G.R. No.

L-50008 August 31, 1987

PRUDENTIAL
BANK, petitioner,
vs.
HONORABLE DOMINGO D. PANIS, Presiding Judge of Branch III, Court of
First Instance of Zambales and Olongapo City; FERNANDO MAGCALE &
TEODULA BALUYUT-MAGCALE, respondents.
PARAS, J.:
This is a petition for review on certiorari of the November 13, 1978 Decision * of the
then Court of First Instance of Zambales and Olongapo City in Civil Case No. 2443-0
entitled "Spouses Fernando A. Magcale and Teodula Baluyut-Magcale vs. Hon.
Ramon Y. Pardo and Prudential Bank" declaring that the deeds of real estate
mortgage executed by respondent spouses in favor of petitioner bank are null and
void.
The undisputed facts of this case by stipulation of the parties are as follows:
... on November 19, 1971, plaintiffs-spouses Fernando A. Magcale and
Teodula Baluyut Magcale secured a loan in the sum of P70,000.00 from
the defendant Prudential Bank. To secure payment of this loan,
plaintiffs executed in favor of defendant on the aforesaid date a deed
of Real Estate Mortgage over the following described properties:
l. A 2-STOREY, SEMI-CONCRETE, residential building with warehouse
spaces containing a total floor area of 263 sq. meters, more or less,
generally constructed of mixed hard wood and concrete materials,
under a roofing of cor. g. i. sheets; declared and assessed in the name
of FERNANDO MAGCALE under Tax Declaration No. 21109, issued by
the Assessor of Olongapo City with an assessed value of P35,290.00.
This building is the only improvement of the lot.
2. THE PROPERTY hereby conveyed by way of MORTGAGE includes the
right of occupancy on the lot where the above property is erected, and
more particularly described and bounded, as follows:
A first class residential land Identffied as Lot No. 720, (Ts308, Olongapo Townsite Subdivision) Ardoin Street, East
Bajac-Bajac, Olongapo City, containing an area of 465 sq.
m. more or less, declared and assessed in the name of
FERNANDO MAGCALE under Tax Duration No. 19595
issued by the Assessor of Olongapo City with an assessed
value of P1,860.00; bounded on the

NORTH: By No. 6, Ardoin Street

SOUTH: By No. 2, Ardoin Street
EAST: By 37 Canda Street, and
WEST: By Ardoin Street.
All corners of the lot marked by conc.
cylindrical monuments of the Bureau of
Lands as visible limits. ( Exhibit "A, " also
Exhibit "1" for defendant).
Apart from the stipulations in the printed portion of the
aforestated deed of mortgage, there appears a rider
typed at the bottom of the reverse side of the document
under the lists of the properties mortgaged which reads,
as follows:
AND IT IS FURTHER AGREED that in the event
the Sales Patent on the lot applied for by the
Mortgagors as herein stated is released or
issued by the Bureau of Lands, the
Mortgagors hereby authorize the Register of
Deeds to hold the Registration of same until
this Mortgage is cancelled, or to annotate
this encumbrance on the Title upon authority
from the Secretary of Agriculture and Natural
Resources, which title with annotation, shall
be released in favor of the herein Mortgage.
From the aforequoted stipulation, it is obvious that the
mortgagee (defendant Prudential Bank) was at the outset
aware of the fact that the mortgagors (plaintiffs) have
already filed a Miscellaneous Sales Application over the
lot, possessory rights over which, were mortgaged to it.
Exhibit "A" (Real Estate Mortgage) was registered under
the Provisions of Act 3344 with the Registry of Deeds of
Zambales on November 23, 1971.
On May 2, 1973, plaintiffs secured an additional loan from
defendant Prudential Bank in the sum of P20,000.00. To
secure payment of this additional loan, plaintiffs executed

in favor of the said defendant another deed of Real Estate

Mortgage over the same properties previously mortgaged
in Exhibit "A." (Exhibit "B;" also Exhibit "2" for defendant).
This second deed of Real Estate Mortgage was likewise
registered with the Registry of Deeds, this time in
Olongapo City, on May 2,1973.
On April 24, 1973, the Secretary of Agriculture issued Miscellaneous
Sales Patent No. 4776 over the parcel of land, possessory rights over
which were mortgaged to defendant Prudential Bank, in favor of
plaintiffs. On the basis of the aforesaid Patent, and upon its
transcription in the Registration Book of the Province of Zambales,
Original Certificate of Title No. P-2554 was issued in the name of
Plaintiff Fernando Magcale, by the Ex-Oficio Register of Deeds of
Zambales, on May 15, 1972.
For failure of plaintiffs to pay their obligation to defendant Bank after it
became due, and upon application of said defendant, the deeds of Real
Estate Mortgage (Exhibits "A" and "B") were extrajudicially foreclosed.
Consequent to the foreclosure was the sale of the properties therein
mortgaged to defendant as the highest bidder in a public auction sale
conducted by the defendant City Sheriff on April 12, 1978 (Exhibit "E").
The auction sale aforesaid was held despite written request from
plaintiffs through counsel dated March 29, 1978, for the defendant City
Sheriff to desist from going with the scheduled public auction sale
(Exhibit "D")." (Decision, Civil Case No. 2443-0, Rollo, pp. 29-31).
Respondent Court, in a Decision dated November 3, 1978 declared the deeds of
Real Estate Mortgage as null and void (Ibid., p. 35).
On December 14, 1978, petitioner filed a Motion for Reconsideration (Ibid., pp. 4153), opposed by private respondents on January 5, 1979 (Ibid., pp. 54-62), and in an
Order dated January 10, 1979 (Ibid., p. 63), the Motion for Reconsideration was
denied for lack of merit. Hence, the instant petition (Ibid., pp. 5-28).
The first Division of this Court, in a Resolution dated March 9, 1979, resolved to
require the respondents to comment (Ibid., p. 65), which order was complied with
the Resolution dated May 18,1979, (Ibid., p. 100), petitioner filed its Reply on June
2,1979 (Ibid., pp. 101-112).
Thereafter, in the Resolution dated June 13, 1979, the petition was given due course
and the parties were required to submit simultaneously their respective
memoranda. (Ibid., p. 114).

On July 18, 1979, petitioner filed its Memorandum (Ibid., pp. 116-144), while private
respondents filed their Memorandum on August 1, 1979 (Ibid., pp. 146-155).
In a Resolution dated August 10, 1979, this case was considered submitted for
decision (Ibid., P. 158).
In its Memorandum, petitioner raised the following issues:
1. WHETHER OR NOT THE DEEDS OF REAL ESTATE MORTGAGE ARE VALID; AND
2. WHETHER OR NOT THE SUPERVENING ISSUANCE IN FAVOR OF PRIVATE
RESPONDENTS OF MISCELLANEOUS SALES PATENT NO. 4776 ON APRIL 24, 1972
UNDER ACT NO. 730 AND THE COVERING ORIGINAL CERTIFICATE OF TITLE NO. P2554 ON MAY 15,1972 HAVE THE EFFECT OF INVALIDATING THE DEEDS OF REAL
ESTATE MORTGAGE. (Memorandum for Petitioner, Rollo, p. 122).
This petition is impressed with merit.
The pivotal issue in this case is whether or not a valid real estate mortgage can be
constituted on the building erected on the land belonging to another.
The answer is in the affirmative.
In the enumeration of properties under Article 415 of the Civil Code of the
Philippines, this Court ruled that, "it is obvious that the inclusion of "building"
separate and distinct from the land, in said provision of law can only mean that a
building is by itself an immovable property." (Lopez vs. Orosa, Jr., et al., L-10817-18,
Feb. 28, 1958; Associated Inc. and Surety Co., Inc. vs. Iya, et al., L-10837-38, May
30,1958).
Thus, while it is true that a mortgage of land necessarily includes, in the absence of
stipulation of the improvements thereon, buildings, still a building by itself may be
mortgaged apart from the land on which it has been built. Such a mortgage would
be still a real estate mortgage for the building would still be considered immovable
property even if dealt with separately and apart from the land (Leung Yee vs. Strong
Machinery Co., 37 Phil. 644). In the same manner, this Court has also established
that possessory rights over said properties before title is vested on the grantee,
may be validly transferred or conveyed as in a deed of mortgage (Vda. de Bautista
vs. Marcos, 3 SCRA 438 [1961]).
Coming back to the case at bar, the records show, as aforestated that the original
mortgage deed on the 2-storey semi-concrete residential building with warehouse
and on the right of occupancy on the lot where the building was erected, was
executed on November 19, 1971 and registered under the provisions of Act 3344

with the Register of Deeds of Zambales on November 23, 1971. Miscellaneous Sales
Patent No. 4776 on the land was issued on April 24, 1972, on the basis of which OCT
No. 2554 was issued in the name of private respondent Fernando Magcale on May
15, 1972. It is therefore without question that the original mortgage was executed
before the issuance of the final patent and before the government was divested of
its title to the land, an event which takes effect only on the issuance of the sales
patent and its subsequent registration in the Office of the Register of Deeds
(Visayan Realty Inc. vs. Meer, 96 Phil. 515; Director of Lands vs. De Leon, 110 Phil.
28; Director of Lands vs. Jurado, L-14702, May 23, 1961; Pena "Law on Natural
Resources", p. 49). Under the foregoing considerations, it is evident that the
mortgage executed by private respondent on his own building which was erected on
the land belonging to the government is to all intents and purposes a valid
mortgage.
As to restrictions expressly mentioned on the face of respondents' OCT No. P-2554,
it will be noted that Sections 121, 122 and 124 of the Public Land Act, refer to land
already acquired under the Public Land Act, or any improvement thereon and
therefore have no application to the assailed mortgage in the case at bar which was
executed before such eventuality. Likewise, Section 2 of Republic Act No. 730, also a
restriction appearing on the face of private respondent's title has likewise no
application in the instant case, despite its reference to encumbrance or alienation
before the patent is issued because it refers specifically to encumbrance or
alienation on the land itself and does not mention anything regarding the
improvements existing thereon.
But it is a different matter, as regards the second mortgage executed over the same
properties on May 2, 1973 for an additional loan of P20,000.00 which was registered
with the Registry of Deeds of Olongapo City on the same date. Relative thereto, it is
evident that such mortgage executed after the issuance of the sales patent and of
the Original Certificate of Title, falls squarely under the prohibitions stated in
Sections 121, 122 and 124 of the Public Land Act and Section 2 of Republic Act 730,
and is therefore null and void.
Petitioner points out that private respondents, after physically possessing the title
for five years, voluntarily surrendered the same to the bank in 1977 in order that
the mortgaged may be annotated, without requiring the bank to get the prior
approval of the Ministry of Natural Resources beforehand, thereby implicitly
authorizing Prudential Bank to cause the annotation of said mortgage on their title.
However, the Court, in recently ruling on violations of Section 124 which refers to
Sections 118, 120, 122 and 123 of Commonwealth Act 141, has held:
... Nonetheless, we apply our earlier rulings because we believe that as
in pari delicto may not be invoked to defeat the policy of the State

