Professional Documents
Culture Documents
L-11658 February 15, 1918 The trial judge, relying upon the terms of article 1473 of the
Civil Code, gave judgment in favor of the machinery company,
LEUNG YEE, plaintiff-appellant, on the ground that the company had its title to the building
vs. registered prior to the date of registry of the plaintiff's
FRANK L. STRONG MACHINERY COMPANY and J. G. certificate.
WILLIAMSON, defendants-appellees.
Article 1473 of the Civil Code is as follows:
Booram and Mahoney for appellant.
Williams, Ferrier and SyCip for appellees. If the same thing should have been sold to different
vendees, the ownership shall be transfer to the
CARSON, J.: person who may have the first taken possession
thereof in good faith, if it should be personal property.
The "Compaia Agricola Filipina" bought a considerable
quantity of rice-cleaning machinery company from the Should it be real property, it shall belong to the person
defendant machinery company, and executed a chattel acquiring it who first recorded it in the registry.
mortgage thereon to secure payment of the purchase price. It
included in the mortgage deed the building of strong materials Should there be no entry, the property shall belong to
in which the machinery was installed, without any reference to the person who first took possession of it in good
the land on which it stood. The indebtedness secured by this faith, and, in the absence thereof, to the person who
instrument not having been paid when it fell due, the presents the oldest title, provided there is good faith.
mortgaged property was sold by the sheriff, in pursuance of the
terms of the mortgage instrument, and was bought in by the The registry her referred to is of course the registry of real
machinery company. The mortgage was registered in the property, and it must be apparent that the annotation or
chattel mortgage registry, and the sale of the property to the inscription of a deed of sale of real property in a chattel
machinery company in satisfaction of the mortgage was mortgage registry cannot be given the legal effect of an
annotated in the same registry on December 29, 1913. inscription in the registry of real property. By its express terms,
the Chattel Mortgage Law contemplates and makes provision
A few weeks thereafter, on or about the 14th of January, 1914, for mortgages of personal property; and the sole purpose and
the "Compaia Agricola Filipina" executed a deed of sale of the object of the chattel mortgage registry is to provide for the
land upon which the building stood to the machinery company, registry of "Chattel mortgages," that is to say, mortgages of
but this deed of sale, although executed in a public document, personal property executed in the manner and form prescribed
was not registered. This deed makes no reference to the in the statute. The building of strong materials in which the rice-
building erected on the land and would appear to have been cleaning machinery was installed by the "Compaia Agricola
executed for the purpose of curing any defects which might be Filipina" was real property, and the mere fact that the parties
found to exist in the machinery company's title to the building seem to have dealt with it separate and apart from the land on
under the sheriff's certificate of sale. The machinery company which it stood in no wise changed its character as real
went into possession of the building at or about the time when property. It follows that neither the original registry in the
this sale took place, that is to say, the month of December, chattel mortgage of the building and the machinery installed
1913, and it has continued in possession ever since. therein, not the annotation in that registry of the sale of the
mortgaged property, had any effect whatever so far as the
At or about the time when the chattel mortgage was executed building was concerned.
in favor of the machinery company, the mortgagor, the
"Compaia Agricola Filipina" executed another mortgage to the We conclude that the ruling in favor of the machinery company
plaintiff upon the building, separate and apart from the land on cannot be sustained on the ground assigned by the trial judge.
which it stood, to secure payment of the balance of its We are of opinion, however, that the judgment must be
indebtedness to the plaintiff under a contract for the sustained on the ground that the agreed statement of facts in
construction of the building. Upon the failure of the mortgagor the court below discloses that neither the purchase of the
to pay the amount of the indebtedness secured by the building by the plaintiff nor his inscription of the sheriff's
mortgage, the plaintiff secured judgment for that amount, levied certificate of sale in his favor was made in good faith, and that
execution upon the building, bought it in at the sheriff's sale on the machinery company must be held to be the owner of the
or about the 18th of December, 1914, and had the sheriff's property under the third paragraph of the above cited article of
certificate of the sale duly registered in the land registry of the the code, it appearing that the company first took possession of
Province of Cavite. the property; and further, that the building and the land were
sold to the machinery company long prior to the date of the
At the time when the execution was levied upon the building, sheriff's sale to the plaintiff.
the defendant machinery company, which was in possession,
filed with the sheriff a sworn statement setting up its claim of It has been suggested that since the provisions of article 1473
title and demanding the release of the property from the levy. of the Civil Code require "good faith," in express terms, in
Thereafter, upon demand of the sheriff, the plaintiff executed relation to "possession" and "title," but contain no express
an indemnity bond in favor of the sheriff in the sum of P12,000, requirement as to "good faith" in relation to the "inscription" of
in reliance upon which the sheriff sold the property at public the property on the registry, it must be presumed that good
auction to the plaintiff, who was the highest bidder at the faith is not an essential requisite of registration in order that it
sheriff's sale. may have the effect contemplated in this article. We cannot
agree with this contention. It could not have been the intention
This action was instituted by the plaintiff to recover possession of the legislator to base the preferential right secured under this
of the building from the machinery company. article of the code upon an inscription of title in bad faith. Such
an interpretation placed upon the language of this section
would open wide the door to fraud and collusion. The public circumstances, and it is highly possible and even probable that
records cannot be converted into instruments of fraud and he thought at that time that he would be able to maintain his
oppression by one who secures an inscription therein in bad position in a contest with the machinery company. There was
faith. The force and effect given by law to an inscription in a no collusion on his part with the common debtor, and no
public record presupposes the good faith of him who enters thought of the perpetration of a fraud upon the rights of
such inscription; and rights created by statute, which are another, in the ordinary sense of the word. He may have
predicated upon an inscription in a public registry, do not and hoped, and doubtless he did hope, that the title of the
cannot accrue under an inscription "in bad faith," to the benefit machinery company would not stand the test of an action in a
of the person who thus makes the inscription. court of law; and if later developments had confirmed his
unfounded hopes, no one could question the legality of the
Construing the second paragraph of this article of the code, the propriety of the course he adopted.
supreme court of Spain held in its sentencia of the 13th of May,
1908, that: But it appearing that he had full knowledge of the machinery
company's claim of ownership when he executed the indemnity
This rule is always to be understood on the basis of bond and bought in the property at the sheriff's sale, and it
the good faith mentioned in the first paragraph; appearing further that the machinery company's claim of
therefore, it having been found that the second ownership was well founded, he cannot be said to have been
purchasers who record their purchase had knowledge an innocent purchaser for value. He took the risk and must
of the previous sale, the question is to be decided in stand by the consequences; and it is in this sense that we find
accordance with the following paragraph. (Note 2, art. that he was not a purchaser in good faith.
