1

G. R. No. 162322

March 14, 2012

REPUBLIC OF THE PHILIPPINES, Petitioner,

vs.
BANTIGUE POINT DEVELOPMENT CORPORATION, Respondent.
DECISION
SERENO, J.:
This Rule 45 Petition requires this Court to address the issue of the proper scope of the delegated jurisdiction of municipal trial courts in land
registration cases. Petitioner Republic of the Philippines (Republic) assails the Decision of the Court of Appeals (CA) 1 in CA-G.R. CV No. 70349,
which affirmed the Decision of the Municipal Trial Court (MTC) of San Juan, Batangas 2 in LRC Case No. N-98-20, LRA Record No. 68329,
granting respondent Bantigue Point Development Corporations (Corporation) application for original registration of a parcel of land. Since only
questions of law have been raised, petitioner need not have filed a Motion for Reconsideration of the assailed CA Decision before filing this Petition
for Review.
The Facts
On 17 July 1997, respondent Bantigue Point Development Corporation filed with the Regional Trial Court (RTC) of Rosario, Batangas an application
for original registration of title over a parcel of land with an assessed value of 4,330, 1,920 and 8,670, or a total assessed value of 14,920 for the
entire property, more particularly described as Lot 8060 of Cad 453-D, San Juan Cadastre, with an area of more or less 10,732 square meters, located
at Barangay Barualte, San Juan, Batangas. 3
On 18 July 1997, the RTC issued an Order setting the case for initial hearing on 22 October 1997. 4 On 7 August 1997, it issued a second Order setting
the initial hearing on 4 November 1997.5
Petitioner Republic filed its Opposition to the application for registration on 8 January 1998 while the records were still with the RTC. 6
On 31 March 1998, the RTC Clerk of Court transmitted motu proprio the records of the case to the MTC of San Juan, because the assessed value of
the property was allegedly less than 100,000.7
Thereafter, the MTC entered an Order of General Default 8 and commenced with the reception of evidence. 9 Among the documents presented by
respondent in support of its application are Tax Declarations, 10 a Deed of Absolute Sale in its favor,11 and a Certification from the Department of
Environment and Natural Resources (DENR) Community Environment and Natural Resources Office (CENRO) of Batangas City that the lot in
question is within the alienable and disposable zone. 12 Thereafter, it awarded the land to respondent Corporation. 13
Acting on an appeal filed by the Republic, 14 the CA ruled that since the former had actively participated in the proceedings before the lower court, but
failed to raise the jurisdictional challenge therein, petitioner is thereby estopped from questioning the jurisdiction of the lower court on appeal. 15 The
CA further found that respondent Corporation had sufficiently established the latters registrable title over the subject property after having proven
open, continuous, exclusive and notorious possession and occupation of the subject land by itself and its predecessors-in-interest even before the
outbreak of World War II. 16
Dissatisfied with the CAs ruling, petitioner Republic filed this instant Rule 45 Petition and raised the following arguments in support of its appeal:
I.
THE REPUBLIC CANNOT BE ESTOPPED FROM QUESTIONING THE JURISDICTION OF THE MUNICIPAL TRIAL COURT
OVER THE APPLICATION FOR ORIGINAL REGISTRATION OF LAND TITLE EVEN FOR THE FIRST TIME ON APPEAL
II.
THE MUNICIPAL TRIAL COURT FAILED TO ACQUIRE JURISDICTION OVER THE APPLICATION FOR ORIGINAL
REGISTRATION OF LAND TITLE.17
The Courts Ruling
We uphold the jurisdiction of the MTC, but remand the case to the court a quo for further proceedings in order to determine if the property in
question forms part of the alienable and disposable land of the public domain.
I
The Republic is not estopped from raising the issue of jurisdiction in this case.
At the outset, we rule that petitioner Republic is not estopped from questioning the jurisdiction of the lower court, even if the former raised the
jurisdictional question only on appeal. The rule is settled that lack of jurisdiction over the subject matter may be raised at any stage of the
proceedings.18 Jurisdiction over the subject matter is conferred only by the Constitution or the law.19 It cannot be acquired through a waiver or
enlarged by the omission of the parties or conferred by the acquiescence of the court. 20 Consequently, questions of jurisdiction may be cognizable
even if raised for the first time on appeal. 21
The ruling of the Court of Appeals that "a party may be estopped from raising such [jurisdictional] question if he has actively taken part in the very
proceeding which he questions, belatedly objecting to the courts jurisdiction in the event that the judgment or order subsequently rendered is adverse
to him"22 is based on the doctrine of estoppel by laches. We are aware of that doctrine first enunciated by this Court in Tijam v. Sibonghanoy.23 In
Tijam, the party-litigant actively participated in the proceedings before the lower court and filed pleadings therein. Only 15 years thereafter, and after
receiving an adverse Decision on the merits from the appellate court, did the party-litigant question the lower courts jurisdiction. Considering the
unique facts in that case, we held that estoppel by laches had already precluded the party-litigant from raising the question of lack of jurisdiction on

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appeal. In Figueroa v. People,24 we cautioned that Tijam must be construed as an exception to the general rule and applied only in the most
exceptional cases whose factual milieu is similar to that in the latter case.
The facts are starkly different in this case, making the exceptional rule in Tijam inapplicable. Here, petitioner Republic filed its Opposition to the
application for registration when the records were still with the RTC. 25 At that point, petitioner could not have questioned the delegated jurisdiction of
the MTC, simply because the case was not yet with that court. When the records were transferred to the MTC, petitioner neither filed pleadings nor
requested affirmative relief from that court. On appeal, petitioner immediately raised the jurisdictional question in its Brief. 26 Clearly, the exceptional
doctrine of estoppel by laches is inapplicable to the instant appeal.
Laches has been defined as the "failure or neglect, for an unreasonable and unexplained length of time, to do that which, by exercising due diligence,
could or should have been done earlier; it is negligence or omission to assert a right within a reasonable time, warranting the presumption that the
party entitled to assert it either has abandoned or declined to assert it." 27 In this case, petitioner Republic has not displayed such unreasonable failure
or neglect that would lead us to conclude that it has abandoned or declined to assert its right to question the lower court's jurisdiction.
II
The Municipal Trial Court properly acquired jurisdiction over the case.
In assailing the jurisdiction of the lower courts, petitioner Republic raised two points of contention: (a) the period for setting the date and hour of the
initial hearing; and (b) the value of the land to be registered.
First, petitioner argued that the lower court failed to acquire jurisdiction over the application, because the RTC set the date and hour of the initial
hearing beyond the 90-day period provided under the Property Registration Decree. 28
We disagree.
The Property Registration Decree provides:
Sec. 23. Notice of initial hearing, publication, etc. - The court shall, within five days from filing of the application, issue an order setting the date and
hour of the initial hearing which shall not be earlier than forty-five days nor later than ninety days from the date of the order. x x x.
In this case, the application for original registration was filed on 17 July 1997. 29 On 18 July 1997, or a day after the filing of the application, the RTC
immediately issued an Order setting the case for initial hearing on 22 October 1997, which was 96 days from the Order. 30 While the date set by the
RTC was beyond the 90-day period provided for in Section 23, this fact did not affect the jurisdiction of the trial court. In Republic v. Manna
Properties, Inc.,31 petitioner Republic therein contended that there was failure to comply with the jurisdictional requirements for original registration,
because there were 125 days between the Order setting the date of the initial hearing and the initial hearing itself. We ruled that the lapse of time
between the issuance of the Order setting the date of initial hearing and the date of the initial hearing itself was not fatal to the application. Thus, we
held:
x x x [A] party to an action has no control over the Administrator or the Clerk of Court acting as a land court; he has no right to meddle unduly with
the business of such official in the performance of his duties. A party cannot intervene in matters within the exclusive power of the trial court. No
fault is attributable to such party if the trial court errs on matters within its sole power. It is unfair to punish an applicant for an act or omission over
which the applicant has neither responsibility nor control, especially if the applicant has complied with all the requirements of the law. 32
Indeed, it would be the height of injustice to penalize respondent Corporation by dismissing its application for registration on account of events
beyond its control.
Moreover, since the RTC issued a second Order on 7 August 1997 setting the initial hearing on 4 November 1997, 33 within the 90-day period
provided by law, petitioner Republic argued that the jurisdictional defect was still not cured, as the second Order was issued more than five days from
the filing of the application, again contrary to the prescribed period under the Property Registration Decree. 34
Petitioner is incorrect.
The RTCs failure to issue the Order setting the date and hour of the initial hearing within five days from the filing of the application for registration,
as provided in the Property Registration Decree, did not affect the courts its jurisdiction. Observance of the five-day period was merely directory,
and failure to issue the Order within that period did not deprive the RTC of its jurisdiction over the case. To rule that compliance with the five-day
period is mandatory would make jurisdiction over the subject matter dependent upon the trial court. Jurisdiction over the subject matter is conferred
only by the Constitution or the law.35 It cannot be contingent upon the action or inaction of the court.
This does not mean that courts may disregard the statutory periods with impunity. We cannot assume that the law deliberately meant the provision "to
become meaningless and to be treated as a dead letter." 36 However, the records of this case do not show such blatant disregard for the law. In fact, the
RTC immediately set the case for initial hearing a day after the filing of the application for registration, 37 except that it had to issue a second Order
because the initial hearing had been set beyond the 90-day period provided by law.
Second, petitioner contended38 that since the selling price of the property based on the Deed of Sale annexed to respondents application for original
registration was 160,000,39 the MTC did not have jurisdiction over the case. Under Section 34 of the Judiciary Reorganization Act, as amended, 40
the MTCs delegated jurisdiction to try cadastral and land registration cases is limited to lands, the value of which should not exceed 100,000.
We are not persuaded.
The delegated jurisdiction of the MTC over cadastral and land registration cases is indeed set forth in the Judiciary Reorganization Act, which
provides:
Sec. 34. Delegated Jurisdiction in Cadastral and Land Registration Cases. - Metropolitan Trial Courts, Municipal Trial Courts, and Municipal
Circuit Trial Courts may be assigned by the Supreme Court to hear and determine cadastral or land registration cases covering lots where there is no
controversy or opposition, or contested lots where the value of which does not exceed One hundred thousand pesos ( 100,000.00), such value to be
ascertained by the affidavit of the claimant or by agreement of the respective claimants if there are more than one, or from the corresponding tax

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declaration of the real property. Their decision in these cases shall be appealable in the same manner as decisions of the Regional Trial Courts. (As
amended by R.A. No. 7691) (Emphasis supplied.)
Thus, the MTC has delegated jurisdiction in cadastral and land registration cases in two instances: first, where there is no controversy or opposition;
or, second, over contested lots, the value of which does not exceed 100,000.
The case at bar does not fall under the first instance, because petitioner opposed respondent Corporations application for registration on 8 January
1998.41
However, the MTC had jurisdiction under the second instance, because the value of the lot in this case does not exceed 100,000.
Contrary to petitioners contention, the value of the land should not be determined with reference to its selling price. Rather, Section 34 of the
Judiciary Reorganization Act provides that the value of the property sought to be registered may be ascertained in three ways: first, by the affidavit of
the claimant; second, by agreement of the respective claimants, if there are more than one; or, third, from the corresponding tax declaration of the real
property.42
In this case, the value of the property cannot be determined using the first method, because the records are bereft of any affidavit executed by
respondent as to the value of the property. Likewise, valuation cannot be done through the second method, because this method finds application only
where there are multiple claimants who agree on and make a joint submission as to the value of the property. Here, only respondent Bantigue Point
Development Corporation claims the property.
The value of the property must therefore be ascertained with reference to the corresponding Tax Declarations submitted by respondent Corporation
together with its application for registration. From the records, we find that the assessed value of the property is 4,330, 1,920 and 8,670, or a total
assessed value of 14,920 for the entire property.43 Based on these Tax Declarations, it is evident that the total value of the land in question does not
exceed 100,000. Clearly, the MTC may exercise its delegated jurisdiction under the Judiciary Reorganization Act, as amended.
III
A certification from the CENRO is not sufficient proof that the property in question is alienable and disposable land of the public domain.
Even as we affirm the propriety of the MTCs exercise of its delegated jurisdiction, we find that the lower court erred in granting respondent
Corporations application for original registration in the absence of sufficient proof that the property in question was alienable and disposable land of
the public domain.
The Regalian doctrine dictates that all lands of the public domain belong to the State. 44 The applicant for land registration has the burden of
overcoming the presumption of State ownership by establishing through incontrovertible evidence that the land sought to be registered is alienable or
disposable based on a positive act of the government. 45 We held in Republic v. T.A.N. Properties, Inc. that a CENRO certification is insufficient to
prove the alienable and disposable character of the land sought to be registered. 46 The applicant must also show sufficient proof that the DENR
Secretary has approved the land classification and released the land in question as alienable and disposable. 47
Thus, the present rule is that an application for original registration must be accompanied by (1) a CENRO or PENRO 48 Certification; and (2) a copy
of the original classification approved by the DENR Secretary and certified as a true copy by the legal custodian of the official records. 49
Here, respondent Corporation only presented a CENRO certification in support of its application. 50 Clearly, this falls short of the requirements for
original registration.1wphi1
We therefore remand this case to the court a quo for reception of further evidence to prove that the property in question forms part of the alienable
and disposable land of the public domain. If respondent Bantigue Point Development Corporation presents a certified true copy of the original
classification approved by the DENR Secretary, the application for original registration should be granted. If it fails to present sufficient proof that
the land in question is alienable and disposable based on a positive act of the government, the application should be denied.
WHEREFORE, premises considered, the instant Petition for Review is DENIED. Let this case be REMANDED to the Municipal Trial Court of San
Juan, Batangas, for reception of evidence to prove that the property sought to be registered is alienable and disposable land of the public domain.
SO ORDERED.
G.R. No. 167707

October 8, 2008

THE SECRETARY OF THE DEPARTMENT OF ENVIRONMENT AND NATURAL RESOURCES, THE REGIONAL EXECUTIVE
DIRECTOR, DENR-REGION VI, REGIONAL TECHNICAL DIRECTOR FOR LANDS, LANDS MANAGEMENT BUREAU, REGION
VI PROVINCIAL ENVIRONMENT AND NATURAL RESOURCES OFFICER OF KALIBO, AKLAN, REGISTER OF DEEDS,
DIRECTOR OF LAND REGISTRATION AUTHORITY, DEPARTMENT OF TOURISM SECRETARY, DIRECTOR OF PHILIPPINE
TOURISM AUTHORITY, petitioners,
vs.
MAYOR JOSE S. YAP, LIBERTAD TALAPIAN, MILA Y. SUMNDAD, and ANICETO YAP, in their behalf and in behalf of all those
similarly situated, respondents.

x--------------------------------------------------x
G.R. No. G.R. No. 173775

October 8, 2008

DR. ORLANDO SACAY and WILFREDO GELITO, joined by THE LANDOWNERS OF BORACAY SIMILARLY SITUATED NAMED
IN A LIST, ANNEX "A" OF THIS PETITION, petitioners,
vs.
THE SECRETARY OF THE DEPARTMENT OF ENVIRONMENT AND NATURAL RESOURCES, THE REGIONAL TECHNICAL
DIRECTOR FOR LANDS, LANDS MANAGEMENT BUREAU, REGION VI, PROVINCIAL ENVIRONMENT AND NATURAL
RESOURCES OFFICER, KALIBO, AKLAN, respondents.

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DECISION
REYES, R.T., J.:
AT stake in these consolidated cases is the right of the present occupants of Boracay Island to secure titles over their occupied lands.
There are two consolidated petitions. The first is G.R. No. 167707, a petition for review on certiorari of the Decision1 of the Court of Appeals (CA)
affirming that2 of the Regional Trial Court (RTC) in Kalibo, Aklan, which granted the petition for declaratory relief filed by respondents-claimants
Mayor Jose Yap, et al. and ordered the survey of Boracay for titling purposes. The second is G.R. No. 173775, a petition for prohibition, mandamus,
and nullification of Proclamation No. 10645">[3] issued by President Gloria Macapagal-Arroyo classifying Boracay into reserved forest and
agricultural land.
The Antecedents
G.R. No. 167707
Boracay Island in the Municipality of Malay, Aklan, with its powdery white sand beaches and warm crystalline waters, is reputedly a premier
Philippine tourist destination. The island is also home to 12,003 inhabitants 4 who live in the bone-shaped islands three barangays.5
On April 14, 1976, the Department of Environment and Natural Resources (DENR) approved the National Reservation Survey of Boracay
Island,6 which identified several lots as being occupied or claimed by named persons. 7
On November 10, 1978, then President Ferdinand Marcos issued Proclamation No. 18018 declaring Boracay Island, among other islands, caves and
peninsulas in the Philippines, as tourist zones and marine reserves under the administration of the Philippine Tourism Authority (PTA). President
Marcos later approved the issuance of PTA Circular 3-829 dated September 3, 1982, to implement Proclamation No. 1801.
Claiming that Proclamation No. 1801 and PTA Circular No 3-82 precluded them from filing an application for judicial confirmation of imperfect title
or survey of land for titling purposes, respondents-claimants
Mayor Jose S. Yap, Jr., Libertad Talapian, Mila Y. Sumndad, and Aniceto Yap filed a petition for declaratory relief with the RTC in Kalibo, Aklan.
In their petition, respondents-claimants alleged that Proclamation No. 1801 and PTA Circular No. 3-82 raised doubts on their right to secure titles
over their occupied lands. They declared that they themselves, or through their predecessors-in-interest, had been in open, continuous, exclusive, and
notorious possession and occupation in Boracay since June 12, 1945, or earlier since time immemorial. They declared their lands for tax purposes and
paid realty taxes on them.10
Respondents-claimants posited that Proclamation No. 1801 and its implementing Circular did not place Boracay beyond the commerce of man. Since
the Island was classified as a tourist zone, it was susceptible of private ownership. Under Section 48(b) of Commonwealth Act (CA) No. 141,
otherwise known as the Public Land Act, they had the right to have the lots registered in their names through judicial confirmation of imperfect titles.
The Republic, through the Office of the Solicitor General (OSG), opposed the petition for declaratory relief. The OSG countered that Boracay Island
was an unclassified land of the public domain. It formed part of the mass of lands classified as "public forest," which was not available for
disposition pursuant to Section 3(a) of Presidential Decree (PD) No. 705 or the Revised Forestry Code, 11 as amended.
The OSG maintained that respondents-claimants reliance on PD No. 1801 and PTA Circular No. 3-82 was misplaced. Their right to judicial
confirmation of title was governed by CA No. 141 and PD No. 705. Since Boracay Island had not been classified as alienable and disposable,
whatever possession they had cannot ripen into ownership.
During pre-trial, respondents-claimants and the OSG stipulated on the following facts: (1) respondents-claimants were presently in possession of
parcels of land in Boracay Island; (2) these parcels of land were planted with coconut trees and other natural growing trees; (3) the coconut trees had
heights of more or less twenty (20) meters and were planted more or less fifty (50) years ago; and (4) respondents-claimants declared the land they
were occupying for tax purposes.12
The parties also agreed that the principal issue for resolution was purely legal: whether Proclamation No. 1801 posed any legal hindrance or
impediment to the titling of the lands in Boracay. They decided to forego with the trial and to submit the case for resolution upon submission of their
respective memoranda.13
The RTC took judicial notice14 that certain parcels of land in Boracay Island, more particularly Lots 1 and 30, Plan PSU-5344, were covered by
Original Certificate of Title No. 19502 (RO 2222) in the name of the Heirs of Ciriaco S. Tirol. These lots were involved in Civil Case Nos. 5222 and
5262 filed before the RTC of Kalibo, Aklan. 15 The titles were issued on
August 7, 1933.16
RTC and CA Dispositions
On July 14, 1999, the RTC rendered a decision in favor of respondents-claimants, with a fallo reading:
WHEREFORE, in view of the foregoing, the Court declares that Proclamation No. 1801 and PTA Circular No. 3-82 pose no legal obstacle to the
petitioners and those similarly situated to acquire title to their lands in Boracay, in accordance with the applicable laws and in the manner prescribed
therein; and to have their lands surveyed and approved by respondent Regional Technical Director of Lands as the approved survey does not in itself
constitute a title to the land.
SO ORDERED.17
The RTC upheld respondents-claimants right to have their occupied lands titled in their name. It ruled that neither Proclamation No. 1801 nor PTA
Circular No. 3-82 mentioned that lands in Boracay were inalienable or could not be the subject of disposition. 18 The Circular itself recognized private

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ownership of lands.19 The trial court cited Sections 8720 and 5321 of the Public Land Act as basis for acknowledging private ownership of lands in
Boracay and that only those forested areas in public lands were declared as part of the forest reserve. 22
The OSG moved for reconsideration but its motion was denied. 23 The Republic then appealed to the CA.
On December 9, 2004, the appellate court affirmed in toto the RTC decision, disposing as follows:
WHEREFORE, in view of the foregoing premises, judgment is hereby rendered by us DENYING the appeal filed in this case and AFFIRMING the
decision of the lower court.24
The CA held that respondents-claimants could not be prejudiced by a declaration that the lands they occupied since time immemorial were part of a
forest reserve.
Again, the OSG sought reconsideration but it was similarly denied. 25 Hence, the present petition under Rule 45.
G.R. No. 173775
On May 22, 2006, during the pendency of G.R. No. 167707, President Gloria Macapagal-Arroyo issued Proclamation No. 1064 26 classifying Boracay
Island into four hundred (400) hectares of reserved forest land (protection purposes) and six hundred twenty-eight and 96/100 (628.96) hectares of
agricultural land (alienable and disposable). The Proclamation likewise provided for a fifteen-meter buffer zone on each side of the centerline of
roads and trails, reserved for right-of-way and which shall form part of the area reserved for forest land protection purposes.
On August 10, 2006, petitioners-claimants Dr. Orlando Sacay,27 Wilfredo Gelito,28 and other landowners29 in Boracay filed with this Court an original
petition for prohibition, mandamus, and nullification of Proclamation No. 1064. 30 They allege that the Proclamation infringed on their "prior vested
rights" over portions of Boracay. They have been in continued possession of their respective lots in Boracay since time immemorial. They have also
invested billions of pesos in developing their lands and building internationally renowned first class resorts on their lots. 31
Petitioners-claimants contended that there is no need for a proclamation reclassifying Boracay into agricultural land. Being classified as neither
mineral nor timber land, the island is deemed agricultural pursuant to the Philippine Bill of 1902 and Act No. 926, known as the first Public Land
Act.32 Thus, their possession in the concept of owner for the required period entitled them to judicial confirmation of imperfect title.
Opposing the petition, the OSG argued that petitioners-claimants do not have a vested right over their occupied portions in the island. Boracay is an
unclassified public forest land pursuant to Section 3(a) of PD No. 705. Being public forest, the claimed portions of the island are inalienable and
cannot be the subject of judicial confirmation of imperfect title. It is only the executive department, not the courts, which has authority to reclassify
lands of the public domain into alienable and disposable lands. There is a need for a positive government act in order to release the lots for
disposition.
On November 21, 2006, this Court ordered the consolidation of the two petitions as they principally involve the same issues on the land classification
of Boracay Island.33
Issues
G.R. No. 167707
The OSG raises the lone issue of whether Proclamation No. 1801 and PTA Circular No. 3-82 pose any legal obstacle for respondents, and all those
similarly situated, to acquire title to their occupied lands in Boracay Island. 34
G.R. No. 173775
Petitioners-claimants hoist five (5) issues, namely:
I.
AT THE TIME OF THE ESTABLISHED POSSESSION OF PETITIONERS IN CONCEPT OF OWNER OVER THEIR RESPECTIVE AREAS IN
BORACAY, SINCE TIME IMMEMORIAL OR AT THE LATEST SINCE 30 YRS. PRIOR TO THE FILING OF THE PETITION FOR
DECLARATORY RELIEF ON NOV. 19, 1997, WERE THE AREAS OCCUPIED BY THEM PUBLIC AGRICULTURAL LANDS AS DEFINED
BY LAWS THEN ON JUDICIAL CONFIRMATION OF IMPERFECT TITLES OR PUBLIC FOREST AS DEFINED BY SEC. 3a, PD 705?
II.
HAVE PETITIONERS OCCUPANTS ACQUIRED PRIOR VESTED RIGHT OF PRIVATE OWNERSHIP OVER THEIR OCCUPIED PORTIONS
OF BORACAY LAND, DESPITE THE FACT THAT THEY HAVE NOT APPLIED YET FOR JUDICIAL CONFIRMATION OF IMPERFECT
TITLE?
III.
IS THE EXECUTIVE DECLARATION OF THEIR AREAS AS ALIENABLE AND DISPOSABLE UNDER SEC 6, CA 141 [AN]
INDISPENSABLE PRE-REQUISITE FOR PETITIONERS TO OBTAIN TITLE UNDER THE TORRENS SYSTEM?
IV.
IS THE ISSUANCE OF PROCLAMATION 1064 ON MAY 22, 2006, VIOLATIVE OF THE PRIOR VESTED RIGHTS TO PRIVATE
OWNERSHIP OF PETITIONERS OVER THEIR LANDS IN BORACAY, PROTECTED BY THE DUE PROCESS CLAUSE OF THE
CONSTITUTION OR IS PROCLAMATION 1064 CONTRARY TO SEC. 8, CA 141, OR SEC. 4(a) OF RA 6657.
V.

