Punsalan v. vda.

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

Evangelista v. Alto Surety
[G.R. No. L-11139. April 23, 1958.]
En Banc, Concepcion (J): 9 concur
Facts: On 4 June 1949, Santos Evangelista instituted Civil Case No. 8235 of the CFI Manila (Santos Evangelista vs. Ricardo Rivera)
for a sum of money. On the same date, he obtained a writ of attachment, which was 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 8 June 1949. In due course, judgment was rendered in favor of Evangelista, who, on 8 October 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 22 October 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. and that the latter is now the true owner of said property. It appears that on 10 May 1952, a definite deed of sale of
the same house had been issued to Alto Surety, as the highest bidder at an auction sale held, on 29 September 1950, in compliance
with a writ of execution issued in Civil Case 6268 of the same court (Alto Surety & Insurance vs. Maximo Quiambao, Rosario
Guevara and Ricardo Rivera)" in which judgment, for the sum of money, had been rendered in favor of Alto Surety. Hence, on 13
June 1953, Evangelista instituted an action against Alto Surety and Ricardo Rivera, for the purpose of establishing his title over said
house, and securing possession thereof, apart from recovering damages. After due trial, the CFI Manila rendered judgment for
Evangelista, sentencing Rivera and Alto Surety to deliver the house in question to Evangelista and to pay him, jointly and severally,
P40.00 a month from October, 1952, until said delivery, plus costs.
On appeal, the decision was reversed by the Court of Appeals, which absolved Alto Surety 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
Alto Surety, 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. Evangelista filed an appeal by Certiorari with the Supreme Court.
The Supreme Court reversed the decision of the Court of Appeals, and another one entered affirming that of the CFI Manila, with the
costs against Alto Surety & Insurance Co.
1. House is not personal, but immovable property
The 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 OG 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 a usufructuary or lessee. This is the doctrine in Leung
Yee vs. Strong Machinery Company, 37 Phil., 644. The opinion 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 "Evangelista 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 is untenable.
2. House may be considered personal property in a deed of chattel mortgage, but view is limited to parties
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 OOG 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.
3. House is not personal property even if subject to chattel mortgage; Rules of execution strict on the character of the
properties as real and personal notwithstanding agreement of parties
The rules on execution do not allow, and should not be interpreted as to allow, the special consideration that parties to a contract may
have desired to impart to real estate 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. 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 (Manarang v. Ofilada)
4. House of mixed material levied upon on execution is real property
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 on
the land, which is real property. (Manarang v. Ofilada, citing various sources).
5. Foregoing consideration apply to conditions for levy of attachment
The foregoing considerations apply, with equal force, to the conditions for the levy of attachment, for it similarly affects the public
and third persons.
6. Evidence; Conclusion, that lack of proof that the writ or notice of attachment to have been served leads to such not having
been served, is inaccurate
Considering 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 that Rivera had received
copies of said documents; and that, for this reason, evidently, no proof was introduced thereon, the Court held 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 admission by the parties, and that,
accordingly, a grave abuse of discretion was committed in making said finding, which is, furthermore, inaccurate.
Tumalad v. Vicencio
[G.R. No. L-30173. September 30, 1971.]
En Banc, Reyes JBL (J): 10 concur
Facts: On 1 September 1955 Vicencio and Simeon, defendants-appellants, executed a chattel mortgage in favor of the Tumalads,
plaintiff-appellees over their house of strong materials located at 550 Int. 3, Quezon Boulevard, Quiapo, Manila, over Lot 6-B and 7-
B, Block 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 mortgage was executed to guarantee a loan of P4,800.00 received from the Tumalads, 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 become immediately due and payable, the Chattel Mortgage enforceable, and the Sheriff
of Manila authorized the Mortgagors property after necessary publication. When Vicencio and Simeon 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, the Tumalads were issued the corresponding certificate of sale.
On 18 April 1956, the Tumalads commenced Civil Case 43073 in the municipal court of Manila, praying, among other things, that the
house be vacated and its possession surrendered to them, and for Vicencio and Simeon to pay rent of P200.00 monthly from 27 March
1956 up to the time the possession is surrendered. On 21 September 1956, the municipal court rendered its decision in favor of the
Tumalads. Having lost therein, appealed to the court a quo (Civil Case 30993) which also rendered a decision against them. On
appeal, the case was certified to the Supreme Court by the Court of Appeals (CA-G.R. No. 27824-R) for the reason that only questions
of law are involved. Plaintiffs-appellees failed to file a brief and this appeal was submitted for decision without it.
Nearly a year after the foreclosure sale the mortgaged house had been demolished on 14 and 15 January 1957 by virtue of a decision
obtained by the lessor of the land on which the house stood.
The Supreme Court reversed the decision appealed from and entered another dismissing the complaint, with costs against plaintiffs-
appellees.
1. Answer a mere statement and not evidence; Allegations or averments determines jurisdiction
It has been held in Supia and Batiaco vs. Quintero and Ayala that "the answer is a mere statement of the facts which the party filing it
expects to prove, but it is not evidence; 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, wherein the
defendant was also a successful bidder in an auction sale, it was likewise held by the Court that in detainer cases the claim 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.
2. Fraud and deceit renders a contract voidable or annullable, and not void ab initio; Claim of ownership by virtue of voidable
contract fails without evidence that steps were made to annul the same
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. In the present case, the charge of fraud, deceit or trickery,
the conterntions are not supported by evidence. Further, 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.
3. Buildings as immovable
The rule about the status of buildings as immovable property is stated in Lopez vs. Orosa, Jr. and Plaza Theatre, Inc., cited in
Associated Insurance Surety Co., Inc. vs. Iya, et al. 16 to the effect 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.
4. Deviations allowed, parties treatment of real property as personal property; cases
Certain deviations, however, have been allowed for various reasons. In the case of Manarang and Manarang vs. Ofilada, it was held
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. In the latter case, the mortgagor conveyed and transferred to the
mortgagee by way of mortgage "the following described personal property." The "personal property" consisted of leasehold rights and
a building. In the case of Luna vs. Encarnacion, the subject of the contract designated as Chattel Mortgage was a house of mixed
materials, and the Court held 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 Navarro vs.
Pineda, the 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). 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, for it is now settled that an object
placed on land by one who had only a temporary right to the same, such as the lessee or usufructuary, does not become immobilized
by attachment (Valdez vs. Central Altagracia, cited in Davao Sawmill vs. Castillo). Hence, if a house belonging to a person stands on
a rented land belonging to another person, it may be mortgaged as a personal property as so stipulated in the document of mortgage. It
should be noted, however that the principle is predicated on statements by the owner declaring his house to be a chattel, a conduct that
may conceivably estop him from subsequently claiming otherwise. (Ladera vs. C.N. Hodges).
5. House treated by parties as chattel; factors to determine
In the contract, the house on rented land is not only expressly designated as Chattel Mortgage; it specifically provides that "the
mortgagor voluntarily cedes, sells and transfers by way of Chattel Mortgage the property together with its leasehold rights over the lot
on which it is constructed and participation;" whcih could only have meant to convey the house as chattel, or at least, intended to treat
the same as such, so that they should not now be allowed to make an inconsistent stand by claiming otherwise. Moreover, the subject
house stood on a rented lot to which defendants-appellants merely had a temporary right as lessee, and although this can not in itself
alone determine the status of the property, it does so when combined with other factors to sustain the interpretation that the parties,
particularly the mortgagors, intended to treat the house as personality.
