G.R. No. L-55729March 28, 1983
ANTONIO PUNSALAN, JR., petitioner, vs.REMEDIOS VDA. DE LACSAMANA
and THE HONORABLE JUDGE RODOLFO A. ORTIZ, respondents.
Benjamin S. Benito & Associates for petitioner.
Expedito Yummul for private respondent.
MELENCIO-HERRERA, J.:
The sole issue presented by petitioner for resolution is whether
or not respondent Court erred in denying the Motion to Set Case for
Pre-trial with respect to respondent Remedios Vda. de Lacsamana as
the case had been dismissed on the ground of improper venue upon
motion of co-respondent Philippine National Bank (PNB).
It appears that petitioner, Antonio Punsalan, Jr., was the
former registered owner of a parcel of land consisting of 340
square meters situated in Bamban, Tarlac. In 1963, petitioner
mortgaged said land to respondent PNB (Tarlac Branch) in the amount
of P10,000.00, but for failure to pay said amount, the property was
foreclosed on December 16, 1970. Respondent PNB (Tarlac Branch) was
the highest bidder in said foreclosure proceedings. However, the
bank secured title thereto only on December 14, 1977.
In the meantime, in 1974, while the properly was still in the
alleged possession of petitioner and with the alleged acquiescence
of respondent PNB (Tarlac Branch), and upon securing a permit from
the Municipal Mayor, petitioner constructed a warehouse on said
property. Petitioner declared said warehouse for tax purposes for
which he was issued Tax Declaration No. 5619. Petitioner then
leased the warehouse to one Hermogenes Sibal for a period of 10
years starting January 1975.
On July 26, 1978, a Deed of Sale was executed between respondent
PNB (Tarlac Branch) and respondent Lacsamana over the property.
This contract was amended on July 31, 1978, particularly to include
in the sale, the building and improvement thereon. By virtue of
said instruments, respondent - Lacsamana secured title over the
property in her name (TCT No. 173744) as well as separate tax
declarations for the land and building. 1
On November 22, 1979, petitioner commenced suit for "Annulment
of Deed of Sale with Damages" against herein respondents PNB and
Lacsamana before respondent Court of First Instance of Rizal,
Branch XXXI, Quezon City, essentially impugning the validity of the
sale of the building as embodied in the Amended Deed of Sale. In
this connection, petitioner alleged:
xxx xxxxxx
22.That defendant, Philippine National Bank, through its Branch
Manager ... by virtue of the request of defendant ... executed a
document dated July 31, 1978, entitled Amendment to Deed of
Absolute Sale ... wherein said defendant bank as Vendor sold to
defendant Lacsamana the building owned by the plaintiff under Tax
Declaration No. 5619, notwithstanding the fact that said building
is not owned by the bank either by virtue of the public auction
sale conducted by the Sheriff and sold to the Philippine National
Bank or by virtue of the Deed of Sale executed by the bank itself
in its favor on September 21, 1977 ...;
23.That said defendant bank fraudulently mentioned ... that the
sale in its favor should likewise have included the building,
notwithstanding no legal basis for the same and despite full
knowledge that the Certificate of Sale executed by the sheriff in
its favor ... only limited the sale to the land, hence, by selling
the building which never became the property of defendant, they
have violated the principle against 'pactum commisorium'.
Petitioner prayed that the Deed of Sale of the building in favor
of respondent Lacsamana be declared null and void and that damages
in the total sum of P230,000.00, more or less, be awarded to him.
2
In her Answer filed on March 4, 1980,-respondent Lacsamana
averred the affirmative defense of lack of cause of action in that
she was a purchaser for value and invoked the principle in Civil
Law that the "accessory follows the principal". 3
On March 14, 1980, respondent PNB filed a Motion to Dismiss on
the ground that venue was improperly laid considering that the
building was real property under article 415 (1) of the New Civil
Code and therefore section 2(a) of Rule 4 should apply. 4
Opposing said Motion to Dismiss, petitioner contended that the
action for annulment of deed of sale with damages is in the nature
of a personal action, which seeks to recover not the title nor
possession of the property but to compel payment of damages, which
is not an action affecting title to real property.
On April 25, 1980, respondent Court granted respondent PNB's
Motion to Dismiss as follows:
Acting upon the 'Motion to Dismiss' of the defendant Philippine
National Bank dated March 13, 1980, considered against the
plaintiff's opposition thereto dated April 1, 1980, including the
reply therewith of said defendant, this Court resolves to DISMISS
the plaintiff's complaint for improper venue considering that the
plaintiff's complaint which seeks for the declaration as null and
void, the amendment to Deed of Absolute Sale executed by the
defendant Philippine National Bank in favor of the defendant
Remedios T. Vda. de Lacsamana, on July 31, 1978, involves a
warehouse allegedly owned and constructed by the plaintiff on the
land of the defendant Philippine National Bank situated in the
Municipality of Bamban, Province of Tarlac, which warehouse is an
immovable property pursuant to Article 415, No. 1 of the New Civil
Code; and, as such the action of the plaintiff is a real action
affecting title to real property which, under Section 2, Rule 4 of
the New Rules of Court, must be tried in the province where the
property or any part thereof lies. 5
In his Motion for Reconsideration of the aforestated Order,
petitioner reiterated the argument that the action to annul does
not involve ownership or title to property but is limited to the
validity of the deed of sale and emphasized that the case should
proceed with or without respondent PNB as respondent Lacsamana had
already filed her Answer to the Complaint and no issue on venue had
been raised by the latter.
On September 1, 1980,.respondent Court denied reconsideration
for lack of merit.
Petitioner then filed a Motion to Set Case for Pre-trial, in so
far as respondent Lacsamana was concerned, as the issues had
already been joined with the filing of respondent Lacsamana's
Answer.
In the Order of November 10, 1980 respondent Court denied said
Motion to Set Case for Pre-trial as the case was already dismissed
in the previous Orders of April 25, 1980 and September 1, 1980.
Hence, this Petition for Certiorari, to which we gave due
course.
We affirm respondent Court's Order denying the setting for
pre-trial.
The warehouse claimed to be owned by petitioner is an immovable
or real property as provided in article 415(l) of the Civil Code. 6
Buildings are always immovable under the Code. 7 A building treated
separately from the land on which it stood is immovable property
and the mere fact that the parties to a contract seem to have dealt
with it separate and apart from the land on which it stood in no
wise changed its character as immovable property. 8
While it is true that petitioner does not directly seek the
recovery of title or possession of the property in question, his
action for annulment of sale and his claim for damages are closely
intertwined with the issue of ownership of the building which,
under the law, is considered immovable property, the recovery of
which is petitioner's primary objective. The prevalent doctrine is
that an action for the annulment or rescission of a sale of real
property does not operate to efface the fundamental and prime
objective and nature of the case, which is to recover said real
property. It is a real action. 9
Respondent Court, therefore, did not err in dismissing the case
on the ground of improper venue (Section 2, Rule 4) 10, which was
timely raised (Section 1, Rule 16) 11.
Petitioner's other contention that the case should proceed in so
far as respondent Lacsamana is concerned as she had already filed
an Answer, which did not allege improper venue and, therefore,
issues had already been joined, is likewise untenable. Respondent
PNB is an indispensable party as the validity of the Amended
Contract of Sale between the former and respondent Lacsamana is in
issue. It would, indeed, be futile to proceed with the case against
respondent Lacsamana alone.
WHEREFORE, the petition is hereby denied without prejudice to
the refiling of the case by petitioner Antonio Punsalan, Jr. in the
proper forum.
Costs against petitioner.
SO ORDERED.
G.R. Nos. L-10837-38 May 30, 1958
ASSOCIATED INSURANCE and SURETY COMPANY, INC., plaintiff,
vs.ISABEL IYA, ADRIANO VALINO and LUCIA VALINO, defendants.
ISABEL IYA, plaintiff, vs.ADRIANO VALINO, LUCIA VALINO and
ASSOCIATED INSURANCE and SURETY COMPANY. INC., defendants.
Jovita L. de Dios for defendant Isabel Iya.M. Perez Cardenas and
Apolonio Abola for defendant Associated Insurance and Surety Co.,
Inc.
FELIX, J.:
Adriano Valino and Lucia A. Valino, husband and wife, were the
owners and possessors of a house of strong materials constructed on
Lot No. 3, Block No. 80 of the Grace Park Subdivision in Caloocan,
Rizal, which they purchased on installment basis from the
Philippine Realty Corporation. On November 6, 1951, to enable her
to purchase on credit rice from the NARIC, Lucia A. Valino filed a
bond in the sum of P11,000.00 (AISCO Bond No. G-971) subscribed by
the Associated Insurance and Surety Co., Inc., and as
counter-guaranty therefor, the spouses Valino executed an alleged
chattel mortgage on the aforementioned house in favor of the surety
company, which encumbrance was duly registered with the Chattel
Mortgage Register of Rizal on December 6, 1951. It is admitted that
at the time said undertaking took place, the parcel of land on
which the house is erected was still registered in the name of the
Philippine Realty Corporation. Having completed payment on the
purchase price of the lot, the Valinos were able to secure on
October 18, 1958, a certificate of title in their name (T.C.T. No.
27884). Subsequently, however, or on October 24, 1952, the Valinos,
to secure payment of an indebtedness in the amount of P12,000.00,
executed a real estate mortgage over the lot and the house in favor
of Isabel Iya, which was duly registered and annotated at the back
of the certificate of title.
