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Republic of the Philippines

SUPREME COURT
Manila
EN BANC

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.

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, subjectmatter 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 plaintiffsappellees 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
2
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 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 defendantsappellants 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 defendantsappellants, 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.
Concepcion, C.J., Dizon, Makalintal, Zaldivar, Castro, Fernando, Teehankee, Barredo, Villamor
and Makasiar, JJ., concur.

Footnotes
1 Exhibit "A," page 1, Folder of Exhibits.
2 See paragraph "G," Exhibit "A," supra.
3 Exhibit "B," page 4, Folder of Exhibits.
4 Page 2, Defendants' Record on appeal, page 97, Rollo.
5 Page 20, Id., page 115, Rollo.
6 Now Section 2, Rule 70, Revised Rules of Court, which reads that
"SEC. 2. Landlord, to proceed against tenant only after demand. No landlord, or his legal representative
or assign, shall bring such action against a tenant for failure to pay rent due or to comply with the conditions
of his lease, unless the tenant shall have failed to pay such rent or comply with such conditions for a period
of ... five (5) days in the case of building, after demand therefor, made upon him personally, or by serving
written notice of such demand upon the person found on the premises, or by posting such notice on the
premises if no persons be found thereon."
7 See CFI order of 20 February 1957, pages 21-25, Defendants' Record on Appeal.
8 Page 31, Defendants' Record on Appeal, page 213, Rollo.
9 See Municipal court decision, pages 17-18, Defendants' Record on Appeal, pages 199-200, Rollo.
10 59 Phil. 320-321.
11 Emphasis supplied.
12 L-19200, 27 February 1958, 22 SCRA 834; See also Aquino vs. Deala, 63 Phil. 582 and De los Reyes vs.
Elepao, et al., G.R. No. L-3466, 13 October 1950.
13 See Canaynay vs. Sarmiento, L-1246, 27 August 1947, 79 Phil. 36.
14 Last paragraph, Article 1290, N.C.C., supra.
15 No. L-10817-18, 28 February 1958, 103 Phil. 98.
16 No. L-10827-38, 30 May 1958, 103 Phil. 972.
17 No. L-8133, 18 May 1956, 99 Phil. 109.
18 No. L-20329, 16 March 1923, 44 Phil. 632.
19 Emphasis supplied.
20 No. L-4637, 30 June 1952, 91 Phil. 531.
21 No. L-18456, 30 November 1963, 9 SCRA 631.
22 Emphasis supplied.
23 Emphasis supplied.
24 See paragraph 2 of Exhibit "A," page 1, Folder of Exhibits.

25 Supra.
26 Supra.
27 See Navarro vs. Pineda, supra.
28 Effective 1 August 1906.
29 See Luna vs. Encarnacion, et al., No. L-4637, 30 June 1952, 91 Phil. 531.
30 See paragraph "G," Exhibit "A," supra.
31 Section 6, Act No. 3135, as amended, provides:
"In all cases in which an extrajudicial sale is made under the special power hereinbefore referred to, the
debtor, his successor in interest or any judicial creditor or judgment creditor of said debtor, or any person
having a lien on the property subsequent to the mortgage or deed of trust under which the property is sold,
may redeem the same at any time within the term of one year from and after the date of the sale; and such
redemption shall be governed by the provisions of sections four hundredand sixty-four to four hundred and
sixty-six, inclusive, of the Code of Civil Procedure, in so far as these are not inconsistent with the provisions
of this Act." (Emphasis supplied) .
32 Section 7, Act No. 3135, as amended, states: .
"In any sale made under the provisions of this Act, the purchaser may petition the Court of First Instance of
the province or place where the property or any part thereof is situated, to give him possession thereof
during the redemption period, furnishing bond in an amount equivalent to the use of the property for a period
of twelve months, to indemnify the debtor in case it be shown that the sale was made without violating the
mortgage or without complying with the requirements of this Act..." (Emphasis supplied) .
33 See De Gracia vs. San Jose, et al., No. L-6493, 25 March 1954.
34 "SEC. 34. Rents and profits pending redemption. Statement thereof and credit therefor on redemption.
The purchaser, from the time of the sale until a redemption, and a redemptioner, from the time of his
redemption until another redemption, is entitled to receive the rents of the property sold or the value of the
use and occupation thereof when such property is in possession of a tenant. But when any such rents and
profits have been received by the judgment creditor or purchaser, or by a redemptioner, or by the assignee
or either of them, from property thus sold preceding such redemption, the amounts of such rents and profits
shall be a credit upon the redemption money to be paid; ..."
35 See Reyes vs. Hamada, No. L-19967, 31 May 1965, 14 SCRA 215; Emphasis supplied.
36 No. L-16777, 20 April 1961, 1 SCRA 1004.
37 Saura Import & Export Co. vs. Philippine International Surety Co., et al., No. L-15184, 31 May 1963, 8
SCRA 143, 148; Hernandez vs. Andal, 78 Phil.198, See also Sec. 7, Rule 51, of the Revised Rules of Court.
Cf. Santaells vs.Otto Lange Co., 155 Fed. 719; Mast vs. Superior Drill Co., 154 Fed., 45, Francisco, Rules of
Court (1965 Ed), Vol. 3, page 765.

The Lawphil Project - Arellano Law Foundation

Republic of the Philippines


SUPREME COURT
Manila
EN BANC

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 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.
Arellano, C.J., Johnson, Araullo, Street and Malcolm, JJ., concur.
Torres, Avancea and Fisher, JJ., took no part.

The Lawphil Project - Arellano Law Foundation

Republic of the Philippines


SUPREME COURT
Manila
EN BANC

G.R. No. 101083 July 30, 1993


JUAN ANTONIO, ANNA ROSARIO and JOSE ALFONSO, all surnamed OPOSA, minors, and represented by their parents
ANTONIO and RIZALINA OPOSA, ROBERTA NICOLE SADIUA, minor, represented by her parents CALVIN and ROBERTA
SADIUA, CARLO, AMANDA SALUD and PATRISHA, all surnamed FLORES, minors and represented by their parents
ENRICO and NIDA FLORES, GIANINA DITA R. FORTUN, minor, represented by her parents SIGRID and DOLORES
FORTUN, GEORGE II and MA. CONCEPCION, all surnamed MISA, minors and represented by their parents GEORGE and
MYRA MISA, BENJAMIN ALAN V. PESIGAN, minor, represented by his parents ANTONIO and ALICE PESIGAN, JOVIE
MARIE ALFARO, minor, represented by her parents JOSE and MARIA VIOLETA ALFARO, MARIA CONCEPCION T.
CASTRO, minor, represented by her parents FREDENIL and JANE CASTRO, JOHANNA DESAMPARADO,
minor, represented by her parents JOSE and ANGELA DESAMPRADO, CARLO JOAQUIN T. NARVASA, minor,
represented by his parents GREGORIO II and CRISTINE CHARITY NARVASA, MA. MARGARITA, JESUS IGNACIO, MA.
ANGELA and MARIE GABRIELLE, all surnamed SAENZ, minors, represented by their parents ROBERTO and AURORA
SAENZ, KRISTINE, MARY ELLEN, MAY, GOLDA MARTHE and DAVID IAN, all surnamed KING, minors, represented by
their parents MARIO and HAYDEE KING, DAVID, FRANCISCO and THERESE VICTORIA, all surnamed ENDRIGA, minors,
represented by their parents BALTAZAR and TERESITA ENDRIGA, JOSE MA. and REGINA MA., all surnamed ABAYA,
minors, represented by their parents ANTONIO and MARICA ABAYA, MARILIN, MARIO, JR. and MARIETTE, all surnamed
CARDAMA, minors, represented by their parents MARIO and LINA CARDAMA, CLARISSA, ANN MARIE, NAGEL, and
IMEE LYN, all surnamed OPOSA, minors and represented by their parents RICARDO and MARISSA OPOSA, PHILIP
JOSEPH, STEPHEN JOHN and ISAIAH JAMES, all surnamed QUIPIT, minors, represented by their parents JOSE MAX and
VILMI QUIPIT, BUGHAW CIELO, CRISANTO, ANNA, DANIEL and FRANCISCO, all surnamed BIBAL, minors, represented
by their parents FRANCISCO, JR. and MILAGROS BIBAL, and THE PHILIPPINE ECOLOGICAL NETWORK, INC.,
petitioners,
vs.
THE HONORABLE FULGENCIO S. FACTORAN, JR., in his capacity as the Secretary of the Department of Environment
and Natural Resources, and THE HONORABLE ERIBERTO U. ROSARIO, Presiding Judge of the RTC, Makati, Branch 66,
respondents.
Oposa Law Office for petitioners.

The Solicitor General for respondents.

DAVIDE, JR., J.:


In a broader sense, this petition bears upon the right of Filipinos to a balanced and healthful ecology which the petitioners
dramatically associate with the twin concepts of "inter-generational responsibility" and "inter-generational justice." Specifically, it
touches on the issue of whether the said petitioners have a cause of action to "prevent the misappropriation or impairment" of
Philippine rainforests and "arrest the unabated hemorrhage of the country's vital life support systems and continued rape of
Mother Earth."
The controversy has its genesis in Civil Case No. 90-77 which was filed before Branch 66 (Makati, Metro Manila) of the Regional
Trial Court (RTC), National Capital Judicial Region. The principal plaintiffs therein, now the principal petitioners, are all minors duly
represented and joined by their respective parents. Impleaded as an additional plaintiff is the Philippine Ecological Network, Inc.
(PENI), a domestic, non-stock and non-profit corporation organized for the purpose of, inter alia, engaging in concerted action
geared for the protection of our environment and natural resources. The original defendant was the Honorable Fulgencio S.
Factoran, Jr., then Secretary of the Department of Environment and Natural Resources (DENR). His substitution in this petition by
1
the new Secretary, the Honorable Angel C. Alcala, was subsequently ordered upon proper motion by the petitioners. The

complaint 2 was instituted as a taxpayers' class suit 3 and alleges that the plaintiffs "are all citizens
of the Republic of the Philippines, taxpayers, and entitled to the full benefit, use and enjoyment of
the natural resource treasure that is the country's virgin tropical forests." The same was filed for
themselves and others who are equally concerned about the preservation of said resource but
are "so numerous that it is impracticable to bring them all before the Court." The minors further
asseverate that they "represent their generation as well as generations yet unborn." 4
Consequently, it is prayed for that judgment be rendered:
. . . ordering defendant, his agents, representatives and other persons acting in
his behalf to
(1) Cancel all existing timber license agreements in the country;
(2) Cease and desist from receiving, accepting, processing, renewing or
approving new timber license agreements.
and granting the plaintiffs ". . . such other reliefs just and equitable under the premises." 5
The complaint starts off with the general averments that the Philippine archipelago of 7,100
islands has a land area of thirty million (30,000,000) hectares and is endowed with rich, lush and
verdant rainforests in which varied, rare and unique species of flora and fauna may be found;
these rainforests contain a genetic, biological and chemical pool which is irreplaceable; they are
also the habitat of indigenous Philippine cultures which have existed, endured and flourished
since time immemorial; scientific evidence reveals that in order to maintain a balanced and
healthful ecology, the country's land area should be utilized on the basis of a ratio of fifty-four per
cent (54%) for forest cover and forty-six per cent (46%) for agricultural, residential, industrial,
commercial and other uses; the distortion and disturbance of this balance as a consequence of
deforestation have resulted in a host of environmental tragedies, such as (a) water shortages
resulting from drying up of the water table, otherwise known as the "aquifer," as well as of rivers,
brooks and streams, (b) salinization of the water table as a result of the intrusion therein of salt
water, incontrovertible examples of which may be found in the island of Cebu and the Municipality
of Bacoor, Cavite, (c) massive erosion and the consequential loss of soil fertility and agricultural
productivity, with the volume of soil eroded estimated at one billion (1,000,000,000) cubic meters
per annum approximately the size of the entire island of Catanduanes, (d) the endangering
and extinction of the country's unique, rare and varied flora and fauna, (e) the disturbance and
dislocation of cultural communities, including the disappearance of the Filipino's indigenous
cultures, (f) the siltation of rivers and seabeds and consequential destruction of corals and other
aquatic life leading to a critical reduction in marine resource productivity, (g) recurrent spells of

drought as is presently experienced by the entire country, (h) increasing velocity of typhoon winds
which result from the absence of windbreakers, (i) the floodings of lowlands and agricultural
plains arising from the absence of the absorbent mechanism of forests, (j) the siltation and
shortening of the lifespan of multi-billion peso dams constructed and operated for the purpose of
supplying water for domestic uses, irrigation and the generation of electric power, and (k) the
reduction of the earth's capacity to process carbon dioxide gases which has led to perplexing and
catastrophic climatic changes such as the phenomenon of global warming, otherwise known as
the "greenhouse effect."
Plaintiffs further assert that the adverse and detrimental consequences of continued and
deforestation are so capable of unquestionable demonstration that the same may be submitted
as a matter of judicial notice. This notwithstanding, they expressed their intention to present
expert witnesses as well as documentary, photographic and film evidence in the course of the
trial.
As their cause of action, they specifically allege that:
CAUSE OF ACTION
7. Plaintiffs replead by reference the foregoing allegations.
8. Twenty-five (25) years ago, the Philippines had some sixteen (16) million
hectares of rainforests constituting roughly 53% of the country's land mass.
9. Satellite images taken in 1987 reveal that there remained no more than 1.2
million hectares of said rainforests or four per cent (4.0%) of the country's land
area.
10. More recent surveys reveal that a mere 850,000 hectares of virgin old-growth
rainforests are left, barely 2.8% of the entire land mass of the Philippine
archipelago and about 3.0 million hectares of immature and uneconomical
secondary growth forests.
11. Public records reveal that the defendant's, predecessors have granted timber
license agreements ('TLA's') to various corporations to cut the aggregate area of
3.89 million hectares for commercial logging purposes.
A copy of the TLA holders and the corresponding areas covered is hereto
attached as Annex "A".
12. At the present rate of deforestation, i.e. about 200,000 hectares per annum or
25 hectares per hour nighttime, Saturdays, Sundays and holidays included
the Philippines will be bereft of forest resources after the end of this ensuing
decade, if not earlier.
13. The adverse effects, disastrous consequences, serious injury and irreparable
damage of this continued trend of deforestation to the plaintiff minor's generation
and to generations yet unborn are evident and incontrovertible. As a matter of
fact, the environmental damages enumerated in paragraph 6 hereof are already
being felt, experienced and suffered by the generation of plaintiff adults.
14. The continued allowance by defendant of TLA holders to cut and deforest the
remaining forest stands will work great damage and irreparable injury to plaintiffs