6. Estoppel; Party in chattel mortgage cannot question validity of chattel mortgage entered into
Inlike in the Iya cases, Lopez vs. Orosa, Jr. and Plaza Theatreand Leung Yee vs. F. L. Strong Machinery and Williamson, wherein
third persons assailed the validity of the chattel mortgage, it is the defendants-appellants themselves, as debtors-mortgagors, who are
attacking the validity of the chattel mortgage in this case. The doctrine of estoppel therefore applies to the herein defendants-
appellants, having treated the subject house as personalty.
7. Chattel mortgage covered by Act 1508, Chattel Mortgage Law
Chattel mortgages are covered and regulated by the Chattel Mortgage Law, Act 1508. Section 14 of this 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 3135, as
amended by Act 4118, provided that the requirements of the law relative to notice and registration are complied with. In the present
case, the parties specifically stipulated that "the chattel mortgage will be enforceable in accordance with the provisions of Special Act
3135.
8. Mortgagors entitled to remain in possession without rent within redemption period
Nearly a year after the foreclosure sale the mortgaged house had been demolished on 14 and 15 January 1957 by virtue of a decision
obtained by the lessor of the land on which the house stood. The CFI sentenced the mortgagors to pay a monthly rent of P200.00 from
the time the chattel mortgage was foreclosed until when it was torn down by the sheriff. The Court ruled that the mortgagors were
entitled to remain in possession without any obligation to pay rent during the one year redemption period after the foreclosure sale.
Section 6 of Act 3135 provides that the debtor-mortgagor 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 allows the purchaser of the property to obtain
from the court the possession during the period of redemption: but the same provision expressly requires the filing of a petition with
the proper CFI and the furnishing of a bond. It is only upon filing of the proper motion and the approval of the corresponding bond
that the order for a writ of possession issues as a matter of course. No discretion is left to the court. 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 governing provision is Section 34, Rule 39, of the Revised Rules of Court which also applies to properties purchased in
extrajudicial foreclosure proceedings.
9. Rentals received during redemption period credited to redemption price
Before the expiration of the 1-year period within which the judgment-debtor or mortgagor may 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 case may be, for the amount so received and the same will be duly credited against the redemption price when the
said debtor or mortgagor effects the redemption. Differently stated, the rentals receivable from tenants, although they may be collected
by the purchaser during the redemption period, do not belong to the latter but still pertain to the debtor of mortgagor. The rationale for
the Rule, it seems, is to secure for the benefit of the debtor or mortgagor, the payment of the redemption amount and the consequent
return to him of his properties sold at public auction. (Reyes vs. Hamada, reiterating Chan v. Espe)
10. Case prematurely filed
The period of redemption had not yet expired when action was instituted in the court of origin, and that plaintiffs-appellees did not
choose to take possession under Section 7, Act 3135, as amended, which is the law selected by the parties to govern the extrajudicial
foreclosure of the chattel mortgage. Neither was there an allegation to that effect. Since plaintiffs-appellees' right to possess was not
yet born at the filing of the complaint, there could be no violation or breach thereof. Wherefore, the original complaint stated no cause
of action and was prematurely filed.
11. Courts authority to review errors not assigned
Even if there was no assignment of error to that effect, the Supreme Court is clothed with ample authority to review palpable errors
not assigned as such if it finds that their consideration is necessary in arriving at a just decision of the case.
Chua Peng Hian v. CA
[G.R. No. 60015. December 19, 1984.]
Second Division, Aquino (J): 4 concur, 1 took no part.
Facts: Miguel C. Veneracion owned a 2,194 sq.m. lot located at 787 Melencio Street, Cabanatuan City. He leased it in 1948 to Patrick
Chua Peng Hian for 10 years. The lease was renewed for another 10 years. Chua constructed on that lot a 2-storey building, the ground
floor being the sawmill and the second floor as residence. On 25 May 1968, after the second lease agreement had expired, Veneracion
leased to Chua 1,850 square meters of the lot for 3 years or from 1 May 1968 to 1 May 1971 at the monthly rental of P1,500. The new
lease contract stipulates that the lease shall terminate automatically without extension and the lessee shall vacate and surrender the
premises without any obstruction thereon; that in the event that the Lessee fails to surrender and vacate the leased premises at the
expiration of this lease on May 1, 1971, and/or to remove his buildings and improvements, same shall automatically remain as
property of the Lessor without the necessity of executing a Deed of Transfer or conveyance of the aforementioned properties; that this
document will serve as Deed of Transfer and Conveyance of the above mentioned buildings and improvements in favor of the Lessor;
and that the Lessee shall pay the Lessor "compensatory damages" of P20,000 plus attorney's fee of P2,000 should the Lessor seek
judicial relief by reason of Lessee's non-fulfillment or violation of the terms of the lease. On 6 February 1969 Veneracion died. After
the third lease contract expired or on 1 May 1971, Veneracion's heirs demanded that Chua vacate the premises and pay the accrued
rentals. Chua did not comply with their demand.
On 11 April 1972, the Veneracions filed in the CFI Nueva Ecija an action for specific performance against Chua. The trial court
rendered a decision from which both parties appealed. On 30 October 1980, the Appellate Court rendered judgment ordering Chua and
his family to vacate the land in question; to convey the buildings and improvements existing on the land to the Veneracion heirs and to
pay the monthly rental of P1,500 from June, 1971 until he delivers possession thereof and the amount of P20,000 as compensatory
damages plus P2,000 as attorney's fee. Chua appealed to the Supreme Court.
The Supreme Court affirmed the judgment of the Court of Appeals; with costs against the petitioner.
1. CFI has jurisdiction over issue on rights of parties to a building constructed on land
Where the issues raised before the inferior court do not only involve possession of the lot but also the rights of the parties to the
building constructed thereon, the Court of First Instance and not the municipal or city court has jurisdiction over the case (Ortigas and
Co., Ltd. Partnership vs. Court of Appeals, G.R. No. 52488, July 25, 1981, 106 SCRA 121).
2. CFI has jurisdiction as action for specific performance is not capable of pecuniary
The action sought was for specific performance of the stipulations of a lease contract. It was not capable of pecuniary estimation. It
was within the exclusive original jurisdiction of the Court of First Instance (De Jesus vs. Garcia, 125 Phil. 965; Lapitan vs. Scandia,
Inc., L-24668, July 31, 1968, 24 SCRA 479).
3. Building and improvements on leased land treated as personal property
The building and improvements on the leased land may be treated as personal properties (Standard Oil Co. of New York vs. Jaramillo,
44 Phil. 630; Luna vs. Encarnacion, 91 Phil. 531; Manarang vs. Ofilada, 99 Phil. 108; Tumalad vs. Vicencio, L-30173, September 30,
1971, 41 SCRA 143, 152-3). Alienation in the contract of lease of the Lessees improvements is not a disposition of conjugal realty
without the wife's consent.
