Chuaquico Jett I.
all personal properties as understood in the
Laurel vs. Abrogar: PROPERTY
CLASSIFICATION OF TELEPHONE
CONVERSATION
FACTS: petitioner is one of the accused in
Criminal Case No. 99-2425, filed with the
Regional Trial Court of Makati City, Branch
150. The Amended Information charged the
accused with theft under Article 308 of the
Revised Penal Code
steal and use the international long distance
calls belonging to PLDT by conducting
International Simple Resale (ISR), which is a
method of routing and completing
international long distance calls using lines,
cables, antenae, and/or air wave frequency
which connect directly to the local or domestic
exchange facilities of the country where the
call is destined, effectively stealing this
business from PLDT
Petitioner filed a Motion to Quash (with
Motion to Defer Arraignment), on the ground
that the factual allegations in the Amended
Information do not constitute the felony of
theft. The trial court denied the Motion to
Quash the Amended Information, as well
petitioners subsequent Motion for
Reconsideration.
ISSUE: W/N accused can be charged of theft
RULING: NO, he cannot be charged with
theft
In the above-quoted Decision, this Court held
that the Amended Information does not
contain material allegations charging
petitioner with theft of personal property since
international long distance calls and the
business of providing telecommunication or
telephone services are not personal properties
under Article 308 of the Revised Penal Code.
PLDT further insists that the Revised Penal
Code should be interpreted in the context of
the Civil Codes definition of real and personal
property. The enumeration of real properties
in Article 415 of the Civil Code is exclusive
such that all those not included therein are
personal properties. Since Article 308 of the
Revised Penal Code used the words personal
property without qualification, it follows that
context of the Civil Code, may be the subject
of theft under Article 308 of the Revised Penal
Code. PLDT alleges that the international calls
and business of providing telecommunication
or telephone service are personal properties
capable of appropriation and can be objects of
theft.
According to respondent, the international
phone calls which are electric currents or sets
of electric impulses transmitted through a
medium, and carry a pattern representing the
human voice to a receiver, are personal
properties which may be subject of theft.
Article 416(3) of the Civil Code deems forces
of nature (which includes electricity) which
are brought under the control by science, are
personal property.
The Office of the Solicitor General (OSG)
agrees with respondent PLDT that
international phone calls and the business or
service of providing international phone calls
are subsumed in the enumeration and
definition of personal property under the Civil
Code hence, may be proper subjects of theft. It
noted that the cases of United States v. Genato,
United States v. Carlos and United States v.
Tambunting, which recognized intangible
properties like gas and electricity as personal
properties, are deemed incorporated in our
penal laws. Moreover, the theft provision in
the Revised Penal Code was deliberately
couched in broad terms precisely to be all-
encompassing and embracing even such
scenario that could not have been easily
anticipated.
In his Comment to PLDTs motion for
reconsideration, petitioner Laurel claims that a
telephone call is a conversation on the phone
or a communication carried out using the
telephone. It is not synonymous to electric
current or impulses. Hence, it may not be
considered as personal property susceptible of
appropriation. Petitioner claims that the
analogy between generated electricity and
telephone calls is misplaced. PLDT does not
produce or generate telephone calls. It only
provides the facilities or services for the
transmission and switching of the calls. He
also insists that business is not personal
property. It is not the business that is
protected but the right to carry on a business.
This right is what is considered as property.
Since the services of PLDT cannot be
considered as property, the same may not be
subject of theft.
Prior to the passage of the Revised Penal Code
on December 8, 1930, the definition of the term
personal property in the penal code provision
on theft had been established in Philippine
jurisprudence. This Court, in United States v.
Genato, United States v. Carlos, and United
States v. Tambunting, consistently ruled that
any personal property, tangible or intangible,
corporeal or incorporeal, capable of
appropriation can be the object of theft.
Moreover, since the passage of the Revised
Penal Code on December 8, 1930, the term
personal property has had a generally
accepted definition in civil law. In Article 335
of the Civil Code of Spain, personal property
is defined as anything susceptible of
appropriation and not included in the
foregoing chapter (not real property). Thus,
the term personal property in the Revised
Penal Code should be interpreted in the
context of the Civil Code provisions in
accordance with the rule on statutory
construction that where words have been long
used in a technical sense and have been
judicially construed to have a certain meaning,
and have been adopted by the legislature as
having a certain meaning prior to a particular
statute, in which they are used, the words
used in such statute should be construed
according to the sense in which they have
been previously used.
Cognizant of the definition given by
jurisprudence and the Civil Code of Spain to
the term personal property at the time the old
Penal Code was being revised, still the
legislature did not limit or qualify the
definition of personal property in the Revised
Penal Code. Neither did it provide a restrictive
definition or an exclusive enumeration of
personal property in the Revised Penal Code,
thereby showing its intent to retain for the
term an extensive and unqualified
interpretation. Consequently, any property
which is not included in the enumeration of
real properties under the Civil Code and
capable of appropriation can be the subject of
theft under the Revised Penal Code.
As illustrated in the above cases,
appropriation of forces of nature which are
brought under control by science such as
electrical energy can be achieved by tampering
with any apparatus used for generating or
measuring such forces of nature, wrongfully
redirecting such forces of nature from such
apparatus, or using any device to fraudulently
obtain such forces of nature. In the instant
case, petitioner was charged with engaging in
International Simple Resale (ISR) or the
unauthorized routing and completing of
international long distance calls using lines,
cables, antennae, and/or air wave frequency
and connecting these calls directly to the local
or domestic exchange facilities of the country
where destined.
As early as 1910, the Court declared in Genato
that ownership over electricity (which an
international long distance call consists of), as
well as telephone service, is protected by the
provisions on theft of the Penal Code.
