DAVIDE, JR., C.J.

:
At issue in this petition for review on certiorari is whether a writ of
possession is the proper remedy for evicting a mortgagor who became a lessee
of the mortgaged properties after the mortgagee has consolidated ownership
over the properties and was issued new certificates of title.

The facts are as follows:

Sometime in 1995, petitioner Bukidnon Doctors Hospital, Inc., obtained a loan

of P25 million from respondent Metropolitan Bank and Trust Company to be
used for the construction of its hospital. To secure this loan, the petitioner
mortgaged six parcels of land located in Valencia, Bukidnon, covered by TCT
Nos. T-52197, T-52198, T-52199, T-52200, T-52201, and T-52202 and
registered in the name of Dr. Rene Sison and Rory P. Roque, President and
Administrator, respectively, of the petitioner. Upon petitioners default in the
payment of the loan, the mortgage was extrajudicially foreclosed and the
mortgaged lots were sold in a public auction to respondent bank, being the sole
and highest bidder. The petitioner failed to redeem the properties within the
period of redemption. Forthwith, the respondent consolidated its ownership
over the properties and was issued new certificates of title on 1 October 2001.[1]

Earlier, in a letter received by the respondent on 7 July 2001, the petitioner

expressed its desire to continue staying in the subject premises so that the
operation of the hospital erected thereon would not be disrupted. For that
purpose, the petitioner proposed to pay rent in the amount of P100,000 per
month for a period of, but not limited to, three years.[2] On 17 December 2001,
the respondent agreed to lease the properties but subject to the following terms:
(1) the monthly rental would be P200,000 with a one month advance rental and
a deposit equivalent to three months rental; (2) the effectivity of the lease
contract would be from June 2001; and (3) the contract would be subject to
review every six months.[3] The terms finally agreed upon by the parties, as
culled from respondents letter to the petitioner of 30 May 2002, were (1) a
monthly rental of P150,000, and (2) the effectivity of the lease contract in
November 2001.[4]

In its letter of 16 July 2003, or approximately a year and eight months after the
agreed effectivity date of the lease contract, the respondent asked the petitioner
to vacate the leased premises within fifteen days. The petitioner refused,
invoking the subsisting lease agreement.
 On 21 August 2003, the respondent filed with the Regional Trial Court
(RTC) of Malaybalay City, Bukidnon, an Ex Parte Motion for a Writ of
Possession. The case was docketed as Misc. Case No. 735-03 and raffled to
Branch 9 of that court.

On 17 November 2003, the trial court issued an order granting

respondents ex parte motion for a writ of possession. The pertinent portion of
the order reads as follows:

Since all the requirements or requisites for the issuance are present in this
case, the court finds that it has no choice or other alternative but to issue
the same, the duty of the Court being ministerial in character. The
respondent can ventilate all its defenses in a separate case that the
respondent may file for that purpose.
...

After the expiration of the period of redemption, a writ of possession

can be demanded by a purchaser of the foreclosed property as a matter of
right. Even during the period of redemption, possession can be demanded
provided a bond is posted in accordance with Section 7, Act No. 3135 (Vda.
De Zaballero vs. CA, 229 SCRA 810).[5]

Its motion for reconsideration having been denied by the trial court in the Order
of 23 January 2004,[6] the petitioner filed on 29 January 2004 (the day it
received the denial order) a Notice of Appeal stating that it was appealing to the
Court of Appeals on both questions of fact and law.[7] Earlier, or on 27
November 2003, the petitioner filed with the trial court an action for specific
performance, injunction, and damages, docketed as Civil Case No. 3312-
03.[8] Also, on 30 January 2004, the petitioner filed a petition for rehabilitation
before the RTC of Cagayan de Oro City, Branch 18, docketed as Spec. Pro. Case
No. 2004-019.

On 11 February 2004, before its Notice of Appeal could be acted upon by the
trial court, the petitioner filed a Manifestation and Motion stating that due to
the nature of the appeal that it intended to file, it was withdrawing the Notice
of Appeal.[9] Two days thereafter, or on 13 February 2004, which was the last
day within which to appeal the 29 January 2004 Order, it filed with us a motion
for extension of thirty days from the expiration of the reglementary period to
file a petition for review on certiorari or until 14 March 2004. We granted this
motion for extension in our Resolution of 3 March 2004. Then, on 4 March
2004, the petitioner instituted the instant petition for review
on certiorari under Rule 45, in relation to Section 2(c) of Rule 41, of the Rules
of Court, raising a single issue for our consideration, to wit:

WHETHER [OR] NOT THE COURT A QUO CORRECTLY RULED THAT

RESPONDENT, A FORMER MORTGAGEE-BUYER, WAS STILL
ENTITLED TO A WRIT OF POSSESSION AS A MATTER OF RIGHT AS
PROVIDED UNDER ACT 3135, AS AMENDED, DESPITE A LEASE
AGREEMENT BETWEEN ITSELF AND THE FORMER MORTGAGOR-
SELLER EXECUTED AFTER RESPONDENT BECAME THE ABSOLUTE
OWNER OF THE FORECLOSED PROPERTIES.[10]