4. Stipulation that Lessor would become owner of improvements is valid
The validity of a stipulation that the lessor would become the owner of the improvements constructed by the lessee on the leased land
has been sustained (Lao Chit vs. Security Bank & Trust Co. and Consolidated Investment, Inc., 105 Phil. 490; Co Bun Kin vs.
Liongson, 100 Phil. 1091).
5. Contract is the law between the parties.
The case is governed by the lease contract which is the law between the parties. The four-year extension of the lease made by the trial
court and the amount of damages do not merit any serious consideration.
Burgos v. Chief of Staff, AFP
[G.R. No. 64261. December 26, 1984.]
En Banc, Escolin (J): 10 concur, 1 took no part
Facts: On 7 December 1982, Judge Ernani Cruz-Pao, Executive Judge of the then CFI Rizal [Quezon City], issued 2 search warrants
where the premises at 19, Road 3, Project 6, Quezon City, and 784 Units C & D, RMS Building, Quezon Avenue, Quezon City,
business addresses of the "Metropolitan Mail" and "We Forum" newspapers, respectively, were searched, and office and printing
machines, equipment, paraphernalia, motor vehicles and other articles used in the printing, publication and distribution of the said
newspapers, as well as numerous papers, documents, books and other written literature alleged to be in the possession and control of
Jose Burgos, Jr. publisher-editor of the "We Forum" newspaper, were seized.
A petition for certiorari, prohibition and mandamus with preliminary mandatory and prohibitory injunction was filed after 6 months
following the raid to question the validity of said search warrants, and to enjoin the Judge Advocate General of the AFP, the city fiscal
of Quezon City, et.al. from using the articles seized as evidence in Criminal Case Q-022782 of the RTC Quezon City (People v.
Burgos). The prayer of preliminary prohibitory injunction was rendered moot and academic when, on 7 July 1983, the Solicitor
General manifested that said articles would not be used until final resolution of the legality of the seizure of said articles.
The Supreme Court declared the search warrants 20-82(a,b) issued on 7 December 1982 null and void, and granted the writ of
mandatory injunction for the return of the seized articles, such articles seized ordered released to the petitioners; without costs.
1. Urgency of constitutional issue raised overrides procedural flaw; Failure to file motion to quash
Petitioners, before impugning the validity of the warrants before the Court, should have filed a motion to quash said warrants in the
court that issued them. But this procedural flaw notwithstanding, the Court take cognizance of this petition in view of the seriousness
and urgency of the constitutional issues raised, not to mention the public interest generated by the search of the "We Forum" offices,
which was televised and widely publicized in all metropolitan dailies. The existence of this special circumstance justifies this Court to
exercise its inherent power to suspend its rules. In Vda. de Ordoveza v. Raymundo, it was said that "it is always in the power of the
court [Supreme Court] to suspend its rules or to except a particular case from its operation, whenever the purposes of justice require it
. . . "
2. Laches defined
Laches is failure or negligence for an unreasonable and unexplained length of time to do that which, by exercising due diligence,
could or should have been done earlier. It is negligence or omission to assert a right within a reasonable time, warranting a
presumption that the party entitled to assert it either has abandoned or declined to assert it.
3. Extrajudicial effort negates presumption of abandonment of right to the possession of property
Extrajudicial efforts exerted by petitioners negate the presumption that they had abandoned their right to the possession of the seized
property, thereby refuting the charge of laches against them. Although the reason given by petitioners may not be flattering to the
judicial system, The Court finds no ground to punish or chastise them for an error in judgment in pursuing other remedies, relying on
the so-called executive benevolence or largesse (e.g. Letter of presidential friend Fiscal Flaminiano to Col. Balbino Diego, Chief
Intelligence and Legal Officer of the PSG).
4. Documents marked as evidence in criminal case do not affect issue on the validity of the warrants
The documents seized lawfully belong to Jose Burgos, Jr. and he can do whatever he pleases with them, within legal bounds; such as
marking them as evidence in the criminal case. The fact that he has used them as evidence does not and cannot in any way affect the
validity or invalidity of the search warrants assailed in the petition.
5. Examination conducted
Petitioners objection that there is an alleged failure to conduct an examination under oath or affirmation of the applicant and his
witnesses, as mandated by the Constitution as well as Sec. 4, Rule 126 of the Rules of Court, may properly be considered moot and
academic, as petitioners themselves conceded during the hearing on 9 August 1983, that an examination had indeed been conducted
by the judge of Col. Abadilla and his witnesses.
6. Defect on the address where items are to be seized is typographical error
Search Warrants No. 20-82[a] and No. 20-82[b] were used to search two distinct places: No. 19, Road 3, Project 6, Quezon City and
784 Units C & D, RMS Building, Quezon Avenue, Quezon City, respectively. Objection is interposed to the execution of Search
Warrant No. 20-82[b] at the latter address on the ground that the two search warrants pinpointed only one place where petitioner Jose
Burgos, Jr. was allegedly keeping and concealing the articles listed therein, i.e., No. 19, Road 3, Project 6, Quezon City. The defect
pointed out is obviously a typographical error. Precisely, two search warrants were applied for and issued because the purpose and
intent were to search two distinct premises. It would be quite absurd and illogical for respondent judge to have issued two warrants
intended for one and the same place.
7. Determination whether warrant describes premises to be search with sufficient particularity
In the determination of whether a search warrant describes the premises to be searched with sufficient particularity, the executing
officer's prior knowledge as to the place intended in the warrant is relevant. This would seem to be especially true where the executing
officer is the affiant on whose affidavit the warrant had issued, and when he knows that the judge who issued the warrant intended the
building described in the affidavit. And it has also been said that the executing officer may look to the affidavit in the official court file
to resolve an ambiguity in the warrant as to the place to be searched.
8. Property seized need not be owned by person against whom the warrant is directed
Section 2, Rule 126 of the Rules of Court, enumerates the personal properties that may be seized under a search warrant, such as [a]
Property subject of the offense; [b] Property stolen or embezzled and other proceeds or fruits of the offense; and [c] Property used or
intended to be used as the means of committing an offense. The rule does not require that the property to be seized should be owned
by the person against whom the search warrant is directed. It may or may not be owned by him. Ownership is of no consequence, and
it is sufficient that the person against whom the warrant is directed has control or possession of the property sought to be seized was
alleged to have in relation to the articles and property seized under the warrants.
9. Machineries remain to be movable property; owner should place the machinery to be immovable
Under Article 415[5] of the Civil Code of the Philippines, "machinery, receptables, instruments or implements intended by the owner
of the tenement for an industry or works which may be carried on in a building or on a piece of land and which tend directly to meet
the needs of the said industry or works" are considered immovable property. In Davao Sawmill Co. v. Castillo, it was said that
machinery which is movable by nature becomes immobilized when placed by the owner of the tenement, property or plant, but not so
when placed by a tenant, usufructuary, or any other person having only a temporary right, unless such person acted as the agent of the
owner. In the present case, petitioners do not claim to be the owners of the land and/or building on which the machineries were placed.
The machineries, while in fact bolted to the ground, remain movable property susceptible to seizure under a search warrant.