As illustrated in the above cases,
appropriation of forces of nature which are
brought under control by science such as
electrical energy can be achieved by tampering
with any apparatus used for generating or
measuring such forces of nature, wrongfully
redirecting such forces of nature from such
apparatus, or using any device to fraudulently
obtain such forces of nature. In the instant
case, petitioner was charged with engaging in
International Simple Resale (ISR) or the
unauthorized routing and completing of
international long distance calls using lines,
cables, antennae, and/or air wave frequency
and connecting these calls directly to the local
or domestic exchange facilities of the country
where destined.
As early as 1910, the Court declared in Genato
that ownership over electricity (which an
international long distance call consists of), as
well as telephone service, is protected by the
provisions on theft of the Penal Code.
Interest in business was not specifically
enumerated as personal property in the Civil
Code in force at the time the above decision
was rendered. Yet, interest in business was
declared to be personal property since it is Leung Yee vs. Strong Machinery Co.:
capable of appropriation and not included in PURCHASER IN GOOD FAITH
the enumeration of real properties. Article 414
FACTS: The "Compaia Agricola Filipina"
of the Civil Code provides that all things
bought a considerable quantity of rice-
which are or may be the object of
cleaning machinery company from the
appropriation are considered either real
defendant machinery company, and executed
property or personal property. Business is
a chattel mortgage thereon to secure payment
likewise not enumerated as personal property
of the purchase price. It included in the
under the Civil Code. Just like interest in
mortgage deed the building of strong
business, however, it may be appropriated.
materials in which the machinery was
Following the ruling in Strochecker v.
installed, without any reference to the land on
Ramirez, business should also be classified as
which it stood. The indebtedness secured by
personal property. Since it is not included in
this instrument not having been paid when it
the exclusive enumeration of real properties
fell due, the mortgaged property was sold by
under Article 415, it is therefore personal
the sheriff, in pursuance of the terms of the
property.
mortgage instrument, and was bought in by
Indeed, while it may be conceded that the machinery company.
international long distance calls, the matter
A few weeks thereafter, on or about the 14th of
alleged to be stolen in the instant case, take the
January, 1914, the "Compaia Agricola
form of electrical energy, it cannot be said that
Filipina" executed a deed of sale of the land
such international long distance calls were
upon which the building stood to the
personal properties belonging to PLDT since
machinery company, but this deed of sale,
the latter could not have acquired ownership
although executed in a public document, was
over such calls. PLDT merely encodes,
not registered. This deed makes no reference
augments, enhances, decodes and transmits
to the building erected on the land and would
said calls using its complex communications
appear to have been executed for the purpose
infrastructure and facilities. PLDT not being
of curing any defects which might be found to
the owner of said telephone calls, then it could
exist in the machinery company's title to the
not validly claim that such telephone calls
building under the sheriff's certificate of sale.
were taken without its consent. It is the use of
The machinery company went into possession
these communications facilities without the
of the building at or about the time when this
consent of PLDT that constitutes the crime of
sale took place, that is to say, the month of
theft, which is the unlawful taking of the
December, 1913, and it has continued in
telephone services and business.
possession ever since.
Therefore, the business of providing
At or about the time when the chattel
telecommunication and the telephone service
mortgage was executed in favor of the
are personal property under Article 308 of the
machinery company, the mortgagor, the
Revised Penal Code, and the act of engaging
"Compaia Agricola Filipina" executed
in ISR is an act of subtraction penalized under
another mortgage to the plaintiff upon the
said article. However, the Amended
building, separate and apart from the land on
Information describes the thing taken as,
which it stood, to secure payment of the
international long distance calls, and only later
balance of its indebtedness to the plaintiff
mentions stealing the business from PLDT as
under a contract for the construction of the
the manner by which the gain was derived by
building. Upon the failure of the mortgagor to
the accused. In order to correct this inaccuracy
pay the amount of the indebtedness secured
of description, this case must be remanded to
by the mortgage, the plaintiff secured
the trial court and the prosecution directed to
judgment for that amount, levied execution
amend the Amended Information, to clearly
upon the building, bought it in at the sheriff's
state that the property subject of the theft are
sale on or about the 18th of December, 1914,
the services and business of respondent PLDT.
and had the sheriff's certificate of the sale duly
registered in the land registry of the Province
of Cavite.
At the time when the execution was levied
upon the building, the defendant machinery
company, which was in possession, filed with
the sheriff a sworn statement setting up its
claim of title and demanding the release of the
property from the levy. Thereafter, upon
demand of the sheriff, the plaintiff executed an
indemnity bond in favor of the sheriff in the
sum of P12,000, in reliance upon which the
sheriff sold the property at public auction to
the plaintiff, who was the highest bidder at the
sheriff's sale.
The trial judge, relying upon the terms of
article 1473 of the Civil Code, gave judgment
in favor of the machinery company, on the
ground that the company had its title to the
building registered prior to the date of registry
of the plaintiff's certificate.
Article 1473 of the Civil Code is as follows:
If the same thing should have been sold to
different vendees, the ownership shall be
transfer to the person who may have the first
taken possession thereof in good faith, if it
should be personal property.
ISSUE: W/N Respondent is the owner
RULING: YES, respondent is the owner
because petitioner is in bad faith
Should it be real property, it shall belong to
the person acquiring it who first recorded it in
the registry.
Should there be no entry, the property shall
belong to the person who first took possession
of it in good faith, and, in the absence thereof,
to the person who presents the oldest title,
provided there is good faith.
The building of strong materials in which the
rice-cleaning machinery was installed by the
"Compaia Agricola Filipina" was real
property, and the mere fact that the parties
seem to have dealt with it separate and apart
from the land on which it stood in no wise
changed its character as real property. It
follows that neither the original registry in the
chattel mortgage of the building and the
machinery installed therein, not the annotation
in that registry of the sale of the mortgaged
property, had any effect whatever so far as the
building was concerned.
We are of opinion, however, that the judgment
must be sustained on the ground that the
agreed statement of facts in the court below
discloses that neither the purchase of the
building by the plaintiff nor his inscription of
the sheriff's certificate of sale in his favor was
made in good faith, and that the machinery
company must be held to be the owner of the
property under the third paragraph of the
above cited article of the code, it appearing
that the company first took possession of the
property; and further, that the building and
the land were sold to the machinery company
long prior to the date of the sheriff's sale to the
plaintiff.
