The preliminary injunction issued in case 9562 (by Judge Inserto enjoining Caballero from cutting and milling

the sugar cane) and

the partial writ of execution pending appeal issued in case 8195 (by Judge Veloso ordering the Baez spouses to vacate and
surrender possession of the parcels of land and not to molest or disturb Estrada's, Caballero's lessor, possession thereof) do not
interfere with the other; but as a matter of fact the order of Judge Inserto complements that of Judge Veloso. The latter refers to
the land itself, the ownership of which was the only issue adjudged in the decision pending appeal, while the former refers to the
sugar cane crop standing thereon. Absent any incompatibility between the orders issued by Judges Inserto and Veloso, the
doctrine that no court has the power to interfere by injunction with the judgment or decrees of another court of concurrent or
coordinate jurisdiction, having equal power to grant the relief, does not apply.
2. Landowner does not ipso facto acquire ownership of what has been planted; good faith is issue
True it is that under article 440 of the Civil Code the ownership of property includes the right of accession to everything attached
thereto either naturally or artificially, and that under article 415, trees, plants and growing fruits, while they are attached to the
land, are immovable property; it is equally true that when a person plants in good faith on land belonging to another, the
landowner does not ipso facto acquire ownership of what has been planted; he must first indemnify the planter before he can
appropriate the same. In the present case, the petitioner has alleged good faith in planting the sugar cane, thus giving rise to a
conflict of rights which poses the issue of the protection of the alleged planter in good faith without causing injustice to the
landowner.
3. Gathering crops existing as Estradas right of ownership and possession premature
The Court of Appeals erred in holding that the gathering of the crops existing on the land is part of Estrada's right of ownership
and possession, as this, in effect prematurely held that the petitioner is a planter in bad faith. The issues as to who planted and
whether the planter planted in good faith are the very issues posed in case 9562, which is yet pending.
4. Procedure; Perishability of goods allow the hearing of petition for certiorari even if motion for reconsideration is
pending in the lower court
The Court of Appeals did not err in entertaining the petition for certiorari even if a motion for reconsideration had not yet been
resolved by the Court of First Instance, in view of the urgency of securing a definitive ruling on the sugar cane crop, which is
perishable.
Sibal v. Valdez
[G.R. No. 26278. August 4, 1927.]
Second Division, Johnson (J): 5 concur
Facts: On 11 May 1923, the deputy-sheriff of the Province of Tarlac, by virtue of a writ of execution in civil case 20203 of the
CFI Manila (Macondray & Co., Inc. vs. Leon Sibal), levied an attachment on Leon Sibals 8 parcels of land for the sum of
P4,273.93. 2 months later, or on 30 July 1923, Macondray & Co., Inc., bought said parcels of land, at the auction held by the
sheriff of the Province of Tarlac. Within 1 year from the sale of said parcels of land, or on 24 September 1923, Sibal paid P2,000
to Macondray for the account of the redemption price of said parcels of land, without specifying which said amount was to be
applied. The redemption price of the parcels was reduced to P2,579.97 including interest.
On 29 April 1924, the deputy sheriff of the Province of Tarlac, by virtue of a writ of execution in civil case 1301 of the Province
of Pampanga (Emiliano J. Valdez vs. Leon Sibal 1.), attached the personal property of Sibal located in Tarlac, among which was
included the sugar cane in question in the 7 parcels of land described in the complaint. He also attached Sibals real property in
Tarlac, including rights, interest and participation therein, which consists of 11 parcels of land and a house and camarin situated in
one of said parcels. On 9-10 May 1924, the deputy sheriff sold at public auction said personal properties to Emiliano J. Valdez,
who paid therefor the sum of P1,550, of which P600 was for the sugar cane. On 25 June 1924, 8 of the 11 parcels, including the
camarin and the house were bought by Valdez at the auction held by the sheriff for the sum of P12,200. The 3 remaining parcels
were released from attachment by virtue of claims presented by Cayugan and Tizon. On the same date, Macondray sold and
conveyed to Valdez for P2,579.97 all of its rights and interest in the 8 parcels of land acquired by it in connection with civil case
20203 of the CFI Manila.
On 14 December 1924, action was commenced in the CFI of the Province of Tarlac. The plaintiff alleged that the deputy sheriff
of Tarlac Province attached and sold to Valdez the sugar cane planted by the plaintiff and his tenants on 7 parcels of land, and that
within 1 year from the date of the attachment and sale the plaintiff ordered to redeem said sugar cane and tendered to Valdez the
amount sufficient to cover the price paid by the latter, with taxes and interests, and that Valdez refused to accept the money and
return the sugar cane to the plaintiff. After hearing and on 28 April 1926, the judge (Lukban) rendered judgment in favor of the
defendant holding that the sugar cane in question was personal property and, as such, was not subject to redemption; among
others. Hence, the appeal.
1. Paragraph 2, Article 334 of the Civil Code interpreted by the Tribunal Supremo de Espana as that growing crops may
be considered as personal property
Sugar cane may come under the classification of real property as "ungathered products" in paragraph 2 of article 334 of the Civil
Code, which enumerates as real property as "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.) Thus, under Spanish authorities, pending fruits and ungathered
products may be sold and transferred as personal property. Also, 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 further, 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.
2. Manresa admits growing crops as personal property
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.
3. Paragraph 2, Article 344 of the Civil Code corresponds to Article 465 of the Civil Code of Louisiana
Article 465 of the Civil Code of Louisiana, which corresponds to paragraph 2 of article 334 of the 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."
4. Louisiana jurisprudence: Growing crops mobilization by anticipation
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.
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.; as cited in Lumber Co. vs.
Sheriff and Tax Collector [106 La., 418], c.f. Citizens Bank v. Wiltz [31 La. Ann., 244])
5. Louisiana jurisprudence: Standing crops as immovable or movable based on owned and leased premises; seizure by
creditors
Standing crops are considered as immovable and as part of the land to which they are attached, and the fruits of an immovable
gathered or produced while it is under seizure are considered as making part thereof, and inure 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. (Porche vs. Bodin [28 La. An., 761])
6. Louisiana jurisprudence: Law cannot be interpreted result in absurd consequences
If crop 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.
7. American jurisprudence: growing crops by yearly labor and cultivation personal property
The settled doctrine followed in the State of California and other 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. 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. 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.
8. Valid sale of a thing not yet in existence; thing must be owned by the vendor
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 the 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.) 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].)
9. Source of provisions on execution of judgment in Code of Civil Procedure (Act 190); Growing crops are personal
property
Section 450 and most of the other sections of the Code of Civil Procedure relating to the execution of judgments were taken from
the Code of Civil Procedure of California. Section 450 of the Code of Civil Procedure enumerates the property of a judgment
debtor which may be subjected to execution, and reads as "All goods, chattels, moneys, and other property, both real and
personal, shall be liable to execution." The Supreme Court of California, under section 688 of the Code of Civil Procedure of that
state, to which the Code of Civil Procedure was pattered, has held, without variation, that growing crops were personal property
and subject to execution.