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CAN RESPONDENTS BE COMPELLED BY MANDAMUS TO ALLOW THE SURVEY AND TO APPROVE THE SURVEY PLANS FOR
PURPOSES OF THE APPLICATION FOR TITLING OF THE LANDS OF PETITIONERS IN BORACAY? 35 (Underscoring supplied)
In capsule, the main issue is whether private claimants (respondents-claimants in G.R. No. 167707 and petitioners-claimants in G.R. No. 173775)
have a right to secure titles over their occupied portions in Boracay. The twin petitions pertain to their right, if any, to judicial confirmation of
imperfect title under CA No. 141, as amended. They do not involve their right to secure title under other pertinent laws.
Our Ruling
Regalian Doctrine and power of the executive
to reclassify lands of the public domain
Private claimants rely on three (3) laws and executive acts in their bid for judicial confirmation of imperfect title, namely: (a) Philippine Bill of
190236 in relation to Act No. 926, later amended and/or superseded by Act No. 2874 and CA No. 141; 37 (b) Proclamation No. 180138 issued by then
President Marcos; and (c) Proclamation No. 106439 issued by President Gloria Macapagal-Arroyo. We shall proceed to determine their rights to apply
for judicial confirmation of imperfect title under these laws and executive acts.
But first, a peek at the Regalian principle and the power of the executive to reclassify lands of the public domain.
The 1935 Constitution classified lands of the public domain into agricultural, forest or timber.40 Meanwhile, the 1973 Constitution provided the
following divisions: agricultural, industrial or commercial, residential, resettlement, mineral, timber or forest and grazing lands, and such other
classes as may be provided by law,41 giving the government great leeway for classification. 42 Then the 1987 Constitution reverted to the 1935
Constitution classification with one addition: national parks. 43 Of these, only agricultural lands may be alienated.44 Prior to Proclamation No. 1064 of
May 22, 2006, Boracay Island had never been expressly and administratively classified under any of these grand divisions. Boracay was an
unclassified land of the public domain.
The Regalian Doctrine dictates that all lands of the public domain belong to the State, that the State is the source of any asserted right to ownership of
land and charged with the conservation of such patrimony. 45 The doctrine has been consistently adopted under the 1935, 1973, and 1987
Constitutions.46
All lands not otherwise appearing to be clearly within private ownership are presumed to belong to the State. 47 Thus, all lands that have not been
acquired from the government, either by purchase or by grant, belong to the State as part of the inalienable public domain. 48 Necessarily, it is up to
the State to determine if lands of the public domain will be disposed of for private ownership. The government, as the agent of the state, is possessed
of the plenary power as the persona in law to determine who shall be the favored recipients of public lands, as well as under what terms they may be
granted such privilege, not excluding the placing of obstacles in the way of their exercise of what otherwise would be ordinary acts of ownership. 49
Our present land law traces its roots to the Regalian Doctrine. Upon the Spanish conquest of the Philippines, ownership of all lands, territories and
possessions in the Philippines passed to the Spanish Crown. 50 The Regalian doctrine was first introduced in the Philippines through the Laws of the
Indies and the Royal Cedulas, which laid the foundation that "all lands that were not acquired from the Government, either by purchase or by grant,
belong to the public domain."51
The Laws of the Indies was followed by the Ley Hipotecaria or the Mortgage Law of 1893. The Spanish Mortgage Law provided for the systematic
registration of titles and deeds as well as possessory claims. 52
The Royal Decree of 1894 or the Maura Law 53 partly amended the Spanish Mortgage Law and the Laws of the Indies. It established possessory
information as the method of legalizing possession of vacant Crown land, under certain conditions which were set forth in said decree. 54 Under
Section 393 of the Maura Law, an informacion posesoria or possessory information title,55 when duly inscribed in the Registry of Property, is
converted into a title of ownership only after the lapse of twenty (20) years of uninterrupted possession which must be actual, public, and adverse, 56
from the date of its inscription.57 However, possessory information title had to be perfected one year after the promulgation of the Maura Law, or until
April 17, 1895. Otherwise, the lands would revert to the State. 58
In sum, private ownership of land under the Spanish regime could only be founded on royal concessions which took various forms, namely: (1) titulo
real or royal grant; (2) concesion especial or special grant; (3) composicion con el estado or adjustment title; (4) titulo de compra or title by purchase;
and (5) informacion posesoria or possessory information title.59>
The first law governing the disposition of public lands in the Philippines under American rule was embodied in the Philippine Bill of 1902.60 By this
law, lands of the public domain in the Philippine Islands were classified into three (3) grand divisions, to wit: agricultural, mineral, and timber or
forest lands.61 The act provided for, among others, the disposal of mineral lands by means of absolute grant (freehold system) and by lease (leasehold
system).62 It also provided the definition by exclusion of "agricultural public lands." 63 Interpreting the meaning of "agricultural lands" under the
Philippine Bill of 1902, the Court declared in Mapa v. Insular Government:64
x x x In other words, that the phrase "agricultural land" as used in Act No. 926 means those public lands acquired from Spain which are not
timber or mineral lands. x x x65 (Emphasis Ours)
On February 1, 1903, the Philippine Legislature passed Act No. 496, otherwise known as the Land Registration Act. The act established a system of
registration by which recorded title becomes absolute, indefeasible, and imprescriptible. This is known as the Torrens system. 66
Concurrently, on October 7, 1903, the Philippine Commission passed Act No. 926, which was the first Public Land Act. The Act introduced the
homestead system and made provisions for judicial and administrative confirmation of imperfect titles and for the sale or lease of public lands. It
permitted corporations regardless of the nationality of persons owning the controlling stock to lease or purchase lands of the public domain. 67 Under
the Act, open, continuous, exclusive, and notorious possession and occupation of agricultural lands for the next ten (10) years preceding July 26,
1904 was sufficient for judicial confirmation of imperfect title. 68
On November 29, 1919, Act No. 926 was superseded by Act No. 2874, otherwise known as the second Public Land Act. This new, more
comprehensive law limited the exploitation of agricultural lands to Filipinos and Americans and citizens of other countries which gave Filipinos the
same privileges. For judicial confirmation of title, possession and occupation en concepto dueo since time immemorial, or since July 26, 1894, was
required.69

7
After the passage of the 1935 Constitution, CA No. 141 amended Act No. 2874 on December 1, 1936. To this day, CA No. 141, as amended,
remains as the existing general law governing the classification and disposition of lands of the public domain other than timber and mineral lands, 70
and privately owned lands which reverted to the State. 71
Section 48(b) of CA No. 141 retained the requirement under Act No. 2874 of possession and occupation of lands of the public domain since time
immemorial or since July 26, 1894. However, this provision was superseded by Republic Act (RA) No. 1942, 72 which provided for a simple thirtyyear prescriptive period for judicial confirmation of imperfect title. The provision was last amended by PD No. 1073,73 which now provides for
possession and occupation of the land applied for since June 12, 1945, or earlier.74
The issuance of PD No. 89275 on February 16, 1976 discontinued the use of Spanish titles as evidence in land registration proceedings. 76 Under the
decree, all holders of Spanish titles or grants should apply for registration of their lands under Act No. 496 within six (6) months from the effectivity
of the decree on February 16, 1976. Thereafter, the recording of all unregistered lands77 shall be governed by Section 194 of the Revised
Administrative Code, as amended by Act No. 3344.
On June 11, 1978, Act No. 496 was amended and updated by PD No. 1529, known as the Property Registration Decree. It was enacted to codify the
various laws relative to registration of property.78 It governs registration of lands under the Torrens system as well as unregistered lands, including
chattel mortgages.79
A positive act declaring land as alienable and disposable is required. In keeping with the presumption of State ownership, the Court has time and
again emphasized that there must be a positive act of the government, such as an official proclamation, 80 declassifying inalienable public land into
disposable land for agricultural or other purposes.81 In fact, Section 8 of CA No. 141 limits alienable or disposable lands only to those lands which
have been "officially delimited and classified." 82
The burden of proof in overcoming the presumption of State ownership of the lands of the public domain is on the person applying for registration
(or claiming ownership), who must prove that the land subject of the application is alienable or disposable. 83 To overcome this presumption,
incontrovertible evidence must be established that the land subject of the application (or claim) is alienable or disposable. 84 There must still be a
positive act declaring land of the public domain as alienable and disposable. To prove that the land subject of an application for registration is
alienable, the applicant must establish the existence of a positive act of the government such as a presidential proclamation or an executive order; an
administrative action; investigation reports of Bureau of Lands investigators; and a legislative act or a statute. 85 The applicant may also secure a
certification from the government that the land claimed to have been possessed for the required number of years is alienable and disposable. 86
In the case at bar, no such proclamation, executive order, administrative action, report, statute, or certification was presented to the Court. The records
are bereft of evidence showing that, prior to 2006, the portions of Boracay occupied by private claimants were subject of a government proclamation
that the land is alienable and disposable. Absent such well-nigh incontrovertible evidence, the Court cannot accept the submission that lands occupied
by private claimants were already open to disposition before 2006. Matters of land classification or reclassification cannot be assumed. They call for
proof.87
Ankron and De Aldecoa did not make the whole of Boracay Island, or portions of it, agricultural lands. Private claimants posit that Boracay was
already an agricultural land pursuant to the old cases Ankron v. Government of the Philippine Islands (1919)88 and De Aldecoa v. The Insular
Government (1909).89 These cases were decided under the provisions of the Philippine Bill of 1902 and Act No. 926. There is a statement in these old
cases that "in the absence of evidence to the contrary, that in each case the lands are agricultural lands until the contrary is shown." 90
Private claimants reliance on Ankron and De Aldecoa is misplaced. These cases did not have the effect of converting the whole of Boracay Island or
portions of it into agricultural lands. It should be stressed that the Philippine Bill of 1902 and Act No. 926 merely provided the manner through which
land registration courts would classify lands of the public domain. Whether the land would be classified as timber, mineral, or agricultural depended
on proof presented in each case.
Ankron and De Aldecoa were decided at a time when the President of the Philippines had no power to classify lands of the public domain into
mineral, timber, and agricultural. At that time, the courts were free to make corresponding classifications in justiciable cases, or were vested with
implicit power to do so, depending upon the preponderance of the evidence. 91 This was the Courts ruling in Heirs of the Late Spouses Pedro S.
Palanca and Soterranea Rafols Vda. De Palanca v. Republic,92 in which it stated, through Justice Adolfo Azcuna, viz.:
x x x Petitioners furthermore insist that a particular land need not be formally released by an act of the Executive before it can be deemed open to
private ownership, citing the cases of Ramos v. Director of Lands and Ankron v. Government of the Philippine Islands.
xxxx
Petitioners reliance upon Ramos v. Director of Lands and Ankron v. Government is misplaced. These cases were decided under the Philippine Bill of
1902 and the first Public Land Act No. 926 enacted by the Philippine Commission on October 7, 1926, under which there was no legal provision
vesting in the Chief Executive or President of the Philippines the power to classify lands of the public domain into mineral, timber and agricultural so
that the courts then were free to make corresponding classifications in justiciable cases, or were vested with implicit power to do so, depending upon
the preponderance of the evidence.93
To aid the courts in resolving land registration cases under Act No. 926, it was then necessary to devise a presumption on land classification. Thus
evolved the dictum in Ankron that "the courts have a right to presume, in the absence of evidence to the contrary, that in each case the lands are
agricultural lands until the contrary is shown."94
But We cannot unduly expand the presumption in Ankron and De Aldecoa to an argument that all lands of the public domain had been automatically
reclassified as disposable and alienable agricultural lands. By no stretch of imagination did the presumption convert all lands of the public domain
into agricultural lands.
If We accept the position of private claimants, the Philippine Bill of 1902 and Act No. 926 would have automatically made all lands in the
Philippines, except those already classified as timber or mineral land, alienable and disposable lands. That would take these lands out of State
ownership and worse, would be utterly inconsistent with and totally repugnant to the long-entrenched Regalian doctrine.
The presumption in Ankron and De Aldecoa attaches only to land registration cases brought under the provisions of Act No. 926, or more specifically
those cases dealing with judicial and administrative confirmation of imperfect titles. The presumption applies to an applicant for judicial or
administrative conformation of imperfect title under Act No. 926. It certainly cannot apply to landowners, such as private claimants or their

8
predecessors-in-interest, who failed to avail themselves of the benefits of Act No. 926. As to them, their land remained unclassified and, by virtue of
the Regalian doctrine, continued to be owned by the State.
In any case, the assumption in Ankron and De Aldecoa was not absolute. Land classification was, in the end, dependent on proof. If there was proof
that the land was better suited for non-agricultural uses, the courts could adjudge it as a mineral or timber land despite the presumption. In Ankron,
this Court stated:
In the case of Jocson vs. Director of Forestry (supra), the Attorney-General admitted in effect that whether the particular land in question belongs to
one class or another is a question of fact. The mere fact that a tract of land has trees upon it or has mineral within it is not of itself sufficient to declare
that one is forestry land and the other, mineral land. There must be some proof of the extent and present or future value of the forestry and of the
minerals. While, as we have just said, many definitions have been given for "agriculture," "forestry," and "mineral" lands, and that in each case it is a
question of fact, we think it is safe to say that in order to be forestry or mineral land the proof must show that it is more valuable for the forestry or
the mineral which it contains than it is for agricultural purposes. (Sec. 7, Act No. 1148.) It is not sufficient to show that there exists some trees upon
the land or that it bears some mineral. Land may be classified as forestry or mineral today, and, by reason of the exhaustion of the timber or mineral,
be classified as agricultural land tomorrow. And vice-versa, by reason of the rapid growth of timber or the discovery of valuable minerals, lands
classified as agricultural today may be differently classified tomorrow. Each case must be decided upon the proof in that particular case, having
regard for its present or future value for one or the other purposes. We believe, however, considering the fact that it is a matter of public
knowledge that a majority of the lands in the Philippine Islands are agricultural lands that the courts have a right to presume, in the absence of
evidence to the contrary, that in each case the lands are agricultural lands until the contrary is shown. Whatever the land involved in a particular
land registration case is forestry or mineral land must, therefore, be a matter of proof. Its superior value for one purpose or the other is a
question of fact to be settled by the proof in each particular case. The fact that the land is a manglar [mangrove swamp] is not sufficient for the
courts to decide whether it is agricultural, forestry, or mineral land. It may perchance belong to one or the other of said classes of land. The
Government, in the first instance, under the provisions of Act No. 1148, may, by reservation, decide for itself what portions of public land shall be
considered forestry land, unless private interests have intervened before such reservation is made. In the latter case, whether the land is agricultural,
forestry, or mineral, is a question of proof. Until private interests have intervened, the Government, by virtue of the terms of said Act (No. 1148), may
decide for itself what portions of the "public domain" shall be set aside and reserved as forestry or mineral land. (Ramos vs. Director of Lands, 39
Phil. 175; Jocson vs. Director of Forestry, supra)95 (Emphasis ours)
Since 1919, courts were no longer free to determine the classification of lands from the facts of each case, except those that have already became
private lands.96 Act No. 2874, promulgated in 1919 and reproduced in Section 6 of CA No. 141, gave the Executive Department, through the
President, the exclusive prerogative to classify or reclassify public lands into alienable or disposable, mineral or forest. 96-a Since then, courts no
longer had the authority, whether express or implied, to determine the classification of lands of the public domain. 97
Here, private claimants, unlike the Heirs of Ciriaco Tirol who were issued their title in 1933, 98 did not present a justiciable case for determination by
the land registration court of the propertys land classification. Simply put, there was no opportunity for the courts then to resolve if the land the
Boracay occupants are now claiming were agricultural lands. When Act No. 926 was supplanted by Act No. 2874 in 1919, without an application for
judicial confirmation having been filed by private claimants or their predecessors-in-interest, the courts were no longer authorized to determine the
propertys land classification. Hence, private claimants cannot bank on Act No. 926.
We note that the RTC decision99 in G.R. No. 167707 mentioned Krivenko v. Register of Deeds of Manila,100 which was decided in 1947 when CA No.
141, vesting the Executive with the sole power to classify lands of the public domain was already in effect. Krivenko cited the old cases Mapa v.
Insular Government,101 De Aldecoa v. The Insular Government,102 and Ankron v. Government of the Philippine Islands.103
Krivenko, however, is not controlling here because it involved a totally different issue. The pertinent issue in Krivenko was whether residential lots
were included in the general classification of agricultural lands; and if so, whether an alien could acquire a residential lot. This Court ruled that as an
alien, Krivenko was prohibited by the 1935 Constitution104 from acquiring agricultural land, which included residential lots. Here, the issue is whether
unclassified lands of the public domain are automatically deemed agricultural.
Notably, the definition of "agricultural public lands" mentioned in Krivenko relied on the old cases decided prior to the enactment of Act No. 2874,
including Ankron and De Aldecoa.105 As We have already stated, those cases cannot apply here, since they were decided when the Executive did not
have the authority to classify lands as agricultural, timber, or mineral.
Private claimants continued possession under Act No. 926 does not create a presumption that the land is alienable. Private claimants also contend
that their continued possession of portions of Boracay Island for the requisite period of ten (10) years under Act No. 926 106 ipso facto converted the
island into private ownership. Hence, they may apply for a title in their name.
A similar argument was squarely rejected by the Court in Collado v. Court of Appeals.107 Collado, citing the separate opinion of now Chief Justice
Reynato S. Puno in Cruz v. Secretary of Environment and Natural Resources,107-a ruled:
"Act No. 926, the first Public Land Act, was passed in pursuance of the provisions of the Philippine Bill of 1902. The law governed the disposition of
lands of the public domain. It prescribed rules and regulations for the homesteading, selling and leasing of portions of the public domain of the
Philippine Islands, and prescribed the terms and conditions to enable persons to perfect their titles to public lands in the Islands. It also provided for
the "issuance of patents to certain native settlers upon public lands," for the establishment of town sites and sale of lots therein, for the completion of
imperfect titles, and for the cancellation or confirmation of Spanish concessions and grants in the Islands." In short, the Public Land Act operated on
the assumption that title to public lands in the Philippine Islands remained in the government; and that the governments title to public land sprung
from the Treaty of Paris and other subsequent treaties between Spain and the United States. The term "public land" referred to all lands of the public
domain whose title still remained in the government and are thrown open to private appropriation and settlement, and excluded the patrimonial
property of the government and the friar lands."
Thus, it is plain error for petitioners to argue that under the Philippine Bill of 1902 and Public Land Act No. 926, mere possession by private
individuals of lands creates the legal presumption that the lands are alienable and disposable.108 (Emphasis Ours)
Except for lands already covered by existing titles, Boracay was an unclassified land of the public domain prior to Proclamation No. 1064. Such
unclassified lands are considered public forest under PD No. 705. The DENR109 and the National Mapping and Resource Information Authority 110
certify that Boracay Island is an unclassified land of the public domain.
PD No. 705 issued by President Marcos categorized all unclassified lands of the public domain as public forest. Section 3(a) of PD No. 705 defines a
public forest as "a mass of lands of the public domain which has not been the subject of the present system of classification for the determination of
which lands are needed for forest purpose and which are not." Applying PD No. 705, all unclassified lands, including those in Boracay Island, are
ipso facto considered public forests. PD No. 705, however, respects titles already existing prior to its effectivity.

9
The Court notes that the classification of Boracay as a forest land under PD No. 705 may seem to be out of touch with the present realities in the
island. Boracay, no doubt, has been partly stripped of its forest cover to pave the way for commercial developments. As a premier tourist destination
for local and foreign tourists, Boracay appears more of a commercial island resort, rather than a forest land.
Nevertheless, that the occupants of Boracay have built multi-million peso beach resorts on the island; 111 that the island has already been stripped of its
forest cover; or that the implementation of Proclamation No. 1064 will destroy the islands tourism industry, do not negate its character as public
forest.
Forests, in the context of both the Public Land Act and the Constitution 112 classifying lands of the public domain into "agricultural, forest or timber,
mineral lands, and national parks," do not necessarily refer to large tracts of wooded land or expanses covered by dense growths of trees and
underbrushes.113 The discussion in Heirs of Amunategui v. Director of Forestry114 is particularly instructive:
A forested area classified as forest land of the public domain does not lose such classification simply because loggers or settlers may have stripped it
of its forest cover. Parcels of land classified as forest land may actually be covered with grass or planted to crops by kaingin cultivators or other
farmers. "Forest lands" do not have to be on mountains or in out of the way places. Swampy areas covered by mangrove trees, nipa palms, and other
trees growing in brackish or sea water may also be classified as forest land. The classification is descriptive of its legal nature or status and does
not have to be descriptive of what the land actually looks like. Unless and until the land classified as "forest" is released in an official
proclamation to that effect so that it may form part of the disposable agricultural lands of the public domain, the rules on confirmation of imperfect
title do not apply.115 (Emphasis supplied)
There is a big difference between "forest" as defined in a dictionary and "forest or timber land" as a classification of lands of the public domain as
appearing in our statutes. One is descriptive of what appears on the land while the other is a legal status, a classification for legal purposes. 116 At any
rate, the Court is tasked to determine the legal status of Boracay Island, and not look into its physical layout. Hence, even if its forest cover has been
replaced by beach resorts, restaurants and other commercial establishments, it has not been automatically converted from public forest to alienable
agricultural land.
Private claimants cannot rely on Proclamation No. 1801 as basis for judicial confirmation of imperfect title. The proclamation did not convert
Boracay into an agricultural land. However, private claimants argue that Proclamation No. 1801 issued by then President Marcos in 1978 entitles
them to judicial confirmation of imperfect title. The Proclamation classified Boracay, among other islands, as a tourist zone. Private claimants assert
that, as a tourist spot, the island is susceptible of private ownership.
Proclamation No. 1801 or PTA Circular No. 3-82 did not convert the whole of Boracay into an agricultural land. There is nothing in the law or the
Circular which made Boracay Island an agricultural land. The reference in Circular No. 3-82 to "private lands" 117 and "areas declared as alienable and
disposable"118 does not by itself classify the entire island as agricultural. Notably, Circular No. 3-82 makes reference not only to private lands and
areas but also to public forested lands. Rule VIII, Section 3 provides:
No trees in forested private lands may be cut without prior authority from the PTA. All forested areas in public lands are declared forest reserves.
(Emphasis supplied)
Clearly, the reference in the Circular to both private and public lands merely recognizes that the island can be classified by the Executive department
pursuant to its powers under CA No. 141. In fact, Section 5 of the Circular recognizes the then Bureau of Forest Developments authority to declare
areas in the island as alienable and disposable when it provides:
Subsistence farming, in areas declared as alienable and disposable by the Bureau of Forest Development.
Therefore, Proclamation No. 1801 cannot be deemed the positive act needed to classify Boracay Island as alienable and disposable land. If President
Marcos intended to classify the island as alienable and disposable or forest, or both, he would have identified the specific limits of each, as President
Arroyo did in Proclamation No. 1064. This was not done in Proclamation No. 1801.
The Whereas clauses of Proclamation No. 1801 also explain the rationale behind the declaration of Boracay Island, together with other islands, caves
and peninsulas in the Philippines, as a tourist zone and marine reserve to be administered by the PTA to ensure the concentrated efforts of the public
and private sectors in the development of the areas tourism potential with due regard for ecological balance in the marine environment. Simply put,
the proclamation is aimed at administering the islands for tourism and ecological purposes. It does not address the areas alienability.119
More importantly, Proclamation No. 1801 covers not only Boracay Island, but sixty-four (64) other islands, coves, and peninsulas in the Philippines,
such as Fortune and Verde Islands in Batangas, Port Galera in Oriental Mindoro, Panglao and Balicasag Islands in Bohol, Coron Island, Puerto
Princesa and surrounding areas in Palawan, Camiguin Island in Cagayan de Oro, and Misamis Oriental, to name a few. If the designation of Boracay
Island as tourist zone makes it alienable and disposable by virtue of Proclamation No. 1801, all the other areas mentioned would likewise be declared
wide open for private disposition. That could not have been, and is clearly beyond, the intent of the proclamation.
It was Proclamation No. 1064 of 2006 which positively declared part of Boracay as alienable and opened the same to private ownership. Sections
6 and 7 of CA No. 141120 provide that it is only the President, upon the recommendation of the proper department head, who has the authority to
classify the lands of the public domain into alienable or disposable, timber and mineral lands. 121
In issuing Proclamation No. 1064, President Gloria Macapagal-Arroyo merely exercised the authority granted to her to classify lands of the public
domain, presumably subject to existing vested rights. Classification of public lands is the exclusive prerogative of the Executive Department, through
the Office of the President. Courts have no authority to do so. 122 Absent such classification, the land remains unclassified until released and rendered
open to disposition.123
Proclamation No. 1064 classifies Boracay into 400 hectares of reserved forest land and 628.96 hectares of agricultural land. The Proclamation
likewise provides for a 15-meter buffer zone on each side of the center line of roads and trails, which are reserved for right of way and which shall
form part of the area reserved for forest land protection purposes.
Contrary to private claimants argument, there was nothing invalid or irregular, much less unconstitutional, about the classification of Boracay Island
made by the President through Proclamation No. 1064. It was within her authority to make such classification, subject to existing vested rights.
Proclamation No. 1064 does not violate the Comprehensive Agrarian Reform Law. Private claimants further assert that Proclamation No. 1064
violates the provision of the Comprehensive Agrarian Reform Law (CARL) or RA No. 6657 barring conversion of public forests into agricultural