The force and effect given by law to an
inscription in a public record presupposes the
good faith of him who enters such inscription;
and rights created by statute, which are
predicated upon an inscription in a public
registry, do not and cannot accrue under an
inscription "in bad faith," to the benefit of the
person who thus makes the inscription.
The agreed statement of facts clearly discloses
that the plaintiff, when he bought the building
at the sheriff's sale and inscribed his title in the
land registry, was duly notified that the
machinery company had bought the building
from plaintiff's judgment debtor; that it had
gone into possession long prior to the sheriff's
sale; and that it was in possession at the time
when the sheriff executed his levy. The
execution of an indemnity bond by the
plaintiff in favor of the sheriff, after the
machinery company had filed its sworn claim
of ownership, leaves no room for doubt in this
regard. Having bought in the building at the
sheriff's sale with full knowledge that at the
time of the levy and sale the building had
already been sold to the machinery company
by the judgment debtor, the plaintiff cannot be
said to have been a purchaser in good faith;
and of course, the subsequent inscription of
the sheriff's certificate of title must be held to
have been tainted with the same defect.
There was no collusion on his part with the
common debtor, and no thought of the
perpetration of a fraud upon the rights of
another, in the ordinary sense of the word. He
may have hoped, and doubtless he did hope,
that the title of the machinery company would
not stand the test of an action in a court of law;
and if later developments had confirmed his
unfounded hopes, no one could question the
legality of the propriety of the course he
adopted.
But it appearing that he had full knowledge of
the machinery company's claim of ownership
when he executed the indemnity bond and
bought in the property at the sheriff's sale, and
it appearing further that the machinery
company's claim of ownership was well
founded, he cannot be said to have been an
innocent purchaser for value. He took the risk
and must stand by the consequences; and it is
in this sense that we find that he was not a
purchaser in good faith.
One who purchases real estate with
knowledge of a defect or lack of title in his
vendor cannot claim that he has acquired title
thereto in good faith as against the true owner
of the land or of an interest therein; and the
same rule must be applied to one who has
knowledge of facts which should have put
him upon such inquiry and investigation as
might be necessary to acquaint him with the
defects in the title of his vendor.
Davao Sawmill vs. Castillo:
TRANSMUTATION OF MACHINERY
FROM MOVABLE TO IMMOVABLE
FACTS: The Davao Saw Mill Co., Inc., is the
holder of a lumber concession from the
Government of the Philippine Islands. It has
operated a sawmill in the sitio of Maa, barrio
of Tigatu, municipality of Davao, Province of
Davao. However, the land upon which the
business was conducted belonged to another
person. On the land the sawmill company
erected a building which housed the
machinery used by it. Some of the implements
thus used were clearly personal property, the
conflict concerning machines which were
placed and mounted on foundations of
cement.
That on the expiration of the period agreed
upon, all the improvements and buildings
introduced and erected by the party of the
second part shall pass to the exclusive
ownership of the party of the first part without
any obligation on its part to pay any amount
for said improvements and buildings; also, in
the event the party of the second part should
leave or abandon the land leased before the
time herein stipulated, the improvements and
buildings shall likewise pass to the ownership
of the party of the first part as though the time
agreed upon had expired: Provided, however,
That the machineries and accessories are not
included in the improvements which will pass
to the party of the first part on the expiration
or abandonment of the land leased.
In another action, wherein the Davao Light &
Power Co., Inc., was the plaintiff and the
Davao, Saw, Mill Co., Inc., was the defendant,
a judgment was rendered in favor of the
plaintiff in that action against the defendant in
that action; a writ of execution issued thereon,
and the properties now in question were
levied upon as personalty by the sheriff. No
third party claim was filed for such properties
at the time of the sales thereof as is borne out
by the record made by the plaintiff herein.
Indeed the bidder, which was the plaintiff in
that action, and the defendant herein having
consummated the sale, proceeded to take
possession of the machinery and other
properties described in the corresponding
certificates of sale executed in its favor by the
sheriff of Davao.
ISSUE: W/N the machinery erected in the
leased building constituted as immovable
property
RULING: NO, the machinery did not become
immovable according to the stipulation in
the lease agreement and treatment of
petitioner
As connecting up with the facts, it should
further be explained that the Davao Saw Mill
Co., Inc., has on a number of occasions treated
the machinery as personal property by
executing chattel mortgages in favor of third
persons. One of such persons is the appellee
by assignment from the original mortgages.
Article 334, paragraphs 1 and 5, of the Civil
Code, is in point. According to the Code, real
property consists of
1. Land, buildings, roads and constructions of
all kinds adhering to the soil;
5. Machinery, liquid containers, instruments or
implements intended by the owner of any
building or land for use in connection with
any industry or trade being carried on therein
and which are expressly adapted to meet the
requirements of such trade of industry.
In the first place, it must again be pointed out
that the appellant should have registered its
protest before or at the time of the sale of this
property. It must further be pointed out that
while not conclusive, the characterization of
the property as chattels by the appellant is
indicative of intention and impresses upon the
property the character determined by the
parties
It is machinery which is involved; moreover,
machinery not intended by the owner of any
building or land for use in connection
therewith, but intended by a lessee for use in a
building erected on the land by the latter to be
returned to the lessee on the expiration or
abandonment of the lease.
A similar question arose in Puerto Rico, and
on appeal being taken to the United States
Supreme Court, it was held that machinery
which is movable in its nature only becomes
immobilized when placed in a plant by the
owner of the property or plant, but not when
so placed by a tenant, a usufructuary, or any
person having only a temporary right, unless
such person acted as the agent of the owner.
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.
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.
Oposa vs. Factoran : CONSTITUTIONAL
RIGHT TO BALANCED AND HEALTHFUL
ECOLOGY
FACTS: The present case before us has its
inception at Makati RTC branch 66, the
principal plaintiffs therein, now the principal
petitioners, are all minors duly represented
and joined by their respective parents.