In its Comment,[11] the respondent asserts that the petitioner is guilty

of forum-shopping for having gone to four different courts for the same
relief. Besides, by filing an ordinary appeal under Rule 41 of the Rules of
Court, the petitioner had already waived its right to file a petition for review
on certiorari under Rule 45, since the two modes of appeal are mutually
exclusive and governed by different rules. Pursuant to the principle of
hierarchy of courts, the petitioner should have first filed the instant
petition with the Court of Appeals, which has concurrent jurisdiction with
the Supreme Court to resolve cases involving only questions of law. As to
the main issue, the respondent argues that as a purchaser in a valid
extrajudicial foreclosure sale under Act No. 3135 and as the absolute owner
of the subject parcels of land, it was entitled as a matter of right to the
issuance of a writ of possession. The subsequent agreement to stay
between the parties did not negate respondents right to take possession of
the subject properties through a writ of possession. In any event, the
agreement to stay on the subject properties was deemed to be on a month-
to-month basis, since the period therefor was not fixed.
The petitioner rebuts, in its Reply, respondents arguments, contending
that it did not shop for a favorable forum, since the three cases where it is either
a defendant/oppositor or plaintiff/petitioner do not involve the same subject
matter, causes of action, and parties. Contrary to the claim of the respondent, it
immediately withdrew by proper motion its notice of appeal in the trial court
after realizing that the proper remedy was a petition for review
on certiorari under Rule 45 of the Rules of Court, not a petition for review
under Rule 42. Rule 42 is not applicable to the case at bar because it is the
Supreme Court that has jurisdiction over the petition as it involves a pure
question of law pursuant to Section 2(c) of Rule 41 and Section 1 of Rule 45 of
the Rules of Court. Lastly, the trial court clearly erred in granting
respondents ex parte motion for a writ of possession because of the existence of
a lease agreement between the parties, which was executed after the respondent
consolidated its title to the subject properties.
 In our Resolution of 2 August 2004, we gave due course to the petition
and resolved to decide the case based on the pleadings already filed.[12]

On 17 December 2004, the respondent filed a Manifestation and Motion

to Dismiss Petition.[13] It brings to our attention petitioners letter dated 3
November 2004 informing it that the petitioner had decided to close its hospital
operations and to turn over the premises to the respondent on 30 November
2004 in view of the expiration of the lease agreement. According to the
respondent, petitioners express and unequivocal recognition of the expiration
of the alleged lease agreement and its act of turning over the possession of the
subject property to the respondent had rendered the instant petition moot and
academic. The petitioner countered that the legal issue of whether a writ of
possession may be issued despite the existence of a lease agreement must be
resolved by this Court, since this issue may again arise as banks continue to
foreclose, seek possession and/or lease out the foreclosed premises to previous
mortgagors.

Indeed, because of petitioners act of surrendering the possession of the

subject properties owing to the expiration of the lease agreement, the instant
petition praying (1) for the reversal of the order for the issuance of a writ of
possession and (2) for full possession by the petitioner of the subject properties
was rendered moot and academic. Nonetheless, for the guidance of the bench
and the bar, we shall proceed to resolve the important issue of whether a writ of
possession will lie to recover the material possession of previously mortgaged
properties that have been leased to the mortgagor after the mortgagee
consolidated its ownership over the properties.

However, we shall first take up the procedural issues raised by the

respondent.

We are not convinced that the petitioner is guilty of forum- shopping.

Forum-shopping is an act of a party against whom an adverse judgment

or order has been rendered in one forum of seeking and possibly getting a
favorable opinion in another forum, other than by appeal or special civil action
for certiorari. It may also be the institution of two or more actions or
proceedings grounded on the same cause on the supposition that one or the
other court would make a favorable disposition. The elements are as follows: (1)
identity of parties, or at least such parties as would represent the same interest
in both actions; (2) identity of rights asserted and relief prayed for, the relief
being founded on the same facts; and (3) identity of the two preceding
particulars such that any judgment in the other action, regardless of which party
is successful, will amount to res judicata in the action under consideration.[14]

Before filing on 4 March 2004 the petition in this case, the petitioner had
filed two other cases, namely, (1) an Action for Specific Performance,
Injunction, and Damages with the RTC of Malaybalay City, docketed as Civil
Case No. 3312-03 and (2) a Petition for Corporate Rehabilitation with the RTC
of Cagayan de Oro City, docketed therein as S.P. Case No. 2004-019. However,
these two cases involve causes of action different from the one at bar. In Civil
Case No. 3312-03, the petitioner sought the enforcement of the lease contract
between it and the respondent, with prayer for damages for the latters breach
of its contractual obligation. In S.P. Case No. 2004-019, the petitioner prayed
for rehabilitation pursuant to the Interim Rules on Corporation Rehabilitation.

Upon the other hand, in this case, the ex parte motion for a writ of
possession was filed at the instance of the respondent. When the motion was
granted, the petitioner filed a notice of appeal to the Court of Appeals, which it
later withdrew. Thereafter, it appealed to us via Rule 45 of the Rules of Court
questioning the propriety of the issuance of a writ of possession for the purpose
of evicting the petitioner despite the lease agreement subsequently entered into
by the parties after the expiration of the redemption period. As can be clearly
seen, the two cases and the appeal filed by the petitioner involved different
causes of action. Thus, the petitioner cannot be said to have engaged in forum-
shopping.

Neither can the petitioner be deemed to have waived its right to file this
petition. Realizing that the remaining issue was a pure question of law, it
withdrew its Notice of Appeal stating that it was appealing the 28 January
2002 Order on both questions of law and fact. Section 9 of Rule 41 of the Rules
of Court provides that prior to the transmittal of the original record, the court
may allow withdrawal of the appeal.

Nothing in the Rules prevents a party from filing a petition under Rule 45
of the Rules of Court after seasonably withdrawing the Notice of Appeal as long
as it is done within the reglementary period and the issue involved is purely one
of law. In this case it was before the lapse of the reglementary period to appeal
that the petitioner withdrew its Notice of Appeal to the Court of Appeals and
filed with us a motion for extension of time to file a petition under Rule 45 of
the Rules of Court. And the petition was filed within the extended period we
granted, raising only one question of law.
 Nor is there a violation of the doctrine of hierarchy of courts. Section 2(c),
Rule 41 of the Rules of Court categorically provides that in all cases where only
questions of law are raised, the appeal from a decision or order of the Regional
Trial Court shall be to the Supreme Court by petition for review on certiorari in
accordance with Rule 45. Section 2(c) of Rule 41 of the Rules of Court reads:

SEC. 2. Modes of appeal.