10. Article IV, Section 3 of the 1973 Constitution; Finding of probable cause required to issue warrant
Section 3 provides that no search warrant or warrant of arrest shall issue except upon probable cause to be determined by the judge, or
such other responsible officer as may be authorized by law, after examination under oath or affirmation of the complainant and the
witnesses he may produce, and particularly describing the place to be searched and the persons or things to be seized. In the present
case, a statement in the effect that the petitioner "is in possession or has in his control printing equipment and other paraphernalia,
news publications and other documents which were used and are all continuously being used as a means of committing the offense of
subversion punishable under PD 885, as amended" is a mere conclusion of law and does not satisfy the requirements of probable
cause. Bereft of such particulars as would justify a finding of the existence of probable cause, said allegation cannot serve as basis for
the issuance of a search warrant.
11. Probable cause for search defined; Application to searches against newspaper publisher/editor
Probable cause for a search is defined as such facts and circumstances which would lead a reasonably discreet and prudent man to
believe that an offense has been committed and that the objects sought in connection with the offense are in the place sought to be
searched. When the search warrant applied for is directed against a newspaper publisher or editor in connection with the publication of
subversive materials, the application and/or its supporting affidavits must contain a specification, stating with particularity the alleged
subversive material he has published or is intending to publish. Mere generalization will not suffice.
12. Constitution requires personal knowledge of complainant / witnesses to justify issuance of warrant
In mandating that "no warrant shall issue except upon probable cause to be determined by the judge, after examination under oath or
affirmation of the complainant and the witnesses he may produce; the Constitution requires no less than personal knowledge by the
complainant or his witnesses of the facts upon which the issuance of a search warrant may be justified. In Alvarez v. CFI, it was ruled
that "the oath required must refer to the truth of the facts within the personal knowledge of the petitioner or his witnesses, because the
purpose thereof is to convince the committing magistrate, not the individual making the affidavit and seeking the issuance of the
warrant, of the existence of probable cause."
13. General warrants invalid
In Standford v. State of Texas, the search warrant which authorized the search for 'books, records, pamphlets, cards, receipts, lists,
memoranda, pictures, recordings and other written instruments concerning the Communist Parties of Texas, and the operations of the
Communist Party in Texas," was declared void by the U.S. Supreme Court for being too general. It is that it is not the policy of the
government to suppress any newspaper or publication that speaks with "the voice of non-conformity" but poses no clear and imminent
danger to state security.
14. Closure of publications in the nature of censorship abhorrent to the freedom of the press
As a consequence of the search and seizure, these premises of the Metropolitan Mail and We Forum were padlocked and sealed, with
the further result that the printing and publication of said newspapers were discontinued. Such closure is in the nature of previous
restraint or censorship abhorrent to the freedom of the press guaranteed under the fundamental law, and constitutes a virtual denial of
petitioners' freedom to express themselves in print. Thus state of being is patently anathematic to a democratic framework where a
free, alert and even militant press is essential for the political enlightenment and growth of the citizenry.
15. Machines not sequestered under PD 885; Lack of IRR, contrary claim by Marcos and Romulo
Sequestration under Section 8 of PD 885, as amended, which authorizes "the sequestration of the property of any person, natural or
artificial, engaged in subversive activities against the government and its duly constituted authorities in accordance with implementing
rules and regulations as may be issued by the Secretary of National Defense" could not validly be effected in view of the absence of
any implementing rules and regulations promulgated by the Minister of National Defense. Further, no less than President Marcos
himself denied the request of the military authorities to sequester the property seized as reported in the 10 December 1982 issue of the
Daily Express. This was confirmed by Foreign Minister Carlos P. Romulo on 10 February 1982, reiterating Marcos claims, in his
letter to US Congressman Tony P. Hall.
Sergs Products v. PCI Leasing
[G.R. No. 137705. August 22, 2000.]
Third division, Panganiban (J): 3 concur
Facts: On 13 February 1998, PCI Leasing and Finance, Inc. filed a complaint for sum of money, with an application for a writ of
replevin (Civil Case Q-98-33500). On 6 March 1998, upon an ex-parte application of PCI Leasing, judge issued a writ of replevin
directing its sheriff to seize and deliver the machineries and equipment to PCI Leasing after 5 days and upon the payment of the
necessary expenses. On 24 March 1998, the sheriff proceeded to petitioner's factory, seized one machinery with word that the return
for the other machineries. On 25 March 1998, petitioners filed a motion for special protective order, invoking the power of the court to
control the conduct of its officers and amend and control its processes, praying for a directive for the sheriff to defer enforcement of
the writ of replevin. On 6 April 1998, the sheriff again sought to enforce the writ of seizure and take possession of the remaining
properties. He was able to take two more, but was prevented by the workers from taking the rest. On 7 April 1998, they went to the
CA via an original action for certiorari.
Citing the Agreement of the parties, the appellate court held that the subject machines were personal property, and that they had only
been leased, not owned, by petitioners; and ruled that the "words of the contract are clear and leave no doubt upon the true intention of
the contracting parties." It thus affirmed the 18 February 1998 Order, and the 31 March 1998 Resolution of the lower court, and lifted
the preliminary injunction issued on 15 June 1998. A subsequent motion for reconsideration was denied on 26 February 1999. Hence,
the petition for review on certiorari.
The Supreme Court denied the petition and affirmed the decision of the Court of Appeals; with costs against petitioners.
1. Petition for review on certiorari is clearly under Rule 45
The petition need not expressly indicate if it is being filed under Rule 45 or Rule 65 of the Rules of Court, as it is clear that the present
recourse is under Rule 45; the conclusion of such supported by the title of the Petition, which is "Petition for Review on Certiorari."
2. Error in impleading the Judge as respondent not ground to dismiss the case
While the judge should not have been impleaded as a respondent, substantial justice requires that such lapse by itself should not
warrant the dismissal of the present Petition. The Court may deems it proper to remove, motu proprio, the name of the Judge from the
caption of the case.
3. Writ of replevin issued for recovery of personal property
Rule 60 of the Rules of Court provides that writs of replevin are issued for the recovery of personal property only. Section 3 provides
that upon the filing of such affidavit and approval of the bonds the court shall issue an order and the corresponding writ of replevin
describing the personal property alleged to be wrongfully detained and requiring the sheriff forthwith to take such property into his
custody.
4. Machinery immovable properties by incorporation
The machinery were essential and principal elements of their chocolate-making industry. Hence, although each of them was movable
or personal property on its own, all of them have become "immobilized by destination because they are essential and principal
elements in the industry." The machines are thus, real, not personal, property pursuant to Article 415 (5) of the Civil Code.
5. Parties estopped when parties stipulated properties as personal; property thus subject to writ of seizure
Contracting parties may validly stipulate that a real property be considered as personal. After agreeing to such stipulation, they are
consequently estopped from claiming otherwise. Under the principle of estoppel, a party to a contract is ordinarily precluded from
denying the truth of any material fact found therein. Thus, said machines are proper subjects of the Writ of Seizure (compare Tumalad
v. Vicencio).