1473, Civ. Code, Medina and Maranon [1911]
edition.) One who purchases real estate with knowledge of a defect or
lack of title in his vendor cannot claim that he has acquired title
Although article 1473, in its second paragraph, thereto in good faith as against the true owner of the land or of
provides that the title of conveyance of ownership of an interest therein; and the same rule must be applied to one
the real property that is first recorded in the registry who has knowledge of facts which should have put him upon
shall have preference, this provision must always be such inquiry and investigation as might be necessary to
understood on the basis of the good faith mentioned acquaint him with the defects in the title of his vendor. A
in the first paragraph; the legislator could not have purchaser cannot close his eyes to facts which should put a
wished to strike it out and to sanction bad faith, just to reasonable man upon his guard, and then claim that he acted
comply with a mere formality which, in given cases, in good faith under the belief that there was no defect in the
does not obtain even in real disputes between third title of the vendor. His mere refusal to believe that such defect
persons. (Note 2, art. 1473, Civ. Code, issued by the exists, or his willful closing of his eyes to the possibility of the
publishers of the La Revista de los Tribunales, 13th existence of a defect in his vendor's title, will not make him an
edition.) innocent purchaser for value, if afterwards develops that the
title was in fact defective, and it appears that he had such
notice of the defects as would have led to its discovery had he
The agreed statement of facts clearly discloses that the acted with that measure of precaution which may reasonably
plaintiff, when he bought the building at the sheriff's sale and be acquired of a prudent man in a like situation. Good faith, or
inscribed his title in the land registry, was duly notified that the lack of it, is in its analysis a question of intention; but in
machinery company had bought the building from plaintiff's ascertaining the intention by which one is actuated on a given
judgment debtor; that it had gone into possession long prior to occasion, we are necessarily controlled by the evidence as to
the sheriff's sale; and that it was in possession at the time the conduct and outward acts by which alone the inward
when the sheriff executed his levy. The execution of an motive may, with safety, be determined. So it is that "the
indemnity bond by the plaintiff in favor of the sheriff, after the honesty of intention," "the honest lawful intent," which
machinery company had filed its sworn claim of ownership, constitutes good faith implies a "freedom from knowledge and
leaves no room for doubt in this regard. Having bought in the circumstances which ought to put a person on inquiry," and so
building at the sheriff's sale with full knowledge that at the time it is that proof of such knowledge overcomes the presumption
of the levy and sale the building had already been sold to the of good faith in which the courts always indulge in the absence
machinery company by the judgment debtor, the plaintiff of proof to the contrary. "Good faith, or the want of it, is not a
cannot be said to have been a purchaser in good faith; and of visible, tangible fact that can be seen or touched, but rather a
course, the subsequent inscription of the sheriff's certificate of state or condition of mind which can only be judged of by
title must be held to have been tainted with the same defect. actual or fancied tokens or signs." (Wilder vs. Gilman, 55 Vt.,
504, 505; Cf. Cardenas Lumber Co. vs. Shadel, 52 La. Ann.,
Perhaps we should make it clear that in holding that the 2094-2098; Pinkerton Bros. Co. vs. Bromley, 119 Mich., 8, 10,
inscription of the sheriff's certificate of sale to the plaintiff was 17.)
not made in good faith, we should not be understood as
questioning, in any way, the good faith and genuineness of the We conclude that upon the grounds herein set forth the
plaintiff's claim against the "Compaia Agricola Filipina." The disposing part of the decision and judgment entered in the
truth is that both the plaintiff and the defendant company court below should be affirmed with costs of this instance
appear to have had just and righteous claims against their against the appellant. So ordered.
common debtor. No criticism can properly be made of the
exercise of the utmost diligence by the plaintiff in asserting and
exercising his right to recover the amount of his claim from the Arellano, C.J., Johnson, Araullo, Street and Malcolm,
estate of the common debtor. We are strongly inclined to JJ., concur.
believe that in procuring the levy of execution upon the factory Torres, Avancea and Fisher, JJ., took no part.
building and in buying it at the sheriff's sale, he considered that
he was doing no more than he had a right to do under all the
22. That defendant, Philippine National
Bank, through its Branch Manager ... by
G.R. No. L-55729 March 28, 1983 virtue of the request of defendant ...
executed a document dated July 31, 1978,
entitled Amendment to Deed of Absolute
ANTONIO PUNSALAN, JR., petitioner, Sale ... wherein said defendant bank as
vs. Vendor sold to defendant Lacsamana the
REMEDIOS VDA. DE LACSAMANA and THE HONORABLE building owned by the plaintiff under Tax
JUDGE RODOLFO A. ORTIZ, respondents. Declaration No. 5619, notwithstanding the
fact that said building is not owned by the
Benjamin S. Benito & Associates for petitioner. bank either by virtue of the public auction
sale conducted by the Sheriff and sold to the
Expedito Yummul for private respondent. Philippine National Bank or by virtue of the
Deed of Sale executed by the bank itself in
its favor on September 21, 1977 ...;
It appears that petitioner, Antonio Punsalan, Jr., was the former Petitioner prayed that the Deed of Sale of the building in favor
registered owner of a parcel of land consisting of 340 square of respondent Lacsamana be declared null and void and that
meters situated in Bamban, Tarlac. In 1963, petitioner damages in the total sum of P230,000.00, more or less, be
mortgaged said land to respondent PNB (Tarlac Branch) in the awarded to him. 2
amount of P10,000.00, but for failure to pay said amount, the
property was foreclosed on December 16, 1970. Respondent
PNB (Tarlac Branch) was the highest bidder in said foreclosure In her Answer filed on March 4, 1980,-respondent Lacsamana
proceedings. However, the bank secured title thereto only on averred the affirmative defense of lack of cause of action in
December 14, 1977. that she was a purchaser for value and invoked the principle in
Civil Law that the "accessory follows the principal". 3
In his Motion for Reconsideration of the aforestated Order, Costs against petitioner.
petitioner reiterated the argument that the action to annul does
not involve ownership or title to property but is limited to the
validity of the deed of sale and emphasized that the case SO ORDERED.
should proceed with or without respondent PNB as respondent
Lacsamana had already filed her Answer to the Complaint and Teehankee (Chairman), Plana, Vasquez, Relova and
no issue on venue had been raised by the latter. Gutierrez, Jr., JJ., concur.
The issue in this case, as announced in the opening sentence 5. Machinery, liquid containers, instruments or
of the decision in the trial court and as set forth by counsel for implements intended by the owner of any building or
the parties on appeal, involves the determination of the nature land for use in connection with any industry or trade
of the properties described in the complaint. The trial judge being carried on therein and which are expressly
found that those properties were personal in nature, and as a adapted to meet the requirements of such trade of
consequence absolved the defendants from the complaint, with industry.
costs against the plaintiff.