(a) Ordinary appeal. The appeal to the Court of Appeals in cases

decided by the Regional Trial Court in the exercise of its original jurisdiction
shall be taken by filing a notice of appeal with the court which rendered the
judgment or final order appealed from and serving a copy thereof upon the
adverse party. No record on appeal shall be required except in special
proceedings and other cases of multiple or separate appeals where the law
or these Rules so require. In such cases, the record on appeal shall be filed
and served in like manner.

(b) Petition for review. The appeal to the Court of Appeals in cases
decided by the Regional Trial Court in the exercise of its appellate
jurisdiction shall be by petition for review in accordance with Rule 42.

(c) Appeal by certiorari. In all cases where only questions of law are raised
or involved, the appeal shall be to the Supreme Court by petition for review
on certiorari in accordance with Rule 45.

Section 1 of Rule 45 provides:

SECTION 1. Filing of petition with Supreme Court. A party desiring

to appeal by certiorari from a judgment or final order or resolution of the
Court of Appeals, the Sandiganbayan, the Regional Trial Court or other
courts whenever authorized by law, may file with the Supreme Court a
verified petition for review on certiorari. The petition shall raise only
questions of law which must be distinctly set forth.

A question of law exists when the doubt or controversy concerns the correct
application of law or jurisprudence to a certain set of facts; or when the issue
does not call for an examination of the probative value of the evidence
presented, the truth or falsehood of facts being admitted. A question of fact
exists when the doubt or difference arises as to the truth or falsehood of facts or
when the query invites calibration of the whole evidence considering mainly the
credibility of the witnesses, the existence and relevancy of specific surrounding
circumstances, as well as their relation to each other and to the whole, and the
probability of the situation.[15]
As earlier stated, the only issue raised in this petition is whether [or] not the
court a quo correctly ruled that respondent, a former mortgagee-
buyer, was still entitled to a writ of possession as a matter of right as
provided under act 3135, as amended, despite a lease agreement
between itself and the former mortgagor-seller executed after
respondent became the absolute owner of the foreclosed properties.

This question is undoubtedly one of law. The existence of a lease agreement

between the parties, which is a question of fact, ceased to be an issue in view of
the admission thereof by both the petitioner and the respondent.[16] Thus, with
only a question of law raised in this petition, direct resort to this Court is proper.

In sum, the petition at bar is not tainted with any of the procedural errors
attributed to it by the respondent.

We shall now consider the issue of the propriety of the issuance of a writ of
possession in favor of the respondent.

The law[17] and jurisprudence[18] are clear that in extrajudicial foreclosure

proceedings, an order for a writ of possession issues as a matter of course, upon
proper motion, after the expiration of the redemption period without the
mortgagor exercising the right of redemption, or even during the redemption
period provided a bond is posted to indemnify the debtor in case the foreclosure
sale is shown to have been conducted without complying with the requirements
of the law or without the debtor violating the mortgage contract.[19] The
rationale for the ministerial issuance of a writ of possession is to put the
foreclosure buyer in possession of the property sold without delay, since the
right to possession is founded on ownership of the property.[20]

However, in the instant case, a writ of possession was not the correct
remedy for the purpose of ousting the petitioner from the subject premises. It
must be noted that possession is the holding of a thing or the enjoyment of a
right.[21] It is acquired by the material occupation of a thing or the exercise of a
right, or by the fact that a thing or right is subject to the action of ones will, or
by the proper acts and legal formalities established for acquiring such
right.[22] By material occupation of a thing, it is not necessary that the person in
possession should be the occupant of the property; the occupancy can be held
by another in his name.[23] Thus Articles 524 and 525 of the Civil Code provide:

Art. 524. Possession may be exercised in ones own name or in that of

another.

Art. 525. The possession of things or rights may be had in one of two
concepts: either in the concept of owner, or in that of the holder of the thing
or right to keep or enjoy it, the ownership pertaining to another person.

In other words, an owner of a real estate has possession, either when he

himself is physically occupying the property, or when another person who
recognizes his rights as owner is occupying it.

In the case at bar, it is not disputed that after the foreclosure of the
property in question and the issuance of new certificates of title in favor of the
respondent, the petitioner and the respondent entered into a contract of lease
of the subject properties. This new contractual relation presupposed that the
petitioner recognized that possession of the properties had been legally placed
in the hands of the respondent, and that the latter had taken such possession
but delivered it to the former as lessee of the property. By paying the monthly
rentals, the petitioner also recognized the superior right of the respondent to
the possession of the property as owner thereof. And by accepting the monthly
rentals, the respondent enjoyed the fruits of its possession over the subject
property.[24] Clearly, the respondent is in material possession of the subject
premises. Thus, the trial courts issuance of a writ of possession is not only
superfluous, but improper under the law. Moreover, as a lessee, the petitioner
was a legitimate possessor of the subject properties under Article 525 of the Civil
Code. Thus, it could not be deprived of its lawful possession by a mere ex
parte motion for a writ of possession.

Apropos to this case is Banco de Oro Savings and Mortgage Bank v.