On the other hand, as Lucia A. Valino, failed to satisfy her
obligation to the NARIC, the surety company was compelled to pay
the same pursuant to the undertaking of the bond. In turn, the
surety company demanded reimbursement from the spouses Valino, and
as the latter likewise failed to do so, the company foreclosed the
chattel mortgage over the house. As a result thereof, a public sale
was conducted by the Provincial Sheriff of Rizal on December 26,
1952, wherein the property was awarded to the surety company for
P8,000.00, the highest bid received therefor. The surety company
then caused the said house to be declared in its name for tax
purposes (Tax Declaration No. 25128).
Sometime in July, 1953, the surety company learned of the
existence of the real estate mortgage over the lot covered by
T.C.T. No. 26884 together with the improvements thereon; thus, said
surety company instituted Civil Case No. 2162 of the Court of First
Instance of Manila naming Adriano and Lucia Valino and Isabel Iya,
the mortgagee, as defendants. The complaint prayed for the
exclusion of the residential house from the real estate mortgage in
favor of defendant Iya and the declaration and recognition of
plaintiff's right to ownership over the same in virtue of the award
given by the Provincial Sheriff of Rizal during the public auction
held on December 26, 1952. Plaintiff likewise asked the Court to
sentence the spouses Valino to pay said surety moral and exemplary
damages, attorney's fees and costs. Defendant Isabel Iya filed her
answer to the complaint alleging among other things, that in virtue
of the real estate mortgage executed by her co-defendants, she
acquired a real right over the lot and the house constructed
thereon; that the auction sale allegedly conducted by the
Provincial Sheriff of Rizal as a result of the foreclosure of the
chattel mortgage on the house was null and void for non-compliance
with the form required by law. She, therefore, prayed for the
dismissal of the complaint and anullment of the sale made by the
Provincial Sheriff. She also demanded the amount of P5,000.00 from
plaintiff as counterclaim, the sum of P5,000.00 from her
co-defendants as crossclaim, for attorney's fees and costs.
Defendants spouses in their answer admitted some of the
averments of the complaint and denied the others. They, however,
prayed for the dismissal of the action for lack of cause of action,
it being alleged that plaintiff was already the owner of the house
in question, and as said defendants admitted this fact, the claim
of the former was already satisfied.
On October 29, 1953, Isabel Iya filed another civil action
against the Valinos and the surety company (Civil Case No. 2504 of
the Court of First Instance of Manila) stating that pursuant to the
contract of mortgage executed by the spouses Valino on October 24,
1952, the latter undertook to pay a loan of P12,000.00 with
interest at 12% per annum or P120.00 a month, which indebtedness
was payable in 4 years, extendible for only one year; that to
secure payment thereof, said defendants mortgaged the house and lot
covered by T.C.T. No. 27884 located at No. 67 Baltazar St., Grace
Park Subdivision, Caloocan, Rizal; that the Associated Insurance
and Surety Co., Inc., was included as a party defendant because it
claimed to have an interest on the residential house also covered
by said mortgage; that it was stipulated in the aforesaid real
estate mortgage that default in the payment of the interest agreed
upon would entitle the mortgagee to foreclose the same even before
the lapse of the 4-year period; and as defendant spouses had
allegedly failed to pay the interest for more than 6 months,
plaintiff prayed the Court to order said defendants to pay the sum
of P12,000.00 with interest thereon at 12% per annum from March 25,
1953, until fully paid; for an additional sum equivalent to 20% of
the total obligation as damages, and for costs. As an alternative
in case such demand may not be met and satisfied plaintiff prayed
for a decree of foreclosure of the land, building and other
improvements thereon to be sold at public auction and the proceeds
thereof applied to satisfy the demands of plaintiff; that the
Valinos, the surety company and any other person claiming interest
on the mortgaged properties be barred and foreclosed of all rights,
claims or equity of redemption in said properties; and for
deficiency judgment in case the proceeds of the sale of the
mortgaged property would be insufficient to satisfy the claim of
plaintiff.
Defendant surety company, in answer to this complaint insisted
on its right over the building, arguing that as the lot on which
the house was constructed did not belong to the spouses at the time
the chattel mortgage was executed, the house might be considered
only as a personal property and that the encumbrance thereof and
the subsequent foreclosure proceedings made pursuant to the
provisions of the Chattel Mortgage Law were proper and legal.
Defendant therefore prayed that said building be excluded from the
real estate mortgage and its right over the same be declared
superior to that of plaintiff, for damages, attorney's fees and
costs.
Taking side with the surety company, defendant spouses admitted
the due execution of the mortgage upon the land but assailed the
allegation that the building was included thereon, it being
contended that it was already encumbered in favor of the surety
company before the real estate mortgage was executed, a fact made
known to plaintiff during the preparation of said contract and to
which the latter offered no objection. As a special defense, it was
asserted that the action was premature because the contract was for
a period of 4 years, which had not yet elapsed.
The two cases were jointly heard upon agreement of the parties,
who submitted the same on a stipulation of facts, after which the
Court rendered judgment dated March 8, 1956, holding that the
chattel mortgage in favor of the Associated Insurance and Surety
Co., Inc., was preferred and superior over the real estate mortgage
subsequently executed in favor of Isabel Iya. It was ruled that as
the Valinos were not yet the registered owner of the land on which
the building in question was constructed at the time the first
encumbrance was made, the building then was still a personality and
a chattel mortgage over the same was proper. However, as the
mortgagors were already the owner of the land at the time the
contract with Isabel Iya was entered into, the building was
transformed into a real property and the real estate mortgage
created thereon was likewise adjudged as proper. It is to be noted
in this connection that there is no evidence on record to sustain
the allegation of the spouses Valino that at the time they
mortgaged their house and lot to Isabel Iya, the latter was told or
knew that part of the mortgaged property, i.e., the house, had
previously been mortgaged to the surety company.
The residential building was, therefore, ordered excluded from
the foreclosure prayed for by Isabel Iya, although the latter could
exercise the right of a junior encumbrance. So the spouses Valino
were ordered to pay the amount demanded by said mortgagee or in
their default to have the parcel of land subject of the mortgage
sold at public auction for the satisfaction of Iya's claim.
There is no question as to appellant's right over the land
covered by the real estate mortgage; however, as the building
constructed thereon has been the subject of 2 mortgages;
controversy arise as to which of these encumbrances should receive
preference over the other. The decisive factor in resolving the
issue presented by this appeal is the determination of the nature
of the structure litigated upon, for where it be considered a
personality, the foreclosure of the chattel mortgage and the
subsequent sale thereof at public auction, made in accordance with
the Chattel Mortgage Law would be valid and the right acquired by
the surety company therefrom would certainly deserve prior
recognition; otherwise, appellant's claim for preference must be
granted. The lower Court, deciding in favor of the surety company,
based its ruling on the premise that as the mortgagors were not the
owners of the land on which the building is erected at the time the
first encumbrance was made, said structure partook of the nature of
a personal property and could properly be the subject of a chattel
mortgage. We find reason to hold otherwise, for as this Court,
defining the nature or character of a building, has said:
. . . while it is true that generally, real estate connotes the
land and the building constructed thereon, it is obvious that the
inclusion of the building, separate and distinct from the land, in
the enumeration of what may constitute real properties (Art. 415,
new Civil Code) could only mean one thing that a building is by
itself an immovable property . . . Moreover, and in view of the
absence of any specific provision to the contrary, a building is an
immovable property irrespective of whether or not said structure
and the land on which it is adhered to belong to the same owner.
(Lopez vs. Orosa, G.R. Nos. supra, p. 98).
A building certainly cannot be divested of its character of a
realty by the fact that the land on which it is constructed belongs
to another. To hold it the other way, the possibility is not remote
that it would result in confusion, for to cloak the building with
an uncertain status made dependent on the ownership of the land,
would create a situation where a permanent fixture changes its
nature or character as the ownership of the land changes hands. In
the case at bar, as personal properties could only be the subject
of a chattel mortgage (Section 1, Act 3952) and as obviously the
structure in question is not one, the execution of the chattel
mortgage covering said building is clearly invalid and a nullity.
While it is true that said document was correspondingly registered
in the Chattel Mortgage Register of Rizal, this act produced no
effect whatsoever for where the interest conveyed is in the nature
of a real property, the registration of the document in the
registry of chattels is merely a futile act. Thus, the registration
of the chattel mortgage of a building of strong materials produce
no effect as far as the building is concerned (Leung Yee vs. Strong
Machinery Co., 37 Phil., 644). Nor can we give any consideration to
the contention of the surety that it has acquired ownership over
the property in question by reason of the sale conducted by the
Provincial Sheriff of Rizal, for as this Court has aptly
pronounced:
A mortgage creditor who purchases real properties at an
extrajudicial foreclosure sale thereof by virtue of a chattel
mortgage constituted in his favor, which mortgage has been declared
null and void with respect to said real properties, acquires no
right thereto by virtue of said sale (De la Riva vs. Ah Keo, 60
Phil., 899).
Wherefore the portion of the decision of the lower Court in
these two cases appealed from holding the rights of the surety
company, over the building superior to that of Isabel Iya and
excluding the building from the foreclosure prayed for by the
latter is reversed and appellant Isabel Iya's right to foreclose
not only the land but also the building erected thereon is hereby
recognized, and the proceeds of the sale thereof at public auction
(if the land has not yet been sold), shall be applied to the
unsatisfied judgment in favor of Isabel Iya. This decision however
is without prejudice to any right that the Associated Insurance and
Surety Co., Inc., may have against the spouses Adriano and Lucia
Valino on account of the mortgage of said building they executed in
favor of said surety company. Without pronouncement as to costs. It
is so ordered.