Appellant emphasizes the first paragraph, and appellees the
The Davao Saw Mill Co., Inc., is the holder of a lumber last mentioned paragraph. We entertain no doubt that the trial
concession from the Government of the Philippine Islands. It judge and appellees are right in their appreciation of the legal
has operated a sawmill in the sitio of Maa, barrio of Tigatu, doctrines flowing from the facts.
municipality of Davao, Province of Davao. However, the land
upon which the business was conducted belonged to another In the first place, it must again be pointed out that the appellant
person. On the land the sawmill company erected a building should have registered its protest before or at the time of the
which housed the machinery used by it. Some of the sale of this property. It must further be pointed out that while
implements thus used were clearly personal property, the not conclusive, the characterization of the property as chattels
conflict concerning machines which were placed and mounted by the appellant is indicative of intention and impresses upon
on foundations of cement. In the contract of lease between the the property the character determined by the parties. In this
sawmill company and the owner of the land there appeared the connection the decision of this court in the case of Standard Oil
following provision: Co. of New Yorkvs. Jaramillo ( [1923], 44 Phil., 630),
whether obiter dicta or not, furnishes the key to such a
That on the expiration of the period agreed upon, all situation.
the improvements and buildings introduced and
erected by the party of the second part shall pass to It is, however not necessary to spend overly must time in the
the exclusive ownership of the party of the first part resolution of this appeal on side issues. It is machinery which is
without any obligation on its part to pay any amount involved; moreover, machinery not intended by the owner of
for said improvements and buildings; also, in the any building or land for use in connection therewith, but
event the party of the second part should leave or intended by a lessee for use in a building erected on the land
abandon the land leased before the time herein by the latter to be returned to the lessee on the expiration or
stipulated, the improvements and buildings shall abandonment of the lease.
likewise pass to the ownership of the party of the first
part as though the time agreed upon had expired:
Provided, however, That the machineries and A similar question arose in Puerto Rico, and on appeal being
accessories are not included in the improvements taken to the United States Supreme Court, it was held that
which will pass to the party of the first part on the machinery which is movable in its nature only becomes
expiration or abandonment of the land leased. 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,
In another action, wherein the Davao Light & Power Co., Inc., unless such person acted as the agent of the owner. In the
was the plaintiff and the Davao, Saw, Mill Co., Inc., was the opinion written by Chief Justice White, whose knowledge of the
defendant, a judgment was rendered in favor of the plaintiff in Civil Law is well known, it was in part said:
that action against the defendant in that action; a writ of
execution issued thereon, and the properties now in question
were levied upon as personalty by the sheriff. No third party To determine this question involves fixing the nature
claim was filed for such properties at the time of the sales and character of the property from the point of view of
thereof as is borne out by the record made by the plaintiff the rights of Valdes and its nature and character from
herein. Indeed the bidder, which was the plaintiff in that action, the point of view of Nevers & Callaghan as a
and the defendant herein having consummated the sale, judgment creditor of the Altagracia Company and the
proceeded to take possession of the machinery and other rights derived by them from the execution levied on
properties described in the corresponding certificates of sale the machinery placed by the corporation in the plant.
executed in its favor by the sheriff of Davao. Following the Code Napoleon, the Porto Rican Code
treats as immovable (real) property, not only land and
buildings, but also attributes immovability in some
As connecting up with the facts, it should further be explained cases to property of a movable nature, that is,
that the Davao Saw Mill Co., Inc., has on a number of personal property, because of the destination to which
it is applied. "Things," says section 334 of the Porto Finding no reversible error in the record, the judgment
Rican Code, "may be immovable either by their own appealed from will be affirmed, the costs of this instance to be
nature or by their destination or the object to which paid by the appellant.
they are applicable." Numerous illustrations are given
in the fifth subdivision of section 335, which is as Villa-Real, Imperial, Butte, and Goddard, JJ., concur.
follows: "Machinery, vessels, instruments or
implements intended by the owner of the tenements
for the industrial or works that they may carry on in
any building or upon any land and which tend directly
to meet the needs of the said industry or works." (See
also Code Nap., articles 516, 518 et seq. to and
inclusive of article 534, recapitulating the things
which, though in themselves movable, may be
immobilized.) So far as the subject-matter with which
we are dealing machinery placed in the plant it
is plain, both under the provisions of the Porto Rican
Law and of the Code Napoleon, that machinery which
is movable in its nature only becomes immobilized
when placed in a plant by the owner of the property or
plant. Such result would not be accomplished,
therefore, by the placing of machinery in a plant by a
tenant or a usufructuary or any person having only a
temporary right. (Demolombe, Tit. 9, No. 203; Aubry
et Rau, Tit. 2, p. 12, Section 164; Laurent, Tit. 5, No.
447; and decisions quoted in Fuzier-Herman ed. Code
Napoleon under articles 522 et seq.) The distinction
rests, as pointed out by Demolombe, upon the fact
that one only having a temporary right to the
possession or enjoyment of property is not presumed
by the law to have applied movable property
belonging to him so as to deprive him of it by causing
it by an act of immobilization to become the property
of another. It follows that abstractly speaking the
machinery put by the Altagracia Company in the plant
belonging to Sanchez did not lose its character of
movable property and become immovable by
destination. But in the concrete immobilization took
place because of the express provisions of the lease
under which the Altagracia held, since the lease in
substance required the putting in of improved
machinery, deprived the tenant of any right to charge
against the lessor the cost such machinery, and it was
expressly stipulated that the machinery so put in
should become a part of the plant belonging to the
owner without compensation to the lessee. Under
such conditions the tenant in putting in the machinery
was acting but as the agent of the owner in
compliance with the obligations resting upon him, and
the immobilization of the machinery which resulted
arose in legal effect from the act of the owner in giving
by contract a permanent destination to the machinery.
The term "poles" was also used to denominate the steel xxx xxx xxx
supports or towers used by an association used to convey its
electric power furnished to subscribers and members, (3) Everything attached to an immovable in a fixed
constructed for the purpose of fastening high voltage and manner, in such a way that it cannot be separated
dangerous electric wires alongside public highways. The steel therefrom without breaking the material or
supports or towers were made of iron or other metals deterioration of the object;
consisting of two pieces running from the ground up some
thirty feet high, being wider at the bottom than at the top, the xxx xxx xxx
said two metal pieces being connected with criss-cross iron
running from the bottom to the top, constructed like ladders
and loaded with high voltage electricity. In form and structure, (5) Machinery, receptacles, instruments or
they are like the steel towers in question. (Salt River Valley implements intended by the owner of the tenement for
Users' Ass'n v. Compton, 8 P. 2nd, 249-250.) an industry or works which may be carried in a
building or on a piece of land, and which tends directly
to meet the needs of the said industry or works;
The term "poles" was used to denote the steel towers of an
electric company engaged in the generation of hydro-electric
power generated from its plant to the Tower of Oxford and City xxx xxx xxx
of Waterbury. These steel towers are about 15 feet square at
the base and extended to a height of about 35 feet to a point, The steel towers or supports in question, do not come within
and are embedded in the cement foundations sunk in the the objects mentioned in paragraph 1, because they do not
earth, the top of which extends above the surface of the soil in constitute buildings or constructions adhered to the soil. They
the tower of Oxford, and to the towers are attached insulators, are not construction analogous to buildings nor adhering to the
soil. As per description, given by the lower court, they are
removable and merely attached to a square metal frame by
means of bolts, which when unscrewed could easily be
dismantled and moved from place to place. They can not be
included under paragraph 3, as they are not attached to an
immovable in a fixed manner, and they can be separated
without breaking the material or causing deterioration upon the
object to which they are attached. Each of these steel towers
or supports consists of steel bars or metal strips, joined
together by means of bolts, which can be disassembled by
unscrewing the bolts and reassembled by screwing the same.