Court of Appeals.[25] There, the spouses Nery were not able to redeem the
property they mortgaged to the bank; hence, the latter was able to consolidate
the title to the property in its name. The Nerys requested the bank for more time
to repurchase the subject property, obligating themselves to pay monthly
rentals or reasonable compensation for the continued occupation of the
premises on the ground that they had leased portions of the building to tenants.
Since neither the Nerys nor their tenants vacated the subject premises nor paid
reasonable compensation for the use thereof, the bank instituted three separate
ejectment suits against them before the Metropolitan Trial Court of
Paraaque. The Nerys argued that the proper remedy that should have been
taken by the bank as mortgagee was to obtain a writ of possession and not an
action for ejectment. We rejected Nerys argument and ruled that it was proper
for the bank to sue for ejectment. Thus:

The Nerys forget, however, that they had asked the Bank for a grace
period within which to repurchase the mortgaged property and to be
allowed to pay monthly rentals or reasonable compensation for the use of
the premises. In fact, they did pay rentals for several months. Their
continued stay in the property was thereby converted to one by tolerance or
permission. A person who occupies the land of another at the latters
tolerance or permission, without any contract between them, is necessarily
bound by an implied promise that he will vacate upon demand, failing
which, a summary action for ejectment is proper against him (Dakudao v.
Consolacion, L-54573, 24 June 1983, 112 SCRA 877). The Nerys refused to
vacate upon demand, the last of which was made by letter, dated 25 July
1984, as found by the Trial Court, and not 9 September 1983 as the Nerys
allege. An ejectment suit, therefore, was proper, with the legally prescribed
period to institute the same having been complied with.

Significantly, too, with the consolidation of title in the Bank, it had become
the owner of the subject premises. As such, it could bring an action for
ejectment to obtain possession and occupation. Thus, Section 1, Rule 70
provides an action for unlawful detainer may be brought by a landlord,
vendor, vendee, or other person against whom the possession of any land
or building is unlawfully withheld after the expiration or termination of
the right to hold possession xxx.

It is indeed, correct that in ordinary extra-judicial foreclosure cases, the

mortgagees remedy is to apply for a Writ of Possession. As already
intimated, however, the stay of the Nerys in the premises had been
converted to one by permission with a corresponding commitment to pay
rentals. An implied lease was thereby treated between the parties. Where
the question relates to the relation between landlord and tenant, the nature
of the lease premises involved, the reasonableness of the rentals
demanded, the right or lack of right of the tenant to continue occupying
the premises against the will of the landlord, the applicability of the rental
law, etc., a case for ejectment is proper. (Commander Realty, Inc., vs. Court
of Appeals, L-77227, 9 May 1988, 161 SCRA 264). Notably, too, there were
other tenants in the premises who were not privy to the foreclosure
proceedings but had to be rejected as well. (emphasis ours)[26]

In a nutshell, where a lease agreement, whether express or implied, is

subsequently entered into by the mortgagor and the mortgagee after the
expiration of the redemption period and the consolidation of title in the name
of the latter, a case for ejectment or unlawful detainer, not a motion for a writ
of possession, is the proper remedy in order to evict from the questioned
premises a mortgagor-turned-lessee. The rationale for this rule is that a new
relationship between the parties has been created. What applies is no longer the
law on extrajudicial foreclosure, but the law on lease. And when an issue arises,
as in the case at bar, regarding the right of the lessee to continue occupying the
leased premises, the rights of the parties must be heard and resolved in a case
for ejectment or unlawful detainer under Rule 70 of the Rules of Court.

WHEREFORE, the petition is hereby GRANTED. The Orders of

the Regional Trial Court of Malaybalay City, Bukidnon, Branch 9, in Misc.
Case. No. 735-03 dated 17 November 2003 and 23 January 2004, are
hereby REVERSED and SET ASIDE.

RUBY L. TSAI, petitioner,

vs.
HON. COURT OF APPEALS, EVER TEXTILE MILLS, INC. and MAMERTO R
VILLALUZ, respondents.

x---------------------------------------------------------x

[G.R. No. 120109. October 2, 2001.]

PHILIPPINE BANK OF COMMUNICATIONS, petitioner,

vs.
HON. COURT OF APPEALS, EVER TEXTILE MILLS and MAMERTO R VILLALUZ, respondents.

QUISUMBING, J.:

These consolidated cases assail the decision1 of the Court of Appeals in CA-G.R. CV No. 32986,
affirming the decision2 of the Regional Trial Court of Manila, Branch 7, in Civil Case No. 89-48265.
Also assailed is respondent court's resolution denying petitioners' motion for reconsideration.

On November 26, 1975, respondent Ever Textile Mills, Inc. (EVERTEX) obtained a three million
peso (P3,000,000.00) loan from petitioner Philippine Bank of Communications (PBCom). As security
for the loan, EVERTEX executed in favor of PBCom, a deed of Real and Chattel Mortgage over the
lot under TCT No. 372097, where its factory stands, and the chattels located therein as enumerated
in a schedule attached to the mortgage contract. The pertinent portions of the Real and Chattel
Mortgage are quoted below:

MORTGAGE

(REAL AND CHATTEL)

xxx xxx xxx

The MORTGAGOR(S) hereby transfer(s) and convey(s), by way of First Mortgage, to the
MORTGAGEE, . . . certain parcel(s) of land, together with all the buildings and improvements
now existing or which may hereafter exist thereon, situated in . . .

"Annex A"

(Real and Chattel Mortgage executed by Ever Textile Mills in favor of PBCommunications
continued)

LIST OF MACHINERIES & EQUIPMENT

A. Forty Eight (48) units of Vayrow Knitting Machines-Tompkins made in Hongkong:

Serial Numbers Size of Machines

xxx xxx xxx

B. Sixteen (16) sets of Vayrow Knitting Machines made in Taiwan.

xxx xxx xxx

C. Two (2) Circular Knitting Machines made in West Germany.

xxx xxx xxx

D. Four (4) Winding Machines.

xxx xxx xxx

SCHEDULE "A"

I. TCT # 372097 - RIZAL

xxx xxx xxx

II. Any and all buildings and improvements now existing or hereafter to exist on the above-
mentioned lot.

III. MACHINERIES & EQUIPMENT situated, located and/or installed on the above-
mentioned lot located at . . .

(a) Forty eight sets (48) Vayrow Knitting Machines . . .