10. Chattel Mortgage Law recognizes growing crops as personal property
Act 1508, the Chattel Mortgage Law, fully recognizes that growing crops are personal property. Section 2 of said Act provides
that "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 that "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." The above provisions of Act 1508 were enacted on the assumption that "growing crops" are personal property.
11. Personal property includes ungathered products; Paragraph 2, Article 334 of the Civil Code modified by Act 190 and
1508
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; or that in the sense
that, for the purposes of attachment and execution, and for the purposes of the Chattel Mortgage Law, "ungathered products" have
the nature of personal property. In other words, the phrase "personal property" should be understood to include "ungathered
products." In the case at bar, the sugar cane in question was personal property and was not subject to redemption.
12. Absence from trial and failure to cross-examine lend weight to the evidence presented by the other party
The absence of the plaintiff from the trial and his failure to cross-examine the defendant have lent considerable weight to the
evidence then presented for the defense. The court has been inclined to to give more weight to the evidence adduced by him than
to the evidence adduced by the plaintiff, with respect to the ownership of parcels of land.
13. Lack of evidence of bad faith in planting palay in questioned parcels entitles plaintiff to of the crop
There being no evidence of bad faith on the plaintiffs part, in planting the palay in the disputed parcels of land and harvested
therefrom 190 cavans, he is therefore entitled to one-half of the crop, or 95 cavans, not 190 cavans as ordered by the lower court.
Berkenkotter v. Cu Unjieng
[G.R. No. 41643. July 31, 1935.]
En Banc, Villa-real (J): 4 concur
Facts: On 26 April 1926, the Mabalacat Sugar Company obtained from Cu Unjieng e Hijos, a loan secured by a first mortgage
constituted on 2 parcels of land "with all its buildings, improvements, sugar-cane mill, steel railway, telephone line, apparatus,
utensils and whatever forms part or is a necessary complement of said sugar-cane mill, steel railway, telephone line, now existing
or that may in the future exist in said lots.
On 5 October 1926, the Mabalacat Sugar Company decided to increase the capacity of its sugar central by buying additional
machinery and equipment, so that instead of milling 150 tons daily, it could produce 250. The estimated cost of said additional
machinery and equipment was P100,000. In order to carry out this plan, B. A. Green, president of said corporation, proposed to
the B. H. Berkenkotter, to advance the necessary amount for the purchase of said machinery and equipment, promising to
reimburse him as soon as he could obtain an additional loan from the mortgagees, Cu Unjieng e Hijos, and that in case B. A.
Green should fail to obtain an additional loan from Cu Unjieng e Hijos, said machinery and equipment would become security
therefor, said B. A. Green binding himself not to mortgage nor encumber them to anybody until Berkenkotter be fully reimbursed
for the corporation's indebtedness to him.. Having agreed to said proposition made in a letter dated 5 October 1926, B. H.
Berkenkotter, on 9 October 1926, delivered the sum of P1,710 to B. A. Green, the total amount supplied by him to B. A. Green
having been P25,750. Furthermore, B. H. Berkenkotter had a credit of P22,000 against said corporation for unpaid salary. With
the loan of P25,750 and said credit of P22,000, the Mabalacat Sugar Co., Inc., purchased the additional machinery and equipment.
On 10 June 1927, B. A. Green applied to Cu Unjieng e Hijos for an additional loan of P75,000 offering as security the additional
machinery and equipment acquired by said B. A. Green and installed in the sugar central after the execution of the original
mortgage deed, on 27 April 1927, together with whatever additional equipment acquired with said loan. B. A. Green failed to
obtain said loan.
The case facts do not provide for the instance when the case was filed with the lower court, and details of such controversy
The CFI Manila dismissed Berkenkotters complaint, with costs. Hence, the appeal.
The Supreme Court affirmed the appealed judgment in all its parts, with costs to the appellant.
1. Mortgage include all natural accessions, improvements, growing fruits and rents not collected
Article 1877 of the Civil Code provides that mortgage includes all natural accessions, improvements, growing fruits, and rents not
collected when the obligation falls due, and the amount of any indemnities paid or due the owner by the insurers of the mortgaged
property or by virtue of the exercise of the power of eminent domain, with the declarations, amplifications, and limitations
established by law, whether the state continues in the possession of the person who mortgaged it or whether it passes into the
hands of a third person.
2. Mortgage includes improvements and fixtures
It is a rule, established by the Civil Code and also by the Mortgage Law, with which the decisions of the courts of the United
States are in accord, that in a mortgage of real estate, the improvements on the same are included; therefore, all objects
permanently attached to a mortgaged building or land, although they may have been placed there after the mortgage was
constituted, are also included. (Arts. 110 and 111 of the Mortgage Law, and 1877 of the Civil Code; decision of U.S. Supreme
Court in the matter of Royal Insurance Co. vs. R. Miller, liquidator, and Amadeo [26 Sup. Ct. Rep., 46; 199 U.S., 353] as cited in
Bischoff vs. Pomar and Compaia General de Tabacos; further cited in Cea vs. Villanueva)
3. Exclusion of machinery from mortgage; necessity of stipulation
In order that it may be understood that the machinery and other objects placed upon and used in connection with a mortgaged
estate are excluded from the mortgage, when it was stated in the mortgage that the improvements, buildings, and machinery that
existed thereon were also comprehended, it is indispensable that the exclusion thereof be stipulated between the contracting
parties (Bischoff vs. Pomar and Compaia General de Tabacos; further cited in Cea vs. Villanueva).
4. Machinery has character of real property
Article 334, 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. The installation of a machinery and
equipment in a mortgaged sugar central, in lieu of another of less capacity, for the purpose of carrying out the industrial functions
of the latter and increasing production, constitutes a permanent improvement on said sugar central and subjects said machinery
and equipment to the mortgage constituted thereon (article 1877, Civil Code).
5. Personal security does not alter permanent character of machinerys incorporation with the central
The fact that the purchaser of the new machinery and equipment has bound himself to the person supplying him the purchase
or an attorney heard the order or judgment being dictated in court cannot be considered as notice of the real judgment. No
judgment can be notified to the parties unless it has previously been rendered. The notice, therefore, that a party has of a judgment
that was being dictated is of no effect because at that time no judgment has as yet been signed by the judge and filed with the
clerk.
5. Rules specific on the service of final orders or judgment
Section 7 of Rule 27 expressly require that final orders or judgments be served personally or by registered mail. In accordance
with this provision, a party is not considered as having been served with the judgment merely because he heard the judge dictating
the said judgment in open court; it is necessary that he be served with a copy of the signed judgment that has been filed with the
clerk in order that he may legally be considered as having been served with the judgment.
6. Issuance of writ of execution null and void
As the signed judgment not having been served upon the petitioner, said judgment could not be effective upon him who had not
received it. It follows as a consequence that the issuance of the writ of execution was null and void, having been issued before
petitioner was served, personally or by registered mail, a copy of the decision.