10
lands. They claim that since Boracay is a public forest under PD No. 705, President Arroyo can no longer convert it into an agricultural land without
running afoul of Section 4(a) of RA No. 6657, thus:
SEC. 4. Scope. The Comprehensive Agrarian Reform Law of 1988 shall cover, regardless of tenurial arrangement and commodity produced, all
public and private agricultural lands as provided in Proclamation No. 131 and Executive Order No. 229, including other lands of the public domain
suitable for agriculture.
More specifically, the following lands are covered by the Comprehensive Agrarian Reform Program:
(a) All alienable and disposable lands of the public domain devoted to or suitable for agriculture. No reclassification of forest or mineral lands to
agricultural lands shall be undertaken after the approval of this Act until Congress, taking into account ecological, developmental and equity
considerations, shall have determined by law, the specific limits of the public domain.
That Boracay Island was classified as a public forest under PD No. 705 did not bar the Executive from later converting it into agricultural land.
Boracay Island still remained an unclassified land of the public domain despite PD No. 705.
In Heirs of the Late Spouses Pedro S. Palanca and Soterranea Rafols v. Republic, 124 the Court stated that unclassified lands are public forests.
While it is true that the land classification map does not categorically state that the islands are public forests, the fact that they were
unclassified lands leads to the same result. In the absence of the classification as mineral or timber land, the land remains unclassified land until
released and rendered open to disposition.125 (Emphasis supplied)
Moreover, the prohibition under the CARL applies only to a "reclassification" of land. If the land had never been previously classified, as in the case
of Boracay, there can be no prohibited reclassification under the agrarian law. We agree with the opinion of the Department of Justice 126 on this point:
Indeed, the key word to the correct application of the prohibition in Section 4(a) is the word "reclassification." Where there has been no previous
classification of public forest [referring, we repeat, to the mass of the public domain which has not been the subject of the present system of
classification for purposes of determining which are needed for forest purposes and which are not] into permanent forest or forest reserves or some
other forest uses under the Revised Forestry Code, there can be no "reclassification of forest lands" to speak of within the meaning of Section 4(a).
Thus, obviously, the prohibition in Section 4(a) of the CARL against the reclassification of forest lands to agricultural lands without a prior law
delimiting the limits of the public domain, does not, and cannot, apply to those lands of the public domain, denominated as "public forest" under the
Revised Forestry Code, which have not been previously determined, or classified, as needed for forest purposes in accordance with the provisions of
the Revised Forestry Code.127
Private claimants are not entitled to apply for judicial confirmation of imperfect title under CA No. 141. Neither do they have vested rights over
the occupied lands under the said law. There are two requisites for judicial confirmation of imperfect or incomplete title under CA No. 141, namely:
(1) open, continuous, exclusive, and notorious possession and occupation of the subject land by himself or through his predecessors-in-interest under
a bona fide claim of ownership since time immemorial or from June 12, 1945; and (2) the classification of the land as alienable and disposable land
of the public domain.128
As discussed, the Philippine Bill of 1902, Act No. 926, and Proclamation No. 1801 did not convert portions of Boracay Island into an agricultural
land. The island remained an unclassified land of the public domain and, applying the Regalian doctrine, is considered State property.
Private claimants bid for judicial confirmation of imperfect title, relying on the Philippine Bill of 1902, Act No. 926, and Proclamation No. 1801,
must fail because of the absence of the second element of alienable and disposable land. Their entitlement to a government grant under our present
Public Land Act presupposes that the land possessed and applied for is already alienable and disposable. This is clear from the wording of the law
itself.129 Where the land is not alienable and disposable, possession of the land, no matter how long, cannot confer ownership or possessory rights. 130
Neither may private claimants apply for judicial confirmation of imperfect title under Proclamation No. 1064, with respect to those lands which were
classified as agricultural lands. Private claimants failed to prove the first element of open, continuous, exclusive, and notorious possession of their
lands in Boracay since June 12, 1945.
We cannot sustain the CA and RTC conclusion in the petition for declaratory relief that private claimants complied with the requisite period of
possession.
The tax declarations in the name of private claimants are insufficient to prove the first element of possession. We note that the earliest of the tax
declarations in the name of private claimants were issued in 1993. Being of recent dates, the tax declarations are not sufficient to convince this Court
that the period of possession and occupation commenced on June 12, 1945.
Private claimants insist that they have a vested right in Boracay, having been in possession of the island for a long time. They have invested millions
of pesos in developing the island into a tourist spot. They say their continued possession and investments give them a vested right which cannot be
unilaterally rescinded by Proclamation No. 1064.
The continued possession and considerable investment of private claimants do not automatically give them a vested right in Boracay. Nor do these
give them a right to apply for a title to the land they are presently occupying. This Court is constitutionally bound to decide cases based on the
evidence presented and the laws applicable. As the law and jurisprudence stand, private claimants are ineligible to apply for a judicial confirmation of
title over their occupied portions in Boracay even with their continued possession and considerable investment in the island.
One Last Note
The Court is aware that millions of pesos have been invested for the development of Boracay Island, making it a by-word in the local and
international tourism industry. The Court also notes that for a number of years, thousands of people have called the island their home. While the
Court commiserates with private claimants plight, We are bound to apply the law strictly and judiciously. This is the law and it should prevail. Ito
ang batas at ito ang dapat umiral.
All is not lost, however, for private claimants. While they may not be eligible to apply for judicial confirmation of imperfect title under Section 48(b)
of CA No. 141, as amended, this does not denote their automatic ouster from the residential, commercial, and other areas they possess now classified

11
as agricultural. Neither will this mean the loss of their substantial investments on their occupied alienable lands. Lack of title does not necessarily
mean lack of right to possess.
For one thing, those with lawful possession may claim good faith as builders of improvements. They can take steps to preserve or protect their
possession. For another, they may look into other modes of applying for original registration of title, such as by homestead 131 or sales patent,132
subject to the conditions imposed by law.
More realistically, Congress may enact a law to entitle private claimants to acquire title to their occupied lots or to exempt them from certain
requirements under the present land laws. There is one such bill 133 now pending in the House of Representatives. Whether that bill or a similar bill
will become a law is for Congress to decide.
In issuing Proclamation No. 1064, the government has taken the step necessary to open up the island to private ownership. This gesture may not be
sufficient to appease some sectors which view the classification of the island partially into a forest reserve as absurd. That the island is no longer
overrun by trees, however, does not becloud the vision to protect its remaining forest cover and to strike a healthy balance between progress and
ecology. Ecological conservation is as important as economic progress.
To be sure, forest lands are fundamental to our nations survival. Their promotion and protection are not just fancy rhetoric for politicians and
activists. These are needs that become more urgent as destruction of our environment gets prevalent and difficult to control. As aptly observed by
Justice Conrado Sanchez in 1968 in Director of Forestry v. Munoz:134
The view this Court takes of the cases at bar is but in adherence to public policy that should be followed with respect to forest lands. Many have
written much, and many more have spoken, and quite often, about the pressing need for forest preservation, conservation, protection, development
and reforestation. Not without justification. For, forests constitute a vital segment of any country's natural resources. It is of common knowledge by
now that absence of the necessary green cover on our lands produces a number of adverse or ill effects of serious proportions. Without the trees,
watersheds dry up; rivers and lakes which they supply are emptied of their contents. The fish disappear. Denuded areas become dust bowls. As
waterfalls cease to function, so will hydroelectric plants. With the rains, the fertile topsoil is washed away; geological erosion results. With erosion
come the dreaded floods that wreak havoc and destruction to property crops, livestock, houses, and highways not to mention precious human
lives. Indeed, the foregoing observations should be written down in a lumbermans decalogue. 135
WHEREFORE, judgment is rendered as follows:
1. The petition for certiorari in G.R. No. 167707 is GRANTED and the Court of Appeals Decision in CA-G.R. CV No. 71118 REVERSED AND
SET ASIDE.
2. The petition for certiorari in G.R. No. 173775 is DISMISSED for lack of merit.
SO ORDERED.
G.R. No. 171056

March 13, 2009

DINAH C. CASTILLO, Petitioner,

vs.
ANTONIO M. ESCUTIN, AQUILINA A. MISTAS, MARIETTA L. LINATOC, AND THE HONORABLE COURT OF APPEALS,
Respondents.
DECISION
CHICO-NAZARIO, J.:
Before this Court is a Petition for Review on Certiorari 1 under Rule 45 of the Rules of Court filed by petitioner Dinah C. Castillo seeking the
reversal and setting aside of the Decision,2 dated 18 October 2005, of the Court of Appeals in CA-G.R. SP No. 90533, as well as the Resolution, 3
dated 11 January 2006 of the same court denying reconsideration of its afore-mentioned Decision. The Court of Appeals, in its assailed Decision,
affirmed the Joint Resolution4 dated 28 April 2004 and Joint Order5 dated 20 June 2005 of the Office of the Deputy Ombudsman for Luzon in OMBL-A-03-0573-F and OMB-L-C-03-0728-F, dismissing petitioner Dinah C. Castillos complaint for grave misconduct and violation of Section 3(e) of
Republic Act No. 3019, the Anti-Graft and Corrupt Practices Act, as amended, against respondent public officers Antonio M. Escutin (Escutin),
Aquilina A. Mistas (Mistas) and Marietta L. Linatoc (Linatoc), together with private individuals Lauro S. Leviste II (Leviste) and Benedicto L.
Orense (Orense).
Petitioner is a judgment creditor of a certain Raquel K. Moratilla (Raquel), married to Roel Buenaventura. In the course of her search for properties
to satisfy the judgment in her favor, petitioner discovered that Raquel, her mother Urbana Kalaw (Urbana), and sister Perla K. Moratilla (Perla), coowned Lot 13713, a parcel of land consisting of 15,000 square meters, situated at Brgy. Bugtongnapulo, Lipa City, Batangas, and covered by Tax
Declaration No. 00449.
Petitioner set about verifying the ownership of Lot 13713. She was able to secure an Order 6 dated 4 March 1999 issued by Secretary Horacio R.
Morales, Jr. of the Department of Agrarian Reform (DAR) approving the application of Summit Point Golf & Country Club, Inc. for conversion of
several agricultural landholdings, including Lot 13713 owned by "Perla K. Mortilla, et al." and covered by Tax Declaration No. 00449, to residential,
commercial, and recreational uses. She was also able to get from the Office of the City Assessor, Lipa City, a Certification 7 stating that Lot 13713,
covered by Tax Declaration No. 00554-A, was in the name of co-owners Raquel, Urbana, and Perla; and a certified true copy of Tax Declaration No.
00554-A itself.8 Lastly, the Register of Deeds of Lipa City issued a Certification 9 attesting that Lot 13713 in the name of co-owners Raquel, Urbana,
and Perla, was not covered by a certificate of title, whether judicial or patent, or subject to the issuance of a Certificate of Land Ownership Award or
patent under the Comprehensive Agrarian Reform Program.
Only thereafter did petitioner proceed to levy on execution Lot 13713, and the public auction sale of the same was scheduled on 14 May 2002.
Sometime in May 2002, before the scheduled public auction sale, petitioner learned that Lot 13713 was inside the Summit Point Golf and Country
Club Subdivision owned by Summit Point Realty and Development Corporation (Summit Realty). She immediately went to the Makati City office of
Summit Realty to meet with its Vice President, Orense. However, she claimed that Orense did not show her any document to prove ownership of Lot
13713 by Summit Realty, and even threatened her that the owners of Summit Realty, the Leviste family, was too powerful and influential for
petitioner to tangle with.

12
The public auction sale pushed through on 14 May 2002, and petitioner bought Raquels 1/3 pro-indiviso share in Lot 13713.
On 4 June 2002, petitioner had the following documents, on her acquisition of Raquels 1/3 pro-indiviso share in Lot 13713, recorded in the Primary
Entry Book and Registration Book of the Register of Deeds of Lipa City in accordance with Act No. 3344 10: (a) Notice of Levy; 11 (b) Certificate of
Sale;12 (c) Affidavit of Publication;13 and (d) Writ of Execution.14
Subsequently, petitioner was issued by the City Assessor of Lipa City Tax Declaration No. 00942-A, 15 indicating that she owned 5,000 square meters
of Lot 13713, while Urbana and Perla owned the other 10,000 square meters.
When petitioner attempted to pay real estate taxes for her 5,000-square-meter share in Lot 13713, she was shocked to find out that, without giving her
notice, her Tax Declaration No. 00942-A was cancelled. Lot 13713 was said to be encompassed in and overlapping with the 105,648 square meter
parcel of land known as Lot 1-B, covered by Transfer Certificate of Title (TCT) No. 129642 16 and Tax Declaration No. 00949-A,17 both in the name
of Francisco Catigbac (Catigbac). The reverse side of TCT No. 129642 bore three entries, reflecting the supposed sale of Lot 1-B to Summit Realty,
to wit:
ENTRY NO. 184894: SPECIAL POWER OF ATTORNEY: In favor of LEONARDO YAGIN: For purposes more particularly stipulated in
the contract ratified before Atty. Ernesto M. Vergara of Lipa City as per Doc. No. 639; Page No. 29; Book No. LXXVI; Series of 1976.
Date of instrument 2-6-1976
Date of inscription 6-26-2002 at 11:20 a.m.
ENTRY NO. 185833: SALE IN FAVOR OF SUMMIT POINT REALTY & DEVELOPMENT CORP:
ENTRY NO. 185834: BIR CLEARANCE: Of the parcel of land described in this cert. of title is hereby sold and cancelled TCT No.
134609(SN-6672938) Vol. 671-A, having been issued by virtue of the aforesaid instrument ratified before Perfecto L. Dimayuga, Notary
Public for Makati City as per Doc. No. 148; Page 31, Book No. LXVII, Series of 2002.
Date of instrument: July 22, 2002
Date of inscription: July 25, 2002 at 2:30 P.M.18
On 25 July 2002, at 2:30 p.m., TCT No. 129642 in the name of Catigbac was cancelled and TCT No. T-134609 in the name of Summit Realty was
issued in its place.
The foregoing incidents prompted petitioner to file a Complaint Affidavit 19 before the Office of the Deputy Ombudsman for Luzon charging several
public officers and private individuals as follows:
32. I respectfully charge that on or about the months of June 2002 and July 2002 and onwards in Lipa City, Atty. Antonio M. [Escutin], the Register
of Deeds of Lipa City[;] Aquilina A. Mistas, the Local Assessment Operations Officer III of the City Assessors Office of Lipa City[;] Marietta
Linatoc, Records Clerk, Office of the City Assessor of Lipa City, who are public officers and acting in concert and conspiring with Lauro S. Leviste
II and Benedicto L. Orense, Executive Vice-President and Vice-President, respectively[,] of Summit Point Realty and Development Corporation x x x
while in the discharge of their administrative functions did then and there unlawfully, through evident bad faith, gross inexcusable negligence and
with manifest partiality towards Summit caused me injury in the sum of P20,000,000.00 by cancelling my TD #00942-A in the Office of the City
Assessor of Lipa City and instead issuing in the name of Francisco Catigbac TC #00949-A when aforesaid personalities well knew that TCT No.
129642 was already cancelled and therefore not legally entitled to a new tax declaration thereby manifestly favoring Summit Point Realty and
Development Corporation who now appears to be the successor-in-interest of Francisco Catigbac, all to my damage and prejudice. 20 (Emphasis ours.)
Petitioners Complaint Affidavit gave rise to simultaneous administrative and preliminary (criminal) investigations, docketed as OMB-L-A-03-0573F and OMB-L-C-03-0728-F, respectively.
Petitioner pointed out several irregularities in the circumstances surrounding the alleged sale of Lot 1-B to Summit Realty and in the documents
evidencing the same.
The supposed Deed of Absolute Sale in favor of Summit Realty executed on 22 July 2002 by Leonardo Yagin (Yagin), as Catigbacs attorney-in-fact,
appeared to be a "one-way street." It did not express the desire of Summit Realty, as vendee, to purchase Lot 1-B or indicate its consent and
conformity to the terms of the Deed. No representative of Summit Realty signed the left margin of each and every page of said Deed. It also did not
appear from the Deed that a representative of Summit Realty presented himself before the Notary Public who notarized the said document. The Tax
Identification Numbers of Yagin, as vendor, and Summit Realty, as vendee, were not stated in the Deed.
Petitioner also averred that, being a corporation, Summit Realty could only act through its Board of Directors. However, when the Deed of Absolute
Sale of Lot 1-B was presented for recording before the Register of Deeds, it was not accompanied by a Secretarys Certificate attesting to the
existence of a Board Resolution which authorized said purchase by Summit Realty. There was no entry regarding such a Secretarys Certificate
and/or Board Resolution, whether on TCT No. 129642 or TCT No. T-134609. A Secretarys Certificate eventually surfaced, but it was executed only
on 30 July 2002, five days after TCT No. T-134609 in the name of Summit Realty was already issued.
The Deed of Absolute Sale was presented before and recorded by the Register of Deeds of Lipa City on 25 July 2002 at 2:30 p.m., at exactly the
same date and time TCT No. T-134609 was issued to Summit Realty. Petitioner theorizes that for this to happen, TCT No. T-134609 was already
prepared and ready even before the presentation for recording of the Deed of Absolute Sale before the Register of Deeds.
Moreover, Catigbac had long been dead and buried. The agency Catigbac supposedly executed in favor of Yagin was extinguished by Catigbacs
death. Thus, petitioner argued, Yagin no longer had authority to execute on 22 July 2002 the Deed of Absolute Sale of Lot 1-B in favor of Summit
Realty, making the said Deed null and void ab initio.
Petitioner asserted that Summit Realty was well-aware of Catigbacs death, having acknowledged the same in LRC Case No. 00-0376, the Petition
for Issuance of New Owners Duplicate of TCT No. 181 In Lieu of Lost One, filed by Summit Realty before the Regional Trial Court (RTC) of Lipa
City. During the ex parte presentation of evidence in the latter part of 2000, Orense testified on behalf of Summit Realty that Catigbacs property used
to form part of a bigger parcel of land, Lot 1 of Plan Psu-12014, measuring 132,975 square meters, covered by TCT No. 181 in the name of Catigbac;

13
after Catigbacs death, Lot 1 was informally subdivided into several parts among his heirs and/or successors-in-interest, some of whom again
transferred their shares to other persons; Summit Realty separately bought subdivided parts of Lot 181 from their respective owners, with a
consolidated area of 105,648 square meters, and identified as Lot 1-B after survey; despite the subdivision and transfer of ownership of Lot 1, TCT
No. 181 covering the same was never cancelled; and the owners duplicate of TCT No. 181 was lost and the fact of such loss was annotated at the
back of the original copy of TCT No. 181 with the Registry of Deeds. Subsequently, in an Order 21 dated 3 January 2001, the RTC granted the Petition
in LRC Case No. 00-0376 and directed the issuance of a new owners duplicate of TCT No. 181 in the name of Catigbac, under the same terms and
condition as in its original form.
Petitioner further cast doubt on the acts undertaken by Summit Realty in connection with Catigbacs property, purportedly without legal personality
and capacity. The Special Power of Attorney dated 6 February 1976 granted Yagin the right to sue on behalf of Catigbac, yet it was Summit Realty
which instituted LRC Case No. 00-0376, and Yagin had no participation at all in said case. Likewise, it was not Yagin, but Orense, who, through a
letter22 dated 27 June 2001, requested the cancellation of TCT No. 181 covering Lot 1 and the issuance of a new certificate of title for Lot 1-B.
Hence, it was Orenses request which resulted in the issuance of TCT No. 129642 in the name of Catigbac, later cancelled and replaced by TCT No.
T-134609 in the name of Summit Realty.
Lastly, petitioner questioned why, despite the cancellation of TCT No. 129642 in the name of Catigbac and the issuance in its place of TCT No. T134609 in the name of Summit Realty, it was the former cancelled title which was used as basis for canceling petitioners Tax Declaration No. 00942A. Tax Declaration No. 00949-A was thus still issued in the name of Catigbac, instead of Summit Realty.
Piecing everything together, petitioner recounted in her Complaint Affidavit the alleged scheme perpetrated against her and the involvement therein
of each of the conspirators:
28. Summit Point Realty and Development Corporation went into action right after I paid Orense a visit sometime May 2002. Summit resurrected
from the grave. (sic) Francisco Catigbac whom they knew to be long dead to face possible litigation. This is the height of malice and bad faith on the
part of Summit through its Lauro Leviste II, the Executive Vice President and Benedicto Orense, the Vice President. I had only in my favor a tax
declaration to show my interest and ownership over the 5, 000 sq.m. of the subject parcel of land. Evidently, Leviste and Orense came to the
desperate conclusion that they needed a TCT which is a far better title than any tax declaration.
Both then methodically commenced their evil and illegal scheme by causing on June 26, 2002 at 11:20 a.m. the inscription with the Register of Deeds
of Lipa City of a purported Special Power of Attorney in favor of Leonardo Yagin (Annex "I"). Next, the Deed of Absolute Sale (Annex "J") was
made the following month in order to make it appear that Yagin unilaterally sold to Summit the subject parcel of land purportedly belonging to
Francisco Catigbac. Since the latter was already dead and realizing that the agency was already extinguished, Annex "J" was not signed or executed
by Leviste or Orense. This fact however did not deter the two from securing a BIR clearance on July 25, 2002. Also, on this same day, July 25, 2002,
Annex "J" was presented to Atty. [Escutin] at 2:30 p.m. simultaneously, at exactly the same time of 2:30 p.m. TCT No. T-134609 in Summits name
was issued by Atty. [Escutin] WITHOUT benefit of the submission of the necessary documentation such as the Board Resolution, DAR Clearance,
Revenue Tax Receipts for documentary stamps, real property tax clearance, proof of payment of transfer tax, tax declaration, articles of
incorporation, SEC certification, license to sell and/or certificate of registration by HLURB, etc. Without the total and lightning speed cooperation of
Atty. [Escutin] to close his eyes to the total absence of said vital documents, the desperately needed TCT to erase my interest and ownership would
not have come into existence. Atty. [Escutin] had indeed acted in concert and in conspiracy with Leviste and Orense in producing Annex "H" and
Annex "K".
29. Thereafter, Leviste and Orense utilized the already cancelled TCT No. 129642 in the name of Francisco Catigbac to be the basis in seeking the
cancellation of TD #00942A in my name (Annex "F"). The Tax Mapping Division of the Office of City Assessor of Lipa City opined that my 5,000
sq.m. was (sic) part and parcel of the 105,648 sq.m. covered by TCT No. 129642. A photocopy of the Certification from said division is hereto
marked and attached as Annex "P", hereof. Aquilina Mistas, the Local Assessment Operations Officer III of the Office of the City Assessor of Lipa
City then conveniently caused the disappearance of my Notice of Levy and other supporting documents which she had personally received from me
on March 13, 2002. For her part of the conspiracy likewise, Marietta Linatoc, Records Clerk, forthwith cancelled by TD#00942-A and in lieu thereof
she issued TD #00949-A in the name of Francisco Catigbac. I dare say so because Mistas and Linatoc were presented a cancelled TCT as basis for
obliterating my 5,000 sq.m. The fact of cancellation is clearly stated on the posterior side of TCT No. 129642. Both can read. But the two
nevertheless proceeded with dispatch in canceling my TD, though they had ample time and opportunity to reject the request of Summit who is not
even the registered owner appearing on TCT No. 129642. Francisco Catigbac could not have been in front of Mistas and Linatoc because he was
already six feet below the ground. Mistas and Linatoc could have demanded presentation of the document authorizing Summit in requesting for the
cancellation of my TD. Also, they could have demanded from Summit any document transferring my interest and ownership in favor of a third party.
Or, at least, they could have annotated in Tax Declaration No. 00949-A the fact that I bought my 5,000 sq.m. from a public auction sale duly
conducted by the court sheriff. Alternatively, Linatoc and Mistas should have advised Summit to the effect that since they already appear to be the
owners of the subject parcel of land, the new tax declaration should bear their name instead. Mistas and Linatoc indeed conspired with Summit in the
illegal and unwarranted cancellation of my TD and in covering up the behind-the-scenes activities of Summit by making it appear that it was
Francisco Catigbac who caused the cancellation. Even Leonardo Yagin, the alleged attorney-in-fact did not appear before Mistas and Linatoc. Yagin
could not have appeared because he is rumored to be long dead. The aforementioned acts of the two benefitted (sic) Summit through their manifest
partiality, evident bad faith and/or gross inexcusable negligence. Perhaps, there is some truth to the rumor that Yagin is dead because he does not even
have a TIN in the questioned Deed of Absolute Sale. If indeed Yagin is already dead or inexistent[,] the allged payment of the purchase price of
P5,282,400.00 on July 25, 2002 is a mere product of the fertile imagination of Orense and Leviste.1avvphi1.zw+ To dispute this assertion[,] the live
body of Leonardo Yagin must be presented by Orense and Leviste. 23
After filing her Affidavit Complaint, petitioner attempted to have the Sheriffs Deed of Final Sale/Conveyance of her 5,000 square meter pro-indiviso
share in Lot 13713 registered with the Register of Deeds of Lipa City. She also sought the annotation of her Affidavit of Adverse Claim on the said
5,000 square meters on TCT No. T-134609 of Summit Realty.
Escutin, the Register of Deeds of Lipa City, relying on the finding of Examiner Juanita H. Sta. Ana (Sta. Ana), refused to have the Sheriffs Deed of
Final Sale/Conveyance registered, since:
The Sheriffs Deed of Final Sale/Conveyance is a Mode of Transfers (sic) ownership in favor of the Plaintiff, [Dinah] C. Castillo, (sic) However[,] it
happen (sic) that the presented Tax Declaration [No.] 00942-A is already transfer (sic) in the name of the said [Dinah] C. Castillo, therefore[,] the
registration of Sheriff (sic) Final Sale is no longer necessary.24
Escutin likewise denied petitioners request to have her Affidavit of Adverse Claim annotated on TCT No. T-134609 on the following grounds:
1. The claimants (sic) rights or interest is not adverse to the registered owner. The registered owner is Summit Point Realty and
Development Corporation under Transfer Certificate of Title No. T-134609 of the Registry of Deeds for Lipa City.