(b) Sixteen sets (16) Vayrow Knitting Machines . . .

(c) Two (2) Circular Knitting Machines . . .

(d) Two (2) Winding Machines . . .

(e) Two (2) Winding Machines . . .

 IV. Any and all replacements, substitutions, additions, increases and accretions to above
properties.

xxx xxx xxx3

On April 23, 1979, PBCom granted a second loan of P3,356,000.00 to EVERTEX. The loan was
secured by a Chattel Mortgage over personal properties enumerated in a list attached thereto.
These listed properties were similar to those listed in Annex A of the first mortgage deed.

After April 23, 1979, the date of the execution of the second mortgage mentioned above, EVERTEX
purchased various machines and equipments.

On November 19, 1982, due to business reverses, EVERTEX filed insolvency proceedings docketed
as SP Proc. No. LP-3091-P before the defunct Court of First Instance of Pasay City, Branch XXVIII.
The CFI issued an order on November 24, 1982 declaring the corporation insolvent. All its assets
were taken into the custody of the Insolvency Court, including the collateral, real and personal,
securing the two mortgages as abovementioned.

In the meantime, upon EVERTEX's failure to meet its obligation to PBCom, the latter commenced
extrajudicial foreclosure proceedings against EVERTEX under Act 3135, otherwise known as "An
Act to Regulate the Sale of Property under Special Powers Inserted in or Annexed to Real Estate
Mortgages" and Act 1506 or "The Chattel Mortgage Law". A Notice of Sheriff's Sale was issued on
December 1, 1982.

On December 15, 1982, the first public auction was held where petitioner PBCom emerged as the
highest bidder and a Certificate of Sale was issued in its favor on the same date. On December 23,
1982, another public auction was held and again, PBCom was the highest bidder. The sheriff issued
a Certificate of Sale on the same day.

On March 7, 1984, PBCom consolidated its ownership over the lot and all the properties in it. In
November 1986, it leased the entire factory premises to petitioner Ruby L. Tsai for P50,000.00 a
month. On May 3, 1988, PBCom sold the factory, lock, stock and barrel to Tsai for P9,000,000.00,
including the contested machineries.

On March 16, 1989, EVERTEX filed a complaint for annulment of sale, reconveyance, and damages
with the Regional Trial Court against PBCom, alleging inter alia that the extrajudicial foreclosure of
subject mortgage was in violation of the Insolvency Law. EVERTEX claimed that no rights having
been transmitted to PBCom over the assets of insolvent EVERTEX, therefore Tsai acquired no
rights over such assets sold to her, and should reconvey the assets.

Further, EVERTEX averred that PBCom, without any legal or factual basis, appropriated the
contested properties, which were not included in the Real and Chattel Mortgage of November 26,
1975 nor in the Chattel Mortgage of April 23, 1979, and neither were those properties included in the
Notice of Sheriff's Sale dated December 1, 1982 and Certificate of Sale . . . dated December 15,
1982.

The disputed properties, which were valued at P4,000,000.00, are: 14 Interlock Circular Knitting
Machines, 1 Jet Drying Equipment, 1 Dryer Equipment, 1 Raisin Equipment and 1 Heatset
Equipment.
The RTC found that the lease and sale of said personal properties were irregular and illegal because
they were not duly foreclosed nor sold at the December 15, 1982 auction sale since these were not
included in the schedules attached to the mortgage contracts. The trial court decreed:

WHEREFORE, judgment is hereby rendered in favor of plaintiff corporation and against the
defendants:

1. Ordering the annulment of the sale executed by defendant Philippine Bank of

Communications in favor of defendant Ruby L. Tsai on May 3, 1988 insofar as it affects the
personal properties listed in par. 9 of the complaint, and their return to the plaintiff
corporation through its assignee, plaintiff Mamerto R. Villaluz, for disposition by the
Insolvency Court, to be done within ten (10) days from finality of this decision;

2. Ordering the defendants to pay jointly and severally the plaintiff corporation the sum of
P5,200,000.00 as compensation for the use and possession of the properties in question
from November 1986 to February 1991 and P100,000.00 every month thereafter, with
interest thereon at the legal rate per annum until full payment;

3. Ordering the defendants to pay jointly and severally the plaintiff corporation the sum of
P50,000.00 as and for attorney's fees and expenses of litigation;

4. Ordering the defendants to pay jointly and severally the plaintiff corporation the sum of
P200,000.00 by way of exemplary damages;

5. Ordering the dismissal of the counterclaim of the defendants; and

6. Ordering the defendants to proportionately pay the costs of suit.

SO ORDERED.4

Dissatisfied, both PBCom and Tsai appealed to the Court of Appeals, which issued its decision
dated August 31, 1994, the dispositive portion of which reads:

WHEREFORE, except for the deletion therefrom of the award; for exemplary damages, and
reduction of the actual damages, from P100,000.00 to P20,000.00 per month, from November 1986
until subject personal properties are restored to appellees, the judgment appealed from is hereby
AFFIRMED, in all other respects. No pronouncement as to costs.5

Motion for reconsideration of the above decision having been denied in the resolution of April 28,
1995, PBCom and Tsai filed their separate petitions for review with this Court.