G.R. No. L-20329 March 16, 1923
THE STANDARD OIL COMPANY OF NEW YORK, petitioner, vs.JOAQUIN
JARAMILLO, as register of deeds of the City of Manila,
respondent.
Ross, Lawrence and Selph for petitioner.City Fiscal Revilla and
Assistant City Fiscal Rodas for respondent.
STREET, J.:
This cause is before us upon demurrer interposed by the
respondent, Joaquin Jaramillo, register of deeds of the City of
Manila, to an original petition of the Standard Oil Company of New
York, seeking a peremptory mandamus to compel the respondent to
record in the proper register a document purporting to be a chattel
mortgage executed in the City of Manila by Gervasia de la Rosa,
Vda. de Vera, in favor of the Standard Oil Company of New York.
It appears from the petition that on November 27, 1922, Gervasia
de la Rosa, Vda. de Vera, was the lessee of a parcel of land
situated in the City of Manila and owner of the house of strong
materials built thereon, upon which date she executed a document in
the form of a chattel mortgage, purporting to convey to the
petitioner by way of mortgage both the leasehold interest in said
lot and the building which stands thereon.
The clauses in said document describing the property intended to
be thus mortgage are expressed in the following words:
Now, therefore, the mortgagor hereby conveys and transfer to the
mortgage, by way of mortgage, the following described personal
property, situated in the City of Manila, and now in possession of
the mortgagor, to wit:
(1) All of the right, title, and interest of the mortgagor in
and to the contract of lease hereinabove referred to, and in and to
the premises the subject of the said lease;
(2) The building, property of the mortgagor, situated on the
aforesaid leased premises.
After said document had been duly acknowledge and delivered, the
petitioner caused the same to be presented to the respondent,
Joaquin Jaramillo, as register of deeds of the City of Manila, for
the purpose of having the same recorded in the book of record of
chattel mortgages. Upon examination of the instrument, the
respondent was of the opinion that it was not a chattel mortgage,
for the reason that the interest therein mortgaged did not appear
to be personal property, within the meaning of the Chattel Mortgage
Law, and registration was refused on this ground only.
We are of the opinion that the position taken by the respondent
is untenable; and it is his duty to accept the proper fee and place
the instrument on record. The duties of a register of deeds in
respect to the registration of chattel mortgage are of a purely
ministerial character; and no provision of law can be cited which
confers upon him any judicial or quasi-judicial power to determine
the nature of any document of which registration is sought as a
chattel mortgage.
The original provisions touching this matter are contained in
section 15 of the Chattel Mortgage Law (Act No. 1508), as amended
by Act No. 2496; but these have been transferred to section 198 of
the Administrative Code, where they are now found. There is nothing
in any of these provisions conferring upon the register of deeds
any authority whatever in respect to the "qualification," as the
term is used in Spanish law, of chattel mortgage. His duties in
respect to such instruments are ministerial only. The efficacy of
the act of recording a chattel mortgage consists in the fact that
it operates as constructive notice of the existence of the
contract, and the legal effects of the contract must be discovered
in the instrument itself in relation with the fact of notice.
Registration adds nothing to the instrument, considered as a source
of title, and affects nobody's rights except as a specifies of
notice.
Articles 334 and 335 of the Civil Code supply no absolute
criterion for discriminating between real property and personal
property for purpose of the application of the Chattel Mortgage
Law. Those articles state rules which, considered as a general
doctrine, are law in this jurisdiction; but it must not be
forgotten that under given conditions property may have character
different from that imputed to it in said articles. It is
undeniable that the parties to a contract may by agreement treat as
personal property that which by nature would be real property; and
it is a familiar phenomenon to see things classed as real property
for purposes of taxation which on general principle might be
considered personal property. Other situations are constantly
arising, and from time to time are presented to this court, in
which the proper classification of one thing or another as real or
personal property may be said to be doubtful.
The point submitted to us in this case was determined on
September 8, 1914, in an administrative ruling promulgated by the
Honorable James A. Ostrand, now a Justice of this Court, but acting
at that time in the capacity of Judge of the fourth branch of the
Court of First Instance of the Ninth Judicial District, in the City
of Manila; and little of value can be here added to the
observations contained in said ruling. We accordingly quote
therefrom as follows:
It is unnecessary here to determine whether or not the property
described in the document in question is real or personal; the
discussion may be confined to the point as to whether a register of
deeds has authority to deny the registration of a document
purporting to be a chattel mortgage and executed in the manner and
form prescribed by the Chattel Mortgage Law.
Then, after quoting section 5 of the Chattel Mortgage Law (Act
No. 1508), his Honor continued:
Based principally upon the provisions of section quoted the
Attorney-General of the Philippine Islands, in an opinion dated
August 11, 1909, held that a register of deeds has no authority to
pass upon the capacity of the parties to a chattel mortgage which
is presented to him for record. A fortiori a register of deeds can
have no authority to pass upon the character of the property sought
to be encumbered by a chattel mortgage. Of course, if the mortgaged
property is real instead of personal the chattel mortgage would no
doubt be held ineffective as against third parties, but this is a
question to be determined by the courts of justice and not by the
register of deeds.
In Leung Yee vs. Frank L. Strong Machinery Co. and Williamson
(37 Phil., 644), this court held that where the interest conveyed
is of the nature of real, property, the placing of the document on
record in the chattel mortgage register is a futile act; but that
decision is not decisive of the question now before us, which has
reference to the function of the register of deeds in placing the
document on record.
In the light of what has been said it becomes unnecessary for us
to pass upon the point whether the interests conveyed in the
instrument now in question are real or personal; and we declare it
to be the duty of the register of deeds to accept the estimate
placed upon the document by the petitioner and to register it, upon
payment of the proper fee.
The demurrer is overruled; and unless within the period of five
days from the date of the notification hereof, the respondent shall
interpose a sufficient answer to the petition, the writ of mandamus
will be issued, as prayed, but without costs. So ordered.
G.R. No. L-4637JOSE A. LUNA, petitioner, vs.DEMETRIO B.
ENCARNACION, Judge of First Instance of Rizal, TRINIDAD REYES and
THE PROVINCIAL SHERIFF OF RIZAL, respondents.
Jose S. Fineza for petitioner.
BAUTISTA ANGELO, J.:
On September 25, 1948, a deed designated as chattel mortgage was
executed by Jose A. Luna in favor of Trinidad Reyes whereby the
former conveyed by way of first mortgage to the latter a certain
house of mixed materials stated in barrio San Nicolas, municipality
of Pasig, Province of Rizal, to secure the payment of a promissory
note in the amount of P1,500, with interest at 12 per cent per
annum. The document was registered in the office of the register of
deeds for the Province of Rizal. The mortgagor having filed to pay
the promissory note when it fell due, the mortgage requested the
sheriff of said province to sell the house at public auction so
that with its proceeds the amount indebted may be paid notifying
the mortgagor in writing of the time and place of the sale as
required by law. The sheriff acceded to the request and sold the
property to the mortgagee for the amount covering the whole
indebtedness with interest and costs. The certificate of sale was
issued by the sheriff on May 28, 1949. After the period for the
redemption of the property had expired without the mortgagor having
exercised his right to repurchase, the mortgagee demanded from the
mortgagor the surrender of the possession of the property, but the
later refused and so on October 13, 1950, she filed a petition in
the Court of First Instance of Rizal praying that the provincial
sheriff be authorized to place her in possession of the property
invoking in her favor the provisions of Act No. 3135, as amended by
Act No. 4118.
When the petition came up for hearing before the court on
October 25, 1950, Jose A. Luna, the mortgagor, opposed the petition
on the following grounds: (1) that Act No. 3135 as amended by Act
No. 4118 is applicable only to a real estate mortgage; (2) that the
mortgage involved herein is a chattel mortgage; and (3) that even
if the mortgage executed by the parties herein be considered as
real estate mortgage, the extra-judicial sale made by the sheriff
of the property in question was valid because the mortgage does not
contain an express stipulation authorizing the extra-judicial sale
of the property. After hearing, at which both parties have
expressed their views in support of their respective contentions,
respondent judge, then presiding the court, overruled the
opposition and granted the petition ordering the provincial sheriff
of Rizal, or any of this disputives, to immediately place
petitioner in possession of the property in question while at the
same time directing the mortgagor Jose A. Luna to vacate it and
relinquish it in favor of petitioner. It is from this order that
Jose A. Luna desires now to obtain relief by filing this petition
for certiorari contending that the respondent judge has acted in
excess of his jurisdiction.
The first question which petitioner poses in his petition for
certiorari is that which relates to the validity of the
extra-judicial sale made by the provincial sheriff of Rizal of the
property in question in line with the request of the mortgagee
Trinidad Reyes. It is contended that said extra-judicial sale
having been conducted under the provisions of Act No. 3135, as
amended by Act No. 4118, is invalid because the mortgage in
question is not a real estate mortgage and, besides, it does not
contain an express stipulation authorizing the mortgagee to
foreclose the mortgage extra-judicially.
There is merit in this claim. As may be gleaned from a perusal
of the deed signed by the parties (Annex "C"), the understanding
executed by them is a chattel mortgage, as the parties have so
expressly designated, and not a real estate mortgage, specially
when it is considered that the property given as security is a
house of mixed materials which by its very nature is considered as
personal property. Such being the case, it is indeed a mistake for
the mortgagee to consider this transaction in the light of Act No.