7. Sawmill machineries and equipment are real properties in accordance with Art. 415 (5)
By reason of installment in a building, the said sawmill machineries and equipments became real estate properties in accordance
with the provision of Art. 415(5) of the Civil Code. It is interpreted similarly to the case of Berkenkotter vs. Cu Unjieng e Hijos,
where the Court held that the installation of the machinery and equipment in the central of the Mabalacat Sugar Company for use
in connection with the industry carried by that company, converted the said machinery and equipment into real estate by reason of
their purpose. In the present case, the installation of the sawmill machineries in the building of the Golden Pacific Sawmill, Inc.,
for use in the sawing of logs carried on in said building, the same became a necessary and permanent part of the building or real
estate on which the same was constructed, converting the said machineries and equipments into real estate within the meaning of
Article 415(5) of the Civil Code of the Philippines.
8. Sale made by sheriff void for lack of publication
Considering that the machineries and equipments in question valued at more than P15,000.00 appear to have been sold without
the necessary advertisement of sale by publication in a newspaper, as required in Section 16 of Rule 39 of the Rules of Court,
which requires publication for properties with value above P400, the sale made by the sheriff must be declared null and void.
Mindanao Bus v. City Assessor
[G.R. No. L-17870. September 29, 1962.]
En Banc, Labrador (J): 7 concur, 3 took no part.
Facts: Mindanao Bus Company is a public utility engaged in transporting passengers and cargoes by motor trucks in Mindanao;
having its main offices in Cagayan de Oro. The company is also owner to the land where it maintains and operates a garafe, a
repair shop, blacksmith and carpentry shops; the machineries are place therein on wooden and cement platforms. The City
Assessor of Cagayan de Oro City assessed at P4,400 said maintenance and repair equipment. The company appealed the
assessment to the 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 the company filed with the Court of Tax Appeals a petition for the review of the assessment. The
Court of Tax Appeal (CTA Case 710) held that the Company was liable to the payment of the realty tax on its maintenance and
repair equipment. Hence, the company filed a petition for review with the Supreme Court.
The Supreme Court set aside the decision subject of the petition for review and the equipment in question declared not subject to
assessment as real estate for the purposes of the real estate tax. Without costs.
1. Machinery made immovable must be essential and principal elements of an industry or works
Paragraph 5 of Article 415 of the New Civil Code (previously Article 344, paragraph 5, of the old Civil Code) which provides
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 are
immovable properties. 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."
2. Machinery essential to industry in Berkenkotter v. Cu Unjieng; Machinery incidental in present case
It cannot be said that the incorporation of the machinery and equipment in the central of the Mabalacat Sugar Company was not
permanent in character because, as essential and principal 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. In contrast, 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.
3. Machinery incidental to industry are not immobilized; examples
Movables which become immobilized by destination because they are essential and principal elements in the industry are
distinguished from 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 equipments. Airline companies use forklifts, jeep-wagons, pressure pumps, IMB 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 incidentals and retain their movable nature.
4. Transportation business not carried on in a building, tenement or specified land; equipment thus are not real estate
Aside from the element of essentiality, Article 415 (5) also requires that the industry or works be carried on in a building or on a
piece of land. In the case of Berkenkotter vs. Cu Unjieng, 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. In contrast, Mindanao Bus Companys transportation 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.
Davao Sawmill v. Castillo
[G.R. No. 40411. August 7, 1935.]
En Banc, Malcolm (J): 4 concur
Facts: The Davao Saw Mill is the holder of a lumber concession from the Government. 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 stipulated that on the expiration of the period agreed upon, or if the Lessee should
leave or abandon the land leased, all the improvements and buildings introduced and erected by the Lessee shall pass to the
exclusive ownership of the Lessor without any obligation on its part to pay any amount for said improvements and buildings;
which do not include the machineries and accessories in the improvements.
In another action (Davao Light & Power vs. Davao Saw Mill), a judgment was rendered in favor of Davao Light & Power; a writ
of execution issued thereon, and the properties 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 Davao Light & Power, 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.
It must be noted that on a number of occasions, Davao Sawmill 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 mortgagees.
Instance on how controversy arose cant be found in the case facts. Impliedly, the issue on the character of the properties arose
from the consummation of a sale following the execution of the judgment in the other action, Davao Light & Power v. Davao
Sawmill
The trial judge found that the properties were personal in nature, and as a consequence absolved the defendants from the
complaint. The issue was raised in the Supreme Court involving the determination of the nature of said properties.
The Supreme Court affirmed the judgment appealed from, with costs against the appellant.
1. Standard Oil ruling key to issue on the character of the property
It must be pointed out that Davao Sawmill 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 Davao Sawmill is
indicative of intention and impresses upon the property the character determined by the parties. In this connection the decision of
the 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.
2. Immobilization of machinery; when placed in plant by owner
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. The distinction rests 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.
3. Concrete immobilization of lessees machinery only if lease stipulates transfer of ownership on its termination
Concrete immobilization takes place because of the express provisions of the lease which requires the putting in of improved
machinery, deprived the tenant of any right to charge against the lessor the cost of 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. (Valdes v. Altagracia)
Peoples Bank v. Dahican Lumber
[G.R. No. L-17500. May 16, 1967.]
En Banc, Dizon (J): 8 concur.
Facts: On 8 September 1948, Atlantic Gulf & Pacific Company of Manila (ATLANTIC) sold and assigned all its right in the
Dahican lumber concession to Dahican Lumber Company (DALCO) for P500,000.00 of which only the amount of $50,000.00
was paid. Thereafter, to develop the concession, DALCO obtained various loans from the People's Bank (P200,000.00, as of 13
July 1950). DALCO also obtained, through the Bank, a loan of $250,000.00 from the Export-Import Bank of Washington D.C.
the agreement between the parties, the old building standing on the mortgaged properties was insured for P300,000.00 on 1
December 1959. Appellee advanced the sum of P5,628,00 for the annual premium, but appellants failed to reimburse the same.
Appellee filed a complaint for the foreclosure of the mortgage with the CFI Manila on 11 August 1958, alleging a number of
violations of the mortgage contract, to wit: (1) that the mortgaged properties had not been freed by the mortgagor from certain
liens and encumbrances other than the mortgage itself; (2) that without the prior written consent of plaintiff defendants removed
and disposed of the complete band sawmill and filing machine which formed part of the properties mortgaged; (3) that Calsons,
Inc., failed to submit to appellee evidence showing the reduction of defendant's account on the lot to at least P819,000.00; (4) and
that. Calsons, Inc., failed to begin, much less complete, the construction of the supermarket building on the mortgaged properties.
On August 11, 1959, plaintiff filed supplemental complaint, which was admitted without opposition. Two additional grounds for
the foreclosure of the mortgage were alleged, namely: (1) that defendants failed, despite demands therefor, to pay the
amortizations due and payable, including accrued interest and surcharges, on the portion of the loan released to them; and (2) that
defendants failed to complete the construction of the textile market building on the mortgaged properties within 12 months from 7
November 1957, the date of the first release of P819,000.00. Judgment was rendered on 3 March 1962 in favor of plaintiff, and
defendants brought the appeal directly to the Court in view of the amount involved.