In G.R No. 120098, petitioner Tsai ascribed the following errors to the respondent court:

THE HONORABLE COURT OF APPEALS (SECOND DIVISION) ERRED IN EFFECT

MAKING A CONTRACT FOR THE PARTIES BY TREATING THE 1981 ACQUIRED
MACHINERIES AS CHATTELS INSTEAD OF REAL PROPERTIES WITHIN THEIR
EARLIER 1975 DEED OF REAL AND CHATTEL MORTGAGE OR 1979 DEED OF
CHATTEL MORTGAGE.
 II

THE HONORABLE COURT OF APPEALS (SECOND DIVISION) ERRED IN HOLDING

THAT THE DISPUTED 1981 MACHINERIES ARE NOT REAL PROPERTIES DEEMED
PART OF THE MORTGAGE DESPITE THE CLEAR IMPORT OF THE EVIDENCE AND
APPLICABLE RULINGS OF THE SUPREME COURT.

III

THE HONORABLE COURT OF APPEALS (SECOND DIVISION) ERRED IN DEEMING

PETITIONER A PURCHASER IN BAD FAITH.

IV

THE HONORABLE COURT OF APPEALS (SECOND DIVISION) ERRED IN ASSESSING

PETITIONER ACTUAL DAMAGES, ATTORNEY'S FEES AND EXPENSES OF LITIGATION
FOR WANT OF VALID FACTUAL AND LEGAL BASIS.

THE HONORABLE COURT OF APPEALS (SECOND DIVISION) ERRED IN HOLDING

AGAINST PETITIONER'S ARGUMENTS ON PRESCRIPTION AND LACHES.6

In G.R. No. 120098, PBCom raised the following issues:

I.

DID THE COURT OF APPEALS VALIDLY DECREE THE MACHINERIES LISTED UNDER
PARAGRAPH 9 OF THE COMPLAINT BELOW AS PERSONAL PROPERTY OUTSIDE OF THE
1975 DEED OF REAL ESTATE MORTGAGE AND EXCLUDED THEM FROM THE REAL
PROPERTY EXTRAJUDICIALLY FORECLOSED BY PBCOM DESPITE THE PROVISION IN THE
1975 DEED THAT ALL AFTER-ACQUIRED PROPERTIES DURING THE LIFETIME OF THE
MORTGAGE SHALL FORM PART THEREOF, AND DESPITE THE UNDISPUTED FACT THAT
SAID MACHINERIES ARE BIG AND HEAVY, BOLTED OR CEMENTED ON THE REAL
PROPERTY MORTGAGED BY EVER TEXTILE MILLS TO PBCOM, AND WERE ASSESSED FOR
REAL ESTATE TAX PURPOSES?

II

CAN PBCOM, WHO TOOK POSSESSION OF THE MACHINERIES IN QUESTION IN GOOD

FAITH, EXTENDED CREDIT FACILITIES TO EVER TEXTILE MILLS WHICH AS OF 1982
TOTALLED P9,547,095.28, WHO HAD SPENT FOR MAINTENANCE AND SECURITY ON THE
DISPUTED MACHINERIES AND HAD TO PAY ALL THE BACK TAXES OF EVER TEXTILE MILLS
BE LEGALLY COMPELLED TO RETURN TO EVER THE SAID MACHINERIES OR IN LIEU
THEREOF BE ASSESSED DAMAGES. IS THAT SITUATION TANTAMOUNT TO A CASE OF
UNJUST ENRICHMENT?7

The principal issue, in our view, is whether or not the inclusion of the questioned properties in
the foreclosed properties is proper. The secondary issue is whether or not the sale of these
properties to petitioner Ruby Tsai is valid.
For her part, Tsai avers that the Court of Appeals in effect made a contract for the parties by treating
the 1981 acquired units of machinery as chattels instead of real properties within their earlier 1975
deed of Real and Chattel Mortgage or 1979 deed of Chattel Mortgage.8 Additionally, Tsai argues that
respondent court erred in holding that the disputed 1981 machineries are not real
properties.9 Finally, she contends that the Court of Appeals erred in holding against petitioner's
arguments on prescription and laches10 and in assessing petitioner actual damages, attorney's fees
and expenses of litigation, for want of valid factual and legal basis.11

Essentially, PBCom contends that respondent court erred in affirming the lower court's judgment
decreeing that the pieces of machinery in dispute were not duly foreclosed and could not be legally
leased nor sold to Ruby Tsai. It further argued that the Court of Appeals' pronouncement that the
pieces of machinery in question were personal properties have no factual and legal basis. Finally, it
asserts that the Court of Appeals erred in assessing damages and attorney's fees against PBCom.

In opposition, private respondents argue that the controverted units of machinery are not "real
properties" but chattels, and, therefore, they were not part of the foreclosed real properties,
rendering the lease and the subsequent sale thereof to Tsai a nullity.12

Considering the assigned errors and the arguments of the parties, we find the petitions devoid of
merit and ought to be denied.

Well settled is the rule that the jurisdiction of the Supreme Court in a petition for review on certiorari
under Rule 45 of the Revised Rules of Court is limited to reviewing only errors of law, not of fact,
unless the factual findings complained of are devoid of support by the evidence on record or the
assailed judgment is based on misapprehension of facts.13 This rule is applied more stringently when
the findings of fact of the RTC is affirmed by the Court of Appeals.14

The following are the facts as found by the RTC and affirmed by the Court of Appeals that are
decisive of the issues: (1) the "controverted machineries" are not covered by, or included in, either of
the two mortgages, the Real Estate and Chattel Mortgage, and the pure Chattel Mortgage; (2) the
said machineries were not included in the list of properties appended to the Notice of Sale, and
neither were they included in the Sheriff's Notice of Sale of the foreclosed properties.15

Petitioners contend that the nature of the disputed machineries, i.e., that they were heavy, bolted or
cemented on the real property mortgaged by EVERTEX to PBCom, make them ipso
facto immovable under Article 415 (3) and (5) of the New Civil Code. This assertion, however, does
not settle the issue. Mere nuts and bolts do not foreclose the controversy. We have to look at the
parties' intent.