especially plaintiff minors and their successors who may never see, use,
benefit from and enjoy this rare and unique natural resource treasure.
This act of defendant constitutes a misappropriation and/or impairment of the
natural resource property he holds in trust for the benefit of plaintiff minors and
succeeding generations.
15. Plaintiffs have a clear and constitutional right to a balanced and healthful
ecology and are entitled to protection by the State in its capacity as the parens
patriae.
16. Plaintiff have exhausted all administrative remedies with the defendant's
office. On March 2, 1990, plaintiffs served upon defendant a final demand to
cancel all logging permits in the country.
A copy of the plaintiffs' letter dated March 1, 1990 is hereto attached as Annex
"B".
17. Defendant, however, fails and refuses to cancel the existing TLA's to the
continuing serious damage and extreme prejudice of plaintiffs.
18. The continued failure and refusal by defendant to cancel the TLA's is an act
violative of the rights of plaintiffs, especially plaintiff minors who may be left with a
country that is desertified (sic), bare, barren and devoid of the wonderful flora,
fauna and indigenous cultures which the Philippines had been abundantly
blessed with.
19. Defendant's refusal to cancel the aforementioned TLA's is manifestly contrary
to the public policy enunciated in the Philippine Environmental Policy which, in
pertinent part, states that it is the policy of the State
(a) to create, develop, maintain and improve conditions under which man and
nature can thrive in productive and enjoyable harmony with each other;
(b) to fulfill the social, economic and other requirements of present and future
generations of Filipinos and;
(c) to ensure the attainment of an environmental quality that is conductive to a life
of dignity and well-being. (P.D. 1151, 6 June 1977)
20. Furthermore, defendant's continued refusal to cancel the aforementioned
TLA's is contradictory to the Constitutional policy of the State to
a. effect "a more equitable distribution of opportunities, income and wealth" and
"make full and efficient use of natural resources (sic)." (Section 1, Article XII of
the Constitution);
b. "protect the nation's marine wealth." (Section 2, ibid);
c. "conserve and promote the nation's cultural heritage and resources (sic)"
(Section 14, Article XIV, id.);

d. "protect and advance the right of the people to a balanced and healthful
ecology in accord with the rhythm and harmony of nature." (Section 16, Article II,
id.)
21. Finally, defendant's act is contrary to the highest law of humankind the
natural law and violative of plaintiffs' right to self-preservation and
perpetuation.
22. There is no other plain, speedy and adequate remedy in law other than the
instant action to arrest the unabated hemorrhage of the country's vital life support
systems and continued rape of Mother Earth. 6
On 22 June 1990, the original defendant, Secretary Factoran, Jr., filed a Motion to Dismiss the
complaint based on two (2) grounds, namely: (1) the plaintiffs have no cause of action against
him and (2) the issue raised by the plaintiffs is a political question which properly pertains to the
legislative or executive branches of Government. In their 12 July 1990 Opposition to the Motion,
the petitioners maintain that (1) the complaint shows a clear and unmistakable cause of action,
(2) the motion is dilatory and (3) the action presents a justiciable question as it involves the
defendant's abuse of discretion.
On 18 July 1991, respondent Judge issued an order granting the aforementioned motion to
dismiss. 7 In the said order, not only was the defendant's claim that the complaint states no
cause of action against him and that it raises a political question sustained, the respondent
Judge further ruled that the granting of the relief prayed for would result in the impairment of
contracts which is prohibited by the fundamental law of the land.
Plaintiffs thus filed the instant special civil action for certiorari under Rule 65 of the Revised Rules
of Court and ask this Court to rescind and set aside the dismissal order on the ground that the
respondent Judge gravely abused his discretion in dismissing the action. Again, the parents of the
plaintiffs-minors not only represent their children, but have also joined the latter in this case. 8
On 14 May 1992, We resolved to give due course to the petition and required the parties to
submit their respective Memoranda after the Office of the Solicitor General (OSG) filed a
Comment in behalf of the respondents and the petitioners filed a reply thereto.
Petitioners contend that the complaint clearly and unmistakably states a cause of action as it
contains sufficient allegations concerning their right to a sound environment based on Articles 19,
20 and 21 of the Civil Code (Human Relations), Section 4 of Executive Order (E.O.) No. 192
creating the DENR, Section 3 of Presidential Decree (P.D.) No. 1151 (Philippine Environmental
Policy), Section 16, Article II of the 1987 Constitution recognizing the right of the people to a
balanced and healthful ecology, the concept of generational genocide in Criminal Law and the
concept of man's inalienable right to self-preservation and self-perpetuation embodied in natural
law. Petitioners likewise rely on the respondent's correlative obligation per Section 4 of E.O. No.
192, to safeguard the people's right to a healthful environment.
It is further claimed that the issue of the respondent Secretary's alleged grave abuse of discretion
in granting Timber License Agreements (TLAs) to cover more areas for logging than what is
available involves a judicial question.
Anent the invocation by the respondent Judge of the Constitution's non-impairment clause,
petitioners maintain that the same does not apply in this case because TLAs are not contracts.
They likewise submit that even if TLAs may be considered protected by the said clause, it is well
settled that they may still be revoked by the State when the public interest so requires.

On the other hand, the respondents aver that the petitioners failed to allege in their complaint a
specific legal right violated by the respondent Secretary for which any relief is provided by law.
They see nothing in the complaint but vague and nebulous allegations concerning an
"environmental right" which supposedly entitles the petitioners to the "protection by the state in its
capacity as parens patriae." Such allegations, according to them, do not reveal a valid cause of
action. They then reiterate the theory that the question of whether logging should be permitted in
the country is a political question which should be properly addressed to the executive or
legislative branches of Government. They therefore assert that the petitioners' resources is not to
file an action to court, but to lobby before Congress for the passage of a bill that would ban
logging totally.
As to the matter of the cancellation of the TLAs, respondents submit that the same cannot be
done by the State without due process of law. Once issued, a TLA remains effective for a certain
period of time usually for twenty-five (25) years. During its effectivity, the same can neither be
revised nor cancelled unless the holder has been found, after due notice and hearing, to have
violated the terms of the agreement or other forestry laws and regulations. Petitioners' proposition
to have all the TLAs indiscriminately cancelled without the requisite hearing would be violative of
the requirements of due process.
Before going any further, We must first focus on some procedural matters. Petitioners instituted
Civil Case No. 90-777 as a class suit. The original defendant and the present respondents did not
take issue with this matter. Nevertheless, We hereby rule that the said civil case is indeed a class
suit. The subject matter of the complaint is of common and general interest not just to several, but
to all citizens of the Philippines. Consequently, since the parties are so numerous, it, becomes
impracticable, if not totally impossible, to bring all of them before the court. We likewise declare
that the plaintiffs therein are numerous and representative enough to ensure the full protection of
all concerned interests. Hence, all the requisites for the filing of a valid class suit under Section
12, Rule 3 of the Revised Rules of Court are present both in the said civil case and in the instant
petition, the latter being but an incident to the former.
This case, however, has a special and novel element. Petitioners minors assert that they
represent their generation as well as generations yet unborn. We find no difficulty in ruling that
they can, for themselves, for others of their generation and for the succeeding generations, file a
class suit. Their personality to sue in behalf of the succeeding generations can only be based on
the concept of intergenerational responsibility insofar as the right to a balanced and healthful
ecology is concerned. Such a right, as hereinafter expounded, considers
the "rhythm and harmony of nature." Nature means the created world in its entirety. 9 Such rhythm
and harmony indispensably include, inter alia, the judicious disposition, utilization, management,
renewal and conservation of the country's forest, mineral, land, waters, fisheries, wildlife, offshore areas and other natural resources to the end that their exploration, development and
utilization be equitably accessible to the present as well as future generations. 10 Needless to say,
every generation has a responsibility to the next to preserve that rhythm and harmony for the full
enjoyment of a balanced and healthful ecology. Put a little differently, the minors' assertion of their
right to a sound environment constitutes, at the same time, the performance of their obligation to
ensure the protection of that right for the generations to come.
The locus standi of the petitioners having thus been addressed, We shall now proceed to the
merits of the petition.
After a careful perusal of the complaint in question and a meticulous consideration and evaluation
of the issues raised and arguments adduced by the parties, We do not hesitate to find for the
petitioners and rule against the respondent Judge's challenged order for having been issued with
grave abuse of discretion amounting to lack of jurisdiction. The pertinent portions of the said order
reads as follows:

xxx xxx xxx


After a careful and circumspect evaluation of the Complaint, the Court cannot
help but agree with the defendant. For although we believe that plaintiffs have but
the noblest of all intentions, it (sic) fell short of alleging, with sufficient
definiteness, a specific legal right they are seeking to enforce and protect, or a
specific legal wrong they are seeking to prevent and redress (Sec. 1, Rule 2,
RRC). Furthermore, the Court notes that the Complaint is replete with vague
assumptions and vague conclusions based on unverified data. In fine, plaintiffs
fail to state a cause of action in its Complaint against the herein defendant.
Furthermore, the Court firmly believes that the matter before it, being impressed
with political color and involving a matter of public policy, may not be taken
cognizance of by this Court without doing violence to the sacred principle of
"Separation of Powers" of the three (3) co-equal branches of the Government.
The Court is likewise of the impression that it cannot, no matter how we stretch
our jurisdiction, grant the reliefs prayed for by the plaintiffs, i.e., to cancel all
existing timber license agreements in the country and to cease and desist from
receiving, accepting, processing, renewing or approving new timber license
agreements. For to do otherwise would amount to "impairment of contracts"
abhored (sic) by the fundamental law. 11
We do not agree with the trial court's conclusions that the plaintiffs failed to allege with sufficient
definiteness a specific legal right involved or a specific legal wrong committed, and that the
complaint is replete with vague assumptions and conclusions based on unverified data. A reading
of the complaint itself belies these conclusions.
The complaint focuses on one specific fundamental legal right the right to a balanced and
healthful ecology which, for the first time in our nation's constitutional history, is solemnly
incorporated in the fundamental law. Section 16, Article II of the 1987 Constitution explicitly
provides:
Sec. 16. The State shall protect and advance the right of the people to a
balanced and healthful ecology in accord with the rhythm and harmony of nature.
This right unites with the right to health which is provided for in the preceding
section of the same article:
Sec. 15. The State shall protect and promote the right to health of the people and
instill health consciousness among them.
While the right to a balanced and healthful ecology is to be found under the Declaration of
Principles and State Policies and not under the Bill of Rights, it does not follow that it is less
important than any of the civil and political rights enumerated in the latter. Such a right belongs to
a different category of rights altogether for it concerns nothing less than self-preservation and
self-perpetuation aptly and fittingly stressed by the petitioners the advancement of which
may even be said to predate all governments and constitutions. As a matter of fact, these basic
rights need not even be written in the Constitution for they are assumed to exist from the
inception of humankind. If they are now explicitly mentioned in the fundamental charter, it is
because of the well-founded fear of its framers that unless the rights to a balanced and healthful
ecology and to health are mandated as state policies by the Constitution itself, thereby
highlighting their continuing importance and imposing upon the state a solemn obligation to
preserve the first and protect and advance the second, the day would not be too far when all else

would be lost not only for the present generation, but also for those to come generations which
stand to inherit nothing but parched earth incapable of sustaining life.
The right to a balanced and healthful ecology carries with it the correlative duty to refrain from
impairing the environment. During the debates on this right in one of the plenary sessions of the
1986 Constitutional Commission, the following exchange transpired between Commissioner
Wilfrido Villacorta and Commissioner Adolfo Azcuna who sponsored the section in question:
MR. VILLACORTA:
Does this section mandate the State to provide sanctions against
all forms of pollution air, water and noise pollution?
MR. AZCUNA:
Yes, Madam President. The right to healthful (sic) environment
necessarily carries with it the correlative duty of not impairing the
same and, therefore, sanctions may be provided for impairment
of environmental balance. 12
The said right implies, among many other things, the judicious management and conservation of
the country's forests.
Without such forests, the ecological or environmental balance would be irreversiby
disrupted.
Conformably with the enunciated right to a balanced and healthful ecology and the right to health,
as well as the other related provisions of the Constitution concerning the conservation,
development and utilization of the country's natural resources, 13 then President Corazon C.
Aquino promulgated on 10 June 1987 E.O. No. 192, 14 Section 4 of which expressly mandates
that the Department of Environment and Natural Resources "shall be the primary government
agency responsible for the conservation, management, development and proper use of the
country's environment and natural resources, specifically forest and grazing lands, mineral,
resources, including those in reservation and watershed areas, and lands of the public domain,
as well as the licensing and regulation of all natural resources as may be provided for by law in
order to ensure equitable sharing of the benefits derived therefrom for the welfare of the present
and future generations of Filipinos." Section 3 thereof makes the following statement of policy:
Sec. 3. Declaration of Policy. It is hereby declared the policy of the State to
ensure the sustainable use, development, management, renewal, and
conservation of the country's forest, mineral, land, off-shore areas and other
natural resources, including the protection and enhancement of the quality of the
environment, and equitable access of the different segments of the population to
the development and the use of the country's natural resources, not only for the
present generation but for future generations as well. It is also the policy of the
state to recognize and apply a true value system including social and
environmental cost implications relative to their utilization, development and
conservation of our natural resources.
This policy declaration is substantially re-stated it Title XIV, Book IV of the Administrative Code of
1987, 15 specifically in Section 1 thereof which reads:

Sec. 1. Declaration of Policy. (1) The State shall ensure, for the benefit of the
Filipino people, the full exploration and development as well as the judicious
disposition, utilization, management, renewal and conservation of the country's
forest, mineral, land, waters, fisheries, wildlife, off-shore areas and other natural
resources, consistent with the necessity of maintaining a sound ecological
balance and protecting and enhancing the quality of the environment and the
objective of making the exploration, development and utilization of such natural
resources equitably accessible to the different segments of the present as well as
future generations.
(2) The State shall likewise recognize and apply a true value system that takes
into account social and environmental cost implications relative to the utilization,
development and conservation of our natural resources.
The above provision stresses "the necessity of maintaining a sound ecological balance and
protecting and enhancing the quality of the environment." Section 2 of the same Title, on the other
hand, specifically speaks of the mandate of the DENR; however, it makes particular reference to
the fact of the agency's being subject to law and higher authority. Said section provides:
Sec. 2. Mandate. (1) The Department of Environment and Natural Resources
shall be primarily responsible for the implementation of the foregoing policy.
(2) It shall, subject to law and higher authority, be in charge of carrying out the
State's constitutional mandate to control and supervise the exploration,
development, utilization, and conservation of the country's natural resources.
Both E.O. NO. 192 and the Administrative Code of 1987 have set the objectives which will serve
as the bases for policy formulation, and have defined the powers and functions of the DENR.
It may, however, be recalled that even before the ratification of the 1987 Constitution, specific
statutes already paid special attention to the "environmental right" of the present and future
generations. On 6 June 1977, P.D. No. 1151 (Philippine Environmental Policy) and P.D. No. 1152
(Philippine Environment Code) were issued. The former "declared a continuing policy of the State
(a) to create, develop, maintain and improve conditions under which man and nature can thrive in
productive and enjoyable harmony with each other, (b) to fulfill the social, economic and other
requirements of present and future generations of Filipinos, and (c) to insure the attainment of an
environmental quality that is conducive to a life of dignity and well-being." 16 As its goal, it speaks
of the "responsibilities of each generation as trustee and guardian of the environment for
succeeding generations." 17 The latter statute, on the other hand, gave flesh to the said policy.
Thus, the right of the petitioners (and all those they represent) to a balanced and healthful
ecology is as clear as the DENR's duty under its mandate and by virtue of its powers and
functions under E.O. No. 192 and the Administrative Code of 1987 to protect and advance the
said right.
A denial or violation of that right by the other who has the corelative duty or obligation to respect
or protect the same gives rise to a cause of action. Petitioners maintain that the granting of the
TLAs, which they claim was done with grave abuse of discretion, violated their right to a balanced
and healthful ecology; hence, the full protection thereof requires that no further TLAs should be
renewed or granted.
A cause of action is defined as:

