by him in the two parcels above-mentioned ,with interest and costs.
prescribed by the Chattel Mortgage Law.

On December 27, 1924, the court, after hearing both parties and upon approval of the bond for P6,000 filed by
Then, after quoting section 5 of the Chattel Mortgage Law (Act No. 1508), his Honor continued:
the plaintiff, issued the writ of preliminary injunction prayed for in the complaint.

Based principally upon the provisions of section quoted the Attorney-General of the Philippine Islands, in an
The defendant Emiliano J. Valdez, in his amended answer, denied generally and specifically each and every
opinion dated August 11, 1909, held that a register of deeds has no authority to pass upon the capacity of the
allegation of the complaint and step up the following defenses:
parties to a chattel mortgage which is presented to him for record. A fortiori a register of deeds can have no
authority to pass upon the character of the property sought to be encumbered by a chattel mortgage. Of
course, if the mortgaged property is real instead of personal the chattel mortgage would no doubt be held (a) That the sugar cane in question had the nature of personal property and was not, therefore, subject to
ineffective as against third parties, but this is a question to be determined by the courts of justice and not by redemption;
the register of deeds.

(b) That he was the owner of parcels 1, 2 and 7 described in the first cause of action of the complaint;
In Leung Yee vs. Frank L. Strong Machinery Co. and Williamson (37 Phil., 644), this court held that where the
interest conveyed is of the nature of real, property, the placing of the document on record in the chattel
mortgage register is a futile act; but that decision is not decisive of the question now before us, which has (c) That he was the owner of the palay in parcels 1, 2 and 7; and
reference to the function of the register of deeds in placing the document on record.
(d) That he never attempted to harvest the palay in parcels 4 and 5.
The defendant Emiliano J. Valdez by way of counterclaim, alleged that by reason of the preliminary injunction
he was unable to gather the sugar cane, sugar-cane shoots (puntas de cana dulce) palay in said parcels of
land, representing a loss to him of P8,375.20 and that, in addition thereto, he suffered damages amounting to
P3,458.56. He prayed, for a judgment (1) absolving him from all liability under the complaint; (2) declaring him
to be the absolute owner of the sugar cane in question and of the palay in parcels 1, 2 and 7; and (3) ordering
the plaintiff to pay to him the sum of P11,833.76, representing the value of the sugar cane and palay in
question, including damages.
Upon the issues thus presented by the pleadings the cause was brought on for trial. After hearing the
evidence, and on April 28, 1926, the Honorable Cayetano Lukban, judge, rendered a judgment against the
plaintiff and in favor of the defendants
(1) Holding that the sugar cane in question was personal property and, as such, was not subject to
redemption;
(2) Absolving the defendants from all liability under the complaint; and
(3) Condemning the plaintiff and his sureties Cenon de la Cruz, Juan Sangalang and Marcos Sibal to jointly
and severally pay to the defendant Emiliano J. Valdez the sum of P9,439.08 as follows:
(a) P6,757.40, the value of the sugar cane;
(b) 1,435.68, the value of the sugar-cane shoots;
(c) 646.00, the value of palay harvested by plaintiff;
(d) 600.00, the value of 150 cavans of palay which the defendant was not able to raise by reason
of the injunction, at P4 cavan. 9,439.08 From that judgment the plaintiff appealed and in his
assignments of error contends that the lower court erred: (1) In holding that the sugar cane in
question was personal property and, therefore, not subject to redemption;
(2) In holding that parcels 1 and 2 of the complaint belonged to Valdez, as well as parcels 7 and 8, and that
the palay therein was planted by Valdez;
(3) In holding that Valdez, by reason of the preliminary injunction failed to realized P6,757.40 from the sugar
cane and P1,435.68 from sugar-cane shoots (puntas de cana dulce);
(4) In holding that, for failure of plaintiff to gather the sugar cane on time, the defendant was unable to raise
palay on the land, which would have netted him the sum of P600; and.
(5) In condemning the plaintiff and his sureties to pay to the defendant the sum of P9,439.08.
It appears from the record:
(1) That on May 11, 1923, the deputy sheriff of the Province of Tarlac, by virtue of writ of execution in civil
case No. 20203 of the Court of First Instance of Manila (Macondray & Co., Inc. vs. Leon Sibal),levied an
attachment on eight parcels of land belonging to said Leon Sibal, situated in the Province of Tarlac,
designated in the second of attachment as parcels 1, 2, 3, 4, 5, 6, 7 and 8 (Exhibit B, Exhibit 2-A).
(2) That on July 30, 1923, Macondray & Co., Inc., bought said eight parcels of land, at the auction held by the
sheriff of the Province of Tarlac, for the sum to P4,273.93, having paid for the said parcels separately as
follows (Exhibit C, and 2-A):
Parcel
1 ..................................................................... P1.00
2 ..................................................................... 2,000.00
3 ..................................................................... 120.93
4 ..................................................................... 1,000.00
5 ..................................................................... 1.00
6 ..................................................................... 1.00
7 with the house thereon .......................... 150.00
8 ..................................................................... 1,000.00
==========
4,273.93
(3) That within one year from the sale of said parcel of land, and on the 24th day of September, 1923, the
judgment debtor, Leon Sibal, paid P2,000 to Macondray & Co., Inc., for the account of the redemption price of
said parcels of land, without specifying the particular parcels to which said amount was to applied. The
redemption price said eight parcels was reduced, by virtue of said transaction, to P2,579.97 including interest
(Exhibit C and 2).
The record further shows:
(1) That on April 29, 1924, the defendant Vitaliano Mamawal, deputy sheriff of the Province of Tarlac, by virtue
of a writ of execution in civil case No. 1301 of the Province of Pampanga (Emiliano J. Valdez vs. Leon Sibal
1. the same parties in the present case), attached the personal property of said Leon Sibal located in
Tarlac, among which was included the sugar cane now in question in the seven parcels of land described in
the complaint (Exhibit A).
(2) That on May 9 and 10, 1924, said deputy sheriff sold at public auction said personal properties of Leon
Sibal, including the sugar cane in question to Emilio J. Valdez, who paid therefor the sum of P1,550, of which
P600 was for the sugar cane (Exhibit A).
(3) That on April 29,1924, said deputy sheriff, by virtue of said writ of execution, also attached the real
property of said Leon Sibal in Tarlac, including all of his rights, interest and participation therein, which real
property consisted of eleven parcels of land and a house and camarin situated in one of said parcels (Exhibit
A).
(4) That on June 25, 1924, eight of said eleven parcels, including the house and the camarin, were bought by
Emilio J. Valdez at the auction held by the sheriff for the sum of P12,200. Said eight parcels were designated
in the certificate of sale as parcels 1, 3, 4, 5, 6, 7, 10 and 11. The house and camarin were situated on parcel
7 (Exhibit A).
(5) That the remaining three parcels, indicated in the certificate of the sheriff as parcels 2, 12, and 13, were
released from the attachment by virtue of claims presented by Agustin Cuyugan and Domiciano Tizon (Exhibit
A).
(6) That on the same date, June 25, 1924, Macondray & Co. sold and conveyed to Emilio J. Valdez for
P2,579.97 all of its rights and interest in the eight parcels of land acquired by it at public auction held by the
deputy sheriff of Tarlac in connection with civil case No. 20203 of the Court of First Instance of Manila, as
stated above. Said amount represented the unpaid balance of the redemption price of said eight parcels, after
payment by Leon Sibal of P2,000 on September 24, 1923, fro the account of the redemption price, as stated
above. (Exhibit C and 2).
The foregoing statement of facts shows:
(1) The Emilio J. Valdez bought the sugar cane in question, located in the seven parcels of land described in
the first cause of action of the complaint at public auction on May 9 and 10, 1924, for P600.
(2) That on July 30, 1923, Macondray & Co. became the owner of eight parcels of land situated in the
Province of Tarlac belonging to Leon Sibal and that on September 24, 1923, Leon Sibal paid to Macondray &
Co. P2,000 for the account of the redemption price of said parcels.
(3) That on June 25, 1924, Emilio J. Valdez acquired from Macondray & Co. all of its rights and interest in the
said eight parcels of land.
(4) That on June 25, 1924, Emilio J. Valdez also acquired all of the rights and interest which Leon Sibal had or
might have had on said eight parcels by virtue of the P2,000 paid by the latter to Macondray.
(5) That Emilio J. Valdez became the absolute owner of said eight parcels of land.
The first question raised by the appeal is, whether the sugar cane in question is personal or real property. It is
contended that sugar cane comes under the classification of real property as "ungathered products" in
paragraph 2 of article 334 of the Civil Code. Said paragraph 2 of article 334 enumerates as real property the
following: Trees, plants, and ungathered products, while they are annexed to the land or form an integral part
of any immovable property." That article, however, has received in recent years an interpretation by
the Tribunal Supremo de Espaa, which holds that, under certain conditions, growing crops may be
considered as personal property. (Decision of March 18, 1904, vol. 97, Civil Jurisprudence of Spain.)
Manresa, the eminent commentator of the Spanish Civil Code, in discussing section 334 of the Civil Code, in
view of the recent decisions of the supreme Court of Spain, admits that growing crops are sometimes
considered and treated as personal property. He says:
No creemos, sin embargo, que esto excluya la excepcionque muchos autores hacen tocante a la venta de
toda cosecha o de parte de ella cuando aun no esta cogida (cosa frecuente con la uvay y la naranja), y a la
de lenas, considerando ambas como muebles. El Tribunal Supremo, en sentencia de 18 de marzo de 1904, al
entender sobre un contrato de arrendamiento de un predio rustico, resuelve que su terminacion por desahucio
no extingue los derechos del arrendario, para recolectar o percibir los frutos correspondientes al ao agricola,
dentro del que nacieron aquellos derechos, cuando el arrendor ha percibido a su vez el importe de la renta
integra correspondiente, aun cuando lo haya sido por precepto legal durante el curso del juicio, fundandose
para ello, no solo en que de otra suerte se daria al desahucio un alcance que no tiene, sino en que, y esto es
lo interesante a nuestro proposito, la consideracion de inmuebles que el articulo 334 del Codigo Civil atribuge
a los frutos pendientes, no les priva del caracter de productos pertenecientes, como tales, a quienes a ellos
tenga derecho, Ilegado el momento de su recoleccion.
xxx xxx xxx
Mas actualmente y por virtud de la nueva edicion de la Ley Hipotecaria, publicada en 16 de diciembre de
1909, con las reformas introducidas por la de 21 de abril anterior, la hipoteca, salvo pacto expreso que
disponga lo contrario, y cualquiera que sea la naturaleza y forma de la obligacion que garantice, no
comprende los frutos cualquiera que sea la situacion en que se encuentre. (3 Manresa, 5. edicion, pags. 22,
23.)
From the foregoing it appears (1) that, under Spanish authorities, pending fruits and ungathered products may
be sold and transferred as personal property; (2) that the Supreme Court of Spain, in a case of ejectment of a
lessee of an agricultural land, held that the lessee was entitled to gather the products corresponding to the
agricultural year, because said fruits did not go with the land but belonged separately to the lessee; and (3)
that under the Spanish Mortgage Law of 1909, as amended, the mortgage of a piece of land does not include
the fruits and products existing thereon, unless the contract expressly provides otherwise.
An examination of the decisions of the Supreme Court of Louisiana may give us some light on the question
which we are discussing. Article 465 of the Civil Code of Louisiana, which corresponds to paragraph 2 of
article 334 of our Civil Code, provides: "Standing crops and the fruits of trees not gathered, and trees before
they are cut down, are likewise immovable, and are considered as part of the land to which they are attached."
The Supreme Court of Louisiana having occasion to interpret that provision, held that in some cases "standing
crops" may be considered and dealt with as personal property. In the case of Lumber Co. vs. Sheriff and Tax
Collector (106 La., 418) the Supreme Court said: "True, by article 465 of the Civil Code it is provided that
'standing crops and the fruits of trees not gathered and trees before they are cut down . . . are considered as
part of the land to which they are attached, but the immovability provided for is only one in abstracto and
without reference to rights on or to the crop acquired by others than the owners of the property to which the
crop is attached. . . . The existence of a right on the growing crop is a mobilization by anticipation, a gathering
as it were in advance, rendering the crop movable quoad the right acquired therein. Our jurisprudence
recognizes the possible mobilization of the growing crop." (Citizens' Bank vs. Wiltz, 31 La. Ann., 244;
Porche vs. Bodin, 28 La., Ann., 761; Sandel vs. Douglass, 27 La. Ann., 629; Lewis vs. Klotz, 39 La. Ann.,
267.)
"It is true," as the Supreme Court of Louisiana said in the case of Porche vs. Bodin (28 La. An., 761) that
"article 465 of the Revised Code says that standing crops are considered as immovable and as part of the
land to which they are attached, and article 466 declares that the fruits of an immovable gathered or produced
while it is under seizure are considered as making part thereof, and incurred to the benefit of the person
making the seizure. But the evident meaning of these articles, is where the crops belong to the owner of the
plantation they form part of the immovable, and where it is seized, the fruits gathered or produced inure to the
benefit of the seizing creditor.
A crop raised on leased premises in no sense forms part of the immovable. It belongs to the lessee, and may
be sold by him, whether it be gathered or not, and it may be sold by his judgment creditors. If it necessarily
forms part of the leased premises the result would be that it could not be sold under execution separate and
apart from the land. If a lessee obtain supplies to make his crop, the factor's lien would not attach to the crop
as a separate thing belonging to his debtor, but the land belonging to the lessor would be affected with the
recorded privilege. The law cannot be construed so as to result in such absurd consequences.
In the case of Citizen's Bank vs. Wiltz (31 La. Ann., 244)the court said:
If the crop quoad the pledge thereof under the act of 1874 was an immovable, it would be destructive of the
very objects of the act, it would render the pledge of the crop objects of the act, it would render the pledge of
the crop impossible, for if the crop was an inseparable part of the realty possession of the latter would be
necessary to that of the former; but such is not the case. True, by article 465 C. C. it is provided that "standing
crops and the fruits of trees not gathered and trees before they are cut down are likewise immovable and are
considered as part of the land to which they are attached;" but the immovability provided for is only one in
abstracto and without reference to rights on or to the crop acquired by other than the owners of the property to
which the crop was attached. The immovability of a growing crop is in the order of things temporary, for the
crop passes from the state of a growing to that of a gathered one, from an immovable to a movable. The
existence of a right on the growing crop is a mobilization by anticipation, a gathering as it were in advance,
rendering the crop movable quoad the right acquired thereon. The provision of our Code is identical with the
Napoleon Code 520, and we may therefore obtain light by an examination of the jurisprudence of France.
The rule above announced, not only by the Tribunal Supremo de Espaa but by the Supreme Court of
Louisiana, is followed in practically every state of the Union.
From an examination of the reports and codes of the State of California and other states we find that the settle
doctrine followed in said states in connection with the attachment of property and execution of judgment is,
that growing crops raised by yearly labor and cultivation are considered personal property. (6 Corpuz Juris, p.
197; 17 Corpus Juris, p. 379; 23 Corpus Juris, p. 329: Raventas vs. Green, 57 Cal., 254; Norris vs. Watson,
55 Am. Dec., 161; Whipple vs. Foot, 3 Am. Dec., 442; 1 Benjamin on Sales, sec. 126; McKenzie vs. Lampley,
31 Ala., 526; Crine vs. Tifts and Co., 65 Ga., 644; Gillitt vs. Truax, 27 Minn., 528; Preston vs. Ryan, 45 Mich.,
174; Freeman on Execution, vol. 1, p. 438; Drake on Attachment, sec. 249; Mechem on Sales, sec. 200 and The description of the parcels in the complaint is as follows:
763.)