14
2. The records of the Registry reveals that the source of the rights or interest of the adverse claimant is by virtue of a Levy on Execution by
the Regional Trial Court Fourth Judicial Region, Branch 30, San Pablo City, in Civil Case No. SP-4489 (1996), [Dinah] C. Castillo vs.
Raquel Buenaventura. The registered owner, Summit Point Realty and Development Corporation nor its predecessor-in-interest are not the
judgment debtor or a party in the said case. Simply stated, there is no privity of contract between them (Consulta No. 1044 and 1119). If
ever, her adverse claim is against Raquel Buenaventura, the judgment debtor who holds no title over the property. 25
Escutin did mention, however, that petitioner may elevate en consulta to the Land Registration Authority (LRA) the denial of her request for
registration of the Sheriffs Deed of Final Sale/Conveyance and annotation of her adverse claim on TCT No. T-134609. This petitioner did on 3 July
2003.
While her Consulta was pending before the LRA, petitioner filed a Supplemental Complaint Affidavit 26 and a Second Supplemental Complaint
Affidavit27 with the Office of the Deputy Ombudsman for Luzon, bringing to its attention the aforementioned developments. In her Second
Supplemental Complaint Affidavit, petitioner prayed that Sta. Ana be included as a co-respondent in OMB-L-A-03-0573-F and OMB-L-C-03-0728F, averring that the latters actuation deprived petitioner of a factual basis for securing a new title in her favor over her 5,000 square meter proindiviso share in Lot 13713, because the public auction sale of the said property to her could never become final without the registration of the
Sheriffs Deed.
The persons charged in OMB-L-A-03-0573-F and OMB-L-C-03-0728-F filed their respective Counter-Affidavits.
Respondent Escutin clarified in his Counter Affidavit that TCT No. T-134609 reflected the same date and time of entry of the Deed of Absolute Sale
between Yagin (as Catigbacs attorney-in-fact) and Summit Realty, i.e., 25 July 2002 at 2:30 p.m., in accordance with Section 56 28 of Presidential
Decree No. 1529, otherwise known as the Property Registration Decree. He emphasized that his duty as Register of Deeds to register the Deed of
Absolute Sale presented before him was purely ministerial. If the document was legal and in due form, and there was nothing mutilated or irregular
on its face, the Register of Deeds had no authority to inquire into its intrinsic validity based upon proofs aliunde. It was not true that he allowed the
registration of the Deed of Absolute Sale notwithstanding the absence of the required documents supporting the application for registration thereof.
On the contrary, all the required documents such as the DAR Clearance, Bureau of Internal Revenue (BIR) Certificate Authorizing Registration
(CAR), Real Property Tax, Transfer Tax, Secretarys Certificate and Articles of Incorporation of Summit Realty were submitted. While it was true
that the Secretarys Certificate did not accompany the Deed of Absolute Sale upon the presentation of the latter for registration, Section 117 of the
Property Registration Decree gives the party seeking registration five days to comply with the rest of the requirements; and only if the party should
still fail to submit the same would it result in the denial of the registration. The License to Sell and the Housing and Land Use Regulatory Board
Registration of Summit Realty are only required when a subdivision project is presented for registration. The use of TINs in certain documents is a
BIR requirement. The BIR itself did not require from Yagin as vendor his TIN in the Deed of Absolute Sale, and issued the CAR even in the absence
thereof. The Register of Deeds, therefore, was only bound by the CAR. As to the Certification earlier issued by the Register of Deeds of Lipa City
attesting that Lot 13713 in the name of co-owners Raquel, Urbana, and Perla, was not covered by any certificate of title, Escutin explained that the
Register of Deeds was not technically equipped to determine whether a cadastral lot number was within a titled property or not. Lastly, Escutin
denied conspiring or participating in the cancellation of petitioners Tax Declaration No. 00942-A for, as Register of Deeds, he was not concerned
with the issuance (or cancellation) of tax declarations.
Respondent Mistas, the Assistant City Assessor for Administration of the Office of the City Assessor, Lipa City, disputed petitioners allegations that
she personally received from petitioner copies of the Notice of Levy and other supporting documents, and that she caused the disappearance thereof.
Although she admitted that said documents were shown to her by petitioner, she referred petitioner to the Receiving Clerk, Lynie Reyes, who
accordingly received the same. Mistas maintained that she was not the custodian of records of the Office and she should not be held responsible for
the missing documents. She opined that petitioners documents could have been among those misplaced or destroyed when the Office of the City
Assessor was flooded with water leaking from the toilet of the Office of the City Mayor. As Assistant City Assessor for Administration, Mistas
identified her main function to be the control and management of all phases of administrative matters and support. She had no hand in the
cancellation of petitioners Tax Declaration No. 00942-A, and the issuance of Catigbacs Tax Declaration No. 00949-A for such function pertained to
another division over which she did not exercise authority. Thus, it was also not within her function or authority to demand the presentation of certain
documents to support the cancellation of petitioners Tax Declaration No. 00942-A or to cause the annotation of petitioners interest on Catigbacs
Tax Declaration No. 00949-A.
Respondent Linatoc averred that as Local Assessment Operation Officer II of the Office of the City Assessor, Lipa City, she was in charge of
safekeeping and updating the North District Records. With respect to the transfer of a tax declaration from one name to another, her duty was limited
only to the act of preparing the new tax declaration and assigning it a number, in lieu of the cancelled tax declaration. It was a purely ministerial duty.
She had no authority to demand the presentation of any document or question the validity of the transfer. Neither was it within her jurisdiction to
determine whether petitioners interest should have been annotated on Catigbacs Tax Declaration No. 00949-A. Examining the documents presented
in support of the transfer of the tax declaration to anothers name was a function belonging to other divisions of the Office of the City Assessors. The
flow of work, the same as in any other ordinary transaction, mandated her to cancel petitioners Tax Declaration No. 00942-A, and to prepare and
release Catigbacs Tax Declaration No. 00949-A after the transfer had been reviewed and approved by other divisions of the Office. It was also not
true that TCT No. 129642 in the name of Catigbac was already cancelled when it was presented before the Office of the City Assessors; the
photocopy of said certificate of title with the Office bore no mark of cancellation.
Leviste and Orense, the private individuals charged with the respondent public officers, admitted that they were corporate officers of Summit Realty.
They related that Summit Realty bought a parcel of land measuring 105,648 square meters, later identified as Lot 1-B, previously included in TCT
No. 181, then specifically covered by TCT No. 129642, both in the name of Catigbac. As a result of such purchase, ownership of Lot 1-B was
transferred from Catigbac to Summit Realty. Summit Realty had every reason to believe in good faith that said property was indeed owned by
Catigbac on the basis of the latters certificate of title over the same. Catigbacs right as registered owner of Lot 1-B under TCT No. 181/No. 129642,
was superior to petitioners, which was based on a mere tax declaration. Leviste and Orense rebutted petitioners assertion that the Deed of Absolute
Sale between Yagin, as Catigbacs attorney-in-fact, and Summit Realty was a "one-way street." The Deed was actually signed on the left margin by
both Yagin and the representative of Summit Realty. The inadvertent failure of the representative of Summit Realty to sign the last page of the Deed
and of both parties to indicate their TINs therein did not invalidate the sale, especially since the Deed was signed by witnesses attesting to its due
execution. Questions as regards the scope of Catigbacs Special Power of Attorney in favor of Yagin and the effectivity of the same after Catigbacs
death can only be raised in an action directly attacking the title of Summit Realty over Lot 1-B, and not in an administrative case and/or preliminary
investigation before the Ombudsman, which constituted a collateral attack against said title. Leviste and Orense further explained that since the
owners duplicate of TCT No. 181 was lost and was judicially ordered replaced only on 3 January 2001, entries/inscriptions were necessarily made
thereon after said date. As to Orenses failure to show petitioner any document proving ownership of Lot 1-B by Summit Realty when the latter paid
him a visit, it was not due to the lack of such documents, but because of petitioners failure to establish her right to peruse the same. Orense also
denied ever threatening petitioner during their meeting. Finally, according to Leviste and Orense, petitioners allegations were based on mere
conjectures and unsupported by evidence. That particular acts were done or not done by certain public officials was already beyond the control of
Leviste and Orense, and just because they benefited from these acts did not mean that they had a hand in the commission or omission of said public
officials.
After more exchange of pleadings, OMB-L-A-03-0573-F and OMB-L-C-03-0728-F were finally submitted for resolution.

15
In a Joint Resolution29 dated 28 April 2004, the Office of the Deputy Ombudsman for Luzon gave more credence to respondent Escutins defenses, as
opposed to petitioners charges against him:
Going to the charges against respondent Escutin, he convincingly explained that he allowed the registration of the allegedly defective Deed of Sale
because he, as Register of Deeds, has no power to look into the intrinsic validity [of] the contract presented to him for registration, owing to the
ministerial character of his function. Moreover, as sufficiently explained by said respondent, all the documents required for the registration of the
Deed of Sale were submitted by the applicant.
We likewise find said respondents explanation satisfactory that Section 56 of P.D. 1529 mandates that the TCT bear the date of registration of the
instrument on which the said TCTs issuance was based. It is for this reason that TCT 134609 bears the same date and time as the registration of the
Deed of Absolute Sale, which deed served as basis for its issuance.
As to his denial to register [herein petitioners] Affidavit of Adverse Claim and Sheriffs Certificate of Final Sale, through the issuance by the
Registry of Deeds Examiner Juanita H. Sta. Ana, of the 29 June 2003 Order denying registration thereof, such matter had been raised by herein
[petitioner] in a letter-consulta to the Administrator of the Land Registration Authority (LRA) on 03 July 2003. As the criminal and administrative
charges respecting this issue is premised, in part, on a matter still pending with the LRA, we find it premature to make a finding on the same.
It is for the same reason that we deny the motion contained in the Second Supplemental Complaint Affidavit praying for the inclusion, as additional
respondent, of Juanita H. Sta. Ana, who is impleaded solely on the basis of having signed, by authority of Escutin, the 29 July 2003 Order of denial
of [petitioners] application for registration.
Finally, respondent Escutin was able to successfully demonstrate, through Consulta 2103 dated 25 July 1994, wherein the denial of registration by the
Examiner of the Registry of Deeds of Quezon City was upheld by the LRA Administrator, that the (sic) it was practice in the different Registries that
Examiners are given authority by the Register to sign letters of denial. 30
The Office of the Deputy Ombudsman for Luzon declared in the same Joint Resolution that there was no basis to hold respondents Mistas and
Linatoc administratively or criminally liable:
In this respect, this Office notes that while [herein petitioner] alleges that Aquilina Mistas caused the disappearance of the Notice of Levy and other
supporting documents received from [petitioner] on 13 March 2003 when she applied for the issuance of a Tax Declaration in her favor, she did not
present her receiving copy thereof showing that it was Mistas who received said documents from her. Neither did she show that Mistas is the
employee responsible for record safekeeping.
Next, we find, as convincingly answered, the allegation that respondent Marietta Linatoc cancelled Tax Declaration No. 00942-A and issued Tax
Declaration 00949-Q (sic) on the basis of a cancelled Transfer Certificate of Title upon the behest of Summit [Realty], which was not the registered
owner of the property.
Respondent Linatoc, meeting squarely [petitioners] allegation, admits having physically cancelled Tax Declaration No. 00942-A and having
prepared a new declaration covering the same property in Catigbacs [name], as mandated by the flow of work in the City Assessors Office.
However, she denies having the authority or discretion to evaluate the correctness and sufficiency of the documents supporting the application for the
issuance of the Tax Declaration, arguing that her official function is limited to the physical preparation of a new tax declaration, the assignment of a
new tax declaration number and the cancellation of the old tax declaration, after the application had passed the other divisions of the City Assessors
Office.
Verily, [petitioner] failed to establish that respondent Mistas and Linatoc, are the ones officially designated to receive applications for issuance of Tax
Declaration, evaluate the sufficiency of the documents supporting such applications, and on the basis of the foregoing recommend or order the
cancellation of an existing Tax Declaration and direct the annotation of any fact affecting the property and direct the issuance of a new tax declaration
covering the same property.
In fact, there is even a discrepancy as to the official designation of said respondents. While [petitioner] impleads Mistas, in her capacity as Local
Assessment Officer, and Linatoc, in her capacity as Records Clerk, Mistas, in her counter-affidavit, alleges a different designation, i.e., Assistant City
Assessor for Administration, while Linatoc claims to be the Local Assessment Operation Officer II of the City Assessors Office.
With the scope of work of said respondents not having been neatly defined by [petitioner], this Office cannot make a definitive determination of their
liability for Grave Misconduct and violation of Section 3(e) of R.A. No. 3019, which charges both relate to the performance or discharge of Mistas
and Linatocs official duties.31
Neither did the Office of the Deputy Ombudsman for Luzon find any probable cause to criminally charge private individuals Leviste and Orense for
the following reasons:
Anent private respondents, with the alleged conspiracy to unlawfully cause the transfer of the title of [herein petitioners] property to Summit
sufficiently explained by respondent Register of Deeds, such allegation against private respondents loses a legal leg to stand on.1avvphi.zw+
Inasmuch as [petitioner] was not able to sufficiently outline the official functions of respondents Mistas and Linatoc to pin down their specific
accountabilities, the imputation that private respondent (sic) conspired with said public respondents respecting the cancellation of Tax Declaration
No. 00942-A is likewise stripped of any factual and legal bases. 32
As to whether petitioner was indeed unlawfully deprived of her 5,000 square meter property, which issue comprised the very premise of OMB-L-A03-0573-F and OMB-L-C-03-0728-F, the Office of the Deputy Ombudsman for Luzon ruled that such matter was not within its jurisdiction and
should be raised in a civil action before the courts of justice.
In the end, the Office of the Ombudsman decreed:
WHEREFORE premises considered, it is respectfully recommended that : (1) the administrative case against public respondents ANTONIO M.
ESCUTIN, AQUILINA A. MISTAS and MARIETA L. LINATOC be DISMISSED, for lack of substantial evidence; and (2) the criminal case against
the same respondents including private respondent LAURO S. LEVISTE II and BENEDICTO L. ORENSE, be DISMISSED, for lack of probable
cause.33

16
In a Joint Order34 dated 20 June 2005, the Office of the Deputy Ombudsman for Luzon denied petitioners Motion for Reconsideration.
The Office of the Deputy Ombudsman for Luzon, in its Joint Order, took notice of the Resolution dated 17 December 2002 of the LRA in Consulta
No. 3483, which involved circumstances similar to those in petitioners case. The LRA distinguished between two systems of land registration: one is
the Torrens system for registered lands under the Property Registration Decree, and the other is the system of registration for unregistered land under
Act No. 3344 (now Section 113 of the Property Registration Decree). These systems are separate and distinct from each other. For documents
involving registered lands, the same should be recorded under the Property Registration Decree. The registration, therefore, of an instrument under
the wrong system produces no legal effect. Since it appeared that in Consulta No. 3483, the registration of the Kasulatan ng Sanglaan, the Certificate
of Sale and the Affidavit of Consolidation was made under Act No. 3344, it did not produce any legal effect on the disputed property, because the
said property was already titled when the aforementioned documents were executed and presented for registration, and their registration should have
been made under the Property Registration Decree.
Furthermore, the Office of the Deputy Ombudsman for Luzon, in the same Joint Order, took into account petitioners withdrawal of her appeal en
consulta before the LRA of the denial by the Register of Deeds of her request for registration of the Sheriffs Deed of Final Sale/Conveyance and
Affidavit of Adverse Claim, which prompted the LRA Administrator to declare the consulta moot and academic. For want of a categorical declaration
on the registerability of petitioners documents from the LRA, the competent authority to rule on the said matter, there could be no basis for a finding
that respondent public officers could be held administratively or criminally liable for the acts imputed to them.
Petitioner sought recourse from the Court of Appeals by filing a Petition for Review under Rule 43 of the Rules of Court challenging the 28 April
2004 Joint Resolution and 20 June 2005 Joint Order of the Office of the Deputy Ombudsman for Luzon. 35 The appeal was docketed as CA-G.R. SP
No. 90533.1avvphi1
The Court of Appeals promulgated its Decision36 on 18 October 2005, also finding no reason to administratively or criminally charge respondents.
Essentially, the appellate court adjudged that petitioner can not impute corrupt motives to respondents acts:
Without evidence showing that respondents received any gift, money or other pay-off or that they were induced by offers of such, the Court cannot
impute any taint of direct corruption in the questioned acts of respondents. Thus, any indication of intent to violate the laws or of flagrant disregard of
established rule may be negated by respondents honest belief that their acts were sanctioned under the provisions of existing law and regulations.
Such is the situation in the case at bar. Respondent Register of Deeds acted in the honest belief that the agency recognized by the court in LRC Case
No. 00-0376 between the registered owner Francisco Catigbac and Leonardo Yagin subsisted with respect to the conveyance or sale of Lot 1 to
Summit as the vendee, and that the Special Power of Attorney and Deed of Absolute Sale presented as evidence during said proceedings are valid and
binding. Hence, respondent Escutin was justified in believing that there is no legal infirmity or defect in registering the documents and proceeding
with the transfer of title of Lot 1 in the name of the new owner Summit. On the other hand, respondent Linatoc could not be held administratively
liable for effecting the cancellation in the course of ordinary flow of work in the City Assessors Office after the documents have undergone the
necessary evaluation and verification by her superiors. 37
The Court of Appeals referred to the consistent policy of the Supreme Court not to interfere with the exercise by the Ombudsman of his investigatory
power. If the Ombudsman, using professional judgment, finds the case dismissible, the Court shall respect such findings, unless clothed with grave
abuse of discretion. The appellate court pronounced that there was no grave abuse of discretion on the part of the Office of the Deputy Ombudsman
for Luzon in dismissing petitioners Complaint Affidavit against respondents.
Hence, the dispositive portion of the Decision of the Court of Appeals reads:
WHEREFORE, premises considered, the present petition is hereby DISMISSED for lack of merit. The challenged Joint Resolution dated April 28,
2004 and Joint Order dated June 20, 2005 in OMB-L-A-03-0573-F and OMB-L-C-03-0728-F are hereby AFFIRMED. 38
In its Resolution dated 11 January 2006, the Court of Appeals denied petitioners Motion for Reconsideration for failing to present new matter which
the appellate court had not already considered in its earlier Decision.
Petitioner now comes before this Court via the instant Petition for Review on Certiorari, with the following assignment of errors:
I.
THE HONORABLE COURT OF APPEALS PATENTLY ERRED IN AFFIRMING THE CANCELLATION OF THE TAX DECLARATION 00942
OF PETITIONER IN VIOLATION OF SECTION 109 OF PRESIDENTIAL DECREE 1529, OTHERWISE KNOWN AS THE PROPERTY
REGISTRATION ACT (sic);
II.
THE HONORABLE COURT OF APPEALS PATENTLY ERRED IN RULING THAT RESPONDENTS COULD NOT BE HELD
ADMINISTRATIVELY LIABLE FOR UNDULY FAVORING SUMMIT TO THE DAMAGE AND PREJUDICE OF PETITIONER. 39
The Petition at bar is without merit.
As to the first issue, petitioner invokes Section 109 of the Property, Registration Decree which provides:
SEC. 109. Notice and replacement of lost duplicate certificate. In case of loss or theft of an owners duplicate certificate of title, due notice under
oath shall be sent by the owner or by someone in his behalf to the Register of Deeds of the province or city where the land lies as soon as the loss or
theft is discovered. If a duplicate certificate is lost or destroyed, or cannot be produced by a person applying for the entry of a new certificate to him
or for the registration of any new instrument, a sworn statement of the fact of such loss or destruction may be filed by the registered owner or other
person in interest and registered.
Upon the petition of the registered owner or other person in interest, the court may, after notice and due hearing, direct the issuance of a new
duplicate certificate, which shall contain a memorandum of the fact that it is issued in place of the lost duplicate certificate, but shall in all respects be
entitled to like faith and credit as the original duplicate, and shall thereafter be regarded as such for all purposes of this decree.
Petitioner argues that the RTC, in LRC Case No. 00-0376, only ordered the issuance of a new owners duplicate of TCT No. 181 in lieu of the lost
one. However, respondents did not only issue a new owners duplicate of TCT No. 181, but also cancelled petitioners Tax Declaration No. 00942-A

17
and issued in its place Tax Declaration No. 00949-A in the name of Catigbac. Respondents did not even annotate petitioners existing right over 5,000
square meters of Lot 1-B or notify petitioner of the cancellation of her Tax Declaration No. 00942-A. Petitioner maintains that a new owners
duplicate of title is not a mode of acquiring ownership, nor is it a mode of losing one. Under Section 109 of the Property Registration Decree, the new
duplicate of title was issued only to replace the old; it cannot cancel existing titles.
Petitioners position on this issue rests on extremely tenuous arguments and befuddled reasoning.
Before anything else, the Court must clarify that a title is different from a certificate of title. Title is generally defined as the lawful cause or ground of
possessing that which is ours. It is that which is the foundation of ownership of property, real or personal. 40 Title, therefore, may be defined briefly as
that which constitutes a just cause of exclusive possession, or which is the foundation of ownership of property. 41 Certificate of title, on the other
hand, is a mere evidence of ownership; it is not the title to the land itself. 42 Under the Torrens system, a certificate of title may be an Original
Certificate of Title, which constitutes a true copy of the decree of registration; or a Transfer Certificate of Title, issued subsequent to the original
registration.
Summit Realty acquired its title to Lot 1-B, not from the issuance of the new owners duplicate of TCT No. 181, but from its purchase of the same
from Yagin, the attorney-in-fact of Catigbac, the registered owner of the said property. Summit Realty merely sought the issuance of a new owners
duplicate of TCT No. 181 in the name of Catigbac so that it could accordingly register thereon the sale in its favor of a substantial portion of Lot 1
covered by said certificate, later identified as Lot 1-B. Catigbacs title to Lot 1-B passed on by sale to Summit Realty, giving the latter the right to
seek the separation of the said portion from the rest of Lot 1 and the issuance of a certificate of title specifically covering the same. This resulted in
the issuance of TCT No. 129642 in the name of Catigbac, covering Lot 1-B, which was subsequently cancelled and replaced by TCT No. T-134609 in
the name of Summit Realty.
Petitioners reliance on Section 109 of the Property Registration Decree is totally misplaced. It provides for the requirements for the issuance of a lost
duplicate certificate of title. It cannot, in any way, be related to the cancellation of petitioners tax declaration.
The cancellation of petitioners Tax Declaration No. 00942-A was not because of the issuance of a new owners duplicate of TCT No. 181, but of the
fact that Lot 1-B, which encompassed the 5,000 square meters petitioner lays claim to, was already covered by TCT No. 181 (and subsequently by
TCT No. 129642) in the name of Catigbac. A certificate of title issued is an absolute and indefeasible evidence of ownership of the property in favor
of the person whose name appears therein. It is binding and conclusive upon the whole world. 43 All persons must take notice, and no one can plead
ignorance of the registration. 44 Therefore, upon presentation of TCT No. 129642, the Office of the City Assessor must recognize the ownership of Lot
1-B by Catigbac and issue in his name a tax declaration for the said property. And since Lot 1-B is already covered by a tax declaration in the name
of Catigbac, accordingly, any other tax declaration for the same property or portion thereof in the name of another person, not supported by any
certificate of title, such that of petitioner, must be cancelled; otherwise, the City Assessor would be twice collecting a realty tax from different
persons on one and the same property.
As between Catigbacs title, covered by a certificate of title, and petitioners title, evidenced only by a tax declaration, the former is evidently far
superior and is, in the absence of any other certificate of title to the same property, conclusive and indefeasible as to Catigbacs ownership of Lot 1-B.
Catigbacs certificate of title is binding upon the whole world, including respondent public officers and even petitioner herself. Time and again, the
Court has ruled that tax declarations and corresponding tax receipts cannot be used to prove title to or ownership of a real property inasmuch as they
are not conclusive evidence of the same. 45 Petitioner acquired her title to the 5,000 square meter property from Raquel, her judgment debtor who, it is
important to note, likewise only had a tax declaration to evidence her title. In addition, the Court of Appeals aptly observed that, "[c]uriously, as to
how and when petitioners alleged predecessor-in-interest, Raquel K. Moratilla and her supposed co-owners acquired portions of Lot 1 described as
Lot 13713 stated in TD No. 00449, petitioner had so far remained utterly silent." 46
Petitioners allegations of defects or irregularities in the sale of Lot 1-B to Summit Realty by Yagin, as Catigbacs attorney-in-fact, are beyond the
jurisdiction of the Office of the Deputy Ombudsman for Luzon to consider. It must be remembered that Summit Realty had already acquired a
certificate of title, TCT No. T-134609, in its name over Lot 1-B, which constitutes conclusive and indefeasible evidence of its ownership of the said
property and, thus, cannot be collaterally attacked in the administrative and preliminary investigations conducted by the Office of the Ombudsman
for Luzon. Section 48 of the Property Registration Decree categorically provides that a certificate of title shall not be subject to collateral attack. It
cannot be altered, modified, or cancelled except in a direct proceeding in accordance with law. For this same reason, the Court has no jurisdiction to
grant petitioners prayer in the instant Petition for the cancellation of TCT No. T-134609 in the name of Summit Realty.
Which now brings the Court to the second issue raised by petitioner on the administrative liability of respondents.
Before the Court proceeds to tackle this issue, it establishes that petitioners Complaint Affidavit before the Office of the Ombudsman for Luzon gave
rise to two charges: (1) OMB-L-A-03-0573-F involved the administrative charge for Gross Misconduct against respondent public officers; and (2)
OMB-L-C-03-0728-F concerned the criminal charge for violation of Section 3(e) of the Anti-Graft and Corrupt Practices Act 47 against respondent
public officers and private individuals Leviste and Orense. The Office of the Deputy Ombudsman for Luzon, affirmed by the Court of Appeals,
dismissed both charges. In the Petition at bar, petitioner only assails the dismissal of the administrative charge for grave misconduct against
respondent public officers. Since petitioner did not raise as an issue herein the dismissal by the Office of the Deputy Ombudsman for Luzon, affirmed
by the Court of Appeals, of the criminal charge against respondent public officers for violation of Section 3(e) of the Anti-Graft and Corrupt Practices
Act, the same became final and executory.48
In Domingo v. Quimson,49 the Court adopted the well-written report and recommendation of its Clerk of Court on the administrative matter then
pending and involving the charge of gross or serious misconduct:
"Under Section 36, par. (b) [1] of PD No. 807, otherwise known as the Civil Service Decree of the Philippines, 'misconduct' is a ground for
disciplinary action. And under MC No. 8, S. 1970, issued by the Civil Service Commission on July 28, 1970, which sets the 'Guidelines in the
Application of Penalties in Administrative Cases and other Matters Relative Thereto,' the administrative offense of 'grave misconduct' carries with it
the maximum penalty of dismissal from the service (Sec. IV-C[3], MC No. 8, S. 1970). But the term 'misconduct' as an administrative offense has a
well defined meaning. It was defined in Amosco vs. Judge Magno, Adm. Mat. No. 439-MJ, Res. September 30, 1976, as referring 'to a transgression
of some established and definite rule of action, more particularly, unlawful behavior or gross negligence by the public officer.' It is a misconduct 'such
as affects the performance of his duties as an officer and not such only as effects his character as a private individual.' In the recent case of Oao vs.
Pabato, etc., Adm. Mat. No. 782-MJ, Res. July 29, 1977, the Court defined 'serious misconduct' as follows:
Hence, even assuming that the dismissal of the case is erroneous, this would be merely an error of judgment and not serious misconduct. The term
`serious misconduct is a transgression of some established and definite rule of action more particularly, unlawful behavior of gross negligence by the
magistrate. It implies a wrongful intention and not a mere error of judgment. For serious misconduct to exist, there must be reliable evidence showing
that the judicial acts complained of were corrupt or inspired by intention to violate the law, or were a persistent disregard of well-known legal rules.
We have previously ruled that negligence and ignorance on the part of a judge are inexcusable if they imply a manifest injustice which cannot be
explained by a reasonable interpretation. This is not so in the case at bar." (Italics supplied.)