. . . an act or omission of one party in violation of the legal right or rights of the
other; and its essential elements are legal right of the plaintiff, correlative
obligation of the defendant, and act or omission of the defendant in violation of
said legal right. 18
It is settled in this jurisdiction that in a motion to dismiss based on the ground that the complaint
fails to state a cause of action, 19 the question submitted to the court for resolution involves the
sufficiency of the facts alleged in the complaint itself. No other matter should be considered;
furthermore, the truth of falsity of the said allegations is beside the point for the truth thereof is
deemed hypothetically admitted. The only issue to be resolved in such a case is: admitting such
alleged facts to be true, may the court render a valid judgment in accordance with the prayer in
the complaint? 20 In Militante vs. Edrosolano, 21 this Court laid down the rule that the judiciary
should "exercise the utmost care and circumspection in passing upon a motion to dismiss on the
ground of the absence thereof [cause of action] lest, by its failure to manifest a correct
appreciation of the facts alleged and deemed hypothetically admitted, what the law grants or
recognizes is effectively nullified. If that happens, there is a blot on the legal order. The law itself
stands in disrepute."
After careful examination of the petitioners' complaint, We find the statements under the
introductory affirmative allegations, as well as the specific averments under the sub-heading
CAUSE OF ACTION, to be adequate enough to show, prima facie, the claimed violation of their
rights. On the basis thereof, they may thus be granted, wholly or partly, the reliefs prayed for. It
bears stressing, however, that insofar as the cancellation of the TLAs is concerned, there is the
need to implead, as party defendants, the grantees thereof for they are indispensable parties.
The foregoing considered, Civil Case No. 90-777 be said to raise a political question. Policy
formulation or determination by the executive or legislative branches of Government is not
squarely put in issue. What is principally involved is the enforcement of a right vis-a-vis policies
already formulated and expressed in legislation. It must, nonetheless, be emphasized that the
political question doctrine is no longer, the insurmountable obstacle to the exercise of judicial
power or the impenetrable shield that protects executive and legislative actions from judicial
inquiry or review. The second paragraph of section 1, Article VIII of the Constitution states that:
Judicial power includes the duty of the courts of justice to settle actual
controversies involving rights which are legally demandable and enforceable, and
to determine whether or not there has been a grave abuse of discretion
amounting to lack or excess of jurisdiction on the part of any branch or
instrumentality of the Government.
Commenting on this provision in his book, Philippine Political Law, 22 Mr. Justice Isagani A. Cruz,
a distinguished member of this Court, says:
The first part of the authority represents the traditional concept of judicial power,
involving the settlement of conflicting rights as conferred as law. The second part
of the authority represents a broadening of judicial power to enable the courts of
justice to review what was before forbidden territory, to wit, the discretion of the
political departments of the government.
As worded, the new provision vests in the judiciary, and particularly the Supreme
Court, the power to rule upon even the wisdom of the decisions of the executive
and the legislature and to declare their acts invalid for lack or excess of
jurisdiction because tainted with grave abuse of discretion. The catch, of course,
is the meaning of "grave abuse of discretion," which is a very elastic phrase that
can expand or contract according to the disposition of the judiciary.

In Daza vs. Singson, 23 Mr. Justice Cruz, now speaking for this Court, noted:
In the case now before us, the jurisdictional objection becomes even less tenable
and decisive. The reason is that, even if we were to assume that the issue
presented before us was political in nature, we would still not be precluded from
revolving it under the expanded jurisdiction conferred upon us that now covers, in
proper cases, even the political question. Article VII, Section 1, of the Constitution
clearly provides: . . .
The last ground invoked by the trial court in dismissing the complaint is the non-impairment of
contracts clause found in the Constitution. The court a quo declared that:
The Court is likewise of the impression that it cannot, no matter how we stretch
our jurisdiction, grant the reliefs prayed for by the plaintiffs, i.e., to cancel all
existing timber license agreements in the country and to cease and desist from
receiving, accepting, processing, renewing or approving new timber license
agreements. For to do otherwise would amount to "impairment of contracts"
abhored (sic) by the fundamental law. 24
We are not persuaded at all; on the contrary, We are amazed, if not shocked, by such a sweeping
pronouncement. In the first place, the respondent Secretary did not, for obvious reasons, even
invoke in his motion to dismiss the non-impairment clause. If he had done so, he would have
acted with utmost infidelity to the Government by providing undue and unwarranted benefits and
advantages to the timber license holders because he would have forever bound the Government
to strictly respect the said licenses according to their terms and conditions regardless of changes
in policy and the demands of public interest and welfare. He was aware that as correctly pointed
out by the petitioners, into every timber license must be read Section 20 of the Forestry Reform
Code (P.D. No. 705) which provides:
. . . Provided, That when the national interest so requires, the President may
amend, modify, replace or rescind any contract, concession, permit, licenses or
any other form of privilege granted herein . . .
Needless to say, all licenses may thus be revoked or rescinded by executive action. It is
not a contract, property or a property right protested by the due process clause of the
Constitution. In Tan vs. Director of Forestry, 25 this Court held:
. . . A timber license is an instrument by which the State regulates the utilization
and disposition of forest resources to the end that public welfare is promoted. A
timber license is not a contract within the purview of the due process clause; it is
only a license or privilege, which can be validly withdrawn whenever dictated by
public interest or public welfare as in this case.
A license is merely a permit or privilege to do what otherwise would be unlawful,
and is not a contract between the authority, federal, state, or municipal, granting it
and the person to whom it is granted; neither is it property or a property right, nor
does it create a vested right; nor is it taxation (37 C.J. 168). Thus, this Court held
that the granting of license does not create irrevocable rights, neither is it
property or property rights (People vs. Ong Tin, 54 O.G. 7576).
We reiterated this pronouncement in Felipe Ysmael, Jr. & Co., Inc. vs. Deputy Executive
Secretary: 26

. . . Timber licenses, permits and license agreements are the principal


instruments by which the State regulates the utilization and disposition of forest
resources to the end that public welfare is promoted. And it can hardly be
gainsaid that they merely evidence a privilege granted by the State to qualified
entities, and do not vest in the latter a permanent or irrevocable right to the
particular concession area and the forest products therein. They may be validly
amended, modified, replaced or rescinded by the Chief Executive when national
interests so require. Thus, they are not deemed contracts within the purview of
the due process of law clause [See Sections 3(ee) and 20 of Pres. Decree No.
705, as amended. Also, Tan v. Director of Forestry, G.R. No. L-24548, October
27, 1983, 125 SCRA 302].
Since timber licenses are not contracts, the non-impairment clause, which reads:
Sec. 10. No law impairing, the obligation of contracts shall be passed.

27

cannot be invoked.
In the second place, even if it is to be assumed that the same are contracts, the instant case does
not involve a law or even an executive issuance declaring the cancellation or modification of
existing timber licenses. Hence, the non-impairment clause cannot as yet be invoked.
Nevertheless, granting further that a law has actually been passed mandating cancellations or
modifications, the same cannot still be stigmatized as a violation of the non-impairment clause.
This is because by its very nature and purpose, such as law could have only been passed in the
exercise of the police power of the state for the purpose of advancing the right of the people to a
balanced and healthful ecology, promoting their health and enhancing the general welfare. In Abe
vs. Foster Wheeler
Corp. 28 this Court stated:
The freedom of contract, under our system of government, is not meant to be
absolute. The same is understood to be subject to reasonable legislative
regulation aimed at the promotion of public health, moral, safety and welfare. In
other words, the constitutional guaranty of non-impairment of obligations of
contract is limited by the exercise of the police power of the State, in the interest
of public health, safety, moral and general welfare.
The reason for this is emphatically set forth in Nebia vs. New York, 29 quoted in Philippine
American Life Insurance Co. vs. Auditor General, 30 to wit:
Under our form of government the use of property and the making of contracts
are normally matters of private and not of public concern. The general rule is that
both shall be free of governmental interference. But neither property rights nor
contract rights are absolute; for government cannot exist if the citizen may at will
use his property to the detriment of his fellows, or exercise his freedom of
contract to work them harm. Equally fundamental with the private right is that of
the public to regulate it in the common interest.
In short, the non-impairment clause must yield to the police power of the state.

31

Finally, it is difficult to imagine, as the trial court did, how the non-impairment clause could apply
with respect to the prayer to enjoin the respondent Secretary from receiving, accepting,
processing, renewing or approving new timber licenses for, save in cases of renewal, no contract
would have as of yet existed in the other instances. Moreover, with respect to renewal, the holder
is not entitled to it as a matter of right.

WHEREFORE, being impressed with merit, the instant Petition is hereby GRANTED, and the
challenged Order of respondent Judge of 18 July 1991 dismissing Civil Case No. 90-777 is
hereby set aside. The petitioners may therefore amend their complaint to implead as defendants
the holders or grantees of the questioned timber license agreements.
No pronouncement as to costs.
SO ORDERED.
Cruz, Padilla, Bidin, Grio-Aquino, Regalado, Romero, Nocon, Bellosillo, Melo and Quiason, JJ.,
concur.
Narvasa, C.J., Puno and Vitug, JJ., took no part.

Separate Opinions

FELICIANO, J., concurring


I join in the result reached by my distinguished brother in the Court, Davide, Jr.,
J., in this case which, to my mind, is one of the most important cases decided by
this Court in the last few years. The seminal principles laid down in this decision
are likely to influence profoundly the direction and course of the protection and
management of the environment, which of course embraces the utilization of all
the natural resources in the territorial base of our polity. I have therefore sought
to clarify, basically to myself, what the Court appears to be saying.
The Court explicitly states that petitioners have the locus standi necessary to
sustain the bringing and, maintenance of this suit (Decision, pp. 11-12). Locus
standi is not a function of petitioners' claim that their suit is properly regarded as
a class suit. I understand locus standi to refer to the legal interest which a plaintiff
must have in the subject matter of the suit. Because of the very broadness of the
concept of "class" here involved membership in this "class" appears to
embrace everyone living in the country whether now or in the
future it appears to me that everyone who may be expected to benefit from the
course of action petitioners seek to require public respondents to take, is vested
with the necessary locus standi. The Court may be seen therefore to be
recognizing a beneficiaries' right of action in the field of environmental protection,
as against both the public administrative agency directly concerned and the
private persons or entities operating in the field or sector of activity involved.
Whether such beneficiaries' right of action may be found under any and all

circumstances, or whether some failure to act, in the first instance, on the part of
the governmental agency concerned must be shown ("prior exhaustion of
administrative remedies"), is not discussed in the decision and presumably is left
for future determination in an appropriate case.
The Court has also declared that the complaint has alleged and focused upon
"one specific fundamental legal right the right to a balanced and healthful
ecology" (Decision, p. 14). There is no question that "the right to a balanced and
healthful ecology" is "fundamental" and that, accordingly, it has been
"constitutionalized." But although it is fundamental in character, I suggest, with
very great respect, that it cannot be characterized as "specific," without doing
excessive violence to language. It is in fact very difficult to fashion language
more comprehensive in scope and generalized in character than a right to "a
balanced and healthful ecology." The list of particular claims which can be
subsumed under this rubic appears to be entirely open-ended: prevention and
control of emission of toxic fumes and smoke from factories and motor vehicles;
of discharge of oil, chemical effluents, garbage and raw sewage into rivers,
inland and coastal waters by vessels, oil rigs, factories, mines and whole
communities; of dumping of organic and inorganic wastes on open land, streets
and thoroughfares; failure to rehabilitate land after strip-mining or open-pit
mining; kaingin or slash-and-burn farming; destruction of fisheries, coral reefs
and other living sea resources through the use of dynamite or cyanide and other
chemicals; contamination of ground water resources; loss of certain species of
fauna and flora; and so on. The other statements pointed out by the Court:
Section 3, Executive Order No. 192 dated 10 June 1987; Section 1, Title XIV,
Book IV of the 1987 Administrative Code; and P.D. No. 1151, dated 6 June 1977
all appear to be formulations of policy, as general and abstract as the
constitutional statements of basic policy in Article II, Section 16 ("the right to a
balanced and healthful ecology") and 15 ("the right to health").
P.D. No. 1152, also dated 6 June 1977, entitled "The Philippine Environment
Code," is, upon the other hand, a compendious collection of more "specific
environment management policies" and "environment quality standards" (fourth
"Whereas" clause, Preamble) relating to an extremely wide range of topics:
(a) air quality management;
(b) water quality management;
(c) land use management;
(d) natural resources management and conservation embracing:
(i) fisheries and aquatic resources;
(ii) wild life;

(iii) forestry and soil conservation;


(iv) flood control and natural calamities;
(v) energy development;
(vi) conservation and utilization of surface and ground water
(vii) mineral resources
Two (2) points are worth making in this connection. Firstly, neither petitioners nor
the Court has identified the particular provision or provisions (if any) of the
Philippine Environment Code which give rise to a specific legal right which
petitioners are seeking to enforce. Secondly, the Philippine Environment Code
identifies with notable care the particular government agency charged with the
formulation and implementation of guidelines and programs dealing with each of
the headings and sub-headings mentioned above. The Philippine Environment
Code does not, in other words, appear to contemplate action on the part of
private persons who are beneficiaries of implementation of that Code.
As a matter of logic, by finding petitioners' cause of action as anchored on a legal
right comprised in the constitutional statements above noted, the Court is in
effect saying that Section 15 (and Section 16) of Article II of the Constitution are
self-executing and judicially enforceable even in their present form. The
implications of this doctrine will have to be explored in future cases; those
implications are too large and far-reaching in nature even to be hinted at here.
My suggestion is simply that petitioners must, before the trial court, show a more
specific legal right a right cast in language of a significantly lower order of
generality than Article II (15) of the Constitution that is or may be violated by
the actions, or failures to act, imputed to the public respondent by petitioners so
that the trial court can validly render judgment granting all or part of the relief
prayed for. To my mind, the Court should be understood as simply saying that
such a more specific legal right or rights may well exist in our corpus of law,
considering the general policy principles found in the Constitution and the
existence of the Philippine Environment Code, and that the trial court should
have given petitioners an effective opportunity so to demonstrate, instead of
aborting the proceedings on a motion to dismiss.
It seems to me important that the legal right which is an essential component of a
cause of action be a specific, operable legal right, rather than a constitutional or
statutory policy, for at least two (2) reasons. One is that unless the legal right
claimed to have been violated or disregarded is given specification in operational
terms, defendants may well be unable to defend themselves intelligently and
effectively; in other words, there are due process dimensions to this matter.