These steel towers or supports do not also fall under
paragraph 5, for they are not machineries, receptacles,
instruments or implements, and even if they were, they are not
intended for industry or works on the land. Petitioner is not
engaged in an industry or works in the land in which the steel
supports or towers are constructed.
Jose V. Mancella for respondent. A motion for reconsideration of this decision of the Court of
Appeals having been denied, petitioner has brought the case to
this Court for review by writ of certiorari. It is contended by
private respondent, however, that the instant petition was
rendered moot and academic by petitioner's act of returning
DE CASTRO, J.: the subject motor drive of respondent's machinery after the
Court of Appeals' decision was promulgated.
Petition for review on certiorari of the decision of the Court of
Appeals (now Intermediate Appellate Court) promulgated on The contention of private respondent is without merit. When
August 27, 1981 in CA-G.R. No. SP-12731, setting aside petitioner returned the subject motor drive, it made itself
certain Orders later specified herein, of Judge Ricardo J. unequivocably clear that said action was without prejudice to a
Francisco, as Presiding Judge of the Court of First instance of motion for reconsideration of the Court of Appeals decision, as
Rizal Branch VI, issued in Civil Case No. 36040, as wen as the shown by the receipt duly signed by respondent's
resolution dated September 22, 1981 of the said appellate representative. 1 Considering that petitioner has reserved its
court, denying petitioner's motion for reconsideration. right to question the propriety of the Court of Appeals' decision,
the contention of private respondent that this petition has been
mooted by such return may not be sustained.
It appears that in order to obtain financial accommodations
from herein petitioner Makati Leasing and Finance Corporation,
the private respondent Wearever Textile Mills, Inc., discounted The next and the more crucial question to be resolved in this
and assigned several receivables with the former under a Petition is whether the machinery in suit is real or personal
Receivable Purchase Agreement. To secure the collection of property from the point of view of the parties, with petitioner
the receivables assigned, private respondent executed a arguing that it is a personality, while the respondent claiming
Chattel Mortgage over certain raw materials inventory as well the contrary, and was sustained by the appellate court, which
as a machinery described as an Artos Aero Dryer Stentering accordingly held that the chattel mortgage constituted thereon
Range. is null and void, as contended by said respondent.
Upon private respondent's default, petitioner filed a petition for A similar, if not Identical issue was raised in Tumalad v.
extrajudicial foreclosure of the properties mortgage to it. Vicencio, 41 SCRA 143 where this Court, speaking through
However, the Deputy Sheriff assigned to implement the Justice J.B.L. Reyes, ruled:
foreclosure failed to gain entry into private respondent's
premises and was not able to effect the seizure of the Although there is no specific statement
aforedescribed machinery. Petitioner thereafter filed a referring to the subject house as personal
complaint for judicial foreclosure with the Court of First property, yet by ceding, selling or transferring
Instance of Rizal, Branch VI, docketed as Civil Case No. a property by way of chattel mortgage
36040, the case before the lower court. defendants-appellants could only have
meant to convey the house as chattel, or at
Acting on petitioner's application for replevin, the lower court least, intended to treat the same as such, so
issued a writ of seizure, the enforcement of which was however that they should not now be allowed to make
subsequently restrained upon private respondent's filing of a an inconsistent stand by claiming otherwise.
motion for reconsideration. After several incidents, the lower Moreover, the subject house stood on a
court finally issued on February 11, 1981, an order lifting the rented lot to which defendants-appellants
restraining order for the enforcement of the writ of seizure and merely had a temporary right as lessee, and
an order to break open the premises of private respondent to although this can not in itself alone
enforce said writ. The lower court reaffirmed its stand upon determine the status of the property, it does
private respondent's filing of a further motion for so when combined with other factors to
reconsideration. sustain the interpretation that the parties,
particularly the mortgagors, intended to treat
the house as personality. Finally, unlike in
On July 13, 1981, the sheriff enforcing the seizure order,
the Iya cases, Lopez vs. Orosa, Jr. & Plaza
repaired to the premises of private respondent and removed
Theatre, Inc. & Leung Yee vs. F.L. Strong
the main drive motor of the subject machinery.
Machinery & Williamson, wherein third
persons assailed the validity of the chattel personal property, becomes very apparent. Moreover, the case
mortgage, it is the defendants-appellants of Machinery and Engineering Supplies, Inc. v. CA, 96 Phil. 70,
themselves, as debtors-mortgagors, who are heavily relied upon by said court is not applicable to the case at
attacking the validity of the chattel mortgage bar, the nature of the machinery and equipment involved
in this case. The doctrine of estoppel therein as real properties never having been disputed nor in
therefore applies to the herein defendants- issue, and they were not the subject of a Chattel Mortgage.
appellants, having treated the subject house Undoubtedly, the Tumalad case bears more nearly perfect
as personality. parity with the instant case to be the more controlling
jurisprudential authority.
Examining the records of the instant case, We find no logical
justification to exclude the rule out, as the appellate court did, WHEREFORE, the questioned decision and resolution of the
the present case from the application of the abovequoted Court of Appeals are hereby reversed and set aside, and the
pronouncement. If a house of strong materials, like what was Orders of the lower court are hereby reinstated, with costs
involved in the above Tumalad case, may be considered as against the private respondent.
personal property for purposes of executing a chattel mortgage
thereon as long as the parties to the contract so agree and no SO ORDERED.
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 Makasiar (Chairman), Aquino, Concepcion Jr., Guerrero and
purpose, may not be likewise treated as such. This is really Escolin JJ., concur.
because one who has so agreed is estopped from denying the
existence of the chattel mortgage. Abad Santos, J., concurs in the result.
In rejecting petitioner's assertion on the applicability of the G.R. No. L-17870 September 29, 1962
Tumalad doctrine, the Court of Appeals lays stress on the fact
that the house involved therein was built on a land that did not MINDANAO BUS COMPANY, petitioner,
belong to the owner of such house. But the law makes no vs.
distinction with respect to the ownership of the land on which THE CITY ASSESSOR & TREASURER and the BOARD OF
the house is built and We should not lay down distinctions not TAX APPEALS of Cagayan de Oro City,respondents.
contemplated by law.