18
To reiterate, for grave misconduct to exist, there must be reliable evidence showing that the acts complained of were corrupt or inspired by an
intention to violate the law, or were a persistent disregard of well-known legal rules. Both the Office of the Deputy Ombudsman for Luzon and the
Court of Appeals found that there was no sufficient evidence to substantiate petitioners charge of grave misconduct against respondents. For this
Court to reverse the rulings of the Office of the Deputy Ombudsman for Luzon and the Court of Appeals, it must necessarily review the evidence
presented by the parties and decide on a question of fact. Once it is clear that the issue invites a review of the evidence presented, the question posed
is one of fact.50
Factual issues are not cognizable by this Court in a Petition for Review under Rule 45 of the Rules of Court. In order to resolve this issue, the Court
would necessarily have to look into the probative value of the evidence presented in the proceedings below. It is not the function of the Court to
reexamine or reevaluate the evidence all over again. This Court is not a trier of facts, its jurisdiction in these cases being limited to reviewing only
errors of law that may have been committed by the lower courts or administrative bodies performing quasi-judicial functions. It should be
emphasized that findings made by an administrative body, which has acquired expertise, are accorded not only respect but even finality by the Court.
In administrative proceedings, the quantum of evidence required is only substantial. 51
Absent a clear showing of grave abuse of discretion, the Court shall not disturb findings of fact. The Court cannot weigh once more the evidence
submitted, not only before the Ombudsman, but also before the Court of Appeals. Under Section 27 of Republic Act No. 6770, findings of fact by the
Ombudsman are conclusive, as long as they are supported by substantial evidence. 52 Substantial evidence is the amount of relevant evidence which a
reasonable mind might accept as adequate to justify a conclusion. 53
The Court finds no reason to disturb the finding of the Office of the Deputy Ombudsman for Luzon and the Court of Appeals that respondents did not
commit gross misconduct. Evident from the 28 April 2004 Joint Resolution of the former and the 18 October 2005 Decision of the latter is that they
arrived at such findings only after a meticulous consideration of the evidence submitted by the parties.
Respondents were able to clearly describe their official functions and to convincingly explain that they had only acted in accordance therewith in
their dealings with petitioner and/or her documents. Respondents also enjoy in their favor the presumption of regularity in the performance of their
official duty. The burden of proving otherwise by substantial evidence falls on petitioner, who failed to discharge the same.
From the very beginning, petitioner was unable to identify correctly the positions held by respondents Mistas and Linatoc at the Office of the City
Assessor. How then could she even assert that a particular action was within or without their jurisdiction to perform? While it may be true that
petitioner should have at least been notified that her Tax Declaration No. 00942-A was being cancelled, she was not able to establish that such would
be the responsibility of respondents Mistas or Linatoc. Moreover, petitioner did not present statutory, regulatory, or procedural basis for her insistence
that respondents should have done or not done a particular act. A perfect example was her assertion that respondents Mistas and Linatoc should have
annotated her interest on Tax Declaration No. 00949-A in the name of Catigbac. However, she failed to cite any law or rule which authorizes or
recognizes the annotation of an adverse interest on a tax declaration. Finally, absent any reliable evidence, petitioners charge that respondents
conspired with one another and with corporate officers of Summit Realty is nothing more than speculation, surmise, or conjecture. Just because the
acts of respondents were consistently favorable to Summit Realty does not mean that there was a concerted effort to cause petitioner prejudice.
Respondents actions were only consistent with the recognition of the title of Catigbac over Lot 1-B, transferred by sale to Summit Realty, registered
under the Torrens system, and accordingly evidenced by certificates of title.
WHEREFORE, premises considered, the instant Petition for Review is hereby DENIED. The Decision dated 18 October 2005 and Resolution dated
11 January 2006 of the Court of Appeals in CA-G.R. SP No. 90533 are hereby AFFIRMED in toto. Costs against the petitioner Dinah C. Castillo.
SO ORDERED.
G.R. No. L-17870

September 29, 1962

MINDANAO BUS COMPANY, petitioner,

vs.
THE CITY ASSESSOR & TREASURER and the BOARD OF TAX APPEALS of Cagayan de Oro City, respondents.
Binamira, Barria and Irabagon for petitioner.
Vicente E. Sabellina for respondents.

LABRADOR, J.:
This is a petition for the review of the decision of the Court of Tax Appeals in C.T.A. Case No. 710 holding that the petitioner Mindanao Bus
Company is liable to the payment of the realty tax on its maintenance and repair equipment hereunder referred to.
Respondent City Assessor of Cagayan de Oro City assessed at P4,400 petitioner's above-mentioned equipment. Petitioner appealed the assessment to
the respondent Board of Tax Appeals on the ground that the same are not realty. The Board of Tax Appeals of the City sustained the city assessor, so
petitioner herein filed with the Court of Tax Appeals a petition for the review of the assessment.
In the Court of Tax Appeals the parties submitted the following stipulation of facts:
Petitioner and respondents, thru their respective counsels agreed to the following stipulation of facts:
1. That petitioner is a public utility solely engaged in transporting passengers and cargoes by motor trucks, over its authorized lines in the
Island of Mindanao, collecting rates approved by the Public Service Commission;
2. That petitioner has its main office and shop at Cagayan de Oro City. It maintains Branch Offices and/or stations at Iligan City, Lanao;
Pagadian, Zamboanga del Sur; Davao City and Kibawe, Bukidnon Province;
3. That the machineries sought to be assessed by the respondent as real properties are the following:
(a) Hobart Electric Welder Machine, appearing in the attached photograph, marked Annex "A";

19
(b) Storm Boring Machine, appearing in the attached photograph, marked Annex "B";
(c) Lathe machine with motor, appearing in the attached photograph, marked Annex "C";
(d) Black and Decker Grinder, appearing in the attached photograph, marked Annex "D";
(e) PEMCO Hydraulic Press, appearing in the attached photograph, marked Annex "E";
(f) Battery charger (Tungar charge machine) appearing in the attached photograph, marked Annex "F"; and
(g) D-Engine Waukesha-M-Fuel, appearing in the attached photograph, marked Annex "G".
4. That these machineries are sitting on cement or wooden platforms as may be seen in the attached photographs which form part of this
agreed stipulation of facts;
5. That petitioner is the owner of the land where it maintains and operates a garage for its TPU motor trucks; a repair shop; blacksmith and
carpentry shops, and with these machineries which are placed therein, its TPU trucks are made; body constructed; and same are repaired in
a condition to be serviceable in the TPU land transportation business it operates;
6. That these machineries have never been or were never used as industrial equipments to produce finished products for sale, nor to repair
machineries, parts and the like offered to the general public indiscriminately for business or commercial purposes for which petitioner has
never engaged in, to date.1awphl.nt
The Court of Tax Appeals having sustained the respondent city assessor's ruling, and having denied a motion for reconsideration, petitioner brought
the case to this Court assigning the following errors:
1. The Honorable Court of Tax Appeals erred in upholding respondents' contention that the questioned assessments are valid; and that said
tools, equipments or machineries are immovable taxable real properties.
2. The Tax Court erred in its interpretation of paragraph 5 of Article 415 of the New Civil Code, and holding that pursuant thereto the
movable equipments are taxable realties, by reason of their being intended or destined for use in an industry.
3. The Court of Tax Appeals erred in denying petitioner's contention that the respondent City Assessor's power to assess and levy real estate
taxes on machineries is further restricted by section 31, paragraph (c) of Republic Act No. 521; and
4. The Tax Court erred in denying petitioner's motion for reconsideration.
Respondents contend that said equipments, tho movable, are immobilized by destination, in accordance with paragraph 5 of Article 415 of the New
Civil Code which provides:
Art. 415. The following are immovable properties:
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 on in a building or on a piece of land, and which tend directly to meet the needs of the said industry or works. (Emphasis ours.)
Note that the stipulation expressly states that the equipment are placed on wooden or cement platforms. They can be moved around and about in
petitioner's repair shop. In the case of B. H. Berkenkotter vs. Cu Unjieng, 61 Phil. 663, the Supreme Court said:
Article 344 (Now Art. 415), paragraph (5) of the Civil Code, gives the character of real property to "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 or industry."
If the installation of the machinery and equipment in question in the central of the Mabalacat Sugar Co., Inc., in lieu of the other of less
capacity existing therein, for its sugar and industry, converted them into real property by reason of their purpose, it cannot be said that their
incorporation therewith was not permanent in character because, as essential and principle elements of a sugar central, without them the
sugar central would be unable to function or carry on the industrial purpose for which it was established. Inasmuch as the central is
permanent in character, the necessary machinery and equipment installed for carrying on the sugar industry for which it has been
established must necessarily be permanent. (Emphasis ours.)
So that movable equipments to be immobilized in contemplation of the law must first be "essential and principal elements" of an industry or works
without which such industry or works would be "unable to function or carry on the industrial purpose for which it was established." We may here
distinguish, therefore, those movable which become immobilized by destination because they are essential and principal elements in the industry for
those which may not be so considered immobilized because they are merely incidental, not essential and principal. Thus, cash registers, typewriters,
etc., usually found and used in hotels, restaurants, theaters, etc. are merely incidentals and are not and should not be considered immobilized by
destination, for these businesses can continue or carry on their functions without these equity comments. Airline companies use forklifts, jeepwagons, pressure pumps, IBM machines, etc. which are incidentals, not essentials, and thus retain their movable nature. On the other hand,
machineries of breweries used in the manufacture of liquor and soft drinks, though movable in nature, are immobilized because they are essential to
said industries; but the delivery trucks and adding machines which they usually own and use and are found within their industrial compounds are
merely incidental and retain their movable nature.
Similarly, the tools and equipments in question in this instant case are, by their nature, not essential and principle municipal elements of petitioner's
business of transporting passengers and cargoes by motor trucks. They are merely incidentals acquired as movables and used only for expediency
to facilitate and/or improve its service. Even without such tools and equipments, its business may be carried on, as petitioner has carried on, without
such equipments, before the war. The transportation business could be carried on without the repair or service shop if its rolling equipment is repaired
or serviced in another shop belonging to another.

20
The law that governs the determination of the question at issue is as follows:
Art. 415. The following are immovable property:
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 on in a building or on a piece of land, and which tend directly to meet the needs of the said industry or works; (Civil Code of the
Phil.)
Aside from the element of essentiality the above-quoted provision also requires that the industry or works be carried on in a building or on a piece of
land. Thus in the case of Berkenkotter vs. Cu Unjieng, supra, the "machinery, liquid containers, and instruments or implements" are found in a
building constructed on the land. A sawmill would also be installed in a building on land more or less permanently, and the sawing is conducted in the
land or building.
But in the case at bar the equipments in question are destined only to repair or service the transportation business, which is not carried on in a
building or permanently on a piece of land, as demanded by the law. Said equipments may not, therefore, be deemed real property.
Resuming what we have set forth above, we hold that the equipments in question are not absolutely essential to the petitioner's transportation
business, and petitioner's business is not carried on in a building, tenement or on a specified land, so said equipment may not be considered real estate
within the meaning of Article 415 (c) of the Civil Code.
WHEREFORE, the decision subject of the petition for review is hereby set aside and the equipment in question declared not subject to assessment as
real estate for the purposes of the real estate tax. Without costs.
So ordered.
G.R. No. L-26278

August 4, 1927

LEON SIBAL , plaintiff-appellant,

vs.
EMILIANO J. VALDEZ ET AL., defendants.
EMILIANO J. VALDEZ, appellee.
J. E. Blanco for appellant.
Felix B. Bautista and Santos and Benitez for appellee.
JOHNSON, J.:
The action was commenced in the Court of First Instance of the Province of Tarlac on the 14th day of December 1924. The facts are about as
conflicting as it is possible for facts to be, in the trial causes.
As a first cause of action the plaintiff alleged that the defendant Vitaliano Mamawal, deputy sheriff of the Province of Tarlac, by virtue of a writ of
execution issued by the Court of First Instance of Pampanga, attached and sold to the defendant Emiliano J. Valdez the sugar cane planted by the
plaintiff and his tenants on seven parcels of land described in the complaint in the third paragraph of the first cause of action; that within one year
from the date of the attachment and sale the plaintiff offered to redeem said sugar cane and tendered to the defendant Valdez the amount sufficient to
cover the price paid by the latter, the interest thereon and any assessments or taxes which he may have paid thereon after the purchase, and the
interest corresponding thereto and that Valdez refused to accept the money and to return the sugar cane to the plaintiff.
As a second cause of action, the plaintiff alleged that the defendant Emiliano J. Valdez was attempting to harvest the palay planted in four of the
seven parcels mentioned in the first cause of action; that he had harvested and taken possession of the palay in one of said seven parcels and in
another parcel described in the second cause of action, amounting to 300 cavans; and that all of said palay belonged to the plaintiff.
Plaintiff prayed that a writ of preliminary injunction be issued against the defendant Emiliano J. Valdez his attorneys and agents, restraining them (1)
from distributing him in the possession of the parcels of land described in the complaint; (2) from taking possession of, or harvesting the sugar cane
in question; and (3) from taking possession, or harvesting the palay in said parcels of land. Plaintiff also prayed that a judgment be rendered in his
favor and against the defendants ordering them to consent to the redemption of the sugar cane in question, and that the defendant Valdez be
condemned to pay to the plaintiff the sum of P1,056 the value of palay harvested by him in the two parcels above-mentioned ,with interest and costs.
On December 27, 1924, the court, after hearing both parties and upon approval of the bond for P6,000 filed by the plaintiff, issued the writ of
preliminary injunction prayed for in the complaint.
The defendant Emiliano J. Valdez, in his amended answer, denied generally and specifically each and every allegation of the complaint and step up
the following defenses:
(a) That the sugar cane in question had the nature of personal property and was not, therefore, subject to redemption;
(b) That he was the owner of parcels 1, 2 and 7 described in the first cause of action of the complaint;
(c) That he was the owner of the palay in parcels 1, 2 and 7; and
(d) That he never attempted to harvest the palay in parcels 4 and 5.
The defendant Emiliano J. Valdez by way of counterclaim, alleged that by reason of the preliminary injunction he was unable to gather the sugar
cane, sugar-cane shoots (puntas de cana dulce) palay in said parcels of land, representing a loss to him of P8,375.20 and that, in addition thereto, he
suffered damages amounting to P3,458.56. He prayed, for a judgment (1) absolving him from all liability under the complaint; (2) declaring him to

21
be the absolute owner of the sugar cane in question and of the palay in parcels 1, 2 and 7; and (3) ordering the plaintiff to pay to him the sum of
P11,833.76, representing the value of the sugar cane and palay in question, including damages.
Upon the issues thus presented by the pleadings the cause was brought on for trial. After hearing the evidence, and on April 28, 1926, the Honorable
Cayetano Lukban, judge, rendered a judgment against the plaintiff and in favor of the defendants
(1) Holding that the sugar cane in question was personal property and, as such, was not subject to redemption;
(2) Absolving the defendants from all liability under the complaint; and
(3) Condemning the plaintiff and his sureties Cenon de la Cruz, Juan Sangalang and Marcos Sibal to jointly and severally pay to the
defendant Emiliano J. Valdez the sum of P9,439.08 as follows:
(a) P6,757.40, the value of the sugar cane;
(b) 1,435.68, the value of the sugar-cane shoots;
(c) 646.00, the value of palay harvested by plaintiff;
(d) 600.00, the value of 150 cavans of palay which the defendant was not able to raise by reason of the injunction, at P4 cavan.
9,439.08 From that judgment the plaintiff appealed and in his assignments of error contends that the lower court erred: (1) In
holding that the sugar cane in question was personal property and, therefore, not subject to redemption;
(2) In holding that parcels 1 and 2 of the complaint belonged to Valdez, as well as parcels 7 and 8, and that the palay therein was planted by
Valdez;
(3) In holding that Valdez, by reason of the preliminary injunction failed to realized P6,757.40 from the sugar cane and P1,435.68 from
sugar-cane shoots (puntas de cana dulce);
(4) In holding that, for failure of plaintiff to gather the sugar cane on time, the defendant was unable to raise palay on the land, which would
have netted him the sum of P600; and.
(5) In condemning the plaintiff and his sureties to pay to the defendant the sum of P9,439.08.
It appears from the record:
(1) That on May 11, 1923, the deputy sheriff of the Province of Tarlac, by virtue of writ of execution in civil case No. 20203 of the Court of
First Instance of Manila (Macondray & Co., Inc. vs. Leon Sibal),levied an attachment on eight parcels of land belonging to said Leon Sibal,
situated in the Province of Tarlac, designated in the second of attachment as parcels 1, 2, 3, 4, 5, 6, 7 and 8 (Exhibit B, Exhibit 2-A).
(2) That on July 30, 1923, Macondray & Co., Inc., bought said eight parcels of land, at the auction held by the sheriff of the Province of
Tarlac, for the sum to P4,273.93, having paid for the said parcels separately as follows (Exhibit C, and 2-A):

Parcel
1 .....................................................................

P1.00

2 .....................................................................

2,000.00

3 .....................................................................

120.93

4 .....................................................................

1,000.00

5 .....................................................................

1.00

6 .....................................................................

1.00

7 with the house thereon ..........................

8 .....................................................................

150.00
1,000.00
==========
4,273.93

(3) That within one year from the sale of said parcel of land, and on the 24th day of September, 1923, the judgment debtor, Leon Sibal, paid
P2,000 to Macondray & Co., Inc., for the account of the redemption price of said parcels of land, without specifying the particular parcels
to which said amount was to applied. The redemption price said eight parcels was reduced, by virtue of said transaction, to P2,579.97
including interest (Exhibit C and 2).
The record further shows:
(1) That on April 29, 1924, the defendant Vitaliano Mamawal, deputy sheriff of the Province of Tarlac, by virtue of a writ of execution in
civil case No. 1301 of the Province of Pampanga (Emiliano J. Valdez vs. Leon Sibal 1. the same parties in the present case), attached
the personal property of said Leon Sibal located in Tarlac, among which was included the sugar cane now in question in the seven parcels
of land described in the complaint (Exhibit A).

22
(2) That on May 9 and 10, 1924, said deputy sheriff sold at public auction said personal properties of Leon Sibal, including the sugar cane
in question to Emilio J. Valdez, who paid therefor the sum of P1,550, of which P600 was for the sugar cane (Exhibit A).
(3) That on April 29,1924, said deputy sheriff, by virtue of said writ of execution, also attached the real property of said Leon Sibal in
Tarlac, including all of his rights, interest and participation therein, which real property consisted of eleven parcels of land and a house and
camarin situated in one of said parcels (Exhibit A).
(4) That on June 25, 1924, eight of said eleven parcels, including the house and the camarin, were bought by Emilio J. Valdez at the auction
held by the sheriff for the sum of P12,200. Said eight parcels were designated in the certificate of sale as parcels 1, 3, 4, 5, 6, 7, 10 and 11.
The house and camarin were situated on parcel 7 (Exhibit A).
(5) That the remaining three parcels, indicated in the certificate of the sheriff as parcels 2, 12, and 13, were released from the attachment by
virtue of claims presented by Agustin Cuyugan and Domiciano Tizon (Exhibit A).
(6) That on the same date, June 25, 1924, Macondray & Co. sold and conveyed to Emilio J. Valdez for P2,579.97 all of its rights and
interest in the eight parcels of land acquired by it at public auction held by the deputy sheriff of Tarlac in connection with civil case No.
20203 of the Court of First Instance of Manila, as stated above. Said amount represented the unpaid balance of the redemption price of said
eight parcels, after payment by Leon Sibal of P2,000 on September 24, 1923, fro the account of the redemption price, as stated above.
(Exhibit C and 2).
The foregoing statement of facts shows:
(1) The Emilio J. Valdez bought the sugar cane in question, located in the seven parcels of land described in the first cause of action of the
complaint at public auction on May 9 and 10, 1924, for P600.
(2) That on July 30, 1923, Macondray & Co. became the owner of eight parcels of land situated in the Province of Tarlac belonging to Leon
Sibal and that on September 24, 1923, Leon Sibal paid to Macondray & Co. P2,000 for the account of the redemption price of said parcels.
(3) That on June 25, 1924, Emilio J. Valdez acquired from Macondray & Co. all of its rights and interest in the said eight parcels of land.
(4) That on June 25, 1924, Emilio J. Valdez also acquired all of the rights and interest which Leon Sibal had or might have had on said eight
parcels by virtue of the P2,000 paid by the latter to Macondray.
(5) That Emilio J. Valdez became the absolute owner of said eight parcels of land.
The first question raised by the appeal is, whether the sugar cane in question is personal or real property. It is contended that sugar cane comes under
the classification of real property as "ungathered products" in paragraph 2 of article 334 of the Civil Code. Said paragraph 2 of article 334 enumerates
as real property the following: Trees, plants, and ungathered products, while they are annexed to the land or form an integral part of any immovable
property." That article, however, has received in recent years an interpretation by the Tribunal Supremo de Espaa, which holds that, under certain
conditions, growing crops may be considered as personal property. (Decision of March 18, 1904, vol. 97, Civil Jurisprudence of Spain.)
Manresa, the eminent commentator of the Spanish Civil Code, in discussing section 334 of the Civil Code, in view of the recent decisions of the
supreme Court of Spain, admits that growing crops are sometimes considered and treated as personal property. He says:
No creemos, sin embargo, que esto excluya la excepcionque muchos autores hacen tocante a la venta de toda cosecha o de parte de ella
cuando aun no esta cogida (cosa frecuente con la uvay y la naranja), y a la de lenas, considerando ambas como muebles. El Tribunal
Supremo, en sentencia de 18 de marzo de 1904, al entender sobre un contrato de arrendamiento de un predio rustico, resuelve que su
terminacion por desahucio no extingue los derechos del arrendario, para recolectar o percibir los frutos correspondientes al ao agricola,
dentro del que nacieron aquellos derechos, cuando el arrendor ha percibido a su vez el importe de la renta integra correspondiente, aun
cuando lo haya sido por precepto legal durante el curso del juicio, fundandose para ello, no solo en que de otra suerte se daria al desahucio
un alcance que no tiene, sino en que, y esto es lo interesante a nuestro proposito, la consideracion de inmuebles que el articulo 334 del
Codigo Civil atribuge a los frutos pendientes, no les priva del caracter de productos pertenecientes, como tales, a quienes a ellos tenga
derecho, Ilegado el momento de su recoleccion.
xxx

xxx

xxx

Mas actualmente y por virtud de la nueva edicion de la Ley Hipotecaria, publicada en 16 de diciembre de 1909, con las reformas
introducidas por la de 21 de abril anterior, la hipoteca, salvo pacto expreso que disponga lo contrario, y cualquiera que sea la naturaleza y
forma de la obligacion que garantice, no comprende los frutos cualquiera que sea la situacion en que se encuentre. (3 Manresa, 5. edicion,
pags. 22, 23.)
From the foregoing it appears (1) that, under Spanish authorities, pending fruits and ungathered products may be sold and transferred as personal
property; (2) that the Supreme Court of Spain, in a case of ejectment of a lessee of an agricultural land, held that the lessee was entitled to gather the
products corresponding to the agricultural year, because said fruits did not go with the land but belonged separately to the lessee; and (3) that under
the Spanish Mortgage Law of 1909, as amended, the mortgage of a piece of land does not include the fruits and products existing thereon, unless the
contract expressly provides otherwise.
An examination of the decisions of the Supreme Court of Louisiana may give us some light on the question which we are discussing. Article 465 of
the Civil Code of Louisiana, which corresponds to paragraph 2 of article 334 of our Civil Code, provides: "Standing crops and the fruits of trees not
gathered, and trees before they are cut down, are likewise immovable, and are considered as part of the land to which they are attached."
The Supreme Court of Louisiana having occasion to interpret that provision, held that in some cases "standing crops" may be considered and dealt
with as personal property. In the case of Lumber Co. vs. Sheriff and Tax Collector (106 La., 418) the Supreme Court said: "True, by article 465 of the
Civil Code it is provided that 'standing crops and the fruits of trees not gathered and trees before they are cut down . . . are considered as part of the
land to which they are attached, but the immovability provided for is only one in abstracto and without reference to rights on or to the crop acquired
by others than the owners of the property to which the crop is attached. . . . The existence of a right on the growing crop is a mobilization by
anticipation, a gathering as it were in advance, rendering the crop movable quoad the right acquired therein. Our jurisprudence recognizes the
possible mobilization of the growing crop." (Citizens' Bank vs. Wiltz, 31 La. Ann., 244; Porche vs. Bodin, 28 La., Ann., 761; Sandel vs. Douglass, 27
La. Ann., 629; Lewis vs. Klotz, 39 La. Ann., 267.)

23
"It is true," as the Supreme Court of Louisiana said in the case of Porche vs. Bodin (28 La. An., 761) that "article 465 of the Revised Code says that
standing crops are considered as immovable and as part of the land to which they are attached, and article 466 declares that the fruits of an
immovable gathered or produced while it is under seizure are considered as making part thereof, and incurred to the benefit of the person making the
seizure. But the evident meaning of these articles, is where the crops belong to the owner of the plantation they form part of the immovable, and
where it is seized, the fruits gathered or produced inure to the benefit of the seizing creditor.
A crop raised on leased premises in no sense forms part of the immovable. It belongs to the lessee, and may be sold by him, whether it be
gathered or not, and it may be sold by his judgment creditors. If it necessarily forms part of the leased premises the result would be that it
could not be sold under execution separate and apart from the land. If a lessee obtain supplies to make his crop, the factor's lien would not
attach to the crop as a separate thing belonging to his debtor, but the land belonging to the lessor would be affected with the recorded
privilege. The law cannot be construed so as to result in such absurd consequences.
In the case of Citizen's Bank vs. Wiltz (31 La. Ann., 244)the court said:
If the crop quoad the pledge thereof under the act of 1874 was an immovable, it would be destructive of the very objects of the act, it would
render the pledge of the crop objects of the act, it would render the pledge of the crop impossible, for if the crop was an inseparable part of
the realty possession of the latter would be necessary to that of the former; but such is not the case. True, by article 465 C. C. it is provided
that "standing crops and the fruits of trees not gathered and trees before they are cut down are likewise immovable and are considered as
part of the land to which they are attached;" but the immovability provided for is only one in abstracto and without reference to rights on or
to the crop acquired by other than the owners of the property to which the crop was attached. The immovability of a growing crop is in the
order of things temporary, for the crop passes from the state of a growing to that of a gathered one, from an immovable to a movable. The
existence of a right on the growing crop is a mobilization by anticipation, a gathering as it were in advance, rendering the crop movable
quoad the right acquired thereon. The provision of our Code is identical with the Napoleon Code 520, and we may therefore obtain light by
an examination of the jurisprudence of France.
The rule above announced, not only by the Tribunal Supremo de Espaa but by the Supreme Court of Louisiana, is followed in practically every state
of the Union.
From an examination of the reports and codes of the State of California and other states we find that the settle doctrine followed in said states in
connection with the attachment of property and execution of judgment is, that growing crops raised by yearly labor and cultivation are considered
personal property. (6 Corpuz Juris, p. 197; 17 Corpus Juris, p. 379; 23 Corpus Juris, p. 329: Raventas vs. Green, 57 Cal., 254; Norris vs. Watson, 55
Am. Dec., 161; Whipple vs. Foot, 3 Am. Dec., 442; 1 Benjamin on Sales, sec. 126; McKenzie vs. Lampley, 31 Ala., 526; Crine vs. Tifts and Co., 65
Ga., 644; Gillitt vs. Truax, 27 Minn., 528; Preston vs. Ryan, 45 Mich., 174; Freeman on Execution, vol. 1, p. 438; Drake on Attachment, sec. 249;
Mechem on Sales, sec. 200 and 763.)
Mr. Mechem says that a valid sale may be made of a thing, which though not yet actually in existence, is reasonably certain to come into existence as
the natural increment or usual incident of something already in existence, and then belonging to the vendor, and then title will vest in the buyer the
moment the thing comes into existence. (Emerson vs. European Railway Co., 67 Me., 387; Cutting vs. Packers Exchange, 21 Am. St. Rep., 63.)
Things of this nature are said to have a potential existence. A man may sell property of which he is potentially and not actually possessed. He may
make a valid sale of the wine that a vineyard is expected to produce; or the gain a field may grow in a given time; or the milk a cow may yield during
the coming year; or the wool that shall thereafter grow upon sheep; or what may be taken at the next cast of a fisherman's net; or fruits to grow; or
young animals not yet in existence; or the good will of a trade and the like. The thing sold, however, must be specific and identified. They must be
also owned at the time by the vendor. (Hull vs. Hull, 48 Conn., 250 [40 Am. Rep., 165].)
It is contended on the part of the appellee that paragraph 2 of article 334 of the Civil Code has been modified by section 450 of the Code of Civil
Procedure as well as by Act No. 1508, the Chattel Mortgage Law. Said section 450 enumerates the property of a judgment debtor which may be
subjected to execution. The pertinent portion of said section reads as follows: "All goods, chattels, moneys, and other property, both real and
personal, * * * shall be liable to execution. Said section 450 and most of the other sections of the Code of Civil Procedure relating to the execution of
judgment were taken from the Code of Civil Procedure of California. The Supreme Court of California, under section 688 of the Code of Civil
Procedure of that state (Pomeroy, p. 424) has held, without variation, that growing crops were personal property and subject to execution.
Act No. 1508, the Chattel Mortgage Law, fully recognized that growing crops are personal property. Section 2 of said Act provides: "All personal
property shall be subject to mortgage, agreeably to the provisions of this Act, and a mortgage executed in pursuance thereof shall be termed a chattel
mortgage." Section 7 in part provides: "If growing crops be mortgaged the mortgage may contain an agreement stipulating that the mortgagor binds
himself properly to tend, care for and protect the crop while growing.
It is clear from the foregoing provisions that Act No. 1508 was enacted on the assumption that "growing crops" are personal property. This
consideration tends to support the conclusion hereinbefore stated, that paragraph 2 of article 334 of the Civil Code has been modified by section 450
of Act No. 190 and by Act No. 1508 in the sense that "ungathered products" as mentioned in said article of the Civil Code have the nature of personal
property. In other words, the phrase "personal property" should be understood to include "ungathered products."
At common law, and generally in the United States, all annual crops which are raised by yearly manurance and labor, and essentially owe
their annual existence to cultivation by man, . may be levied on as personal property." (23 C. J., p. 329.) On this question Freeman, in his
treatise on the Law of Executions, says: "Crops, whether growing or standing in the field ready to be harvested, are, when produced by
annual cultivation, no part of the realty. They are, therefore, liable to voluntary transfer as chattels. It is equally well settled that they may
be seized and sold under execution. (Freeman on Executions, vol. p. 438.)
We may, therefore, conclude that paragraph 2 of article 334 of the Civil Code has been modified by section 450 of the Code of Civil Procedure and
by Act No. 1508, in the sense that, for the purpose of attachment and execution, and for the purposes of the Chattel Mortgage Law, "ungathered
products" have the nature of personal property. The lower court, therefore, committed no error in holding that the sugar cane in question was personal
property and, as such, was not subject to redemption.
All the other assignments of error made by the appellant, as above stated, relate to questions of fact only. Before entering upon a discussion of said
assignments of error, we deem it opportune to take special notice of the failure of the plaintiff to appear at the trial during the presentation of
evidence by the defendant. His absence from the trial and his failure to cross-examine the defendant have lent considerable weight to the evidence
then presented for the defense.
Coming not to the ownership of parcels 1 and 2 described in the first cause of action of the complaint, the plaintiff made a futile attempt to show that
said two parcels belonged to Agustin Cuyugan and were the identical parcel 2 which was excluded from the attachment and sale of real property of
Sibal to Valdez on June 25, 1924, as stated above. A comparison of the description of parcel 2 in the certificate of sale by the sheriff (Exhibit A) and
the description of parcels 1 and 2 of the complaint will readily show that they are not the same.