The second is a broader-gauge consideration where a specific violation of law


or applicable regulation is not alleged or proved, petitioners can be expected to
fall back on the expanded conception of judicial power in the second paragraph
of Section 1 of Article VIII of the Constitution which reads:
Section 1. . . .
Judicial power includes the duty of the courts of justice to settle
actual controversies involving rights which are legally demandable
and enforceable, and to determine whether or not there has been a
grave abuse of discretion amounting to lack or excess of jurisdiction
on the part of any branch or instrumentality of the Government.
(Emphasis supplied)
When substantive standards as general as "the right to a balanced and
healthy ecology" and "the right to health" are combined with remedial
standards as broad ranging as "a grave abuse of discretion amounting to
lack or excess of jurisdiction," the result will be, it is respectfully submitted,
to propel courts into the uncharted ocean of social and economic policy
making. At least in respect of the vast area of environmental protection
and management, our courts have no claim to special technical
competence and experience and professional qualification. Where no
specific, operable norms and standards are shown to exist, then the policy
making departments the legislative and executive departments must
be given a real and effective opportunity to fashion and promulgate those
norms and standards, and to implement them before the courts should
intervene.
My learned brother Davide, Jr., J., rightly insists that the timber companies,
whose concession agreements or TLA's petitioners demand public respondents
should cancel, must be impleaded in the proceedings below. It might be asked
that, if petitioners' entitlement to the relief demanded is not dependent upon proof
of breach by the timber companies of one or more of the specific terms and
conditions of their concession agreements (and this, petitioners implicitly
assume), what will those companies litigate about? The answer I suggest is that
they may seek to dispute the existence of the specific legal right petitioners
should allege, as well as the reality of the claimed factual nexus between
petitioners' specific legal rights and the claimed wrongful acts or failures to act of
public respondent administrative agency. They may also controvert the
appropriateness of the remedy or remedies demanded by petitioners, under all
the circumstances which exist.
I vote to grant the Petition for Certiorari because the protection of the
environment, including the forest cover of our territory, is of extreme importance
for the country. The doctrines set out in the Court's decision issued today should,
however, be subjected to closer examination.

# Separate Opinions
FELICIANO, J., concurring
I join in the result reached by my distinguished brother in the Court, Davide, Jr., J., in this case which, to my mind, is one of the
most important cases decided by this Court in the last few years. The seminal principles laid down in this decision are likely to
influence profoundly the direction and course of the protection and management of the environment, which of course embraces
the utilization of all the natural resources in the territorial base of our polity. I have therefore sought to clarify, basically to myself,
what the Court appears to be saying.
The Court explicitly states that petitioners have the locus standi necessary to sustain the bringing and, maintenance of this suit
(Decision, pp. 11-12). Locus standi is not a function of petitioners' claim that their suit is properly regarded as a class suit. I
understand locus standi to refer to the legal interest which a plaintiff must have in the subject matter of the suit. Because of the
very broadness of the concept of "class" here involved membership in this "class" appears to embrace everyone living in the
country whether now or in the
future it appears to me that everyone who may be expected to benefit from the course of action petitioners seek to require
public respondents to take, is vested with the necessary locus standi. The Court may be seen therefore to be recognizing a
beneficiaries' right of action in the field of environmental protection, as against both the public administrative agency directly
concerned and the private persons or entities operating in the field or sector of activity involved. Whether such beneficiaries' right
of action may be found under any and all circumstances, or whether some failure to act, in the first instance, on the part of the
governmental agency concerned must be shown ("prior exhaustion of administrative remedies"), is not discussed in the decision
and presumably is left for future determination in an appropriate case.
The Court has also declared that the complaint has alleged and focused upon "one specific fundamental legal right the right to
a balanced and healthful ecology" (Decision, p. 14). There is no question that "the right to a balanced and healthful ecology" is
"fundamental" and that, accordingly, it has been "constitutionalized." But although it is fundamental in character, I suggest, with
very great respect, that it cannot be characterized as "specific," without doing excessive violence to language. It is in fact very
difficult to fashion language more comprehensive in scope and generalized in character than a right to "a balanced and healthful
ecology." The list of particular claims which can be subsumed under this rubic appears to be entirely open-ended: prevention and
control of emission of toxic fumes and smoke from factories and motor vehicles; of discharge of oil, chemical effluents, garbage
and raw sewage into rivers, inland and coastal waters by vessels, oil rigs, factories, mines and whole communities; of dumping of
organic and inorganic wastes on open land, streets and thoroughfares; failure to rehabilitate land after strip-mining or open-pit
mining; kaingin or slash-and-burn farming; destruction of fisheries, coral reefs and other living sea resources through the use of
dynamite or cyanide and other chemicals; contamination of ground water resources; loss of certain species of fauna and flora; and
so on. The other statements pointed out by the Court: Section 3, Executive Order No. 192 dated 10 June 1987; Section 1, Title
XIV, Book IV of the 1987 Administrative Code; and P.D. No. 1151, dated 6 June 1977 all appear to be formulations of policy, as
general and abstract as the constitutional statements of basic policy in Article II, Section 16 ("the right to a balanced and
healthful ecology") and 15 ("the right to health").
P.D. No. 1152, also dated 6 June 1977, entitled "The Philippine Environment Code," is, upon the other hand, a compendious
collection of more "specific environment management policies" and "environment quality standards" (fourth "Whereas" clause,
Preamble) relating to an extremely wide range of topics:
(a) air quality management;
(b) water quality management;
(c) land use management;
(d) natural resources management and conservation embracing:
(i) fisheries and aquatic resources;
(ii) wild life;
(iii) forestry and soil conservation;
(iv) flood control and natural calamities;

(v) energy development;


(vi) conservation and utilization of surface and ground water
(vii) mineral resources
Two (2) points are worth making in this connection. Firstly, neither petitioners nor the Court has identified the particular provision
or provisions (if any) of the Philippine Environment Code which give rise to a specific legal right which petitioners are seeking to
enforce. Secondly, the Philippine Environment Code identifies with notable care the particular government agency charged with
the formulation and implementation of guidelines and programs dealing with each of the headings and sub-headings mentioned
above. The Philippine Environment Code does not, in other words, appear to contemplate action on the part of private persons
who are beneficiaries of implementation of that Code.
As a matter of logic, by finding petitioners' cause of action as anchored on a legal right comprised in the constitutional statements
above noted, the Court is in effect saying that Section 15 (and Section 16) of Article II of the Constitution are self-executing and
judicially enforceable even in their present form. The implications of this doctrine will have to be explored in future cases; those
implications are too large and far-reaching in nature even to be hinted at here.
My suggestion is simply that petitioners must, before the trial court, show a more specific legal right a right cast in language of
a significantly lower order of generality than Article II (15) of the Constitution that is or may be violated by the actions, or failures
to act, imputed to the public respondent by petitioners so that the trial court can validly render judgment granting all or part of the
relief prayed for. To my mind, the Court should be understood as simply saying that such a more specific legal right or rights may
well exist in our corpus of law, considering the general policy principles found in the Constitution and the existence of the
Philippine Environment Code, and that the trial court should have given petitioners an effective opportunity so to demonstrate,
instead of aborting the proceedings on a motion to dismiss.
It seems to me important that the legal right which is an essential component of a cause of action be a specific, operable legal
right, rather than a constitutional or statutory policy, for at least two (2) reasons. One is that unless the legal right claimed to have
been violated or disregarded is given specification in operational terms, defendants may well be unable to defend themselves
intelligently and effectively; in other words, there are due process dimensions to this matter.
The second is a broader-gauge consideration where a specific violation of law or applicable regulation is not alleged or proved,
petitioners can be expected to fall back on the expanded conception of judicial power in the second paragraph of Section 1 of
Article VIII of the Constitution which reads:
Section 1. . . .
Judicial power includes the duty of the courts of justice to settle actual controversies involving rights which
are legally demandable and enforceable, and to determine whether or not there has been a grave abuse of
discretion amounting to lack or excess of jurisdiction on the part of any branch or instrumentality of the
Government. (Emphasis supplied)
When substantive standards as general as "the right to a balanced and healthy ecology" and "the right to health" are
combined with remedial standards as broad ranging as "a grave abuse of discretion amounting to lack or excess of
jurisdiction," the result will be, it is respectfully submitted, to propel courts into the uncharted ocean of social and
economic policy making. At least in respect of the vast area of environmental protection and management, our courts
have no claim to special technical competence and experience and professional qualification. Where no specific,
operable norms and standards are shown to exist, then the policy making departments the legislative and executive
departments must be given a real and effective opportunity to fashion and promulgate those norms and standards,
and to implement them before the courts should intervene.
My learned brother Davide, Jr., J., rightly insists that the timber companies, whose concession agreements or TLA's petitioners
demand public respondents should cancel, must be impleaded in the proceedings below. It might be asked that, if petitioners'
entitlement to the relief demanded is not dependent upon proof of breach by the timber companies of one or more of the specific
terms and conditions of their concession agreements (and this, petitioners implicitly assume), what will those companies litigate
about? The answer I suggest is that they may seek to dispute the existence of the specific legal right petitioners should allege, as
well as the reality of the claimed factual nexus between petitioners' specific legal rights and the claimed wrongful acts or failures to
act of public respondent administrative agency. They may also controvert the appropriateness of the remedy or remedies
demanded by petitioners, under all the circumstances which exist.
I vote to grant the Petition for Certiorari because the protection of the environment, including the forest cover of our territory, is of
extreme importance for the country. The doctrines set out in the Court's decision issued today should, however, be subjected to
closer examination.
# Footnotes

1 Rollo, 164; 186.


2 Id., 62-65, exclusive of annexes.
3 Under Section 12, Rule 3, Revised Rules of Court.
4 Rollo, 67.
5 Id., 74.
6 Rollo, 70-73.
7 Annex "B" of Petitions; Id., 43-44.
8 Paragraph 7, Petition, 6; Rollo, 20.
9 Webster's Third New International Dictionary, unabridged, 1986, 1508.
10 Title XIV (Environment and Natural Resources), Book IV of the Administrative Code of 1987, E.O. No.
292.
11 Annex "B" of Petition; Rollo, 43-44.
12 Record of the Constitutional Commission, vol. 4, 913.
13 For instance, the Preamble and Article XII on the National Economy and Patrimony.
14 The Reorganization Act of the Department of Environment and Natural Resources.
15 E.O. No. 292.
16 Section 1.
17 Section 2.
18 Ma-ao Sugar Central Co. vs. Barrios, 79 Phil. 666 [1947]; Community Investment and Finance Corp. vs.
Garcia, 88 Phil. 215 [1951]; Remitere vs. Vda. de Yulo, 16 SCRA 251 [1966]; Caseas vs. Rosales, 19
SCRA 462 [1967]; Virata vs. Sandiganbayan, 202 SCRA 680 [1991]; Madrona vs. Rosal, 204 SCRA 1
[1991].
19 Section 1(q), Rule 16, Revised Rules of Court.
20 Adamos vs. J.M. Tuason and Co., Inc. 25 SCRA 529 [1968]; Virata vs. Sandiganbayn, supra; Madrona
vs. Rosal, supra.
21 39 SCRA 473, 479 [1971].
22 1991 ed., 226-227.
23 180 SCRA 496, 501-502 [1989]. See also, Coseteng vs. Mitra, 187 SCRA 377 [1990]; Gonzales vs.
Macaraig, 191 SCRA 452 [1990]; Llamas vs. Orbos, 202 SCRA 844 [1991]; Bengzon vs. Senate Blue
Ribbon Committee, 203 SCRA 767 [1991].
24 Rollo, 44.
25 125 SCRA 302, 325 [1983].
26 190 SCRA 673, 684 [1990].

27 Article III, 1987 Constitution.


28 110 Phil. 198, 203 [1960]; footnotes omitted.
29 291 U.S. 502, 523, 78 L. ed. 940, 947-949.
30 22 SCRA 135, 146-147 [1968].
31 Ongsiako vs. Gamboa, 86 Phil. 50 [1950]; Abe vs. Foster Wheeler Corp. supra.; Phil. American Life
Insurance Co. vs. Auditor General, supra.; Alalayan vs. NPC, 24 SCRA 172[1968]; Victoriano vs. Elizalde
Rope Workers' Union, 59 SCRA 54 [1974]; Kabiling vs. National Housing Authority, 156 SCRA 623 [1987].