neither may the doctrine of estoppel give a validating effect to a void

contract. Indeed, it is generally considered that as between parties to a
contract, validity cannot be given to it by estoppel if it is prohibited by
law or is against public policy (19 Am. Jur. 802). It is not within the
competence of any citizen to barter away what public policy by law
was to preserve (Gonzalo Puyat & Sons, Inc. vs. De los Amas and
Alino supra). ... (Arsenal vs. IAC, 143 SCRA 54 [1986]).
This pronouncement covers only the previous transaction already alluded to and
does not pass upon any new contract between the parties (Ibid), as in the case at
bar. It should not preclude new contracts that may be entered into between
petitioner bank and private respondents that are in accordance with the
requirements of the law. After all, private respondents themselves declare that they
are not denying the legitimacy of their debts and appear to be open to new
negotiations under the law (Comment; Rollo, pp. 95-96). Any new transaction,
however, would be subject to whatever steps the Government may take for the
reversion of the land in its favor.
PREMISES CONSIDERED, the decision of the Court of First Instance of Zambales &
Olongapo City is hereby MODIFIED, declaring that the Deed of Real Estate Mortgage
for P70,000.00 is valid but ruling that the Deed of Real Estate Mortgage for an
additional loan of P20,000.00 is null and void, without prejudice to any appropriate
action the Government may take against private respondents.
SO ORDERED.
MAKATI
LEASING
vs.
WEAREVER
TEXTILE
APPEALS, respondents.

and
MILLS,

FINANCE
INC.,

and

CORPORATION, petitioner,
HONORABLE

COURT

OF

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. SP12731, 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 inStandard 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.
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, defendantsappellants 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, defendantsappellants' 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 ..." 24Although 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 defendatsappellants 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 debtorsmortgagors, 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 (defendantsappellants 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 [Link] 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 plaintiffsappellees 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.

SERGS
PRODUCTS,
INC.,
GOQUIOLAY, petitioners, vs. PCI
INC., respondent.

and
LEASING

SERGIO
T.
AND
FINANCE,

DECISION
PANGANIBAN, J.:
After agreeing to a contract stipulating that a real or immovable
property be considered as personal or movable, a party is estopped from
subsequently claiming [Link], such property is a proper subject of
a writ of replevin obtained by the other contracting party.
The Case
Before us is a Petition for Review on Certiorari assailing the January 6,
1999 Decision[1] of the Court of Appeals (CA)[2] in CA-GR SP No. 47332 and
its February 26, 1999 Resolution[3] denying reconsideration. The decretal
portion of the CA Decision reads as follows:
WHEREFORE, premises considered, the assailed Order dated February 18, 1998 and
Resolution dated March 31, 1998 in Civil Case No. Q-98-33500 are
hereby AFFIRMED. The writ of preliminary injunction issued on June 15, 1998 is
hereby LIFTED.[4]
In its February 18, 1998 Order, [5] the Regional Trial Court (RTC) of
Quezon City (Branch 218)[6] issued a Writ of Seizure.[7] The March 18, 1998
Resolution[8] denied petitioners Motion for Special Protective Order, praying
that the deputy sheriff be enjoined from seizing immobilized or other real
properties in (petitioners) factory in Cainta, Rizal and to return to their
original place whatever immobilized machineries or equipments he may
have removed.[9]
The Facts
The undisputed facts are summarized by the Court of Appeals as
follows:[10]
On February 13, 1998, respondent PCI Leasing and Finance, Inc. (PCI Leasing for
short) filed with the RTC-QC a complaint for [a] sum of money (Annex E), with an
application for a writ of replevin docketed as Civil Case No. Q-98-33500.
On March 6, 1998, upon an ex-parte application of PCI Leasing, respondent judge
issued a writ of replevin (Annex B) directing its sheriff to seize and deliver the

machineries and equipment to PCI Leasing after 5 days and upon the payment of
the necessary expenses.
On March 24, 1998, in implementation of said writ, the sheriff proceeded to
petitioners factory, seized one machinery with [the] word that he [would] return for
the other machineries.
On March 25, 1998, petitioners filed a motion for special protective order (Annex C),
invoking the power of the court to control the conduct of its officers and amend and
control its processes, praying for a directive for the sheriff to defer enforcement of
the writ of replevin.
This motion was opposed by PCI Leasing (Annex F), on the ground that the
properties [were] still personal and therefore still subject to seizure and a writ of
replevin.
In their Reply, petitioners asserted that the properties sought to be seized [were]
immovable as defined in Article 415 of the Civil Code, the parties agreement to the
contrary notwithstanding. They argued that to give effect to the agreement would
be prejudicial to innocent third parties. They further stated that PCI Leasing [was]
estopped from treating these machineries as personal because the contracts in
which the alleged agreement [were] embodied [were] totally sham and farcical.
On April 6, 1998, the sheriff again sought to enforce the writ of seizure and take
possession of the remaining properties. He was able to take two more, but was
prevented by the workers from taking the rest.
On April 7, 1998, they went to [the CA] via an original action for certiorari.
Ruling of the Court of Appeals
Citing the Agreement of the parties, the appellate court held that the
subject machines were personal property, and that they had only been
leased, not owned, by petitioners. It also ruled that the words of the
contract are clear and leave no doubt upon the true intention of the
contracting parties. Observing that Petitioner Goquiolay was an experienced
businessman who was not unfamiliar with the ways of the trade, it ruled that
he should have realized the import of the document he signed. The CA
further held:
Furthermore, to accord merit to this petition would be to preempt the trial court in
ruling upon the case below, since the merits of the whole matter are laid down
before us via a petition whose sole purpose is to inquire upon the existence of a
grave abuse of discretion on the part of the [RTC] in issuing the assailed Order and

Resolution. The issues raised herein are proper subjects of a full-blown trial,
necessitating presentation of evidence by both parties. The contract is being
enforced by one, and [its] validity is attacked by the other a matter x x x which
respondent court is in the best position to determine.
Hence, this Petition.[11]
The Issues
In their Memorandum, petitioners submit the following issues for our
consideration:
A. Whether or not the machineries purchased and imported by SERGS became real
property by virtue of immobilization.
B. Whether or not the contract between the parties is a loan or a lease. [12]
In the main, the Court will resolve whether the said machines are
personal, not immovable, property which may be a proper subject of a writ
of replevin. As a preliminary matter, the Court will also address briefly the
procedural points raised by respondent.
The Courts Ruling
The Petition is not meritorious.
Preliminary Matter:Procedural Questions
Respondent contends that the Petition failed to indicate expressly
whether it was being filed under Rule 45 or Rule 65 of the Rules of Court. It
further alleges that the Petition erroneously impleaded Judge Hilario Laqui
as respondent.
There is no question that the present recourse is under Rule 45. This
conclusion finds support in the very title of the Petition, which is Petition for
Review on Certiorari.[13]
While Judge Laqui should not have been impleaded as a respondent,
substantial justice requires that such lapse by itself should not warrant
the dismissal of the present Petition. In this light, the Court deems it proper
to remove, motu proprio, the name of Judge Laqui from the caption of the
present case.
[14]

Main Issue: Nature of the Subject Machinery

Petitioners contend that the subject machines used in their factory were
not proper subjects of the Writ issued by the RTC, because they were in fact
real property. Serious policy considerations, they argue, militate against a
contrary characterization.
Rule 60 of the Rules of Court provides that writs of replevin are issued
for the recovery of personal property only.[15] Section 3 thereof reads:
SEC. 3. Order. -- Upon the filing of such affidavit and approval of the bond, the court
shall issue an order and the corresponding writ of replevin describing the personal
property alleged to be wrongfully detained and requiring the sheriff forthwith to take
such property into his custody.
On the other hand, Article 415 of the Civil Code enumerates immovable
or real property as follows:
ART. 415. The following are immovable property:
x x x....................................x x x....................................x x x
(5) Machinery, receptacles, instruments or implements intended by the owner of the
tenement for an industry or works which may be carried on in a building or on a
piece of land, and which tend directly to meet the needs of the said industry or
works;
x x x....................................x x x....................................x x x
In the present case, the machines that were the subjects of the Writ of
Seizure were placed by petitioners in the factory built on their own
land. Indisputably, they were essential and principal elements of their
chocolate-making industry. Hence, although each of them was movable or
personal property on its own, all of them have become immobilized by
destination because they are essential and principal elements in the
industry.[16] In that sense, petitioners are correct in arguing that the said
machines are real, not personal, property pursuant to Article 415 (5) of the
Civil Code.[17]
Be that as it may, we disagree with the submission of the petitioners
that the said machines are not proper subjects of the Writ of Seizure.
The Court has held that contracting parties may validly stipulate that a
real property be considered as personal.[18] After agreeing to such
stipulation, they are consequently estopped from claiming otherwise. Under

the principle of estoppel, a party to a contract is ordinarily precluded from

denying the truth of any material fact found therein.
Hence, in Tumalad v. Vicencio,[19] the Court upheld the intention of the
parties to treat a house as a personal property because it had been made
the subject of a chattel mortgage. The Court ruled:
x x x. 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.
Applying Tumalad, the Court in Makati Leasing and Finance Corp. v.
Wearever Textile Mills[20] also held that the machinery used in a factory and
essential to the industry, as in the present case, was a proper subject of a
writ of replevin because it was treated as personal property in a
contract. Pertinent portions of the Courts ruling are reproduced hereunder:
x x x. 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 the present case, the Lease Agreement clearly provides that the
machines in question are to be considered as personal property. Specifically,
Section 12.1 of the Agreement reads as follows: [21]
12.1 The PROPERTY is, and shall at all times be and remain, personal property
notwithstanding that the PROPERTY or any part thereof may now be, or hereafter
become, in any manner affixed or attached to or embedded in, or permanently
resting upon, real property or any building thereon, or attached in any manner to
what is permanent.
Clearly then, petitioners are estopped from denying the characterization
of the subject machines as personal property. Under the circumstances, they
are proper subjects of the Writ of Seizure.
It should be stressed, however, that our holding -- that the machines
should be deemed personal property pursuant to the Lease Agreement is