Additional plaintiff is the Philippine
Ecological Network Inc. (PENI) a non-stock,
non-profit organization organized for the
purpose engaging in concerted action geared
for the protection of our environment and
natural resources.
The original defendant was the Honorable
Fulgencio S. Factoran, Jr., then Secretary of the
Department of Environment and Natural
Resources (DENR). His substitution in this
petition by the new Secretary, the Honorable
Angel C. Alcala, was subsequently ordered
upon proper motion by the petitioners.
The complaint was instituted as a taxpayers
class suit and alleges that they are all citizens
of the Republic of the Philippines, taxpayers,
and entitled to the full benefit, use and
enjoyment of the natural resource treasure that
is the country's virgin tropical forests." The
minors further asseverate that they "represent
their generation as well as generations yet
unborn."
They pray for: (1) Cancellation of all existing
timber licensing agreements in the country. (2)
Cease and desist from receiving, accepting,
processing, renewing or approving new
timber license agreements.
They allege that due to the licensing
agreements issued and approved by DENR it
will result into massive deforestation 200k
hectares per annum , increase in pollution,
massive calamities, extinction of unique and
rare flora and fauna, increase in global
warming and drought, water shortages and
salinization. It will result into parched earth
incapable of sustaining life.
The basis of their cause of action is Section 16,
Article II of the 1987 Constitution explicitly
provides: Sec. 16. The State shall protect and
advance the right of the people to a balanced
and healthful ecology in accord with the
rhythm and harmony of nature.
Defendant move the case to be dismissed on
the grounds that: (1) the plaintiffs have no
cause of action against him and (2) the issue
raised by the plaintiffs is a political question
which properly pertains to the legislative or
executive branches of Government.
On 18 July 1991, respondent Judge issued an
order granting the aforementioned motion to
dismiss. 7 In the said order, not only was the
defendant's claim that the complaint states no
cause of action against him and that it raises a
political question sustained, the respondent
Judge further ruled that the granting of the
relief prayed for would result in the
impairment of contracts which is prohibited
by the fundamental law of the land.
ISSUE: W/N TLA can be cancelled
RULING: YES, it can be cancelled
The complaint focuses on one specific
fundamental legal right the right to a balanced
and healthful ecology which, for the first time
in our nation's constitutional history, is
solemnly incorporated in the fundamental
law. Section 16, Article II of the 1987
Constitution.
While the right to a balanced and healthful
ecology is to be found under the Declaration
of Principles and State Policies and not under
the Bill of Rights, it does not follow that it is
less important than any of the civil and
political rights enumerated in the latter. If they
are now explicitly mentioned in the
fundamental charter, it is because of the well-
founded fear of its framers that unless the
rights to a balanced and healthful ecology and
to health are mandated as state policies by the
Constitution itself, thereby highlighting their
continuing importance and imposing upon the
state a solemn obligation to preserve the first
and protect and advance the second, the day
would not be too far when all else would be
lost not only for the present generation, but
also for those to come generations which stand
to inherit nothing but parched earth incapable
of sustaining life.
President Corazon C. Aquino promulgated on
10 June 1987 E.O. No. 192, Section 4 of which
expressly mandates that the Department of
Environment and Natural Resources "shall be
the primary government agency responsible
for the conservation, management,
development and proper use of the country's
environment and natural resources,
specifically forest and grazing lands, mineral,
resources, including those in reservation and
watershed areas, and lands of the public
domain, as well as the licensing and regulation
of all natural resources as may be provided for
by law in order to ensure equitable sharing of
the benefits derived therefrom for the welfare
of the present and future generations of
Filipinos."
This policy declaration is substantially re-
stated it Title XIV, Book IV of the
Administrative Code of 1987: Sec. 1.
Declaration of Policy. (1) The State shall
ensure, for the benefit of the Filipino people,
the full exploration and development as well
as the judicious disposition, utilization,
management, renewal and conservation of the
country's forest, mineral, land, waters,
fisheries, wildlife, off-shore areas and other
natural resources, consistent with the necessity
of maintaining a sound ecological balance and
protecting and enhancing the quality of the
environment and the objective of making the
exploration, development and utilization of
such natural resources equitably accessible to
the different segments of the present as well as
future generations.
DENR is mandated to be primarily responsible
for the implementation of the foregoing policy.
It shall, subject to law and higher authority, be
in charge of carrying out the State's
constitutional mandate to control and
supervise the exploration, development,
utilization, and conservation of the country's
natural resources (Sec. 2 of the Admin Code).
Thus, the right of the petitioners (and all those
they represent) to a balanced and healthful
ecology is as clear as the DENR's duty under
its mandate and by virtue of its powers and
functions under E.O. No. 192 and the
Administrative Code of 1987 to protect and
advance the said right.
A denial or violation of that right by the other
who has the correlative duty or obligation to
respect or protect the same gives rise to a
cause of action. Petitioners maintain that the
granting of the TLAs, which they claim was
done with grave abuse of discretion, violated
their right to a balanced and healthful ecology;
hence, the full protection thereof requires that
no further TLAs should be renewed or
granted.
In Tan vs. Director of Forestry, this Court held:
A timber license is an instrument by which the
State regulates the utilization and disposition
of forest resources to the end that public
welfare is promoted. A timber license is not a
contract within the purview of the due process
clause; it is only a license or privilege, which
can be validly withdrawn whenever dictated
by public interest or public welfare as in this
case.
Felipe Ysmael, Jr. & Co., Inc. vs. Deputy
Executive Secretary: [TLA] may be validly
amended, modified, replaced or rescinded by
the Chief Executive when national interests so
require. Thus, they are not deemed contracts
within the purview of the due process of law
clause.