The Lawphil Project - Arellano Law Foundation

Republic of the Philippines


SUPREME COURT
Manila
EN BANC
G.R. No. L-20329

March 16, 1923

THE STANDARD OIL COMPANY OF NEW YORK, petitioner,


vs.
JOAQUIN JARAMILLO, as register of deeds of the City of Manila, respondent.
Ross, Lawrence and Selph for petitioner.
City Fiscal Revilla and Assistant City Fiscal Rodas for respondent.
STREET, J.:
This cause is before us upon demurrer interposed by the respondent, Joaquin Jaramillo,
register of deeds of the City of Manila, to an original petition of the Standard Oil
Company of New York, seeking a peremptory mandamus to compel the respondent to
record in the proper register a document purporting to be a chattel mortgage executed in
the City of Manila by Gervasia de la Rosa, Vda. de Vera, in favor of the Standard Oil
Company of New York.
It appears from the petition that on November 27, 1922, Gervasia de la Rosa, Vda. de
Vera, was the lessee of a parcel of land situated in the City of Manila and owner of the
house of strong materials built thereon, upon which date she executed a document in the
form of a chattel mortgage, purporting to convey to the petitioner by way of mortgage
both the leasehold interest in said lot and the building which stands thereon.
The clauses in said document describing the property intended to be thus mortgage are
expressed in the following words:

Now, therefore, the mortgagor hereby conveys and transfer to the mortgage, by
way of mortgage, the following described personal property, situated in the City
of Manila, and now in possession of the mortgagor, to wit:
(1) All of the right, title, and interest of the mortgagor in and to the contract of
lease hereinabove referred to, and in and to the premises the subject of the said
lease;
(2) The building, property of the mortgagor, situated on the aforesaid leased
premises.
After said document had been duly acknowledge and delivered, the petitioner caused the
same to be presented to the respondent, Joaquin Jaramillo, as register of deeds of the City
of Manila, for the purpose of having the same recorded in the book of record of chattel
mortgages. Upon examination of the instrument, the respondent was of the opinion that it
was not a chattel mortgage, for the reason that the interest therein mortgaged did not
appear to be personal property, within the meaning of the Chattel Mortgage Law, and
registration was refused on this ground only.
We are of the opinion that the position taken by the respondent is untenable; and it is his
duty to accept the proper fee and place the instrument on record. The duties of a register
of deeds in respect to the registration of chattel mortgage are of a purely ministerial
character; and no provision of law can be cited which confers upon him any judicial or
quasi-judicial power to determine the nature of any document of which registration is
sought as a chattel mortgage.
The original provisions touching this matter are contained in section 15 of the Chattel
Mortgage Law (Act No. 1508), as amended by Act No. 2496; but these have been
transferred to section 198 of the Administrative Code, where they are now found. There is
nothing in any of these provisions conferring upon the register of deeds any authority
whatever in respect to the "qualification," as the term is used in Spanish law, of chattel
mortgage. His duties in respect to such instruments are ministerial only. The efficacy of
the act of recording a chattel mortgage consists in the fact that it operates as constructive
notice of the existence of the contract, and the legal effects of the contract must be
discovered in the instrument itself in relation with the fact of notice. Registration adds
nothing to the instrument, considered as a source of title, and affects nobody's rights
except as a specifies of notice.
Articles 334 and 335 of the Civil Code supply no absolute criterion for discriminating
between real property and personal property for purpose of the application of the Chattel
Mortgage Law. Those articles state rules which, considered as a general doctrine, are law
in this jurisdiction; but it must not be forgotten that under given conditions property may
have character different from that imputed to it in said articles. It is undeniable that the
parties to a contract may by agreement treat as personal property that which by nature
would be real property; and it is a familiar phenomenon to see things classed as real
property for purposes of taxation which on general principle might be considered

personal property. Other situations are constantly arising, and from time to time are
presented to this court, in which the proper classification of one thing or another as real
or personal property may be said to be doubtful.
The point submitted to us in this case was determined on September 8, 1914, in an
administrative ruling promulgated by the Honorable James A. Ostrand, now a Justice of
this Court, but acting at that time in the capacity of Judge of the fourth branch of the
Court of First Instance of the Ninth Judicial District, in the City of Manila; and little of
value can be here added to the observations contained in said ruling. We accordingly
quote therefrom as follows:
It is unnecessary here to determine whether or not the property described in the
document in question is real or personal; the discussion may be confined to the
point as to whether a register of deeds has authority to deny the registration of a
document purporting to be a chattel mortgage and executed in the manner and
form prescribed by the Chattel Mortgage Law.
Then, after quoting section 5 of the Chattel Mortgage Law (Act No. 1508), his Honor
continued:
Based principally upon the provisions of section quoted the Attorney-General of
the Philippine Islands, in an opinion dated August 11, 1909, held that a register of
deeds has no authority to pass upon the capacity of the parties to a chattel
mortgage which is presented to him for record. A fortiori a register of deeds can
have no authority to pass upon the character of the property sought to be
encumbered by a chattel mortgage. Of course, if the mortgaged property is real
instead of personal the chattel mortgage would no doubt be held ineffective as
against third parties, but this is a question to be determined by the courts of justice
and not by the register of deeds.
In Leung Yee vs. Frank L. Strong Machinery Co. and Williamson (37 Phil., 644), this
court held that where the interest conveyed is of the nature of real, property, the placing
of the document on record in the chattel mortgage register is a futile act; but that decision
is not decisive of the question now before us, which has reference to the function of the
register of deeds in placing the document on record.
In the light of what has been said it becomes unnecessary for us to pass upon the point
whether the interests conveyed in the instrument now in question are real or personal; and
we declare it to be the duty of the register of deeds to accept the estimate placed upon the
document by the petitioner and to register it, upon payment of the proper fee.
The demurrer is overruled; and unless within the period of five days from the date of the
notification hereof, the respondent shall interpose a sufficient answer to the petition, the
writ of mandamus will be issued, as prayed, but without costs. So ordered.
Araullo, C.J., Malcolm, Avancea, Ostrand, Johns, and Romualdez, JJ., concur.

The Lawphil Project - Arellano Law Foundation

Republic of the Philippines


SUPREME COURT
Manila
EN BANC

G.R. No. 106041 January 29, 1993


BENGUET CORPORATION, petitioner,
vs.
CENTRAL BOARD OF ASSESSMENT APPEALS, BOARD OF ASSESSMENT APPEALS OF ZAMBALES, PROVINCIAL
ASSESSOR OF ZAMBALES, PROVINCE OF ZAMBALES, and MUNICIPALITY OF SAN MARCELINO, respondents.
Romulo, Mabanta, Buenaventura, Sayoc & De los Angeles for petitioner.

CRUZ, J.:
The realty tax assessment involved in this case amounts to P11,319,304.00. It has been imposed on the petitioner's tailings dam
and the land thereunder over its protest.
The controversy arose in 1985 when the Provincial Assessor of Zambales assessed the said properties as taxable improvements.
The assessment was appealed to the Board of Assessment Appeals of the Province of Zambales. On August 24, 1988, the appeal
was dismissed mainly on the ground of the petitioner's "failure to pay the realty taxes that fell due during the pendency of the
appeal."
1

one of the herein


respondents. In its decision dated March 22, 1990, the Board reversed the dismissal of the
appeal but, on the merits, agreed that "the tailings dam and the lands submerged thereunder
(were) subject to realty tax."
The petitioner seasonably elevated the matter to the Central Board of Assessment Appeals,

For purposes of taxation the dam is considered as real property as it comes


within the object mentioned in paragraphs (a) and (b) of Article 415 of the New
Civil Code. It is a construction adhered to the soil which cannot be separated or
detached without breaking the material or causing destruction on the land upon
which it is attached. The immovable nature of the dam as an improvement
determines its character as real property, hence taxable under Section 38 of the
Real Property Tax Code. (P.D. 464).
Although the dam is partly used as an anti-pollution device, this Board cannot
accede to the request for tax exemption in the absence of a law authorizing the
same.
xxx xxx xxx
We find the appraisal on the land submerged as a result of the construction of the
tailings dam, covered by Tax Declaration Nos.

002-0260 and 002-0266, to be in accordance with the Schedule of Market Values


for Zambales which was reviewed and allowed for use by the Ministry
(Department) of Finance in the 1981-1982 general revision. No serious attempt
was made by Petitioner-Appellant Benguet Corporation to impugn its
reasonableness, i.e., that the P50.00 per square meter applied by RespondentAppellee Provincial Assessor is indeed excessive and unconscionable. Hence,
we find no cause to disturb the market value applied by Respondent Appellee
Provincial Assessor of Zambales on the properties of Petitioner-Appellant
Benguet Corporation covered by Tax Declaration Nos. 002-0260 and 002-0266.
This petition for certiorari now seeks to reverse the above ruling.
The principal contention of the petitioner is that the tailings dam is not subject to realty tax
because it is not an "improvement" upon the land within the meaning of the Real Property Tax
Code. More particularly, it is claimed
(1) as regards the tailings dam as an "improvement":
(a) that the tailings dam has no value separate from and
independent of the mine; hence, by itself it cannot be considered
an improvement separately assessable;
(b) that it is an integral part of the mine;
(c) that at the end of the mining operation of the petitioner
corporation in the area, the tailings dam will benefit the local
community by serving as an irrigation facility;
(d) that the building of the dam has stripped the property of any
commercial value as the property is submerged under water
wastes from the mine;
(e) that the tailings dam is an environmental pollution control
device for which petitioner must be commended rather than
penalized with a realty tax assessment;
(f) that the installation and utilization of the tailings dam as a
pollution control device is a requirement imposed by law;
(2) as regards the valuation of the tailings dam and the submerged lands:
(a) that the subject properties have no market value as they
cannot be sold independently of the mine;
(b) that the valuation of the tailings dam should be based on its
incidental use by petitioner as a water reservoir and not on the
alleged cost of construction of the dam and the annual build-up
expense;
(c) that the "residual value formula" used by the Provincial
Assessor and adopted by respondent CBAA is arbitrary and
erroneous; and

(3) as regards the petitioner's liability for penalties for


non-declaration of the tailings dam and the submerged lands for realty tax
purposes:
(a) that where a tax is not paid in an honest belief that it is not
due, no penalty shall be collected in addition to the basic tax;
(b) that no other mining companies in the Philippines operating a
tailings dam have been made to declare the dam for realty tax
purposes.
The petitioner does not dispute that the tailings dam may be considered realty within the meaning
of Article 415. It insists, however, that the dam cannot be subjected to realty tax as a separate
and independent property because it does not constitute an "assessable improvement" on the
mine although a considerable sum may have been spent in constructing and maintaining it.
To support its theory, the petitioner cites the following cases:
1. Municipality of Cotabato v. Santos (105 Phil. 963), where this Court considered the dikes and
gates constructed by the taxpayer in connection with a fishpond operation as integral parts of the
fishpond.
2. Bislig Bay Lumber Co. v. Provincial Government of Surigao (100 Phil. 303), involving a road
constructed by the timber concessionaire in the area, where this Court did not impose a realty tax
on the road primarily for two reasons:
In the first place, it cannot be disputed that the ownership of the road that was
constructed by appellee belongs to the government by right of accession not only
because it is inherently incorporated or attached to the timber land . . . but also
because upon the expiration of the concession said road would ultimately pass to
the national government. . . . In the second place, while the road was constructed
by appellee primarily for its use and benefit, the privilege is not exclusive, for . . .
appellee cannot prevent the use of portions of the concession for homesteading
purposes. It is also duty bound to allow the free use of forest products within the
concession for the personal use of individuals residing in or within the vicinity of
the land. . . . In other words, the government has practically reserved the rights to
use the road to promote its varied activities. Since, as above shown, the road in
question cannot be considered as an improvement which belongs to appellee,
although in part is for its benefit, it is clear that the same cannot be the subject of
assessment within the meaning of Section 2 of C.A.
No. 470.
Apparently, the realty tax was not imposed not because the road was an integral part of the
lumber concession but because the government had the right to use the road to promote its
varied activities.
3. Kendrick v. Twin Lakes Reservoir Co. (144 Pacific 884), an American case, where it was
declared that the reservoir dam went with and formed part of the reservoir and that the dam
would be "worthless and useless except in connection with the outlet canal, and the water rights
in the reservoir represent and include whatever utility or value there is in the dam and
headgates."

4. Ontario Silver Mining Co. v. Hixon (164 Pacific 498), also from the United States. This case
involved drain tunnels constructed by plaintiff when it expanded its mining operations downward,
resulting in a constantly increasing flow of water in the said mine. It was held that:
Whatever value they have is connected with and in fact is an integral part of the
mine itself. Just as much so as any shaft which descends into the earth or an
underground incline, tunnel, or drift would be which was used in connection with
the mine.
On the other hand, the Solicitor General argues that the dam is an assessable improvement
because it enhances the value and utility of the mine. The primary function of the dam is to
receive, retain and hold the water coming from the operations of the mine, and it also enables the
petitioner to impound water, which is then recycled for use in the plant.
There is also ample jurisprudence to support this view, thus:
. . . 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 [Phil.] Inc. v. CBAA, 114 SCRA 296).
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. (Manila
Electric Co. v. CBAA, 114 SCRA 273).
The pipeline system in question is indubitably a construction adhering to the soil.
It is attached to the land in such a way that it cannot be separated therefrom
without dismantling the steel pipes which were welded to form the pipeline.
(MERALCO Securities Industrial Corp. v. CBAA, 114 SCRA 261).
The tax upon the dam was properly assessed to the plaintiff as a tax upon real
estate. (Flax-Pond Water Co. v. City of Lynn, 16 N.E. 742).
The oil tanks are structures within the statute, that they are designed and used
by the owner as permanent improvement of the free hold, and that for such
reasons they were properly assessed by the respondent taxing district as
improvements. (Standard Oil Co. of New Jersey v. Atlantic City, 15 A 2d. 271)
The Real Property Tax Code does not carry a definition of "real property" and simply says that the
realty tax is imposed on "real property, such as lands, buildings, machinery and other
improvements affixed or attached to real property." In the absence of such a definition, we apply
Article 415 of the Civil Code, the pertinent portions of which state:
Art. 415. The following are immovable property.
(1) Lands, buildings 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.
Section 2 of C.A. No. 470, otherwise known as the Assessment Law, provides that the realty tax
is due "on the real property, including land, buildings, machinery and other improvements" not
specifically exempted in Section 3 thereof. A reading of that section shows that the tailings dam of
the petitioner does not fall under any of the classes of exempt real properties therein enumerated.
Is the tailings dam an improvement on the mine? Section 3(k) of the Real Property Tax Code
defines improvement as follows:
(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
adopt it for new or further purposes.
The term has also been interpreted as "artificial alterations of the physical condition of the ground
that are reasonably permanent in character." 2
The Court notes that in the Ontario case the plaintiff admitted that the mine involved therein could
not be operated without the aid of the drain tunnels, which were indispensable to the successful
development and extraction of the minerals therein. This is not true in the present case.
Even without the tailings dam, the petitioner's mining operation can still be carried out because
the primary function of the dam is merely to receive and retain the wastes and water coming from
the mine. There is no allegation that the water coming from the dam is the sole source of water
for the mining operation so as to make the dam an integral part of the mine. In fact, as a result of
the construction of the dam, the petitioner can now impound and recycle water without having to
spend for the building of a water reservoir. And as the petitioner itself points out, even if the
petitioner's mine is shut down or ceases operation, the dam may still be used for irrigation of the
surrounding areas, again unlike in the Ontario case.
As correctly observed by the CBAA, the Kendrick case is also not applicable because it involved
water reservoir dams used for different purposes and for the benefit of the surrounding areas. By
contrast, the tailings dam in question is being used exclusively for the benefit of the petitioner.
Curiously, the petitioner, while vigorously arguing that the tailings dam has no separate existence,
just as vigorously contends that at the end of the mining operation the tailings dam will serve the
local community as an irrigation facility, thereby implying that it can exist independently of the
mine.
From the definitions and the cases cited above, it would appear that whether a structure
constitutes an improvement so as to partake of the status of realty would depend upon the
degree of permanence intended in its construction and use. The expression "permanent" as
applied to an improvement does not imply that the improvement must be used perpetually but
only until the purpose to which the principal realty is devoted has been accomplished. It is
sufficient that the improvement is intended to remain as long as the land to which it is annexed is
still used for the said purpose.