good only insofar as the contracting parties are concerned. [22] Hence, while
the parties are bound by the Agreement, third persons acting in good faith
are not affected by its stipulation characterizing the subject machinery as
personal.[23] In any event, there is no showing that any specific third party
would be adversely affected.
Validity of the Lease Agreement
In their Memorandum, petitioners contend that the Agreement is a loan
and not a lease.[24] Submitting documents supposedly showing that they
own the subject machines, petitioners also argue in their Petition that the
Agreement suffers from intrinsic ambiguity which places in serious doubt
the intention of the parties and the validity of the lease agreement itself.
[25]
In their Reply to respondents Comment, they further allege that the
Agreement is invalid.[26]
These arguments are unconvincing. The validity and the nature of the
contract are the lis mota of the civil action pending before the RTC. A
resolution of these questions, therefore, is effectively a resolution of the
merits of the case. Hence, they should be threshed out in the trial, not in the
proceedings involving the issuance of the Writ of Seizure.
Indeed, in La Tondea Distillers v. CA,[27] the Court explained that the
policy under Rule 60 was that questions involving title to the subject
property questions which petitioners are now raising -- should be
determined in the trial. In that case, the Court noted that the remedy of
defendants under Rule 60 was either to post a counter-bond or to question
the sufficiency of the plaintiffs bond. They were not allowed, however, to
invoke the title to the subject property. The Court ruled:
In other words, the law does not allow the defendant to file a motion to dissolve or
discharge the writ of seizure (or delivery) on ground of insufficiency of the complaint
or of the grounds relied upon therefor, as in proceedings on preliminary attachment
or injunction, and thereby put at issue the matter of the title or right of possession
over the specific chattel being replevied, the policy apparently being that said
matter should be ventilated and determined only at the trial on the merits. [28]
Besides, these questions require a determination of facts and a
presentation of evidence, both of which have no place in a petition for
certiorari in the CA under Rule 65 or in a petition for review in this Court
under Rule 45.[29]
Reliance on the Lease Agreement

It should be pointed out that the Court in this case may rely on the
Lease Agreement, for nothing on record shows that it has been nullified or
annulled. In fact, petitioners assailed it first only in the RTC proceedings,
which had ironically been instituted by respondent. Accordingly, it must be
presumed valid and binding as the law between the parties.
Makati Leasing and Finance Corporation [30] is also instructive on this
point. In that case, the Deed of Chattel Mortgage, which characterized the
subject machinery as personal property, was also assailed because
respondent had allegedly been required to sign a printed form of chattel
mortgage which was in a blank form at the time of signing. The Court
rejected the argument and relied on the Deed, ruling as follows:
x x x. 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. x x x
Alleged Injustice Committed on the Part of Petitioners
Petitioners contend that if the Court allows these machineries to be
seized, then its workers would be out of work and thrown into the streets.
[31]
They also allege that the seizure would nullify all efforts to rehabilitate
the corporation.
Petitioners arguments do not preclude the implementation of the
Writ. As earlier discussed, law and jurisprudence support its propriety. Verily,
the above-mentioned consequences, if they come true, should not be
blamed on this Court, but on the petitioners for failing to avail themselves of
the remedy under Section 5 of Rule 60, which allows the filing of a counterbond. The provision states:
SEC. 5. Return of property. -- If the adverse party objects to the sufficiency of the
applicants bond, or of the surety or sureties thereon, he cannot immediately require
the return of the property, but if he does not so object, he may, at any time before
the delivery of the property to the applicant, require the return thereof, by filing
with the court where the action is pending a bond executed to the applicant, in
double the value of the property as stated in the applicants affidavit for the delivery
thereof to the applicant, if such delivery be adjudged, and for the payment of such
sum to him as may be recovered against the adverse party, and by serving a copy
bond on the applicant.

WHEREFORE, the Petition is DENIED and the assailed Decision of the

Court of Appeals AFFIRMED. Costs against petitioners.
JULIAN
S.
YAP, petitioner,
vs.
HON. SANTIAGO O. TAADA, etc., and GOULDS PUMPS INTERNATIONAL
(PHIL.), INC., respondents.
Paterno P. Natinga for private respondent.

NARVASA, J.:
The petition for review on certiorari at bar involves two (2) Orders of respondent
Judge Taada 1 in Civil Case No. 10984. The first, dated September 16, 1970, denied
petitioner Yap's motion to set aside execution sale and to quash alias writ of
execution. The second, dated November 21, 1970, denied Yap's motion for
reconsideration. The issues concerned the propriety of execution of a judgment
claimed to be "incomplete, vague and non-final," and the denial of petitioner's
application to prove and recover damages resulting from alleged irregularities in the
process of execution.
The antecedents will take some time in the telling. The case began in the City Court
of Cebu with the filing by Goulds Pumps International (Phil.), Inc. of a
complaint 2 against Yap and his wife 3 seeking recovery of P1,459.30 representing
the balance of the price and installation cost of a water pump in the latter's
premises. 4 The case resulted in a judgment by the City Court on November 25,
1968, reading as follows:
When this case was called for trial today, Atty. Paterno Natinga
appeared for the plaintiff Goulds and informed the court that he is
ready for trial. However, none of the defendants appeared despite
notices having been served upon them.
Upon petition Atty. Natinga, the plaintiff is hereby allowed to present its
evidence ex-parte.
After considering the evidence of the plaintiff, the court hereby renders
judgment in favor of the plaintiff and against the defendant (Yap),
ordering the latter to pay to the former the sum of Pl,459.30 with
interest at the rate of 12% per annum until fully paid, computed from
August 12, 1968, date of the filing of the complaint; to pay the sum of

P364.80 as reasonable attorney's fees, which is equivalent " to 25% of

the unpaid principal obligation; and to pay the costs, if any.
Yap appealed to the Court of First Instance. The appeal was assigned to the sala of
respondent Judge Taada. For failure to appear for pre-trial on August 28, 1968, this
setting being intransferable since the pre-trial had already been once postponed at
his instance, 5 Yap was declared in default by Order of Judge Taada dated August
28, 1969, 6 reading as follows:
When this case was called for pre-trial this morning, the plaintiff and
counsel appeared, but neither the defendants nor his counsel appeared
despite the fact that they were duly notified of the pre-trial set this
morning. Instead he filed an Ex-Parte Motion for Postponement which
this Court received only this morning, and on petition of counsel for the
plaintiff that the Ex-Parte Motion for Postponement was not filed in
accordance with the Rules of Court he asked that the same be denied
and the defendants be declared in default; .. the motion for the plaintiff
being well- grounded, the defendants are hereby declared in default
and the Branch Clerk of Court ..is hereby authorized to receive
evidence for the plaintiff and .. submit his report within ten (10) days
after reception of evidence.
Goulds presented evidence ex parte and judgment by default was rendered the
following day by Judge Taada requiring Yap to pay to Goulds (1) Pl,459.30
representing the unpaid balance of the pump purchased by him; (2) interest of 12%
per annum thereon until fully paid; and (3) a sum equivalent to 25% of the amount
due as attorney's fees and costs and other expenses in prosecuting the action.
Notice of the judgment was served on Yap on September 1, 1969. 7
On September 16, 1969 Yap filed a motion for reconsideration. 8 In it he insisted that
his motion for postponement should have been granted since it expressed his desire
to explore the possibility of an amicable settlement; that the court should give the
parties time to arrive at an amicable settlement failing which, he should be allowed
to present evidence in support of his defenses (discrepancy as to the price and
breach of warranty). The motion was not verified or accompanied by any separate
affidavit. Goulds opposed the motion. Its opposition 9 drew attention to the
eleventh-hour motion for postponement of Yap which had resulted in the
cancellation of the prior hearing of June 30, 1969 despite Goulds' vehement
objection, and the re-setting thereof on August 28, 1969 with intransferable
character; it averred that Yap had again sought postponement of this last hearing by
another eleventh-hour motion on the plea that an amicable settlement would be
explored, yet he had never up to that time ever broached the matter, 10 and that
this pattern of seeking to obtain last-minute postponements was discernible also in
the proceedings before the City Court. In its opposition, Goulds also adverted to the

examination made by it of the pump, on instructions of the City Court, with a view
to remedying the defects claimed to exist by Yap; but the examination had disclosed
the pump's perfect condition. Yap's motion for reconsideration was denied by Order
dated October 10, 1969, notice of which was received by Yap on October 4, 1969. 11
On October 15, 1969 Judge Taada issued an Order granting Goulds' Motion for
Issuance of Writ of Execution dated October 14, 1969, declaring the reasons therein
alleged to be meritorious. 12 Yap forthwith filed an "Urgent Motion for
Reconsideration of Order" dated October 17, 1969, 13 contending that the judgment
had not yet become final, since contrary to Goulds' view, his motion for
reconsideration was not pro forma for lack of an affidavit of merit, this not being
required under Section 1 (a) of Rule 37 of the Rules of Court upon which his motion
was grounded. Goulds presented an opposition dated October 22, 1969. 14 It pointed
out that in his motion for reconsideration Yap had claimed to have a valid defense to
the action, i.e., ".. discrepancy as to price and breach of seller's warranty," in effect,
that there was fraud on Goulds' paint; Yap's motion for reconsideration should
therefore have been supported by an affidavit of merit respecting said defenses; the
absence thereof rendered the motion for reconsideration fatally defective with the
result that its filing did not interrupt the running of the period of appeal. The
opposition also drew attention to the failure of the motion for reconsideration to
specify the findings or conclusions in the judgment claimed to be contrary to law or
not supported by the evidence, making it a pro forma motion also incapable of
stopping the running of the appeal period. On October 23, 1969, Judge Taada
denied Yap's motion for reconsideration and authorized execution of the
judgment. 15 Yap sought reconsideration of this order, by another motion dated
October 29, 1969. 16 This motion was denied by Order dated January 26,
1970. 17 Again Yap moved for reconsideration, and again was rebuffed, by Order
dated April 28, 1970. 18
In the meantime the Sheriff levied on the water pump in question, 19 and by notice
dated November 4, 1969, scheduled the execution sale thereof on November 14,
1969. 20 But in view of the pendency of Yap's motion for reconsideration of October
29, 1969, suspension of the sale was directed by Judge Taada in an order dated
November 6, 1969. 21
Counsel for the plaintiff is hereby given 10 days time to answer the
Motion, dated October 29, 1969, from receipt of this Order and in the
meantime, the Order of October 23, 1969, insofar as it orders the
sheriff to enforce the writ of execution is hereby suspended.
It appears however that a copy of this Order was not transmitted to the Sheriff
"through oversight, inadvertence and pressure of work" of the Branch Clerk of
Court. 22 So the Deputy Provincial Sheriff went ahead with the scheduled auction
sale and sold the property levied on to Goulds as the highest bidder. 23 He later

submitted the requisite report to the Court dated November 17, 1969, 24 as well as
the "Sheriffs Return of Service" dated February 13, 1970, 25 in both of which it was
stated that execution had been "partially satisfied." It should be observed that up to
this time, February, 1970, Yap had not bestirred himself to take an appeal from the
judgment of August 29, 1969.
On May 9, 1970 Judge Taada ordered the issuance of an alias writ of execution on
Gould's ex parte motion therefor. 26 Yap received notice of the Order on June 11.
Twelve (1 2) days later, he filed a "Motion to Set Aside Execution Sale and to
Quash Alias Writ of Execution." 27 As regards the original, partial execution of the
judgment, he argued that
1) "the issuance of the writ of execution on October 16, 1969 was contrary to law,
the judgment sought to be executed not being final and executory;" and
2) "the sale was made without the notice required by Sec. 18, Rule 39, of the New
Rules of Court," i.e., notice by publication in case of execution sale of real property,
the pump and its accessories being immovable because attached to the ground with
character of permanency (Art. 415, Civil Code).
And with respect to the alias writ, he argued that it should not have issued because