1. La caa dulce sembrada por los inquilinos del ejecutado Leon Sibal 1. en una parcela de terreno de la
Mr. Mechem says that a valid sale may be made of a thing, which though not yet actually in existence, is pertenencia del citado ejecutado, situada en Libutad, Culubasa, Bamban, Tarlac, de unas dos hectareas poco
reasonably certain to come into existence as the natural increment or usual incident of something already in mas o menos de superficie.
existence, and then belonging to the vendor, and then title will vest in the buyer the moment the thing comes
into existence. (Emerson vs. European Railway Co., 67 Me., 387; Cutting vs. Packers Exchange, 21 Am. St.
Rep., 63.) Things of this nature are said to have a potential existence. A man may sell property of which he is 2. La caa dulce sembrada por el inquilino del ejecutado Leon Sibal 1., Ilamado Alejandro Policarpio, en una
potentially and not actually possessed. He may make a valid sale of the wine that a vineyard is expected to parcela de terreno de la pertenencia del ejecutado, situada en Dalayap, Culubasa, Bamban, Tarlac de unas
produce; or the gain a field may grow in a given time; or the milk a cow may yield during the coming year; or dos hectareas de superficie poco mas o menos." The description of parcel 2 given in the certificate of sale
the wool that shall thereafter grow upon sheep; or what may be taken at the next cast of a fisherman's net; or (Exhibit A) is as follows:
fruits to grow; or young animals not yet in existence; or the good will of a trade and the like. The thing sold,
however, must be specific and identified. They must be also owned at the time by the vendor. (Hull vs. Hull, 48
2a. Terreno palayero situado en Culubasa, Bamban, Tarlac, de 177,090 metros cuadrados de superficie, linda
Conn., 250 [40 Am. Rep., 165].)
al N. con Canuto Sibal, Esteban Lazatin and Alejandro Dayrit; al E. con Francisco Dizon, Felipe Mau and
others; al S. con Alejandro Dayrit, Isidro Santos and Melecio Mau; y al O. con Alejandro Dayrit and Paulino
It is contended on the part of the appellee that paragraph 2 of article 334 of the Civil Code has been modified Vergara. Tax No. 2854, vador amillarado P4,200 pesos.
by section 450 of the Code of Civil Procedure as well as by Act No. 1508, the Chattel Mortgage Law. Said
section 450 enumerates the property of a judgment debtor which may be subjected to execution. The pertinent
On the other hand the evidence for the defendant purported to show that parcels 1 and 2 of the complaint
portion of said section reads as follows: "All goods, chattels, moneys, and other property, both real and
were included among the parcels bought by Valdez from Macondray on June 25, 1924, and corresponded to
personal, * * * shall be liable to execution. Said section 450 and most of the other sections of the Code of Civil
parcel 4 in the deed of sale (Exhibit B and 2), and were also included among the parcels bought by Valdez at
Procedure relating to the execution of judgment were taken from the Code of Civil Procedure of California.
the auction of the real property of Leon Sibal on June 25, 1924, and corresponded to parcel 3 in the certificate
The Supreme Court of California, under section 688 of the Code of Civil Procedure of that state (Pomeroy, p.
of sale made by the sheriff (Exhibit A). The description of parcel 4 (Exhibit 2) and parcel 3 (Exhibit A) is as
424) has held, without variation, that growing crops were personal property and subject to execution.
follows:

Act No. 1508, the Chattel Mortgage Law, fully recognized that growing crops are personal property. Section 2
Parcels No. 4. Terreno palayero, ubicado en el barrio de Culubasa,Bamban, Tarlac, I. F. de 145,000
of said Act provides: "All personal property shall be subject to mortgage, agreeably to the provisions of this
metros cuadrados de superficie, lindante al Norte con Road of the barrio of Culubasa that goes to
Act, and a mortgage executed in pursuance thereof shall be termed a chattel mortgage." Section 7 in part
Concepcion; al Este con Juan Dizon; al Sur con Lucio Mao y Canuto Sibal y al Oeste con Esteban Lazatin,
provides: "If growing crops be mortgaged the mortgage may contain an agreement stipulating that the
su valor amillarado asciende a la suma de P2,990. Tax No. 2856.
mortgagor binds himself properly to tend, care for and protect the crop while growing.

As will be noticed, there is hardly any relation between parcels 1 and 2 of the complaint and parcel 4 (Exhibit 2
It is clear from the foregoing provisions that Act No. 1508 was enacted on the assumption that "growing crops"
and B) and parcel 3 (Exhibit A). But, inasmuch as the plaintiff did not care to appear at the trial when the
are personal property. This consideration tends to support the conclusion hereinbefore stated, that paragraph
defendant offered his evidence, we are inclined to give more weight to the evidence adduced by him that to
2 of article 334 of the Civil Code has been modified by section 450 of Act No. 190 and by Act No. 1508 in the
the evidence adduced by the plaintiff, with respect to the ownership of parcels 1 and 2 of the compliant. We,
sense that "ungathered products" as mentioned in said article of the Civil Code have the nature of personal
therefore, conclude that parcels 1 and 2 of the complaint belong to the defendant, having acquired the same
property. In other words, the phrase "personal property" should be understood to include "ungathered
from Macondray & Co. on June 25, 1924, and from the plaintiff Leon Sibal on the same date.
products."

It appears, however, that the plaintiff planted the palay in said parcels and harvested therefrom 190 cavans.
At common law, and generally in the United States, all annual crops which are raised by yearly manurance
There being no evidence of bad faith on his part, he is therefore entitled to one-half of the crop, or 95 cavans.
and labor, and essentially owe their annual existence to cultivation by man, . may be levied on as personal
He should therefore be condemned to pay to the defendant for 95 cavans only, at P3.40 a cavan, or the sum
property." (23 C. J., p. 329.) On this question Freeman, in his treatise on the Law of Executions, says: "Crops,
of P323, and not for the total of 190 cavans as held by the lower court.
whether growing or standing in the field ready to be harvested, are, when produced by annual cultivation, no
part of the realty. They are, therefore, liable to voluntary transfer as chattels. It is equally well settled that they
may be seized and sold under execution. (Freeman on Executions, vol. p. 438.) As to the ownership of parcel 7 of the complaint, the evidence shows that said parcel corresponds to parcel 1
of the deed of sale of Macondray & Co, to Valdez (Exhibit B and 2), and to parcel 4 in the certificate of sale to
Valdez of real property belonging to Sibal, executed by the sheriff as above stated (Exhibit A). Valdez is
We may, therefore, conclude that paragraph 2 of article 334 of the Civil Code has been modified by section
therefore the absolute owner of said parcel, having acquired the interest of both Macondray and Sibal in said
450 of the Code of Civil Procedure and by Act No. 1508, in the sense that, for the purpose of attachment and
parcel.
execution, and for the purposes of the Chattel Mortgage Law, "ungathered products" have the nature of
personal property. The lower court, therefore, committed no error in holding that the sugar cane in question
was personal property and, as such, was not subject to redemption. With reference to the parcel of land in Pacalcal, Tarlac, described in paragraph 3 of the second cause of
action, it appears from the testimony of the plaintiff himself that said parcel corresponds to parcel 8 of the
deed of sale of Macondray to Valdez (Exhibit B and 2) and to parcel 10 in the deed of sale executed by the
All the other assignments of error made by the appellant, as above stated, relate to questions of fact only.
sheriff in favor of Valdez (Exhibit A). Valdez is therefore the absolute owner of said parcel, having acquired the
Before entering upon a discussion of said assignments of error, we deem it opportune to take special notice of
interest of both Macondray and Sibal therein.
the failure of the plaintiff to appear at the trial during the presentation of evidence by the defendant. His
absence from the trial and his failure to cross-examine the defendant have lent considerable weight to the
evidence then presented for the defense. In this connection the following facts are worthy of mention:

Coming not to the ownership of parcels 1 and 2 described in the first cause of action of the complaint, the
plaintiff made a futile attempt to show that said two parcels belonged to Agustin Cuyugan and were the
identical parcel 2 which was excluded from the attachment and sale of real property of Sibal to Valdez on June
25, 1924, as stated above. A comparison of the description of parcel 2 in the certificate of sale by the sheriff
(Exhibit A) and the description of parcels 1 and 2 of the complaint will readily show that they are not the same.
Execution in favor of Macondray & Co., May 11, 1923. Eight parcels of land were attached under said
execution. Said parcels of land were sold to Macondray & Co. on the 30th day of July, 1923. Rice paid
P4,273.93. On September 24, 1923, Leon Sibal paid to Macondray & Co. P2,000 on the redemption of said
parcels of land. (See Exhibits B and C ).
Attachment, April 29, 1924, in favor of Valdez. Personal property of Sibal was attached, including the sugar
cane in question. (Exhibit A) The said personal property so attached, sold at public auction May 9 and 10,
1924. April 29, 1924, the real property was attached under the execution in favor of Valdez (Exhibit A). June
25, 1924, said real property was sold and purchased by Valdez (Exhibit A).
June 25, 1924, Macondray & Co. sold all of the land which they had purchased at public auction on the 30th
day of July, 1923, to Valdez.
As to the loss of the defendant in sugar cane by reason of the injunction, the evidence shows that the sugar
cane in question covered an area of 22 hectares and 60 ares (Exhibits 8, 8-b and 8-c); that said area would
have yielded an average crop of 1039 picos and 60 cates; that one-half of the quantity, or 519 picos and 80
cates would have corresponded to the defendant, as owner; that during the season the sugar was selling at
P13 a pico (Exhibit 5 and 5-A). Therefore, the defendant, as owner, would have netted P 6,757.40 from the
sugar cane in question. The evidence also shows that the defendant could have taken from the sugar cane
1,017,000 sugar-cane shoots (puntas de cana) and not 1,170,000 as computed by the lower court. During the
season the shoots were selling at P1.20 a thousand (Exhibits 6 and 7). The defendant therefore would have
netted P1,220.40 from sugar-cane shoots and not P1,435.68 as allowed by the lower court.
As to the palay harvested by the plaintiff in parcels 1 and 2 of the complaint, amounting to 190 cavans, one-
half of said quantity should belong to the plaintiff, as stated above, and the other half to the defendant. The
court erred in awarding the whole crop to the defendant. The plaintiff should therefore pay the defendant for
95 cavans only, at P3.40 a cavan, or P323 instead of P646 as allowed by the lower court.
The evidence also shows that the defendant was prevented by the acts of the plaintiff from cultivating about
10 hectares of the land involved in the litigation. He expected to have raised about 600 cavans of palay, 300
cavans of which would have corresponded to him as owner. The lower court has wisely reduced his share to
150 cavans only. At P4 a cavan, the palay would have netted him P600.
In view of the foregoing, the judgment appealed from is hereby modified. The plaintiff and his sureties Cenon
de la Cruz, Juan Sangalang and Marcos Sibal are hereby ordered to pay to the defendant jointly and severally
the sum of P8,900.80, instead of P9,439.08 allowed by the lower court, as follows:
P6,757.40 for the sugar cane;
1,220.40 for the sugar cane shoots;
323.00 for the palay harvested by plaintiff in parcels 1 and 2;
600.00 for the palay which defendant could have raised.
8,900.80
============
In all other respects, the judgment appealed from is hereby affirmed, with costs. So ordered.
FAUSTINO IGNACIO, applicant-appellant,
vs.
THE DIRECTOR OF LANDS and LAUREANO VALERIANO, oppositors-appellees.
Acting Assistant Solicitor General Pacifico P. de Castro and Solicitor Crispin V. Bautista for appellee Director
of Lands.
Benjamin H. Aquino for appellee Laureano Veleriano.
MONTEMAYOR, J.:
Faustino Ignacio is appealing the decision of the Court of First Instance of Rizal, dismissing his application for
the registration of a parcel of land.
On January 25, 1950, Ignacio filed an application for the registration of a parcel of land (mangrove), situated in
barrio Gasac, Navotas, Rizal, with an area of 37,877 square meters. Later, he amended his application by
alleging among others that he owned the parcel applied for by right of accretion. To the application, the
Director of Lands, Laureano Valeriano and Domingo Gutierrez filed oppositions. Gutierrez later withdrew his
opposition. The Director of Lands claimed the parcel applied for as a portion of the public domain, for the
reason that neither the applicant nor his predecessor-in-interest possessed sufficient title thereto, not having
acquired it either by composition title from the Spanish government or by possessory information title under
the Royal Decree of February 13, 1894, and that he had not possessed the same openly, continuously and
adversely under a bona fide claim of ownership since July 26, 1894. In his turn, Valeriano alleged he was
holding the land by virtue of a permit granted him by the Bureau of Fisheries, issued on January 13, 1947, and
approved by the President.
It is not disputed that the land applied for adjoins a parcel owned by the applicant which he had acquired from
the Government by virtue of a free patent title in 1936. It has also been established that the parcel in question
was formed by accretion and alluvial deposits caused by the action of the Manila Bay which boarders it on the
southwest. Applicant Ignacio claims that he had occupied the land since 1935, planting it with api-api trees,
and that his possession thereof had been continuous, adverse and public for a period of twenty years until
said possession was distributed by oppositor Valeriano.
On the other hand, the Director of Lands sought to prove that the parcel is foreshore land, covered by the ebb
and flow of the tide and, therefore, formed part of the public domain.
After hearing, the trial court dismissed the application, holding that the parcel formed part of the public domain.
In his appeal, Ignacio assigns the following errors:
I. The lower court erred in holding that the land in question, altho an accretion to the land of the applicant-
appellant, does not belong to him but forms part of the public domain.
II. Granting that the land in question forms part of the public domain, the lower court nevertheless erred in not
declaring the same to be the necessary for any public use or purpose and in not ordering in the present
registration proceedings.
III. The lower court erred in not holding that the land in question now belongs to the applicant-appellant by
virtue of acquisitive prescription, the said land having ceased to be of the public domain and became the
private or patrimonial property of the State.
IV. The lower court erred in not holding that the oppositor Director of Lands is now in estoppel from claiming
the land in question as a land of the public domain.
Appellant contends that the parcel belongs to him by the law of accretion, having been formed by gradual
deposit by action of the Manila Bay, and he cites Article 457 of the New Civil Code (Article 366, Old Civil
Code), which provides that:
To the owners of lands adjoining the banks of rivers belong the accretion which they gradually receive from
the effects of the current of the waters.
The article cited is clearly inapplicable because it refers to accretion or deposits on the banks of rivers, while
the accretion in the present case was caused by action of the Manila Bay.
Appellant next contends that Articles 1, 4 and 5 of the Law of Waters are not applicable because they refer to
accretions formed by the sea, and that Manila Bay cannot be considered as a sea. We find said contention
untenable. A bay is a part of the sea, being a mere indentation of the same:
Bay. An opening into the land where the water is shut in on all sides except at the entrance; an inlet of the
sea; an arm of the sea, distinct from a river, a bending or curbing of the shore of the sea or of a lake. 7 C.J.
1013-1014 (Cited in Francisco, Philippine Law of Waters and Water Rights p. 6)
Moreover, this Tribunal has some cases applied the Law of Waters on Lands bordering Manila Bay. (See the
cases of Ker & Co. vs. Cauden, 6 Phil., 732, involving a parcel of land bounded on the sides by Manila Bay,
where it was held that such land formed by the action of the sea is property of the State; Francisco vs.
Government of the P.I., 28 Phil., 505, involving a land claimed by a private person and subject to the ebb and
flow of the tides of the Manila Bay).
Then the applicant argues that granting that the land in question formed part of the public domain, having
been gained from the sea, the trial court should have declared the same no longer necessary for any public
use or purpose, and therefore, became disposable and available for private ownership. Article 4 of the Law of
Waters of 1866 reads thus:
ART. 4. Lands added to the shores by accretions and alluvial deposits caused by the action of the sea, form
part of the public domain. When they are no longer washed by the waters of the sea and are not necessary for
purposes of public utility, or for the establishment of special industries, or for the coastguard service, the
Government shall declare them to be the property of the owners of the estates adjacent thereto and as
increment thereof.
Interpreting Article 4 of the Law of Waters of 1866, in the case of Natividad vs. Director of Lands, (CA) 37 Off.
Gaz., 2905, it was there held that:
Article 4 of the Law of Waters of 1866 provides that when a portion of the shore is no longer washed by the
waters of the sea and is not necessary for purposes of public utility, or for the establishment of special
industries, or for coastguard service, the government shall declare it to be the property of the owners of the
estates adjacent thereto and as an increment thereof. We believe that only the executive and possibly the
legislative departments have the authority and the power to make the declaration that any land so gained by
the sea, is not necessary for purposes of public utility, or for the establishment of special industries, on for
coast-guard service. If no such declaration has been made by said departments, the lot in question forms part
of the public domain. (Natividad vs. Director of Lands, supra.)
The reason for this pronouncement, according to this Tribunal in the case of Vicente Joven y Monteverde vs.
Director of Lands, 93 Phil., 134, (cited in Velayo's Digest, VI. I, p. 52).
. . . is undoubtedly that the courts are neither primarily called upon, nor indeed in a position to determine
whether any public land are to be used for the purposes specified in Article 4 of the Law of Waters.
Consequently, until a formal declaration on the part of the Government, through the executive department or
the Legislature, to the effect that the land in question is no longer needed for coast guard service, for public
use or for special industries, they continue to be part of the public domain, not available for private
appropriation or ownership.
Appellant next contends that he had acquired the parcel in question through acquisitive prescription, having
possessed the same for over ten years. In answer, suffice it to say that land of the public domain is not subject
to ordinary prescription. In the case of Insular Government vs. Aldecoa & Co., 19 Phil., 505 this Court said:
The occupation or material possession of any land formed upon the shore by accretion, without previous
permission from the proper authorities, although the occupant may have held the same as owner for
seventeen years and constructed a wharf on the land, is illegal and is a mere detainer, inasmuch as such land
is outside of the sphere of commerce; it pertains to the national domain; it is intended for public uses and for
the benefit of those who live nearby.
We deem it unnecessary to discuss the other points raised in the appeal.
In view of the foregoing, the appealed decision is hereby affirmed, with costs.
MANILA LODGE NO. 761, BENEVOLENT AND PROTECTIVE ORDER OF THE ELKS, INC., petitioner,
vs.
THE HONORABLE COURT OF APPEALS, CITY OF MANILA, and TARLAC DEVELOPMENT
CORPORATION, respondents.
No. L-41012 September 30, 1976
TARLAC DEVELOPMENT CORPORATION, petitioner,
vs.
HONORABLE COURT OF APPEALS, CITY OF MANILA, LODGE NO. 761, BENEVOLENT AND
PROTECTIVE ORDER OF ELKS, INC., respondents.
CASTRO, C.J.:t.hqw
STATEMENT OF THE CASE AND STATEMENTOF THE FACTS
These two cases are petitions on certiorari to review the decision dated June 30, 1975 of the Court of Appeals
in CA-G.R. No. 51590-R entitled "Tarlac Development Corporation vs. City of Manila, and Manila Lodge No.
761, Benevolent and Protective Order of Elks, Inc.," affirming the trial court's finding in Civil Case No. 83009
that the property subject of the decision a quo is a "public park or plaza."
On June 26, 1905 the Philippine Commission enacted Act No. l360 which authorized the City of Manila to
reclaim a portion of Manila Bay. The reclaimed area was to form part of the Luneta extension. The Act
provided that the reclaimed area "Shall be the property of the City of Manila" and that "the City of Manila is
hereby authorized to set aside a tract of the reclaimed land formed by the Luneta extension x x x at the north
end not to exceed five hundred feet by six hundred feet in size, for a hotel site, and to lease the same, with the
approval of the Governor General, to a responsible person or corporation for a term not exceed ninety-nine
years."
Subsequently, the Philippine Commission passed on May 18, 1907 Act No. 1657, amending Act No. 1360, so
as to authorize the City of' Manila either to lease or to sell the portion set aside as a hotel site.
The total area reclaimed was a little over 25 hectares. The City of Manila applied for the registration of the
reclaimed area, and on January 20, 1911, O.C.T. No. 1909 was issued in the name of the City of Manila. The
title described the registered land as "un terreno conocido con el nombre de Luneta Extension, situato en el
distrito de la Ermita x x x." The registration was "subject, however to such of the incumbrances mentioned in
Article 39 of said law (Land Registration Act) as may be subsisting" and "sujeto a las disposiciones y
condiciones impuestas en la Ley No. 1360; y sujeto tambein a los contratos de venta, celebrados y otorgados
por la Ciudad de Manila a favor del Army and Navy Club y la Manila Lodge No. 761, Benevolent and
Protective Order of Elks, fechados respectivamente, en 29 de Diciembre de 1908 y 16 de Enero de 1909." 1
On July 13, 1911 the City of Manila, affirming a prior sale dated January 16, 1909 cancelled 5,543.07 square
meters of the reclaimed area to the Manila Lodge No. 761, Benevolent and Protective Order of Elks of the
U.S.A. (BPOE, for short) on the basis of which TCT No. 2195 2 was issued to the latter over the Marcela de
terreno que es parte de la Luneta Extension, Situada en el Distrito le la Ermita ... ." At the back of this title vas
annotated document 4608/T-1635, which in part reads as follows: "que la citada Ciusdad de Manila tendra
derecho a su opcion, de recomparar la expresada propiedad para fines publicos solamete in cualquier tiempo
despues de cincuenta anos desde el 13 le Julio le 1911, precio de la misma propiedad, mas el valor que
entonces tengan las mejoras."
For the remainder of the Luneta Extension, that is, after segregating therefrom the portion sold to the Manila
Lodge No. 761, PBOE, a new Certificate of Title No. 2196 3 was issued on July 17, 1911 to the City of Manila.
Manila Lodge No. 761, BPOE, subsequently sold the said 5,543.07 square meters to the Elks Club, Inc., to
which was issued TCT No. 67488. 4 The registered owner, "The Elks Club, Inc.," was later changed by court
oder to "Manila Lodge No. 761, Benevolent and Protective Order of Elks, Inc."
In January 1963 the BPOE. petitioned the Court of First Instance of Manila, Branch IV, for the cancellation of
the right of the City of Manila to repurchase the property This petition was granted on February 15, 1963.
On November 19, 1963 the BPOE sold for the sum of P4,700,000 the land together with all the improvements
thereon to the Tarlac Development Corporation (TDC, for short) which paid P1,700.000 as down payment and
mortgaged to the vendor the same realty to secure the payment of the balance to be paid in quarterly
installments.5At the time of the sale,, there was no annotation of any subsisting lien on the title to the property.
On December 12, 1963 TCT No. 73444 was issued to TDC over the subject land still described as "UNA
PARCELA DE TERRENO, que es parte de la Luneta Extension, situada en el Distrito de Ermita ... ."
In June 1964 the City of Manila filed with the Court of First Instance of Manila a petition for the reannotation of
its right to repurchase; the court, after haering, issued an order, dated November 19, 1964, directing the
Register of Deeds of the City of Manila to reannotate in toto the entry regarind the right of the City of Manila to
repurchase the property after fifty years. From this order TDC and BPOE appealed to this Court which on July
31, 1968 affirmed in G.R. Nos. L-24557 and L-24469 the trial court's order of reannotation, but reserved to
TDC the right to bring another action for the clarification of its rights.
As a consequence of such reservation, TDC filed on April 28, 1971 against the City of Manila and the Manila
Lodge No. 761, BPOE, a complaint, docketed as Civil Case No. 83009 of the Court of First Instance of Manila,
containing three causes of action and praying -
a) On the first cause of action, that the plaintiff TDC be declared to have purchased the parcel of land now in
question with the buildings and improvements thereon from the defendant BPOE for value and in good faith,
and accordingly ordering the cancellation of Entry No. 4608/T-1635 on Transfer Certificate of Title No. 73444
in the name of the Plaintiff;
b) On the second cause of action, ordering the defendant City of Manila to pay the plaintiff TDC damages in
the sum of note less than one hundred thousand pesos (P100,000.00);
c) On the third cause of action, reserving to the plaintiff TDC the right to recover from the defendant BPOE the
amounts mentioned in par. XVI of the complaint in accordance with Art. 1555 of the Civil Code, in the remote
event that the final judgment in this case should be that the parcel of land now in question is a public park; and
d) For costs, and for such other and further relief as the Court may deem just and equitable. 6
Therein defendant City of Manila, in its answer dated May 19, 1971, admitted all the facts alleged in the first
cause of action except the allegation that TDC purchased said property "for value and in good faith," but
denied for lack of knowledge or information the allegations in the second and third causes of action. As,
special and affirmative defense, the City of Manila claimed that TDC was not a purchaser in good faith for it
had actual notice of the City's right to repurchase which was annotated at the back of the title prior to its
cancellation, and that, assuming arguendo that TDC had no notice of the right to repurchase, it was,
nevertheless, under obligation to investigate inasmuch as its title recites that the property is a part of the
Luneta extension. 7
The Manila Lodge No. 761, BPOE, in its answer dated June 7, 1971, admitted having sold the land together
with the improvements thereon for value to therein plaintiff which was in good faith, but denied for lack of
knowledge as to their veracity the allegations under the second cause of action. It furthermore admitted that
TDC had paid the quarterly installments until October l5, 1964 but claimed that the latter failed without
justifiable cause to pay the subsequent installments. It also asserted that it was a seller for value in good faith
without having misrepresented or concealed tacts relative to the title on the property. As counterclaim, Manila
Lodge No. 761 (BPOE) sought to recover the balance of the purchase price plus interest and costs. 8
On June 15, 1971 TDC answered the aforesaid counterclaim, alleging that its refusal to make further
payments was fully justified. 9
After due trial the court a quo rendered on July 14, 1972 its decision finding the subject land to be part of the
"public park or plaza" and, therefore, part of the public domain. The court consequently declared that the sale
of the subject land by the City of Manila to Manila Lodge No. 761, BPOE, was null and void; that plaintiff TDC
was a purchaser thereof in g faith and for value from BPOE and can enforce its rights against the latter; and
that BPOE is entitled to recover from the City of Manila whatever consideration it had 'paid the latter. 'The
dispositive part of the decision reads: +.wph!1
WHEREFORE, the Court hereby declares that the parcel of land formerly covered by Transfer Certificate of
Title Nos 2195 and 67488 in the name of BPOE and now by Transfer Certificate of Title No. 73444 in the
name of Tarlac Development Corporation is a public' park or plaza, and, consequently, instant complaint is
dimissed, without pronouncement as to costs.
In view of the reservation made by plaintiff Tarlac Development Corporation to recover from defendant BPOE
the amounts mentioned in paragraph XVI of the complaint in accordance with Article 1555 of the Civil Code,
the Court makes no pronouncement on this point. 10
From said decision the therein plaintiff TDC as well as the defendant Manila Lodge No. 761, BPOE, appealed
to the Court of Appeals.
In its appeal docketed as CA-G.R. No. 51590-R, the Manila Lodge No. 761, BPOE, avers that the trial court
committed the following errors, namely:
1. In holding that the property subject of the action is not patrimonial property of the City of Manila; and
2. In holding that the Tarlac Development Corporation may recover and enforce its right against the defendant
BPOE. 11
The Tarlac Development Corporation, on the other hand, asserts that the trial court erred:
(1) In finding that the property in question is or was a public park and in consequently nullifying the sale
thereof by the City of Manila to BPOE;
(2) In applying the cases of Municipality of Cavite vs. Rojas, 30 Phil. 602, and Government vs. Cabangis, 53
Phil. 112, to the case at bar; and
(3) In not holding that the plaintiff-appellant is entitled to ,recover damages from the defendant City of
Manila. 12
Furthermore, TDC as appellee regarding the second assignment of error raised by BPOE, maintained that it
can recover and enforce its rigth against BPOE in the event that the land in question is declared a public park
or part thereof. 13
In its decision promulgated on June 30, 1975, the Court of Appeals concur ed in the findings and conclusions
of the lower court upon the ground that they are supported by he evidence and are in accordance with law,
and accordingly affirmed the lower court's judgment.
Hence, the present petitions for review on certiorari.
G.R. No. L-41001
The Manila Lodge No. 761, BPOE, contends, in its petition for review on certiorari docketed as G.R. No. L-
41001, that the Court of Appeals erred in (1) disregarding the very enabling acts and/or statutes according to
which the subject property was, and still is, patrimonial property of the City of Manila and could therefore be
sold and/or disposed of like any other private property; and (2) in departing from the accepted and usual
course of judicial proceedings when it simply made a general affirmance of the court a quo's findings and
conclusions without bothering to discuss or resolve several vital points stressed by the BPOE in its assigned
errrors. 14
G.R. No. L-41012
The Tarlac Development Corporation, in its petition for review on certiorari docketed as G.R. No. L-41012,
relies on the following grounds for the allowance of its petition:
1. that the Court of Appeals did not correctly interpret Act No. 1360, as amended by Act No. 1657, of the
Philippine Commission; and
2. that the Court of Appeals has departed from the accepted and usual course of judicial proceedings in that it
did not make its own findings but simply recited those of the lower court. 15
ISSUES AND ARGUMENTS
FIRST ISSUE
Upon the first issue, both petitioners claim that the property subject of the action, pursuant to the provisions of
Act No. 1360, as amended by Act No. 1657, was patrimonial property of the City of Manila and not a park or
plaza.
Arguments of Petitioners
In G.R. No. L-41001, the Manila Lodge No. 761, BPOE, admits that "there appears to be some logic in the
conclusion" of the Court of Appeals that "neither Act No. 1360 nor Act No. 1657 could have meant to supply
the City of Manila the authority to sell the subject property which is located at the south end not the north of
the reclaimed area." 16 It argues, however, that when Act No. 1360, as amended, authorized the City of Manila
to undertake the construction of the Luneta extension by reclaimed land from the Manila Bay, and declared
that the reclaimed land shall be the "property of the City of Manila," the State expressly granted the ownership
thereof to the City of Manila which. consequently. could enter into transactions involving it; that upon the
issuance of O.C.T. No. 1909, there could he no doubt that the reclaimed area owned by the City was its
patrimonial property;" that the south end of the reclaimed area could not be for public use for. as argued by
TDC a street, park or promenade can be property for public use pursuant to Article 344 of the Spanish Civil
Code only when it has already been so constructed or laid out, and the subject land, at the time it was sold to
the Elk's Club, was neither actually constructed as a street, park or promenade nor laid out as a street, park or
promenade;" that even assuming that the subject property was at the beginning property of public dominion, it
was subsequently converted into patrimonial property pursuant to Art. 422 of the Civil Code, inasmuch as it
had never been used, red or utilized since it was reclaimed in 1905 for purpose other than this of an ordinary
real estate for sale or lease; that the subject property had never been intended for public use, is further shown
by the fact that it was neither included as a part of the Luneta Park under Plan No. 30 of the National Planning
Commission nor considered a part of the Luneta National Park (now Rizal Park) by Proclamation No. 234
dated December 19, 1955 of President Ramon Magsaysay or by Proclamation Order No. 274 dated October
4, 1967 of President Ferdinand E. Marcos;" 19 that, such being the case, there is no reason why the subject
property should -not be considered as having been converted into patrimonial property, pursuant to the ruling
in Municipality vs. Roa 7 Phil. 20, inasmuch as the City of Manila has considered it as its patrimonial property
not only bringing it under the operation of the Land Registration Act but also by disposing of it; 20 and that to
consider now the subject property as a public plaza or park would not only impair the obligations of the parties
to the contract of sale (rated July 13, 1911, but also authorize deprivation of property without due process of
law. 21
G.R. No. L-410112
In L-41012, the petitioner TDC stresses that the principal issue is the interpretation of Act No. 1360, as
amended by. Act No. 1657 of the Philippine Commission, 22 and avers that inasmuch as Section 6 of Act No.
1360, as amended by Act 1657, provided that the reclamation of the Luneta extension was to be paid for out
of the funds of the City of Manila which was authorized to borrow P350,000 "to be expended in the
construction of Luneta Extension," the reclaimed area became "public land" belonging to the City of Manila
that spent for the reclamation, conformably to the holding in Cabangis, 23 and consequently, said land was
subject to sale and other disposition; that the Insular Government itself considered the reclaimed Luneta
extension as patrimonial property subject to disposition as evidenced by the fact that See. 3 of Act 1360
declared that "the land hereby reclaimed shall be the property of the City of Manila;" that this property cannot
be property for public use for according to Article 344 of the Civil Code, the character of property for public use
can only attach to roads and squares that have already been constructed or at least laid out as such, which
conditions did not obtain regarding the subject land, that Sec. 5 of Act 1360 authorized the City of Manila to
lease the northern part of the reclaimed area for hotel purposes; that Act No. 1657 furthermore authorized the
City of Manila to sell the same; 24 that the express statutory authority to lease or sell the northern part of the
reclaimed area cannot be interpreted to mean that the remaining area could not be sold inasmuch as the
purpose of the statute was not merely to confer authority to sell the northern portion but rather to limit the city's
power of disposition thereof, to wit: to prevent disposition of the northern portion for any purpose other than for
a hotel site that the northern and southern ends of the reclaimed area cannot be considered as extension of
the Luneta for they lie beyond the sides of the original Luneta when extended in the direction of the sea, and
that is the reason why the law authorized the sale of the northern portion for hotel purposes, and, for the same
reason, it is implied that the southern portion could likewise be disposed of. 26
TDC argues likewise that there are several items of uncontradicted circumstantial evidence which may serve
as aids in construing the legislative intent and which demonstrate that the subject property is patrimonial in
nature, to wit: (1) Exhibits "J" and "J-1", or Plan No. 30 of the National Planning Commission showing the
Luneta and its vicinity, do not include the subject property as part of the Luneta Park; (2) Exhibit "K", which is
the plan of the subject property covered by TCT No. 67488 of BPOE, prepared on November 11, 1963,
indicates that said property is not a public park; (3) Exhibit "T", which is a certified copy of Proclamation No.
234 issued on December 15, 1955 is President Magsaysay, and Exhibit "U" which is Proclamation Order No.
273 issued on October 4, 1967 by President Marcos, do not include the subject property in the Luneta Park-,
(4) Exhibit "W", which is the location plan of the Luneta National Park under Proclamations Nos. 234 and 273,
further confirms that the subject property is not a public park; and (5) Exhibit "Y", which is a copy of O.C.T. No.
7333 in the name of the United States of America covering the land now occupied by the America covering the
land now occupied by the American Embassy, the boundaries of which were delineated by the Philippine