24
The description of the parcels in the complaint is as follows:
1. La caa dulce sembrada por los inquilinos del ejecutado Leon Sibal 1. en una parcela de terreno de la pertenencia del citado ejecutado,
situada en Libutad, Culubasa, Bamban, Tarlac, de unas dos hectareas poco mas o menos de superficie.
2. La caa dulce sembrada por el inquilino del ejecutado Leon Sibal 1., Ilamado Alejandro Policarpio, en una parcela de terreno de la
pertenencia del ejecutado, situada en Dalayap, Culubasa, Bamban, Tarlac de unas dos hectareas de superficie poco mas o menos." The
description of parcel 2 given in the certificate of sale (Exhibit A) is as follows:
2a. Terreno palayero situado en Culubasa, Bamban, Tarlac, de 177,090 metros cuadrados de superficie, linda al N. con Canuto Sibal,
Esteban Lazatin and Alejandro Dayrit; al E. con Francisco Dizon, Felipe Mau and others; al S. con Alejandro Dayrit, Isidro Santos and
Melecio Mau; y al O. con Alejandro Dayrit and Paulino Vergara. Tax No. 2854, vador amillarado P4,200 pesos.
On the other hand the evidence for the defendant purported to show that parcels 1 and 2 of the complaint were included among the parcels bought by
Valdez from Macondray on June 25, 1924, and corresponded to parcel 4 in the deed of sale (Exhibit B and 2), and were also included among the
parcels bought by Valdez at the auction of the real property of Leon Sibal on June 25, 1924, and corresponded to parcel 3 in the certificate of sale
made by the sheriff (Exhibit A). The description of parcel 4 (Exhibit 2) and parcel 3 (Exhibit A) is as follows:
Parcels No. 4. Terreno palayero, ubicado en el barrio de Culubasa,Bamban, Tarlac, I. F. de 145,000 metros cuadrados de superficie,
lindante al Norte con Road of the barrio of Culubasa that goes to Concepcion; al Este con Juan Dizon; al Sur con Lucio Mao y Canuto
Sibal y al Oeste con Esteban Lazatin, su valor amillarado asciende a la suma de P2,990. Tax No. 2856.
As will be noticed, there is hardly any relation between parcels 1 and 2 of the complaint and parcel 4 (Exhibit 2 and B) and parcel 3 (Exhibit A). But,
inasmuch as the plaintiff did not care to appear at the trial when the defendant offered his evidence, we are inclined to give more weight to the
evidence adduced by him that to the evidence adduced by the plaintiff, with respect to the ownership of parcels 1 and 2 of the compliant. We,
therefore, conclude that parcels 1 and 2 of the complaint belong to the defendant, having acquired the same from Macondray & Co. on June 25, 1924,
and from the plaintiff Leon Sibal on the same date.
It appears, however, that the plaintiff planted the palay in said parcels and harvested therefrom 190 cavans. There being no evidence of bad faith on
his part, he is therefore entitled to one-half of the crop, or 95 cavans. He should therefore be condemned to pay to the defendant for 95 cavans only, at
P3.40 a cavan, or the sum of P323, and not for the total of 190 cavans as held by the lower court.
As to the ownership of parcel 7 of the complaint, the evidence shows that said parcel corresponds to parcel 1 of the deed of sale of Macondray & Co,
to Valdez (Exhibit B and 2), and to parcel 4 in the certificate of sale to Valdez of real property belonging to Sibal, executed by the sheriff as above
stated (Exhibit A). Valdez is therefore the absolute owner of said parcel, having acquired the interest of both Macondray and Sibal in said parcel.
With reference to the parcel of land in Pacalcal, Tarlac, described in paragraph 3 of the second cause of action, it appears from the testimony of the
plaintiff himself that said parcel corresponds to parcel 8 of the deed of sale of Macondray to Valdez (Exhibit B and 2) and to parcel 10 in the deed of
sale executed by the sheriff in favor of Valdez (Exhibit A). Valdez is therefore the absolute owner of said parcel, having acquired the interest of both
Macondray and Sibal therein.
In this connection the following facts are worthy of mention:
Execution in favor of Macondray & Co., May 11, 1923. Eight parcels of land were attached under said execution. Said parcels of land were sold to
Macondray & Co. on the 30th day of July, 1923. Rice paid P4,273.93. On September 24, 1923, Leon Sibal paid to Macondray & Co. P2,000 on the
redemption of said parcels of land. (See Exhibits B and C ).
Attachment, April 29, 1924, in favor of Valdez. Personal property of Sibal was attached, including the sugar cane in question. (Exhibit A) The said
personal property so attached, sold at public auction May 9 and 10, 1924. April 29, 1924, the real property was attached under the execution in favor
of Valdez (Exhibit A). June 25, 1924, said real property was sold and purchased by Valdez (Exhibit A).
June 25, 1924, Macondray & Co. sold all of the land which they had purchased at public auction on the 30th day of July, 1923, to Valdez.
As to the loss of the defendant in sugar cane by reason of the injunction, the evidence shows that the sugar cane in question covered an area of 22
hectares and 60 ares (Exhibits 8, 8-b and 8-c); that said area would have yielded an average crop of 1039 picos and 60 cates; that one-half of the
quantity, or 519 picos and 80 cates would have corresponded to the defendant, as owner; that during the season the sugar was selling at P13 a pico
(Exhibit 5 and 5-A). Therefore, the defendant, as owner, would have netted P 6,757.40 from the sugar cane in question. The evidence also shows that
the defendant could have taken from the sugar cane 1,017,000 sugar-cane shoots (puntas de cana) and not 1,170,000 as computed by the lower court.
During the season the shoots were selling at P1.20 a thousand (Exhibits 6 and 7). The defendant therefore would have netted P1,220.40 from sugarcane shoots and not P1,435.68 as allowed by the lower court.
As to the palay harvested by the plaintiff in parcels 1 and 2 of the complaint, amounting to 190 cavans, one-half of said quantity should belong to the
plaintiff, as stated above, and the other half to the defendant. The court erred in awarding the whole crop to the defendant. The plaintiff should
therefore pay the defendant for 95 cavans only, at P3.40 a cavan, or P323 instead of P646 as allowed by the lower court.
The evidence also shows that the defendant was prevented by the acts of the plaintiff from cultivating about 10 hectares of the land involved in the
litigation. He expected to have raised about 600 cavans of palay, 300 cavans of which would have corresponded to him as owner. The lower court has
wisely reduced his share to 150 cavans only. At P4 a cavan, the palay would have netted him P600.
In view of the foregoing, the judgment appealed from is hereby modified. The plaintiff and his sureties Cenon de la Cruz, Juan Sangalang and
Marcos Sibal are hereby ordered to pay to the defendant jointly and severally the sum of P8,900.80, instead of P9,439.08 allowed by the lower court,
as follows:
P6,757.40 for the sugar cane;
1,220.40 for the sugar cane shoots;
323.00 for the palay harvested by plaintiff in parcels 1 and 2;

25

600.00 for the palay which defendant could have raised.

8,900.80
============
In all other respects, the judgment appealed from is hereby affirmed, with costs. So ordered.
G.R. No. L-20329

March 16, 1923

THE STANDARD OIL COMPANY OF NEW YORK, petitioner,

vs.
JOAQUIN JARAMILLO, as register of deeds of the City of Manila, respondent.
Ross, Lawrence and Selph for petitioner.
City Fiscal Revilla and Assistant City Fiscal Rodas for respondent.
STREET, J.:
This cause is before us upon demurrer interposed by the respondent, Joaquin Jaramillo, register of deeds of the City of Manila, to an original petition
of the Standard Oil Company of New York, seeking a peremptory mandamus to compel the respondent to record in the proper register a document
purporting to be a chattel mortgage executed in the City of Manila by Gervasia de la Rosa, Vda. de Vera, in favor of the Standard Oil Company of
New York.
It appears from the petition that on November 27, 1922, Gervasia de la Rosa, Vda. de Vera, was the lessee of a parcel of land situated in the City of
Manila and owner of the house of strong materials built thereon, upon which date she executed a document in the form of a chattel mortgage,
purporting to convey to the petitioner by way of mortgage both the leasehold interest in said lot and the building which stands thereon.
The clauses in said document describing the property intended to be thus mortgage are expressed in the following words:
Now, therefore, the mortgagor hereby conveys and transfer to the mortgage, by way of mortgage, the following described personal
property, situated in the City of Manila, and now in possession of the mortgagor, to wit:
(1) All of the right, title, and interest of the mortgagor in and to the contract of lease hereinabove referred to, and in and to the premises the
subject of the said lease;
(2) The building, property of the mortgagor, situated on the aforesaid leased premises.
After said document had been duly acknowledge and delivered, the petitioner caused the same to be presented to the respondent, Joaquin Jaramillo,
as register of deeds of the City of Manila, for the purpose of having the same recorded in the book of record of chattel mortgages. Upon examination
of the instrument, the respondent was of the opinion that it was not a chattel mortgage, for the reason that the interest therein mortgaged did not
appear to be personal property, within the meaning of the Chattel Mortgage Law, and registration was refused on this ground only.
We are of the opinion that the position taken by the respondent is untenable; and it is his duty to accept the proper fee and place the instrument on
record. The duties of a register of deeds in respect to the registration of chattel mortgage are of a purely ministerial character; and no provision of law
can be cited which confers upon him any judicial or quasi-judicial power to determine the nature of any document of which registration is sought as a
chattel mortgage.
The original provisions touching this matter are contained in section 15 of the Chattel Mortgage Law (Act No. 1508), as amended by Act No. 2496;
but these have been transferred to section 198 of the Administrative Code, where they are now found. There is nothing in any of these provisions
conferring upon the register of deeds any authority whatever in respect to the "qualification," as the term is used in Spanish law, of chattel mortgage.
His duties in respect to such instruments are ministerial only. The efficacy of the act of recording a chattel mortgage consists in the fact that it
operates as constructive notice of the existence of the contract, and the legal effects of the contract must be discovered in the instrument itself in
relation with the fact of notice. Registration adds nothing to the instrument, considered as a source of title, and affects nobody's rights except as a
specifies of notice.
Articles 334 and 335 of the Civil Code supply no absolute criterion for discriminating between real property and personal property for purpose of the
application of the Chattel Mortgage Law. Those articles state rules which, considered as a general doctrine, are law in this jurisdiction; but it must not
be forgotten that under given conditions property may have character different from that imputed to it in said articles. It is undeniable that the parties
to a contract may by agreement treat as personal property that which by nature would be real property; and it is a familiar phenomenon to see things
classed as real property for purposes of taxation which on general principle might be considered personal property. Other situations are constantly
arising, and from time to time are presented to this court, in which the proper classification of one thing or another as real or personal property may
be said to be doubtful.
The point submitted to us in this case was determined on September 8, 1914, in an administrative ruling promulgated by the Honorable James A.
Ostrand, now a Justice of this Court, but acting at that time in the capacity of Judge of the fourth branch of the Court of First Instance of the Ninth
Judicial District, in the City of Manila; and little of value can be here added to the observations contained in said ruling. We accordingly quote
therefrom as follows:
It is unnecessary here to determine whether or not the property described in the document in question is real or personal; the discussion
may be confined to the point as to whether a register of deeds has authority to deny the registration of a document purporting to be a chattel
mortgage and executed in the manner and form prescribed by the Chattel Mortgage Law.
Then, after quoting section 5 of the Chattel Mortgage Law (Act No. 1508), his Honor continued:
Based principally upon the provisions of section quoted the Attorney-General of the Philippine Islands, in an opinion dated August 11,
1909, held that a register of deeds has no authority to pass upon the capacity of the parties to a chattel mortgage which is presented to him
for record. A fortiori a register of deeds can have no authority to pass upon the character of the property sought to be encumbered by a

26
chattel mortgage. Of course, if the mortgaged property is real instead of personal the chattel mortgage would no doubt be held ineffective
as against third parties, but this is a question to be determined by the courts of justice and not by the register of deeds.
In Leung Yee vs. Frank L. Strong Machinery Co. and Williamson (37 Phil., 644), this court held that where the interest conveyed is of the nature of
real, property, the placing of the document on record in the chattel mortgage register is a futile act; but that decision is not decisive of the question
now before us, which has reference to the function of the register of deeds in placing the document on record.
In the light of what has been said it becomes unnecessary for us to pass upon the point whether the interests conveyed in the instrument now in
question are real or personal; and we declare it to be the duty of the register of deeds to accept the estimate placed upon the document by the
petitioner and to register it, upon payment of the proper fee.
The demurrer is overruled; and unless within the period of five days from the date of the notification hereof, the respondent shall interpose a
sufficient answer to the petition, the writ of mandamus will be issued, as prayed, but without costs. So ordered.
G.R. No. L-11658

February 15, 1918

LEUNG YEE, plaintiff-appellant,

vs.
FRANK L. STRONG MACHINERY COMPANY and J. G. WILLIAMSON, defendants-appellees.
Booram and Mahoney for appellant.
Williams, Ferrier and SyCip for appellees.
CARSON, J.:
The "Compaia Agricola Filipina" bought a considerable quantity of rice-cleaning machinery company from the defendant machinery company, and
executed a chattel mortgage thereon to secure payment of the purchase price. It included in the mortgage deed the building of strong materials in
which the machinery was installed, without any reference to the land on which it stood. The indebtedness secured by this instrument not having been
paid when it fell due, the mortgaged property was sold by the sheriff, in pursuance of the terms of the mortgage instrument, and was bought in by the
machinery company. The mortgage was registered in the chattel mortgage registry, and the sale of the property to the machinery company in
satisfaction of the mortgage was annotated in the same registry on December 29, 1913.
A few weeks thereafter, on or about the 14th of January, 1914, the "Compaia Agricola Filipina" executed a deed of sale of the land upon which the
building stood to the machinery company, but this deed of sale, although executed in a public document, was not registered. This deed makes no
reference to the building erected on the land and would appear to have been executed for the purpose of curing any defects which might be found to
exist in the machinery company's title to the building under the sheriff's certificate of sale. The machinery company went into possession of the
building at or about the time when this sale took place, that is to say, the month of December, 1913, and it has continued in possession ever since.
At or about the time when the chattel mortgage was executed in favor of the machinery company, the mortgagor, the "Compaia Agricola Filipina"
executed another mortgage to the plaintiff upon the building, separate and apart from the land on which it stood, to secure payment of the balance of
its indebtedness to the plaintiff under a contract for the construction of the building. Upon the failure of the mortgagor to pay the amount of the
indebtedness secured by the mortgage, the plaintiff secured judgment for that amount, levied execution upon the building, bought it in at the sheriff's
sale on or about the 18th of December, 1914, and had the sheriff's certificate of the sale duly registered in the land registry of the Province of Cavite.
At the time when the execution was levied upon the building, the defendant machinery company, which was in possession, filed with the sheriff a
sworn statement setting up its claim of title and demanding the release of the property from the levy. Thereafter, upon demand of the sheriff, the
plaintiff executed an indemnity bond in favor of the sheriff in the sum of P12,000, in reliance upon which the sheriff sold the property at public
auction to the plaintiff, who was the highest bidder at the sheriff's sale.
This action was instituted by the plaintiff to recover possession of the building from the machinery company.
The trial judge, relying upon the terms of article 1473 of the Civil Code, gave judgment in favor of the machinery company, on the ground that the
company had its title to the building registered prior to the date of registry of the plaintiff's certificate.
Article 1473 of the Civil Code is as follows:
If the same thing should have been sold to different vendees, the ownership shall be transfer to the person who may have the first taken
possession thereof in good faith, if it should be personal property.
Should it be real property, it shall belong to the person acquiring it who first recorded it in the registry.
Should there be no entry, the property shall belong to the person who first took possession of it in good faith, and, in the absence thereof, to
the person who presents the oldest title, provided there is good faith.
The registry her referred to is of course the registry of real property, and it must be apparent that the annotation or inscription of a deed of sale of real
property in a chattel mortgage registry cannot be given the legal effect of an inscription in the registry of real property. By its express terms, the
Chattel Mortgage Law contemplates and makes provision for mortgages of personal property; and the sole purpose and object of the chattel mortgage
registry is to provide for the registry of "Chattel mortgages," that is to say, mortgages of personal property executed in the manner and form
prescribed in the statute. The building of strong materials in which the rice-cleaning machinery was installed by the "Compaia Agricola Filipina"
was real property, and the mere fact that the parties seem to have dealt with it separate and apart from the land on which it stood in no wise changed
its character as real property. It follows that neither the original registry in the chattel mortgage of the building and the machinery installed therein,
not the annotation in that registry of the sale of the mortgaged property, had any effect whatever so far as the building was concerned.
We conclude that the ruling in favor of the machinery company cannot be sustained on the ground assigned by the trial judge. We are of opinion,
however, that the judgment must be sustained on the ground that the agreed statement of facts in the court below discloses that neither the purchase of
the building by the plaintiff nor his inscription of the sheriff's certificate of sale in his favor was made in good faith, and that the machinery company
must be held to be the owner of the property under the third paragraph of the above cited article of the code, it appearing that the company first took

27
possession of the property; and further, that the building and the land were sold to the machinery company long prior to the date of the sheriff's sale to
the plaintiff.
It has been suggested that since the provisions of article 1473 of the Civil Code require "good faith," in express terms, in relation to "possession" and
"title," but contain no express requirement as to "good faith" in relation to the "inscription" of the property on the registry, it must be presumed that
good faith is not an essential requisite of registration in order that it may have the effect contemplated in this article. We cannot agree with this
contention. It could not have been the intention of the legislator to base the preferential right secured under this article of the code upon an inscription
of title in bad faith. Such an interpretation placed upon the language of this section would open wide the door to fraud and collusion. The public
records cannot be converted into instruments of fraud and oppression by one who secures an inscription therein in bad faith. The force and effect
given by law to an inscription in a public record presupposes the good faith of him who enters such inscription; and rights created by statute, which
are predicated upon an inscription in a public registry, do not and cannot accrue under an inscription "in bad faith," to the benefit of the person who
thus makes the inscription.
Construing the second paragraph of this article of the code, the supreme court of Spain held in its sentencia of the 13th of May, 1908, that:
This rule is always to be understood on the basis of the good faith mentioned in the first paragraph; therefore, it having been found that the
second purchasers who record their purchase had knowledge of the previous sale, the question is to be decided in accordance with the
following paragraph. (Note 2, art. 1473, Civ. Code, Medina and Maranon [1911] edition.)
Although article 1473, in its second paragraph, provides that the title of conveyance of ownership of the real property that is first recorded
in the registry shall have preference, this provision must always be understood on the basis of the good faith mentioned in the first
paragraph; the legislator could not have wished to strike it out and to sanction bad faith, just to comply with a mere formality which, in
given cases, does not obtain even in real disputes between third persons. (Note 2, art. 1473, Civ. Code, issued by the publishers of the La
Revista de los Tribunales, 13th edition.)
The agreed statement of facts clearly discloses that the plaintiff, when he bought the building at the sheriff's sale and inscribed his title in the land
registry, was duly notified that the machinery company had bought the building from plaintiff's judgment debtor; that it had gone into possession long
prior to the sheriff's sale; and that it was in possession at the time when the sheriff executed his levy. The execution of an indemnity bond by the
plaintiff in favor of the sheriff, after the machinery company had filed its sworn claim of ownership, leaves no room for doubt in this regard. Having
bought in the building at the sheriff's sale with full knowledge that at the time of the levy and sale the building had already been sold to the
machinery company by the judgment debtor, the plaintiff cannot be said to have been a purchaser in good faith; and of course, the subsequent
inscription of the sheriff's certificate of title must be held to have been tainted with the same defect.
Perhaps we should make it clear that in holding that the inscription of the sheriff's certificate of sale to the plaintiff was not made in good faith, we
should not be understood as questioning, in any way, the good faith and genuineness of the plaintiff's claim against the "Compaia Agricola Filipina."
The truth is that both the plaintiff and the defendant company appear to have had just and righteous claims against their common debtor. No criticism
can properly be made of the exercise of the utmost diligence by the plaintiff in asserting and exercising his right to recover the amount of his claim
from the estate of the common debtor. We are strongly inclined to believe that in procuring the levy of execution upon the factory building and in
buying it at the sheriff's sale, he considered that he was doing no more than he had a right to do under all the circumstances, and it is highly possible
and even probable that he thought at that time that he would be able to maintain his position in a contest with the machinery company. There was no
collusion on his part with the common debtor, and no thought of the perpetration of a fraud upon the rights of another, in the ordinary sense of the
word. He may have hoped, and doubtless he did hope, that the title of the machinery company would not stand the test of an action in a court of law;
and if later developments had confirmed his unfounded hopes, no one could question the legality of the propriety of the course he adopted.
But it appearing that he had full knowledge of the machinery company's claim of ownership when he executed the indemnity bond and bought in the
property at the sheriff's sale, and it appearing further that the machinery company's claim of ownership was well founded, he cannot be said to have
been an innocent purchaser for value. He took the risk and must stand by the consequences; and it is in this sense that we find that he was not a
purchaser in good faith.
One who purchases real estate with knowledge of a defect or lack of title in his vendor cannot claim that he has acquired title thereto in good faith as
against the true owner of the land or of an interest therein; and the same rule must be applied to one who has knowledge of facts which should have
put him upon such inquiry and investigation as might be necessary to acquaint him with the defects in the title of his vendor. A purchaser cannot close
his eyes to facts which should put a reasonable man upon his guard, and then claim that he acted in good faith under the belief that there was no
defect in the title of the vendor. His mere refusal to believe that such defect exists, or his willful closing of his eyes to the possibility of the existence
of a defect in his vendor's title, will not make him an innocent purchaser for value, if afterwards develops that the title was in fact defective, and it
appears that he had such notice of the defects as would have led to its discovery had he acted with that measure of precaution which may reasonably
be acquired of a prudent man in a like situation. Good faith, or lack of it, is in its analysis a question of intention; but in ascertaining the intention by
which one is actuated on a given occasion, we are necessarily controlled by the evidence as to the conduct and outward acts by which alone the
inward motive may, with safety, be determined. So it is that "the honesty of intention," "the honest lawful intent," which constitutes good faith
implies a "freedom from knowledge and circumstances which ought to put a person on inquiry," and so it is that proof of such knowledge overcomes
the presumption of good faith in which the courts always indulge in the absence of proof to the contrary. "Good faith, or the want of it, is not a
visible, tangible fact that can be seen or touched, but rather a state or condition of mind which can only be judged of by actual or fancied tokens or
signs." (Wilder vs. Gilman, 55 Vt., 504, 505; Cf. Cardenas Lumber Co. vs. Shadel, 52 La. Ann., 2094-2098; Pinkerton Bros. Co. vs. Bromley, 119
Mich., 8, 10, 17.)
We conclude that upon the grounds herein set forth the disposing part of the decision and judgment entered in the court below should be affirmed
with costs of this instance against the appellant. So ordered.
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.

28
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, (Ts-308, 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. 41-53), 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. 101112).

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. P-2554 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.

29
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.