1) "the judgment sought to be executed is null and void" as "it deprived the
defendant of his day in court" and "of due process;"
2) "said judgment is incomplete and vague" because there is no starting point for
computation of the interest imposed, or a specification of the "other expenses
incurred in prosecuting this case" which Yap had also been ordered to pay;
3) "said judgment is defective because it contains no statement of facts but a mere
recital of the evidence; and
4) "there has been a change in the situation of the parties which makes execution
unjust and inequitable" because Yap suffered damages by reason of the illegal
execution.
Goulds filed an opposition on July 6, 1970. Yap's motion was thereafter denied by
Order dated September 16, 1970. Judge Taada pointed out that the motion had
"become moot and academic" since the decision of August 29, 1969, "received by
the defendant on September 1, 1969 had long become final when the Order for the
Issuance of a Writ of Execution was promulgated on October 15, 1969." His Honor
also stressed that

The defendant's Motion for Reconsideration of the Courts decision was

in reality one for new trial. Regarded as motion for new trial it should
allege the grounds for new trial, provided for in the Rules of Court, to
be supported by affidavit of merits; and this the defendant failed to do.
If the defendant sincerely desired for an opportunity to submit to an
amicable settlement, which he failed to do extra judicially despite the
ample time before him, he should have appeared in the pre- trial to
achieve the same purpose.
Judge Taada thereafter promulgated another Order dated September 21, 1970
granting a motion of Goulds for completion of execution of the judgment of August
29, 1969 to be undertaken by the City Sheriff of Cebu. Once more, Yap sought
reconsideration. He submitted a "Motion for Reconsideration of Two Orders" dated
October 13, 1970, 28 seeking the setting aside not only of this Order of September
21, 1970 but also that dated September 16, 1970, denying his motion to set aside
execution dated June 23, 1970. He contended that the Order of September 21, 1970
(authorizing execution by the City Sheriff) was premature, since the 30-day period
to appeal from the earlier order of September 16, 1970 (denying his motion to set
aside) had not yet expired. He also reiterated his view that his motion for
reconsideration dated September 15, 1969 did not require that it be accompanied
by an affidavit of merits. This last motion was also denied for "lack of merits," by
Order dated November 21, 1970. 29
On December 3, 1970, Yap filed a "Notice of Appeal" manifesting his intention to
appeal to the Supreme Court on certiorari only on questions of law, "from the
Order ... of September 16, 1970 ... and from the Order ... of November 21, 1970, ...
pursuant to sections 2 and 3 of Republic Act No. 5440." He filed his petition for
review with this Court on January 5, 1971, after obtaining an extension therefor. 30
The errors of law he attributes to the Court a quo are the following:

31

1) refusing to invalidate the execution pursuant to its Order of October 16, 1969
although the judgment had not then become final and executory and despite its
being incomplete and vague;
2) ignoring the fact that the execution sale was carried out although it (the Court)
had itself ordered suspension of execution on November 6, 1969;
3) declining to annul the execution sale of the pump and accessories subject of the
action although made without the requisite notice prescribed for the sale of
immovables; and
4) refusing to allow the petitioner to prove irregularities in the process of execution
which had resulted in damages to him.

Notice of the Trial Court's judgment was served on Yap on September 1, 1969. His
motion for reconsideration thereof was filed 15 days thereafter, on September 16,
1969. Notice of the Order denying the motion was received by him on October 14,
1969. The question is whether or not the motion for reconsideration which was
not verified, or accompanied by an affidavit of merits (setting forth facts
constituting his meritorious defenses to the suit) or other sworn statement (stating
facts excusing his failure to appear at the pre-trial was pro forma and consequently
had not interrupted the running of the period of appeal. It is Yap's contention that
his motion was not pro forma for lack of an affidavit of merits, such a document not
being required by Section 1 (a) of Rule 37 of the Rules of Court upon which his
motion was based. This is incorrect.
Section 2, Rule 37 precisely requires that when the motion for new trial is founded
on Section 1 (a), it should be accompanied by an affidavit of merit.
xxx xxx xxx
When the motion is made for the causes mentioned in subdivisions (a)
and (b) of the preceding section, it shall be proved in the manner
provided for proof of motions. Affidavit or affidavits of merits shall also
be attached to a motion for the cause mentioned in subdivision
(a) which may be rebutted by counter-affidavits.
xxx xxx xxx

32

Since Yap himself asserts that his motion for reconsideration is grounded on Section
1 (a) of Rule 37, 33 i.e., fraud, accident, mistake or excusable negligence which
ordinary prudence could not have guarded against and by reason of which ... (the)
aggrieved party has probably been impaired in his rights" this being in any event
clear from a perusal of the motion which theorizes that he had "been impaired in his
rights" because he was denied the right to present evidence of his defenses
(discrepancy as to price and breach of warranty) it was a fatal omission to fail to
attach to his motion an affidavit of merits, i.e., an affidavit "showing the facts (not
conclusions) constituting the valid x x defense which the movant may prove in case
a new trial is granted." 34 The requirement of such an affidavit is essential because
obviously "a new trial would be a waste of the court's time if the complaint turns out
to be groundless or the defense ineffective." 35
In his motion for reconsideration, Yap also contended that since he had expressed a
desire to explore the possibility of an amicable settlement, the Court should have
given him time to do so, instead of declaring him in default and thereafter rendering
judgment by default on Gould's ex parte evidence.

The bona fides of this desire to compromise is however put in doubt by the
attendant circumstances. It was manifested in an eleventh-hour motion for
postponement of the pre-trial which had been scheduled with intransferable
character since it had already been earlier postponed at Yap's instance; it had never
been mentioned at any prior time since commencement of the litigation; such a
possible compromise (at least in general or preliminary terms) was certainly most
appropriate for consideration at the pre-trial; in fact Yap was aware that the matter
was indeed a proper subject of a pre-trial agenda, yet he sought to avoid
appearance at said pre-trial which he knew to be intransferable in character. These
considerations and the dilatory tactics thus far attributable to him-seeking
postponements of hearings, or failing to appear therefor despite notice, not only in
the Court of First Instance but also in the City Court proscribe belief in the
sincerity of his avowed desire to negotiate a compromise. Moreover, the disregard
by Yap of the general requirement that "(n)otice of a motion shall be served by the
applicant to all parties concerned at least three (3) days before the hearing thereof,
together with a copy of the motion, and of any affidavits and other papers
accompanying it," 36 for which no justification whatever has been offered, also
militates against the bona fides of Yap's expressed wish for an amicable settlement.
The relevant circumstances do not therefore justify condemnation, as a grave abuse
of discretion, or a serious mistake, of the refusal of the Trial Judge to grant
postponement upon this proferred ground.
The motion for reconsideration did not therefore interrupt the running of the period
of appeal. The time during which it was pending before the court from September
16, 1969 when it was filed with the respondent Court until October 14, 1969 when
notice of the order denying the motion was received by the movant could not be
deducted from the 30-day period of appeal. 37 This is the inescapable conclusion
from a consideration of Section 3 of Rule 41 which in part declares that, "The "time
during which a motion to set aside the judgment or order or for a new trial has been
pending shall be deducted, unless such motion fails to satisfy the requirements of
Rule 37. 38
Notice of the judgment having been received by Yap on September 1, 1969, and the
period of appeal therefrom not having been interrupted by his motion for
reconsideration filed on September 16, 1969, the reglementary period of appeal
expired thirty (30) days after September 1, 1969, or on October 1, 1969, without an
appeal being taken by Yap. The judgment then became final and executory; Yap
could no longer take an appeal therefrom or from any other subsequent orders; and
execution of judgment correctly issued on October 15, 1969, "as a matter of
right." 39
The next point discussed by Yap, that the judgment is incomplete and vague, is not
well taken. It is true that the decision does not fix the starting time of the
computation of interest on the judgment debt, but this is inconsequential since that

time is easily determinable from the opinion, i.e., from the day the buyer (Yap)
defaulted in the payment of his obligation, 40 on May 31, 1968. 41 The absence of
any disposition regarding his counterclaim is also immaterial and does not render
the judgment incomplete. Yap's failure to appear at the pre-trial without justification
and despite notice, which caused the declaration of his default, was a waiver of his
right to controvert the plaintiff s proofs and of his right to prove the averments of
his answer, inclusive of the counterclaim therein pleaded. Moreover, the conclusion
in the judgment of the merit of the plaintiff s cause of action was necessarily and at
the same time a determination of the absence of merit of the defendant's claim of
untenability of the complaint and of malicious prosecution.
Yap's next argument that the water pump had become immovable property by its
being installed in his residence is also untenable. The Civil Code considers as
immovable property, among others, anything "attached to an immovable in a fixed
manner, in such a way that it cannot be separated therefrom without breaking the
material or deterioration of the object." 42 The pump does not fit this description. It
could be, and was in fact separated from Yap's premises without being broken or
suffering deterioration. Obviously the separation or removal of the pump involved
nothing more complicated than the loosening of bolts or dismantling of other
fasteners.
Yap's last claim is that in the process of the removal of the pump from his house,
Goulds' men had trampled on the plants growing there, destroyed the shed over the
pump, plugged the exterior casings with rags and cut the electrical and conduit
pipes; that he had thereby suffered actual-damages in an amount of not less than P
2,000.00, as well as moral damages in the sum of P 10,000.00 resulting from his
deprivation of the use of his water supply; but the Court had refused to allow him to
prove these acts and recover the damages rightfully due him. Now, as to the loss of
his water supply, since this arose from acts legitimately done, the seizure on
execution of the water pump in enforcement of a final and executory judgment, Yap
most certainly is not entitled to claim moral or any other form of damages therefor.
WHEREFORE, the petition is DENIED and the appeal DISMISSED, and the Orders of
September 16, 1970 and November 21, 1970 subject thereof, AFFIRMED in
toto. Costs against petitioner.
BOARD OF ASSESSMENT APPEALS, CITY ASSESSOR and CITY TREASURER
OF
QUEZON
CITY,petitioners,
vs.
MANILA ELECTRIC COMPANY, respondent.
Assistant
City
Attorney
Jaime
Ross, Selph and Carrascoso for respondent.