Legislature, states that the said land is bounded on the northwest by properties of the Army and Navy Club
(Block No. 321) and the Elks Club (Block No. 321), and this circumstance shows that even the Philippine
Legislature recognized the subject property as private property of the Elks Club. 27
TDC furthermore contends that the City of Manila is estopped from questioning the validity of the sale of the
subject property that it executed on July 13, 1911 to the Manila Lodge No. 761, BPOE, for several reasons,
namely: (1) the City's petition for the reannotation of Entry No. 4608/T-1635 was predicated on the validity of
said sale; (2) when the property was bought by the petitioner TDC it was not a public plaza or park as testified
to by both Pedro Cojuanco, treasurer of TDC, and the surveyor, Manuel Aoneuvo, according to whom the
subject property was from all appearances private property as it was enclosed by fences; (3) the property in
question was cadastrally surveyed and registered as property of the Elks Club, according to Manuel
Anonuevo; (4) the property was never used as a public park, for, since the issuance of T.C.T. No. 2165 on
July 17, 1911 in the name of the Manila Lodge NO. 761, the latter used it as private property, and as early as
January 16, 1909 the City of Manila had already executed a deed of sale over the property in favor of the
Manila Lodge No. 761; and (5) the City of Manila has not presented any evidence to show that the subject
property has ever been proclaimed or used as a public park. 28
TDC, moreover, contends that Sec. 60 of Com. Act No. 141 cannot apply to the subject land, for Com. Act No.
141 took effect on December 1, 1936 and at that time the subject land was no longer part of the part of the
public domain. 29
TDC also stresses that its rights as a purchaser in good faith cannot be disregarded, for the mere mention in
the certificate of title that the lot it purchased was "part of the Luneta extension" was not a sufficient warning
that tile title to the City of Manila was invalid; and that although the trial court, in its decision affirmed by the
Court of Appeals, found the TDC -to has been an innocent purchaser for value, the court disregarded the
petitioner's rights as such purchaser that relied on Torrens certificate of title. 30
The Court, continues the petitioner TDC erred in not holding that the latter is entitled to recover from the City
of Manila damages in the amount of P100,000 caused by the City's petition for- reannotation of its right to
repurchase.
DISCUSSION AND RESOLUTION OF FIRST ISSUE
It is a cardinal rule of statutory construction that courts must give effect to the general legislative intent that
can be discovered from or is unraveled by the four corners of the statute, 31 and in order to discover said
intent, the whole statute, and not only a particular provision thereof, should be considered. 32 It is, therefore,
necessary to analyze all the provisions of Act No. 1360, as amended, in order to unravel the legislative intent.
Act No. 1360 which was enacted by the Philippine Commission on June 26, 1905, as amended by Act No.
1657 enacted on May 18, 1907, authorized the "construction of such rock and timber bulkheads or sea walls
as may be necessary for the making of an extension to the Luneta" (Sec. 1 [a]), and the placing of the material
dredged from the harbor of Manila "inside the bulkheads constructed to inclose the Luneta extension above
referred to" (Sec. 1 [a]). It likewise provided that the plan of Architect D. H. Burnham as "a general outline for
the extension and improvement of the Luneta in the City of Manila" be adopted; that "the reclamation from the
Bay of Manila of the land included in said projected Luneta extension... is hereby authorized and the land
thereby reclaimed shall be the property of the City of Manila" (Sec. 3); that "the City of Manila is hereby
authorized to set aside a tract of the reclaimed land formed by the Luneta extension authorized by this Act at
the worth end of said tract, not to exceed five hundred feet by six hundred feet in size, for a hotel site, and to
lease the same with the approval of the Governor General, ... for a term not exceeding ninety-nine years; that
"should the Municipal Board ... deem it advisable it is hereby authorized to advertise for sale to sell said tract
of land ... ;" "that said tract shall be used for hotel purposes as herein prescribed, and shall not be devoted to
any other purpose or object whatever;" "that should the grantee x x x fail to maintain on said tract a first-class
hotel x x x then the title to said tract of land sold, conveyed, and transferred, and shall not be devoted to any
other purpose or object whatever;" "that should the grantee x x x fail to maintain on said tract a first-class hotel
x x x then the title to said tract of land sold, conveyed, and transferred to the grantee shall revert to the City of
Manila, and said City of Manila shall thereupon become entitled to immediate possession of said tract of land"
(Sec. 5); that the construction of the rock and timber bulkheads or sea wall "shall be paid for out of the funds
of the City of Manila, but the area to be reclaimed by said proposed Luneta extension shall be filled, without
cost to the City of Manila, with material dredged from Manila Bay at the expense of the Insular Government"
(Sec. 6); and that "the City of Manila is hereby authorized to borrow from the Insular Government ... the sum of
three hundred thousand pesos, to be expended in the construction of Luneta extension provided for by
paragraph (a) of section one hereof" (Sec.7).
The grant made by Act No. 1360 of the reclaimed land to the City of Manila is a grant of "public" nature, the
same having been made to a local political subdivision. Such grants have always been strictly construed
against the grantee. 33 One compelling reason given for the strict interpretation of a public grant is that there is
in such grant a gratuitous donation of, public money or resources which results in an unfair advantage to the
grantee and for that reason, the grant should be narrowly restricted in favor of the public. 34 This reason for
strict interpretation obtains relative to the aforesaid grant, for, although the City of Manila was to pay for the
construction of such work and timber bulkheads or sea walls as may be necessary for the making of the
Luneta extension, the area to be reclaimed would be filled at the expense of the Insular Government and
without cost to the City of Manila, with material dredged from Manila Bay. Hence, the letter of the statute
should be narrowed to exclude maters which if included would defeat the policy of the legislation.
The reclaimed area, an extension to the Luneta, is declared to be property of the City of Manila. Property,
however, is either of public ownership or of private ownership. 35 What kind of property of the City is the
reclaimed land? Is it of public ownership (dominion) or of private ownership?
We hold that it is of public dominion, intended for public use.
Firstly, if the reclaimed area was granted to the City of Manila as its patrimonial property, the City could, by
virtue of its ownership, dispose of the whole reclaimed area without need of authorization to do so from the
lawmaking body. Thus Article 348 of the Civil Code of Spain provides that "ownership is the right to enjoy and
dispose of a thing without further limitations than those established by law." 36 The right to dispose (jus
disponendi) of one's property is an attribute of ownership. Act No. 1360, as amended, however, provides by
necessary implication, that the City of Manila could not dispose of the reclaimed area without
being authorized by the lawmaking body. Thus the statute provides that "the City of Manila is hereby
authorized to set aside a tract ... at the north end, for a hotel site, and to lease the same ... should the
municipal board ... deem it advisable, it is hereby authorized ...to sell said tract of land ... " (Sec. 5). If the
reclaimed area were patrimonial property of the City, the latter could dispose of it without need of the
authorization provided by the statute, and the authorization to set aside ... lease ... or sell ... given by the
statute would indeed be superfluous. To so construe the statute s to render the term "authorize," which is
repeatedly used by the statute, superfluous would violate the elementary rule of legal hermeneutics that effect
must be given to every word, clause, and sentence of the statute and that a statute should be so interpreted
that no part thereof becomes inoperative or superfluous. 37 To authorize means to empower, to give a right to
act. 38 Act No. 1360 furthermore qualifies the verb it authorize" with the adverb "hereby," which means "by
means of this statue or section," Hence without the authorization expressly given by Act No. 1360, the City of
Manila could not lease or sell even the northern portion; much less could it dispose of the whole reclaimed
area. Consequently, the reclaimed area was granted to the City of Manila, not as its patrimonial property. At
most, only the northern portion reserved as a hotel site could be said to be patrimonial property for, by express
statutory provision it could be disposed of, and the title thereto would revert to the City should the grantee fail
to comply with the terms provided by the statute.
TDC however, contends that the purpose of the authorization provided in Act No. 1360 to lease or sell was
really to limit the City's power of disposition. To sustain such contention is to beg the question. If the purpose
of the law was to limit the City's power of disposition then it is necessarily assumed that the City had already
the power to dispose, for if such power did not exist, how could it be limited? It was precisely Act 1360 that
gave the City the power to dispose for it was hereby authorized by lease of sale. Hence, the City of Manila had
no power to dispose of the reclaimed land had such power not been granted by Act No. 1360, and the
purpose of the authorization was to empower the city to sell or lease the northern part and not, as TDC claims,
to limit only the power to dispose. Moreover, it is presumed that when the lawmaking body enacted the
statute, it had full knowledge of prior and existing laws and legislation on the subject of the statute and acted
in accordance or with respect thereto. 39 If by another previous law, the City of Manila could already dispose of
the reclaimed area, which it could do if such area were given to it as its patrimonial property, would it then not
be a superfluity for Act No. 1360 to authorize the City to dispose of the reclaimed land? Neither has petitioner
TDC pointed to any other law that authorized the City to do so, nor have we come across any. What we do
know is that if the reclaimed land were patrimonial property, there would be no need of giving special
authorization to the City to dispose of it. Said authorization was given because the reclaimed land was not
intended to be patrimonial property of the City of Manila, and without the express authorization to dispose of
the northern portion, the City could not dispose of even that part.
Secondly, the reclaimed area is an "extension to the Luneta in the City of Manila." 40 If the reclaimed area is an
extension of the Luneta, then it is of the same nature or character as the old Luneta. Anent this matter, it has
been said that a power to extend (or continue an act or business) cannot authorize a transaction that is totally
distinct. 41 It is not disputed that the old Luneta is a public park or plaza and it is so considered by Section 859
of the Revised Ordinances of the City of Manila. 42 Hence the "extension to the Luneta" must be also a public
park or plaza and for public use.
TDC, however, contends that the subject property cannot be considered an extension of the old Luneta
because it is outside of the limits of the old Luneta when extended to the sea. This is a strained interpretation
of the term "extension," for an "extension," it has been held, "signifies enlargement in any direction in
length, breadth, or circumstance." 43
Thirdly, the reclaimed area was formerly a part of the manila Bay. A bay is nothing more than an inlet of the
sea. Pursuant to Article 1 of the Law of Waters of 1866, bays, roadsteads, coast sea, inlets and shores are
parts of the national domain open to public use. These are also property of public ownership devoted to public
use, according to Article 339 of the Civil Code of Spain.
When the shore or part of the bay is reclaimed, it does not lose its character of being property for public use,
according to Government of the Philippine Islands vs. Cabangis. 44 The predecessor of the claimants in this
case was the owner of a big tract of land including the lots in question. From 1896 said land began to wear
away due to the action of the waters of Manila Bay. In 1901 the lots in question became completely
submerged in water in ordinary tides. It remained in such a state until 1912 when the Government undertook
the dredging of the Vitas estuary and dumped the Sand and - silt from estuary on the low lands completely
Submerged in water thereby gradually forming the lots in question. Tomas Cabangis took possession thereof
as soon as they were reclaimed hence, the claimants, his successors in interest, claimed that the lots
belonged to them. The trial court found for the claimants and the Government appealed. This Court held that
when the lots became a part of the shore. As they remained in that condition until reclaimed by the filling done
by the Government, they belonged to the public domain. for public use .4' Hence, a part of the shore, and for
that purpose a part of the bay, did not lose its character of being for public use after it was reclaimed.
Fourthly, Act 1360, as amended, authorized the lease or sale of the northern portion of the reclaimed area as
a hotel sites. The subject property is not that northern portion authorized to be leased or sold; the subject
property is the southern portion. Hence, applying the rule of expresio unius est exlusio alterius, the City of
Manila was not authorized to sell the subject property. The application of this principle of statutory construction
becomes the more imperative in the case at bar inasmuch as not only must the public grant of the reclaimed
area to the City of Manila be, as above stated, strictly construed against the City of Manila, but also because a
grant of power to a municipal corporation, as happens in this case where the city is author ized to lease or sell
the northern portion of the Luneta extension, is strictly limited to such as are expressly or impliedly authorized
or necessarily incidental to the objectives of the corporation.
Fifthly, Article 344 of the Civil Code of Spain provides that to property of public use, in provinces and in towns,
comprises the provincial and town roads, the squares streets fountains, and public waters the promenades,
and public works of general service paid for by such towns or provinces." A park or plaza, such as the
extension to the Luneta, is undoubtedly comprised in said article.
The petitioners, however, argue that, according to said Article 344, in order that the character of property for
public use may be so attached to a plaza, the latter must be actually constructed or at least laid out as such,
and since the subject property was not yet constructed as a plaza or at least laid out as a plaza when it was
sold by the City, it could not be property for public use. It should be noted, however, that properties of
provinces and towns for public use are governed by the same principles as properties of the same character
belonging to the public domain. 46 In order to be property of public domain an intention to devote it to public
use is sufficient. 47 The, petitioners' contention is refuted by Manresa himself who said, in his comments", on
Article 344, that: +.wph!1
Las plazas, calles y paseos publicos correspondent sin duda aiguna aldominio publico municipal ), porque se
hallan establecidos sobre suelo municipal y estan destinadas al uso de todos Laurent presenta tratando de
las plazas, una question relativa a si deben conceptuarse como de dominio publico los lugares vacios libres,
que se encuenttan en los Municipios rurales ... Laurent opina contra Pioudhon que toda vez que estan al
servicio de todos pesos lugares, deben considerable publicos y de dominion publico. Realmente, pala decidir
el punto, bastara siempre fijarse en el destino real y efectivo de los citados lugares, y si este destino entraa
un uso comun de todos, no hay duda que son de dominio publico municipal si no patrimoniales.
It is not necessary, therefore, that a plaza be already constructed of- laid out as a plaza in order that it be
considered property for public use. It is sufficient that it be intended to be such In the case at bar, it has been
shown that the intention of the lawmaking body in giving to the City of Manila the extension to the Luneta was
not a grant to it of patrimonial property but a grant for public use as a plaza.
We have demonstrated ad satietatem that the Luneta extension as intended to be property of the City of
Manila for public use. But, could not said property-later on be converted, as the petitioners contend, to
patrimonial property? It could be. But this Court has already said, in Ignacio vs. The Director of Lands, 49 the
executive and possibly the legislation department that has the authority and the power to make the declaration
that said property, is no longer required for public use, and until such declaration i made the property must
continue to form paint of the public domain. In the case at bar, there has been no such explicit or unequivocal
declaration It should be noted, furthermore, anent this matter, that courts are undoubted v not. primarily called
upon, and are not in a position, to determine whether any public land is still needed for the purposes specified
in Article 4 of the Law of Waters . 50
Having disposed of the petitioners' principal arguments relative to the main issue, we now pass to the items of
circumstantial evidence which TDC claims may serve as aids in construing the legislative intent in the
enactment of Act No. 1360, as amended. It is noteworthy that all these items of alleged circumstantial
evidence are acts far removed in time from the date of the enactment of Act No.1360 such that they cannot be
considered contemporaneous with its enactment. Moreover, it is not farfetched that this mass of circumstantial
evidence might have been influenced by the antecedent series of invalid acts, to wit: the City's having
obtained over the reclaimed area OCT No. 1909 on January 20,1911; the sale made by the City of the subject
property to Manila Lodge No. 761; and the issuance to the latter of T.C.T. No. 2195. It cannot gainsaid that if
the subsequent acts constituting the circumstantial evidence have been base on, or at least influenced, by
those antecedent invalid acts and Torrens titles S they can hardly be indicative of the intent of the lawmaking
body in enacting Act No. 1360 and its amendatory act.
TDC claims that Exhs. "J," "J-l" "K," "T," "U," "W" and "Y" show that the subject property is not a park.
Exhibits "J" and "J-1," the "Luneta and vicinity showing proposed development" dated May 14, 1949, were
prepared by the National Urban Planning Commission of the Office of the President. It cannot be reasonably
expected that this plan for development of the Luneta should show that the subject property occupied by the
ElksClub is a public park, for it was made 38 years after the sale to the Elks, and after T.C.T. No. 2195 had
been issued to Elks. It is to be assumed that the Office of the President was cognizant of the Torrens title of
BPOE. That the subject property was not included as a part of the Luneta only indicated that the National
Urban Planning Commission that made the plan knew that the subject property was occupied by Elks and that
Elks had a Torrens title thereto. But this in no way proves that the subject property was originally intended to
be patrimonial property of the City of Manila or that the sale to Elks or that the Torrens-title of the latter is valid.
Exhibit "K" is the "Plan of land covered by T.C.T . No ----, as prepared for Tarlac Development Company." It
was made on November 11, 1963 by Felipe F. Cruz, private land surveyor. This surveyor is admittedly a
surveyor for TDC. 51 This plan cannot be expected to show that the subject property is a part of the Luneta
Park, for he plan was made to show the lot that "was to be sold to petitioner." This plan must have also
assumed the existence of a valid title to the land in favor of Elks.
Exhibits "T" and "U" are copies of Presidential Proclamations No. 234 issued on November 15, 1955 and No.
273 issued on October 4, 1967, respectively. The purpose of the said Proclamations was to reserve certain
parcels of land situated in the District of Ermita, City of Manila, for park site purposes. Assuming that the
subject property is not within the boundaries of the reservation, this cannot be interpreted to mean that the
subject property was not originally intended to be for public use or that it has ceased to be such. Conversely,
had the subject property been included in the reservation, it would mean, if it really were private property, that
the rights of the owners thereof would be extinguished, for the reservations was "subject to private rights, if
any there be." That the subject property was not included in the reservation only indicates that the President
knew of the existence of the Torrens titles mentioned above. The failure of the Proclamations to include the
subject property in the reservation for park site could not change the character of the subject property as
originally for public use and to form part of the Luneta Park. What has been said here applies to Exhibits "V",
"V-1" to "V-3," and "W" which also refer to the area and location of the reservation for the Luneta Park.
Exhibit "Y" is a copy of O.C.T. No. 7333 dated November 13, 1935, covering the lot where now stands the
American Embassy [Chancery]. It states that the property is "bounded ... on the Northwest by properties of
Army and Navy Club (Block No.321) and Elks Club (Block No. 321)." Inasmuch as the said bounderies
delineated by the Philippine Legislature in Act No. 4269, the petitioners contend that the Legislature
recognized and conceded the existence of the Elks Club property as a primate property (the property in
question) and not as a public park or plaza. This argument is non sequitur plain and simple Said Original
Certificate of Title cannot be considered as an incontrovertible declaration that the Elks Club was in truth and
in fact the owner of such boundary lot. Such mention as boundary owner is not a means of acquiring title nor
can it validate a title that is null and void.
TDC finally claims that the City of Manila is estopped from questioning the validity of the sale it executed on
July 13,'1911 conconveying the subject property to the Manila Lodge No. 761, BPOE. This contention cannot
be seriously defended in the light of the doctrine repeatedly enunciated by this Court that the Government is
never estopped by mistakes or errors on the pan of its agents, and estoppel does not apply to a municipal
corporation to validate a contract that is prohibited by law or its against Republic policy, and the sale of July
13, 1911 executed by the City of Manila to Manila Lodge was certainly a contract prohibited by law. Moreover,
estoppel cannot be urged even if the City of Manila accepted the benefits of such contract of sale and the
Manila Lodge No. 761 had performed its part of the agreement, for to apply the doctrine of estoppel against
the City of Manila in this case would be tantamount to enabling it to do indirectly what it could not do directly. 52
The sale of the subject property executed by the City of Manila to the Manila Lodge No. 761, BPOE, was void
and inexistent for lack of subject matter. 53 It suffered from an incurable defect that could not be ratified either
by lapse of time or by express ratification. The Manila Lodge No. 761 therefore acquired no right by virtue of
the said sale. Hence to consider now the contract inexistent as it always has seen, cannot be, as claimed by
the Manila Lodge No. 761, an impairment of the obligations of contracts, for there was it, contemplation of law,
no contract at all.
The inexistence of said sale can be set up against anyone who asserts a right arising from it, not only against
the first vendee, the Manila Lodge No. 761, BPOE, but also against all its suceessors, including the TDC
which are not protected the doctrine of bona fide ii purchaser without notice, being claimed by the TDC does
not apply where there is a total absence of title in the vendor, and the good faith of the purchaser TDC cannot
create title where none exists. 55
The so-called sale of the subject property having been executed, the restoration or restitution of what has
been given is order 56
SECOND ISSUE
The second ground alleged in support of the instant petitions for review on certiorari is that the Court of
Appeals has departed from the accepted and usual course of judicial proceedings as to call for an exercise of
the power of supervision. TDC in L-41012, argues that the respondent Court did not make its own findings but
simply recited those of the lower court and made a general affirmance, contrary to the requirements of the
Constitution; that the respondent Court made glaring and patent mistakes in recounting even the copied
findings, palpably showing lack of deliberate consideration of the matters involved, as, for example, when said
court said that Act No. 1657 authorized the City of Manila to set aside a portion of the reclaimed land "formed
by the Luneta Extension of- to lease or sell the same for park purposes;" and that respondent Court. further
more, did not resolve or dispose of any of the assigned errors contrary to the mandate of the Judiciary Act.. 57
The Manila Lodge No. 761, in L-41001, likewise alleges, as one of the reasons warranting review, that the
Court of Appeals departed from the accepted and usual course of Judicial proceedings by simply making a
general affirmance of the court a quo findings without bothering to resolve several vital points mentioned by
the BPOE in its assigned errors. 58
COMMENTS ON SECOND ISSUE
We have shown in our discussion of the first issue that the decision of the trial court is fully in accordance with
law. To follows that when such decision was affirmed by the Court of Appeals, the affirmance was likewise in
accordance with law. Hence, no useful purpose will be served in further discussing the second issue.
CONCLUSION
ACCORDINGLY, the petitions in both G.R. Nos. L-41001 and L-41012 are denied for lack of merit, and the
decision of the Court of Appeals of June 30, 1975, is hereby affirmed, at petitioner's cost.
VIUDA DE TAN TOCO, plaintiff-appellant,
vs.
THE MUNICIPAL COUNCIL OF ILOILO, defendant-appellee.
Arroyo & Evangelista for appellant.
Provincial Fiscal Borromeo Veloso for appelle.
VILLAMOR, J.:
It appears from the record that the widow of Tan Toco had sued the municipal council of Iloilo for the amount
of P42,966.40, being the purchase price of two strips of land, one on Calle J. M. Basa consisting of 592
square meters, and the other on Calle Aldiguer consisting of 59 square meters, which the municipality of Iloilo
had appropriated for widening said street. The Court of First Instance of Iloilo sentenced the said municipality
to pay the plaintiff the amount so claimed, plus the interest, and the said judgment was on appeal affirmed by
this court.1
On account of lack of funds the municipality of Iloilo was unable to pay the said judgment, wherefore plaintiff
had a writ of execution issue against the property of the said municipality, by virtue of which the sheriff
attached two auto trucks used for street sprinkling, one police patrol automobile, the police stations on Mabini
street, and in Molo and Mandurriao and the concrete structures, with the corresponding lots, used as markets
by Iloilo, Molo, and Mandurriao.
After notice of the sale of said property had been made, and a few days before the sale, the provincial fiscal of
Iloilo filed a motion which the Court of First Instance praying that the attachment on the said property be
dissolved, that the said attachment be declared null and void as being illegal and violative of the rights of the
defendant municipality.
Plaintiffs counsel objected o the fiscal's motion but the court, by order of August 12, 1925, declared the
attachment levied upon the aforementioned property of the defendant municipality null and void, thereby
dissolving the said attachment.
From this order the plaintiff has appealed by bill of exceptions. The fundamental question raised by appellant
in her four assignments of error is whether or not the property levied upon is exempt from execution.
The municipal law, section 2165 of the Administrative Code, provides that:
Municipalities are political bodies corporate, and as such are endowed with the faculties of municipal
corporations, to be exercised by and through their respective municipal government in conformity with law.
It shall be competent for them, in their proper corporate name, to sue and be sued, to contract and be
contracted with, to acquire and hold real and personal property for municipal purposes, and generally to
exercise the powers hereinafter specified or otherwise conferred upon them by law.
For the purposes of the matter here in question, the Administrative Code does not specify the kind of property
that a municipality may acquire. However, article 343 of the Civil Code divides the property of provinces and
towns (municipalities) into property for public use and patrimonial property. According to article 344 of the
same Code, provincial roads and foot-path, squares, streets, fountains and public waters, drives and public
improvements of general benefit built at the expense of the said towns or provinces, are property for public
use.
All other property possessed by the said towns and provinces is patrimonial and shall be subject to the
provisions of the Civil Code except as provided by special laws.
Commenting upon article 344, Mr. Manresa says that "In accordance with administrative legislation" (Spanish)
we must distinguish, as to the patrimonial property of the towns, "between that a common benefit and that
which is private property of the town. The first differs from property for public use in that generally its
enjoyment is less, as it is limited to neighbors or to a group or class thereof; and, furthermore, such use, more
or less general, is not intrinsic with this kind of property, for by its very nature it may be enjoyed as though it
were private property. The third group, that is, private property, is used in the name of the town or province by