The Supreme Court affirmed the judgment appealed from, with costs against appellants.
1. Vendors lien a legal encumbrance, which is effective even if not recorded
Even if the two certificates of title covering the mortgaged property do not show any lien or encumbrance thereon other than the
mortgage itself; the vendor's lien in favor of the former owners, representing the unpaid balance of P280,000.00 on the purchase
price of the lots mortgaged. The lien is a legal encumbrance and therefore effective although not recorded.
2. Appellee not estopped in invoking right to have properties free from vendors lien
One of the reasons why appellant Calsons, Inc., applied for the P2M loan was precisely to use part thereof to pay the balance of
the purchase price of 5 parcels of land it mortgaged to appellee. And to assure itself that no vendor's lien attached to the said
properties, appellee caused the additional conditions to be added to the original terms of the mortgage contract. It turns out in fact
that appellants had failed to reduce their account on the lot to P819,000.00, as stipulated in the mortgage contract, since there was
still a balance of P280,000 on the purchase price. With respect to the second release of P30,000.00, the check was also drawn in
favor of the vendor with the understanding that it would be used to pay the real estate taxes due on said properties and thus
remove the corresponding tax lien imposed by law. The steps taken by appellee negate any inference that it agreed to waive its
right to have the properties "free from all liens and encumbrances," as provided in the mortgage contract.
3. Appellee cannot be estopped by a commitment made by its agent not reflected in the Agreement
Estoppel is invoked by appellants on the basis of a letter dated 28 October 1957, sent by the Manager of appellee's Real Estate
Department to the vendor of the properties, to the effect that the balance of the purchase price in the amount of P280,000.00
would be released within six (6) months from the date of the said letter. The commitment of said Manager was not recognized by
the Board of Trustees of the appellee as shown by the fact that it was not incorporated in the mortgage contract, which was
executed on a later date, 31 October 1957. While the schedule of subsequent releases was clearly defined in the mortgage
contract, no mention was made about the said commitment.
4. Machineries are immovables and are included in mortgage; installed by the owner to meet demands of industry or
works
The mortgage was on the lands "together with all the buildings and improvements now existing or which may hereafter be
constructed" thereon. And the machineries were permanently attached to the property, and installed there by the former owner to
meet the needs of certain works or industry therein. They were therefore part of immovable pursuant to Article 415 of the Civil
Code, and need not be the subject of a separate chattel mortgage in order to be deemed duly encumbered in favor of appellee.
5. Promissory note provides for due date of installments; Failure to pay amortizations a violation of mortgage contract
The promissory note executed by the parties clearly provides when the first installment, as well as subsequent ones, would
become due, i.e. beginning the month following the last release and/or the month following the expiration of the period for the
construction of the textile market building, whichever is earlier and the rest on the 7th day of every month thereafter until the
principal of P2M and the interest shall have been fully paid. The mortgage contract provides that the proposed building should be
completed within 12 months from the date of the first release. Said release having been made on 7 November 1957, the
construction period expired on 7 November 1958; hence, the first installment became due one month thereafter or on 7 December
1958, and the rest on the 7th day of every month thereafter. Appellants' failure to pay the amortizations, interest and surcharges
demanded of them by appellee, therefore, constitutes a violation of the mortgage contract and is sufficient ground for the
foreclosure of the mortgage.
Sergs Products v. PCI Leasing
[G.R. No. 137705. August 22, 2000.]
Third division, Panganiban (J): 3 concur
Facts: On 13 February 1998, PCI Leasing and Finance, Inc. filed a complaint for sum of money, with an application for a writ of
replevin (Civil Case Q-98-33500). On 6 March 1998, upon an ex-parte application of PCI Leasing, judge issued a writ of replevin
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 24 March 1998, the sheriff proceeded to petitioner's factory, seized one machinery with word that the
return for the other machineries. On 25 March 1998, petitioners filed a motion for special protective order, 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. On 6 April 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 7 April 1998,
they went to the CA via an original action for certiorari.
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; and ruled that the "words of the contract are clear and leave no doubt upon the true
intention of the contracting parties." It thus affirmed the 18 February 1998 Order, and the 31 March 1998 Resolution of the lower
court, and lifted the preliminary injunction issued on 15 June 1998. A subsequent motion for reconsideration was denied on 26
February 1999. Hence, the petition for review on certiorari.
The Supreme Court denied the petition and affirmed the decision of the Court of Appeals; with costs against petitioners.
1. Petition for review on certiorari is clearly under Rule 45
The petition need not expressly indicate if it is being filed under Rule 45 or Rule 65 of the Rules of Court, as it is clear that the
present recourse is under Rule 45; the conclusion of such supported by the title of the Petition, which is "Petition for Review on
Certiorari."
2. Error in impleading the Judge as respondent not ground to dismiss the case
While the judge should not have been impleaded as a respondent, substantial justice requires that such lapse by itself should not
warrant the dismissal of the present Petition. The Court may deems it proper to remove, motu proprio, the name of the Judge from
the caption of the case.
3. Writ of replevin issued for recovery of personal property
Rule 60 of the Rules of Court provides that writs of replevin are issued for the recovery of personal property only. Section 3
provides that upon the filing of such affidavit and approval of the bonds 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.
4. Machinery immovable properties by incorporation
The machinery 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." The machines are thus, real, not personal, property pursuant to Article 415 (5) of the Civil
Code.
5. Parties estopped when parties stipulated properties as personal; property thus subject to writ of seizure
Contracting parties may validly stipulate that a real property be considered as personal. 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. Thus, said machines are proper subjects of the Writ of Seizure (compare
Tumalad v. Vicencio).
6. Similar cases
In Trinidad v. Vicencio, the Court upheld the intention of the parties to treat a house of strong materials as a personal property
because it had been made the subject of a chattel mortgage. Applying Tumalad, the Court in Makati Leasing and Finance Corp. v.
Wearever Textile Mills also held that the machinery used in a factory and essential to the industry was a proper subject of a writ
of replevin because it was treated as personal property in a contract.
7. Third parties acting in good faith not affected by stipulation to consider real property as personal
The holding that the machines should be deemed personal property pursuant to the Lease Agreement is good only insofar as the
contracting parties are concerned. 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. In the present case, however, there is no showing that
any specific third party would be adversely affected.
8. Title to property should be determined at trial; Remedies under Rule 60 either to post a counter-bond or to question the
sufficiency of the plaintiffs bond
The validity and the nature of the contract are the lis mota of the civil action pending before the RTC. A resolution of the
questions whether the Agreement is a loan and not a lease, or whether the Agreement is invalid, 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. As held in La Tondea Distillers v. CA, the Court explained that the policy under Rule 60 was that
questions involving title to the subject property 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 plaintiff's bond. They were not
allowed, however, to invoke the title to the subject property.
9. Title to property should be determined at trial; no place in a petition for certiorari under Rule 65 or in a petition for
review under Rule 45.