3135, as amended by Act No. 4118, as was so considered by her when
she requested to provincial sheriff to sell it extra-judicially in
order to secure full satisfaction of the indebtedness still owed
her by the mortgagor. It is clear that Act No. 3135, as amended,
only covers real estate mortgages and is intended merely to
regulate the extra-judicial sale of the property mortgaged if and
when the mortgagee is given a special power or express authority to
do so in the deed itself, or in a document annexed thereto. These
conditions do not here obtain. The mortgage before us is not a real
estate mortgage nor does it contain an express authority or power
to sell the property extra-judicially.
But regardless of what we have heretofore stated, we find that
the validity of the sale in question may be maintained, it
appearing that the mortgage in question is a chattel mortgage and
as such it is covered and regulated by the Chattel Mortgage Law,
Act No. 1508. Section 14 of this Act allows the mortgagee through a
public officer in almost the same manner as that allowed by Act No.
3135, as amended by Act No. 4118, provided that the requirements of
the law relative to notice and registration are complied with. We
are not prepared to state if these requirements of the law had been
complied with in the case for the record before us is not complete
and there is no showing to that effect. At any rate, this issue is
not how important because the same can be treshed out when the
opportunity comes for its determination, nor is it necessary for us
to consider it in reaching a decision in the present case. Suffice
it to state that for the present we are not expressing any opinion
on this matter which concerns the validity of the sale in question
for the reason that this opinion will only be limited to a matter
of procedure relative to the step taken by the mortgagee in
securing the possession of the property involved.
In the supposition that the sale of the property made by the
sheriff has been made in accordance with law, and the question he
is confronted is how to deliver the possession of the property to
the purchaser in case of refusal to surrender its possession on the
part of the debtor or mortgagor, the remedy of the purchaser
according to the authorities, is to bring an ordinary action for
recovery of possession (Continental Gin Co. vs. Pannell, 160 P.,
598; 61 Okl., 102; 14 C.J.S., pp. 1027, 1028). The purchaser cannot
take possession of the property by force either directly or through
the sheriff. And the reason for this is "that the creditor's right
of possession is conditioned upon the fact of default, and the
existence of this fact may naturally be the subject of controversy"
(Bachrah Motor Co. vs. Summers, 42 Phil., 3, 6). The creditor
cannot merely file a petition for a writ of possession as was done
by Trinidad Reyes in this case. Her remedy is to file an ordinary
action for recovery of possession in ordered that the debtor may be
given an opportunity to be heard not only in regarding possession
but also regarding the obligation covered by the mortgage. The
petition she has filed in the lower court, which was not even
docketed, is therefore improper and should be regarded.
Wherefore, the order subject of the present petition for
certiorari is hereby set aside, with costs against respondent
Trinidad Reyes.
[G.R. No. L-11139. April 23, 1958.]
SANTOS EVANGELISTA, Petitioner, v. ALTO SURETY & INSURANCE
CO., INC., Respondent.
Gonzalo D. David for Petitioner.
Raul A. Aristorenas and Benjamin Relova for Respondent.
SYNOPSIS
1. PROPERTY; HOUSE IS NOT PERSONAL BUT REAL PROPERTY FOR
PURPOSES OF ATTACHMENT. A house is not personal property, much less
a debt, credit or other personal property capable of manual
delivery, but immovable property "A true building (not merely
superimposed on the soil), is immovable or real property, whether
it is erected by the owner of the land or by a usufructuary or
lessee" (Laddera v. Hodges, 48 Off. Gaz., 5374.) and the attachment
of such building is subject to the provisions of subsection (a) of
section 7, Rule 59 of the Rules of Court.
D E C I S I O N
CONCEPCION, J.:
This is an appeal by certiorari from a decision of the Court of
Appeals.
Briefly, the facts are: On June 4, 1949, petitioner herein,
Santos Evangelista, instituted Civil Case No. 8235 of the Court of
First Instance of Manila, entitled "Santos Evangelista v. Ricardo
Rivera," for a sum of money. On the same date, he obtained a writ
of attachment, which was levied upon a house, built by Rivera on a
land situated in Manila and leased to him, by filing copy of said
writ and the corresponding notice of attachment with the Office of
the Register of Deeds of Manila, on June 8, 1949. In due course,
judgment was rendered in favor of Evangelista, who, on October 8,
1951, bought the house at public auction held in compliance with
the writ of execution issued in said case. The corresponding
definite deed of sale was issued to him on October 22, 1952, upon
expiration of the period of redemption. When Evangelista sought to
take possession of the house, Rivera refused to surrender it, upon
the ground that he had leased the property from the Alto Surety
& Insurance Co., Inc. respondent herein and that the latter is
now the true owner of said property. It appears that on May 10,
1952, a definite deed of sale of the same house had been issued to
respondent, as the highest bidder at an auction sale held, on
September 29, 1950, in compliance with a writ of execution issued
in Civil Case No. 6268 of the same court, entitled "Alto Surety
& Insurance Co., Inc. v. Maximo Quiambao, Rosario Guevara and
Ricardo Rivera," in which judgment, for the sum of money, had been
rendered in favor of respondent herein, as plaintiff therein.
Hence, on June 13, 1953, Evangelista instituted the present action
against respondent and Ricardo Rivera, for the purpose of
establishing his (Evangelista) title over said house, and securing
possession thereof, apart from recovering damages.
In its answer, respondent alleged, in substance, that it has a
better right to the house, because the sale made, and the definite
deed of sale executed, in its favor, on September 29, 1950 and May
10, 1952, respectively, precede the sale to Evangelista (October 8,
1951) and the definite deed of sale in his favor (October 22,
1952). It, also, made some special defenses which are discussed
hereafter. Rivera, in effect, joined forces with Respondent. After
due trial, the Court of First Instance of Manila rendered judgment
for Evangelista, sentencing Rivera and respondent to deliver the
house in question to petitioner herein and to pay him, jointly and
severally, forty pesos (P40.00) a month from October, 1952, until
said delivery, plus costs.
On appeal taken by respondent, this decision was reversed by the
Court of Appeals, which absolved said respondent from the
complaint, upon the ground that, although the writ of attachment in
favor of Evangelista had been filed with the Register of Deeds of
Manila prior to the sale in favor of respondent, Evangelista did
not acquire thereby a preferential lien, the attachment having been
levied as if the house in question were immovable property,
although, in the opinion of the Court of Appeals, it is "ostensibly
a personal property." As such, the Court of Appeals held, "the
order of attachment . . . should have been served in the manner
provided in subsection (e) of section 7 of Rule 59," of the Rules
of Court, reading:jgc:chanrobles.com.ph
"The property of the defendant shall be attached by the officer
executing the order in the following manner:chanrob1es virtual 1aw
library
. . .
"(e)Debts and credits, and other personal property not capable
of manual delivery, by leaving with the person owing such debts, or
having in his possession or under his control, such credits or
other personal property, or with his agent, a copy of the order,
and a notice that the debts owing by him to the defendant, and the
credits and other personal property in his possession, or under his
control, belonging to the defendant, are attached in pursuance of
such order." (Emphasis ours.)
However, the Court of Appeals seems to have been of the opinion,
also, that the house of Rivera should have been attached in
accordance with subsection (c) of said section 7, as "personal
property capable of manual delivery, by taking and safely keeping
in his custody", for it declared that "Evangelista could not have .
. . validly purchased Ricardo Riveras house from the sheriff as the
latter was not in possession thereof at the time he sold it at a
public auction."cralaw virtua1aw library
Evangelista now seeks a review, by certiorari, of this decision
of the Court of Appeals. In this connection, it is not disputed
that although the sale to the respondent preceded that made to
Evangelista, the latter would have a better right if the writ of
attachment, issued in his favor before the sale to the respondent,
had been properly executed or enforced. This question, in turn,
depends upon whether the house of Ricardo Rivera is real property
or not. In the affirmative case, the applicable provision would be
subsection (a) of section 7, Rule 59 of the Rules of Court,
pursuant to which the attachment should be made "by filing with the
registrar of deeds a copy of the order, together with a description
of the property attached, and a notice that it is attached, and by
leaving a copy of such order, description, and notice with the
occupant of the property, if any there be.
Respondent maintains, however, and the Court of Appeals held,
that Riveras house is personal property, the levy upon which must
be made in conformity with subsections (c) and (e) of said section
7 of Rule 59. Hence, the main issue before us is whether a house,
constructed by the lessee of the land on which it is built, should
be dealt with, for purposes of attachment, as immovable property,
or as personal property.
It is our considered opinion that said house is not personal
property, much less a debt, credit or other personal property not
capable of manual delivery, but immovable property. As explicitly
held, in Laddera v. Hodges (48 Off. Gaz., 5374), "a true building
(not merely superimposed on the soil) is immovable or real
property, whether it is erected by the owner of the land or by a
usufructuary or lessee. This is the doctrine of our Supreme Court
in Leung Yee v. Strong Machinery Company, 37 Phil., 644. And it is
amply supported by the rulings of the French Court . . . ."cralaw
virtua1aw library
It is true that the parties to a deed of chattel mortgage may
agree to consider a house as personal property for purposes of said
contract (Luna v. Encarnacion, * 48 Off. Gaz., 2664; Standard Oil
Co. of New York v. Jaramillo, 44 Phil., 630; De Jesus v. Juan Dee
Co., Inc., 72 Phil., 464). However, this view is good only insofar
as the contracting parties are concerned. It is based, partly, upon
the principle of estoppel. Neither this principle, nor said view,
is applicable to strangers to said contract. Much less is it in
point where there has been no contract whatsoever, with respect to
the status of the house involved, as in the case at bar. Apart from
this, in Manarang v. Ofilada (99 Phil., 108; 52 Off. Gaz., 3954),
we held:jgc:chanrobles.com.ph
"The question now before us, however, is: Does the fact that the
parties entering into a contract regarding a house gave said
property the consideration of personal property in their contract,
bind the sheriff in advertising the propertys sale at public
auction as personal property? It is to be remembered that in the
case at bar the action was to collect a loan secured by a chattel
mortgage on the house. It is also to be remembered that in practice
it is the judgment creditor who points out to the sheriff the
properties that the sheriff is to levy upon in execution, and the
judgment creditor in the case at bar is the party in whose favor
the owner of the house had conveyed it by way of chattel mortgage
and, therefore, knew its consideration as personal property.