6. Similar cases
In Trinidad v. Vicencio, the Court upheld the intention of the parties to treat a house of strong materials as a personal property because
it had been made the subject of a chattel mortgage. Applying Tumalad, the Court in Makati Leasing and Finance Corp. v. Wearever
Textile Mills also held that the machinery used in a factory and essential to the industry was a proper subject of a writ of replevin
because it was treated as personal property in a contract.
7. Third parties acting in good faith not affected by stipulation to consider real property as personal
The holding that the machines should be deemed personal property pursuant to the Lease Agreement is good only insofar as the
contracting parties are concerned. Hence, while the parties are bound by the Agreement, third persons acting in good faith are not
affected by its stipulation characterizing the subject machinery as personal. In the present case, however, there is no showing that any
specific third party would be adversely affected.
8. Title to property should be determined at trial; Remedies under Rule 60 either to post a counter-bond or to question the
sufficiency of the plaintiffs bond
The validity and the nature of the contract are the lis mota of the civil action pending before the RTC. A resolution of the questions
whether the Agreement is a loan and not a lease, or whether the Agreement is invalid, therefore, is effectively a resolution of the
merits of the case. Hence, they should be threshed out in the trial, not in the proceedings involving the issuance of the Writ of Seizure.
As held in La Tondea Distillers v. CA, the Court explained that the policy under Rule 60 was that questions involving title to the
subject property should be determined in the trial. In that case, the Court noted that the remedy of defendants under Rule 60 was either
to post a counter-bond or to question the sufficiency of the plaintiff's bond. They were not allowed, however, to invoke the title to the
subject property.
9. Title to property should be determined at trial; no place in a petition for certiorari under Rule 65 or in a petition for review
under Rule 45.
The questions whether the Agreement is a loan and not a lease, or whether the Agreement is invalid require a determination of facts
and a presentation of evidence, both of which have no place in a petition for certiorari in the CA under Rule 65 or in a petition for
review in the Court under Rule 45.
10. Agreement presumed to be valid and binding
The Agreement must be presumed to be valid and binding as the law between the parties; as there is nothing on record to show that it
has been nullified or annulled. In the present case, petitioners assailed it first only in the RTC proceedings, which had ironically been
instituted by respondent. As in the Makati Leasing and Finance case, even granting that he charge is true, such fact alone does not
render a contract void ab initio, but can only be a ground for rendering said contract voidable, or annullable pursuant to Article 1390
of the new Civil Code, by a proper action in court.
11. Consequences cannot be blamed on the Court for the petitioners failure to avail of remedies under Section 5, Rule 60 of
the Rules of Court
Petitioners' arguments, that the seizure will lead to the unemployment of their workers and nullify all efforts to rehabilitate the
corporation, do not preclude the implementation of the Writ. Law and jurisprudence support its propriety. Such consequences should
not be blamed on this Court, but on the petitioners for failing to avail themselves of the remedy under Section 5 of Rule 60, which
allows the filing of a counter-bond.
Makati Leasing v. Wearever Textiles
[G.R. No. L-58469. May 16, 1983.]
Second Division, de Castro (J): 5 concur, 1 concur in result
Facts: To obtain financial accommodations from Makati Leasing and Finance Corporation, Wearever Textile Mills, discounted and
assigned several receivables with the former under a Receivable Purchase Agreement. To secure the collection of the receivables
assigned, Wearever Textile executed a Chattel Mortgage over certain raw materials inventory as well as a machinery described as an
Artos Aero Dryer Stentering Range. Upon Wearever's default, Makati Leasing filed a petition for extrajudicial foreclosure of the
properties mortgage to it. However, the Deputy Sheriff assigned to implement the foreclosure failed to gain entry into Wearever's
premises and was not able to effect the seizure of the machinery. Makati Leasing thereafter filed a complaint for judicial foreclosure
with the CFI Rizal (Branch VI, Civil Case 36040).
Acting on petitioner's application for replevin, the lower court issued a writ of seizure, the enforcement of which was restrained upon
Wearever's filing of a motion for reconsideration. The lower court finally issued on 11 February 1981, an order lifting the restraining
order for the enforcement of the writ of seizure and an order to break open the premises of Wearever to enforce said writ. The lower
court reaffirmed its stand upon Wearever's filing of a further motion for reconsideration. On 13 July 1981, the sheriff enforcing the
seizure order, repaired to the premises of Wearever and removed the main drive motor of the subject machinery.
On 27 August 1981, the Court of Appeals, in certiorari and prohibition proceedings filed by Wearever, set aside the Orders of the
lower court and ordered the return of the drive motor seized by the sheriff pursuant to said Orders, after ruling that the machinery in
suit cannot be the subject of replevin, much less of a chattel mortgage, because it is a real property pursuant to Article 415 of the new
Civil Code. The appellate court also rejected the argument that Wearever is estopped from claiming that the machine is real property
by constituting a chattel mortgage thereon. A motion for reconsideration was filed by Makati Leasing, which was later denied. Makati
Leasing brought the case to the Supreme Court by review by writ of certiorari.
The Supreme Court reversed and set aside the decision and resolution of the Court of Appeals, and reinstated the orders of the lower
court, with costs against Wearever Textiles.
1. Case not moot and academic with the return of the seized motor
When the subject motor drive was returned, it was made unequivocably clear that said action was without prejudice to a motion for
reconsideration of the Court of Appeals decision, as shown by the receipt duly signed by Wearever's representative. Considering that
Makati Leasing has reserved its right to question the propriety of the CA' decision, the contention of Wearever that the petition has
been mooted by such return may not be sustained.
2. Similar case; Estoppel applies to parties as having treated the house as personalty
Although there is no specific statement referring to the subject house as personal property, yet by ceding, selling or transferring a
property by way of chattel mortgage defendants-appellants could only have meant to convey the house as chattel, or at least, intended
to treat the same as such, so that they should not now be allowed to make an inconsistent stand by claiming otherwise. Unlike in the
Iya cases, Lopez vs. Orosa, Jr. & Plaza Theatre, Inc. & Leung Yee vs. F.L. Strong Machinery & Williamson, wherein third persons
assailed the validity of the chattel mortgage, it is the defendants-appellants themselves, as debtors mortgagors, who are attacking the
validity of the chattel mortgage in this case. The doctrine of estoppel therefore applies to the herein defendants appellants, having
treated the subject house as personalty" (Tumalad v. Vicencio). One who has so agreed is estopped from denying the existence of the
chattel mortgage.
3. Pronouncement on estoppel involving chattel mortgage applies to machinery
There is no logical justification to exclude the rule out the present case from the application of the pronouncement in Tumalad v.
Vicencio. If a house of strong materials may be considered as personal property for purposes of executing a chattel mortgage thereon
as long as the parties to the contract so agree and no innocent third party will be prejudiced thereby, there is absolutely no reason why
a machinery, which is movable in its nature and becomes immobilized only by destination or purpose, may not be likewise treated as
such.
4. Chattel mortgage treating real property as personal property valid, as long as third parties are not prejudiced
The characterization of the subject machinery as chattel is indicative of intention and impresses upon the property the character
determined by the parties. As stated in Standard Oil v. Jaramillo, , it is undeniable that the parties to a contract may by agreement treat
as personal property that which by nature would be real property, as long as no interest of third parties would be prejudiced thereby.