The questions whether the Agreement is a loan and not a lease, or whether the Agreement is invalid 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 the Court under Rule 45.
10. Agreement presumed to be valid and binding
The Agreement must be presumed to be valid and binding as the law between the parties; as there is nothing on record to show
that it has been nullified or annulled. In the present case, petitioners assailed it first only in the RTC proceedings, which had
ironically been instituted by respondent. As in the Makati Leasing and Finance case, even granting that he 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.
1. Interest in business may be subject of mortgage
With regard to the nature of the property mortgaged which is one-half interest in the business, such interest is a personal property
capable of appropriation and not included in the enumeration of real properties in articles 335 of the Civil Code, and may be the
subject of mortgage. All personal property may be mortgaged. (Sec. 7, Act 1508.)
2. Description of mortgage property sufficient
The description contained in the document is sufficient. The law (sec. 7, Act 1508) requires only a description of the mortgaged
property shall be such as to enable the parties to the mortgage, or any other person, after reasonable inquiry and investigation, to
identify the same. In the case at bar, his half interest in the drug business known as Antigua Botica Ramirez, located at Calle
Real Nos. 123 and 125, District of Intramuros, Manila Philippine Islands" is sufficient.
3. Article 1922 (1-3) of the Civil Code applicable only to mortgage property in possession
Numbers 1, 2, and 3 of the article 1922 of the Civil Code are not applicable as neither the debtor, nor himself, is in possession of
the property mortgaged, which is, and since the registration of the mortgage has been, legally in possession of the surety company
(Sec. 4, Act. 1508; Meyers vs. Thein, 15 Phil., 303)
4. Stipulation about personal property not a mortgage upon property
In no way can the mortgage executed be given effect as of the date of the sale of the store in question; as there was a mere
stipulation about personal security during said date, but not a mortgage upon property, and much less upon the property in
question.
US v. Carlos
[G.R. No. 6295. September 1, 1911.]
En Banc, per curiam: 4 concur.
Facts: Ignacio Carlos has been a consumer of electricity furnished by the Manila Electric Railroad and Light Company for a
building containing the residence of the accused and 3 other residences. On 15 March 1909, representatives of the company,
believing that more light is consumed than what is shown in the meter, installed an additional meter on a pole outside Carlos
house to compare actual consumption (2,500 kilowatts against 233 kilowatts). Marks on the insulation of the meter points to the
use of jumper. Further, the consumption registered in the inside meter is not the reasonable amount for the number of lights
installed in Carlos building. On the strength of a search warrant duly served by a police officer, a jumper was found in a
drawer of a small cabinet in the room of the defendants house were the meter was installed. In the absence of any explanation for
Carlos possession of said device, the presumption raised was that Carlos was the owner of the device whose only use was to
deflect the current from the meter.
Thus, it was deduced that from 13 February, 1909 and until 3 March 1910, Carlos was found to have taken 2,273 kilowatts of
electric current, worth P909.20, the electricity being the property of the Manila Electric Railroad and Light Company, a
corporation doing business in the Philippine Islands, without the consent of the owner thereof. Thus, he was charged with the
crime of theft. A warrant for the arrest of Carlos was issued by Judge Jenkins on 4 March and placed in the hands of the sheriff.
The sheriff's return shows that the defendant gave bond for his appearance. On 14 March, the counsel for the defendant demurred
to the complaint claiming the court has no jurisdiction over the person of the accused, and that the facts do not constitute a public
offense. The demurrer was overruled, and as defendant refused to plead, a plea of not guilty was entered for him. After due trial,
Carlos was found guilty and was sentenced to 1 year, 8 months and 21 days in prison, and was ordered to indemnify Manila
Electric Railroad and Light company in the sum of P865.26 with subsidiary imprisonment in case of insolvency; and to pay the
costs. From this judgment, defendant appealed.
The Supreme Court affirmed the judgment appealed from; with costs against the appellant.
1. US v. Grant and Kennedy; overrule of demurrer on issue involving alleged lack of preliminary investigation
The question whether "the court erred in overruling the objection of the accused to the jurisdiction of the court, because he was
not given a preliminary investigation as required by law, and in overruling his demurrer is the same as was raised in US v. Grant
and Kennedy (18 Phil 122), where after a thorough examination and due consideration, decided adversely to appellant's
contention. No sufficient reason is presented why the Court should not follow the doctrine enunciated in that case.
2. Right of ownership of electric current secured by article 517-518 of the Penal Code
The right of ownership of electric current is secured by articles 517 and 518 of the Penal Code; the application of these articles in
cases of substraction of gas, a fluid used for lighting, and in some respects resembling electricity, is confirmed by the rule laid
down in the decisions of the supreme court of Spain January 20, 1887, and April 1, 1897, construing and enforcing the provisions
of articles 530 and 531 of the penal code of that country, articles identical with articles 517 and 518 of the code in force in the
Philippines (US v. Genato).
3. Test of proper subject of larceny
The true test of what is a proper subject of larceny seems to be not whether the subject is corporeal or incorporeal, but whether it
is capable of appropriation by another than the owner. It is true that electricity is no longer, as formerly, regarded by electricians
as a fluid, but its manifestations and effects, like those of gas, may be seen and felt. There is nothing in the nature of gas used for
illuminating purposes which renders it incapable of being feloniously taken and carried away. It is a valuable article of
merchandise, bought and sold like other personal property, susceptible of being severed from a mass or larger quantity, and of
being transported from place to place (Commonwealth v. Shaw). Electricity, the same as gas, is a valuable article of merchandise,
bought and sold like other personal property and is capable of appropriation by another.
4. Illuminating gas subject of larceny even in the absence of statute
Further, it is well-settled that illuminating gas may be the subject of larceny, even in the absence of a statute so providing.
(Decisions of supreme court of Spain, January 20, 1887. and April 1, 1897, supra; also (England) Queen vs. Firth, L. R. 1 C. C.,
172, 11 Cox C. C., 234; Queen vs. White, 3 C. & K., 363, 6 Cox C. C., 213; Woods vs. People, 222 Ill., 293, 7 L. R. A., 520;
Commonwealth vs. Shaw, 4 Allen (Mass.), 308; State vs. Wellman, 34 Minn., 221, N. W. Rep., 385, and 25 Cyc., p. 12, note 10.)
5. No consent by company for defendant to misappropriate electricity
The company had a contract with the defendant to furnish him with current for lighting purposes. It could not stop the
misappropriation without cutting off the current entirely. It could not reduce the current so as to just furnish sufficient for the
lighting of two, three, or five lights, as claimed by the defendant that he used during the most of this times but the current must
always be sufficiently strong to furnish current for the thirty lights, at any time the defendant desired to use them. There is no
indication that the company wished the electricity to be taken, and no knowledge by the defendant that the company wished him
to take the current, and no mutual understanding between the company and the defendant, and no measures of inducement of any
kind were employed by the company for the purpose of leading the defendant into temptation, and no preconcert whatever
between him and the company: The original design to misappropriate this current was formed by the defendant absolutely
independent of any acts on the part of the company or its agents.