3. That the machineries sought to be assessed by the 3. The Court of Tax Appeals erred in denying
respondent as real properties are the following: petitioner's contention that the respondent City
Assessor's power to assess and levy real estate taxes
(a) Hobart Electric Welder Machine, on machineries is further restricted by section 31,
appearing in the attached photograph, paragraph (c) of Republic Act No. 521; and
marked Annex "A";
4. The Tax Court erred in denying petitioner's motion
(b) Storm Boring Machine, appearing in the for reconsideration.
attached photograph, marked Annex "B";
Respondents contend that said equipments, tho movable, are
(c) Lathe machine with motor, appearing in immobilized by destination, in accordance with paragraph 5 of
the attached photograph, marked Annex "C"; Article 415 of the New Civil Code which provides:
(d) Black and Decker Grinder, appearing in Art. 415. The following are immovable properties:
the attached photograph, marked Annex "D";
xxx xxx xxx
(e) PEMCO Hydraulic Press, appearing in
the attached photograph, marked Annex "E"; (5) Machinery, receptacles, instruments or
implements intended by the owner of the tenement for
(f) Battery charger (Tungar charge machine) an industry or works which may be carried on in a
appearing in the attached photograph, building or on a piece of land, and which tend directly
marked Annex "F"; and to meet the needs of the said industry or works.
(Emphasis ours.)
(g) D-Engine Waukesha-M-Fuel, appearing
in the attached photograph, marked Annex Note that the stipulation expressly states that the equipment
"G". are placed on wooden or cement platforms. They can be
moved around and about in petitioner's repair shop. In the case
of B. H. Berkenkotter vs. Cu Unjieng, 61 Phil. 663, the
4. That these machineries are sitting on cement or Supreme Court said:
wooden platforms as may be seen in the attached
photographs which form part of this agreed stipulation
of facts; Article 344 (Now Art. 415), paragraph (5) of the Civil
Code, gives the character of real property to
"machinery, liquid containers, instruments or
5. That petitioner is the owner of the land where it implements intended by the owner of any building or
maintains and operates a garage for its TPU motor land for use in connection with any industry or trade
trucks; a repair shop; blacksmith and carpentry shops, being carried on therein and which are expressly
and with these machineries which are placed therein, adapted to meet the requirements of such trade or
its TPU trucks are made; body constructed; and same industry."
are repaired in a condition to be serviceable in the
TPU land transportation business it operates;
If the installation of the machinery and equipment in
question in the central of the Mabalacat Sugar Co.,
6. That these machineries have never been or were Inc., in lieu of the other of less capacity existing
never used as industrial equipments to produce therein, for its sugar and industry, converted them into
finished products for sale, nor to repair machineries, real property by reason of their purpose, it cannot be
parts and the like offered to the general public said that their incorporation therewith was not
indiscriminately for business or commercial purposes permanent in character because, as essential and
for which petitioner has never engaged in, to principle elements of a sugar central, without them the
date.1awphl.nt sugar central would be unable to function or carry on
the industrial purpose for which it was established.
The Court of Tax Appeals having sustained the respondent city Inasmuch as the central is permanent in character,
assessor's ruling, and having denied a motion for the necessary machinery and equipment installed for
reconsideration, petitioner brought the case to this Court carrying on the sugar industry for which it has been
assigning the following errors: established must necessarily be permanent.
(Emphasis ours.)
1. The Honorable Court of Tax Appeals erred in
upholding respondents' contention that the questioned So that movable equipments to be immobilized in
assessments are valid; and that said tools, contemplation of the law must first be "essential and principal
equipments or machineries are immovable taxable elements" of an industry or works without which such industry
real properties. or works would be "unable to function or carry on the industrial
purpose for which it was established." We may here
distinguish, therefore, those movable which become WHEREFORE, the decision subject of the petition for review is
immobilized by destination because they are essential and hereby set aside and the equipment in question declared not
principal elements in the industry for those which may not be subject to assessment as real estate for the purposes of the
so considered immobilized because they are merely incidental, real estate tax. Without costs.
not essential and principal. Thus, cash registers, typewriters,
etc., usually found and used in hotels, restaurants, theaters, So ordered.
etc. are merely incidentals and are not and should not be
considered immobilized by destination, for these businesses
can continue or carry on their functions without these equity Bengzon, C.J., Padilla, Bautista Angelo, Reyes, J.B.L.,
comments. Airline companies use forklifts, jeep-wagons, Paredes, Dizon and Makalintal, JJ., concur.
pressure pumps, IBM machines, etc. which are incidentals, not Regala, Concepcion and Barrera JJ., took no part.
essentials, and thus retain their movable nature. On the other
hand, machineries of breweries used in the manufacture of
liquor and soft drinks, though movable in nature, are
immobilized because they are essential to said industries; but
the delivery trucks and adding machines which they usually
own and use and are found within their industrial compounds
are merely incidental and retain their movable nature.
On April 7, 1998, they went to [the CA] via an original action for
WHEREFORE, premises considered, the assailed Order dated
certiorari.
February 18, 1998 and Resolution dated March 31, 1998 in
Civil Case No. Q-98-33500 are hereby AFFIRMED. The writ of
preliminary injunction issued on June 15, 1998 is
hereby LIFTED.[4] Ruling of the Court of Appeals
The Facts
Furthermore, to accord merit to this petition would be to
preempt the trial court in ruling upon the case below, since the
merits of the whole matter are laid down before us via a
The undisputed facts are summarized by the
petition whose sole purpose is to inquire upon the existence of
Court of Appeals as follows:[10]
a grave abuse of discretion on the part of the [RTC] in issuing
the assailed Order and Resolution. The issues raised herein
On February 13, 1998, respondent PCI Leasing and Finance, are proper subjects of a full-blown trial, necessitating
Inc. (PCI Leasing for short) filed with the RTC-QC a complaint presentation of evidence by both parties. The contract is being
for [a] sum of money (Annex E), with an application for a writ of enforced by one, and [its] validity is attacked by the other a
replevin docketed as Civil Case No. Q-98-33500. matter x x x which respondent court is in the best position to
determine.