G.R. No. 120098

October 2, 2001

RUBY L. TSAI, petitioner,

vs.
HON. COURT OF APPEALS, EVER TEXTILE MILLS, INC. and MAMERTO R VILLALUZ, respondents.
x---------------------------------------------------------x
[G.R. No. 120109. October 2, 2001.]
PHILIPPINE BANK OF COMMUNICATIONS, petitioner,
vs.
HON. COURT OF APPEALS, EVER TEXTILE MILLS and MAMERTO R VILLALUZ, respondents.
QUISUMBING, J.:
These consolidated cases assail the decision1 of the Court of Appeals in CA-G.R. CV No. 32986, affirming the decision 2 of the Regional Trial Court
of Manila, Branch 7, in Civil Case No. 89-48265. Also assailed is respondent court's resolution denying petitioners' motion for reconsideration.
On November 26, 1975, respondent Ever Textile Mills, Inc. (EVERTEX) obtained a three million peso (P3,000,000.00) loan from petitioner
Philippine Bank of Communications (PBCom). As security for the loan, EVERTEX executed in favor of PBCom, a deed of Real and Chattel
Mortgage over the lot under TCT No. 372097, where its factory stands, and the chattels located therein as enumerated in a schedule attached to the
mortgage contract. The pertinent portions of the Real and Chattel Mortgage are quoted below:
MORTGAGE
(REAL AND CHATTEL)
xxx

xxx

xxx

The MORTGAGOR(S) hereby transfer(s) and convey(s), by way of First Mortgage, to the MORTGAGEE, . . . certain parcel(s) of land,
together with all the buildings and improvements now existing or which may hereafter exist thereon, situated in . . .
"Annex A"
(Real and Chattel Mortgage executed by Ever Textile Mills in favor of PBCommunications continued)
LIST OF MACHINERIES & EQUIPMENT
A. Forty Eight (48) units of Vayrow Knitting Machines-Tompkins made in Hongkong:
Serial Numbers Size of Machines
xxx

xxx

xxx

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

xxx

xxx

xxx

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

xxx

xxx

xxx

D. Four (4) Winding Machines.

xxx

xxx

xxx
SCHEDULE "A"

I. TCT # 372097 - RIZAL

xxx

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II. Any and all buildings and improvements now existing or hereafter to exist on the above-mentioned lot.
III. MACHINERIES & EQUIPMENT situated, located and/or installed on the above-mentioned lot located at . . .
(a) Forty eight sets (48) Vayrow Knitting Machines . . .
(b) Sixteen sets (16) Vayrow Knitting Machines . . .

30
(c) Two (2) Circular Knitting Machines . . .
(d) Two (2) Winding Machines . . .
(e) Two (2) Winding Machines . . .
IV. Any and all replacements, substitutions, additions, increases and accretions to above properties.
xxx

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xxx3

On April 23, 1979, PBCom granted a second loan of P3,356,000.00 to EVERTEX. The loan was secured by a Chattel Mortgage over personal
properties enumerated in a list attached thereto. These listed properties were similar to those listed in Annex A of the first mortgage deed.
After April 23, 1979, the date of the execution of the second mortgage mentioned above, EVERTEX purchased various machines and equipments.
On November 19, 1982, due to business reverses, EVERTEX filed insolvency proceedings docketed as SP Proc. No. LP-3091-P before the defunct
Court of First Instance of Pasay City, Branch XXVIII. The CFI issued an order on November 24, 1982 declaring the corporation insolvent. All its
assets were taken into the custody of the Insolvency Court, including the collateral, real and personal, securing the two mortgages as
abovementioned.
In the meantime, upon EVERTEX's failure to meet its obligation to PBCom, the latter commenced extrajudicial foreclosure proceedings against
EVERTEX under Act 3135, otherwise known as "An Act to Regulate the Sale of Property under Special Powers Inserted in or Annexed to Real
Estate Mortgages" and Act 1506 or "The Chattel Mortgage Law". A Notice of Sheriff's Sale was issued on December 1, 1982.
On December 15, 1982, the first public auction was held where petitioner PBCom emerged as the highest bidder and a Certificate of Sale was issued
in its favor on the same date. On December 23, 1982, another public auction was held and again, PBCom was the highest bidder. The sheriff issued a
Certificate of Sale on the same day.
On March 7, 1984, PBCom consolidated its ownership over the lot and all the properties in it. In November 1986, it leased the entire factory premises
to petitioner Ruby L. Tsai for P50,000.00 a month. On May 3, 1988, PBCom sold the factory, lock, stock and barrel to Tsai for P9,000,000.00,
including the contested machineries.
On March 16, 1989, EVERTEX filed a complaint for annulment of sale, reconveyance, and damages with the Regional Trial Court against PBCom,
alleging inter alia that the extrajudicial foreclosure of subject mortgage was in violation of the Insolvency Law. EVERTEX claimed that no rights
having been transmitted to PBCom over the assets of insolvent EVERTEX, therefore Tsai acquired no rights over such assets sold to her, and should
reconvey the assets.
Further, EVERTEX averred that PBCom, without any legal or factual basis, appropriated the contested properties, which were not included in the
Real and Chattel Mortgage of November 26, 1975 nor in the Chattel Mortgage of April 23, 1979, and neither were those properties included in the
Notice of Sheriff's Sale dated December 1, 1982 and Certificate of Sale . . . dated December 15, 1982.
The disputed properties, which were valued at P4,000,000.00, are: 14 Interlock Circular Knitting Machines, 1 Jet Drying Equipment, 1 Dryer
Equipment, 1 Raisin Equipment and 1 Heatset Equipment.
The RTC found that the lease and sale of said personal properties were irregular and illegal because they were not duly foreclosed nor sold at the
December 15, 1982 auction sale since these were not included in the schedules attached to the mortgage contracts. The trial court decreed:
WHEREFORE, judgment is hereby rendered in favor of plaintiff corporation and against the defendants:
1. Ordering the annulment of the sale executed by defendant Philippine Bank of Communications in favor of defendant Ruby L. Tsai on
May 3, 1988 insofar as it affects the personal properties listed in par. 9 of the complaint, and their return to the plaintiff corporation through
its assignee, plaintiff Mamerto R. Villaluz, for disposition by the Insolvency Court, to be done within ten (10) days from finality of this
decision;
2. Ordering the defendants to pay jointly and severally the plaintiff corporation the sum of P5,200,000.00 as compensation for the use and
possession of the properties in question from November 1986 to February 1991 and P100,000.00 every month thereafter, with interest
thereon at the legal rate per annum until full payment;
3. Ordering the defendants to pay jointly and severally the plaintiff corporation the sum of P50,000.00 as and for attorney's fees and
expenses of litigation;
4. Ordering the defendants to pay jointly and severally the plaintiff corporation the sum of P200,000.00 by way of exemplary damages;
5. Ordering the dismissal of the counterclaim of the defendants; and
6. Ordering the defendants to proportionately pay the costs of suit.
SO ORDERED.4
Dissatisfied, both PBCom and Tsai appealed to the Court of Appeals, which issued its decision dated August 31, 1994, the dispositive portion of
which reads:
WHEREFORE, except for the deletion therefrom of the award; for exemplary damages, and reduction of the actual damages, from P100,000.00 to
P20,000.00 per month, from November 1986 until subject personal properties are restored to appellees, the judgment appealed from is hereby
AFFIRMED, in all other respects. No pronouncement as to costs. 5

31
Motion for reconsideration of the above decision having been denied in the resolution of April 28, 1995, PBCom and Tsai filed their separate
petitions for review with this Court.
In G.R No. 120098, petitioner Tsai ascribed the following errors to the respondent court:
I
THE HONORABLE COURT OF APPEALS (SECOND DIVISION) ERRED IN EFFECT MAKING A CONTRACT FOR THE PARTIES
BY TREATING THE 1981 ACQUIRED MACHINERIES AS CHATTELS INSTEAD OF REAL PROPERTIES WITHIN THEIR
EARLIER 1975 DEED OF REAL AND CHATTEL MORTGAGE OR 1979 DEED OF CHATTEL MORTGAGE.
II
THE HONORABLE COURT OF APPEALS (SECOND DIVISION) ERRED IN HOLDING THAT THE DISPUTED 1981
MACHINERIES ARE NOT REAL PROPERTIES DEEMED PART OF THE MORTGAGE DESPITE THE CLEAR IMPORT OF THE
EVIDENCE AND APPLICABLE RULINGS OF THE SUPREME COURT.
III
THE HONORABLE COURT OF APPEALS (SECOND DIVISION) ERRED IN DEEMING PETITIONER A PURCHASER IN BAD
FAITH.
IV
THE HONORABLE COURT OF APPEALS (SECOND DIVISION) ERRED IN ASSESSING PETITIONER ACTUAL DAMAGES,
ATTORNEY'S FEES AND EXPENSES OF LITIGATION FOR WANT OF VALID FACTUAL AND LEGAL BASIS.
V
THE HONORABLE COURT OF APPEALS (SECOND DIVISION) ERRED IN HOLDING AGAINST PETITIONER'S ARGUMENTS
ON PRESCRIPTION AND LACHES.6
In G.R. No. 120098, PBCom raised the following issues:
I.
DID THE COURT OF APPEALS VALIDLY DECREE THE MACHINERIES LISTED UNDER PARAGRAPH 9 OF THE COMPLAINT BELOW
AS PERSONAL PROPERTY OUTSIDE OF THE 1975 DEED OF REAL ESTATE MORTGAGE AND EXCLUDED THEM FROM THE REAL
PROPERTY EXTRAJUDICIALLY FORECLOSED BY PBCOM DESPITE THE PROVISION IN THE 1975 DEED THAT ALL AFTERACQUIRED PROPERTIES DURING THE LIFETIME OF THE MORTGAGE SHALL FORM PART THEREOF, AND DESPITE THE
UNDISPUTED FACT THAT SAID MACHINERIES ARE BIG AND HEAVY, BOLTED OR CEMENTED ON THE REAL PROPERTY
MORTGAGED BY EVER TEXTILE MILLS TO PBCOM, AND WERE ASSESSED FOR REAL ESTATE TAX PURPOSES?
II
CAN PBCOM, WHO TOOK POSSESSION OF THE MACHINERIES IN QUESTION IN GOOD FAITH, EXTENDED CREDIT FACILITIES TO
EVER TEXTILE MILLS WHICH AS OF 1982 TOTALLED P9,547,095.28, WHO HAD SPENT FOR MAINTENANCE AND SECURITY ON
THE DISPUTED MACHINERIES AND HAD TO PAY ALL THE BACK TAXES OF EVER TEXTILE MILLS BE LEGALLY COMPELLED TO
RETURN TO EVER THE SAID MACHINERIES OR IN LIEU THEREOF BE ASSESSED DAMAGES. IS THAT SITUATION TANTAMOUNT
TO A CASE OF UNJUST ENRICHMENT?7
The principal issue, in our view, is whether or not the inclusion of the questioned properties in the foreclosed properties is proper. The secondary
issue is whether or not the sale of these properties to petitioner Ruby Tsai is valid.
For her part, Tsai avers that the Court of Appeals in effect made a contract for the parties by treating the 1981 acquired units of machinery as chattels
instead of real properties within their earlier 1975 deed of Real and Chattel Mortgage or 1979 deed of Chattel Mortgage. 8 Additionally, Tsai argues
that respondent court erred in holding that the disputed 1981 machineries are not real properties. 9 Finally, she contends that the Court of Appeals
erred in holding against petitioner's arguments on prescription and laches 10 and in assessing petitioner actual damages, attorney's fees and expenses of
litigation, for want of valid factual and legal basis. 11
Essentially, PBCom contends that respondent court erred in affirming the lower court's judgment decreeing that the pieces of machinery in dispute
were not duly foreclosed and could not be legally leased nor sold to Ruby Tsai. It further argued that the Court of Appeals' pronouncement that the
pieces of machinery in question were personal properties have no factual and legal basis. Finally, it asserts that the Court of Appeals erred in
assessing damages and attorney's fees against PBCom.
In opposition, private respondents argue that the controverted units of machinery are not "real properties" but chattels, and, therefore, they were not
part of the foreclosed real properties, rendering the lease and the subsequent sale thereof to Tsai a nullity. 12
Considering the assigned errors and the arguments of the parties, we find the petitions devoid of merit and ought to be denied.
Well settled is the rule that the jurisdiction of the Supreme Court in a petition for review on certiorari under Rule 45 of the Revised Rules of Court is
limited to reviewing only errors of law, not of fact, unless the factual findings complained of are devoid of support by the evidence on record or the
assailed judgment is based on misapprehension of facts. 13 This rule is applied more stringently when the findings of fact of the RTC is affirmed by the
Court of Appeals.14
The following are the facts as found by the RTC and affirmed by the Court of Appeals that are decisive of the issues: (1) the "controverted
machineries" are not covered by, or included in, either of the two mortgages, the Real Estate and Chattel Mortgage, and the pure Chattel Mortgage;

32
(2) the said machineries were not included in the list of properties appended to the Notice of Sale, and neither were they included in the Sheriff's
Notice of Sale of the foreclosed properties.15
Petitioners contend that the nature of the disputed machineries, i.e., that they were heavy, bolted or cemented on the real property mortgaged by
EVERTEX to PBCom, make them ipso facto immovable under Article 415 (3) and (5) of the New Civil Code. This assertion, however, does not
settle the issue. Mere nuts and bolts do not foreclose the controversy. We have to look at the parties' intent.
While it is true that the controverted properties appear to be immobile, a perusal of the contract of Real and Chattel Mortgage executed by the parties
herein gives us a contrary indication. In the case at bar, both the trial and the appellate courts reached the same finding that the true intention of
PBCOM and the owner, EVERTEX, is to treat machinery and equipment as chattels. The pertinent portion of respondent appellate court's ruling is
quoted below:
As stressed upon by appellees, appellant bank treated the machineries as chattels; never as real properties. Indeed, the 1975 mortgage
contract, which was actually real and chattel mortgage, militates against appellants' posture. It should be noted that the printed form used
by appellant bank was mainly for real estate mortgages. But reflective of the true intention of appellant PBCOM and appellee EVERTEX
was the typing in capital letters, immediately following the printed caption of mortgage, of the phrase "real and chattel." So also, the
"machineries and equipment" in the printed form of the bank had to be inserted in the blank space of the printed contract and connected
with the word "building" by typewritten slash marks. Now, then, if the machineries in question were contemplated to be included in the real
estate mortgage, there would have been no necessity to ink a chattel mortgage specifically mentioning as part III of Schedule A a listing of
the machineries covered thereby. It would have sufficed to list them as immovables in the Deed of Real Estate Mortgage of the land and
building involved.
As regards the 1979 contract, the intention of the parties is clear and beyond question. It refers solely to chattels. The inventory list of the
mortgaged properties is an itemization of sixty-three (63) individually described machineries while the schedule listed only machines and
2,996,880.50 worth of finished cotton fabrics and natural cotton fabrics. 16
In the absence of any showing that this conclusion is baseless, erroneous or uncorroborated by the evidence on record, we find no compelling reason
to depart therefrom.
Too, assuming arguendo that the properties in question are immovable by nature, nothing detracts the parties from treating it as chattels to secure an
obligation under the principle of estoppel. As far back as Navarro v. Pineda, 9 SCRA 631 (1963), an immovable may be considered a personal
property if there is a stipulation as when it is used as security in the payment of an obligation where a chattel mortgage is executed over it, as in the
case at bar.
In the instant case, the parties herein: (1) executed a contract styled as "Real Estate Mortgage and Chattel Mortgage," instead of just "Real Estate
Mortgage" if indeed their intention is to treat all properties included therein as immovable, and (2) attached to the said contract a separate "LIST OF
MACHINERIES & EQUIPMENT". These facts, taken together, evince the conclusion that the parties' intention is to treat these units of machinery as
chattels. A fortiori, the contested after-acquired properties, which are of the same description as the units enumerated under the title "LIST OF
MACHINERIES & EQUIPMENT," must also be treated as chattels.
Accordingly, we find no reversible error in the respondent appellate court's ruling that inasmuch as the subject mortgages were intended by the
parties to involve chattels, insofar as equipment and machinery were concerned, the Chattel Mortgage Law applies, which provides in Section 7
thereof that: "a chattel mortgage shall be deemed to cover only the property described therein and not like or substituted property thereafter acquired
by the mortgagor and placed in the same depository as the property originally mortgaged, anything in the mortgage to the contrary notwithstanding."
And, since the disputed machineries were acquired in 1981 and could not have been involved in the 1975 or 1979 chattel mortgages, it was
consequently an error on the part of the Sheriff to include subject machineries with the properties enumerated in said chattel mortgages.
As the auction sale of the subject properties to PBCom is void, no valid title passed in its favor. Consequently, the sale thereof to Tsai is also a nullity
under the elementary principle of nemo dat quod non habet, one cannot give what one does not have. 17
Petitioner Tsai also argued that assuming that PBCom's title over the contested properties is a nullity, she is nevertheless a purchaser in good faith and
for value who now has a better right than EVERTEX.
To the contrary, however, are the factual findings and conclusions of the trial court that she is not a purchaser in good faith. Well-settled is the rule
that the person who asserts the status of a purchaser in good faith and for value has the burden of proving such assertion. 18 Petitioner Tsai failed to
discharge this burden persuasively.
Moreover, a purchaser in good faith and for value is one who buys the property of another without notice that some other person has a right to or
interest in such property and pays a full and fair price for the same, at the time of purchase, or before he has notice of the claims or interest of some
other person in the property.19 Records reveal, however, that when Tsai purchased the controverted properties, she knew of respondent's claim
thereon. As borne out by the records, she received the letter of respondent's counsel, apprising her of respondent's claim, dated February 27, 1987. 20
She replied thereto on March 9, 1987.21 Despite her knowledge of respondent's claim, she proceeded to buy the contested units of machinery on May
3, 1988. Thus, the RTC did not err in finding that she was not a purchaser in good faith.
Petitioner Tsai's defense of indefeasibility of Torrens Title of the lot where the disputed properties are located is equally unavailing. This defense
refers to sale of lands and not to sale of properties situated therein. Likewise, the mere fact that the lot where the factory and the disputed properties
stand is in PBCom's name does not automatically make PBCom the owner of everything found therein, especially in view of EVERTEX's letter to
Tsai enunciating its claim.
Finally, petitioners' defense of prescription and laches is less than convincing. We find no cogent reason to disturb the consistent findings of both
courts below that the case for the reconveyance of the disputed properties was filed within the reglementary period. Here, in our view, the doctrine of
laches does not apply. Note that upon petitioners' adamant refusal to heed EVERTEX's claim, respondent company immediately filed an action to
recover possession and ownership of the disputed properties. There is no evidence showing any failure or neglect on its part, for an unreasonable and
unexplained length of time, to do that which, by exercising due diligence, could or should have been done earlier. The doctrine of stale demands
would apply only where by reason of the lapse of time, it would be inequitable to allow a party to enforce his legal rights. Moreover, except for very
strong reasons, this Court is not disposed to apply the doctrine of laches to prejudice or defeat the rights of an owner. 22

33
As to the award of damages, the contested damages are the actual compensation, representing rentals for the contested units of machinery, the
exemplary damages, and attorney's fees.
As regards said actual compensation, the RTC awarded P100,000.00 corresponding to the unpaid rentals of the contested properties based on the
testimony of John Chua, who testified that the P100,000.00 was based on the accepted practice in banking and finance, business and investments that
the rental price must take into account the cost of money used to buy them. The Court of Appeals did not give full credence to Chua's projection and
reduced the award to P20,000.00.
Basic is the rule that to recover actual damages, the amount of loss must not only be capable of proof but must actually be proven with reasonable
degree of certainty, premised upon competent proof or best evidence obtainable of the actual amount thereof. 23 However, the allegations of
respondent company as to the amount of unrealized rentals due them as actual damages remain mere assertions unsupported by documents and other
competent evidence. In determining actual damages, the court cannot rely on mere assertions, speculations, conjectures or guesswork but must
depend on competent proof and on the best evidence obtainable regarding the actual amount of loss. 24 However, we are not prepared to disregard the
following dispositions of the respondent appellate court:
. . . In the award of actual damages under scrutiny, there is nothing on record warranting the said award of P5,200,000.00, representing
monthly rental income of P100,000.00 from November 1986 to February 1991, and the additional award of P100,000.00 per month
thereafter.
As pointed out by appellants, the testimonial evidence, consisting of the testimonies of Jonh (sic) Chua and Mamerto Villaluz, is shy of
what is necessary to substantiate the actual damages allegedly sustained by appellees, by way of unrealized rental income of subject
machineries and equipments.
The testimony of John Cua (sic) is nothing but an opinion or projection based on what is claimed to be a practice in business and industry.
But such a testimony cannot serve as the sole basis for assessing the actual damages complained of. What is more, there is no showing that
had appellant Tsai not taken possession of the machineries and equipments in question, somebody was willing and ready to rent the same
for P100,000.00 a month.
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Then, too, even assuming arguendo that the said machineries and equipments could have generated a rental income of P30,000.00 a month,
as projected by witness Mamerto Villaluz, the same would have been a gross income. Therefrom should be deducted or removed, expenses
for maintenance and repairs . . . Therefore, in the determination of the actual damages or unrealized rental income sued upon, there is a
good basis to calculate that at least four months in a year, the machineries in dispute would have been idle due to absence of a lessee or
while being repaired. In the light of the foregoing rationalization and computation, We believe that a net unrealized rental income of
P20,000.00 a month, since November 1986, is more realistic and fair.25
As to exemplary damages, the RTC awarded P200,000.00 to EVERTEX which the Court of Appeals deleted. But according to the CA, there was no
clear showing that petitioners acted malevolently, wantonly and oppressively. The evidence, however, shows otherwise.It is a requisite to award
exemplary damages that the wrongful act must be accompanied by bad faith, 26 and the guilty acted in a wanton, fraudulent, oppressive, reckless or
malevolent manner.27 As previously stressed, petitioner Tsai's act of purchasing the controverted properties despite her knowledge of EVERTEX's
claim was oppressive and subjected the already insolvent respondent to gross disadvantage. Petitioner PBCom also received the same letters of Atty.
Villaluz, responding thereto on March 24, 1987.28 Thus, PBCom's act of taking all the properties found in the factory of the financially handicapped
respondent, including those properties not covered by or included in the mortgages, is equally oppressive and tainted with bad faith. Thus, we are in
agreement with the RTC that an award of exemplary damages is proper.
The amount of P200,000.00 for exemplary damages is, however, excessive. Article 2216 of the Civil Code provides that no proof of pecuniary loss is
necessary for the adjudication of exemplary damages, their assessment being left to the discretion of the court in accordance with the circumstances
of each case.29 While the imposition of exemplary damages is justified in this case, equity calls for its reduction. In Inhelder Corporation v. Court of
Appeals, G.R. No. L-52358, 122 SCRA 576, 585, (May 30, 1983), we laid down the rule that judicial discretion granted to the courts in the
assessment of damages must always be exercised with balanced restraint and measured objectivity. Thus, here the award of exemplary damages by
way of example for the public good should be reduced to P100,000.00.
By the same token, attorney's fees and other expenses of litigation may be recovered when exemplary damages are awarded. 30 In our view, RTC's
award of P50,000.00 as attorney's fees and expenses of litigation is reasonable, given the circumstances in these cases.
WHEREFORE, the petitions are DENIED. The assailed decision and resolution of the Court of Appeals in CA-G.R. CV No. 32986 are AFFIRMED
WITH MODIFICATIONS. Petitioners Philippine Bank of Communications and Ruby L. Tsai are hereby ordered to pay jointly and severally Ever
Textile Mills, Inc. the following: (1) P20,000.00 per month, as compensation for the use and possession of the properties in question from November
198631 until subject personal properties are restored to respondent corporation; (2) P100,000.00 by way of exemplary damages, and (3) P50,000.00 as
attorney's fees and litigation expenses. Costs against petitioners.
SO ORDERED.
G.R. No. L-40411

August 7, 1935

DAVAO SAW MILL CO., INC., plaintiff-appellant,

vs.
APRONIANO G. CASTILLO and DAVAO LIGHT & POWER CO., INC., defendants-appellees.
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.

34
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;
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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 York vs. 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.
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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

35
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.
G.R. No. L-15334

January 31, 1964

BOARD OF ASSESSMENT APPEALS, CITY ASSESSOR and CITY TREASURER OF QUEZON CITY, petitioners,
vs.
MANILA ELECTRIC COMPANY, respondent.
Assistant City Attorney Jaime R. Agloro for petitioners.
Ross, Selph and Carrascoso for respondent.
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

36
"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.

37
G.R. No. L-50466 May 31, 1982
CALTEX (PHILIPPINES) INC., petitioner,
vs.
CENTRAL BOARD OF ASSESSMENT APPEALS and CITY ASSESSOR OF PASAY, respondents.