6. Consolidation of complaint covering a period beneficial, rather than prejudicial to the defendant
None of the essential rights of the defendant were shown to have been prejudiced by reason of the fact that the complaint covered
the entire period. If twelve distinct and separate complaints had been filed against the defendant, one for each month, the sum
total of the penalties imposed might have been very much greater than that imposed by the court in this case. The covering of the
entire period by one charge has been beneficial, if anything, and not prejudicial to the rights of the defendant. The electricity was
stolen from the same person, in the same manner, and in the same place. It was substantially one continuous act, although the
"jumper" might have been removed and replaced daily or monthly.
7. Continuous act; Analogy of a person stealing gas by means of a pipe
A person stole gas for the use of a manufactory by means of a pipe, which drew off the gas from the main without allowing it to
pass through the meter. The gas from this pipe was burnt everyday, and turned off at night. The pipe was never closed at its
junction with the main, and consequently always remained full of gas. It was held, that if the pipe always remained full, there was,
in fact, a continuous taking of the gas and not a series of separate takings. It was held also that even if the pipe had not been kept
full, the taking would have been continuous, as it was substantially all one transaction." (Regina vs. Firth, L. R., 1 C. C., 172; 11
Cox C. C., 234. Cited on p. 758 of Wharton's Criminal-Law, vol. 1, 10th ed.)
US v. Tambunting
[G.R. No. 16513. January 18, 1921.]
En Banc, Street (J): 4 concur
Facts: On January 1918, Manuel Tambunting and his wife became occupants of the upper floor of the house situated at 443, Calle
Evangelista, Manila. In this house the Manila Gas Corporation had previously installed apparatus for the delivery of gas on both
the upper and lower floors, consisting of the necessary piping and a gas meter, which last mentioned apparatus was installed
below. When the occupants at whose request this installation had been made vacated the premises, the gas company disconnected
the gas pipe and removed the meter, thus cutting off the supply of gas from said premises. Upon 2 June 1919, one of the
inspectors of the gas company visited the house in question, while Manuel Tambunting was not home, and found that gas was
being used, without the knowledge and consent of the gas company, for cooking in the quarters occupied by the Tambuntings.
Upon arrival, Tambunting admitted that he was using gas without knowledge of the company for 2-3 months but denied making
the connection where the meter used to be installed.
Before the institution of the case in the CFI, the accused had been unsuccessfully prosecuted for an infraction of section 504 of
the Revised Ordinances of the city of Manila, under a complaint charging that the accused, not being a registered installer of gas
equipment, had placed a gas installation in the house at 443, Calle Evangelista.
Later, the gas company sued Manuel Tambunting at the CFI Manila; which later found the accused guilty of stealing a quantity of
gas belonging to the Manila Gas Corporation, and sentencing him to undergo imprisonment for 2 months and 1 day (arresto
mayor) with the accessories prescribed by law; to indemnify the said corporation in the sum of P2, with subsidiary imprisonment
in case of insolvency; and to pay the costs. Tambunting appealed.
The Supreme Court affirmed the judgment with modification, it being understood that the amount of the indemnity which the
accused shall pay to the gas company is P4, instead of P2, with subsidiary imprisonment for one day in case of insolvency; with
costs against the appellant.
1. Right of ownership of electric current, gas, fluid used for lighting
The right of the ownership of electric current is secured by articles 517 and 518 of the Penal Code; the application of these articles
in cases of substraction of gas, a fluid used for lighting, and in some respects resembling electricity, is confirmed by the rule laid
down in the decisions of the supreme court of Spain of January 20, 1887, and April 1, 1897, construing and enforcing the
provisions of articles 530 and 531 of the Penal Code of Spain, articles identical with above articles 517 and 518. These
expressions were used in a case which involved the substraction and appropriation of electrical energy and the court held, in
accordance with the analogy of the case involving the theft of gas, that electrical energy could also be the subject of theft (see US
v. Genato, 15 Phil., 170, 175; US v. Carlos, 21 Phil., 553)
2. Landmark case as to issue whether taking of gas constitute larceny
The taking of gas may constitute larceny has never before been the subject of adjudication in the Supreme Court, but the decisions
of Spanish, English, and American courts all answer the question in the affirmative. (See US vs. Carlos, 21 Phil., 553, 560.)
3. Gas has character of personal property, and may be subject of larceny
There is nothing in the nature of gas used for illuminating purposes which renders it incapable of being feloniously taken and
carried away. It is a valuable article of merchandise, bought and sold like other personal property, susceptible of being severed
from a mass or larger quantity and of being transported from place to place. Likewise water which is confined in pipes and
electricity which is conveyed by wires are subjects of larceny (Ruling Case Law, Vol. 17, p. 34).
4. Justification of the P2 per month charge
The court was justified in fixing the value of the gas at P2 per month, which is the minimum charge for gas made by the gas
company, however small the amount consumed. Presumably, no person desiring to use gas at all for domestic purposes can
purchase the commodity at a lower rate per month than P2. There was evidence, however, before the court showing that the
general average of the monthly bills paid by consumers throughout the city for the use of gas in a kitchen equipped like that used
by the accused is from P18 to P20, while the average minimum is about P8 per month. We think that the facts above stated are
competent evidence; and the conclusion is inevitable that the accused is at least liable to the extent of the minimum charge of P2
per month. Absolute certainty as to the full amount taken is of course impossible, because no meter was used; but absolute
certainty upon this point is not necessary, when it is certain that the minimum that could have been taken was worth a
determinable amount.
5. Acquittal in prosecution for violation of city ordinance not bar to prosecution for same offense under the general law of
the land
Acquittal of the charge of illegal gas installation in violation of Section 504 of the Revised Ordinances of Manila does not bar his
prosecution for the offense of theft, since the two offenses are of totally distinct nature. Furthermore, a prosecution for violation
of a city ordinance is not ordinarily a bar to a subsequent prosecution for the same offense under the general law of the land. (US
vs. Garcia Gavieres, 10 Phil., 694.)
Philippine Refining v. Jarque
[G.R. No. 41506. March 25, 1935.]
En Banc, Malcolm (J): 9 Concur
Facts: On varying dates the Philippine Refining Co., Inc., and Francisco Jarque executed three mortgages, denominated as
chattel mortgage on the motor vessels Pandan and Zaragoza. The first two mortgages do not have an appended affidavit of good
faith, while the third contains such. The third mortgage was subscribed by Jarque and MN Brink (in what capacity the latter
signed is not disclosed) and was not registered in the customs house until 17 May 1932, or within the period of 30 prior to the
commencement of insolvency proceedings against Jarque. A fourth mortgage was executed by Jarque and Ramon Aboitiz on the
motorship Zaragoza and was entered in the chattel mortgage registry of the register of deeds on 12 May 1932, or again within the
30-day period before the institution of insolvency proceedings.