the entities representing it and, like and private property, giving a source of revenue."
Such distinction, however, is of little practical importance in this jurisdiction in view of the different principles
underlying the functions of a municipality under the American rule. Notwithstanding this, we believe that the
principle governing property of the public domain of the State is applicable to property for public use of the
municipalities as said municipal is similar in character. The principle is that the property for public use of the
State is not within the commerce of man and, consequently, is inalienable and not subject to prescription.
Likewise, property for public of the municipality is not within the commerce of man so long as it is used by the
public and, consequently, said property is also inalienable.
The American Law is more explicit about this matter as expounded by Mcquilin in Municipal Corporations,
volume 3, paragraph 1160, where he says that:
States statutes often provide the court houses, jails and other buildings owned by municipalities and the lots
on which they stand shall be exempt from attachment and execution. But independent of express statutory
exemption, as a general proposition, property, real and personal, held by municipal corporations, in trust for
the benefit of their inhabitants, and used for public purposes, is exempt.
For example, public buildings, school houses, streets, squares, parks, wharves, engines and engine houses,
and the like, are not subject to execution. So city waterworks, and a stock of liquors carried in a town
dispensary, are exempt. The reason for the exemption is obvious. Municipal corporations are created for
public purposes and for the good of the citizens in their aggregate or public capacity. That they may properly
discharge such public functions corporate property and revenues are essential, and to deny them these
means the very purpose of their creation would be materially impeded, and in some instances practically
destroy it. Respecting this subject the Supreme Court of Louisiana remarked: "On the first view of this
question there is something very repugnant to the moral sense in the idea that a municipal corporation should
contract debts, and that, having no resources but the taxes which are due to it, these should not be subjected
by legal process to the satisfaction of its creditors. This consideration, deduced from the principles of moral
equity has only given way to the more enlarged contemplation of the great and paramount interests of public
order and the principles of government."
It is generally held that property owned by a municipality, where not used for a public purpose but for quasi
private purposes, is subject to execution on a judgment against the municipality, and may be sold. This rule
applies to shares of stock owned by a municipal corporation, and the like. But the mere fact that corporate
property held for public uses is being temporarily used for private purposes does not make it subject
execution.
If municipal property exempt from execution is destroyed, the insurance money stands in lieu thereof and is
also exempt.
The members or inhabitants of a municipal corporation proper are not personally liable for the debts of the
municipality, except that in the New England States the individual liability of the inhabitant is generally
maintained.
In Corpus Juris, vol 23, page 355, the following is found:
Where property of a municipal or other public corporation is sough to be subjected to execution to satisfy
judgments recovered against such corporation, the question as to whether such property is leviable or not is to
be determined by the usage and purposes for which it is held. The rule is that property held for public uses,
such as public buildings, streets, squares parks, promenades, wharves, landing places fire engines, hose and
hose carriages, engine houses, public markets, hospitals, cemeteries, and generally everything held for
governmental purposes, is not subject to levy and sale under execution against such corporation. The rule
also applies to funds in the hands of a public officer. Likewise it has been held that taxes due to a municipal
corporation or country cannot be seized under execution by a creditor of such corporation. But where a
municipal corporation or country owns in its proprietary, as distinguished from its public or governmental
capacity, property not useful or used for a public purpose but for quasi private purposes, the general rule is
that such property may be seized and sold under execution against the corporation, precisely as similar
property of individuals is seized and sold. But property held for public purposes is not subject to execution
merely because it is temporarily used for private purposes, although if the public use is wholly abandoned it
becomes subject to execution. Whether or not property held as public property is necessary for the public use
is a political, rather than a judicial question.
In the case of City of New Orleans vs. Louisiana Construction Co., Ltd. (140 U. S., 654; 35 Law. ed., 556), it
was held that a wharf for unloading sugar and molasses, open to the public, was property for the public use of
the City of New Orleans and was not subject to attachment for the payment of the debts of the said city.
In that case it was proven that the said wharf was a parcel of land adjacent to the Mississippi River where all
shipments of sugar and molasses taken to New Orleans were unloaded.
That city leased the said wharf to the Louisiana Construction Company, Ltd., in order that it might erect
warehouses so that the merchandise upon discharge might not be spoiled by the elements. The said company
was given the privilege of charging certain fees for storing merchandise in the said warehouses and the public
in general had the right to unload sugar and molasses there by paying the required fees, 10 per cent of which
was turned over to the city treasury.
The United States Supreme Court on an appeal held that the wharf was public property, that it never ceased
to be such in order to become private property of the city; wherefore the company could not levy execution
upon the wharf in order to collect the amount of the judgment rendered in favor thereof.
In the case of Klein vs. City of New Orleans (98 U. S., 149; 25 Law. ed., 430), the Supreme Court of the
United States that a public wharf on the banks of the Mississippi River was public property and not subject to
execution for the payment of a debt of the City of New Orleans where said wharf was located.
In this case a parcel of land adjacent to the Mississippi River, which formerly was the shore of the river and
which later enlarged itself by accession, was converted into a wharf by the city for public use, who charged a
certain fee for its use.
It was held that the land was public property as necessary as a public street and was not subject to execution
on account of the debts of the city. It was further held that the fees collected where also exempt from
execution because they were a part of the income of the city.
In the case of Tufexis vs. Olaguera and Municipal Council of Guinobatan (32 Phil., 654), the question raised
was whether for the payment of a debt to a third person by the concessionaire of a public market, the said
public market could be attached and sold at public auction. The Supreme Court held that:
Even though a creditor is unquestionably entitled to recover out of his debtor's property, yet when among such
property there is included the special right granted by the Government of usufruct in a building intended for a
public service, and when this privilege is closely related to a service of a public character, such right of the
creditor to the collection of a debt owed him by the debtor who enjoys the said special privilege of usufruct in a
public market is not absolute and may be exercised only through the action of court of justice with respect to
the profits or revenue obtained under the special right of usufruct enjoyed by debtor.
The special concession of the right of usufruct in a public market cannot be attached like any ordinary right,
because that would be to permit a person who has contracted with the state or with the administrative officials
thereof to conduct and manage a service of a public character, to be substituted, without the knowledge and
consent of the administrative authorities, by one who took no part in the contract, thus giving rise to the
possibility of the regular course of a public service being disturbed by the more or less legal action of a
grantee, to the prejudice of the state and the public interests.
The privilege or franchise granted to a private person to enjoy the usufruct of a public market cannot lawfully
be attached and sold, and a creditor of such person can recover his debt only out of the income or revenue
obtained by the debtor from the enjoyment or usufruct of the said privilege, in the same manner that the rights
of such creditors of a railroad company can be exercised and their credit collected only out of the gross
receipts remaining after deduction has been made therefrom of the operating expenses of the road. (Law of
November 12, 1896, extended to the overseas provinces by the royal order of August 3, 1886.)
For the reasons contained in the authorities above quoted we believe that this court would have reached the
same conclusion if the debtor had been municipality of Guinobatan and the public market had been levied
upon by virtue of the execution.
It is evident that the movable and immovable property of a municipality, necessary for governmental purpose,
may not be attached and sold for the payment of a judgment against the municipality. The supreme reason for
this rule is the character of the public use to which such kind of property is devoted. The necessity for
government service justifies that the property of public of the municipality be exempt from execution just as it
is necessary to exempt certain property of private individuals in accordance with section 452 of the Code of
Civil Procedure.
Even the municipal income, according to the above quoted authorities, is exempt from levy and execution. In
volume 1, page 467, Municipal Corporations by Dillon we find that:
Municipal corporations are instituted by the supreme authority of a state for the public good. They exercise, by
delegation from the legislature, a portion of the sovereign power. The main object of their creation is to act as
administrative agencies for the state, and to provide for the police and local government of certain designated
civil divisions of its territory. To this end they are invested with certain governmental powers and charged with
civil, political, and municipal duties. To enable them beneficially to exercise these powers and discharge these
duties, they are clothed with the authority to raise revenues, chiefly by taxation, and subordinately by other
modes as by licenses, fines, and penalties. The revenue of the public corporation is the essential means by
which it is enabled to perform its appointed work. Deprived of its regular and adequate supply of revenue,
such a corporation is practically destroyed and the ends of its erection thwarted. Based upon considerations of
this character, it is the settled doctrine of the law that only the public property but also the taxes and public
revenues of such corporations cannot be seized under execution against them, either in the treasury or when
in transit to it. Judgments rendered for taxes, and the proceeds of such judgments in the hands of officers of
the law, are not subject to execution unless so declared by statute. The doctrine of the inviolability of the
public revenues by the creditor is maintained, although the corporation is in debt, and has no means of
payment but the taxes which it is authorized to collect.
Another error assigned by counsel for appellant is the holding of the court a quo that the proper remedy for
collecting the judgment in favor of the plaintiff was by way or mandamus.
While this question is not necessarily included in the one which is the subject of this appeal, yet we believe
that the holding of the court, assigned as error by appellant's counsel, is true when, after a judgment is
rendered against a municipality, it has no property subject to execution. This doctrine is maintained by Dillon
(Municipal Corporations, vol. 4, par. 1507, 5th ed.) based upon the decisions of several States of the Union
upholding the same principle and which are cited on page 2679 of the aforesaid work. In this sense this
assignment of error, we believe, is groundless.
By virtue of all the foregoing, the judgment appealed from should be and is hereby affirmed with costs against
the appellant. So ordered.
MARCOS MENDOZA, plaintiff-appellee,
vs.
FRANCISCO DE LEON, ET AL., defendants-appellants.
Luis Morales for appellant.
Hugo Sansano for appellee.
TRENT, J.:
This is an action for damages against the individual members of the municipal council of the municipality of
Villasis, Pangasinan, for the revocation of the lease of an exclusive ferry privilege duly awarded to the plaintiff
under the provisions of Act No. 1643 of the Philippine Commission. After use of a little more than one year, the
plaintiff was forcibly ejected under and pursuance of a resolution adopted by the herein defendants, awarding
a franchise for the same ferry to another person.
Municipalities of the Philippine Islands organized under the Municipal Code have both governmental and
corporate or business functions. Of the first class are the adoption of regulation against fire and disease,
preservation of the public peace, maintenance of municipal prisons, establishment of primary schools and
post-offices, etc. Of the latter class are the establishment of municipal waterworks for the use of the
inhabitants, the construction and maintenance of municipal slaughterhouses, markets, stables, bathing
establishments, wharves, ferries, and fisheries. Act No. 1643 provides that the use of each fishery, fish-
breeding ground, ferry, stable, market, and slaughterhouse belonging to any municipality or township shall be
let to the highest bidder annually or for such longer period not exceeding five years as may have been
previously approved by the provincial board of the province in which the municipality or township is located.
The two fold character of the powers of a municipality under our Municipal Code (Act No. 82) is so apparent
and its private or corporate powers so numerous and important that we find no difficulty in reaching the
conclusion that the general principles governing the liability of such entities to applicable to it. The distinction
between governmental powers on the one hand, and corporate or proprietary or business powers on the
other, as the latter class is variously described in the reported cases, has been long recognized in the United
States and there is no dissent from the doctrine.
In Wilcox vs. City of Rochester (190 N. Y., 137), it was said:
The broad general doctrine of the Maxmilian case (Maxmilian vs. Mayor, etc., New York, 62 N. Y. 160), which
is certainly not now open to question in the courts of this State, is that "two kinds of duties are imposed on
municipal corporations, the one governmental and a branch of the general administration of the state, the
other quasi private or corporate;" and "that in the exercise of the latter duties the municipality is liable for the
acts of its officers and agents, while in the former it is not." (Cullen, J., in Lefrois vs. Co. of Monroe, 162 N. Y.,
563, 567.)
The Maxmilian case is quoted with approval in Bond vs. Royston (130 Ga., 646).
In Co. Comm's of Anne Arundel Co. vs. Duckett (20 Md., 468, 476; 83 Am. Dec., 557), it was said:
With regard to the liability of a public municipal corporation for the acts of its officers, the distinction is between
an exercise of those legislative powers which it holds for public purposes, and as part of the government of the
country, and those private franchise which belong to it, as a creation of the law; within the sphere of the
former, it enjoys, the exemption of the government, from responsibility for its own acts, and for the acts of
those who are independent corporate officers, deriving their rights and duties from the sovereign power. But in
regard to the latter, it is responsible for the acts of those who are in law its agents, though they may not be
appointed by itself.
This case was quoted with approval in Trammell vs. Russellville (34 Ark., 105; 36 Am. Rep., 1); and in
McIlhenney vs. Wilmington (127 N. C., 146; 50 L. R. A. 470).
In Cummings vs. Lobsitz (42 Okla., 704; L. R. A., N. S., 1915 B, p. 415), it was said:
A distinction is made between the liability of a municipal corporation for the acts of its officers in the exercise
of powers which it possesses for public purpose and which it holds as agent of the state, and those powers
which embrace private or corporate duties and are exercised for the advantage of the municipality and its
inhabitants. When the acts of its officers come within the powers which it has as agent of the state, it is
exempt from liability for its own acts and the acts of its officers; if the acts of the officer or agent of the city are
for the special benefits of the corporation in its private or corporate interest, such officer is deemed the agent
or servant of the city, but where the act is not in relation to a private or corporate interest of the municipality,
but for the benefit of the public at large, such acts by the agents and servants are deemed to be acts by public
or state officers, and for the public benefit.
The distinction is also recognized by Dillon in his work on Municipal Corporations (5th ed.) section 38 and 39.
As is indicated in some of the above quoted cases, the municipality is not liable for the acts of its officers or
agents in the performance of its governmental functions. Governmental affairs do not lose their governmental
character by being delegated to the municipal governments. Nor of the municipality which, for convenience the
state allows the municipality to select, change their character. To preserve the peace, protect the morals and
health of the community and so on to administer government, whether it be done by the central government
itself or is shifted to a local organization. And the state being immune for injuries suffered by private individuals
in the administration of strictly governmental functions, like immunity is enjoyed by the municipality in the
performance of the same duties, unless it is expressly made liable by statute.
The state cannot, without its consent expressed through legislation, be sued for injuries resulting from an act
done in the exercise of its lawful governmental powers and pertaining to the administration of government. ...
Municipal corporations are agents of the state in the exercise of certain governmental powers. The
preservation of the health and peace of its inhabitants and fire protection afforded the property owner, are
governmental functions. (Burke vs. City of South Omaha, 79 Neb., 793.)
In Nicholson vs. Detroit (129 Mich., 246; 56 L. R. A., 601), it was said:
It is the well-settled rule that the state is not liable to private persons who suffer injuries through the negligence
of its officers and the rule extends to township and cities while in the performance of state functions,
imposed upon them by law. This subject is fully discussed in Detroit vs. Blackeby (21 Mich., 84; 4 Am. Rep.,
450). It was there held that cities are governmental agencies, and that their "officers are in no such sense
municipal agents; that their negligence is the neglect of the municipality; nor will their misconduct be
chargeable against them, unless act complained of the either authorized or ratified." And in a large number of
cases it has been held that there is no such liability on the part of such governmental agency unless it has
been imposed by statute, and in such case it is necessarily limited by the statute.
In Claussen vs. City of Luverne (103 Minn., 491; 15 L. R. A., N. S., 698), it was said:
It is elementary that neither the state nor any of the subdivisions, like a municipality, through which it operates,
is liable for torts committed by public officers, save in definitely excepted classes of cases. The exemption is
based upon the sovereign character of the state and its agencies, and upon the absence of obligation, and not
on the ground that no means for remedy have been provided. "The government," said Mr. Justice Story, "does
not undertake to guarantee to any person the fidelity of the officers or agents whom it employs, since that
would involve in all its operations in endless embarrassments, difficulties and losses, which would be
subversive of the public interest." (U.S. vs. Kirkpatrick, 9 Wheat., 720; 6 L. ed., 199; Beers vs. Arkansas, 20
How., 527; 15 L. ed., 991.) This general exemption has been applied to municipal corporations in so far as the
acts complained of were, in the language of the memorandum of the trial court, "done in exercising powers for
the public at large as a governing agency." While so acting, the city cannot be held liable for misfeasance; and
... the rule of respondeat superior has no application.
Nor are officers or agents of the Government charged with the performance of governmental duties which are
in their nature legislative, or quasi judicial, liable for the consequences of their official acts, unless it be shown
that they act willfully and maliciously, and with the express purpose of inflicting injury upon the plaintiff. If they
exercise their honest judgment in the performance of their duties, their errors cannot be charged against them.
(People vs. May, 251 Ill., 54; Salt Lake County vs. Clinton [Utah, 1911], 117 Pac., 1075; Comanche
County vs. Burks (Tex. Civ. App., 1914), 166 S. W., 470; Monnier vs. Godbold, 116 La., 165; 5 L. R. A., N. S.,
463; Ray vs. Dodd, 132 Mo. App., 444; Johnson vs. Marsh, 82 N. J. L.M, 4; Gregory vs. Brooks, 37 Conn.,
3645; Lecourt vs. Gaster, 50 La. Ann., 521.) So it may be said that in so far as its governmental functions are
concerned, a municipality is not liable at all, unless expressly made so by statute; nor are its officers, so long
as they perform their duties honestly and in good faith. The most common illustration of both phrases of this
rule is the action for false imprisonment so often brought either against a municipality or a municipal police
officer. (Bartlett vs. City of Columbus, 101 Ga., 300; 44 L. R. A., 795; Peter vs. City of Lindborg, 40 Kan., 654.)
So, in Field vs. City of Des Moines (39 Iowa, 575), it was held that a municipality, acting under authority given
it by the central government to destroy houses in the path of a conflagration, was not liable in damages in the
absence of a statute expressly making it so.
From what has already been said, it should be clear that a municipality is not exempt from liability for the
negligent performance of its corporate or proprietary or business functions. In the administration of its
patrimonial property, it is to be regarded as a private corporation or individual so far as its liability to third
persons on contract or in tort is concerned. Its contracts, validly entered into, may be enforced and damages
may be collected from it for the torts of its officers or agents within the scope of their employment in precisely
the same manner and to the same extent as those of private corporations or individuals. As to such matters
the principles of respondeat superior applies. It is for these purposes that the municipality is made liable to
suits in the courts.
Municipal corporations are subject to be sued upon contracts and in tort. In a previous chapter we have
considered at length the authority of such corporations to make contracts, the mode of exercising, and the
effect of transcending the power. This leaves but little to add in this place respecting their liability in actions ex
contractu. Upon an authorized contract that is, upon a contract within the scope of the charter or legislative
powers of the corporation and duly made by the proper officers or agents they are liable in the same
manner and to the same extent as private corporations or natural persons. (Dillon on Municipal Corporations,
5th ed., sec. 1610.)
The same author says in section 1647:
The rule of law is a general one, that the superior or employer must answer civilly of the negligence or want of
skill of his agent or servant in the course or line of his employment, by which another, who is free from
contributory fault, is injured. Municipal corporations, under the conditions herein stated, fall within the
operation of this rule of law, and are liable, accordingly, to civil actions for damages when the requisite
elements of liability coexist. To create such liability, it is fundamentally necessary that the act done which is
injurious to others must be within the scope of the corporate powers as prescribed by charter or positive
enactment (the extent of which powers all persons are bound, at their peril, know); in other words, it must not
be ultra vires in the sense that it is not within the power or authority of the corporation to act in reference to it
under any circumstances. If the act complained of necessarily lies wholly outside of the general or special
powers of the corporation as conferred in its charter or by statute, the corporation can in no event be liable to
an action for damages, whether it directly commanded the performance of the act whether it be done by its
officers without its express command; for a corporation cannot of course be impliedly liable to a greater extent
than it could make itself by express corporate vote or action.
It often happens that the same agent or agency has both a governmental and a corporate character. Such, for
instance, are a municipal water system designed both for protection against fire (a governmental function) and
to supply water to the inhabitants for profit (a corporate function) (Omaha Water Co. vs. Omaha, 12 L.R.A., N.
S., 736l 77 C.C.A., 267; 147 Fed., 1; Judson vs. Borough of Winsted, 80 Conn., 3841 15 L. R. A., N. S., 91); a
municipal light plant both for lighting the streets (a governmental function) and for furnishing light to the
inhabitants at a profit (a corporate function) (Fisher vs. NewBern, 140 N. C., 506; 111 Am. St. Rep., 857); an
agent who is at the same time a police officer and a caretaker of a municipal toll bridge (Woodhull vs. Mayor,
etc., of New York, 150 N. Y., 450). It is, also, sometimes the case that considerable difficulty is experienced in
determining whether a particular municipal duty is governmental or corporate.
But questions such as these do not arise in the case at bar. Here is it clear that the leasing of a municipal ferry
to the highest bidder for a specified period of time is not a governmental but a corporate function. Such a
lease, when validly entered into, constitutes a contract with the lessee which the municipality is bound to
respect. The matter is thus summed up by Dillon on Municipal Corporations (5th ed., sec. 1306):
Ordinances made by municipalities under charter or legislative authority, containing grants to water and light
companies and other public service corporations of the right to use the streets for pipes, mains, etc., upon the
condition of the performance of service by the grantee, are, after acceptance and performance by the grantee,
contracts protected by the prohibition of the Federal Constitution against the enactment of any State law
impairing the obligation of contracts.
Again, this author, adopting the language of the court in In re Fay (15 Pick. [Mass.], 243), says, in section 277:
If a municipal corporation, seized of a ferry, lease the same, through the agency of the mayor and aldermen,
with a covenant of quiet enjoyment, this covenant will not restrain in them by statute, to license another ferry
over the same waters, if in their judgment (which cannot be reviewed by the courts) the public necessity and
convenience require it. On such a covenant the city may be liable to the covenantees; but the powers vested
in the city officers as trustees for the public cannot be thus abrogated. If, however, city in its corporate capacity
is the legal owner of an exclusive franchise, its grantees or lessees would hold it, notwithstanding any license
to others, whether granted by the mayor and aldermen or any other tribunal.
It seems clear, therefore, that under the provisions of Municipal Code and Act No. 1634, above referred to, the
plaintiff had a vested right to the exclusive operation of the ferry in question for the period of his lease. Were
the municipality a party to this action, it would be patent that a judgment for damages against it for the
rescission of the contract would be proper. This, be it said, is the usual method of exacting damages, either ex
contractu or ex delictoarising from the exercise of corporate powers of municipalities. But the present action is
against the members of the municipal council personally, and the question arises: Are they liable? In
administering the patrimonial property of municipalities, the municipal council occupies, for most purposes, the
position of a board of directors of a private corporation. In disposing of the local public utilities, if the term may
be used, such as the fishing and ferry rights, etc., they must exercise considerable judgment. It required some
considerable amount of business acumen to compel performance on the part of lessees of these privileges in
accordance with the terms of their leases and in a manner which will not cause the property to deteriorate.
Questions must continually arise which are not expressly provided for in contracts and which must be settled,
if possible, in a manner that will preserve the just claims of the municipality. Indeed, it is not at all improbable
that on occasion the councilors may have reason to believe that a particular contract has been rescinded by
the other party or has never been legally entered into, in both of which cases, decisive steps must be taken to
safeguard the interest of the municipality. Thus, in Municipality of Moncada vs. Cajuigan (21 Phil. Rep., 184),
the lessee of a municipal fishery was evicted for failing to pay his quarterly rents. The municipal authorities
rightly held that the contract was rescinded but forcibly evicted the lessee instead of resorting to the courts.
Hence, in an action by the municipality against the lessee and his bondsmen to recover rent arrears, damages
were allowed the lessee on his counterclaim for the loss caused by the forcible eviction. Nevertheless, we do
not think the councilors could have been held personally liable for their error in resorting to forcible eviction of
the lessee. Theirs was an error of judgment, and honest mistake on their part as to the rights of the