5. Equity prevents respondent to impugn the efficacy of the chattel mortgage
Equity dictates that one should not benefit at the expense of another. Weareverf could not be allowed to impugn the efficacy of the
chattel mortgage after it has benefited therefrom.
6. Machinery and Engineering Supplies v. CA not applicable; Tumalad case more in parity with case
The case of Machinery and Engineering Supplies, Inc. v. CA, 96 Phil. 70, heavily relied upon by the Court of Appeals, is not
applicable to the present case as the nature of the machinery and equipment involved therein as real properties never having been
disputed nor in issue, and they were not the subject of a Chattel Mortgage. Undoubtedly, the Tumalad case bears more nearly perfect
parity with the present case to be the more controlling jurisprudential authority.
Hongkong & Shanghai Banking v. Aldecoa & Co.
[G.R. No. 8437. March 23, 1915.]
En Banc, Trent (J): 3 concur, 1 concurs in result, 1 dissents.
Facts: The defendants, Joaquin, Zoilo, and Cecilia (all Ibaez de Aldecoa), were born in the Philippines on 27 March 1884, 4 July
1885, and 1887, respectively, the legitimate children of Zoilo Ibaez de Aldecoa and Isabel Palet; the parents being natives of Spain
but domiciled in Manila. The firm of Aldecoa & Co., of which Zoilo Ibaez de Aldecoa, the father who died on 4 October 1895, had
been a member and managing director, was reorganized in December 1896, and the widow became one of the general or "capitalistic"
partners of the firm. The 3 children appear in the articles of agreement as industrial partners. The widow, retaining her Manila
domicile, left the Philippines and went to Spain in 1897 due to her health, and did not return until the latter part of 1902.
On 31 July 1903, Isabel Palet went before a notary public and executed two instruments, whereby she emancipated her sons, who were
18 years old at that time, with their consent and acceptance. After the execution of said instruments, both Joaquin and Zoilo
participated in the management of Aldecoa & Co. as partners by being present and voting at meetings of the partners of the company
upon matters connected with its affairs.
On 23 February 1906, Aldecoa & Co. obtained from the bank a credit in account current up to the sum of P450,000 upon the terms
and conditions set forth in the instrument Exhibit A. Later it was agreed that Isabel Palet and her sons should mortgage, in addition to
certain securities of Aldecoa & Co. certain of their real properties as additional security for the obligations of Aldecoa & Co. Thus, on
23 March 1906, the mortgage, Exhibit B, was executed wherein certain corrections in the description of some of the real property
mortgaged to the bank by Exhibit A were made and the amount for which each of the mortgaged properties should be liable was set
forth. These two mortgages, Exhibits A and B, were duly recorded in the registry of property of the city of Manila on 23 March 1906.
The real property mortgaged by Isabel Palet was at her instance, registered under the provisions of the Land Registration, the property
subject to the mortgage in favor of the bank, by decree of the land court 8 March 1907; while another property, on 6 November 1906
and at the instance of Isabel Palet and her 3 children, was applied for registration (the undivided of said property being subject to
the mortgage in favor of the bank), the application of which was granted by decree of the land court 8 September 1907.
On 31 December 1906, Aldecoa & Co. went into liquidation on account of the expiration of the term for which it had been organized,
and the intervener, Urquhart, was duly elected by the parties as liquidator, and by resolution dated 24 January 1907, he was granted
the authority expressed in that resolution.
Additional security for the performance of the obligation in favor of the bank under the terms of contracts Exhibit A and B were made
on various dates. On 22 December 1906, Aldecoa & co. mortgaged to the bank the right of mortgage upon real property in the
Province of Albay mortgage to it by one Zubeldia. On 31 Mach 1907, Aldecoa & Co., already in liquidation, mortgaged to the bank
the right of mortgage upon real estate in the province of Ambos Camarines mortgage to it by one Andres Garchitorena (P20,280.19).
On the same date, Aldecoa & Co. further mortgaged the right of mortgage upon real property in the same province mortgage to it by
Tremoya Hermanos (P43,117.40) and Liborio Tremoya (P75,463.54). Further, on 30 January 1907, Aldecoa & Co. duly authorized
the bank to collect from certain persons and firms any and all debts owing by them to Aldecoa & Co. and to apply all amounts so
collected to the satisfaction, pro tanto, of any indebtedness of Aldecoa & Co. to the bank.
On the other hand, as the result of the litigation between Aldecoa & Co. and A. S. Macleod, wherein the injunction bond of P50,000
was made by the bank upon the condition that any liability incurred on the part of the bank upon this injunction bond would be
covered by the mortgage of 23 February 1906, Aldecoa & Co. became the owner, through a compromise agreement executed on 14
August 1907, of the shares of the Pasay Estate Company Limited, and on 30 August 1907, Urquhart, as liquidator mortgaged to the
bank, by way of additional security for the performance of the obligations set forth in Exhibits A and B, the 312 shares of the Pasay
Estate Company, Limited, acquired by Aldecoa & Co.
On 18 February 1907, Aldecoa & Co. acknowledged an indebtedness of P154,689,20 each to Joaquin and Zoilo Ibaez de Aldecoa,
and another P89,177.07 to Cecilia Ibaez de Aldecoa. On 30 September 1908, Joaquin, Zoilo, and Cecilia recovered a judgment in the
CFI Manila for the payment of the balance of P155,127.31.
On 30 November 1907, Joaquin, Zoilo, and Cecilia instituted an action in the CFI Manila against the bank for the purpose of obtaining
a judicial declaration to the effect that the contract whereby Aldecoa & Co. mortgaged to the bank the shares of the Pasay Estate
Company recovered from Alejandro S. Macleod, was null and void, and for a judgment that these shares be sold and applied to the
satisfaction of their judgment obtained on 30 September 1908. Judgment was rendered by the lower court in favor of the children, but
upon appeal the Supreme Court reversed that judgment and declared that the mortgage of the shares of stock in the Pasay Estate Co. to
the bank was valid.
In 1908, Joaquin, Zoilo, and Cecilia commenced an action against their mother, Isabel Palet, and Aldecoa & Co., in which the bank
was not a party, and in September of that year procured a judgment of the CFI annulling the articles of copartnership of Aldecoa &
Co., in so far as they were concerned, and decreeing that they were creditors and not partners of that firm.
In October 1908, Joaquin and Zoilo instituted an action against the bank for the purpose of obtaining a judgment annulling the
mortgages created by them upon their interest in the properties described in Exhibits A and B, upon the ground that the emancipation
by their mother was void and of no effect, and that, therefore, they were minors incapable of creating a valid mortgage upon their real
property. The CFI dismissed the complaint as to Joaquin upon the ground that he had ratified those mortgages after becoming of age,
but entered a judgment annulling said mortgages with respect to Zoilo. Both parties appealed from this decision and the case was
given registry No. 6889 in the Supreme Court.