The Court is convinced that the subject dam falls within the definition of an "improvement"
because it is permanent in character and it enhances both the value and utility of petitioner's
mine. Moreover, the immovable nature of the dam defines its character as real property under
Article 415 of the Civil Code and thus makes it taxable under Section 38 of the Real Property Tax
Code.
The Court will also reject the contention that the appraisal at P50.00 per square meter made by
the Provincial Assessor is excessive and that his use of the "residual value formula" is arbitrary
and erroneous.
Respondent Provincial Assessor explained the use of the "residual value formula" as follows:
A 50% residual value is applied in the computation because, while it is true that
when slime fills the dike, it will then be covered by another dike or stage, the
stage covered is still there and still exists and since only one face of the dike is
filled, 50% or the other face is unutilized.
In sustaining this formula, the CBAA gave the following justification:
We find the appraisal on the land submerged as a result of the construction of the
tailings dam, covered by Tax Declaration Nos.
002-0260 and 002-0266, to be in accordance with the Schedule of Market Values
for San Marcelino, Zambales, which is fifty (50.00) pesos per square meter for
third class industrial land (TSN, page 17, July 5, 1989) and Schedule of Market
Values for Zambales which was reviewed and allowed for use by the Ministry
(Department) of Finance in the 1981-1982 general revision. No serious attempt
was made by Petitioner-Appellant Benguet Corporation to impugn its
reasonableness, i.e, that the P50.00 per square meter applied by RespondentAppellee Provincial Assessor is indeed excessive and unconscionable. Hence,
we find no cause to disturb the market value applied by Respondent-Appellee
Provincial Assessor of Zambales on the properties of Petitioner-Appellant
Benguet Corporation covered by Tax Declaration Nos. 002-0260 and 002-0266.
It has been the long-standing policy of this Court to respect the conclusions of quasi-judicial
agencies like the CBAA, which, because of the nature of its functions and its frequent exercise
thereof, has developed expertise in the resolution of assessment problems. The only exception to
this rule is where it is clearly shown that the administrative body has committed grave abuse of
discretion calling for the intervention of this Court in the exercise of its own powers of review.
There is no such showing in the case at bar.
We disagree, however, with the ruling of respondent CBAA that it cannot take cognizance of the
issue of the propriety of the penalties imposed upon it, which was raised by the petitioner for the
first time only on appeal. The CBAA held that this "is an entirely new matter that petitioner can
take up with the Provincial Assessor (and) can be the subject of another protest before the Local
Board or a negotiation with the local sanggunian . . ., and in case of an adverse decision by either
the Local Board or the local sanggunian, (it can) elevate the same to this Board for appropriate
action."
There is no need for this time-wasting procedure. The Court may resolve the issue in this petition
instead of referring it back to the local authorities. We have studied the facts and circumstances
of this case as above discussed and find that the petitioner has acted in good faith in questioning
the assessment on the tailings dam and the land submerged thereunder. It is clear that it has not
done so for the purpose of evading or delaying the payment of the questioned tax. Hence, we

hold that the petitioner is not subject to penalty for its


non-declaration of the tailings dam and the submerged lands for realty tax purposes.
WHEREFORE, the petition is DISMISSED for failure to show that the questioned decision of
respondent Central Board of Assessment Appeals is tainted with grave abuse of discretion except
as to the imposition of penalties upon the petitioner which is hereby SET ASIDE. Costs against
the petitioner. It is so ordered.
Narvasa, C.J., Gutierrez, Jr., Padilla, Bidin, Grio-Aquino, Regalado, Davide, Jr., Romero, Nocon,
Bellosillo, Melo and Campos, Jr., JJ., concur.
Feliciano, J., took no part.

# Footnotes
1 Secretary of Finance Jesus Estanislao as chairman with Secretary of Justice Franklin M. Drilon and
Secretary of Local Government Luis T. Santos as members.
2 Francisco, Philippine Mining Law, Vol. 1, 2nd Ed., p. 274.

The Lawphil Project - Arellano Law Foundation

Republic of the Philippines


SUPREME COURT
Manila
EN BANC
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.

The Davao Saw Mill Co., Inc., is the holder of a lumber concession from the Government
of the Philippine Islands. It has operated a sawmill in the sitio of Maa, barrio of Tigatu,
municipality of Davao, Province of Davao. However, the land upon which the business
was conducted belonged to another person. On the land the sawmill company erected a
building which housed the machinery used by it. Some of the implements thus used were
clearly personal property, the conflict concerning machines which were placed and
mounted on foundations of cement. In the contract of lease between the sawmill company
and the owner of the land there appeared the following provision:
That on the expiration of the period agreed upon, all the improvements and
buildings introduced and erected by the party of the second part shall pass to the
exclusive ownership of the party of the first part without any obligation on its part
to pay any amount for said improvements and buildings; also, in the event the
party of the second part should leave or abandon the land leased before the time
herein stipulated, the improvements and buildings shall likewise pass to the
ownership of the party of the first part as though the time agreed upon had
expired: Provided, however, That the machineries and accessories are not
included in the improvements which will pass to the party of the first part on the
expiration or abandonment of the land leased.
In another action, wherein the Davao Light & Power Co., Inc., was the plaintiff and the
Davao, Saw, Mill Co., Inc., was the defendant, a judgment was rendered in favor of the
plaintiff in that action against the defendant in that action; a writ of execution issued
thereon, and the properties now in question were levied upon as personalty by the sheriff.
No third party claim was filed for such properties at the time of the sales thereof as is
borne out by the record made by the plaintiff herein. Indeed the bidder, which was the
plaintiff in that action, and the defendant herein having consummated the sale, proceeded
to take possession of the machinery and other properties described in the corresponding
certificates of sale executed in its favor by the sheriff of Davao.
As connecting up with the facts, it should further be explained that the Davao Saw Mill
Co., Inc., has on a number of occasions treated the machinery as personal property by
executing chattel mortgages in favor of third persons. One of such persons is the appellee
by assignment from the original mortgages.
Article 334, paragraphs 1 and 5, of the Civil Code, is in point. According to the Code,
real property consists of
1. Land, buildings, roads and constructions of all kinds adhering to the soil;
xxx

xxx

xxx

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


of any building or land for use in connection with any industry or trade being
carried on therein and which are expressly adapted to meet the requirements of
such trade of industry.

Appellant emphasizes the first paragraph, and appellees the last mentioned paragraph. We
entertain no doubt that the trial judge and appellees are right in their appreciation of the
legal doctrines flowing from the facts.
In the first place, it must again be pointed out that the appellant should have registered its
protest before or at the time of the sale of this property. It must further be pointed out that
while not conclusive, the characterization of the property as chattels by the appellant is
indicative of intention and impresses upon the property the character determined by the
parties. In this connection the decision of this court in the case of Standard Oil Co. of
New 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.
xxx

xxx

xxx

The machinery levied upon by Nevers & Callaghan, that is, that which was placed
in the plant by the Altagracia Company, being, as regards Nevers & Callaghan,
movable property, it follows that they had the right to levy on it under the
execution upon the judgment in their favor, and the exercise of that right did not
in a legal sense conflict with the claim of Valdes, since as to him the property was
a part of the realty which, as the result of his obligations under the lease, he could
not, for the purpose of collecting his debt, proceed separately against. (Valdes vs.
Central Altagracia [192], 225 U.S., 58.)
Finding no reversible error in the record, the judgment appealed from will be affirmed,
the costs of this instance to be paid by the appellant.
Villa-Real, Imperial, Butte, and Goddard, JJ., concur.

The Lawphil Project - Arellano Law Foundation

Republic of the Philippines


SUPREME COURT
Manila

EN BANC
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 abovementioned 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";

(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, jeep-wagons, 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.
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.
Bengzon, C.J., Padilla, Bautista Angelo, Reyes, J.B.L., Paredes, Dizon and Makalintal,
JJ., concur.
Regala, Concepcion and Barrera JJ., took no part.

The Lawphil Project - Arellano Law Foundation

Republic of the Philippines


SUPREME COURT
Manila
EN BANC
G.R. No. L-41643

July 31, 1935

B.H. BERKENKOTTER, plaintiff-appellant,


vs.
CU UNJIENG E HIJOS, YEK TONG LIN FIRE AND MARINE INSURANCE
COMPANY, MABALACAT SUGAR COMPANY and THE PROVINCE SHERIFF
OF PAMPANGA, defendants-appellees.
Briones and Martinez for appellant.
Araneta, Zaragoza and Araneta for appellees Cu Unjieng e Hijos.
No appearance for the other appellees.
VILLA-REAL, J.:
This is an appeal taken by the plaintiff, B.H. Berkenkotter, from the judgment of the
Court of First Instance of Manila, dismissing said plaintiff's complaint against Cu
Unjiengs e Hijos et al., with costs.
In support of his appeal, the appellant assigns six alleged errors as committed by the trial
court in its decision in question which will be discussed in the course of this decision.

The first question to be decided in this appeal, which is raised in the first assignment of
alleged error, is whether or not the lower court erred in declaring that the additional
machinery and equipment, as improvement incorporated with the central are subject to
the mortgage deed executed in favor of the defendants Cu Unjieng e Hijos.
It is admitted by the parties that on April 26, 1926, the Mabalacat Sugar Co., Inc., owner
of the sugar central situated in Mabalacat, Pampanga, obtained from the defendants, Cu
Unjieng e Hijos, a loan secured by a first mortgage constituted on two parcels and land
"with all its buildings, improvements, sugar-cane mill, steel railway, telephone line,
apparatus, utensils and whatever forms part or is necessary complement of said sugarcane mill, steel railway, telephone line, now existing or that may in the future exist is said
lots."
On October 5, 1926, shortly after said mortgage had been constituted, the Mabalacat
Sugar Co., Inc., 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 approximately
P100,000. In order to carry out this plan, B.A. Green, president of said corporation,
proposed to the plaintiff, 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, the herein defendants Cu Unjieng e
Hijos. Having agreed to said proposition made in a letter dated October 5, 1926 (Exhibit
E), B.H. Berkenkotter, on October 9th of the same year, delivered the sum of P1,710 to
B.A. Green, president of the Mabalacat Sugar Co., Inc., the total amount supplied by him
to said 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 now in litigation.
On June 10, 1927, B.A. Green, president of the Mabalacat Sugar Co., Inc., 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 April 27, 1927, together with
whatever additional equipment acquired with said loan. B.A. Green failed to obtain said
loan.
Article 1877 of the Civil Code provides as follows.
ART. 1877. A 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 estate continues in
the possession of the person who mortgaged it or whether it passes into the hands
of a third person.

In the case of Bischoff vs. Pomar and Compaia General de Tabacos (12 Phil., 690),
cited with approval in the case of Cea vs. Villanueva (18 Phil., 538), this court laid shown
the following doctrine:
1. REALTY; MORTGAGE OF REAL ESTATE 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].)
2. ID.; ID.; INCLUSION OR EXCLUSION OF MACHINERY, ETC. 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.
The appellant contends that the installation of the machinery and equipment claimed by
him in the sugar central of the Mabalacat Sugar Company, Inc., was not permanent in
character inasmuch as B.A. Green, in proposing to him to advance the money for the
purchase thereof, made it appear in the letter, Exhibit E, that in case B.A. Green should
fail to obtain an additional loan from the defendants 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 said plaintiff be fully reimbursed for the
corporation's indebtedness to him.
Upon acquiring the machinery and equipment in question with money obtained as loan
from the plaintiff-appellant by B.A. Green, as president of the Mabalacat Sugar Co., Inc.,
the latter became owner of said machinery and equipment, otherwise B.A. Green, as such
president, could not have offered them to the plaintiff as security for the payment of his
credit.
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.
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 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 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.
Furthermore, the fact that B.A. Green bound himself to the plaintiff B.H. Berkenkotter to
hold said machinery and equipment as security for the payment of the latter's credit and
to refrain from mortgaging or otherwise encumbering them until Berkenkotter has been
fully reimbursed therefor, is not incompatible with the permanent character of the
incorporation of said machinery and equipment with the sugar central of the Mabalacat
Sugar Co., Inc., as nothing could prevent B.A. Green from giving them as security at
least under a second mortgage.
As to the alleged sale of said machinery and equipment to the plaintiff and appellant after
they had been permanently incorporated with sugar central of the Mabalacat Sugar Co.,
Inc., and while the mortgage constituted on said sugar central to Cu Unjieng e Hijos
remained in force, only the right of redemption of the vendor Mabalacat Sugar Co., Inc.,
in the sugar central with which said machinery and equipment had been incorporated,
was transferred thereby, subject to the right of the defendants Cu Unjieng e Hijos under
the first mortgage.
For the foregoing considerations, we are of the opinion and so hold: (1) That 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); (2) that the fact that the purchaser of the new machinery and equipment has
bound himself to the person supplying him the purchase money to hold them as security
for the payment of the latter's credit, and to refrain from mortgaging or otherwise
encumbering them does not alter the permanent character of the incorporation of said
machinery and equipment with the central; and (3) that the sale of the machinery and
equipment in question by the purchaser who was supplied the purchase money, as a loan,
to the person who supplied the money, after the incorporation thereof with the mortgaged
sugar central, does not vest the creditor with ownership of said machinery and equipment
but simply with the right of redemption.
Wherefore, finding no error in the appealed judgment, it is affirmed in all its parts, with
costs to the appellant. So ordered.
Malcolm, Imperial, Butte, and Goddard, JJ., concur.