Even if it is to be assumed that the same are
contracts, the instant case does not involve a
law or even an executive issuance declaring
the cancellation or modification of existing
timber licenses. Hence, the non-impairment
clause cannot as yet be invoked. Nevertheless,
granting further that a law has actually been
passed mandating cancellations or
modifications, the same cannot still be
stigmatized as a violation of the non-
impairment clause. This is because by its very
nature and purpose, such as law could have
only been passed in the exercise of the police
power of the state for the purpose of
advancing the right of the people to a balanced
and healthful ecology, promoting their health
and enhancing the general welfare.
However, they need to implead the grantees of
the TLA because they are indispensable
parties.
Tan vs. Director of Forestry:
FACTS: Sometime in April 1961, the Bureau of
Forestry issued Notice No. 2087, advertising
for public bidding a certain tract of public
forest land situated in Olongapo, Zambales,
provided tenders were received on or before
May 22, 1961
On May 5, 1961, petitioner-appellant
Wenceslao Vinzons Tan submitted his
application in due form after paying the
necessary fees and posting tile required bond
therefor. Nine other applicants submitted their
offers before the deadline (p. 29, rec.).
Thereafter, questions arose as to the wisdom
of having the area declared as a forest reserve
or allow the same to be awarded to the most
qualified bidder. On June 7, 1961, then
President Carlos P. Garcia issued a directive to
the Director of the Bureau of Forestry, which
read as follows:
It is desired that the area formerly covered by
the Naval Reservation be made a forest
reserve for watershed purposes. Prepare and
submit immediately a draft of a proclamation
establishing the said area as a watershed forest
reserve for Olongapo, Zambales. It is also
desired that the bids received by the Bureau of
Forestry for the issuance of the timber license
in the area during the public bidding
conducted last May 22, 1961 be rejected in
order that the area may be reserved as above
stated
On August 3, 1961, Secretary Cesar M. Fortich
of Agriculture and Natural Resources
sustained the findings and re comendations of
the Director of Forestry who concluded that "it
would be beneficial to the public interest if the
area is made available for exploitation under
certain conditions
The Office of the President in its 4th
Indorsement dated February 2, 1962, signed by
Atty. Juan Cancio, Acting Legal Officer,
"respectfully returned to the Honorable
Secretary of the Department of Agriculture
and Natural Resources for appropriate action,"
the papers subject of Forestry Notice No. 2087
which was referred to the Bureau of Forestry
for decision
Finally, of the ten persons who submitted
proposed the area was awarded to herein
petitioner-appellant Wenceslao Vinzons Tan,
on April 15, 1963 by the Bureau of Forestry (p.
17, CFI rec.). Against this award, bidders
Ravago Commercial Company and Jorge Lao
Happick filed motions for reconsideration
which were denied by the Director of Forestry
on December 6, 1963.
Thereafter, Jose Y. Feliciano was appointed as
Acting secretary of Agriculture and Natural
Resources, replacing secretary Benjamin M.
Gozon. Upon assumption of office he
Immediately promulgate on December 19,
1963 General memorandum Order No. 60,
revoking the authority delegated to the
Director of Forestry, under General
Memorandum order No. 46, to grant ordinary
timber licenses, which order took effect on the
same day
On the same date that the above-quoted
memorandum took effect, December 19, 1963,
Ordinary Timber License No. 20-'64 (NEW)
dated April 22, 1963, in the name of Wenceslao
Vinzons Tan, was signed by then Acting
Director of Forestry Estanislao R. Bernal
without the approval of the Secretary of
Agriculture and Natural Resources. On
January 6, 1964, the license was released by the
Office of the Director of Forestry
On March 9, 1964, acting on the said
representation made by Ravago Commercial
Company, the Secretary of Agriculture and
Natural Resources promulgated an order
declaring Ordinary Timber License No. 20-'64
issued in the name of Wenceslao Vinzons Tan,
as having been issued by the Director of
Forestry without authority, and is therefore
void ab initio.
Trial court denies the appeal of the petitioner
and sustained the decision of the Secretary of
Agriculture in denying Tans TLAs approval
ISSUE: W/N the TLA of Tan is in accordance
with law hence should be approved
RULING: NO, TLA OF TAN IS VOID AB
INITIO HENCE HE HAS NO RIGHT TO
OPERATE IN THE DISPUTED LAND
It is of public knowledge that watersheds
serves as a defense against soil erosion and
guarantees the steady supply of water. As a
matter of general policy, the Philippine
Constitution expressly mandated the
conservation and proper utilization of natural
resources, which includes the country's
watershed. Watersheds in the Philippines had
been subjected to rampant abusive treatment
due to various unscientific and destructive
land use practices. Once lush watersheds were
wantonly deforested due to uncontrolled
timber cutting by licensed concessionaries and
illegal loggers.
Considering the overriding public interest
involved in the instant case, We therefore take
judicial notice of the fact that, on April 30,
1964, the area covered by petitioner-
appellant's timber license has been established
as the Olongapo Watershed Forest Reserve by
virtue of Executive Proclamation No. 238 by
then President Diosdado Macapagal
WE fully concur with the findings of the trial
court that petitioner- appellant's timber license
was signed and released without authority by
then Acting Director Estanislao R. Bernal of
Forestry, and is therefore void ab initio.
The release of the license on January 6, 1964,
gives rise to the impression that it was ante-
dated to December 19, 1963 on which date the
authority of the Director of Forestry was
revoked. But, what is of greatest importance is
the date of the release or issuance, and not the
date of the signing of the license. While
petitioner-appellant's timber license might
have been signed on December 19, 1963 it was
released only on January 6, 1964. Before its
release, no right is acquired by the licensee. As
pointed out by the trial court, the Director of
Forestry had no longer any authority to
release the license on January 6, 1964.