municipality in the premises. We think the rule of personal liability should be with municipal councilors in such
matters as it is with the directors or managers of an ordinary private corporation.
Under the rule that directors are not liable for mistakes of judgment, it follows naturally that they are not liable
for the mismanagement of the corporate affairs where such mismanagement is a mistake of judgment. The
wisdom of this rule is not only approved by common experience but by law writers and all courts. A rule so
rigid as to hold directors personally liable for honest mistakes in corporate management would deter all
prudent business men from accepting such positions. The remedy of stockholders in all such cases is by a
change in the directory. ... The rule is that courts will not interfere even in the doubtful cases. But directors and
managing officers may be liable for mismanagement to warrant the interposition of a court either as against
the contemplated action of the directors, or a majority of the stockholders, or to give relief by way of damages
after the action as been taken; a case must be made out which plainly shows that such action is so far
opposed to the true interests of the corporation itself as to lead to clear inference that no one thus acting could
have been influenced by any honest desire to secure such interests, but that he must have acted with an
intent to subserve some outside purpose, regardless of the consequences to the corporation, and in a manner
inconsistent with its interests. (Thompson on Corporations, sec. 1298.)
In the case at bar, there is not a scintilla of evidence that there was any justifiable reason for forcibly evicting
the plaintiff from the ferry which he had leased. On the contrary, the defendant councilors attempted to justify
their action on the ground that the ferry which he was operating was not the one leased to him; this, in spite of
the fact that the vice-president had personally placed him in possession of it more than a year before, and the
fact that he had operated this ferry for over year, evidently with the knowledge of the defendants. The
evidence is so clear that the ferry of which the plaintiff was dispossessed was the one which he leased that no
reasonable man would entertain any doubt whatever upon the question. Hence, we cannot say that in
rescinding the contract with the plaintiff, thereby making the municipality liable to an action for damages for no
valid reason at all, the defendant councilors were honestly acting for the interests of the municipality. We are,
therefore, of the opinion that the defendants are liable jointly and severally for the damages sustained by the
plaintiff from the rescission of his contract of lease of the ferry privilege in question. In reaching this
conclusion, we have not failed to take into consideration the rule enunciated in Dennison vs. The Moro
Province (R.G. No. 8173, March 28, 1914; not reported), nor the distinction made by the courts in the United
States between the liability of a municipal corporation, made such acceptance of a village or city charter, and
the involuntary quasi corporations known as counties, towns, school districts, and especially the townships of
New England. Upon the question of the amount of damages sustained, we accept the findings of the lower
court.
For the foregoing reasons, the judgment appealed from is affirmed, with cost. So ordered.
ALONZO Q. ANCHETA, Petitioner,
vs.
CANDELARIA GUERSEY-DALAYGON, Respondent.
DECISION
AUSTRIA-MARTINEZ, J.:
Spouses Audrey ONeill (Audrey) and W. Richard Guersey (Richard) were American citizens who have
resided in the Philippines for 30 years. They have an adopted daughter, Kyle Guersey Hill (Kyle). On July 29,
1979, Audrey died, leaving a will. In it, she bequeathed her entire estate to Richard, who was also designated
as executor.1 The will was admitted to probate before the Orphans Court of Baltimore, Maryland, U.S.A, which
named James N. Phillips as executor due to Richards renunciation of his appointment. 2 The court also named
Atty. Alonzo Q. Ancheta (petitioner) of the Quasha Asperilla Ancheta Pena & Nolasco Law Offices as ancillary
administrator.3
In 1981, Richard married Candelaria Guersey-Dalaygon (respondent) with whom he has two children, namely,
Kimberly and Kevin.
On October 12, 1982, Audreys will was also admitted to probate by the then Court of First Instance of Rizal,
Branch 25, Seventh Judicial District, Pasig, in Special Proceeding No. 9625.4 As administrator of Audreys
estate in the Philippines, petitioner filed an inventory and appraisal of the following properties: (1) Audreys
conjugal share in real estate with improvements located at 28 Pili Avenue, Forbes Park, Makati, Metro Manila,
valued at P764,865.00 (Makati property); (2) a current account in Audreys name with a cash balance
of P12,417.97; and (3) 64,444 shares of stock in A/G Interiors, Inc. worth P64,444.00.5
On July 20, 1984, Richard died, leaving a will, wherein he bequeathed his entire estate to respondent, save for
his rights and interests over the A/G Interiors, Inc. shares, which he left to Kyle. 6 The will was also admitted to
probate by the Orphans Court of Ann Arundel, Maryland, U.S.A, and James N. Phillips was likewise
appointed as executor, who in turn, designated Atty. William Quasha or any member of the Quasha Asperilla
Ancheta Pena & Nolasco Law Offices, as ancillary administrator.
Richards will was then submitted for probate before the Regional Trial Court of Makati, Branch 138, docketed
as Special Proceeding No. M-888.7 Atty. Quasha was appointed as ancillary administrator on July 24, 1986.8
On October 19, 1987, petitioner filed in Special Proceeding No. 9625, a motion to declare Richard and Kyle as
heirs of Audrey.9 Petitioner also filed on October 23, 1987, a project of partition of Audreys estate, with
Richard being apportioned the undivided interest in the Makati property, 48.333 shares in A/G Interiors, Inc.,
and P9,313.48 from the Citibank current account; and Kyle, the undivided interest in the Makati property,
16,111 shares in A/G Interiors, Inc., and P3,104.49 in cash.10
The motion and project of partition was granted and approved by the trial court in its Order dated February 12,
1988.11 The trial court also issued an Order on April 7, 1988, directing the Register of Deeds of Makati to
cancel TCT No. 69792 in the name of Richard and to issue a new title in the joint names of the Estate of W.
Richard Guersey ( undivided interest) and Kyle ( undivided interest); directing the Secretary of A/G
Interiors, Inc. to transfer 48.333 shares to the Estate of W. Richard Guersey and 16.111 shares to Kyle; and
directing the Citibank to release the amount of P12,417.97 to the ancillary administrator for distribution to the
heirs.12
Consequently, the Register of Deeds of Makati issued on June 23, 1988, TCT No. 155823 in the names of the
Estate of W. Richard Guersey and Kyle.13
Meanwhile, the ancillary administrator in Special Proceeding No. M-888 also filed a project of partition
wherein 2/5 of Richards undivided interest in the Makati property was allocated to respondent,
while 3/5 thereof were allocated to Richards three children. This was opposed by respondent on the ground
that under the law of the State of Maryland, "a legacy passes to the legatee the entire interest of the
testator in the property subject of the legacy."14 Since Richard left his entire estate to respondent, except
for his rights and interests over the A/G Interiors, Inc, shares, then his entire undivided interest in the Makati
property should be given to respondent.
The trial court found merit in respondents opposition, and in its Order dated December 6, 1991, disapproved
the project of partition insofar as it affects the Makati property. The trial court also adjudicated Richards entire
undivided interest in the Makati property to respondent.15
On October 20, 1993, respondent filed with the Court of Appeals (CA) an amended complaint for the
annulment of the trial courts Orders dated February 12, 1988 and April 7, 1988, issued in Special Proceeding
No. 9625.16Respondent contended that petitioner willfully breached his fiduciary duty when he disregarded the
laws of the State of Maryland on the distribution of Audreys estate in accordance with her will. Respondent
argued that since Audrey devised her entire estate to Richard, then the Makati property should be wholly
adjudicated to him, and not merely thereof, and since Richard left his entire estate, except for his rights and
interests over the A/G Interiors, Inc., to respondent, then the entire Makati property should now pertain to
respondent.
Petitioner filed his Answer denying respondents allegations. Petitioner contended that he acted in good faith
in submitting the project of partition before the trial court in Special Proceeding No. 9625, as he had no
knowledge of the State of Marylands laws on testate and intestate succession. Petitioner alleged that he
believed that it is to the "best interests of the surviving children that Philippine law be applied as they would
receive their just shares." Petitioner also alleged that the orders sought to be annulled are already final and
executory, and cannot be set aside.
On March 18, 1999, the CA rendered the assailed Decision annulling the trial courts Orders dated February
12, 1988 and April 7, 1988, in Special Proceeding No. 9625.17 The dispositive portion of the assailed Decision
provides:
WHEREFORE, the assailed Orders of February 12, 1998 and April 7, 1988 are hereby ANNULLED and, in
lieu thereof, a new one is entered ordering:
(a) The adjudication of the entire estate of Audrey ONeill Guersey in favor of the estate of W. Richard
Guersey; and
(b) The cancellation of Transfer Certificate of Title No. 15583 of the Makati City Registry and the issuance of a
new title in the name of the estate of W. Richard Guersey.
SO ORDERED.18
Petitioner filed a motion for reconsideration, but this was denied by the CA per Resolution dated August 27,
1999.19
Hence, the herein petition for review on certiorari under Rule 45 of the Rules of Court alleging that the CA
gravely erred in not holding that:
A) THE ORDERS OF 12 FEBRUARY 1988 AND 07 APRIL 1988 IN SPECIAL PROCEEDINGS NO. 9625 "IN
THE MATTER OF THE PETITION FOR PROBATE OF THE WILL OF THE DECEASED AUDREY GUERSEY,
ALONZO Q. ANCHETA, ANCILLARY ADMINISTRATOR", ARE VALID AND BINDING AND HAVE LONG
BECOME FINAL AND HAVE BEEN FULLY IMPLEMENTED AND EXECUTED AND CAN NO LONGER BE
ANNULLED.
B) THE ANCILLARY ADMINISTRATOR HAVING ACTED IN GOOD FAITH, DID NOT COMMIT FRAUD,
EITHER EXTRINSIC OR INTRINSIC, IN THE PERFORMANCE OF HIS DUTIES AS ANCILLARY
ADMINISTRATOR OF AUDREY ONEIL GUERSEYS ESTATE IN THE PHILIPPINES, AND THAT NO
FRAUD, EITHER EXTRINSIC OR INTRINSIC, WAS EMPLOYED BY [HIM] IN PROCURING SAID
ORDERS.20
Petitioner reiterates his arguments before the CA that the Orders dated February 12, 1988 and April 7, 1988
can no longer be annulled because it is a final judgment, which is "conclusive upon the administration as to all
matters involved in such judgment or order, and will determine for all time and in all courts, as far as the
parties to the proceedings are concerned, all matters therein determined," and the same has already been
executed.21
Petitioner also contends that that he acted in good faith in performing his duties as an ancillary administrator.
He maintains that at the time of the filing of the project of partition, he was not aware of the relevant laws of
the State of Maryland, such that the partition was made in accordance with Philippine laws. Petitioner also
imputes knowledge on the part of respondent with regard to the terms of Aubreys will, stating that as early as
1984, he already apprised respondent of the contents of the will and how the estate will be divided.22
Respondent argues that petitioners breach of his fiduciary duty as ancillary administrator of Aubreys estate
amounted to extrinsic fraud. According to respondent, petitioner was duty-bound to follow the express terms of
Aubreys will, and his denial of knowledge of the laws of Maryland cannot stand because petitioner is a senior
partner in a prestigious law firm and it was his duty to know the relevant laws.
Respondent also states that she was not able to file any opposition to the project of partition because she was
not a party thereto and she learned of the provision of Aubreys will bequeathing entirely her estate to Richard
only after Atty. Ancheta filed a project of partition in Special Proceeding No. M-888 for the settlement of
Richards estate.
A decree of distribution of the estate of a deceased person vests the title to the land of the estate in the
distributees, which, if erroneous may be corrected by a timely appeal. Once it becomes final, its binding effect
is like any other judgment in rem.23 However, in exceptional cases, a final decree of distribution of the estate
may be set aside for lack of jurisdiction or fraud.24 Further, in Ramon v. Ortuzar,25 the Court ruled that a party
interested in a probate proceeding may have a final liquidation set aside when he is left out by reason of
circumstances beyond his control or through mistake or inadvertence not imputable to negligence.26
The petition for annulment was filed before the CA on October 20, 1993, before the issuance of the 1997
Rules of Civil Procedure; hence, the applicable law is Batas Pambansa Blg. 129 (B.P. 129) or the Judiciary
Reorganization Act of 1980. An annulment of judgment filed under B.P. 129 may be based on the ground that
a judgment is void for want of jurisdiction or that the judgment was obtained by extrinsic fraud.27 For fraud to
become a basis for annulment of judgment, it has to be extrinsic or actual,28 and must be brought within four
years from the discovery of the fraud.29
In the present case, respondent alleged extrinsic fraud as basis for the annulment of the RTC Orders dated
February 12, 1988 and April 7, 1988. The CA found merit in respondents cause and found that petitioners
failure to follow the terms of Audreys will, despite the latters declaration of good faith, amounted to extrinsic
fraud. The CA ruled that under Article 16 of the Civil Code, it is the national law of the decedent that is
applicable, hence, petitioner should have distributed Aubreys estate in accordance with the terms of her will.
The CA also found that petitioner was prompted to distribute Audreys estate in accordance with Philippine
laws in order to equally benefit Audrey and Richard Guerseys adopted daughter, Kyle Guersey Hill.
Petitioner contends that respondents cause of action had already prescribed because as early as 1984,
respondent was already well aware of the terms of Audreys will,30 and the complaint was filed only in 1993.
Respondent, on the other hand, justified her lack of immediate action by saying that she had no opportunity to
question petitioners acts since she was not a party to Special Proceeding No. 9625, and it was only after Atty.
Ancheta filed the project of partition in Special Proceeding No. M-888, reducing her inheritance in the estate of
Richard that she was prompted to seek another counsel to protect her interest. 31
It should be pointed out that the prescriptive period for annulment of judgment based on extrinsic fraud
commences to run from the discovery of the fraud or fraudulent act/s. Respondents knowledge of the
terms of Audreys will is immaterial in this case since it is not the fraud complained of. Rather, it is petitioners
failure to introduce in evidence the pertinent law of the State of Maryland that is the fraudulent act, or in this
case, omission, alleged to have been committed against respondent, and therefore, the four-year period
should be counted from the time of respondents discovery thereof.
Records bear the fact that the filing of the project of partition of Richards estate, the opposition thereto, and
the order of the trial court disallowing the project of partition in Special Proceeding No. M-888 were all done in
1991.32Respondent cannot be faulted for letting the assailed orders to lapse into finality since it was only
through Special Proceeding No. M-888 that she came to comprehend the ramifications of petitioners acts.
Obviously, respondent had no other recourse under the circumstances but to file the annulment case. Since
the action for annulment was filed in 1993, clearly, the same has not yet prescribed.
Fraud takes on different shapes and faces. In Cosmic Lumber Corporation v. Court of Appeals, 33 the Court
stated that "man in his ingenuity and fertile imagination will always contrive new schemes to fool the unwary."
There is extrinsic fraud within the meaning of Sec. 9 par. (2), of B.P. Blg. 129, where it is one the effect of
which prevents a party from hearing a trial, or real contest, or from presenting all of his case to the court, or
where it operates upon matters, not pertaining to the judgment itself, but to the manner in which it was
procured so that there is not a fair submission of the controversy. In other words, extrinsic fraud refers to any
fraudulent act of the prevailing party in the litigation which is committed outside of the trial of the case,
whereby the defeated party has been prevented from exhibiting fully his side of the case by fraud or deception
practiced on him by his opponent. Fraud is extrinsic where the unsuccessful party has been prevented from
exhibiting fully his case, by fraud or deception practiced on him by his opponent, as by keeping him away from
court, a false promise of a compromise; or where the defendant never had any knowledge of the suit, being
kept in ignorance by the acts of the plaintiff; or where an attorney fraudulently or without authority connives at
his defeat; these and similar cases which show that there has never been a real contest in the trial or hearing
of the case are reasons for which a new suit may be sustained to set aside and annul the former judgment
and open the case for a new and fair hearing.34
The overriding consideration when extrinsic fraud is alleged is that the fraudulent scheme of the prevailing
litigant prevented a party from having his day in court.35
Petitioner is the ancillary administrator of Audreys estate. As such, he occupies a position of the highest trust
and confidence, and he is required to exercise reasonable diligence and act in entire good faith in the
performance of that trust. Although he is not a guarantor or insurer of the safety of the estate nor is he
expected to be infallible, yet the same degree of prudence, care and judgment which a person of a fair
average capacity and ability exercises in similar transactions of his own, serves as the standard by which his
conduct is to be judged.36
Petitioners failure to proficiently manage the distribution of Audreys estate according to the terms of her will
and as dictated by the applicable law amounted to extrinsic fraud. Hence the CA Decision annulling the RTC
Orders dated February 12, 1988 and April 7, 1988, must be upheld.
It is undisputed that Audrey Guersey was an American citizen domiciled in Maryland, U.S.A. During the
reprobate of her will in Special Proceeding No. 9625, it was shown, among others, that at the time of Audreys
death, she was residing in the Philippines but is domiciled in Maryland, U.S.A.; her Last Will and Testament
dated August 18, 1972 was executed and probated before the Orphans Court in Baltimore, Maryland, U.S.A.,
which was duly authenticated and certified by the Register of Wills of Baltimore City and attested by the Chief
Judge of said court; the will was admitted by the Orphans Court of Baltimore City on September 7, 1979; and
the will was authenticated by the Secretary of State of Maryland and the Vice Consul of the Philippine
Embassy.
Being a foreign national, the intrinsic validity of Audreys will, especially with regard as to who are her heirs, is
governed by her national law, i.e., the law of the State of Maryland, as provided in Article 16 of the Civil Code,
to wit:
Art. 16. Real property as well as personal property is subject to the law of the country where it is situated.
However, intestate and testamentary succession, both with respect to the order of succession and to the
amount of successional rights and to the intrinsic validity of testamentary provisions, shall be
regulated by the national law of the person whose succession is under consideration, whatever may
be the nature of the property and regardless of the country wherein said property may be found.
(Emphasis supplied)
Article 1039 of the Civil Code further provides that "capacity to succeed is governed by the law of the nation of
the decedent."
As a corollary rule, Section 4, Rule 77 of the Rules of Court on Allowance of Will Proved Outside the
Philippines and Administration of Estate Thereunder, states:
SEC. 4. Estate, how administered.When a will is thus allowed, the court shall grant letters testamentary, or
letters of administration with the will annexed, and such letters testamentary or of administration, shall extend
to all the estate of the testator in the Philippines. Such estate, after the payment of just debts and
expenses of administration, shall be disposed of according to such will, so far as such will may
operate upon it; and the residue, if any, shall be disposed of as is provided by law in cases of estates in the
Philippines belonging to persons who are inhabitants of another state or country. (Emphasis supplied)
While foreign laws do not prove themselves in our jurisdiction and our courts are not authorized to take judicial
notice of them;37 however, petitioner, as ancillary administrator of Audreys estate, was duty-bound to
introduce in evidence the pertinent law of the State of Maryland.38
Petitioner admitted that he failed to introduce in evidence the law of the State of Maryland on Estates and
Trusts, and merely relied on the presumption that such law is the same as the Philippine law on wills and
succession. Thus, the trial court peremptorily applied Philippine laws and totally disregarded the terms of
Audreys will. The obvious result was that there was no fair submission of the case before the trial court or a
judicious appreciation of the evidence presented.
Petitioner insists that his application of Philippine laws was made in good faith. The Court cannot accept
petitioners protestation. How can petitioner honestly presume that Philippine laws apply when as early as the
reprobate of Audreys will before the trial court in 1982, it was already brought to fore that Audrey was a U.S.
citizen, domiciled in the State of Maryland. As asserted by respondent, petitioner is a senior partner in a
prestigious law firm, with a "big legal staff and a large library." 39 He had all the legal resources to determine
the applicable law. It was incumbent upon him to exercise his functions as ancillary administrator with
reasonable diligence, and to discharge the trust reposed on him faithfully. Unfortunately, petitioner failed to
perform his fiduciary duties.
Moreover, whether his omission was intentional or not, the fact remains that the trial court failed to consider
said law when it issued the assailed RTC Orders dated February 12, 1988 and April 7, 1988, declaring
Richard and Kyle as Audreys heirs, and distributing Audreys estate according to the project of partition
submitted by petitioner. This eventually prejudiced respondent and deprived her of her full successional right
to the Makati property.
In GSIS v. Bengson Commercial Bldgs., Inc.,40 the Court held that when the rule that the negligence or
mistake of counsel binds the client deserts its proper office as an aid to justice and becomes a great hindrance
and chief enemy, its rigors must be relaxed to admit exceptions thereto and to prevent a miscarriage of justice,
and the court has the power to except a particular case from the operation of the rule whenever the purposes
of justice require it.
The CA aptly noted that petitioner was remiss in his responsibilities as ancillary administrator of Audreys
estate. The CA likewise observed that the distribution made by petitioner was prompted by his concern over
Kyle, whom petitioner believed should equally benefit from the Makati property. The CA correctly stated, which
the Court adopts, thus:
In claiming good faith in the performance of his duties and responsibilities, defendant Alonzo H. Ancheta
invokes the principle which presumes the law of the forum to be the same as the foreign law (Beam vs. Yatco,
82 Phil. 30, 38) in the absence of evidence adduced to prove the latter law (Slade Perkins vs. Perkins, 57 Phil.
205, 210). In defending his actions in the light of the foregoing principle, however, it appears that the
defendant lost sight of the fact that his primary responsibility as ancillary administrator was to distribute the
subject estate in accordance with the will of Audrey ONeill Guersey. Considering the principle established
under Article 16 of the Civil Code of the Philippines, as well as the citizenship and the avowed domicile of the
decedent, it goes without saying that the defendant was also duty-bound to prove the pertinent laws of
Maryland on the matter.
The record reveals, however, that no clear effort was made to prove the national law of Audrey ONeill
Guersey during the proceedings before the court a quo. While there is claim of good faith in distributing the
subject estate in accordance with the Philippine laws, the defendant appears to put his actuations in a different
light as indicated in a portion of his direct examination, to wit:
xxx
It would seem, therefore, that the eventual distribution of the estate of Audrey ONeill Guersey was prompted
by defendant Alonzo H. Anchetas concern that the subject realty equally benefit the plaintiffs adopted
daughter Kyle Guersey.
Well-intentioned though it may be, defendant Alonzo H. Anchetas action appears to have breached his duties
and responsibilities as ancillary administrator of the subject estate. While such breach of duty admittedly
cannot be considered extrinsic fraud under ordinary circumstances, the fiduciary nature of the said
defendants position, as well as the resultant frustration of the decedents last will, combine to create
a circumstance that is tantamount to extrinsic fraud. Defendant Alonzo H. Anchetas omission to prove the
national laws of the decedent and to follow the latters last will, in sum, resulted in the procurement of the
subject orders without a fair submission of the real issues involved in the case.41 (Emphasis supplied)
This is not a simple case of error of judgment or grave abuse of discretion, but a total disregard of the law as a
result of petitioners abject failure to discharge his fiduciary duties. It does not rest upon petitioners pleasure
as to which law should be made applicable under the circumstances. His onus is clear. Respondent was thus
excluded from enjoying full rights to the Makati property through no fault or negligence of her own, as
petitioners omission was beyond her control. She was in no position to analyze the legal implications of
petitioners omission and it was belatedly that she realized the adverse consequence of the same. The end
result was a miscarriage of justice. In cases like this, the courts have the legal and moral duty to provide
judicial aid to parties who are deprived of their rights.42
The trial court in its Order dated December 6, 1991 in Special Proceeding No. M-888 noted the law of the
State of Maryland on Estates and Trusts, as follows:
Under Section 1-301, Title 3, Sub-Title 3 of the Annotated Code of the Public General Laws of Maryland on
Estates and Trusts, "all property of a decedent shall be subject to the estate of decedents law, and upon his
death shall pass directly to the personal representative, who shall hold the legal title for administration and
distribution," while Section 4-408 expressly provides that "unless a contrary intent is expressly indicated in the
will, a legacy passes to the legatee the entire interest of the testator in the property which is the subject of the
legacy". Section 7-101, Title 7, Sub-Title 1, on the other hand, declares that "a personal representative is a
fiduciary" and as such he is "under the general duty to settle and distribute the estate of the decedent in
accordance with the terms of the will and the estate of decedents law as expeditiously and with as little
sacrifice of value as is reasonable under the circumstances".43
In her will, Audrey devised to Richard her entire estate, consisting of the following: (1) Audreys conjugal share
in the Makati property; (2) the cash amount of P12,417.97; and (3) 64,444 shares of stock in A/G Interiors, Inc.
worth P64,444.00. All these properties passed on to Richard upon Audreys death. Meanwhile, Richard, in his
will, bequeathed his entire estate to respondent, except for his rights and interests over the A/G Interiors, Inc.
shares, which he left to Kyle. When Richard subsequently died, the entire Makati property should have then
passed on to respondent. This, of course, assumes the proposition that the law of the State of Maryland which
allows "a legacy to pass to the legatee the entire estate of the testator in the property which is the subject of
the legacy," was sufficiently proven in Special Proceeding No. 9625. Nevertheless, the Court may take judicial
notice thereof in view of the ruling in Bohanan v. Bohanan.44 Therein, the Court took judicial notice of the law
of Nevada despite failure to prove the same. The Court held, viz.:
We have, however, consulted the records of the case in the court below and we have found that during the
hearing on October 4, 1954 of the motion of Magdalena C. Bohanan for withdrawal of P20,000 as her share,
the foreign law, especially Section 9905, Compiled Nevada Laws, was introduced in evidence by appellants'
(herein) counsel as Exhibit "2" (See pp. 77-79, Vol. II, and t.s.n. pp. 24-44, Records, Court of First Instance).
Again said law was presented by the counsel for the executor and admitted by the Court as Exhibit "B" during
the hearing of the case on January 23, 1950 before Judge Rafael Amparo (see Records, Court of First
Instance, Vol. 1).
In any case, the Court has also ruled that if land is invalidly transferred to an alien who subsequently becomes
a citizen or transfers it to a citizen, the flaw in the original transaction is considered cured and the title of the
transferee is rendered valid.49 In this case, since the Makati property had already passed on to respondent
who is a Filipino, then whatever flaw, if any, that attended the acquisition by the Guerseys of the Makati
property is now inconsequential, as the objective of the constitutional provision to keep our lands in Filipino
hands has been achieved.
WHEREFORE, the petition is denied. The Decision dated March 18, 1999 and the Resolution dated August
27, 1999 of the Court of Appeals are AFFIRMED.
Petitioner is ADMONISHED to be more circumspect in the performance of his duties as an official of the court.