R.

Agloro

for

petitioners.

PAREDES, J.:
From the stipulation of facts and evidence adduced during the hearing, the following
appear:
On October 20, 1902, the Philippine Commission enacted Act No. 484 which
authorized the Municipal Board of Manila to grant a franchise to construct, maintain
and operate an electric street railway and electric light, heat and power system in
the City of Manila and its suburbs to the person or persons making the most
favorable bid. Charles M. Swift was awarded the said franchise on March 1903, the
terms and conditions of which were embodied in Ordinance No. 44 approved on
March 24, 1903. Respondent Manila Electric Co. (Meralco for short), became the
transferee and owner of the franchise.
Meralco's electric power is generated by its hydro-electric plant located at Botocan
Falls, Laguna and is transmitted to the City of Manila by means of electric
transmission wires, running from the province of Laguna to the said City. These
electric transmission wires which carry high voltage current, are fastened to
insulators attached on steel towers constructed by respondent at intervals, from its
hydro-electric plant in the province of Laguna to the City of Manila. The respondent
Meralco has constructed 40 of these steel towers within Quezon City, on land
belonging to it. A photograph of one of these steel towers is attached to the petition
for review, marked Annex A. Three steel towers were inspected by the lower court
and parties and the following were the descriptions given there of by said court:
The first steel tower is located in South Tatalon, Espaa Extension, Quezon
City. The findings were as follows: the ground around one of the four posts
was excavated to a depth of about eight (8) feet, with an opening of about
one (1) meter in diameter, decreased to about a quarter of a meter as it we
deeper until it reached the bottom of the post; at the bottom of the post were
two parallel steel bars attached to the leg means of bolts; the tower proper
was attached to the leg three bolts; with two cross metals to prevent
mobility; there was no concrete foundation but there was adobe stone
underneath; as the bottom of the excavation was covered with water about
three inches high, it could not be determined with certainty to whether said
adobe stone was placed purposely or not, as the place abounds with this kind
of stone; and the tower carried five high voltage wires without cover or any
insulating materials.
The second tower inspected was located in Kamuning Road, K-F, Quezon City,
on land owned by the petitioner approximate more than one kilometer from
the first tower. As in the first tower, the ground around one of the four legs
was excavate from seven to eight (8) feet deep and one and a half (1-)
meters wide. There being very little water at the bottom, it was seen that

there was no concrete foundation, but there soft adobe beneath. The leg was
likewise provided with two parallel steel bars bolted to a square metal frame
also bolted to each corner. Like the first one, the second tower is made up of
metal rods joined together by means of bolts, so that by unscrewing the
bolts, the tower could be dismantled and reassembled.
The third tower examined is located along Kamias Road, Quezon City. As in
the first two towers given above, the ground around the two legs of the third
tower was excavated to a depth about two or three inches beyond the
outside level of the steel bar foundation. It was found that there was no
concrete foundation. Like the two previous ones, the bottom arrangement of
the legs thereof were found to be resting on soft adobe, which, probably due
to high humidity, looks like mud or clay. It was also found that the square
metal frame supporting the legs were not attached to any material or
foundation.
On November 15, 1955, petitioner City Assessor of Quezon City declared the
aforesaid steel towers for real property tax under Tax declaration Nos. 31992 and
15549. After denying respondent's petition to cancel these declarations, an appeal
was taken by respondent to the Board of Assessment Appeals of Quezon City, which
required respondent to pay the amount of P11,651.86 as real property tax on the
said steel towers for the years 1952 to 1956. Respondent paid the amount under
protest, and filed a petition for review in the Court of Tax Appeals (CTA for short)
which rendered a decision on December 29, 1958, ordering the cancellation of the
said tax declarations and the petitioner City Treasurer of Quezon City to refund to
the respondent the sum of P11,651.86. The motion for reconsideration having been
denied, on April 22, 1959, the instant petition for review was filed.
In upholding the cause of respondents, the CTA held that: (1) the steel towers come
within the term "poles" which are declared exempt from taxes under part II
paragraph 9 of respondent's franchise; (2) the steel towers are personal properties
and are not subject to real property tax; and (3) the City Treasurer of Quezon City is
held responsible for the refund of the amount paid. These are assigned as errors by
the petitioner in the brief.
The tax exemption privilege of the petitioner is quoted hereunder:
PAR 9. The grantee shall be liable to pay the same taxes upon its real estate,
buildings, plant (not including poles, wires, transformers, and insulators),
machinery and personal property as other persons are or may be hereafter
required by law to pay ... Said percentage shall be due and payable at the
time stated in paragraph nineteen of Part One hereof, ... and shall be in lieu
of all taxes and assessments of whatsoever nature and by whatsoever
authority upon the privileges, earnings, income, franchise, and poles, wires,

transformers, and insulators of the grantee from which taxes and

assessments the grantee is hereby expressly exempted. (Par. 9, Part Two, Act
No. 484 Respondent's Franchise; emphasis supplied.)
The word "pole" means "a long, comparatively slender usually cylindrical piece of
wood or timber, as typically the stem of a small tree stripped of its branches; also
by extension, a similar typically cylindrical piece or object of metal or the like". The
term also refers to "an upright standard to the top of which something is affixed or
by which something is supported; as a dovecote set on a pole; telegraph poles; a
tent pole; sometimes, specifically a vessel's master (Webster's New International
Dictionary 2nd Ed., p. 1907.) Along the streets, in the City of Manila, may be seen
cylindrical metal poles, cubical concrete poles, and poles of the PLDT Co. which are
made of two steel bars joined together by an interlacing metal rod. They are called
"poles" notwithstanding the fact that they are no made of wood. It must be noted
from paragraph 9, above quoted, that the concept of the "poles" for which
exemption is granted, is not determined by their place or location, nor by the
character of the electric current it carries, nor the material or form of which it is
made, but the use to which they are dedicated. In accordance with the definitions,
pole is not restricted to a long cylindrical piece of wood or metal, but includes
"upright standards to the top of which something is affixed or by which something is
supported. As heretofore described, respondent's steel supports consists of a
framework of four steel bars or strips which are bound by steel cross-arms atop of
which are cross-arms supporting five high voltage transmission wires (See Annex A)
and their sole function is to support or carry such wires.
The conclusion of the CTA that the steel supports in question are embraced in the
term "poles" is not a novelty. Several courts of last resort in the United States have
called these steel supports "steel towers", and they denominated these supports or
towers, as electric poles. In their decisions the words "towers" and "poles" were
used interchangeably, and it is well understood in that jurisdiction that a
transmission tower or pole means the same thing.
In a proceeding to condemn land for the use of electric power wires, in which the
law provided that wires shall be constructed upon suitable poles, this term was
construed to mean either wood or metal poles and in view of the land being subject
to overflow, and the necessary carrying of numerous wires and the distance
between poles, the statute was interpreted to include towers or poles. (Stemmons
and Dallas Light Co. (Tex) 212 S.W. 222, 224; 32-A Words and Phrases, p. 365.)
The term "poles" was also used to denominate the steel supports or towers used by
an association used to convey its electric power furnished to subscribers and
members, constructed for the purpose of fastening high voltage and dangerous
electric wires alongside public highways. The steel supports or towers were made of
iron or other metals consisting of two pieces running from the ground up some

thirty feet high, being wider at the bottom than at the top, the said two metal
pieces being connected with criss-cross iron running from the bottom to the top,
constructed like ladders and loaded with high voltage electricity. In form and
structure, they are like the steel towers in question. (Salt River Valley Users' Ass'n v.
Compton, 8 P. 2nd, 249-250.)
The term "poles" was used to denote the steel towers of an electric company
engaged in the generation of hydro-electric power generated from its plant to the
Tower of Oxford and City of Waterbury. These steel towers are about 15 feet square
at the base and extended to a height of about 35 feet to a point, and are embedded
in the cement foundations sunk in the earth, the top of which extends above the
surface of the soil in the tower of Oxford, and to the towers are attached insulators,
arms, and other equipment capable of carrying wires for the transmission of electric
power (Connecticut Light and Power Co. v. Oxford, 101 Conn. 383, 126 Atl. p. 1).
In a case, the defendant admitted that the structure on which a certain person met
his death was built for the purpose of supporting a transmission wire used for
carrying high-tension electric power, but claimed that the steel towers on which it is
carried were so large that their wire took their structure out of the definition of a
pole line. It was held that in defining the word pole, one should not be governed by
the wire or material of the support used, but was considering the danger from any
elevated wire carrying electric current, and that regardless of the size or material
wire of its individual members, any continuous series of structures intended and
used solely or primarily for the purpose of supporting wires carrying electric
currents is a pole line (Inspiration Consolidation Cooper Co. v. Bryan 252 P. 1016).
It is evident, therefore, that the word "poles", as used in Act No. 484 and
incorporated in the petitioner's franchise, should not be given a restrictive and
narrow interpretation, as to defeat the very object for which the franchise was
granted. The poles as contemplated thereon, should be understood and taken as a
part of the electric power system of the respondent Meralco, for the conveyance of
electric current from the source thereof to its consumers. If the respondent would be
required to employ "wooden poles", or "rounded poles" as it used to do fifty years
back, then one should admit that the Philippines is one century behind the age of
space. It should also be conceded by now that steel towers, like the ones in
question, for obvious reasons, can better effectuate the purpose for which the
respondent's franchise was granted.
Granting for the purpose of argument that the steel supports or towers in question
are not embraced within the term poles, the logical question posited is whether they
constitute real properties, so that they can be subject to a real property tax. The tax
law does not provide for a definition of real property; but Article 415 of the Civil
Code does, by stating the following are immovable property:

(1) Land, buildings, roads, and constructions of all kinds adhered to the soil;
xxx

xxx

xxx

(3) Everything attached to an immovable in a fixed manner, in such a way

that it cannot be separated therefrom without breaking the material or
deterioration of the object;
xxx

xxx

xxx

(5) Machinery, receptacles, instruments or implements intended by the owner

of the tenement for an industry or works which may be carried in a building
or on a piece of land, and which tends directly to meet the needs of the said
industry or works;
xxx

xxx

xxx

The steel towers or supports in question, do not come within the objects mentioned
in paragraph 1, because they do not constitute buildings or constructions adhered
to the soil. They are not construction analogous to buildings nor adhering to the soil.
As per description, given by the lower court, they are removable and merely
attached to a square metal frame by means of bolts, which when unscrewed could
easily be dismantled and moved from place to place. They can not be included
under paragraph 3, as they are not attached to an immovable in a fixed manner,
and they can be separated without breaking the material or causing deterioration
upon the object to which they are attached. Each of these steel towers or supports
consists of steel bars or metal strips, joined together by means of bolts, which can
be disassembled by unscrewing the bolts and reassembled by screwing the same.
These steel towers or supports do not also fall under paragraph 5, for they are not
machineries, receptacles, instruments or implements, and even if they were, they
are not intended for industry or works on the land. Petitioner is not engaged in an
industry or works in the land in which the steel supports or towers are constructed.
It is finally contended that the CTA erred in ordering the City Treasurer of Quezon
City to refund the sum of P11,651.86, despite the fact that Quezon City is not a
party to the case. It is argued that as the City Treasurer is not the real party in
interest, but Quezon City, which was not a party to the suit, notwithstanding its
capacity to sue and be sued, he should not be ordered to effect the refund. This
question has not been raised in the court below, and, therefore, it cannot be
properly raised for the first time on appeal. The herein petitioner is indulging in legal
technicalities and niceties which do not help him any; for factually, it was he (City
Treasurer) whom had insisted that respondent herein pay the real estate taxes,
which respondent paid under protest. Having acted in his official capacity as City

Treasurer of Quezon City, he would surely know what to do, under the
circumstances.
IN VIEW HEREOF, the decision appealed from is hereby affirmed, with costs against
the petitioners.
DAVAO
SAW
MILL
CO.,
INC., plaintiff-appellant,
vs.
APRONIANO G. CASTILLO and DAVAO LIGHT & POWER CO., INC., defendantsappellees.
Arsenio Suazo and Jose L. Palma Gil and Pablo Lorenzo and Delfin Joven for
appellant.
J.W. Ferrier for appellees.
MALCOLM, J.:
The issue in this case, as announced in the opening sentence of the decision in the
trial court and as set forth by counsel for the parties on appeal, involves the
determination of the nature of the properties described in the complaint. The trial
judge found that those properties were personal in nature, and as a consequence
absolved the defendants from the complaint, with costs against the plaintiff.
The Davao Saw Mill Co., Inc., is the holder of a lumber concession from the
Government of the Philippine Islands. It has operated a sawmill in the sitio of Maa,
barrio of Tigatu, municipality of Davao, Province of Davao. However, the land upon
which the business was conducted belonged to another person. On the land the
sawmill company erected a building which housed the machinery used by it. Some
of the implements thus used were clearly personal property, the conflict concerning
machines which were placed and mounted on foundations of cement. In the
contract of lease between the sawmill company and the owner of the land there
appeared the following provision:
That on the expiration of the period agreed upon, all the improvements and
buildings introduced and erected by the party of the second part shall pass to
the exclusive ownership of the party of the first part without any obligation on
its part to pay any amount for said improvements and buildings; also, in the
event the party of the second part should leave or abandon the land leased
before the time herein stipulated, the improvements and buildings shall
likewise pass to the ownership of the party of the first part as though the time
agreed upon had expired: Provided, however, That the machineries and
accessories are not included in the improvements which will pass to the party
of the first part on the expiration or abandonment of the land leased.

In another action, wherein the Davao Light & Power Co., Inc., was the plaintiff and
the Davao, Saw, Mill Co., Inc., was the defendant, a judgment was rendered in favor
of the plaintiff in that action against the defendant in that action; a writ of execution
issued thereon, and the properties now in question were levied upon as personalty
by the sheriff. No third party claim was filed for such properties at the time of the
sales thereof as is borne out by the record made by the plaintiff herein. Indeed the
bidder, which was the plaintiff in that action, and the defendant herein having
consummated the sale, proceeded to take possession of the machinery and other
properties described in the corresponding certificates of sale executed in its favor
by the sheriff of Davao.
As connecting up with the facts, it should further be explained that the Davao Saw
Mill Co., Inc., has on a number of occasions treated the machinery as personal
property by executing chattel mortgages in favor of third persons. One of such
persons is the appellee by assignment from the original mortgages.
Article 334, paragraphs 1 and 5, of the Civil Code, is in point. According to the Code,
real property consists of
1. Land, buildings, roads and constructions of all kinds adhering to the soil;
xxx

xxx

xxx

5. Machinery, liquid containers, instruments or implements intended by the

owner of any building or land for use in connection with any industry or trade
being carried on therein and which are expressly adapted to meet the
requirements of such trade of industry.
Appellant emphasizes the first paragraph, and appellees the last mentioned
paragraph. We entertain no doubt that the trial judge and appellees are right in
their appreciation of the legal doctrines flowing from the facts.
In the first place, it must again be pointed out that the appellant should have
registered its protest before or at the time of the sale of this property. It must
further be pointed out that while not conclusive, the characterization of the property
as chattels by the appellant is indicative of intention and impresses upon the
property the character determined by the parties. In this connection the decision of
this court in the case of Standard Oil Co. of New Yorkvs. Jaramillo ( [1923], 44 Phil.,
630), whether obiter dicta or not, furnishes the key to such a situation.
It is, however not necessary to spend overly must time in the resolution of this
appeal on side issues. It is machinery which is involved; moreover, machinery not
intended by the owner of any building or land for use in connection therewith, but

intended by a lessee for use in a building erected on the land by the latter to be
returned to the lessee on the expiration or abandonment of the lease.
A similar question arose in Puerto Rico, and on appeal being taken to the United
States Supreme Court, it was held that machinery which is movable in its nature
only becomes immobilized when placed in a plant by the owner of the property or
plant, but not when so placed by a tenant, a usufructuary, or any person having
only a temporary right, unless such person acted as the agent of the owner. In the
opinion written by Chief Justice White, whose knowledge of the Civil Law is well
known, it was in part said:
To determine this question involves fixing the nature and character of the
property from the point of view of the rights of Valdes and its nature and
character from the point of view of Nevers & Callaghan as a judgment
creditor of the Altagracia Company and the rights derived by them from the
execution levied on the machinery placed by the corporation in the plant.
Following the Code Napoleon, the Porto Rican Code treats as immovable
(real) property, not only land and buildings, but also attributes immovability
in some cases to property of a movable nature, that is, personal property,
because of the destination to which it is applied. "Things," says section 334 of
the Porto Rican Code, "may be immovable either by their own nature or by
their destination or the object to which they are applicable." Numerous
illustrations are given in the fifth subdivision of section 335, which is as
follows: "Machinery, vessels, instruments or implements intended by the
owner of the tenements for the industrial or works that they may carry on in
any building or upon any land and which tend directly to meet the needs of
the said industry or works." (See also Code Nap., articles 516, 518 et seq. to
and inclusive of article 534, recapitulating the things which, though in
themselves movable, may be immobilized.) So far as the subject-matter with
which we are dealing machinery placed in the plant it is plain, both
under the provisions of the Porto Rican Law and of the Code Napoleon, that
machinery which is movable in its nature only becomes immobilized when
placed in a plant by the owner of the property or plant. Such result would not
be accomplished, therefore, by the placing of machinery in a plant by a
tenant or a usufructuary or any person having only a temporary right.
(Demolombe, Tit. 9, No. 203; Aubry et Rau, Tit. 2, p. 12, Section 164; Laurent,
Tit. 5, No. 447; and decisions quoted in Fuzier-Herman ed. Code Napoleon
under articles 522 et seq.) The distinction rests, as pointed out by
Demolombe, upon the fact that one only having a temporary right to the
possession or enjoyment of property is not presumed by the law to have
applied movable property belonging to him so as to deprive him of it by
causing it by an act of immobilization to become the property of another. It
follows that abstractly speaking the machinery put by the Altagracia
Company in the plant belonging to Sanchez did not lose its character of

movable property and become immovable by destination. But in the concrete

immobilization took place because of the express provisions of the lease
under which the Altagracia held, since the lease in substance required the
putting in of improved machinery, deprived the tenant of any right to charge
against the lessor the cost such machinery, and it was expressly stipulated
that the machinery so put in should become a part of the plant belonging to
the owner without compensation to the lessee. Under such conditions the
tenant in putting in the machinery was acting but as the agent of the owner
in compliance with the obligations resting upon him, and the immobilization
of the machinery which resulted arose in legal effect from the act of the
owner in giving by contract a permanent destination to the machinery.
xxx

xxx

xxx

The machinery levied upon by Nevers & Callaghan, that is, that which was
placed in the plant by the Altagracia Company, being, as regards Nevers &
Callaghan, movable property, it follows that they had the right to levy on it
under the execution upon the judgment in their favor, and the exercise of
that right did not in a legal sense conflict with the claim of Valdes, since as to
him the property was a part of the realty which, as the result of his
obligations under the lease, he could not, for the purpose of collecting his
debt, proceed separately against. (Valdes vs. Central Altagracia [192], 225
U.S., 58.)
Finding no reversible error in the record, the judgment appealed from will be
affirmed, the costs of this instance to be paid by the appellant.
FELICIDAD VILLANUEVA, FERNANDO CAISIP, ANTONIO LIANG, FELINA
MIRANDA,
RICARDO
PUNO,
FLORENCIO
LAXA,
and
RENE
OCAMPO, petitioners,
vs.
HON. MARIANO CASTAEDA, JR., Presiding Judge of the Court of First
Instance of Pampanga, Branch III, VICENTE A. MACALINO, Officer-inCharge, Office of the Mayor, San Fernando, Pampanga, respondents.