Therefore, petitioner-appellant had not
acquired any legal right under such void
license. This is evident on the face of his
petition as supplemented by its annexes which
includes Ordinary Timber License No. 20-'64
(NEW). Thus, in the case of World Wide
Insurance & Surety Co., Inc. vs. Macrohon, et
al. (105 Phil. 250, Feb. 28, 1959), this Court held
that if from the face of the complaint, as
supplemented by its annexes, plaintiff is not
the owner, or entitled to the properties it
claims to have been levied upon and sold at
public auction by the defendants and for
which it now seeks indemnity, the said
complaint does not give plaintiff any right of
action against the defendants. In the same
case, this Court further held that, in acting on
a motion to dismiss, the court cannot separate
the complaint from its annexes where it clearly
appears that the claim of the plaintiff to be the
A owner of the properties in question is
predicated on said annexes. Accordingly,
petitioner-appellant's petition must be
dismissed due to lack of cause of action.
Granting arguendo, that petitioner-appellant's
timber license is valid, still respondents-
appellees can validly revoke his timber license.
As pointed out earlier, paragraph 27 of the
rules and regulations included in the ordinary
timber license states: "The terms and
conditions of this license are subject to change
at the discretion of the Director of Forestry,
and that this license may be made to expire at
an earlier date, when public interests so
require" (Exh. D, p. 22, CFI rec.). A timber
license is an instrument by which the State
regulates the utilization and disposition of
forest resources to the end that public welfare
is promoted. A timber license is not a contract
within the purview of the due process clause;
it is only a license or privilege, which can be
validly withdrawn whenever dictated by
public interest or public welfare
As provided in the aforecited provision,
timber licenses are subject to the authority of
the Director of Forestry. The utilization and
disposition of forest resources is directly
under the control and supervision of the
Director of Forestry. However, "while Section
1831 of the Revised Administrative Code
provides that forest products shall be cut,
gathered and removed from any forest only
upon license from the Director of Forestry, it is
no less true that as a subordinate officer, the
Director of Forestry is subject to the control of
the Department Head or the Secretary of
Agriculture and Natural Resources (See. 79[c],
Rev. Adm. Code), who, therefore, may impose
reasonable regulations in the exercise of the
powers of the subordinate officer" (Director of
Forestry vs. Benedicto, 104 SCRA 309, May 5,
1981). The power of control of the Department
Head over bureaus and offices includes the
power to modify, reverse or set aside acts of
subordinate officials (Province of Pangasinan
vs. Secretary of Public Works and
Communications, 30 SCRA 134, Oct. 31, 1969;
Montano vs. Silvosa, 97 Phil. 143, 144, 147-
148). Accordingly, respondent-appellee
Secretary of Agriculture and Natural
Resources has the authority to revoke, on valid
grounds, timber licenses issued by the
Director of Forestry. There being supporting
evidence, the revocation of petitioner-
appellant's timber license was a wise exercise
of the power of the respondent- appellee
(Secretary of Agriculture and Natural
Resources) and therefore, valid.
China Banking Corp. vs. CA: FRAUDULENT
ASSIGNMENT
FACTS: Alfonso Roxas Chua and his wife
Kiang Ming Chu Chua were the owners of a
residential land in San Juan, Metro Manila,
covered by Transfer Certificate of Title No.
410603. On February 2, 1984, a notice of levy
affecting the property was issued in
connection with Civil Case No. 82-14134
entitled, "Metropolitan Bank and Trust
Company, Plaintiff versus Pacific Multi
Commercial Corporation and Alfonso Roxas
Chua, Defendants," before the Regional Trial
Court, Branch XLVI of Manila. The notice of
levy was inscribed and annotated at the back
of TCT 410603. Subsequently, Kiang Ming Chu
Chua filed a complaint against the City Sheriff
of Manila and Metropolitan Bank and Trust
Company, questioning the levy of the
abovementioned property. She alleged that the
judgment of the court in Civil Case No. 82-
14134 against Alfonso Roxas Chua could not
be enforced against TCT 410603 inasmuch as
the land subject thereof was the conjugal
property of the spouses.
The parties thereafter entered into a
compromise agreement to the effect that the
levy on TCT 410603 was valid and enforceable
only to the extent of the 1/2 undivided portion
of the property pertaining to the conjugal
share of Alfonso Roxas Chua.
Meanwhile, on June 19, 1985, petitioner China
Bank filed with the Regional Trial Court of
Manila, Branch 29, an action for collection of
sum of money against Pacific Multi Agro-
Industrial Corporation and Alfonso Roxas
Chua which was docketed as Civil Case No.
85-31257. The court favors China bank
ordering the defendants to pay petitioners.
On September 8, 1986, an alias notice of levy
on execution on the one-half (1/2) undivided
portion of TCT 410603 belonging to Alfonso
Chua was issued in connection with Civil Case
82-14134. The notice was inscribed and
annotated at the back of TCT 410603 on
September 15, 1986 and a certificate of sale
covering the one-half undivided portion of the
property was executed in favor of
Metropolitan Bank and Trust Company. The
certificate of sale was inscribed at the back of
said TCT on December 22, 1987.
On November 21, 1988, Alfonso Roxas Chua
executed a public instrument denominated as
"Assignment of Rights to Redeem," whereby
he assigned his rights to redeem the one-half
undivided portion of the property to his son,
private respondent Paulino Roxas Chua.
On the other hand, in connection with Civil
Case No. 85-31257, another notice of levy on
execution was issued on February 4, 1991 by
the Deputy Sheriff of Manila against the right
and interest of Alfonso Roxas Chua in TCT
410603. Thereafter, a certificate of sale on
execution dated April 13, 1992 was issued by
the Sheriff of Branch 39, RTC Manila in Civil
Case No. 85-31257, in favor of China Bank and
inscribed at the back of TCT 410603 as Entry
No. 01896 on May 4, 1992.
