Leung Yee vs Frank Strong

Machinery Co.
In 1913, Compania Agricola Filipina (CAF) was indebted to two personalities: Leung Yee and
Frank L. Strong Machinery Co. CAF purchased some rice cleaning machines from Strong
Machinery. CAF installed the machines in a building. As security for the purchase price, CAF
executed a chattel mortgage on the rice cleaning machines including the building where
the machines were installed. CAF failed to pay Strong Machinery, hence the latter
foreclosed the mortgage – the same was registered in the chattel mortgage registry.
CAF also sold the land (where the building was standing) to Strong Machinery. Strong
Machinery took possession of the building and the land.
On the other hand, Yee, another creditor of CAF who engaged in the construction of the
building, being the highest bidder in an auction conducted by the sheriff, purchased the
same building where the machines were installed. Apparently CAF also executed a chattel
mortgage in favor Yee. Yee registered the sale in the registry of land. Yee was however
aware that prior to his buying, the property has been sold in favor of Strong Machinery –
evidence is the chattel mortgage already registered by Strong Machinery (constructive
notice).
ISSUE: Who is the owner of the building?
HELD: The SC ruled that Strong Machinery has a better right to the contested property.
Yee cannot be regarded as a buyer in good faith as he was already aware of the fact that
there was a prior sale of the same property to Strong Machinery.
The SC also noted that the Chattel Mortgage Law expressly contemplates provisions for
chattel mortgages which only deal with personal properties. The fact that the parties dealt
the building as if it’s a personal property does not change the nature of the thing. It is still a
real property. Its inscription in the Chattel Mortgage registry does not modify its inscription
the registry of real property.
 PRUDENTIAL BANK V. PANIS
153 SCRA 390
FACTS:
Spouses Magcale secured a loan from Prudential Bank. To secure payment, they executed a real
estate mortgage over a residential building. The mortgage included also the right to occupy the lot and
the information about the sales patent applied for by the spouses for the lot to which the building
stood. After securing the first loan, the spouses secured another
from the same bank. To secure payment, another real estate mortgage was executed over the
same properties.

The Secretary of Agriculture then issued a Miscellaneous Sales Patent over the land which was later on
mortgaged to the bank.

The spouses then failed to pay for the loan and the REM was extrajudicially foreclosed and sold in public
auction despite opposition from the spouses. The respondent court held that the REM was null and void.

HELD:

A real estate mortgage can be constituted on the building erected on the land belonging to
another.

The inclusion of building distinct and separate from the land in the Civil Code can only mean
that the building itself is an immovable property.

While it is true that a mortgage of land necessarily includes in the absence

of stipulation of the improvements thereon, buildings, still a building in itself may be
mortgaged by itself apart from the land on which it is built. Such a mortgage would still be
considered as a REM for the building would
still be considered as immovable property even if dealt with separately and apart from the land.

The original mortgage on the building and right to occupancy of the land
was executed before the issuance of the sales patent and before the
government was divested of title to the land. Under the foregoing, it is
evident that the mortgage executed by private respondent on his own
building was a valid mortgage.

As to the second mortgage, it was done after the sales patent was issued and thus prohibits
pertinent provisions of the Public Land Act.

Tsai v. CA
October 2, 2001
FACTS:
 Ever Textile Mills, Inc. (EVERTEX) obtained loan from Philippine Bank of
Communications (PBCom), secured by a deed of Real and Chattel Mortgage over the
lot where its factory stands, and the chattels located therein as enumerated in a
schedule attached to the mortgage contract. PBCom again granted a second loan to
EVERTEX which was secured by a Chattel Mortgage over personal properties
enumerated in a list attached thereto. These listed properties were similar to those
listed in the first mortgage deed. After the date of the execution of the second
mortgage mentioned above, EVERTEX purchased various machines and
equipments. Upon EVERTEX's failure to meet
its obligation to PBCom, the latter commenced extrajudicial foreclosure proceedings
against EVERTEX under Act 3135 and Act 1506 or "The Chattel Mortgage
Law". PBCom then consolidated its ownership over the lot and all the properties in
it. It leased the entire factory premises to Ruby Tsai and sold to the same the
factory, lock, stock and barrel including the contested machineries.