CRUZ, J.:
There is in the vicinity of the public market of San Fernando, Pampanga, along
Mercado Street, a strip of land measuring 12 by 77 meters on which stands a
conglomeration of vendors stalls together forming what is commonly known as
a talipapa. This is the subject of the herein petition. The petitioners claim they have
a right to remain in and conduct business in this area by virtue of a previous

authorization granted to them by the municipal government. The respondents deny

this and justify the demolition of their stalls as illegal constructions on public
property. At the petitioners' behest, we have issued a temporary restraining order to
preserve the status quobetween the parties pending our decision. 1 Now we shall
rule on the merits.
This dispute goes back to November 7, 1961, when the municipal council of San
Fernando adopted Resolution No. 218 authorizing some 24 members of the
Fernandino United Merchants and Traders Association to construct permanent stags
and sell in the above-mentioned place. 2 The action was protested on November 10,
1961, in Civil Case No. 2040, where the Court of First Instance of Pampanga, Branch
2, issued a writ of preliminary injunction that prevented the defendants from
constructing the said stalls until final resolution of the controversy. 3 On January 18,
1964, while this case was pending, the municipal council of San Fernando adopted
Resolution G.R. No. 29, which declared the subject area as "the parking place and as
the public plaza of the municipality, 4 thereby impliedly revoking Resolution No. 218,
series of 1961. Four years later, on November 2, 1968, Judge Andres C. Aguilar
decided the aforesaid case and held that the land occupied by the petitioners, being
public in nature, was beyond the commerce of man and therefore could not be the
subject of private occupancy. 5 The writ of preliminary injunction was made
permanent. 6
The decision was apparently not enforced, for the petitioners were not evicted from
the place; in fact, according to then they and the 128 other persons were in 1971
assigned specific areas or space allotments therein for which they paid daily fees to
the municipal government. 7 The problem appears to have festered for some more
years under a presumably uneasy truce among the protagonists, none of whom
made any move, for some reason that does not appear in the record. Then, on
January 12, 1982, the Association of Concerned Citizens and Consumers of San
Fernando filed a petition for the immediate implementation of Resolution No. 29, to
restore the subject property "to its original and customary use as a public plaza. 8
Acting
thereon
after
an
investigation
conducted
by
the
municipal
9
attorney, respondent Vicente A. Macalino, as officer-in-charge of the office of the
mayor of San Fernando, issued on June 14, 1982, a resolution requiring the
municipal treasurer and the municipal engineer to demolish the stalls in the subject
place beginning July 1, 1982. 10 The reaction of the petitioners was to file a petition
for prohibition with the Court of First Instance of Pampanga, docketed as Civil Case
No. 6470, on June 26, 1982. The respondent judge denied the petition on July 19,
1982, 11 and the motion for reconsideration on August 5, 1982, 12 prompting the
petitioners to come to this Court on certiorari to challenge his decision. 13
As required, respondent Macalino filed his comment 14 on the petition, and the
petitioners countered with their reply. 15 In compliance with our resolution of

February 2, 1983, the petitioners submitted their memorandum 16 and respondent

Macalino, for his part, asked that his comment be considered his
memorandum. 17 On July 28, 1986, the new officer-in-charge of the office of the
mayor of San Fernando, Paterno S. Guevarra, was impleaded in lieu of Virgilio
Sanchez, who had himself earlier replaced the original respondent Macalino. 18
After considering the issues and the arguments raised by the parties in their
respective pleadings, we rule for the respondents. The petition must be dismissed.
There is no question that the place occupied by the petitioners and from which they
are sought to be evicted is a public plaza, as found by the trial court in Civil Case
No. 2040. This finding was made after consideration of the antecedent facts as
especially established by the testimony of former San Fernando Mayor Rodolfo
Hizon, who later became governor of Pampanga, that the National Planning
Commission had reserved the area for a public plaza as early as 1951. This intention
was reiterated in 1964 through the adoption of Resolution No. 29. 19
It does not appear that the decision in this case was appealed or has been reversed.
In Civil Case G.R. No. 6740, which is the subject of this petition, the respondent
judge saw no reason to disturb the finding in Civil Case No. 2040 and indeed used it
as a basis for his own decision sustaining the questioned order. 20
The basic contention of the petitioners is that the disputed area is under lease to
them by virtue of contracts they had entered into with the municipal government,
first in 1961 insofar as the original occupants were concerned, and later with them
and the other petitioners by virtue of the space allocations made in their favor in
1971 for which they saw they are paying daily fees. 21 The municipal government
has denied making such agreements. In any case, they argue, since the fees were
collected daily, the leases, assuming their validity, could be terminated at will, or
any day, as the claimed rentals indicated that the period of the leases was from day
to day. 22
The parties belabor this argument needlessly.
A public plaza is beyond the commerce of man and so cannot be the subject of
lease or any other contractual undertaking. This is elementary. Indeed, this point
was settled as early as in Municipality of Cavite vs. Rojas, 23decided in 1915, where
the Court declared as null and void the lease of a public plaza of the said
municipality in favor of a private person.
Justice Torres said in that case:
According to article 344 of the Civil Code: "Property for public use in
provinces and in towns comprises the provincial and town roads, the

squares, streets, fountains, and public waters, the promenades, and

public works of general service supported by said towns or provinces.
The said Plaza Soledad being a promenade for public use, the
municipal council of Cavite could not in 1907 withdraw or exclude from
public use a portion thereof in order to lease it for the sole benefit of
the defendant Hilaria Rojas. In leasing a portion of said plaza or public
place to the defendant for private use the plaintiff municipality
exceeded its authority in the exercise of its powers by executing a
contract over a thing of which it could not dispose, nor is it empowered
so to do.
The Civil Code, article 1271, prescribes that everything which is not
outside the commerce of man may be the object of a contract, and
plazas and streets are outside of this commerce, as was decided by the
supreme court of Spain in its decision of February 12, 1895, which
says: "communal things that cannot be sold because they are by their
very nature outside of commerce are those for public use, such as the
plazas, streets, common lands, rivers, fountains, etc."
Therefore, it must be concluded that the contract, Exhibit C, whereby
the municipality of Cavite leased to Hilaria Rojas a portion of the Plaza
Soledad is null and void and of no force or effect, because it is contrary
to the law and the thing leased cannot be the object of a was held that
the City of contract.
In Muyot vs. de la Fuente, 24 it was held that the City of Manila could not lease a
portion of a public sidewalk on Plaza Sta. Cruz, being likewise beyond the commerce
of man.
Echoing Rojas, the decision said:
Appellants claim that they had obtained permit from the present of the
City of Manila, to connect booths Nos. 1 and 2, along the premises in
question, and for the use of spaces where the booths were
constructed, they had paid and continued paying the corresponding
rentals. Granting this claim to be true, one should not entertain any
doubt that such permit was not legal, because the City of Manila does
not have any power or authority at all to lease a portion of a public
sidewalk. The sidewalk in question, forming part of the public plaza of
Sta. Cruz, could not be a proper subject matter of the contract, as it
was not within the commerce of man (Article 1347, new Civil Code, and
article 1271, old Civil Code). Any contract entered into by the City of
Manila in connection with the sidewalk, is ipso facto null and ultra

vires. (Municipality of Cavite vs. Roxas, et a1, 30 Phil. 603.) The

sidewalk in question was intended for and was used by the public, in
going from one place to another. "The streets and public places of the
city shall be kept free and clear for the use of the public, and the
sidewalks and crossings for the pedestrians, and the same shall only
be used or occupied for other purpose as provided by ordinance or
regulation; ..." (Sec. 1119, Revised Ordinances of the City of Manila.)
The booths in question served as fruit stands for their owners and
often, if not always, blocked the fire passage of pedestrians who had to
take the plaza itself which used to be clogged with vehicular traffic.
Exactly in point is Espiritu vs. Municipal Council of Pozorrubio,
Court declared:

25

where the Supreme

There is absolutely no question that the town plaza cannot be used for
the construction of market stalls, specially of residences, and that such
structures constitute a nuisance subject to abatement according to law.
Town plazas are properties of public dominion, to be devoted to public
use and to be made available to the public in general They are outside
the common of man and cannot be disposed of or even leased by the
municipality to private parties.
Applying this well-settled doctrine, we rule that the petitioners had no right in the
first place to occupy the disputed premises and cannot insist in remaining there now
on the strength of their alleged lease contracts. They should have realized and
accepted this earlier, considering that even before Civil Case No. 2040 was decided,
the municipalcouncil of San Fernando had already adopted Resolution No. 29, series
of 1964, declaring the area as the parking place and public plaza of the municipality.
It is the decision in Civil Case No. 2040 and the said resolution of the municipal
council of San Fernando that respondent Macalino was seeking to enforce when he
ordered the demolition of the stags constructed in the disputed area. As officer-incharge of the office of the mayor, he had the duty to clear the area and restore it to
its intended use as a parking place and public plaza of the municipality of San
Fernando, conformably to the aforementioned orders from the court and the council.
It is, therefore, not correct to say that he had acted without authority or taken the
law into his hands in issuing his order.
Neither can it be said that he acted whimsically in exercising his authority for it has
been established that he directed the demolition of the stalls only after, upon his
instructions, the municipal attorney had conducted an investigation, to look into the
complaint filed by the Association of Concerned Citizens and Consumers of San
Fernando. 26 There is evidence that the petitioners were notified of this
hearing, 27which they chose to disregard. Photographs of the disputed area, 28 which

does look congested and ugly, show that the complaint was valid and that the area
really needed to be cleared, as recommended by the municipal attorney.
The Court observes that even without such investigation and recommendation, the
respondent mayor was justified in ordering the area cleared on the strength alone of
its status as a public plaza as declared by the judicial and legislative authorities. In
calling first for the investigation (which the petitioner saw fit to boycott), he was just
scrupulously paying deference to the requirements of due process, to remove an
taint of arbitrariness in the action he was caged upon to take.
Since the occupation of the place in question in 1961 by the original 24 stallholders
(whose number later ballooned to almost 200), it has deteriorated increasingly to
the great prejudice of the community in general. The proliferation of stags therein,
most of them makeshift and of flammable materials, has converted it into a
veritable fire trap, which, added to the fact that it obstructs access to and from the
public market itself, has seriously endangered public safety. The filthy condition of
the talipapa, where fish and other wet items are sold, has aggravated health and
sanitation problems, besides pervading the place with a foul odor that has spread
into the surrounding areas. The entire place is unsightly, to the dismay and
embarrassment of the inhabitants, who want it converted into a showcase of the
town of which they can all be proud. The vendors in the talipapa have also spilled
into the street and obstruct the flow of traffic, thereby impairing the convenience of
motorists and pedestrians alike. The regular stallholders in the public market, who
pay substantial rentals to the municipality, are deprived of a sizable volume of
business from prospective customers who are intercepted by the talipapa vendors
before they can reach the market proper. On top of all these, the people are denied
the proper use of the place as a public plaza, where they may spend their leisure in
a relaxed and even beautiful environment and civic and other communal activities
of the town can be held.
The problems caused by the usurpation of the place by the petitioners are covered
by the police power as delegated to the municipality under the general welfare
clause. 29 This authorizes the municipal council "to enact such ordinances and make
such regulations, not repugnant to law, as may be necessary to carry into effect and
discharge the powers and duties conferred upon it by law and such as shall seem
necessary and proper to provide for the health and safety, promote the prosperity,
improve the morals, peace, good order, comfort, and convenience of the
municipality and the inhabitants thereof, and for the protection of property therein."
This authority was validly exercised in this casethrough the adoption of Resolution
No. 29, series of 1964, by the municipal council of San Fernando.
Even assuming a valid lease of the property in dispute, the resolution could have
effectively terminated the agreement for it is settled that the police power cannot
be surrendered or bargained away through the medium of a contract. 30 In fact,