On 31 January 1911, the Bank filed an action against the defendants for the purpose of recovering from Aldecoa & Co., an amount
due from the latter as the balance to its debit in an account current with the Company, and to enforce the subsidiary liability of the
other defendants for the payment of this indebtedness, as partners of the Company, and to foreclose certain mortgages executed by the
defendants to secure the indebtedness sued upon. On 10 August 1912, judgment was entered in favor of the bank, ordering the
defendants to pay the sum of P344,924.23 with interest of 7% per annum from date of judgment until fully paid, and the costs; and
ordering the foreclosure of the mortgages. Judgment was also entered denying the relief sought by the intervener. All of the defendants
and the intervener have appealed.
The Supreme Court affirmed the judgment appealed from, and ordered the appellants whose appeals are determined to pay their
respective portions of the cost.
1. Complaint not vague nor ambiguous
The complaint alleges that a certain specific amount was due from the defendant firm as a balance of its indebtedness to the plaintiff,
and this necessarily implies that there were no credits in favor of the defendant firm of any kind whatsoever which had not already
been deducted from the original obligation.
2. No evidence supports claim that bank prejudiced Aldecoa by inducing the customers to cease commercial relations
There is no evidence to show that there was any inducement made by the bank to prejudice Aldecoa & Co, for its customers to cease
their commercial relations with Aldecoa & Co.. It may be possible that some of Aldecoa & Co.'s customers ceased doing business
with that firm after it went into liquidation. This is the ordinary effect of a commercial firm going into liquidation. This is especially
true for the reason that it was a well known fact that Aldecoa & Co. was insolvent. Furthermore, the bank was expressly empowered to
take any steps which might be necessary, judicially or extrajudicially, for the collection of these credits. The real reason which caused
the defendant's provincial customers to cease making shipments was due to the fact that the defendant, being out of funds, could not
give its customers any further credit. It is therefore clear that the bank, having exercised the authority conferred upon it by the
company in a legal manner, is not responsible for any damages which might have resulted from the failure of the defendant's
provincial customers to continue doing business with that firm.
3. Court has jurisdiction as bank does not seek to exercise mortgage right on real properties in the provinces
The bank is not seeking to exercise its mortgage rights upon the mortgages which the defendant firm holds upon certain real properties
in the Provinces of Albay and Ambos Camarines and to sell these properties at public auction in these proceedings; nor does the
judgment of the trial court directs that this be done. Before that property can be sold the original mortgagors will have to be made
parties. The bank is not trying to foreclose any mortgages on real property executed by Aldecoa & Co.
4. Solidary obligation; Money judgment against the firm and foreclosure judgment against the others
It is true that the bank sought and obtained a money judgment against that firm, and at the same time and in the same action obtained a
foreclosure judgment against the other defendants. If two or more persons are in solidum the debtors of a third person, and one or
more of such debtors mortgage any of their real property situate in the jurisdiction of the court, the creditor, in case his obligation is
not paid at maturity, may include all of the solidary debtors in the same suit and secure a joint and several judgment against them, as
well as judgments of foreclosure upon the respective mortgages.
5. Extensions does not extinguish the mortgages
The contention that the extensions granted to Aldecoa & Co.'s debtors, with the consent and authority of that firm itself, has resulted in
extinguishment of the mortgages created by Aldecoa & Co. or of the mortgages created by partners of that company to secure its
liabilities to the bank, is untenable. The record shows that all the sureties were represented by Urquhart, the person elected by them as
liquidator of the firm, when he agreed with the bank upon the extensions granted to those debtors. The authority to grant these
extensions was conferred upon the bank by the liquidator, and he was given authority by all the sureties to authorize the bank to
proceed in this manner.
6. Properties Isabel Palet mortgage were not security for performance of her solidary subsidiary obligation but part of the
direct obligation of the firm itself
Although the court recognized the subsidiary character of the personal liability of Doa Isabel Palet as a member of the firm of
Aldecoa & Co. and decreed that as to any deficiency which might result after the sale of the mortgaged properties, execution should
not issue against the properties of Doa Isabel Palet until all the property of Aldecoa & Co. shall have been exhausted. The properties
mortgaged by Doa Isabel Palet were so mortgaged not merely as security for the performance of her own solidary subsidiary
obligation as a partner bound for all the debts of Aldecoa & Co., but for the purpose of securing the direct obligation of the firm itself
to the bank.
7. Isabel Palet a personal debtor in solidum with Aldecoa & Co., and not a mere surety
The extension of the term which, in accordance with the provisions of article 1851 of the Civil Code produces the extinction of the
liability of the surety must of necessity be based on some new agreement between the creditor and principal debtor, by virtue of which
the creditor deprives himself of his right to immediately bring an action for the enforcement of his claim. The mere failure to bring an
action upon a credit, as soon as the same or any part of it matures, does not constitute an extension of the term of the obligation. In the
present case, Doa Isabel Palet is a personal debtor jointly and severally with Aldecoa & Co. for the whole indebtedness of the latter
firm to the bank, and not a mere surety for the performance of the obligations of Aldecoa & Co. without any solidary liability. It is true
that certain additional deeds of mortgage and pledge were executed by Aldecoa & Co. in favor of the bank as additional security after
Aldecoa & Co. had failed to meet its obligation to pay the first installment due under the agreement of 23 February 1906, but there is
no stipulation whatever in any of these documents or deeds which can in any way be interpreted in the sense of constituting an
extension which would bind the bank to wait for the expiration of any new term before suing upon its claim against Aldecoa & Co.
8. Intervener is not a preferred creditor over the bank
The intervener is seeking to have himself declared a preferred creditor over the bank; citing Section 121 of the Code of Civil
Procedure which provides that "A person may, at any period of a trial, upon motion, be permitted by the court to intervene in an action
or proceeding, if he has legal interest in the matter in litigation, or in the success of either of the parties, or an interest against both."
The amount (P21,000) to which the intervener is a creditor of Aldecoa & Co. is not evidenced by a public document, or any document
for that matter, nor secured by pledge or mortgage, while the amount due the bank appears in a public instrument and is also secured
by pledges and mortgages on the property of Aldecoa & Co., out of which the intervener seeks to have his indebtedness satisfied. It is,
therefore, clear that the intervener is not entitled to the relief sought. Further, the amount (P14,000) sought by the intervener as salary
represents his salary as liquidator of the firm and not to salary prior to liquidation.
9. Receiver appointed by the court preferred in payment of fees over creditors; Intervener was appointed by members of the
Company without approval from the creditor-bank
The ruling of the supreme court of Spain in 16 March 1897 was correct to the effect that the fees of a receiver, appointed by the court
to preserve property in litigation, must be paid in preference to the claims of creditors. In said ruling the court said that the expense of
maintenance of property is bound to affect such persons as have an interest therein, whether they be the owners or creditors of the
property; therefore payment for this object has preference over any other debt, since such other debts are recoverable to the extent that
the property is preserved and maintained." In the present case, however, Urquhart was elected liquidator by the members of the firm of
Aldecoa & Co. without the consent or approval of the bank or of any other creditor. He did not receive his employment by reason of
any judicial act. Whatever may be due him for his services as liquidator is due under a contract of employment between himself and
the members of the firm of Aldecoa & Co.