The Lawphil Project - Arellano Law Foundation

Republic of the Philippines


SUPREME COURT
Manila
EN BANC
G.R. No. L-17898

October 31, 1962

PASTOR D. AGO, petitioner,


vs.
THE HON. COURT OF APPEALS, HON. MONTANO A. ORTIZ, Judge of the
Court of First Instance of Agusan, THE PROVINCIAL SHERIFF OF SURIGAO
and GRACE PARK ENGINEERING, INC., respondents.
Jose M. Luison for petitioner.
Norberto J. Quisumbing for respondent Grace Park Engineering, Inc.
The Provincial Fiscal of Surigao for respondent Sheriff of Surigao.
LABRABOR, J.:
Appeal by certiorari to review the decision of respondent Court of Appeals in CA-G.R.
No. 26723-R entitled "Pastor D. Ago vs. The Provincial Sheriff of Surigao, et al." which
in part reads:
In this case for certiorari and prohibition with preliminary injunction, it appears
from the records that the respondent Judge of the Court of First Instance of
Agusan rendered judgment (Annex "A") in open court on January 28, 1959,
basing said judgment on a compromise agreement between the parties.
On August 15, 1959, upon petition, the Court of First Instance issued a writ of
execution.
Petitioner's motion for reconsideration dated October 12, 1959 alleges that he, or
his counsel, did not receive a formal and valid notice of said decision, which
motion for reconsideration was denied by the court below in the order of
November 14, 1959.
Petitioner now contends that the respondent Judge exceeded in his jurisdiction in
rendering the execution without valid and formal notice of the decision.
A compromise agreement is binding between the parties and becomes the law
between them. (Gonzales vs. Gonzales G.R. No. L-1254, May 21, 1948, 81 Phil.
38; Martin vs. Martin, G.R. No. L-12439, May 22, 1959) .
It is a general rule in this jurisdiction that a judgment based on a compromise
agreement is not appealable and is immediately executory, unless a motion is filed

on the ground fraud, mistake or duress. (De los Reyes vs. Ugarte, 75 Phil. 505;
Lapena vs. Morfe, G.R. No. L-10089, July 31, 1957)
Petitioner's claim that he was not notified or served notice of the decision is
untenable. The judgment on the compromise agreement rendered by the court
below dated January 28, 1959, was given in open court. This alone is a substantial
compliance as to notice. (De los Reyes vs. Ugarte, supra)
IN VIEW THEREOF, we believe that the lower court did not exceed nor abuse its
jurisdiction in ordering the execution of the judgment. The petition for certiorari
is hereby dismissed and the writ of preliminary injunction heretofore dissolved,
with costs against the petitioner.
IT IS SO ORDERED.
The facts of the case may be briefly stated as follows: In 1957, petitioner Pastor D. Ago
bought sawmill machineries and equipments from respondent Grace Park Engineer
domineering, Inc., executing a chattel mortgage over said machineries and equipments to
secure the payment of balance of the price remaining unpaid of P32,000.00, which
petitioner agreed to pay on installment basis.
Petitioner Ago defaulted in his payment and so, in 1958 respondent Grace Park
Engineering, Inc. instituted extra-judicial foreclosure proceedings of the mortgage. To
enjoin said foreclosure, petitioner herein instituted Special Civil Case No. 53 in the Court
of First Instance of Agusan. The parties to the case arrived at a compromise agreement
and submitted the same in court in writing, signed by Pastor D. Ago and the Grace Park
Engineering, Inc. The Hon. Montano A. Ortiz, Judge of the Court of First Instance of
Agusan, then presiding, dictated a decision in open court on January 28, 1959.
Petitioner continued to default in his payments as provided in the judgment by
compromise, so Grace Park Engineering, Inc. filed with the lower court a motion for
execution, which was granted by the court on August 15, 1959. A writ of execution, dated
September 23, 1959, later followed.
The herein respondent, Provincial Sheriff of Surigao, acting upon the writ of execution
issued by the lower court, levied upon and ordered the sale of the sawmill machineries
and equipments in question. These machineries and equipments had been taken to and
installed in a sawmill building located in Lianga, Surigao del Sur, and owned by the
Golden Pacific Sawmill, Inc., to whom, petitioner alleges, he had sold them on February
16, 1959 (a date after the decision of the lower court but before levy by the Sheriff).
Having been advised by the sheriff that the public auction sale was set for December 4,
1959, petitioner, on December 1, 1959, filed the petition for certiorari and prohibition
with preliminary injunction with respondent Court of Appeals, alleging that a copy of the
aforementioned judgment given in open court on January 28, 1959 was served upon
counsel for petitioner only on September 25, 1959 (writ of execution is dated September

23, 1959); that the order and writ of execution having been issued by the lower court
before counsel for petitioner received a copy of the judgment, its resultant last order that
the "sheriff may now proceed with the sale of the properties levied constituted a grave
abuse of discretion and was in excess of its jurisdiction; and that the respondent
Provincial Sheriff of Surigao was acting illegally upon the allegedly void writ of
execution by levying the same upon the sawmill machineries and equipments which have
become real properties of the Golden Pacific sawmill, Inc., and is about to proceed in
selling the same without prior publication of the notice of sale thereof in some newspaper
of general circulation as required by the Rules of Court.
The Court of Appeals, on December 8, 1959, issued a writ of preliminary injunction
against the sheriff but it turned out that the latter had already sold at public auction the
machineries in question, on December 4, 1959, as scheduled. The respondent Grace Park
Engineering, Inc. was the only bidder for P15,000.00, although the certificate sale was
not yet executed. The Court of Appeals constructed the sheriff to suspend the issuance of
a certificate of sale of the said sawmill machineries and equipment sold by him on
December 4, 1959 until the final decision of the case. On November 9, 1960 the Court of
Appeals rendered the aforequoted decision.
Before this Court, petitioner alleges that the Court of Appeals erred (1) in holding that the
rendition of judgment on compromise in open court on January 1959 was a sufficient
notice; and (2) in not resolving the other issues raised before it, namely, (a) the legality of
the public auction sale made by the sheriff, and (b) the nature of the machineries in
question, whether they are movables or immovables.
The Court of Appeals held that as a judgment was entered by the court below in open
court upon the submission of the compromise agreement, the parties may be considered
as having been notified of said judgment and this fact constitutes due notice of said
judgment. This raises the following legal question: Is the order dictated in open court of
the judgment of the court, and is the fact the petitioner herein was present in open court
was the judgment was dictated, sufficient notice thereof? The provisions of the Rules of
Court decree otherwise. Section 1 of Rule 35 describes the manner in which judgment
shall be rendered, thus:
SECTION 1. How judgment rendered. All judgments determining the merits of
cases shall be in writing personally and directly prepared by the judge, and signed
by him, stating clearly and distinctly the facts and the law on which it is based,
filed with the clerk of the court.
The court of first instance being a court of record, in order that a judgment may be
considered as rendered, must not only be in writing, signed by the judge, but it must also
be filed with the clerk of court. The mere pronouncement of the judgment in open court
with the stenographer taking note thereof does not, therefore, constitute a rendition of the
judgment. It is the filing of the signed decision with the clerk of court that constitutes
rendition. While it is to be presumed that the judgment that was dictated in open court
will be the judgment of the court, the court may still modify said order as the same is

being put into writing. And even if the order or judgment has already been put into
writing and signed, while it has not yet been delivered to the clerk for filing it is still
subject to amendment or change by the judge. It is only when the judgment signed by the
judge is actually filed with the clerk of court that it becomes a valid and binding
judgment. Prior thereto, it could still be subject to amendment and change and may not,
therefore, constitute the real judgment of the court.
Regarding the notice of judgment, the mere fact that a party heard the judge dictating the
judgment in open court, is not a valid notice of said judgment. If rendition thereof is
constituted by the filing with the clerk of court of a signed copy (of the judgment), it is
evident that the fact that a party 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 the time no judgment
has as yet been signed by the judge and filed with the clerk.
Besides, the Rules expressly require that final orders or judgments be served personally
or by registered mail. Section 7 of Rule 27 provides as follows:
SEC. 7. Service of final orders or judgments. Final orders or judgments shall
be served either 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 judgment 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.
For all the foregoing, the fact that the petitioner herein heard the trial judge dictating the
judgment in open court, is not sufficient to constitute the service of judgement as required
by the above-quoted section 7 of Rule 2 the signed judgment not having been served
upon the petitioner, said judgment could not be effective upon him (petitioner) who had
not received it. It follows as a consequence that the issuance of the writ of execution null
and void, having been issued before petitioner her was served, personally or by registered
mail, a copy of the decision.
The second question raised in this appeal, which has been passed upon by the Court of
Appeals, concerns the validity of the proceedings of the sheriff in selling the sawmill
machineries and equipments at public auction with a notice of the sale having been
previously published.
The record shows that after petitioner herein Pastor D. Ago had purchased the sawmill
machineries and equipments he assigned the same to the Golden Pacific Sawmill, Inc. in
payment of his subscription to the shares of stock of said corporation. Thereafter the
sawmill machinery and equipments were installed in a building and permanently attached
to the ground. By reason of such installment in a building, the said sawmill machineries

and equipment became real estate properties in accordance with the provision of Art. 415
(5) of the Civil Code, thus:
ART. 415. The following are immovable property:
xxx

xxx

xxx

(5) Machinery, receptacles, instruments or implements tended 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;
This Court in interpreting a similar question raised before it in the case of Berkenkotter
vs. Cu Unjieng e Hijos, 61 Phil. 683, held that the installation of the machine and
equipment in the central of the Mabalacat Sugar Co., Inc. for use in connection with the
industry carried by the company, converted the said machinery and equipment into real
estate by reason of their purpose. Paraphrasing language of said decision we hold that by
the installment of the sawmill machineries in the building of the Gold 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) above-quoted of the Civil Code of the Philippines.
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 Sec. 16 of Rule 39 of the Rules of Court, which
is as follows:
SEC. 16. Notice of sale of property on execution. Before the sale of property
on execution, notice thereof must be given as follows:
xxx

xxx

xxx

(c) In case of real property, by posting a similar notice particularly describing the
property for twenty days in three public places in the municipality or city where
the property is situated, and also where the property is to be sold, and, if the
assessed value of the property exceeds four hundred pesos, by publishing a copy
of the notice once a week, for the same period, in some newspaper published or
having general circulation in the province, if there be one. If there are newspapers
published in the province in both the English and Spanish languages, then a like
publication for a like period shall be made in one newspaper published in the
English language, and in one published in the Spanish language.
the sale made by the sheriff must be declared null and void.

WHEREFORE, the decision of the Court of Appeals sought to be reviewed is hereby set
aside and We declare that the issuance of the writ of execution in this case against the
sawmill machineries and equipments purchased by petitioner Pastor D. Ago from the
Grace Park Engineering, Inc., as well as the sale of the same by the Sheriff of Surigao,
are null and void. Costs shall be against the respondent Grace Park Engineering, Inc.
Bengzon, C.J., Bautista Angelo, Concepcion, Reyes, J.B.L., Barrera, Paredes, Dizon,
Regala and Makalintal, JJ., concur.
Padilla, J., took no part.

The Lawphil Project - Arellano Law Foundation

Republic of the Philippines


SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-58469 May 16, 1983
MAKATI LEASING and FINANCE CORPORATION, petitioner,
vs.
WEAREVER TEXTILE MILLS, INC., and HONORABLE COURT OF APPEALS,
respondents.
Loreto C. Baduan for petitioner.
Ramon D. Bagatsing & Assoc. (collaborating counsel) for petitioner.
Jose V. Mancella for respondent.

DE CASTRO, J.:
Petition for review on certiorari of the decision of the Court of Appeals (now
Intermediate Appellate Court) promulgated on August 27, 1981 in CA-G.R. No.
SP-12731, setting aside certain Orders later specified herein, of Judge Ricardo J.
Francisco, as Presiding Judge of the Court of First instance of Rizal Branch VI,
issued in Civil Case No. 36040, as wen as the resolution dated September 22,
1981 of the said appellate court, denying petitioner's motion for reconsideration.

It appears that in order to obtain financial accommodations from herein petitioner


Makati Leasing and Finance Corporation, the private respondent Wearever
Textile Mills, Inc., discounted and assigned several receivables with the former
under a Receivable Purchase Agreement. To secure the collection of the
receivables assigned, private respondent executed a Chattel Mortgage over
certain raw materials inventory as well as a machinery described as an Artos
Aero Dryer Stentering Range.
Upon private respondent's default, petitioner filed a petition for extrajudicial
foreclosure of the properties mortgage to it. However, the Deputy Sheriff
assigned to implement the foreclosure failed to gain entry into private
respondent's premises and was not able to effect the seizure of the
aforedescribed machinery. Petitioner thereafter filed a complaint for judicial
foreclosure with the Court of First Instance of Rizal, Branch VI, docketed as Civil
Case No. 36040, the case before the lower court.
Acting on petitioner's application for replevin, the lower court issued a writ of
seizure, the enforcement of which was however subsequently restrained upon
private respondent's filing of a motion for reconsideration. After several incidents,
the lower court finally issued on February 11, 1981, an order lifting the restraining
order for the enforcement of the writ of seizure and an order to break open the
premises of private respondent to enforce said writ. The lower court reaffirmed its
stand upon private respondent's filing of a further motion for reconsideration.
On July 13, 1981, the sheriff enforcing the seizure order, repaired to the premises
of private respondent and removed the main drive motor of the subject
machinery.
The Court of Appeals, in certiorari and prohibition proceedings subsequently filed
by herein private respondent, set aside the Orders of the lower court and ordered
the return of the drive motor seized by the sheriff pursuant to said Orders, after
ruling that the machinery in suit cannot be the subject of replevin, much less of a
chattel mortgage, because it is a real property pursuant to Article 415 of the new
Civil Code, the same being attached to the ground by means of bolts and the
only way to remove it from respondent's plant would be to drill out or destroy the
concrete floor, the reason why all that the sheriff could do to enfore the writ was
to take the main drive motor of said machinery. The appellate court rejected
petitioner's argument that private respondent is estopped from claiming that the
machine is real property by constituting a chattel mortgage thereon.
A motion for reconsideration of this decision of the Court of Appeals having been
denied, petitioner has brought the case to this Court for review by writ of
certiorari. It is contended by private respondent, however, that the instant petition
was rendered moot and academic by petitioner's act of returning the subject
motor drive of respondent's machinery after the Court of Appeals' decision was
promulgated.