While it is true that the controverted properties appear to be immobile, a perusal of the contract of
Real and Chattel Mortgage executed by the parties herein gives us a contrary indication. In the case
at bar, both the trial and the appellate courts reached the same finding that the true intention of
PBCOM and the owner, EVERTEX, is to treat machinery and equipment as chattels. The pertinent
portion of respondent appellate court's ruling is quoted below:

As stressed upon by appellees, appellant bank treated the machineries as chattels; never as
real properties. Indeed, the 1975 mortgage contract, which was actually real and chattel
mortgage, militates against appellants' posture. It should be noted that the printed form used
by appellant bank was mainly for real estate mortgages. But reflective of the true intention of
appellant PBCOM and appellee EVERTEX was the typing in capital letters, immediately
following the printed caption of mortgage, of the phrase "real and chattel." So also, the
"machineries and equipment" in the printed form of the bank had to be inserted in the blank
 space of the printed contract and connected with the word "building" by typewritten slash
marks. Now, then, if the machineries in question were contemplated to be included in the
real estate mortgage, there would have been no necessity to ink a chattel mortgage
specifically mentioning as part III of Schedule A a listing of the machineries covered thereby.
It would have sufficed to list them as immovables in the Deed of Real Estate Mortgage of the
land and building involved.

As regards the 1979 contract, the intention of the parties is clear and beyond question. It
refers solely to chattels. The inventory list of the mortgaged properties is an itemization of
sixty-three (63) individually described machineries while the schedule listed only machines
and 2,996,880.50 worth of finished cotton fabrics and natural cotton fabrics.16

In the absence of any showing that this conclusion is baseless, erroneous or uncorroborated by the
evidence on record, we find no compelling reason to depart therefrom.

Too, assuming arguendo that the properties in question are immovable by nature, nothing detracts
the parties from treating it as chattels to secure an obligation under the principle of estoppel. As far
back as Navarro v. Pineda, 9 SCRA 631 (1963), an immovable may be considered a personal
property if there is a stipulation as when it is used as security in the payment of an obligation where
a chattel mortgage is executed over it, as in the case at bar.

In the instant case, the parties herein: (1) executed a contract styled as "Real Estate Mortgage and
Chattel Mortgage," instead of just "Real Estate Mortgage" if indeed their intention is to treat all
properties included therein as immovable, and (2) attached to the said contract a separate "LIST OF
MACHINERIES & EQUIPMENT". These facts, taken together, evince the conclusion that the parties'
intention is to treat these units of machinery as chattels. A fortiori, the contested after-acquired
properties, which are of the same description as the units enumerated under the title "LIST OF
MACHINERIES & EQUIPMENT," must also be treated as chattels.

Accordingly, we find no reversible error in the respondent appellate court's ruling that inasmuch as
the subject mortgages were intended by the parties to involve chattels, insofar as equipment and
machinery were concerned, the Chattel Mortgage Law applies, which provides in Section 7 thereof
that: "a chattel mortgage shall be deemed to cover only the property described therein and not like or
substituted property thereafter acquired by the mortgagor and placed in the same depository as the
property originally mortgaged, anything in the mortgage to the contrary notwithstanding."

And, since the disputed machineries were acquired in 1981 and could not have been involved in the
1975 or 1979 chattel mortgages, it was consequently an error on the part of the Sheriff to include
subject machineries with the properties enumerated in said chattel mortgages.

As the auction sale of the subject properties to PBCom is void, no valid title passed in its favor.
Consequently, the sale thereof to Tsai is also a nullity under the elementary principle of nemo dat
quod non habet, one cannot give what one does not have.17

Petitioner Tsai also argued that assuming that PBCom's title over the contested properties is a
nullity, she is nevertheless a purchaser in good faith and for value who now has a better right than
EVERTEX.

To the contrary, however, are the factual findings and conclusions of the trial court that she is not a
purchaser in good faith. Well-settled is the rule that the person who asserts the status of a purchaser
in good faith and for value has the burden of proving such assertion.18 Petitioner Tsai failed to
discharge this burden persuasively.
Moreover, a purchaser in good faith and for value is one who buys the property of another without
notice that some other person has a right to or interest in such property and pays a full and fair price
for the same, at the time of purchase, or before he has notice of the claims or interest of some other
person in the property.19 Records reveal, however, that when Tsai purchased the controverted
properties, she knew of respondent's claim thereon. As borne out by the records, she received the
letter of respondent's counsel, apprising her of respondent's claim, dated February 27, 1987.20 She
replied thereto on March 9, 1987.21 Despite her knowledge of respondent's claim, she proceeded to
buy the contested units of machinery on May 3, 1988. Thus, the RTC did not err in finding that she
was not a purchaser in good faith.

Petitioner Tsai's defense of indefeasibility of Torrens Title of the lot where the disputed properties
are located is equally unavailing. This defense refers to sale of lands and not to sale of properties
situated therein. Likewise, the mere fact that the lot where the factory and the disputed properties
stand is in PBCom's name does not automatically make PBCom the owner of everything found
therein, especially in view of EVERTEX's letter to Tsai enunciating its claim.