"These considerations notwithstanding, we hold that the rules on
execution do not allow, and we should not interpret them in such a
way as to allow, the special consideration that parties to a
contract may have desired to impart to real estate, for example, as
personal property, when they are not ordinarily so. Sales on
execution affect the public and third persons. The regulation
governing sales on execution are for public officials to follow.
The form of proceedings prescribed for each kind of property is
suited to its character, not to the character which the parties
have given to it or desire to give it. When the rules speak of
personal property, property which is ordinarily so considered is
meant; and when real property is spoken of, it means property which
is generally known as real property. The regulations were never
intended to suit the consideration that parties may have privately
given to the property levied upon. Enforcement of regulations would
be difficult were the convenience or agreement of private parties
to determine or govern the nature of the proceedings. We,
therefore, hold that the mere fact that a house was the subject of
a chattel mortgage and was considered as personal property by the
parties does not make said house personal property for purposes of
the notice to be given for its sale at public auction. This ruling
is demanded by the need for a definite, orderly and well-defined
regulation for official and public guidance and which would prevent
confusion and misunderstanding.
"We, therefore, declare that the house of mixed materials levied
upon on execution, although subject of a contract of chattel
mortgage between the owner and a third person, is real property
within the purview of Rule 39, section 16, of the Rules of Court as
it has become a permanent fixture of the land, which is real
property. (42 Am. Jur. 199-200; Leung Yee v. Strong Machinery Co.,
37 Phil., 644; Republic v. Ceniza, Et Al., 90 Phil., 544; Ladera,
Et. Al. v. Hodges, Et Al., [C.A. ], 48 Off. Gaz., 5374.)" (Emphasis
ours.)
The foregoing considerations apply, with equal force, to the
conditions for the levy of attachment, for it similarly affects the
public and third persons.
It is argued, however, that, even if the house in question were
immovable property, its attachment by Evangelista was void or
ineffective, because, in the language of the Court of Appeals,
"after presenting a copy of the order of attachment in the Office
of the Register of Deeds, the person who might then be in
possession of the house, the sheriff took no pains to serve Ricardo
Rivera, or other copies thereof ." This finding of the Court of
Appeals is neither conclusive upon us, nor accurate.
The Record on Appeal, annexed to the petition for certiorari,
shows that petitioner alleged, in paragraph 3 of the complaint,
that he acquired the house in question "as a consequence of the
levy of an attachment and execution of the judgment in Civil Case
No. 8235" of the Court of First Instance of Manila. In his answer
(paragraph 2), Ricardo Rivera admitted said attachment and
execution of judgment. He alleged, however, by way of special
defense, that the title of respondent "is superior to that of
plaintiff because it is based on a public instrument," whereas
Evangelista relied upon a "promissory note" which "is only a
private instrument" ; that said public instrument in favor of
respondent "is superior also to the judgment in Civil Case No.
8235" ; and that plaintiffs claim against Rivera amounted only to
P866, "which is much below the real value" of said house, for which
reason it would be "grossly unjust to allow plaintiff to acquire
the property for such an inadequate consideration." Thus, Rivera
impliedly admitted that his house had been attached, that the house
had been sold to Evangelista in accordance with the requisite
formalities, and that said attachment was valid, although allegedly
inferior to the rights of respondent, and the consideration for the
sale to Evangelista was claimed to be inadequate.
Respondent, in turn, denied the allegation in said paragraph 3
of the complaint, but only "for the reasons stated in its special
defenses" namely: (1) that by virtue of the sale at public auction,
and the final deed executed by the sheriff in favor of respondent,
the same became the "legitimate owner of the house" in question;
(2) that respondent "is a buyer in good faith and for value" ; (3)
that respondent "took possession and control of said house" ; (4)
that "there was no valid attachment by the plaintiff and/or the
Sheriff of Manila of the property in question as neither took
actual or constructive possession or control of the property at any
time" ; and (5) "that the alleged registration of plaintiffs
attachment, certificate of sale and final deed in the Office of
Register of Deeds, Manila, if there was any, is likewise, not valid
as there is no registry of transactions covering houses erected on
land belonging to or leased from another." In this manner,
respondent claimed a better right, merely under the theory that, in
case of double sale of immovable property, the purchaser who first
obtains possession in good faith, acquires title, if the sale has
not been "recorded . . . in the Registry of Property" (Art. 1544,
Civil Code of the Philippines), and that the writ of attachment and
the notice of attachment in favor of Evangelista should be
considered unregistered, "as there is no registry of transactions
covering houses erected on land belonging to or leased from
another." In fact, said article 1544 of the Civil Code of the
Philippines, governing double sales, was quoted on page 15 of the
brief for respondent in the Court of Appeals, in support of its
fourth assignment of error therein, to the effect that it "has
preference or priority over the sale of the same property" to
Evangelista.
In other words, there was no issue on whether copy of the writ
and notice of attachment had been served on Rivera. No evidence
whatsoever, to the effect that Rivera had not been served with
copies of said writ and notice, was introduced in the Court of
First Instance. In its brief in the Court of Appeals, respondent
did not aver, or even intimate, that no such copies were served by
the sheriff upon Rivera. Service thereof on Rivera had been
impliedly admitted by the defendants, in their respective answers,
and by their behaviour throughout the proceedings in the Court of
First Instance, and, as regards respondent, in the Court of
Appeals. In fact, petitioner asserts in his brief herein (p. 26)
that copies of said writ and notice were delivered to Rivera,
simultaneously with copy of the complaint, upon service of summons,
prior to the filing of copies of said writ and notice with the
register of deeds, and the truth of this assertion has not been
directly and positively challenged or denied in the brief filed
before us by respondent herein. The latter did not dare therein to
go beyond making a statement for the first time in the course of
these proceedings, begun almost five (5) years ago (June 18, 1953)
reproducing substantially the aforementioned finding of the Court
of Appeals and then quoting the same.
Considering, therefore, that neither the pleadings, nor the
briefs in the Court of Appeals, raised an issue on whether or not
copies of the writ of attachment and notice of attachment had been
served upon Rivera; that the defendants had impliedly admitted in
said pleadings and briefs, as well as by their conduct during the
entire proceedings, prior to the rendition of the decision of the
Court of Appeals that Rivera had received copies of said documents;
and that, for this reason, evidently, no proof was introduced
thereon, we are of the opinion, and so hold that the finding of the
Court of Appeals to the effect that said copies had not been served
upon Rivera is based upon a misapprehension of the specific issues
involved therein and goes beyond the range of such issues, apart
from being contrary to the aforementioned admission by the parties,
and that, accordingly, a grave abuse of discretion was committed in
making said finding, which is, furthermore, inaccurate.
Wherefore, the decision of the Court of Appeals is hereby
reversed, and another one shall be entered affirming that of the
Court of First Instance of Manila, with the costs of this instance
against respondent, the Alto Surety & Insurance Co., Inc. It is
so ordered.
Chua Peng Hian v. CA [G.R. No. 60015. December 19, 1984.]Second
Division, Aquino (J): 4 concur, 1 took no part.
Facts: Miguel C. Veneracion owned a 2,194 sq.m. lot located at
787 Melencio Street, Cabanatuan City. He leased it in 1948 to
Patrick Chua Peng Hian for 10 years. The lease was renewed for
another 10 years. Chua constructed on that lot a 2-storey building,
the ground floor being the sawmill and the second floor as
residence. On 25 May 1968, after the second lease agreement had
expired, Veneracion leased to Chua 1,850 square meters of the lot
for 3 years or from 1 May 1968 to 1 May 1971 at the monthly rental
of P1,500. The new lease contract stipulates that the lease shall
terminate automatically without extension and the lessee shall
vacate and surrender the premises without any obstruction thereon;
that in the event that the Lessee fails to surrender and vacate the
leased premises at the expiration of this lease on May 1, 1971,
and/or to remove his buildings and improvements, same shall
automatically remain as property of the Lessor without the
necessity of executing a Deed of Transfer or conveyance of the
aforementioned properties; that this document will serve as Deed of
Transfer and Conveyance of the above mentioned buildings and
improvements in favor of the Lessor; and that the Lessee shall pay
the Lessor compensatory damages of P20,000 plus attorneys fee of
P2,000 should the Lessor seek judicial relief by reason of Lessees
non-fulfillment or violation of the terms of the lease. On 6
February 1969 Veneracion died. After the third lease contract
expired or on 1 May 1971, Veneracions heirs demanded that Chua
vacate the premises and pay the accrued rentals. Chua did not
comply with their demand.