every contract affecting the public interest suffers a congenital infirmity in that it
contains an implied reservation of the police power as a postulate of the existing
legal order. 31 This power can be activated at any time to change the provisions of
the contract, or even abrogate it entirely, for the promotion or protection of the
general welfare. Such an act will not militate against the impairment clause, which
is subject to and limited by the paramount police power. 32
We hold that the respondent judge did not commit grave abuse of discretion in
denying the petition for prohibition. On the contrary, he acted correctly in sustaining
the right and responsibility of the mayor to evict the petitioners from the disputed
area and clear it of an the structures illegally constructed therein.
The Court feels that it would have been far more amiable if the petitioners
themselves, recognizing their own civic duty, had at the outset desisted from their
original stance and withdrawn in good grace from the disputed area to permit its
peaceful restoration as a public plaza and parking place for the benefit of the whole
municipality. They owned this little sacrifice to the community in general which has
suffered all these many years because of their intransigence. Regrettably, they have
refused to recognize that in the truly democratic society, the interests of the few
should yield to those of the greater number in deference to the principles that the
welfare of the people is the supreme law and overriding purpose. We do not see any
altruism here. The traditional ties of sharing are absent here. What we find, sad to
say, is a cynical disdaining of the spirit of "bayanihan," a selfish rejection of the
cordial virtues of "pakikisama " and "pagbibigayan" which are the hallmarks of our
people.
WHEREFORE, the petition is DISMISSED. The decision dated July 19, 1982, and the
order-dated August 5, 1982, are AFFIRMED. The temporary restraining order dated
August 9, 1982, is LIFTED. This decision is immediately executory. Costs against the
petitioners.
ADRIANO MANECLANG, JULIETA, RAMONA, VICTOR, ANTONINA, LOURDES,
TEODORO
and
MYRNA,
all
surnamed
MANECLANG, petitioners,
vs.
THE INTERMEDIATE APPELLATE COURT and ALFREDO MAZA, CORLETO
CASTRO, SALOME RODRIGUEZ, EDUCARDO CUISON, FERNANDO ZARCILLA,
MARIANO GABRIEL, NICOMEDES CORDERO, CLETO PEDROZO, FELIX SALARY
and JOSE PANLILIO, respondents.
Loreto Novisteros for petitioners.
Corleto R. Castro for respondents.

FERNAN, J.:
Petitioners Adriano Maneclang, et. al. filed before the then Court of First Instance of
Pangasinan, Branch XI a complaint for quieting of title over a certain fishpond
located within the four [41 parcels of land belonging to them situated in Barrio
Salomague, Bugallon, Pangasinan, and the annulment of Resolutions Nos. 38 and 95
of the Municipal Council of Bugallon Pangasinan. The trial court dismissed the
complaint in a decision dated August 15, 1975 upon a finding that the body of water
traversing the titled properties of petitioners is a creek constituting a tributary of
the Agno River; therefore public in nature and not subject to private appropriation.
The lower court likewise held that Resolution No. 38, ordering an ocular inspection
of the Cayangan Creek situated between Barrios Salomague Sur and Salomague
Norte, and Resolution No. 95 authorizing public bidding for the lease of all municipal
ferries and fisheries, including the fishpond under consideration, were passed by
respondents herein as members of the Municipal Council of Bugallon, Pangasinan in
the exercise of their legislative powers.
Petitioners appealed said decision to the Intermediate Appellate Court, which
affirmed the same on April 29, 1983. Hence, this petition for review on certiorari.
Acting on the petition, the Court required the respondents to comment thereon.
However, before respondents could do so, petitioners manifested that for lack of
interest on the part of respondent Alfredo Maza, the awardee in the public bidding
of the fishpond, the parties desire to amicably settle the case by submitting to the
Court a Compromise Agreement praying that judgment be rendered recognizing the
ownership of petitioners over the land the body of water found within their titled
properties, stating therein, among other things, that "to pursue the case, the same
will not amount to any benefit of the parties, on the other hand it is to the
advantage and benefit of the municipality if the ownership of the land and the water
found therein belonging to petitioners be recognized in their favor as it is now clear
that after the National Irrigation Administration [NIA] had built the dike around the
land, no water gets in or out of the land. 1
The stipulations contained in the Compromise Agreement partake of the nature of
an adjudication of ownership in favor of herein petitioners of the fishpond in dispute,
which, as clearly found by the lower and appellate courts, was originally a creek
forming a tributary of the Agno River. Considering that as held in the case
of Mercado vs. Municipal President of Macabebe, 59 Phil. 592 [1934], a creek,
defined as a recess or arm extending from a river and participating in the ebb and
flow of the sea, is a property belonging to the public domain which is not
susceptible to private appropriation and acquisitive prescription, and as a public
water, it cannot be registered under the Torrens System in the name of any
individual [Diego v. Court of Appeals, 102 Phil. 494; Mangaldan v. Manaoag, 38 Phil.
4551; and considering further that neither the mere construction of irrigation dikes

by the National Irrigation Administration which prevented the water from flowing in
and out of the subject fishpond, nor its conversion into a fishpond, alter or change
the nature of the creek as a property of the public domain, the Court finds the
Compromise Agreement null and void and of no legal effect, the same being
contrary to law and public policy.
The finding that the subject body of water is a creek belonging to the public domain
is a factual determination binding upon this Court. The Municipality of Bugallon,
acting thru its duly-constituted municipal council is clothed with authority to pass,
as it did the two resolutions dealing with its municipal waters, and it cannot be said
that petitioners were deprived of their right to due process as mere publication of
the notice of the public bidding suffices as a constructive notice to the whole world.
IN VIEW OF THE FOREGOING, the Court Resolved to set aside the Compromise
Agreement and declare the same null and void for being contrary to law and public
policy. The Court further resolved to DISMISS the instant petition for lack of merit.
THE
DIRECTOR
OF
LANDS, petitioner,
vs.
MANILA ELECTRIC COMPANY and HON. RIZALINA BONIFACIO VERA, as
Presiding Judge, Court of First Instance of Rizal, Pasig, Branch
XXIII, respondents.

CORTES, J.:
This is an appeal by certiorari of a decision of the respondent Judge in Land
Registration Case No. N-10317 LRC Record No. N-54803 entitled "In Re: Application
for Registration of Title, Manila Electric Company, applicant," dated May 29, 1981.
The facts are not disputed. Manila Electric Company filed an amended application
for registration of a parcel of land located in Taguig, Metro Manila on December 4,
1979. On August 17, 1976, applicant acquired the land applied for registration by
purchase from Ricardo Natividad (Exhibit E) who in turn acquired the same from his
father Gregorio Natividad as evidenced by a Deed of Original Absolute Sale
executed on December 28, 1970 (Exhibit E). Applicant's predecessors-in-interest
have possessed the property under the concept of an owner for more than 30 years.
The property was declared for taxation purposes under the name of the applicant
(Exhibit 1) and the taxes due thereon have been paid (Exhibits J and J-1).
On May 29, 1981 respondent Judge rendered a decision ordering the registration of
the property in the name of the private respondent. The Director of Lands
interposed this petition raising the issue of whether or not a corporation may apply

for registration of title to land. After comments were filed by the respondents, the
Court gave the petition due course. The legal issue raised by the petitioner Director
of Lands has been squarely dealt with in two recent cases (The Director of Lands v.
Intermediate Appellate Court and Acme Plywood & Veneer Co., Inc., etc., No. L73002 (December 29, 1986), 146 SCRA 509. The Director of Lands v. Hon. Bengzon
and Dynamarine Corporation, etc., No. 54045 (July 28, 1987)], and resolved in the
affirmative. There can be no different answer in the case at bar.
In the Acme decision, this Court upheld the doctrine that open, exclusive and
undisputed possession of alienable public land for the period prescribed by law
creates the legal fiction whereby the land, upon completion of the requisite
period ipso jure and without the need of judicial or other sanction, ceases to be
public land and becomes private property.
As the Court said in that case:
Nothing can more clearly demonstrate the logical inevitability of
considering possession of public land which is of the character and
duration prescribed by statute as the equivalent of an express grant
from the State than the dictum of the statute itself that the
possessor(s) "... shall be conclusively presumed to have performed all
the conditions essential to a Government grant and shall be entitled to
a certificate of title .... " No proof being admissible to overcome a
conclusive presumption, confirmation proceedings would in truth be
little more than a formality, at the most limited to ascertaining whether
the possession claimed is of the required character and length of time;
and registration thereunder would not confer title, but simply recognize
a title already vested. The proceedings would not originally convert the
land from public to private land, but only confirm such a conversion
already affected (sic) from the moment the required period of
possession became complete.
Coming to the case at bar, if the land was already private at the time Meralco
bought it from Natividad, then the prohibition in the 1973 Constitution against
corporations holding alienable lands of the public domain except by lease (1973
Const., Art. XIV, See. 11) does not apply.
Petitioner, however, contends that a corporation is not among those that may apply
for confirmation of title under Section 48 of Commonwealth Act No. 141, the Public
Land Act.
As ruled in the Acme case, the fact that the confirmation proceedings were
instituted by a corporation is simply another accidental circumstance, "productive of
a defect hardly more than procedural and in nowise affecting the substance and

merits of the right of ownership sought to be confirmed in said proceedings."

Considering that it is not disputed that the Natividads could have had their title
confirmed, only a rigid subservience to the letter of the law would deny private
respondent the right to register its property which was validly acquired.
WHEREFORE, the petition is DENIED. The questioned decision of the respondent
Judge is AFFIRMED.