Finally, petitioners' defense of prescription and laches is less than convincing. We find no cogent
reason to disturb the consistent findings of both courts below that the case for the reconveyance of
the disputed properties was filed within the reglementary period. Here, in our view, the doctrine of
laches does not apply. Note that upon petitioners' adamant refusal to heed EVERTEX's claim,
respondent company immediately filed an action to recover possession and ownership of the
disputed properties. There is no evidence showing any failure or neglect on its part, for an
unreasonable and unexplained length of time, to do that which, by exercising due diligence, could or
should have been done earlier. The doctrine of stale demands would apply only where by reason of
the lapse of time, it would be inequitable to allow a party to enforce his legal rights. Moreover, except
for very strong reasons, this Court is not disposed to apply the doctrine of laches to prejudice or
defeat the rights of an owner.22

As to the award of damages, the contested damages are the actual compensation, representing
rentals for the contested units of machinery, the exemplary damages, and attorney's fees.

As regards said actual compensation, the RTC awarded P100,000.00 corresponding to the unpaid
rentals of the contested properties based on the testimony of John Chua, who testified that the
P100,000.00 was based on the accepted practice in banking and finance, business and investments
that the rental price must take into account the cost of money used to buy them. The Court of
Appeals did not give full credence to Chua's projection and reduced the award to P20,000.00.

Basic is the rule that to recover actual damages, the amount of loss must not only be capable of
proof but must actually be proven with reasonable degree of certainty, premised upon competent
proof or best evidence obtainable of the actual amount thereof.23 However, the allegations of
respondent company as to the amount of unrealized rentals due them as actual damages remain
mere assertions unsupported by documents and other competent evidence. In determining actual
damages, the court cannot rely on mere assertions, speculations, conjectures or guesswork but
must depend on competent proof and on the best evidence obtainable regarding the actual amount
of loss.24 However, we are not prepared to disregard the following dispositions of the respondent
appellate court:

. . . In the award of actual damages under scrutiny, there is nothing on record warranting the
said award of P5,200,000.00, representing monthly rental income of P100,000.00 from
November 1986 to February 1991, and the additional award of P100,000.00 per month
thereafter.
 As pointed out by appellants, the testimonial evidence, consisting of the testimonies of Jonh
(sic) Chua and Mamerto Villaluz, is shy of what is necessary to substantiate the actual
damages allegedly sustained by appellees, by way of unrealized rental income of subject
machineries and equipments.

The testimony of John Cua (sic) is nothing but an opinion or projection based on what is
claimed to be a practice in business and industry. But such a testimony cannot serve as the
sole basis for assessing the actual damages complained of. What is more, there is no
showing that had appellant Tsai not taken possession of the machineries and equipments in
question, somebody was willing and ready to rent the same for P100,000.00 a month.

xxx xxx xxx

Then, too, even assuming arguendo that the said machineries and equipments could have
generated a rental income of P30,000.00 a month, as projected by witness Mamerto Villaluz,
the same would have been a gross income. Therefrom should be deducted or removed,
expenses for maintenance and repairs . . . Therefore, in the determination of the actual
damages or unrealized rental income sued upon, there is a good basis to calculate that at
least four months in a year, the machineries in dispute would have been idle due to absence
of a lessee or while being repaired. In the light of the foregoing rationalization and
computation, We believe that a net unrealized rental income of P20,000.00 a month, since
November 1986, is more realistic and fair.25

As to exemplary damages, the RTC awarded P200,000.00 to EVERTEX which the Court of Appeals
deleted. But according to the CA, there was no clear showing that petitioners acted malevolently,
wantonly and oppressively. The evidence, however, shows otherwise.It is a requisite to award
exemplary damages that the wrongful act must be accompanied by bad faith,26 and the guilty acted
in a wanton, fraudulent, oppressive, reckless or malevolent manner.27 As previously stressed,
petitioner Tsai's act of purchasing the controverted properties despite her knowledge of EVERTEX's
claim was oppressive and subjected the already insolvent respondent to gross disadvantage.
Petitioner PBCom also received the same letters of Atty. Villaluz, responding thereto on March 24,
1987.28 Thus, PBCom's act of taking all the properties found in the factory of the financially
handicapped respondent, including those properties not covered by or included in the mortgages, is
equally oppressive and tainted with bad faith. Thus, we are in agreement with the RTC that an award
of exemplary damages is proper.

The amount of P200,000.00 for exemplary damages is, however, excessive. Article 2216 of the Civil
Code provides that no proof of pecuniary loss is necessary for the adjudication of exemplary
damages, their assessment being left to the discretion of the court in accordance with the
circumstances of each case.29 While the imposition of exemplary damages is justified in this case,
equity calls for its reduction. In Inhelder Corporation v. Court of Appeals, G.R. No. L-52358, 122
SCRA 576, 585, (May 30, 1983), we laid down the rule that judicial discretion granted to the courts in
the assessment of damages must always be exercised with balanced restraint and measured
objectivity. Thus, here the award of exemplary damages by way of example for the public good
should be reduced to P100,000.00.

By the same token, attorney's fees and other expenses of litigation may be recovered when
exemplary damages are awarded.30 In our view, RTC's award of P50,000.00 as attorney's fees and
expenses of litigation is reasonable, given the circumstances in these cases.

WHEREFORE, the petitions are DENIED. The assailed decision and resolution of the Court of
Appeals in CA-G.R. CV No. 32986 are AFFIRMED WITH MODIFICATIONS. Petitioners Philippine
Bank of Communications and Ruby L. Tsai are hereby ordered to pay jointly and severally Ever
Textile Mills, Inc. the following: (1) P20,000.00 per month, as compensation for the use and
possession of the properties in question from November 198631 until subject personal properties are
restored to respondent corporation; (2) P100,000.00 by way of exemplary damages, and (3)
P50,000.00 as attorney's fees and litigation expenses. Costs against petitioners.