On 11 April 1972, the Veneracions filed in the CFI Nueva Ecija
an action for specific performance against Chua. The trial court
rendered a decision from which both parties appealed. On 30 October
1980, the Appellate Court rendered judgment ordering Chua and his
family to vacate the land in question; to convey the buildings and
improvements existing on the land to the Veneracion heirs and to
pay the monthly rental of P1,500 from June, 1971 until he delivers
possession thereof and the amount of P20,000 as compensatory
damages plus P2,000 as attorneys fee. Chua appealed to the Supreme
Court.
The Supreme Court affirmed the judgment of the Court of Appeals;
with costs against the petitioner.
1. CFI has jurisdiction over issue on rights of parties to a
building constructed on land Where the issues raised before the
inferior court do not only involve possession of the lot but also
the rights of the parties to the building constructed thereon, the
Court of First Instance and not the municipal or city court has
jurisdiction over the case (Ortigas and Co., Ltd. Partnership vs.
Court of Appeals, G.R. No. 52488, July 25, 1981, 106 SCRA 121).
2. CFI has jurisdiction as action for specific performance is
not capable of pecuniary. The action sought was for specific
performance of the stipulations of a lease contract. It was not
capable of pecuniary estimation. It was within the exclusive
original jurisdiction of the Court of First Instance (De Jesusvs.
Garcia, 125 Phil. 965; Lapitan vs. Scandia, Inc., L-24668, July 31,
1968, 24 SCRA 479).
3. Building and improvements on leased land treated as personal
property. The building and improvements on the leased land may be
treated as personal properties (Standard Oil Co. of New York vs.
Jaramillo, 44 Phil. 630; Luna vs. Encarnacion, 91 Phil. 531;
Manarang vs. Ofilada, 99 Phil. 108; Tumalad vs. Vicencio, L-30173,
September 30, 1971, 41 SCRA 143, 152-3). Alienation in the contract
of lease of the Lessees improvements is not a disposition of
conjugal realty without the wifes consent.
4. Stipulation that Lessor would become owner of improvements is
valid. The validity of a stipulation that the lessor would become
the owner of the improvements constructed by the lessee on the
leased land has been sustained (Lao Chit vs. Security Bank &
Trust Co. and Consolidated Investment, Inc., 105 Phil. 490; Co Bun
Kin vs. Liongson, 100 Phil. 1091).
5. Contract is the law between the parties. The case is governed
by the lease contract which is the law between the parties. The
four-year extension of the lease made by the trial court and the
amount of damages do not merit any serious consideration.
G.R. No. L-30173September 30, 1971
GAVINO A. TUMALAD and GENEROSA R. TUMALAD, plaintiffs-appellees,
vs.ALBERTA VICENCIO and EMILIANO SIMEON, defendants-appellants.
Castillo & Suck for plaintiffs-appellees.
Jose Q. Calingo for defendants-appellants.
REYES, J.B.L., J.:
Case certified to this Court by the Court of Appeals (CA-G.R.
No. 27824-R) for the reason that only questions of law are
involved.
This case was originally commenced by defendants-appellants in
the municipal court of Manila in Civil Case No. 43073, for
ejectment. Having lost therein, defendants-appellants appealed to
the court a quo (Civil Case No. 30993) which also rendered a
decision against them, the dispositive portion of which
follows:
WHEREFORE, the court hereby renders judgment in favor of the
plaintiffs and against the defendants, ordering the latter to pay
jointly and severally the former a monthly rent of P200.00 on the
house, subject-matter of this action, from March 27, 1956, to
January 14, 1967, with interest at the legal rate from April 18,
1956, the filing of the complaint, until fully paid, plus
attorney's fees in the sum of P300.00 and to pay the costs.
It appears on the records that on 1 September 1955
defendants-appellants executed a chattel mortgage in favor of
plaintiffs-appellees over their house of strong materials located
at No. 550 Int. 3, Quezon Boulevard, Quiapo, Manila, over Lot Nos.
6-B and 7-B, Block No. 2554, which were being rented from Madrigal
& Company, Inc. The mortgage was registered in the Registry of
Deeds of Manila on 2 September 1955. The herein mortgage was
executed to guarantee a loan of P4,800.00 received from
plaintiffs-appellees, payable within one year at 12% per annum. The
mode of payment was P150.00 monthly, starting September, 1955, up
to July 1956, and the lump sum of P3,150 was payable on or before
August, 1956. It was also agreed that default in the payment of any
of the amortizations, would cause the remaining unpaid balance to
becomeimmediately due and Payable and
the Chattel Mortgage will be enforceable in accordance with the
provisions of Special Act No. 3135, and for this purpose, the
Sheriff of the City of Manila or any of his deputies is hereby
empowered and authorized to sell all the Mortgagor's property after
the necessary publication in order to settle the financial debts of
P4,800.00, plus 12% yearly interest, and attorney's fees... 2
When defendants-appellants defaulted in paying, the mortgage was
extrajudicially foreclosed, and on 27 March 1956, the house was
sold at public auction pursuant to the said contract. As highest
bidder, plaintiffs-appellees were issued the corresponding
certificate of sale. 3 Thereafter, on 18 April 1956,
plaintiffs-appellant commenced Civil Case No. 43073 in the
municipal court of Manila, praying, among other things, that the
house be vacated and its possession surrendered to them, and for
defendants-appellants to pay rent of P200.00 monthly from 27 March
1956 up to the time the possession is surrendered. 4 On 21
September 1956, the municipal court rendered its decision
... ordering the defendants to vacate the premises described in
the complaint; ordering further to pay monthly the amount of
P200.00 from March 27, 1956, until such (time that) the premises is
(sic) completely vacated; plus attorney's fees of P100.00 and the
costs of the suit. 5
Defendants-appellants, in their answers in both the municipal
court and court a quo impugned the legality of the chattel
mortgage, claiming that they are still the owners of the house; but
they waived the right to introduce evidence, oral or documentary.
Instead, they relied on their memoranda in support of their motion
to dismiss, predicated mainly on the grounds that: (a) the
municipal court did not have jurisdiction to try and decide the
case because (1) the issue involved, is ownership, and (2) there
was no allegation of prior possession; and (b) failure to prove
prior demand pursuant to Section 2, Rule 72, of the Rules of Court.
6
During the pendency of the appeal to the Court of First
Instance, defendants-appellants failed to deposit the rent for
November, 1956 within the first 10 days of December, 1956 as
ordered in the decision of the municipal court. As a result, the
court granted plaintiffs-appellees' motion for execution, and it
was actually issued on 24 January 1957. However, the judgment
regarding the surrender of possession to plaintiffs-appellees could
not be executed because the subject house had been already
demolished on 14 January 1957 pursuant to the order of the court in
a separate civil case (No. 25816) for ejectment against the present
defendants for non-payment of rentals on the land on which the
house was constructed.
The motion of plaintiffs for dismissal of the appeal, execution
of the supersedeas bond and withdrawal of deposited rentals was
denied for the reason that the liability therefor was disclaimed
and was still being litigated, and under Section 8, Rule 72,
rentals deposited had to be held until final disposition of the
appeal. 7
On 7 October 1957, the appellate court of First Instance
rendered its decision, the dispositive portion of which is quoted
earlier. The said decision was appealed by defendants to the Court
of Appeals which, in turn, certified the appeal to this Court.
Plaintiffs-appellees failed to file a brief and this appeal was
submitted for decision without it.
Defendants-appellants submitted numerous assignments of error
which can be condensed into two questions, namely: .
(a)Whether the municipal court from which the case originated
had jurisdiction to adjudicate the same;
(b)Whether the defendants are, under the law, legally bound to
pay rentals to the plaintiffs during the period of one (1) year
provided by law for the redemption of the extrajudicially
foreclosed house.
We will consider these questions seriatim.
(a) Defendants-appellants mortgagors question the jurisdiction
of the municipal court from which the case originated, and
consequently, the appellate jurisdiction of the Court of First
Instance a quo, on the theory that the chattel mortgage is void ab
initio; whence it would follow that the extrajudicial foreclosure,
and necessarily the consequent auction sale, are also void. Thus,
the ownership of the house still remained with
defendants-appellants who are entitled to possession and not
plaintiffs-appellees. Therefore, it is argued by
defendants-appellants, the issue of ownership will have to be
adjudicated first in order to determine possession. lt is contended
further that ownership being in issue, it is the Court of First
Instance which has jurisdiction and not the municipal court.
Defendants-appellants predicate their theory of nullity of the
chattel mortgage on two grounds, which are: (a) that, their
signatures on the chattel mortgage were obtained through fraud,
deceit, or trickery; and (b) that the subject matter of the
mortgage is a house of strong materials, and, being an immovable,
it can only be the subject of a real estate mortgage and not a
chattel mortgage.
On the charge of fraud, deceit or trickery, the Court of First
Instance found defendants-appellants' contentions as not supported
by evidence and accordingly dismissed the charge, 8 confirming the
earlier finding of the municipal court that "the defense of
ownership as well as the allegations of fraud and deceit ... are
mere allegations." 9
It has been held in Supia and Batiaco vs. Quintero and Ayala 10
that "the answer is a mere statement of the facts which the party
filing it expects to prove, but it is not evidence; 11 and further,
that when the question to be determined is one of title, the Court
is given the authority to proceed with the hearing of the cause
until this fact is clearly established. In the case of Sy vs.