Hence, this Petition.[11] SEC. 3. Order. -- Upon the filing of such affidavit and approval
of the bond, 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
The Issues forthwith to take such property into his custody.
x x x....................................x x x....................................x x x
B. Whether or not the contract between the parties is a loan or
a lease.[12]
(5) Machinery, receptacles, instruments or implements
intended by the owner of the tenement for an industry or works
In the main, the Court will resolve whether the
which may be carried on in a building or on a piece of land, and
said machines are personal, not immovable,
which tend directly to meet the needs of the said industry or
property which may be a proper subject of a writ of
works;
replevin. As a preliminary matter, the Court will also
address briefly the procedural points raised by
respondent. x x x....................................x x x....................................x x x
In the present case, the machines that were
the subjects of the Writ of Seizure were placed by
The Courts Ruling petitioners in the factory built on their own
land. Indisputably, they were essential and principal
elements of their chocolate-making industry. Hence,
The Petition is not meritorious. 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
Preliminary Matter:Procedural Questions industry.[16] In that sense, petitioners are correct in
arguing that the said machines are real, not
personal, property pursuant to Article 415 (5) of the
Respondent contends that the Petition failed to Civil Code.[17]
indicate expressly whether it was being filed under
Be that as it may, we disagree with the
Rule 45 or Rule 65 of the Rules of Court. It further
submission of the petitioners that the said machines
alleges that the Petition erroneously
are not proper subjects of the Writ of Seizure.
impleaded Judge Hilario Laqui as respondent.
The Court has held that contracting parties
There is no question that the present recourse
may validly stipulate that a real property be
is under Rule 45. This conclusion finds support in
considered as personal.[18] After agreeing to such
the very title of the Petition, which is Petition for
stipulation, they are consequently estopped from
Review on Certiorari.[13]
claiming otherwise. Under the principle of estoppel,
While Judge Laqui should not have been a party to a contract is ordinarily precluded from
impleaded as a respondent,[14] substantial justice denying the truth of any material fact found therein.
requires that such lapse by itself should not warrant
Hence, in Tumalad v. Vicencio,[19] the Court
the dismissal of the present Petition. In this light, the
upheld the intention of the parties to treat
Court deems it proper to remove, motu proprio, the
a house as a personal property because it had been
name of Judge Laqui from the caption of the present
made the subject of a chattel mortgage. The Court
case.
ruled:
G.R. No. L-30173 September 30, 1971 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.
GAVINO A. TUMALAD and GENEROSA R. As highest bidder, plaintiffs-appellees were issued the
TUMALAD, plaintiffs-appellees, corresponding certificate of sale. 3 Thereafter, on 18 April 1956,
vs. plaintiffs-appellant commenced Civil Case No. 43073 in the
ALBERTA VICENCIO and EMILIANO SIMEON, defendants- municipal court of Manila, praying, among other things, that the
appellants. house be vacated and its possession surrendered to them, and
for defendants-appellants to pay rent of P200.00 monthly from
Castillo & Suck for plaintiffs-appellees. 27 March 1956 up to the time the possession is
surrendered. 4 On 21 September 1956, the municipal court
rendered its decision
Jose Q. Calingo for defendants-appellants.
On 7 October 1957, the appellate court of First Instance Moreover, even granting that the charge is true, fraud or deceit
rendered its decision, the dispositive portion of which is quoted does not render a contract void ab initio, and can only be a
earlier. The said decision was appealed by defendants to the ground for rendering the contract voidable or annullable
Court of Appeals which, in turn, certified the appeal to this pursuant to Article 1390 of the New Civil Code, by a proper
Court. Plaintiffs-appellees failed to file a brief and this appeal action in court. 14 There is nothing on record to show that the
was submitted for decision without it. mortgage has been annulled. Neither is it disclosed that steps
were taken to nullify the same. Hence, defendants-appellants'
Defendants-appellants submitted numerous assignments of claim of ownership on the basis of a voidable contract which
error which can be condensed into two questions, namely: . has not been voided fails.
(a) Whether the municipal court from which It is claimed in the alternative by defendants-appellants that
the case originated had jurisdiction to even if there was no fraud, deceit or trickery, the chattel
adjudicate the same; 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
(b) Whether the defendants are, under the in Lopez vs. Orosa, Jr. and Plaza Theatre Inc., 15 cited
law, legally bound to pay rentals to the in Associated Insurance Surety Co., Inc. vs. Iya, et al. 16 to the
plaintiffs during the period of one (1) year effect that
provided by law for the redemption of the
extrajudicially foreclosed house.
... it is obvious that the inclusion of the
building, separate and distinct from the land,
We will consider these questions seriatim. in the enumeration of what may constitute
real properties (art. 415, New Civil Code)
(a) Defendants-appellants mortgagors question the jurisdiction could only mean one thing that a building
of the municipal court from which the case originated, and is by itself an immovable
consequently, the appellate jurisdiction of the Court of First property irrespective of whether or not said
Instance a quo, on the theory that the chattel mortgage is structure and the land on which it is adhered
void ab initio; whence it would follow that the extrajudicial to belong to the same owner.
foreclosure, and necessarily the consequent auction sale, are
also void. Thus, the ownership of the house still remained with Certain deviations, however, have been allowed for various
defendants-appellants who are entitled to possession and not reasons. In the case of Manarang and Manarang vs.
plaintiffs-appellees. Therefore, it is argued by defendants- Ofilada, 17 this Court stated that "it is undeniable that the
appellants, the issue of ownership will have to be adjudicated parties to a contract may by agreement treat as personal
first in order to determine possession. lt is contended further property that which by nature would be real property",
that ownership being in issue, it is the Court of First Instance citing Standard Oil Company of New York vs. Jaramillo. 18 In
which has jurisdiction and not the municipal court. the latter case, the mortgagor conveyed and transferred to the
mortgagee by way of mortgage "the following
Defendants-appellants predicate their theory of nullity of the described personal property."19 The "personal property"
chattel mortgage on two grounds, which are: (a) that, their consisted of leasehold rights and a building. Again, in the case
signatures on the chattel mortgage were obtained through of Luna vs. Encarnacion, 20 the subject of the contract
fraud, deceit, or trickery; and (b) that the subject matter of the designated as Chattel Mortgage was a house of mixed
mortgage is a house of strong materials, and, being an materials, and this Court hold therein that it was a valid Chattel
immovable, it can only be the subject of a real estate mortgage mortgage because it was so expressly designated and
and not a chattel mortgage. specifically that the property given as security "is a house of
mixed materials, which by its very nature is considered
On the charge of fraud, deceit or trickery, the Court of First personal property." In the later case of Navarro vs.
Pineda, 21 this Court stated that
Instance found defendants-appellants' contentions as not
supported by evidence and accordingly dismissed the
charge, 8 confirming the earlier finding of the municipal court The view that parties to a deed of chattel
mortgage may agree to consider a house as
personal property for the purposes of said Appellants mortgagors question this award, claiming that they
contract, "is good only insofar as the were entitled to remain in possession without any obligation to
contracting parties are concerned. It is pay rent during the one year redemption period after the
based, partly, upon the principle of estoppel" foreclosure sale, i.e., until 27 March 1957. On this issue, We
(Evangelista vs. Alto Surety, No. L-11139, 23 must rule for the appellants.