AQUINO, J.:
This case is about the realty tax on machinery and equipment installed by Caltex (Philippines) Inc. in its gas stations located on leased
land.
The machines and equipment consists of underground tanks, elevated tank, elevated water tanks, water tanks, gasoline pumps,
computing pumps, water pumps, car washer, car hoists, truck hoists, air compressors and tireflators. The city assessor described the
said equipment and machinery in this manner:
A gasoline service station is a piece of lot where a building or shed is erected, a water tank if there is any is placed in
one corner of the lot, car hoists are placed in an adjacent shed, an air compressor is attached in the wall of the shed
or at the concrete wall fence.
The controversial underground tank, depository of gasoline or crude oil, is dug deep about six feet more or less, a few
meters away from the shed. This is done to prevent conflagration because gasoline and other combustible oil are
very inflammable.
This underground tank is connected with a steel pipe to the gasoline pump and the gasoline pump is commonly
placed or constructed under the shed. The footing of the pump is a cement pad and this cement pad is imbedded in
the pavement under the shed, and evidence that the gasoline underground tank is attached and connected to the
shed or building through the pipe to the pump and the pump is attached and affixed to the cement pad and pavement
covered by the roof of the building or shed.
The building or shed, the elevated water tank, the car hoist under a separate shed, the air compressor, the
underground gasoline tank, neon lights signboard, concrete fence and pavement and the lot where they are all
placed or erected, all of them used in the pursuance of the gasoline service station business formed the entire
gasoline service-station.
As to whether the subject properties are attached and affixed to the tenement, it is clear they are, for the tenement we
consider in this particular case are (is) the pavement covering the entire lot which was constructed by the owner of
the gasoline station and the improvement which holds all the properties under question, they are attached and affixed
to the pavement and to the improvement.
The pavement covering the entire lot of the gasoline service station, as well as all the improvements, machines,
equipments and apparatus are allowed by Caltex (Philippines) Inc. ...
The underground gasoline tank is attached to the shed by the steel pipe to the pump, so with the water tank it is
connected also by a steel pipe to the pavement, then to the electric motor which electric motor is placed under the
shed. So to say that the gasoline pumps, water pumps and underground tanks are outside of the service station, and
to consider only the building as the service station is grossly erroneous. (pp. 58-60, Rollo).
The said machines and equipment are loaned by Caltex to gas station operators under an appropriate lease agreement or receipt. It is
stipulated in the lease contract that the operators, upon demand, shall return to Caltex the machines and equipment in good condition
as when received, ordinary wear and tear excepted.
The lessor of the land, where the gas station is located, does not become the owner of the machines and equipment installed therein.
Caltex retains the ownership thereof during the term of the lease.
The city assessor of Pasay City characterized the said items of gas station equipment and machinery as taxable realty. The realty tax
on said equipment amounts to P4,541.10 annually (p. 52, Rollo). The city board of tax appeals ruled that they are personalty. The
assessor appealed to the Central Board of Assessment Appeals.
The Board, which was composed of Secretary of Finance Cesar Virata as chairman, Acting Secretary of Justice Catalino Macaraig, Jr.
and Secretary of Local Government and Community Development Jose Roo, held in its decision of June 3, 1977 that the said
machines and equipment are real property within the meaning of sections 3(k) & (m) and 38 of the Real Property Tax Code, Presidential
Decree No. 464, which took effect on June 1, 1974, and that the definitions of real property and personal property in articles 415 and
416 of the Civil Code are not applicable to this case.
The decision was reiterated by the Board (Minister Vicente Abad Santos took Macaraig's place) in its resolution of January 12, 1978,
denying Caltex's motion for reconsideration, a copy of which was received by its lawyer on April 2, 1979.
On May 2, 1979 Caltex filed this certiorari petition wherein it prayed for the setting aside of the Board's decision and for a declaration
that t he said machines and equipment are personal property not subject to realty tax (p. 16, Rollo).
The Solicitor General's contention that the Court of Tax Appeals has exclusive appellate jurisdiction over this case is not correct. When
Republic act No. 1125 created the Tax Court in 1954, there was as yet no Central Board of Assessment Appeals. Section 7(3) of that
law in providing that the Tax Court had jurisdiction to review by appeal decisions of provincial or city boards of assessment appeals had
in mind the local boards of assessment appeals but not the Central Board of Assessment Appeals which under the Real Property Tax
Code has appellate jurisdiction over decisions of the said local boards of assessment appeals and is, therefore, in the same category
as the Tax Court.

38
Section 36 of the Real Property Tax Code provides that the decision of the Central Board of Assessment Appeals shall become final
and executory after the lapse of fifteen days from the receipt of its decision by the appellant. Within that fifteen-day period, a petition for
reconsideration may be filed. The Code does not provide for the review of the Board's decision by this Court.
Consequently, the only remedy available for seeking a review by this Court of the decision of the Central Board of Assessment Appeals
is the special civil action of certiorari, the recourse resorted to herein by Caltex (Philippines), Inc.
The issue is whether the pieces of gas station equipment and machinery already enumerated are subject to realty tax. This issue has to
be resolved primarily under the provisions of the Assessment Law and the Real Property Tax Code.
Section 2 of the Assessment Law provides that the realty tax is due "on real property, including land, buildings, machinery, and other
improvements" not specifically exempted in section 3 thereof. This provision is reproduced with some modification in the Real Property
Tax Code which provides:
SEC. 38. Incidence of Real Property Tax. There shall be levied, assessed and collected in all provinces, cities and
municipalities an annual ad valorem tax on real property, such as land, buildings, machinery and other improvements
affixed or attached to real property not hereinafter specifically exempted.
The Code contains the following definitions in its section 3:
k) Improvements is a valuable addition made to property or an amelioration in its condition, amounting to more
than mere repairs or replacement of waste, costing labor or capital and intended to enhance its value, beauty or utility
or to adapt it for new or further purposes.
m) Machinery shall embrace machines, mechanical contrivances, instruments, appliances and apparatus attached
to the real estate. It includes the physical facilities available for production, as well as the installations and
appurtenant service facilities, together with all other equipment designed for or essential to its manufacturing,
industrial or agricultural purposes (See sec. 3[f], Assessment Law).
We hold that the said equipment and machinery, as appurtenances to the gas station building or shed owned by Caltex (as to which it is
subject to realty tax) and which fixtures are necessary to the operation of the gas station, for without them the gas station would be
useless, and which have been attached or affixed permanently to the gas station site or embedded therein, are taxable improvements
and machinery within the meaning of the Assessment Law and the Real Property Tax Code.
Caltex invokes the rule 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 (Davao Saw Mill Co. vs. Castillo, 61 Phil 709).
That ruling is an interpretation of paragraph 5 of article 415 of the Civil Code regarding machinery that becomes real property by
destination. In the Davao Saw Mills case the question was whether the machinery mounted on foundations of cement and installed by
the lessee on leased land should be regarded as real property for purposes of execution of a judgment against the lessee. The sheriff
treated the machinery as personal property. This Court sustained the sheriff's action. (Compare with Machinery & Engineering Supplies,
Inc. vs. Court of Appeals, 96 Phil. 70, where in a replevin case machinery was treated as realty).
Here, the question is whether the gas station equipment and machinery permanently affixed by Caltex to its gas station and pavement
(which are indubitably taxable realty) should be subject to the realty tax. This question is different from the issue raised in the Davao
Saw Mill case.
Improvements on land are commonly taxed as realty even though for some purposes they might be considered personalty (84 C.J.S.
181-2, Notes 40 and 41). "It is a familiar phenomenon to see things classed as real property for purposes of taxation which on general
principle might be considered personal property" (Standard Oil Co. of New York vs. Jaramillo, 44 Phil. 630, 633).
This case is also easily distinguishable from Board of Assessment Appeals vs. Manila Electric Co., 119 Phil. 328, where Meralco's steel
towers were considered poles within the meaning of paragraph 9 of its franchise which exempts its poles from taxation. The steel
towers were considered personalty because they were attached to square metal frames by means of bolts and could be moved from
place to place when unscrewed and dismantled.
Nor are Caltex's gas station equipment and machinery the same as tools and equipment in the repair shop of a bus company which
were held to be personal property not subject to realty tax (Mindanao Bus Co. vs. City Assessor, 116 Phil. 501).
The Central Board of Assessment Appeals did not commit a grave abuse of discretion in upholding the city assessor's is imposition of
the realty tax on Caltex's gas station and equipment.
WHEREFORE, the questioned decision and resolution of the Central Board of Assessment Appeals are affirmed. The petition for
certiorari is dismissed for lack of merit. No costs.
SO ORDERED.
G.R. No. 137705

August 22, 2000

SERG'S PRODUCTS, INC., and SERGIO T. GOQUIOLAY, petitioners,

vs.
PCI LEASING AND FINANCE, INC., respondent.
DECISION
PANGANIBAN, J.:

39
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 otherwise. Hence, 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 Resolution3 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-9833500 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
Resolution8 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

40
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, 14 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.
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:
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 on in a
building or on a piece of land, and which tend directly to meet the needs of the said industry or works;
xxx

xxx

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 Mills20 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

41
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 Corporation30 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.1wphi1 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 counter-bond. 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.
SO ORDERED.
G.R. No. L-47943 May 31, 1982
MANILA ELECTRIC COMPANY, petitioner,
vs.
CENTRAL BOARD OF ASSESSMENT APPEALS, BOARD OF ASSESSMENT APPEALS OF BATANGAS and PROVINCIAL
ASSESSOR OF BATANGAS, respondents.

AQUINO, J.:
This case is about the imposition of the realty tax on two oil storage tanks installed in 1969 by Manila Electric Company on a lot in San
Pascual, Batangas which it leased in 1968 from Caltex (Phil.), Inc. The tanks are within the Caltex refinery compound. They have a total
capacity of 566,000 barrels. They are used for storing fuel oil for Meralco's power plants.
According to Meralco, the storage tanks are made of steel plates welded and assembled on the spot. Their bottoms rest on a
foundation consisting of compacted earth as the outermost layer, a sand pad as the intermediate layer and a two-inch thick bituminous
asphalt stratum as the top layer. The bottom of each tank is in contact with the asphalt layer,
The steel sides of the tank are directly supported underneath by a circular wall made of concrete, eighteen inches thick, to prevent the
tank from sliding. Hence, according to Meralco, the tank is not attached to its foundation. It is not anchored or welded to the concrete
circular wall. Its bottom plate is not attached to any part of the foundation by bolts, screws or similar devices. The tank merely sits on its
foundation. Each empty tank can be floated by flooding its dike-inclosed location with water four feet deep. (pp. 29-30, Rollo.)

42
On the other hand, according to the hearing commissioners of the Central Board of Assessment Appeals, the area where the two tanks
are located is enclosed with earthen dikes with electric steel poles on top thereof and is divided into two parts as the site of each tank.
The foundation of the tanks is elevated from the remaining area. On both sides of the earthen dikes are two separate concrete steps
leading to the foundation of each tank.
Tank No. 2 is supported by a concrete foundation with an asphalt lining about an inch thick. Pipelines were installed on the sides of
each tank and are connected to the pipelines of the Manila Enterprises Industrial Corporation whose buildings and pumping station are
near Tank No. 2.
The Board concludes that while the tanks rest or sit on their foundation, the foundation itself and the walls, dikes and steps, which are
integral parts of the tanks, are affixed to the land while the pipelines are attached to the tanks. (pp. 60-61, Rollo.) In 1970, the municipal
treasurer of Bauan, Batangas, on the basis of an assessment made by the provincial assessor, required Meralco to pay realty taxes on
the two tanks. For the five-year period from 1970 to 1974, the tax and penalties amounted to P431,703.96 (p. 27, Rollo). The Board
required Meralco to pay the tax and penalties as a condition for entertaining its appeal from the adverse decision of the Batangas board
of assessment appeals.
The Central Board of Assessment Appeals (composed of Acting Secretary of Finance Pedro M. Almanzor as chairman and Secretary of
Justice Vicente Abad Santos and Secretary of Local Government and Community Development Jose Roo as members) in its decision
dated November 5, 1976 ruled that the tanks together with the foundation, walls, dikes, steps, pipelines and other appurtenances
constitute taxable improvements.
Meralco received a copy of that decision on February 28, 1977. On the fifteenth day, it filed a motion for reconsideration which the
Board denied in its resolution of November 25, 1977, a copy of which was received by Meralco on February 28, 1978.
On March 15, 1978, Meralco filed this special civil action of certiorari to annul the Board's decision and resolution. It contends that the
Board acted without jurisdiction and committed a grave error of law in holding that its storage tanks are taxable real property.
Meralco contends that the said oil storage tanks do not fall within any of the kinds of real property enumerated in article 415 of the Civil
Code and, therefore, they cannot be categorized as realty by nature, by incorporation, by destination nor by analogy. Stress is laid on
the fact that the tanks are not attached to the land and that they were placed on leased land, not on the land owned by Meralco.
This is one of those highly controversial, borderline or penumbral cases on the classification of property where strong divergent
opinions are inevitable. The issue raised by Meralco has to be resolved in the light of the provisions of the Assessment Law,
Commonwealth Act No. 470, and the Real Property Tax Code, Presidential Decree No. 464 which took effect on June 1, 1974.
Section 2 of the Assessment Law provides that the realty tax is due "on real property, including land, buildings, machinery, and other
improvements" not specifically exempted in section 3 thereof. This provision is reproduced with some modification in the Real Property
Tax Code which provides:
Sec. 38. Incidence of Real Property Tax. They shall be levied, assessed and collected in all provinces, cities and
municipalities an annual ad valorem tax on real property, such as land, buildings, machinery and other improvements
affixed or attached to real property not hereinafter specifically exempted.
The Code contains the following definition in its section 3:
k) Improvements is a valuable addition made to property or an amelioration in its condition, amounting to more
than mere repairs or replacement of waste, costing labor or capital and intended to enhance its value, beauty or utility
or to adapt it for new or further purposes.
We hold that while the two storage tanks are not embedded in the land, they may, nevertheless, be considered as improvements on the
land, enhancing its utility and rendering it useful to the oil industry. It is undeniable that the two tanks have been installed with some
degree of permanence as receptacles for the considerable quantities of oil needed by Meralco for its operations.
Oil storage tanks were held to be taxable realty in Standard Oil Co. of New Jersey vs. Atlantic City, 15 Atl. 2nd 271.
For purposes of taxation, the term "real property" may include things which should generally be regarded as personal property(84
C.J.S. 171, Note 8). It is a familiar phenomenon to see things classed as real property for purposes of taxation which on general
principle might be considered personal property (Standard Oil Co. of New York vs. Jaramillo, 44 Phil. 630, 633).
The case of Board of Assessment Appeals vs. Manila Electric Company, 119 Phil. 328, wherein Meralco's steel towers were held not to
be subject to realty tax, is not in point because in that case the steel towers were regarded as poles and under its franchise Meralco's
poles are exempt from taxation. Moreover, the steel towers were not attached to any land or building. They were removable from their
metal frames.
Nor is there any parallelism between this case and Mindanao Bus Co. vs. City Assessor, 116 Phil. 501, where the tools and equipment
in the repair, carpentry and blacksmith shops of a transportation company were held not subject to realty tax because they were
personal property.
WHEREFORE, the petition is dismissed. The Board's questioned decision and resolution are affirmed. No costs.
SO ORDERED.
G.R. No. L-30173 September 30, 1971

GAVINO A. TUMALAD and GENEROSA R. TUMALAD, plaintiffs-appellees,

vs.
ALBERTA VICENCIO and EMILIANO SIMEON, defendants-appellants.

Castillo & Suck for plaintiffs-appellees.

Jose Q. Calingo for defendants-appellants.

43

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...

When defendants-appellants defaulted in paying, the mortgage was extrajudicially foreclosed, and on 27 March 1956, the house was sold at public auction pursuant to the
said contract. As highest bidder, plaintiffs-appellees were issued the corresponding certificate of sale. 3 Thereafter, on 18 April 1956, plaintiffs-appellant commenced Civil Case
No. 43073 in the municipal court of Manila, praying, among other things, that the house be vacated and its possession surrendered to them, and for defendants-appellants to
pay rent of P200.00 monthly from 27 March 1956 up to the time the possession is surrendered. 4 On 21 September 1956, the municipal court rendered its decision
... ordering the defendants to vacate the premises described in the complaint; ordering further to pay monthly the amount of P200.00 from March 27,
1956, until such (time that) the premises is (sic) completely vacated; plus attorney's fees of P100.00 and the costs of the suit. 5
Defendants-appellants, in their answers in both the municipal court and court a quo impugned the legality of the chattel mortgage, claiming that they are still the owners of the
house; but they waived the right to introduce evidence, oral or documentary. Instead, they relied on their memoranda in support of their motion to dismiss, predicated mainly
on the grounds that: (a) the municipal court did not have jurisdiction to try and decide the case because (1) the issue involved, is ownership, and (2) there was no allegation of
prior possession; and (b) failure to prove prior demand pursuant to Section 2, Rule 72, of the Rules of Court. 6
During the pendency of the appeal to the Court of First Instance, defendants-appellants failed to deposit the rent for November, 1956 within the first 10 days of December,
1956 as ordered in the decision of the municipal court. As a result, the court granted plaintiffs-appellees' motion for execution, and it was actually issued on 24 January 1957.
However, the judgment regarding the surrender of possession to plaintiffs-appellees could not be executed because the subject house had been already demolished on 14
January 1957 pursuant to the order of the court in a separate civil case (No. 25816) for ejectment against the present defendants for non-payment of rentals on the land on
which the house was constructed.
The motion of plaintiffs for dismissal of the appeal, execution of the supersedeas bond and withdrawal of deposited rentals was denied for the reason that the liability therefor
was disclaimed and was still being litigated, and under Section 8, Rule 72, rentals deposited had to be held until final disposition of the appeal. 7
On 7 October 1957, the appellate court of First Instance rendered its decision, the dispositive portion of which is quoted earlier. The said decision was appealed by defendants
to the Court of Appeals which, in turn, certified the appeal to this Court. Plaintiffs-appellees failed to file a brief and this appeal was submitted for decision without it.
Defendants-appellants submitted numerous assignments of error which can be condensed into two questions, namely: .
(a) Whether the municipal court from which the case originated had jurisdiction to adjudicate the same;
(b) Whether the defendants are, under the law, legally bound to pay rentals to the plaintiffs during the period of one (1) year provided by law for the
redemption of the extrajudicially foreclosed house.
We will consider these questions seriatim.
(a) Defendants-appellants mortgagors question the jurisdiction of the municipal court from which the case originated, and consequently, the appellate jurisdiction of the Court
of First Instance a quo, on the theory that the chattel mortgage is void ab initio; whence it would follow that the extrajudicial foreclosure, and necessarily the consequent
auction sale, are also void. Thus, the ownership of the house still remained with defendants-appellants who are entitled to possession and not plaintiffs-appellees. Therefore, it
is argued by defendants-appellants, the issue of ownership will have to be adjudicated first in order to determine possession. lt is contended further that ownership being in
issue, it is the Court of First Instance which has jurisdiction and not the municipal court.
Defendants-appellants predicate their theory of nullity of the chattel mortgage on two grounds, which are: (a) that, their signatures on the chattel mortgage were obtained
through fraud, deceit, or trickery; and (b) that the subject matter of the mortgage is a house of strong materials, and, being an immovable, it can only be the subject of a real
estate mortgage and not a chattel mortgage.
On the charge of fraud, deceit or trickery, the Court of First Instance found defendants-appellants' contentions as not supported by evidence and accordingly dismissed the
charge, 8 confirming the earlier finding of the municipal court that "the defense of ownership as well as the allegations of fraud and deceit ... are mere allegations." 9
It has been held in Supia and Batiaco vs. Quintero and Ayala 10 that "the answer is a mere statement of the facts which the party filing it expects to prove, but it is not evidence;
11
and further, that when the question to be determined is one of title, the Court is given the authority to proceed with the hearing of the cause until this fact is clearly
established. In the case of Sy vs. Dalman, 12 wherein the defendant was also a successful bidder in an auction sale, it was likewise held by this Court that in detainer cases the
aim of ownership "is a matter of defense and raises an issue of fact which should be determined from the evidence at the trial." What determines jurisdiction are the
allegations or averments in the complaint and the relief asked for. 13
Moreover, even granting that the charge is true, fraud or deceit does not render a contract void ab initio, and can only be a ground for rendering the contract voidable or
annullable pursuant to Article 1390 of the New Civil Code, by a proper action in court. 14 There is nothing on record to show that the mortgage has been annulled. Neither is it
disclosed that steps were taken to nullify the same. Hence, defendants-appellants' claim of ownership on the basis of a voidable contract which has not been voided fails.
It is claimed in the alternative by defendants-appellants that even if there was no fraud, deceit or trickery, the chattel mortgage was still null and void ab initio because only
personal properties can be subject of a chattel mortgage. The rule about the status of buildings as immovable property is stated in Lopez vs. Orosa, Jr. and Plaza Theatre
Inc., 15 cited in Associated Insurance Surety Co., Inc. vs. Iya, et al. 16 to the effect that
... it is obvious that the inclusion of the building, separate and distinct from the land, in the enumeration of what may constitute real properties (art. 415,
New Civil Code) could only mean one thing that a building is by itself an immovable property irrespective of whether or not said structure and the
land on which it is adhered to belong to the same owner.
Certain deviations, however, have been allowed for various reasons. In the case of Manarang and Manarang vs. Ofilada, 17 this Court stated that "it is undeniable that the
parties to a contract may by agreement treat as personal property that which by nature would be real property", citing Standard Oil Company of New York vs. Jaramillo. 18 In
the latter case, the mortgagor conveyed and transferred to the mortgagee by way of mortgage "the following described personal property." 19 The "personal property"
consisted of leasehold rights and a building. Again, in the case of Luna vs. Encarnacion, 20 the subject of the contract designated as Chattel Mortgage was a house of mixed
materials, and this Court hold therein that it was a valid Chattel mortgage because it was so expressly designated and specifically that the property given as security "is a
house of mixed materials, which by its very nature is considered personal property." In the later case of Navarro vs. Pineda, 21 this Court stated that
The view that parties to a deed of chattel mortgage may agree to consider a house as personal property for the purposes of said contract, "is good only
insofar as the contracting parties are concerned. It is based, partly, upon the principle of estoppel" (Evangelista vs. Alto Surety, No. L-11139, 23 April
1958). In a case, a mortgaged house built on a rented land was held to be a personal property, not only because the deed of mortgage considered it as
such, but also because it did not form part of the land (Evangelists vs. Abad, [CA]; 36 O.G. 2913), for it is now settled that an object placed on land by

44
one who had only a temporary right to the same, such as the lessee or usufructuary, does not become immobilized by attachment (Valdez vs. Central
Altagracia, 222 U.S. 58, cited in Davao Sawmill Co., Inc. vs. Castillo, et al., 61 Phil. 709). Hence, if a house belonging to a person stands on a rented
land belonging to another person, it may be mortgaged as a personal property as so stipulated in the document of mortgage. (Evangelista vs. Abad,
Supra.) It should be noted, however that the principle is predicated on statements by the owner declaring his house to be a chattel, a conduct that may
conceivably estop him from subsequently claiming otherwise. (Ladera vs. C.N. Hodges, [CA] 48 O.G. 5374): 22
In the contract now before Us, the house on rented land is not only expressly designated as Chattel Mortgage; it specifically provides that "the mortgagor ... voluntarily
CEDES, SELLS and TRANSFERS by way of Chattel Mortgage 23 the property together with its leasehold rights over the lot on which it is constructed and participation ..." 24
Although there is no specific statement referring to the subject house as personal property, yet by ceding, selling or transferring a property by way of chattel mortgage
defendants-appellants could only have meant to convey the house as chattel, or at least, intended to treat the same as such, so that they should not now be allowed to make
an inconsistent stand by claiming otherwise. Moreover, the subject house stood on a rented lot to which defendats-appellants merely had a temporary right as lessee, and
although this can not in itself alone determine the status of the property, it does so when combined with other factors to sustain the interpretation that the parties, particularly
the mortgagors, intended to treat the house as personalty. Finally unlike in the Iya cases, Lopez vs. Orosa, Jr. and Plaza Theatre, Inc. 25 and Leung Yee vs. F. L. Strong
Machinery and Williamson, 26 wherein third persons assailed the validity of the chattel mortgage, 27 it is the defendants-appellants themselves, as debtors-mortgagors, who are
attacking the validity of the chattel mortgage in this case. The doctrine of estoppel therefore applies to the herein defendants-appellants, having treated the subject house as
personalty.
(b) Turning to the question of possession and rentals of the premises in question. The Court of First Instance noted in its decision that nearly a year after the foreclosure sale
the mortgaged house had been demolished on 14 and 15 January 1957 by virtue of a decision obtained by the lessor of the land on which the house stood. For this reason,
the said court limited itself to sentencing the erstwhile mortgagors to pay plaintiffs a monthly rent of P200.00 from 27 March 1956 (when the chattel mortgage was foreclosed
and the house sold) until 14 January 1957 (when it was torn down by the Sheriff), plus P300.00 attorney's fees.
Appellants mortgagors question this award, claiming that they were entitled to remain in possession without any obligation to pay rent during the one year redemption period
after the foreclosure sale, i.e., until 27 March 1957. On this issue, We must rule for the appellants.
Chattel mortgages are covered and regulated by the Chattel Mortgage Law, Act No. 1508. 28 Section 14 of this Act allows the mortgagee to have the property mortgaged sold
at public auction through a public officer in almost the same manner as that allowed by Act No. 3135, as amended by Act No. 4118, provided that the requirements of the law
relative to notice and registration are complied with. 29 In the instant case, the parties specifically stipulated that "the chattel mortgage will be enforceable in accordance with
the provisions of Special Act No. 3135 ... ." 30 (Emphasis supplied).
Section 6 of the Act referred to 31 provides that the debtor-mortgagor (defendants-appellants herein) may, at any time within one year from and after the date of the auction
sale, redeem the property sold at the extra judicial foreclosure sale. Section 7 of the same Act 32 allows the purchaser of the property to obtain from the court the possession
during the period of redemption: but the same provision expressly requires the filing of a petition with the proper Court of First Instance and the furnishing of a bond. It is only
upon filing of the proper motion and the approval of the corresponding bond that the order for a writ of possession issues as a matter of course. No discretion is left to the
court. 33 In the absence of such a compliance, as in the instant case, the purchaser can not claim possession during the period of redemption as a matter of right. In such a
case, the governing provision is Section 34, Rule 39, of the Revised Rules of Court 34 which also applies to properties purchased in extrajudicial foreclosure proceedings. 35
Construing the said section, this Court stated in the aforestated case of Reyes vs. Hamada.
In other words, before the expiration of the 1-year period within which the judgment-debtor or mortgagor may redeem the property, the purchaser
thereof is not entitled, as a matter of right, to possession of the same. Thus, while it is true that the Rules of Court allow the purchaser to receive the
rentals if the purchased property is occupied by tenants, he is, nevertheless, accountable to the judgment-debtor or mortgagor as the case may be, for
the amount so received and the same will be duly credited against the redemption price when the said debtor or mortgagor effects the redemption.
Differently stated, the rentals receivable from tenants, although they may be collected by the purchaser during the redemption period, do not belong to
the latter but still pertain to the debtor of mortgagor. The rationale for the Rule, it seems, is to secure for the benefit of the debtor or mortgagor, the
payment of the redemption amount and the consequent return to him of his properties sold at public auction. (Emphasis supplied)
The Hamada case reiterates the previous ruling in Chan vs. Espe. 36
Since the defendants-appellants were occupying the house at the time of the auction sale, they are entitled to remain in possession during the period of redemption or within
one year from and after 27 March 1956, the date of the auction sale, and to collect the rents or profits during the said period.
It will be noted further that in the case at bar the period of redemption had not yet expired when action was instituted in the court of origin, and that plaintiffs-appellees did not
choose to take possession under Section 7, Act No. 3135, as amended, which is the law selected by the parties to govern the extrajudicial foreclosure of the chattel mortgage.
Neither was there an allegation to that effect. Since plaintiffs-appellees' right to possess was not yet born at the filing of the complaint, there could be no violation or breach
thereof. Wherefore, the original complaint stated no cause of action and was prematurely filed. For this reason, the same should be ordered dismissed, even if there was no
assignment of error to that effect. The Supreme Court is clothed with ample authority to review palpable errors not assigned as such if it finds that their consideration is
necessary in arriving at a just decision of the cases. 37
It follows that the court below erred in requiring the mortgagors to pay rents for the year following the foreclosure sale, as well as attorney's fees.
FOR THE FOREGOING REASONS, the decision appealed from is reversed and another one entered, dismissing the complaint. With costs against plaintiffs-appellees.