Dalman, 12 wherein the defendant was also a successful bidder in an
auction sale, it was likewise held by this Court that in detainer
cases the aim of ownership "is a matter of defense and raises an
issue of fact which should be determined from the evidence at the
trial." What determines jurisdiction are the allegations or
averments in the complaint and the relief asked for. 13
Moreover, even granting that the charge is true, fraud or deceit
does not render a contract void ab initio, and can only be a ground
for rendering the contract voidable or annullable pursuant to
Article 1390 of the New Civil Code, by a proper action in court. 14
There is nothing on record to show that the mortgage has been
annulled. Neither is it disclosed that steps were taken to nullify
the same. Hence, defendants-appellants' claim of ownership on the
basis of a voidable contract which has not been voided fails.
It is claimed in the alternative by defendants-appellants that
even if there was no fraud, deceit or trickery, the chattel
mortgage was still null and void ab initio because only personal
properties can be subject of a chattel mortgage. The rule about the
status of buildings as immovable property is stated in Lopez vs.
Orosa, Jr. and Plaza Theatre Inc., 15 cited in Associated Insurance
Surety Co., Inc. vs. Iya, et al. 16 to the effect that
... it is obvious that the inclusion of the building, separate
and distinct from the land, in the enumeration of what may
constitute real properties (art. 415, New Civil Code) could only
mean one thing that a building is by itself an immovable property
irrespective of whether or not said structure and the land on which
it is adhered to belong to the same owner.
Certain deviations, however, have been allowed for various
reasons. In the case of Manarang and Manarang vs. Ofilada, 17 this
Court stated that "it is undeniable that the parties to a contract
may by agreement treat as personal property that which by nature
would be real property", citing Standard Oil Company of New York
vs. Jaramillo. 18 In the latter case, the mortgagor conveyed and
transferred to the mortgagee by way of mortgage "the following
described personal property." 19 The "personal property" consisted
of leasehold rights and a building. Again, in the case of Luna vs.
Encarnacion, 20 the subject of the contract designated as Chattel
Mortgage was a house of mixed materials, and this Court hold
therein that it was a valid Chattel mortgage because it was so
expressly designated and specifically that the property given as
security "is a house of mixed materials, which by its very nature
is considered personal property." In the later case of Navarro vs.
Pineda, 21 this Court stated that
The view that parties to a deed of chattel mortgage may agree to
consider a house as personal property for the purposes of said
contract, "is good only insofar as the contracting parties are
concerned. It is based, partly, upon the principle of estoppel"
(Evangelista vs. Alto Surety, No. L-11139, 23 April 1958). In a
case, a mortgaged house built on a rented land was held to be a
personal property, not only because the deed of mortgage considered
it as such, but also because it did not form part of the land
(Evangelists vs. Abad, [CA]; 36 O.G. 2913), for it is now settled
that an object placed on land by one who had only a temporary right
to the same, such as the lessee or usufructuary, does not become
immobilized by attachment (Valdez vs. Central Altagracia, 222 U.S.
58, cited in Davao Sawmill Co., Inc. vs. Castillo, et al., 61 Phil.
709). Hence, if a house belonging to a person stands on a rented
land belonging to another person, it may be mortgaged as a personal
property as so stipulated in the document of mortgage. (Evangelista
vs. Abad, Supra.) It should be noted, however that the principle is
predicated on statements by the owner declaring his house to be a
chattel, a conduct that may conceivably estop him from subsequently
claiming otherwise. (Ladera vs. C.N. Hodges, [CA] 48 O.G. 5374):
22
In the contract now before Us, the house on rented land is not
only expressly designated as Chattel Mortgage; it specifically
provides that "the mortgagor ... voluntarily CEDES, SELLS and
TRANSFERS by way of Chattel Mortgage 23 the property together with
its leasehold rights over the lot on which it is constructed and
participation ..." 24 Although there is no specific statement
referring to the subject house as personal property, yet by ceding,
selling or transferring a property by way of chattel mortgage
defendants-appellants could only have meant to convey the house as
chattel, or at least, intended to treat the same as such, so that
they should not now be allowed to make an inconsistent stand by
claiming otherwise. Moreover, the subject house stood on a rented
lot to which defendats-appellants merely had a temporary right as
lessee, and although this can not in itself alone determine the
status of the property, it does so when combined with other factors
to sustain the interpretation that the parties, particularly the
mortgagors, intended to treat the house as personalty. Finally
unlike in the Iya cases, Lopez vs. Orosa, Jr. and Plaza Theatre,
Inc. 25 and Leung Yee vs. F. L. Strong Machinery and Williamson, 26
wherein third persons assailed the validity of the chattel
mortgage, 27 it is the defendants-appellants themselves, as
debtors-mortgagors, who are attacking the validity of the chattel
mortgage in this case. The doctrine of estoppel therefore applies
to the herein defendants-appellants, having treated the subject
house as personalty.
(b)Turning to the question of possession and rentals of the
premises in question. The Court of First Instance noted in its
decision that nearly a year after the foreclosure sale the
mortgaged house had been demolished on 14 and 15 January 1957 by
virtue of a decision obtained by the lessor of the land on which
the house stood. For this reason, the said court limited itself to
sentencing the erstwhile mortgagors to pay plaintiffs a monthly
rent of P200.00 from 27 March 1956 (when the chattel mortgage was
foreclosed and the house sold) until 14 January 1957 (when it was
torn down by the Sheriff), plus P300.00 attorney's fees.
Appellants mortgagors question this award, claiming that they
were entitled to remain in possession without any obligation to pay
rent during the one year redemption period after the foreclosure
sale, i.e., until 27 March 1957. On this issue, We must rule for
the appellants.
Chattel mortgages are covered and regulated by the Chattel
Mortgage Law, Act No. 1508. 28 Section 14 of this Act allows the
mortgagee to have the property mortgaged sold at public auction
through a public officer in almost the same manner as that allowed
by Act No. 3135, as amended by Act No. 4118, provided that the
requirements of the law relative to notice and registration are
complied with. 29 In the instant case, the parties specifically
stipulated that "the chattel mortgage will be enforceable in
accordance with the provisions of Special Act No. 3135 ... ." 30
(Emphasis supplied).
Section 6 of the Act referred to 31 provides that the
debtor-mortgagor (defendants-appellants herein) may, at any time
within one year from and after the date of the auction sale, redeem
the property sold at the extra judicial foreclosure sale. Section 7
of the same Act 32 allows the purchaser of the property to obtain
from the court the possession during the period of redemption: but
the same provision expressly requires the filing of a petition with
the proper Court of First Instance and the furnishing of a bond. It
is only upon filing of the proper motion and the approval of the
corresponding bond that the order for a writ of possession issues
as a matter of course. No discretion is left to the court. 33 In
the absence of such a compliance, as in the instant case, the
purchaser can not claim possession during the period of redemption
as a matter of right. In such a case, the governing provision is
Section 34, Rule 39, of the Revised Rules of Court 34 which also
applies to properties purchased in extrajudicial foreclosure
proceedings. 35 Construing the said section, this Court stated in
the aforestated case of Reyes vs. Hamada.
In other words, before the expiration of the 1-year period
within which the judgment-debtor or mortgagor may redeem the
property, the purchaser thereof is not entitled, as a matter of
right, to possession of the same. Thus, while it is true that the
Rules of Court allow the purchaser to receive the rentals if the
purchased property is occupied by tenants, he is, nevertheless,
accountable to the judgment-debtor or mortgagor as the case may be,
for the amount so received and the same will be duly credited
against the redemption price when the said debtor or mortgagor
effects the redemption. Differently stated, the rentals receivable
from tenants, although they may be collected by the purchaser
during the redemption period, do not belong to the latter but still
pertain to the debtor of mortgagor. The rationale for the Rule, it
seems, is to secure for the benefit of the debtor or mortgagor, the
payment of the redemption amount and the consequent return to him
of his properties sold at public auction. (Emphasis supplied)
The Hamada case reiterates the previous ruling in Chan vs. Espe.
36
Since the defendants-appellants were occupying the house at the
time of the auction sale, they are entitled to remain in possession
during the period of redemption or within one year from and after
27 March 1956, the date of the auction sale, and to collect the
rents or profits during the said period.
It will be noted further that in the case at bar the period of
redemption had not yet expired when action was instituted in the
court of origin, and that plaintiffs-appellees did not choose to
take possession under Section 7, Act No. 3135, as amended, which is
the law selected by the parties to govern the extrajudicial
foreclosure of the chattel mortgage. Neither was there an
allegation to that effect. Since plaintiffs-appellees' right to
possess was not yet born at the filing of the complaint, there
could be no violation or breach thereof. Wherefore, the original
complaint stated no cause of action and was prematurely filed. For
this reason, the same should be ordered dismissed, even if there
was no assignment of error to that effect. The Supreme Court is
clothed with ample authority to review palpable errors not assigned
as such if it finds that their consideration is necessary in
arriving at a just decision of the cases. 37
It follows that the court below erred in requiring the
mortgagors to pay rents for the year following the foreclosure
sale, as well as attorney's fees.
FOR THE FOREGOING REASONS, the decision appealed from is
reversed and another one entered, dismissing the complaint. With
costs against plaintiffs-appellees.
G.R. No. L-58469May 16, 1983
MAKATI LEASING and FINANCE CORPORATION, petitioner, vs.WEAREVER
TEXTILE MILLS, INC., and HONORABLE COURT OF APPEALS,
respondents.Loreto C. Baduan for petitioner.Ramon D. Bagatsing
& Assoc. (collaborating counsel) for petitioner.Jose V.