10. Intervener not preferred over creditors over the firms personal property; mortgage over real property not personal
property
Article 1922 of the Civil Code provides that, with regard to specified the personal property of the debtor, the credits for the
construction, repair, preservation, or for the amount of the sale of personal property which may be in the possession of the debtor to
the extent of the value of the same are preferred. The only personal property of Aldecoa & Co. is 16 shares of the stock of the Banco
Espaol-Filipino; 450 shares of the stock of the Compaia Maritima (both items preceding were pledged before the liquidation); 330
shares of the stock of the Pasay Estate Co., Ltd. (which were in the possession of Aldecoa & co or its liquidator for only 1 day); and
certain claims against debtors of Aldecoa & Co., mentioned in Exhibit G, which were assigned to the bank on 30 January 1907. As the
intervener has been paid for his services up to January 1910, he cannot be declared a preferred creditor of the bank. The only property
of Aldecoa & Co. which the liquidator had anything to do with after 1910 was the real estate mortgages mortgaged to the bank as
additional security. These mortgages on real property cannot be regarded as personal property, and it is only of personal property that
article 1922 speaks of.
11. Plea of another action pending is not sustained if its pendency is set up to defeat another
The principle upon which a plea of another action pending is sustained is that the latter action is deemed unnecessary and vexatious
(Williams vs. Gaston, 148 Ala., 214; 42 Sou., 552; 1 Cyc. 21; 1 RCL, sec. 1.) but when the pendency of such a suit is set up to defeat
another, the case must be the same. There must be the same parties, or at least such as represent the same interest, there must be the
same rights asserted, and the same relief prayed for. This relief must be founded on the same facts, and the title or essential basis of
the relief sought must be the same. The identity in these particulars should be such that if the pending case had already been disposed
of, it could be pleaded in bar as a former adjudication of the same matter between the same parties (Watson vs. Jones, 13 Wall., 679,
715; 20 L. ed., 666). In the present case, the case and the one pending in the Supreme Court are identical; thus the inquiry must
therefore proceed to the other requisites demanded by the rule. The former suit is one to annul the mortgages. The present suit is one
for the foreclosure of the mortgages. It may be conceded that if the final judgment in the former action is that the mortgages be
annulled, such an adjudication will deny the right of the bank to foreclose the mortgages.
12. Test of identity
The test of identity, stated in 1 Cyc., 28, is that "a plea of the pendency of a prior action is not available unless the prior action is of
such a character that, had a judgment been rendered therein on the merits, such a judgment would be conclusive between the parties
and could be pleaded in bar of the second action." This test has been approved, citing the quotation, in Williams vs. Gaston (148 Ala.,
214; 42 Sou., 552); Van Vleck vs. Anderson (136 Iowa, 366; 113 N. W., 853); Wetzstein vs. Mining Co. (28 Mont., 451; 72 P., 865).
It is applicable, between the same parties, only when the judgment to be rendered in the action first instituted will be such that,
regardless of which party is successful, it will amount to res adjudicata against the second action.
13. Judgment declaring the children as creditors and not partners of Aldecoa not binding to the bank
It appears that a certified copy of the judgment entered in the former case, wherein it was declared that the children, were creditors and
partners of Aldecoa & Co., was offered in evidence. Such evidence was objected to by the bank on the ground that is was res inter
alios acta and not competent evidence against the bank or binding upon it in any way because it was not a party to that action. This
objection was sustained and the proffered evidence excluded. It was an action in personam and the bank was not a party. The
judgment is binding only upon the parties to the suit and their successors in interest (sec. 306, Code of Civil Procedure, No. 2).
Davao Sawmill v. Castillo
[G.R. No. 40411. August 7, 1935.]
En Banc, Malcolm (J): 4 concur
Facts: The Davao Saw Mill is the holder of a lumber concession from the Government. It has operated a sawmill in the sitio of Maa,
barrio of Tigatu, municipality of Davao, Province of Davao. However, the land upon which the business was conducted belonged to
another person. On the land the sawmill company erected a building which housed the machinery used by it. Some of the implements
thus used were clearly personal property, the conflict concerning machines which were placed and mounted on foundations of cement.
In the contract of lease stipulated that on the expiration of the period agreed upon, or if the Lessee should leave or abandon the land
leased, all the improvements and buildings introduced and erected by the Lessee shall pass to the exclusive ownership of the Lessor
without any obligation on its part to pay any amount for said improvements and buildings; which do not include the machineries and
accessories in the improvements.
In another action (Davao Light & Power vs. Davao Saw Mill), a judgment was rendered in favor of Davao Light & Power; a writ of
execution issued thereon, and the properties in question were levied upon as personalty by the sheriff. No third party claim was filed
for such properties at the time of the sales thereof as is borne out by the record made by the plaintiff herein. Indeed the bidder, which
was Davao Light & Power, and the defendant herein having consummated the sale, proceeded to take possession of the machinery and
other properties described in the corresponding certificates of sale executed in its favor by the sheriff of Davao.
It must be noted that on a number of occasions, Davao Sawmill treated the machinery as personal property by executing chattel
mortgages in favor of third persons. One of such persons is the appellee by assignment from the original mortgagees.
Instance on how controversy arose cant be found in the case facts. Impliedly, the issue on the character of the properties arose from
the consummation of a sale following the execution of the judgment in the other action, Davao Light & Power v. Davao Sawmill
The trial judge found that the properties were personal in nature, and as a consequence absolved the defendants from the complaint.
The issue was raised in the Supreme Court involving the determination of the nature of said properties.
The Supreme Court affirmed the judgment appealed from, with costs against the appellant.
1. Standard Oil ruling key to issue on the character of the property
It must be pointed out that Davao Sawmill should have registered its protest before or at the time of the sale of this property. It must
further be pointed out that while not conclusive, the characterization of the property as chattels by Davao Sawmill is indicative of
intention and impresses upon the property the character determined by the parties. In this connection the decision of the court in the
case of Standard Oil Co. of New York vs. Jaramillo ([1923], 44 Phil., 630), whether obiter dicta or not, furnishes the key to such a
situation.
2. Immobilization of machinery; when placed in plant by owner
Machinery which is movable in its nature only becomes immobilized when placed in a plant by the owner of the property or plant, but
not when so placed by a tenant, a usufructuary, or any person having only a temporary right, unless such person acted as the agent of
the owner. The distinction rests upon the fact that one only having a temporary right to the possession or enjoyment of property is not
presumed by the law to have applied movable property belonging to him so as to deprive him of it by causing it by an act of
immobilization to become the property of another.
3. Concrete immobilization of lessees machinery only if lease stipulates transfer of ownership on its termination
Concrete immobilization takes place because of the express provisions of the lease which requires the putting in of improved
machinery, deprived the tenant of any right to charge against the lessor the cost of such machinery, and it was expressly stipulated that
the machinery so put in should become a part of the plant belonging to the owner without compensation to the lessee. Under such
conditions the tenant in putting in the machinery was acting but as the agent of the owner in compliance with the obligations resting
upon him, and the immobilization of the machinery which resulted arose in legal effect from the act of the owner in giving by contract
a permanent destination to the machinery. (Valdes v. Altagracia)