April 1958). In a case, a mortgaged house
built on a rented land was held to be a Chattel mortgages are covered and regulated by the Chattel
personal property, not only because the Mortgage Law, Act No. 1508. 28 Section 14 of this Act allows
deed of mortgage considered it as such, but the mortgagee to have the property mortgaged sold at public
also because it did not form part of the land auction through a public officer in almost the same manner as
(Evangelists vs. Abad, [CA]; 36 O.G. 2913), that allowed by Act No. 3135, as amended by Act No. 4118,
for it is now settled that an object placed on provided that the requirements of the law relative to notice and
land by one who had only a temporary right registration are complied with. 29 In the instant case, the parties
to the same, such as the lessee or specifically stipulated that "the chattel mortgage will
usufructuary, does not become immobilized be enforceable in accordance with the provisions of Special Act
by attachment (Valdez vs. Central Altagracia, No. 3135 ... ." 30 (Emphasis supplied).
222 U.S. 58, cited in Davao Sawmill Co., Inc.
vs. Castillo, et al., 61 Phil. 709). Hence, if a
house belonging to a person stands on a Section 6 of the Act referred to 31 provides that the debtor-
rented land belonging to another person, it mortgagor (defendants-appellants herein) may, at any time
may be mortgaged as a personal property as within one year from and after the date of the auction sale,
so stipulated in the document of mortgage. redeem the property sold at the extra judicial foreclosure sale.
(Evangelista vs. Abad, Supra.) It should be Section 7 of the same Act 32 allows the purchaser of the
noted, however that the principle is property to obtain from the court the possession during the
predicated on statements by the owner period of redemption: but the same provision expressly
declaring his house to be a chattel, a requires the filing of a petition with the proper Court of First
conduct that may conceivably estop him from Instance and the furnishing of a bond. It is only upon filing of
subsequently claiming otherwise. (Ladera vs. the proper motion and the approval of the corresponding bond
C.N. Hodges, [CA] 48 O.G. 5374): 22 that the order for a writ of possession issues as a matter 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
In the contract now before Us, the house on rented land is not not claim possession during the period of redemption as a
only expressly designated as Chattel Mortgage; it specifically matter of right. In such a case, the governing provision is
provides that "the mortgagor ... voluntarily CEDES, SELLS and Section 34, Rule 39, of the Revised Rules of Court 34 which
TRANSFERS by way of Chattel Mortgage 23 the property also applies to properties purchased in extrajudicial foreclosure
together with its leasehold rights over the lot on which it is proceedings. 35 Construing the said section, this Court stated in
constructed and participation ..." 24Although there is no specific the aforestated case of Reyes vs. Hamada.
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 In other words, before the expiration of the 1-
to convey the house as chattel, or at least, intended to treat the year period within which the judgment-debtor
same as such, so that they should not now be allowed to make or mortgagor may redeem the property, the
an inconsistent stand by claiming otherwise. Moreover, the purchaser thereof is not entitled, as a matter
subject house stood on a rented lot to which defendats- of right, to possession of the same. Thus,
appellants merely had a temporary right as lessee, and while it is true that the Rules of Court allow
although this can not in itself alone determine the status of the the purchaser to receive the rentals if the
property, it does so when combined with other factors to purchased property is occupied by tenants,
sustain the interpretation that the parties, particularly the he is, nevertheless, accountable to the
mortgagors, intended to treat the house as personalty. Finally judgment-debtor or mortgagor as the case
unlike in the Iya cases, Lopez vs. Orosa, Jr. and Plaza may be, for the amount so received and the
Theatre, Inc. 25 and Leung Yee vs. F. L. Strong Machinery and same will be duly credited against the
Williamson, 26 wherein third persons assailed the validity of the redemption price when the said debtor or
chattel mortgage, 27 it is the defendants-appellants themselves, mortgagor effects the redemption.Differently
as debtors-mortgagors, who are attacking the validity of the stated, the rentals receivable from tenants,
chattel mortgage in this case. The doctrine of estoppel although they may be collected by the
therefore applies to the herein defendants-appellants, having purchaser during the redemption period, do
treated the subject house as personalty. 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
(b) Turning to the question of possession and rentals of the the debtor or mortgagor, the payment of the
premises in question. The Court of First Instance noted in its redemption amount and the consequent
decision that nearly a year after the foreclosure sale the return to him of his properties sold at public
mortgaged house had been demolished on 14 and 15 January auction. (Emphasis supplied)
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 The Hamada case reiterates the previous ruling in Chan vs.
plaintiffs a monthly rent of P200.00 from 27 March 1956 (when Espe. 36
the chattel mortgage was foreclosed and the house sold) until
14 January 1957 (when it was torn down by the Sheriff), plus Since the defendants-appellants were occupying the house at
P300.00 attorney's fees. the time of the auction sale, they are entitled to remain in
possession during the period of redemption or within one year Petitioner's motion for reconsideration dated October
from and after 27 March 1956, the date of the auction sale, and 12, 1959 alleges that he, or his counsel, did not
to collect the rents or profits during the said period. receive a formal and valid notice of said decision,
which motion for reconsideration was denied by the
It will be noted further that in the case at bar the period of court below in the order of November 14, 1959.
redemption had not yet expired when action was instituted in
the court of origin, and that plaintiffs-appellees did not choose Petitioner now contends that the respondent Judge
to take possession under Section 7, Act No. 3135, as exceeded in his jurisdiction in rendering the execution
amended, which is the law selected by the parties to govern without valid and formal notice of the decision.
the extrajudicial foreclosure of the chattel mortgage. Neither
was there an allegation to that effect. Since plaintiffs-appellees' A compromise agreement is binding between the
right to possess was not yet born at the filing of the complaint, parties and becomes the law between them.
there could be no violation or breach thereof. Wherefore, the (Gonzales vs. Gonzales G.R. No. L-1254, May 21,
original complaint stated no cause of action and was 1948, 81 Phil. 38; Martin vs. Martin, G.R. No. L-
prematurely filed. For this reason, the same should be ordered 12439, May 22, 1959) .
dismissed, 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 It is a general rule in this jurisdiction that a judgment
consideration is necessary in arriving at a just decision of the based on a compromise agreement is not appealable
cases. 37 and is immediately executory, unless a motion is filed
on the ground fraud, mistake or duress. (De los Reyes
vs. Ugarte, 75 Phil. 505; Lapena vs. Morfe, G.R. No.
It follows that the court below erred in requiring the mortgagors L-10089, July 31, 1957)
to pay rents for the year following the foreclosure sale, as well
as attorney's fees.
Petitioner's claim that he was not notified or served
notice of the decision is untenable. The judgment on
FOR THE FOREGOING REASONS, the decision appealed the compromise agreement rendered by the court
from is reversed and another one entered, dismissing the below dated January 28, 1959, was given in open
complaint. With costs against plaintiffs-appellees. court. This alone is a substantial compliance as to
notice. (De los Reyes vs. Ugarte, supra)
Concepcion, C.J., Dizon, Makalintal, Zaldivar, Castro,
Fernando, Teehankee, Barredo, Villamor and Makasiar, JJ., IN VIEW THEREOF, we believe that the lower court
concur. did not exceed nor abuse its jurisdiction in ordering
the execution of the judgment. The petition
for certiorari is hereby dismissed and the writ of
preliminary injunction heretofore dissolved, with costs
G.R. No. L-17898 October 31, 1962 against the petitioner.