On May 20, 1993, Paulino Roxas Chua and
Kiang Ming Chu Chua instituted Civil Case
No. 63199 before the RTC of Pasig, Metro
Manila against China Bank, averring that
Paulino has a prior and better right over the
rights, title, interest and participation of China
Banking Corporation in TCT 410603; that
Alfonso Roxas Chua sold his right to redeem
one-half (1/2) of the aforesaid conjugal
property in his favor on November 21, 1988
while China Banking Corporation acquired its
right from the notice of levy of execution
dated January 30, 1991; that the assignment of
rights in his favor was annotated at the back of
TCT 410603 on March 14, 1989 and inscribed
as Entry No. 7629, and his redemption of the
property was effected in an instrument dated
January 11, 1989 and inscribed and annotated
at the back of TCT 410603 on March 14, 1989,
two years before the annotation of the rights of
China Banking Corporation on TCT 410603 on
February 4, 1991.
The trial court ruled that the assignment was
made for a valuable consideration and was
executed two years before petitioner China
Bank levied the conjugal share of Alfonso
Roxas Chua on TCT 410603. The trial court
found that Paulino redeemed the one-half
portion of the property, using therefor the
amount of P100,000.00 which he withdrew
from his savings account as evidenced by his
bankbook and the receipts of Metrobank for
his payment of the redemption price. The
court noted that Paulino at that time was
already of age and had his own source of
income.
On appeal, the Court of Appeals affirmed the
ruling of the trial court. It held that petitioner
China Bank had been remiss in the exercise of
its rights as creditor; and that it should have
exercised its right of redemption under
Sections 29 and 30, Rule 39 of the Rules of
Court.
ISSUE: W/N the assignment of the right of
redemption made by Alfonso Roxas Chua in
favor of private respondent Paulino was done
to defraud his creditors and may be rescinded
under Article 1387 of the Civil Code.
RULING: YES, the assignment of rights was
fraudulent
The existence of fraud or intent to defraud
creditors may either be presumed in
accordance with Article 1387 of the Civil Code
or duly proved in accordance with the
ordinary rules of evidence. Article 1387 reads:
Art. 1387. All contracts by virtue of which the
debtor alienates property by gratuitous title
are presumed to have been entered into in
fraud of creditors, when the donor did not
reserve sufficient property to pay all debts
contracted before the donation.
Alienation by onerous title are also presumed
fraudulent when made by persons against
whom some judgment has been rendered in
any instance or some writ of attachment has
been issued. The decision or attachment need
not refer to the property alienated, and need
not have been obtained by the party seeking
rescission.
In addition to these presumptions, the design
to defraud creditors may be proved in any
other manner recognized by the law of
evidence.
Hence, the law presumes that there is fraud of
creditors when:
a) There is alienation of property by gratuitous
title by the debtor who has not reserved
sufficient property to pay his debts contracted
before such alienation; or
b) There is alienation of property by onerous
title made by a debtor against whom some
judgment has been rendered in any instance or
some writ of attachment has been issued. The
decision or attachment need not refer to the
property alienated and need not have been
obtained by the party seeking rescission.
After his conjugal share in TCT 410603 was
foreclosed by Metrobank, the only property
that Alfonso Roxas Chua had was his right to
redeem the same, it forming part of his
patrimony. "Property" under civil law
comprehends every species of title, inchoate or
complete, legal or equitable.
Alfonso Roxas Chua sold his right of
redemption to his son, Paulino Roxas Chua, in
1988. Thereafter, Paulino redeemed the
property and caused the annotation thereof at
the back of TCT 410603. This preceded the
annotation of the levy of execution in favor of
China Bank by two (2) years and the certificate
of sale in favor of China Bank by more than
three (3) years. On this basis, the Court of
Appeals concluded that the allegation of fraud
made by petitioner China Bank is vague and
unsubstantiated.
Such conclusion, however, runs counter to the
law applicable in the case at bar. Inasmuch as
the judgment of the trial court in favor of
China Bank against Alfonso Roxas Chua was
rendered as early as 1985, there is a
presumption that the 1988 sale of his property,
in this case the right of redemption, is
fraudulent under Article 1387 of the Civil
Code. The fact that private respondent Paulino
Roxas Chua redeemed the property and
caused its annotation on the TCT more than
two years ahead of petitioner China Bank is of
no moment. As stated in the case of Cabaliw
vs. Sadorra, 7 "the parties here do not stand in
equipoise, for the petitioners have in their
favor, by a specific provision of law, the
presumption of fraudulent transaction which
is not overcome by the mere fact that the
deeds of sale were in the nature of public
instruments."
This presumption is strengthened by the fact
that the conveyance has virtually left Alfonso's
other creditors with no other property to
attach. It should be noted that the
presumption of fraud or intention to defraud
creditors is not just limited to the two
instances set forth in the first and second
paragraphs of Article 1387 of the Civil Code.
Before China Bank obtained judgment against
Pacific Multi Agro-Industrial Corporation and
Alfonso Roxas Chua on November 7, 1985,
Alfonso Roxas Chua had only his one-half
share of the conjugal property in question to
pay his previous creditor, Metrobank. Even his
son, private respondent Paulino Roxas Chua
himself, knew this as shown by the following
excerpts of his testimony during the trial
Despite Alfonso Roxas Chua's knowledge that
it is the only property he had which his other
creditors could levy, he still assigned his right
to redeem his one-half share of the conjugal
property in question from Metrobank in favor
of his son, Paulino. Alfonso's intent to defraud
his other creditors, specifically, China Bank,
becomes even more apparent when we take
into consideration the fact that immediately
after the Court of Appeals rendered its
Resolution dated September 29, 1988,
dismissing the appeal of Pacific Multi-Agro
and Alfonso Roxas Chua in CA-G.R. No. CV-
14681 entitled, "China Banking Corporation,
Plaintiff-Appellee versus Pacific Multi Agro-
Industrial Corporation, et al., Defendants-
Appellants, 10 "he assigned his right to
redeem one-half of the conjugal property to
his son on November 21, 1988.
It bears emphasis that it is not sufficient that
the conveyance is founded on a valuable
consideration. In the case of Oria vs.