In addition, the other appellants, children of the testator, do not dispute the above-quoted provision of the laws No pronouncement as to costs.
of the State of Nevada. Under all the above circumstances, we are constrained to hold that the pertinent law of
Nevada, especially Section 9905 of the Compiled Nevada Laws of 1925, can be taken judicial notice of by us,
without proof of such law having been offered at the hearing of the project of partition.

In this case, given that the pertinent law of the State of Maryland has been brought to record before the CA,
and the trial court in Special Proceeding No. M-888 appropriately took note of the same in disapproving the
proposed project of partition of Richards estate, not to mention that petitioner or any other interested person
for that matter, does not dispute the existence or validity of said law, then Audreys and Richards estate
should be distributed according to their respective wills, and not according to the project of partition submitted
by petitioner. Consequently, the entire Makati property belongs to respondent.

Decades ago, Justice Moreland, in his dissenting opinion in Santos v. Manarang,45 wrote:

A will is the testator speaking after death. Its provisions have substantially the same force and effect in the
probate court as if the testator stood before the court in full life making the declarations by word of mouth as
they appear in the will. That was the special purpose of the law in the creation of the instrument known as the
last will and testament. Men wished to speak after they were dead and the law, by the creation of that
instrument, permitted them to do so x x x All doubts must be resolved in favor of the testator's having meant
just what he said.