On August 15, 1959, upon petition, the Court of First The herein respondent, Provincial Sheriff of Surigao, acting
Instance issued a writ of execution. upon the writ of execution issued by the lower court, levied
upon and ordered the sale of the sawmill machineries and The court of first instance being a court of record, in order that
equipments in question. These machineries and equipments a judgment may be considered as rendered, must not only be
had been taken to and installed in a sawmill building located in in writing, signed by the judge, but it must also be filed with the
Lianga, Surigao del Sur, and owned by the Golden Pacific clerk of court. The mere pronouncement of the judgment in
Sawmill, Inc., to whom, petitioner alleges, he had sold them on open court with the stenographer taking note thereof does not,
February 16, 1959 (a date after the decision of the lower court therefore, constitute a rendition of the judgment. It is the filing
but before levy by the Sheriff). of the signed decision with the clerk of court that constitutes
rendition. While it is to be presumed that the judgment that was
Having been advised by the sheriff that the public auction sale dictated in open court will be the judgment of the court, the
was set for December 4, 1959, petitioner, on December 1, court may still modify said order as the same is being put into
1959, filed the petition for certiorari and prohibition with writing. And even if the order or judgment has already been put
preliminary injunction with respondent Court of Appeals, into writing and signed, while it has not yet been delivered to
alleging that a copy of the aforementioned judgment given in the clerk for filing it is still subject to amendment or change by
open court on January 28, 1959 was served upon counsel for the judge. It is only when the judgment signed by the judge is
petitioner only on September 25, 1959 (writ of execution is actually filed with the clerk of court that it becomes a valid and
dated September 23, 1959); that the order and writ of binding judgment. Prior thereto, it could still be subject to
execution having been issued by the lower court before amendment and change and may not, therefore, constitute the
counsel for petitioner received a copy of the judgment, its real judgment of the court.
resultant last order that the "sheriff may now proceed with the
sale of the properties levied constituted a grave abuse of Regarding the notice of judgment, the mere fact that a party
discretion and was in excess of its jurisdiction; and that the heard the judge dictating the judgment in open court, is not a
respondent Provincial Sheriff of Surigao was acting illegally valid notice of said judgment. If rendition thereof is constituted
upon the allegedly void writ of execution by levying the same by the filing with the clerk of court of a signed copy (of the
upon the sawmill machineries and equipments which have judgment), it is evident that the fact that a party or an attorney
become real properties of the Golden Pacific sawmill, Inc., and heard the order or judgment being dictated in court cannot be
is about to proceed in selling the same without prior publication considered as notice of the real judgment. No judgment can be
of the notice of sale thereof in some newspaper of general notified to the parties unless it has previously been rendered.
circulation as required by the Rules of Court. The notice, therefore, that a party has of a judgment that was
being dictated is of no effect because at the time no judgment
The Court of Appeals, on December 8, 1959, issued a writ of has as yet been signed by the judge and filed with the clerk.
preliminary injunction against the sheriff but it turned out that
the latter had already sold at public auction the machineries in Besides, the Rules expressly require that final orders or
question, on December 4, 1959, as scheduled. The respondent judgments be served personally or by registered mail. Section
Grace Park Engineering, Inc. was the only bidder for 7 of Rule 27 provides as follows:
P15,000.00, although the certificate sale was not yet executed.
The Court of Appeals constructed the sheriff to suspend the SEC. 7. Service of final orders or judgments. Final
issuance of a certificate of sale of the said sawmill machineries orders or judgments shall be served either personally
and equipment sold by him on December 4, 1959 until the final or by registered mail.
decision of the case. On November 9, 1960 the Court of
Appeals rendered the aforequoted decision.
In accordance with this provision, a party is not considered as
having been served with the judgment merely because he
Before this Court, petitioner alleges that the Court of Appeals heard the judgment dictating the said judgment in open court; it
erred (1) in holding that the rendition of judgment on is necessary that he be served with a copy of the signed
compromise in open court on January 1959 was a sufficient judgment that has been filed with the clerk in order that he may
notice; and (2) in not resolving the other issues raised before it, legally be considered as having been served with the
namely, (a) the legality of the public auction sale made by the judgment.
sheriff, and (b) the nature of the machineries in question,
whether they are movables or immovables.
For all the foregoing, the fact that the petitioner herein heard
the trial judge dictating the judgment in open court, is not
The Court of Appeals held that as a judgment was entered by sufficient to constitute the service of judgement as required by
the court below in open court upon the submission of the the above-quoted section 7 of Rule 2 the signed judgment not
compromise agreement, the parties may be considered as having been served upon the petitioner, said judgment could
having been notified of said judgment and this fact constitutes not be effective upon him (petitioner) who had not received it. It
due notice of said judgment. This raises the following legal follows as a consequence that the issuance of the writ of
question: Is the order dictated in open court of the judgment of execution null and void, having been issued before petitioner
the court, and is the fact the petitioner herein was present in her was served, personally or by registered mail, a copy of the
open court was the judgment was dictated, sufficient notice decision.
thereof? The provisions of the Rules of Court decree
otherwise. Section 1 of Rule 35 describes the manner in which
judgment shall be rendered, thus: The second question raised in this appeal, which has been
passed upon by the Court of Appeals, concerns the validity of
the proceedings of the sheriff in selling the sawmill machineries
SECTION 1. How judgment rendered. All and equipments at public auction with a notice of the sale
judgments determining the merits of cases shall be in having been previously published.
writing personally and directly prepared by the judge,
and signed by him, stating clearly and distinctly the
facts and the law on which it is based, filed with the The record shows that after petitioner herein Pastor D. Ago
clerk of the court. had purchased the sawmill machineries and equipments he
assigned the same to the Golden Pacific Sawmill, Inc. in
payment of his subscription to the shares of stock of said Pastor D. Ago from the Grace Park Engineering, Inc., as well
corporation. Thereafter the sawmill machinery and equipments as the sale of the same by the Sheriff of Surigao, are null and
were installed in a building and permanently attached to the void. Costs shall be against the respondent Grace Park
ground. By reason of such installment in a building, the said Engineering, Inc.
sawmill machineries and equipment became real estate
properties in accordance with the provision of Art. 415 (5) of Bengzon, C.J., Bautista Angelo, Concepcion, Reyes, J.B.L.,
the Civil Code, thus: Barrera, Paredes, Dizon, Regala and Makalintal, JJ.,concur.
Padilla, J., took no part.
ART. 415. The following are immovable property:
the sale made by the sheriff must be declared null and void.