A petition was filed with the CFI Cebu on 2 June 1932 in which it was prayed that Francisco Jarque be declared an insolvent
debtor, with the result that an assignment of all the properties of the insolvent debtor, was executed in favor of Jose Corominas.
The petition on the matter of Jarques insolvency was granted. However, the judge declined to order the foreclosure of the
mortgages, but on the contrary sustained the special defenses of fatal defectiveness of the mortgages.
The Supreme Court affirmed the judgment, with costs against appellant.
1. Admiralty jurisdiction of court raised to warrant court to sit en banc
The case was decided by the court in banc, as a motion was presented by counsel for the appellant in which it was asked that the
case be heard and determined by the court sitting in banc because the admiralty jurisdiction of the court was involved, and this
motion was granted in regular course. On further investigation it appears that this was an error because the mere mortgage of a
ship is a contract entered into by the parties to it without reference to navigation or perils of the sea, and does not, therefore,
confer admiralty jurisdiction. (Bogart vs. Steamboat John Jay [1854], 17 How., 399.)
2. Vessels are personal property under civil and common law
Vessels are considered personal property under the civil law. (Code of Commerce, article 585.) Similarly under the common law,
vessels are personal property. Under the common law, vessels are personal property although occasionally referred to as a
peculiar kind of personal property.
3. Chattel mortgage of a vessel, distinguished to chattel mortgage of other personality
Since the term "personal property" includes vessels, they are subject to mortgage agreeably to the provisions of the Chattel
Mortgage Law. (Act 1508, section 2.) Indeed, it has heretofore been accepted without discussion that a mortgage on a vessel is in
nature a chattel mortgage. The only difference between a chattel mortgage of a vessel and a chattel mortgage of other personality
is that it is not now necessary for a chattel mortgage of a vessel to be noted in the registry of the register of deeds, but it is
essential that a record of documents affecting the title to a vessel be entered in the record of the Collector of Customs at the port
of entry. Otherwise a mortgage on a vessel is generally like other chattel mortgages as to its requisites and validity.
4. Chattel mortgage of a vessel without affidavit of good faith is unenforceable against third persons
Section 5 of the Chattel Mortgage Law deemed it a requirement to have an affidavit of good faith appended to the mortgage and
recorded therewith. The absence of the affidavit vitiates a mortgage as against creditors and subsequent encumbrancers. As a
consequence a chattel mortgage of a vessel wherein the affidavit of good faith required by the Chattel Mortgage Law is lacking, is
unenforceable against third persons.
Rubiso v. Rivera
[G.R. No. L-11407. October 30, 1917.]
First Division, Torres (J): 5 concur, 1 took no part
7. Matute (Erma Inc.) a conditional purchaser in good faith
Erma, Inc., as a conditional purchaser of the shares of stock in question given as security for the payment of his credit, acquired in
good faith Ceron's right and title to the 600 common shares of stock evidenced by certificate No. 7 of the Manila Yellow Taxicab
Company., and as such conditional purchaser in good faith, it is entitle to the protection of the law. Evidence would show that
Matute found the shares, as recorded in the Stock and Transfer Book of the company, free from all liens and encumbrances and
made no reference made to the deed Exhibit A.
Chua Guan v. Samahang Magsasaka
[G.R. No. 42091. November 2, 1935.]
Second Division, Butte (J): 4 concur
Facts: On June 18, 1931, Gonzalo H. Co Toco, the owner of 5,894 shares of the capital stock of Samahang Magsasaka Inc.
represented by 9 certificates having a par value of P5 per share mortgaged said shares to Chua Chiu to guarantee the payment of a
debt of P20,000 due on or before 19 June 1932. The said certificates of stock were delivered with the mortgage to the mortgagee,
Chua Chiu. The said mortgage was duly registered in the office of the registered of deeds of Manila on 23 June 1931, and in the
office of the said corporation on 30 September 1931. On 28 November 1931, Chua Chiu assigned all his right and interest in said
mortgage to the Chua Guan and the assignment in the office of the register of deeds in the City of Manila on 28 December 1931,
and in the office of the said corporation on 4 January 1932.
Co Toco defaulted in the payment of said debt at maturity and Chua Guan foreclosed said mortgage and delivered the certificates
of stock and copies of the mortgage and assignment to the sheriff of the City of Manila in order to sell the said shares at public
auction. The sheriff auctioned said shares on 22 December 1932, and the plaintiff having been the highest bidder for the sum of
P14,390, the sheriff executed in his favor a certificate of sale of said shares. The plaintiff tendered the certificates of stock
standing in the name of Co Toco to the proper officers of the corporation for cancellation and demanded that they issue new
certificates in the name of Chua Guan. The officers (the individual defendants) refused and still refuse to issue said new shares in
the name of Chua Guan.
An action for writ of mandamus was filed with the CFI Nueva Ecija, praying that the defendants transfer the said 5,894 shares of
stock to the plaintiff by cancelling the old certificates and issuing new ones in their stead. The parties entered into a stipulation in
which the defendants admitted all of the allegations of the complaint and the plaintiff admitted all of the special defenses in the
answer of the defendants, and on this stipulation they submitted the case for decision. As special defense, the defendants refused
to cancel said certificates (Co Tocos) and to issue new ones in the name of Chua Guan because prior to the date of the latters
demand (4 February 1933), 9 attachments had been issued and served and noted on the books of the corporation against Co
Tocos shares and Chua Guan objected to having these attachments noted on the new certificates which he demanded.
The Supreme Court affirmed the judgment appealed from, holding that the attaching creditors are entitled to priority over the
defectively registered mortgage of the appellant; without special pronouncement as to costs.
1. Registration of chattel mortgage in the office of corporation not necessary and had no legal effect
The registration of the said chattel mortgage in the office of the corporation was not necessary and had no legal effect. Whether
the shares of a corporation could be hypothecated by placing a chattel mortgage on the certificate representing such shares are
settled by the case of Monserrat vs. Ceron. In the present case, the registration of such a mortgage or the effect of such registration
was not in question. Nothing appears in the record of that case even tending to show that the chattel mortgage there involved was
ever registered anywhere except in the office of the corporation, and there was no question involved there as to the right of
priority among conflicting claims of creditors of the owner of the shares.
2. Difficulty on the practical application of the Chattel Mortgage law to shares of stock of a corporation
The practical application of the Chattel Mortgage Law to shares of stock of a corporation presents considerable difficulty, as an
equity in shares of stock is of such an intangible character, and the Court has obtained little aid from the decisions of other
jurisdictions because that form of mortgage is ill suited to the hypothecation of shares of stock and has been rarely used
elsewhere. In fact, it has been doubted whether shares of stock in a corporation are chattels in the sense in which that word is used
in chattel mortgage statutes (see Fua Cun vs. Summers and China Banking Corporation).
3. Ways in executing a valid chattel mortgage effective against third persons
Section 4 of Act 1508 provides two ways for executing a valid chattel mortgage which shall be effective against third persons.