Honorable as it seems, petitioners motive in equitably distributing Audreys estate cannot prevail over
Audreys and Richards wishes. As stated in Bellis v. Bellis:46

x x x whatever public policy or good customs may be involved in our system of legitimes, Congress has not
intended to extend the same to the succession of foreign nationals. For it has specifically chosen to leave,
inter alia, the amount of successional rights, to the decedent's national Law. Specific provisions must prevail
over general ones.47

Before concluding, the Court notes the fact that Audrey and Richard Guersey were American citizens who
owned real property in the Philippines, although records do not show when and how the Guerseys acquired
the Makati property.

Under Article XIII, Sections 1 and 4 of the 1935 Constitution, the privilege to acquire and exploit lands of the
public domain, and other natural resources of the Philippines, and to operate public utilities, were reserved to
Filipinos and entities owned or controlled by them. In Republic v. Quasha,48 the Court clarified that the Parity
Rights Amendment of 1946, which re-opened to American citizens and business enterprises the right in the
acquisition of lands of the public domain, the disposition, exploitation, development and utilization of natural
resources of the Philippines, does not include the acquisition or exploitation of private agricultural lands. The
prohibition against acquisition of private lands by aliens was carried on to the 1973 Constitution under Article
XIV, Section 14, with the exception of private lands acquired by hereditary succession and when the transfer
was made to a former natural-born citizen, as provided in Section 15, Article XIV. As it now stands, Article XII,
Sections 7 and 8 of the 1986 Constitution explicitly prohibits non-Filipinos from acquiring or holding title to
private lands or to lands of the public domain, except only by way of legal succession or if the acquisition was
made by a former natural-born citizen.