EVERTEX filed a complaint for annulment of sale, reconveyance, and damages

against PBCom, alleging inter alia that the extrajudicial foreclosure of subject
mortgage was not valid, and that PBCom, without any legal or factual basis,
appropriated the contested properties which were not included in the Real and
Chattel Mortgage of the first mortgage contract nor in the second contract which is a
Chattel Mortgage, and neither were those properties included in the Notice of
Sheriff's Sale.

ISSUES:
1) W/N the contested properties are personal or movable properties
2) W/N the sale of these properties to a third person (Tsai) by the bank through an
irregular foreclosure sale is valid.

HELD:

1) Nature of the Properties and Intent of the Parties

The nature of the disputed machineries, i.e., that they were heavy, bolted or
cemented on the real property mortgaged does not make them ipso
facto immovable under Article 415 (3) and (5) of the New Civil Code. While it is true
that the properties appear to be immobile, a perusal of the contract of Real and
Chattel Mortgage executed by the parties herein reveal their intent, that is - to treat
machinery and equipment as chattels.

In the first mortgage contract, reflective of the true intention of PBCOM and
EVERTEX was the typing in capital letters, immediately following the printed
caption of mortgage, of the phrase "real and chattel." So also, the "machineries and
equipment" in the printed form of the bank had to be inserted in the blank space of
the printed contract and connected with the word "building" by typewritten slash
marks. Now, then, if the machineries in question were contemplated to be included
in the real estate mortgage, there would have been no necessity to ink a chattel
mortgage specifically mentioning as part III of Schedule A a listing of the
machineries covered thereby. It would have sufficed to list them as immovables in
the Deed of Real Estate Mortgage of the land and building involved. As regards the
second contract, the intention of the parties is clear and beyond question. It refers
solely to chattels. The inventory list of the mortgaged properties is an itemization of
63 individually described machineries while the schedule listed only machines and
2,996,880.50 worth of finished cotton fabrics and natural cotton fabrics.

UNDER PRINCIPLE OF STOPPEL

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

2) Sale of the Properties Not Included in the Subject of Chattel Mortgage is Not Valid

The auction sale of the subject properties to PBCom is void. Inasmuch as the subject
mortgages were intended by the parties to involve chattels, insofar as equipment
and machinery were concerned, the Chattel Mortgage Law applies. Section 7
provides thereof that: "a chattel mortgage shall be deemed to cover only the
property described therein and not like or substituted property thereafter acquired
by the mortgagor and placed in the same depository as the property originally
mortgaged, anything in the mortgage to the contrary notwithstanding." Since the
disputed machineries were acquired later after the two mortgage contracts were
executed, it was consequently an error on the part of the Sheriff to include subject
machineries with the properties enumerated in said chattel mortgages.

As the lease and sale of said personal properties were irregular and illegal because
they were not duly foreclosed nor sold at the auction, no valid title passed in its
favor. Consequently, the sale thereof to Ruby Tsai is also a nullity under the
elementary principle of nemo dat quod non habet, one cannot give what one does
not have. ##

Property Case Digests

(Atty. Vivencio Abano)

 Athena Louise Erandio 2A | Batch 2014 | 1

Maneclang v. Intermediate Appellate CourtFacts:

Adriano Maneclang in this case filed a complaint for

quieting of titleover a certain fishpond located within the 4 parcels ofland belonging to
them

situated in Pangasinan but the trial courtdismissed it bysaying that the body of water is a

creek constitutinga tributary to Agno River

therefore public in nature and notsubject to private appropriation.

They appealed it tothe IAC which affirmed theaforementioned decision. Hence, this review
on certiorari.

However, after having been asked to comment to the case thereon,they manifested theirlack of
interest and the parties to the case (thecomplainant and the awardee in thepublic bidding Maza)
decided toamicably settle the case saying that judgment berendered and that the court

recognizetheownershipotfhepeitonersoverthelandthe body of water found within their titled properties.

They say that there would be no benefit since the NIA already constructed a dike and no water
now gets in and out of theland.

Issue:

Whether or not the fishpond is public in nature.

Ratio:

Yes.

A creek is defined as a recess or arm extending from a river andparticipating in the ebband flow of
the sea.

It is a property belonging to the public domain and isnot susceptible toprivate appropriation
andacquisitive prescription.

The mere construction of the dikes by NIA nor its conversionto a fishpond altered orchanged the
nature of the creek asproperty of the public domain.

The compromise agreement is null and void and of no legal effect because it is contraryto law and
public policy.