First, the possession of the property mortgaged must be delivered to and retained by the mortgagee; and, second, without such
delivery the mortgage must be recorded in the proper office or offices of the register or registers of deeds.
4. Proper place of registration of a chattel mortgage
Section 4 provides that in such a case the mortgage shall be registered in the province in which the mortgagor resides at the time
of making the same or, if he is a non-resident, in the province in which the property is situated; and it also provides that if the
property is situated in a different province from that in which the mortgagor resides the mortgage shall be recorded both in the
province of the mortgagor's residence and in the province where the property is situated.
5. Domicile of corporation decisive for purposes of execution, attachment and garnishment of shares of stock
It is a common but not accurate generalization that the situs of shares of stock is at the domicile of the owner. The term situs is not
one of fixed or invariable meaning or usage. Nor should one lose sight of the difference between the situs of the shares and the
situs of the certificate of shares. The situs of shares of stock for some purposes may be at the domicile of the owner and for others
at the domicile of the corporation; and even elsewhere. It is a general rule that for purposes of execution, attachment and
garnishment, it is not the domicile of the owner of a certificate but the domicile of the corporation which is decisive.
6. Courts construction of Section 4, Act 1508, as to ownership of shares in a corporation
By analogy with the foregoing and considering the ownership of shares in a corporation as property distinct from the certificates
which are merely the evidence of such ownership, it seems to be a reasonable construction of section 4 of Act 1508 to hold that
the property in the shares may be deemed to be situated in the province in which the corporation has its principal office or place of
business. If this province is also the province of the owner's domicile, a single registration is sufficient. If not, the chattel
mortgage should be registered both at the owner's domicile and in the province where the corporation has its principal office or
place of business. In this sense the property mortgaged is not the certificate but the participation and share of the owner in the
assets of the corporation.
7. Method of hypothecating shares of stock by chattel mortgage cumbersome and unusual in the present state of law;
Risks of debtor and/or creditor; Remedy is with legislature
Apart from the cumbersome and unusual method of hypothecating shares of stock by chattel mortgage, it appears that in the
present state of our law, the only safe way to accomplish the hypothecation of share of stock of a Philippine corporation is for the
creditor to insist on the assignment and delivery of the certificate and to obtain the transfer of the legal title to him on the books of
the corporation by the cancellation of the certificate and the issuance of a new one to him. From the standpoint of the debtor this
may be unsatisfactory because it leaves the creditor as the ostensible owner of the shares and the debtor is forced to rely upon the
honesty and solvency of the creditor. Of course, the mere possession and retention of the debtor's certificate by the creditor gives
some security to the creditor against an attempted voluntary transfer by the debtor, provided by- laws of the corporation expressly
enact that transfers may be made only upon the surrender of the certificate. It is to be noted, however, that section 35 of the
Corporation Law enacts that shares of stock "may be transferred by delivery of the certificate endorsed by the owner or his
attorney in fact or other person legally authorized to make the transfer." The use of the verb "may" does not exclude the
possibility that a transfer may be made in a different manner, thus leaving the creditor in an insecure position even though he has
the certificate in his possession. Moreover, the shares still standing in the name of the debtor on the books of the corporation will
be liable to seizure by attachment or levy on execution at the instance of other creditors. Decisions in the case of Monserrat vs.
Ceron and in the present case have done little perhaps to ameliorate the present uncertain and unsatisfactory state of our law
applicable to pledges and chattel mortgages of shares of stock of Philippine corporations. The remedy lies with the legislature.
8. Transfer by endorsement and delivery of certificate with intention to pledge sufficient to give legal effect
The transfer by endorsement and delivery of a certificate with intention to pledge the shares covered thereby should be sufficient
to give legal effect to that intention and to consummate the juristic act without necessity for registration.
Republic v. CA
[G.R. No. L-43105. August 31, 1984.]; also Bautista v. CA [G.R. No. L-43190]
Second Division, Cuevas (J): 4 concur, 1 on leave, 1 took no part.
Facts: A lot with an area of 17,311 sq.m. situated in Barrio Pinagbayanan, Pila, Laguna and 20 meters from the shore of Laguna
de Bay; was purchased by Benedicto del Rio from Angel Pili on 19 April 1909. The Deed of Sale evidencing said purchase is
duly recorded with the Registry of Deeds of Sta. Cruz, Laguna. The land was declared for tax purposes beginning the year 1918,
and the realty taxes thereon had been paid since 1948. When Benedicto del Rio died in 1957, his heirs extrajudicially partitioned
his estate and the subject parcel passed on to his son, Santos del Rio, as the latter's share in the inheritance. Santos del Rio filed
his application for registration of said parcel on 9 May 1966. The application was opposed by the Director of Lands and by
private oppositors, petitioners in G.R. No. L-43190.
Sometime before 1966, private oppositors obtained permission from Santos del Rio to construct duck houses on the land in
question. Although there was no definite commitment as to rentals, some of them had made voluntary payments to private
respondent. In violation of the original agreement, private oppositors constructed residential houses on the land which prompted
private respondent to file an ejectment suit against the former in 1966. Meanwhile, during the latter part of 1965 and in 1966,
private oppositors had simultaneously filed their respective sales applications with the Bureau of Lands, and in 1966, they
opposed Santos del Rio's application for registration. The CFI Laguna dismissed the application for registration. Applicant
appealed and obtained a favorable judgment from the Court of Appeals, setting aside that of the trial court. The Director of Lands
and the private oppositors filed their respective Petitions for Review of said decision.
The Supreme Court affirmed the judgment affirmed from, and ordered the registration of the land described in the application in
favor of Santos del Rio, applicant private respondent; with costs against private petitioners.
1. Classification of property as either of public dominion or of private ownership; Public lands / public dominion
Property, which includes parcels of land found in Philippine territory, is either of public dominion or of private ownership. Public
lands, or those of public dominion, have been described as those which, under existing legislation are not the subject of private
ownership, and are reserved for public purposes. The New Civil Code enumerates properties of public dominion in Articles 420
and 502 thereof. Article 402 includes those intended for public use, such as roads, canals, rivers, torrents, ports and bridges
constructed by the State, banks, shores, roadsteads, and others of similar character; and those which belong to the State without
being for public use, and are intended for some public service or for the development of the national wealth" as property
belonging to public dominion. Article 502 adds "rivers and their natural beds; continuous or intermittent waters of springs and
brooks running in their natural beds and the beds themselves; waters rising continuously or intermittently on lands of public
dominion; and lakes and lagoons formed by Nature on public lands and their beds; to the enumeration.
2. Extent of a lake bed
The extent of a lake bed is defined in Artcile 74 of the Law of Waters of 1866, as the natural bed or basin of lakes, ponds, or
pools, is the ground covered by their waters when at their highest ordinary depth."
3. Highest Ordinary Depth in a lake; Determinant is rainfall and not gravitational pull (tides)
The phrase "highest ordinary depth" has been interpreted in the case of Government. vs. Colegio de San Jose to be the highest
depth of the waters of Laguna de Bay during the dry season, such depth being the "regular, common, natural, which occurs always