Mcmicking, 11 we had occasion to state that
"In determining whether or not a certain
conveyance is fraudulent the question in every
case is whether the conveyance was a bona
fide transaction or a trick and contrivance to
defeat creditors, or whether it conserves to the
debtor a special right. It is not sufficient that it
is founded on good considerations or is made
with bona fide intent: it must have both
elements. If defective; in either of these,
although good between the parties, it is
voidable as to creditors. . . . The test as to
whether or not a conveyance is fraudulent is,
does it prejudice the rights of creditors?"
The mere fact that the conveyance was
founded on valuable consideration does not
necessarily negate the presumption of fraud
under Article 1387 of the Civil Code. There has
to be a valuable consideration and the
transaction must have been made bona fide.
In the case at bar, the presumption that the
conveyance is fraudulent has not been
overcome.
Adorable vs. CA: RECISSION, REMEDY OF
LAST RESORT
FACTS: Private respondent Saturnino Bareng
was the registered owner of two parcels of
land, one identified as Lot No. 661-D-5-A, with
an area of 20,000 sq. m., covered by TCT No.
T-162837, and the other known as Lot No. 661-
E, with an area of 4.0628 hectares, covered by
TCT No. T-60814, both of which are in San
Fabian, Echague, Isabela. Petitioners were
lessees of a 200 sq.m. portion of Lot No. 661-D-
5-A.
On April 29, 1985, Saturnino Bareng and his
son, private respondent Francisco Bareng,
obtained a loan from petitioners amounting to
twenty six thousand pesos (P26,000), in
consideration of which they promised to
transfer the possession and enjoyment of the
fruits of Lot No. 661-E.
n August 3, 1986, Saturnino sold to his son
Francisco 18,500 sq.m. of Lot No. 661-D-5-A.
The conveyance was annotated on the back of
TCT No. T-162873. In turn, Francisco sold on
August 27, 1986 to private respondent Jose
Ramos 3,000 sq.m. of the lot. The portion of
land being rented to petitioners was included
in the portion sold to Jose Ramos. The deeds of
sale evidencing the conveyances were not
registered in the office of the register of deeds.
As the Barengs failed to pay their loan,
petitioners complained to Police Captain
Rodolfo Saet of the Integrated National Police
(INP) of Echague through whose mediation a
Compromise Agreement was executed
between Francisco Bareng and the Adorables
whereby the former acknowledged his
indebtedness of P56,385.00 which he promised
to pay on or before July 15, 1987. When the
maturity date arrived, however, Francisco
Bareng failed to pay. A demand letter was sent
to Francisco Bareng, but he refused to pay.
Petitioners, learning of the sale made by
Francisco Bareng to Jose Ramos, then filed a
complaint with the Regional Trial Court,
Branch 24, Echague, Isabela for the annulment
or rescission of the sale on the ground that the
sale was fraudulently prepared and executed.
Trial court declared that the sale made to
Francisco was valid and affirmed by CA
ISSUE: W/N the sale is rescissible
RULING: NO, it is only a remedy of last
resort, petitioners failed to adduce such
evidence
The creditors, after having pursued the
property in possession of the debtor to satisfy
their claims, may exercise all the rights and
bring all the actions of the latter for the same
purpose, save those which are inherent in his
person; they may also impugn the actions
which the debtor may have done to defraud
them.
Thus, the following successive measures must
be taken by a creditor before he may bring an
action for rescission of an allegedly fraudulent
sale: (1) exhaust the properties of the debtor
through levying by attachment and execution
upon all the property of the debtor, except
such as are exempt by law from execution; (2)
exercise all the rights and actions of the
debtor, save those personal to him (accion
subrogatoria); and (3) seek rescission of the
contracts executed by the debtor in fraud of
their rights (accion pauliana). Without availing
of the first and second remedies, i.e.,
exhausting the properties of the debtor or
subrogating themselves in Francisco Barengs
transmissible rights and actions, petitioners
simply undertook the third measure and filed
an action for annulment of the sale. This
cannot be done.
Indeed, an action for rescission is a subsidiary
remedy; it cannot be instituted except when
the party suffering damage has no other legal
means to obtain reparation for the same.Thus,
Art. 1380 of the Civil Code provides
Petitioners have not shown that they have no
other means of enforcing their credit. As the
Court of Appeals pointed out in its decision:
In this case, plaintiffs-appellants had not even
commenced an action against defendants-
appellees Bareng for the collection of the
alleged indebtedness. Plaintiffs-appellants had
not even tried to exhaust the property of
defendants-appellees Bareng. Plaintiffs-
appellants, in seeking for the rescission of the
contracts of sale entered into between
defendants-appellees, failed to show and
prove that defendants-appellees Bareng had
no other property, either at the time of the sale
or at the time this action was filed, out of
which they could have collected this (sic)
debts.
not intervened, with regard at least to one of
the contracting parties.
Petitioners attempt to establish such legal
injury through a claim of preference created
under C.A. No. 539, the pertinent provision of
which provides:
SEC. 1. The President of the Philippines is
authorized to acquire private lands or any
interest therein, through purchase or
expropriation, and to subdivide the same into
home lots or small farms for resale at
reasonable prices and under such conditions
as he may fix to their bona fide tenants or
occupants or to private individuals who will
work the lands themselves and who are
qualified to acquire and own lands in the
Philippines.
This statute was passed to implement Art.
XIII, 4 of the 1935 Constitution which
provided that The Congress may authorize,
upon payment of just compensation, the
expropriation of lands to be subdivided into
small lots and conveyed at cost to individuals.
It is obvious that neither under this provision
of the former Constitution nor that of C.A. No.
539 can petitioners claim any right since the
grant of preference therein applies only to
bona fide tenants, after the expropriation or
purchase by the government of the land they
are occupying. Petitioners are not tenants of
the land in question in this case. Nor has the
land been acquired by the government for
their benefit.

Second. Nor do petitioners enjoy any

preference to buy the questioned property. In
Aldecoa v. Hongkong and Shanghai Banking
Corporation,[7] it was held that in order that
one who is not obligated in a contract either
principally or subsidiarily may maintain an
action for nullifying the same, his complaint
must show the injury that would positively
result to him from the contract in which he has