Mancella for respondent.DE CASTRO, J.:
Petition for review on certiorari of the decision of the Court
of Appeals (now Intermediate Appellate Court) promulgated on August
27, 1981 in CA-G.R. No. SP-12731, setting aside certain Orders
later specified herein, of Judge Ricardo J. Francisco, as Presiding
Judge of the Court of First instance of Rizal Branch VI, issued in
Civil Case No. 36040, as wen as the resolution dated September 22,
1981 of the said appellate court, denying petitioner's motion for
reconsideration.
It appears that in order to obtain financial accommodations from
herein petitioner Makati Leasing and Finance Corporation, the
private respondent Wearever Textile Mills, Inc., discounted and
assigned several receivables with the former under a Receivable
Purchase Agreement. To secure the collection of the receivables
assigned, private respondent executed a Chattel Mortgage over
certain raw materials inventory as well as a machinery described as
an Artos Aero Dryer Stentering Range.
Upon private respondent's default, petitioner filed a petition
for extrajudicial foreclosure of the properties mortgage to it.
However, the Deputy Sheriff assigned to implement the foreclosure
failed to gain entry into private respondent's premises and was not
able to effect the seizure of the aforedescribed machinery.
Petitioner thereafter filed a complaint for judicial foreclosure
with the Court of First Instance of Rizal, Branch VI, docketed as
Civil Case No. 36040, the case before the lower court.
Acting on petitioner's application for replevin, the lower court
issued a writ of seizure, the enforcement of which was however
subsequently restrained upon private respondent's filing of a
motion for reconsideration. After several incidents, the lower
court finally issued on February 11, 1981, an order lifting the
restraining order for the enforcement of the writ of seizure and an
order to break open the premises of private respondent to enforce
said writ. The lower court reaffirmed its stand upon private
respondent's filing of a further motion for reconsideration.
On July 13, 1981, the sheriff enforcing the seizure order,
repaired to the premises of private respondent and removed the main
drive motor of the subject machinery.
The Court of Appeals, in certiorari and prohibition proceedings
subsequently filed by herein private respondent, set aside the
Orders of the lower court and ordered the return of the drive motor
seized by the sheriff pursuant to said Orders, after ruling that
the machinery in suit cannot be the subject of replevin, much less
of a chattel mortgage, because it is a real property pursuant to
Article 415 of the new Civil Code, the same being attached to the
ground by means of bolts and the only way to remove it from
respondent's plant would be to drill out or destroy the concrete
floor, the reason why all that the sheriff could do to enfore the
writ was to take the main drive motor of said machinery. The
appellate court rejected petitioner's argument that private
respondent is estopped from claiming that the machine is real
property by constituting a chattel mortgage thereon.
A motion for reconsideration of this decision of the Court of
Appeals having been denied, petitioner has brought the case to this
Court for review by writ of certiorari. It is contended by private
respondent, however, that the instant petition was rendered moot
and academic by petitioner's act of returning the subject motor
drive of respondent's machinery after the Court of Appeals'
decision was promulgated.
The contention of private respondent is without merit. When
petitioner returned the subject motor drive, it made itself
unequivocably clear that said action was without prejudice to a
motion for reconsideration of the Court of Appeals decision, as
shown by the receipt duly signed by respondent's representative. 1
Considering that petitioner has reserved its right to question the
propriety of the Court of Appeals' decision, the contention of
private respondent that this petition has been mooted by such
return may not be sustained.
The next and the more crucial question to be resolved in this
Petition is whether the machinery in suit is real or personal
property from the point of view of the parties, with petitioner
arguing that it is a personality, while the respondent claiming the
contrary, and was sustained by the appellate court, which
accordingly held that the chattel mortgage constituted thereon is
null and void, as contended by said respondent.
A similar, if not Identical issue was raised in Tumalad v.
Vicencio, 41 SCRA 143 where this Court, speaking through Justice
J.B.L. Reyes, ruled:
Although there is no specific statement referring to the subject
house as personal property, yet by ceding, selling or transferring
a property by way of chattel mortgage defendants-appellants could
only have meant to convey the house as chattel, or at least,
intended to treat the same as such, so that they should not now be
allowed to make an inconsistent stand by claiming otherwise.
Moreover, the subject house stood on a rented lot to which
defendants-appellants merely had a temporary right as lessee, and
although this can not in itself alone determine the status of the
property, it does so when combined with other factors to sustain
the interpretation that the parties, particularly the mortgagors,
intended to treat the house as personality. Finally, unlike in the
Iya cases, Lopez vs. Orosa, Jr. & Plaza Theatre, Inc. &
Leung Yee vs. F.L. Strong Machinery & Williamson, wherein third
persons assailed the validity of the chattel mortgage, it is the
defendants-appellants themselves, as debtors-mortgagors, who are
attacking the validity of the chattel mortgage in this case. The
doctrine of estoppel therefore applies to the herein
defendants-appellants, having treated the subject house as
personality.
Examining the records of the instant case, We find no logical
justification to exclude the rule out, as the appellate court did,
the present case from the application of the abovequoted
pronouncement. If a house of strong materials, like what was
involved in the above Tumalad case, may be considered as personal
property for purposes of executing a chattel mortgage thereon as
long as the parties to the contract so agree and no innocent third
party will be prejudiced thereby, there is absolutely no reason why
a machinery, which is movable in its nature and becomes immobilized
only by destination or purpose, may not be likewise treated as
such. This is really because one who has so agreed is estopped from
denying the existence of the chattel mortgage.
In rejecting petitioner's assertion on the applicability of the
Tumalad doctrine, the Court of Appeals lays stress on the fact that
the house involved therein was built on a land that did not belong
to the owner of such house. But the law makes no distinction with
respect to the ownership of the land on which the house is built
and We should not lay down distinctions not contemplated by
law.
It must be pointed out that the characterization of the subject
machinery as chattel by the private respondent is indicative of
intention and impresses upon the property the character determined
by the parties. As stated in Standard Oil Co. of New York v.
Jaramillo, 44 Phil. 630, it is undeniable that the parties to a
contract may by agreement treat as personal property that which by
nature would be real property, as long as no interest of third
parties would be prejudiced thereby.
Private respondent contends that estoppel cannot apply against
it because it had never represented nor agreed that the machinery
in suit be considered as personal property but was merely required
and dictated on by herein petitioner to sign a printed form of
chattel mortgage which was in a blank form at the time of signing.
This contention lacks persuasiveness. As aptly pointed out by
petitioner and not denied by the respondent, the status of the
subject machinery as movable or immovable was never placed in issue
before the lower court and the Court of Appeals except in a
supplemental memorandum in support of the petition filed in the
appellate court. Moreover, even granting that the charge is true,
such fact alone does not render a contract void ab initio, but can
only be a ground for rendering said contract voidable, or
annullable pursuant to Article 1390 of the new Civil Code, by a
proper action in court. There is nothing on record to show that the
mortgage has been annulled. Neither is it disclosed that steps were
taken to nullify the same. On the other hand, as pointed out by
petitioner and again not refuted by respondent, the latter has
indubitably benefited from said contract. Equity dictates that one
should not benefit at the expense of another. Private respondent
could not now therefore, be allowed to impugn the efficacy of the
chattel mortgage after it has benefited therefrom,
From what has been said above, the error of the appellate court
in ruling that the questioned machinery is real, not personal
property, becomes very apparent. Moreover, the case of Machinery
and Engineering Supplies, Inc. v. CA, 96 Phil. 70, heavily relied
upon by said court is not applicable to the case at bar, the nature
of the machinery and equipment involved therein as real properties
never having been disputed nor in issue, and they were not the
subject of a Chattel Mortgage. Undoubtedly, the Tumalad case bears
more nearly perfect parity with the instant case to be the more
controlling jurisprudential authority.
WHEREFORE, the questioned decision and resolution of the Court
of Appeals are hereby reversed and set aside, and the Orders of the
lower court are hereby reinstated, with costs against the private
respondent.
SO ORDERED.
G.R. No. L-64261December 26, 1984
JOSE BURGOS, SR., JOSE BURGOS, JR., BAYANI SORIANO and J. BURGOS
MEDIA SERVICES, INC., petitioners, vs.THE CHIEF OF STAFF, ARMED
FORCES OF THE PHILIPPINES, THE CHIEF, PHILIPPINE CONSTABULARY, THE
CHIEF LEGAL OFFICER, PRESIDENTIAL SECURITY COMMAND, THE JUDGE
ADVOCATE GENERAL, ET AL., respondents.
Lorenzo M. Taada, Wigberto E. Taada, Martiniano Vivo, Augusto
Sanchez, Joker P. Arroyo, Jejomar Binay and Rene Saguisag for
petitioners.
The Solicitor General for respondents.
ESCOLIN, J.:
Assailed in this petition for certiorari prohibition and
mandamus with preliminary mandatory and prohibitory injunction is
the validity of two [2] search warrants issued on December 7, 1982
by respondent Judge Ernani Cruz-Pano, Executive Judge of the then
Court of First Instance of Rizal [Quezon City], under which the
premises known as No. 19, Road 3, Project 6, Quezon City, and 784
Units C & D, RMS Building, Quezon Avenue, Quezon City, business
addresses of the "Metropolitan Mail" and "We Forum" newspapers,
respectively, were searched, and office and printing machines,
equipment, paraphernalia, motor vehicles and other articles used in
the printing, publication and distribution of the said newspapers,
as well as numerous papers, documents, books and other written
literature alleged to be in the possession and control of
petitioner Jose Burgos, Jr. publisher-editor of the "We Forum"
newspaper, were seized.
Petitioners further pray that a writ of preliminary mandatory
and prohibitory injunction be issued for the return of the
seize