The contention of private respondent is without merit. When petitioner returned


the subject motor drive, it made itself unequivocably clear that said action was
without prejudice to a motion for reconsideration of the Court of Appeals decision,
as shown by the receipt duly signed by respondent's representative. 1 Considering
that petitioner has reserved its right to question the propriety of the Court of Appeals' decision, the
contention of private respondent that this petition has been mooted by such return may not be
sustained.
The next and the more crucial question to be resolved in this Petition is whether the machinery in
suit is real or personal property from the point of view of the parties, with petitioner arguing that it
is a personality, while the respondent claiming the contrary, and was sustained by the appellate
court, which accordingly held that the chattel mortgage constituted thereon is null and void, as
contended by said respondent.
A similar, if not Identical issue was raised in Tumalad v. Vicencio, 41 SCRA 143 where this Court,
speaking through Justice J.B.L. Reyes, ruled:
Although there is no specific statement referring to the subject house as personal
property, yet by ceding, selling or transferring a property by way of chattel
mortgage defendants-appellants could only have meant to convey the house as
chattel, or at least, intended to treat the same as such, so that they should not
now be allowed to make an inconsistent stand by claiming otherwise. Moreover,
the subject house stood on a rented lot to which defendants-appellants merely
had a temporary right as lessee, and although this can not in itself alone
determine the status of the property, it does so when combined with other factors
to sustain the interpretation that the parties, particularly the mortgagors, intended
to treat the house as personality. Finally, unlike in the Iya cases, Lopez vs.
Orosa, Jr. & Plaza Theatre, Inc. & Leung Yee vs. F.L. Strong Machinery &
Williamson, wherein third persons assailed the validity of the chattel mortgage, it
is the defendants-appellants themselves, as debtors-mortgagors, who are
attacking the validity of the chattel mortgage in this case. The doctrine of
estoppel therefore applies to the herein defendants-appellants, having treated
the subject house as personality.
Examining the records of the instant case, We find no logical justification to exclude the rule out,
as the appellate court did, the present case from the application of the abovequoted
pronouncement. If a house of strong materials, like what was involved in the above Tumalad
case, may be considered as personal property for purposes of executing a chattel mortgage
thereon as long as the parties to the contract so agree and no innocent third party will be
prejudiced thereby, there is absolutely no reason why a machinery, which is movable in its nature
and becomes immobilized only by destination or purpose, may not be likewise treated as such.
This is really because one who has so agreed is estopped from denying the existence of the
chattel mortgage.
In rejecting petitioner's assertion on the applicability of the Tumalad doctrine, the Court of Appeals
lays stress on the fact that the house involved therein was built on a land that did not belong to
the owner of such house. But the law makes no distinction with respect to the ownership of the
land on which the house is built and We should not lay down distinctions not contemplated by
law.
It must be pointed out that the characterization of the subject machinery as chattel by the private
respondent is indicative of intention and impresses upon the property the character determined
by the parties. As stated in Standard Oil Co. of New York v. Jaramillo, 44 Phil. 630, it is
undeniable that the parties to a contract may by agreement treat as personal property that which

by nature would be real property, as long as no interest of third parties would be prejudiced
thereby.
Private respondent contends that estoppel cannot apply against it because it had never
represented nor agreed that the machinery in suit be considered as personal property but was
merely required and dictated on by herein petitioner to sign a printed form of chattel mortgage
which was in a blank form at the time of signing. This contention lacks persuasiveness. As aptly
pointed out by petitioner and not denied by the respondent, the status of the subject machinery as
movable or immovable was never placed in issue before the lower court and the Court of Appeals
except in a supplemental memorandum in support of the petition filed in the appellate court.
Moreover, even granting that the charge is true, such fact alone does not render a contract void
ab initio, but can only be a ground for rendering said contract voidable, or annullable pursuant to
Article 1390 of the new Civil Code, by a proper action in court. There is nothing on record to show
that the mortgage has been annulled. Neither is it disclosed that steps were taken to nullify the
same. On the other hand, as pointed out by petitioner and again not refuted by respondent, the
latter has indubitably benefited from said contract. Equity dictates that one should not benefit at
the expense of another. Private respondent could not now therefore, be allowed to impugn the
efficacy of the chattel mortgage after it has benefited therefrom,
From what has been said above, the error of the appellate court in ruling that the questioned
machinery is real, not personal property, becomes very apparent. Moreover, the case of
Machinery and Engineering Supplies, Inc. v. CA, 96 Phil. 70, heavily relied upon by said court is
not applicable to the case at bar, the nature of the machinery and equipment involved therein as
real properties never having been disputed nor in issue, and they were not the subject of a
Chattel Mortgage. Undoubtedly, the Tumalad case bears more nearly perfect parity with the
instant case to be the more controlling jurisprudential authority.
WHEREFORE, the questioned decision and resolution of the Court of Appeals are hereby
reversed and set aside, and the Orders of the lower court are hereby reinstated, with costs
against the private respondent.
SO ORDERED.
Makasiar (Chairman), Aquino, Concepcion Jr., Guerrero and Escolin JJ., concur.
Abad Santos, J., concurs in the result.

Footnotes
1 p. 52, Rollo.

The Lawphil Project - Arellano Law Foundation

Republic of the Philippines


SUPREME COURT
Manila
EN BANC

G.R. No. L-17500

May 16, 1967

PEOPLE'S BANK AND TRUST CO. and ATLANTIC GULF AND PACIFIC CO.
OF MANILA, plaintiffs-appellants,
vs.
DAHICAN LUMBER COMPANY, DAHICAN AMERICAN LUMBER
CORPORATION and CONNELL BROS. CO. (PHIL.), defendants-appellants.
Angel S. Gamboa for defendants-appellants.
Laurel Law Offices for plaintiffs-appellants.
DIZON, J.:
On September 8, 1948, Atlantic Gulf & Pacific Company of Manila, a West Virginia
corporation licensed to do business in the Philippines hereinafter referred to as
ATLANTIC sold and assigned all its rights in the Dahican Lumber concession to
Dahican Lumber Company hereinafter referred to as DALCO for the total sum of
$500,000.00, 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 & Trust
Company hereinafter referred to as the BANK amounting, as of July 13, 1950, to
P200,000.00. In addition, DALCO obtained, through the BANK, a loan of $250,000.00
from the Export-Import Bank of Washington D.C., evidenced by five promissory notes of
$50,000.00 each, maturing on different dates, executed by both DALCO and the Dahican
America Lumber Corporation, a foreign corporation and a stockholder of DALCO,
hereinafter referred to as DAMCO, all payable to the BANK or its order.
As security for the payment of the abovementioned loans, on July 13, 1950 DALCO
executed in favor of the BANK the latter acting for itself and as trustee for the ExportImport Bank of Washington D.C. a deed of mortgage covering five parcels of land
situated in the province of Camarines Norte together with all the buildings and other
improvements existing thereon and all the personal properties of the mortgagor located in
its place of business in the municipalities of Mambulao and Capalonga, Camarines Norte
(Exhibit D). On the same date, DALCO executed a second mortgage on the same
properties in favor of ATLANTIC to secure payment of the unpaid balance of the sale
price of the lumber concession amounting to the sum of $450,000.00 (Exhibit G). Both
deeds contained the following provision extending the mortgage lien to properties to be
subsequently acquired referred to hereafter as "after acquired properties" by the
mortgagor:
All property of every nature and description taken in exchange or replacement,
and all buildings, machinery, fixtures, tools equipment and other property which
the Mortgagor may hereafter acquire, construct, install, attach, or use in, to, upon,
or in connection with the premises, shall immediately be and become subject to
the lien of this mortgage in the same manner and to the same extent as if now
included therein, and the Mortgagor shall from time to time during the existence

of this mortgage furnish the Mortgagee with an accurate inventory of such


substituted and subsequently acquired property.
Both mortgages were registered in the Office of the Register of Deeds of Camarines
Norte. In addition thereto DALCO and DAMCO pledged to the BANK 7,296 shares of
stock of DALCO and 9,286 shares of DAMCO to secure the same obligations.
Upon DALCO's and DAMCO's failure to pay the fifth promissory note upon its maturity,
the BANK paid the same to the Export-Import Bank of Washington D.C., and the latter
assigned to the former its credit and the first mortgage securing it. Subsequently, the
BANK gave DALCO and DAMCO up to April 1, 1953 to pay the overdue promissory
note.
After July 13, 1950 the date of execution of the mortgages mentioned above
DALCO purchased various machineries, equipment, spare parts and supplies in addition
to, or in replacement of some of those already owned and used by it on the date aforesaid.
Pursuant to the provision of the mortgage deeds quoted theretofore regarding "after
acquired properties," the BANK requested DALCO to submit complete lists of said
properties but the latter failed to do so. In connection with these purchases, there
appeared in the books of DALCO as due to Connell Bros. Company (Philippines) a
domestic corporation who was acting as the general purchasing agent of DALCO
thereinafter called CONNELL the sum of P452,860.55 and to DAMCO, the sum of
P2,151,678.34.
On December 16, 1952, the Board of Directors of DALCO, in a special meeting called
for the purpose, passed a resolution agreeing to rescind the alleged sales of equipment,
spare parts and supplies by CONNELL and DAMCO to it. Thereafter, the corresponding
agreements of rescission of sale were executed between DALCO and DAMCO, on the
one hand and between DALCO and CONNELL, on the other.
On January 13, 1953, the BANK, in its own behalf and that of ATLANTIC, demanded
that said agreements be cancelled but CONNELL and DAMCO refused to do so. As a
result, on February 12, 1953; ATLANTIC and the BANK, commenced foreclosure
proceedings in the Court of First Instance of Camarines Norte against DALCO and
DAMCO. On the same date they filed an ex-parte application for the appointment of a
Receiver and/or for the issuance of a writ of preliminary injunction to restrain DALCO
from removing its properties. The court granted both remedies and appointed George H.
Evans as Receiver. Upon defendants' motion, however, the court, in its order of February
21, 1953, discharged the Receiver.
On March 2, 1953, defendants filed their answer denying the material allegations of the
complaint and alleging several affirmative defenses and a counterclaim.
On March 4 of the same year, CONNELL, filed a motion for intervention alleging that it
was the owner and possessor of some of the equipments, spare parts and supplies which
DALCO had acquired subsequent to the execution of the mortgages sought to be

foreclosed and which plaintiffs claimed were covered by the lien. In its order of March
18,1953 the Court granted the motion, as well as plaintiffs' motion to set aside the order
discharging the Receiver. Consequently, Evans was reinstated.
On April 1, 1953, CONNELL filed its answer denying the material averment of the
complaint, and asserting affirmative defenses and a counterclaim.
Upon motion of the parties the Court, on September 30, 1953, issued an order
transferring the venue of the action to the Court of First Instance of Manila where it was
docketed as Civil Case No. 20987.
On August 30, 1958, upon motion of all the parties, the Court ordered the sale of all the
machineries, equipment and supplies of DALCO, and the same were subsequently sold
for a total consideration of P175,000.00 which was deposited in court pending final
determination of the action. By a similar agreement one-half (P87,500.00) of this amount
was considered as representing the proceeds obtained from the sale of the "undebated
properties" (those not claimed by DAMCO and CONNELL), and the other half as
representing those obtained from the sale of the "after acquired properties".
After due trial, the Court, on July 15, 1960, rendered judgment as follows:
IN VIEW WHEREFORE, the Court:
1. Condemns Dahican Lumber Co. to pay unto People's Bank the sum of
P200,000,00 with 7% interest per annum from July 13, 1950, Plus another sum of
P100,000.00 with 5% interest per annum from July 13, 1950; plus 10% on both
principal sums as attorney's fees;
2. Condemns Dahican Lumber Co. to pay unto Atlantic Gulf the sum of
P900,000.00 with 4% interest per annum from July 3, 1950, plus 10% on both
principal as attorney's fees;
3. Condemns Dahican Lumber Co. to pay unto Connell Bros, the sum of
P425,860.55, and to pay unto Dahican American Lumber Co. the sum of
P2,151,678.24 both with legal interest from the date of the filing of the respective
answers of those parties, 10% of the principals as attorney's fees;
4. Orders that of the sum realized from the sale of the properties of P175,000.00,
after deducting the recognized expenses, one-half thereof be adjudicated unto
plaintiffs, the court no longer specifying the share of each because of that
announced intention under the stipulation of facts to "pool their resources"; as to
the other one-half, the same should be adjudicated unto both plaintiffs, and
defendant Dahican American and Connell Bros. in the proportion already set forth
on page 9, lines 21, 22 and 23 of the body of this decision; but with the
understanding that whatever plaintiffs and Dahican American and Connell Bros.

should receive from the P175,000.00 deposited in the Court shall be applied to the
judgments particularly rendered in favor of each;
5. No other pronouncement as to costs; but the costs of the receivership as to the
debated properties shall be borne by People's Bank, Atlantic Gulf, Connell Bros.,
and Dahican American Lumber Co., pro-rata.
On the following day, the Court issued the following supplementary decision:
IN VIEW WHEREOF, the dispositive part of the decision is hereby amended in
order to add the following paragraph 6:
6. If the sums mentioned in paragraphs 1 and 2 are not paid within ninety (90)
days, the Court orders the sale at public auction of the lands object of the
mortgages to satisfy the said mortgages and costs of foreclosure.
From the above-quoted decision, all the parties appealed.
Main contentions of plaintiffs as appellants are the following: that the "after acquired
properties" were subject to the deeds of mortgage mentioned heretofore; that said
properties were acquired from suppliers other than DAMCO and CONNELL; that even
granting that DAMCO and CONNELL were the real suppliers, the rescission of the sales
to DALCO could not prejudice the mortgage lien in favor of plaintiffs; that considering
the foregoing, the proceeds obtained from the sale of the "after acquired properties" as
well as those obtained from the sale of the "undebated properties" in the total sum of
P175,000.00 should have been awarded exclusively to plaintiffs by reason of the
mortgage lien they had thereon; that damages should have been awarded to plaintiffs
against defendants, all of them being guilty of an attempt to defraud the former when they
sought to rescind the sales already mentioned for the purpose of defeating their mortgage
lien, and finally, that defendants should have been made to bear all the expenses of the
receivership, costs and attorney's fees.
On the other hand, defendants-appellants contend that the trial court erred: firstly, in not
holding that plaintiffs had no cause of action against them because the promissory note
sued upon was not yet due when the action to foreclose the mortgages was commenced;
secondly, in not holding that the mortgages aforesaid were null and void as regards the
"after acquired properties" of DALCO because they were not registered in accordance
with the Chattel Mortgage Law, the court erring, as a consequence, in holding that said
properties were subject to the mortgage lien in favor of plaintiffs; thirdly, in not holding
that the provision of the fourth paragraph of each of said mortgages did not automatically
make subject to such mortgages the "after acquired properties", the only meaning thereof
being that the mortgagor was willing to constitute a lien over such properties; fourthly, in
not ruling that said stipulation was void as against DAMCO and CONNELL and in not
awarding the proceeds obtained from the sale of the "after acquired properties" to the
latter exclusively; fifthly, in appointing a Receiver and in holding that the damages
suffered by DAMCO and CONNELL by reason of the depreciation or loss in value of the

"after acquired properties" placed under receivership was damnum absque injuria and,
consequently, in not awarding, to said parties the corresponding damages claimed in their
counterclaim; lastly, in sentencing DALCO and DAMCO to pay attorney's fees and in
requiring DAMCO and CONNELL to pay the costs of the Receivership, instead of
sentencing plaintiffs to pay attorney's fees.
Plaintiffs' brief as appellants submit six assignments of error, while that of defendants
also as appellants submit a total of seventeen. However, the multifarious issues thus
before Us may be resolved, directly or indirectly, by deciding the following issues:
Firstly, are the so-called "after acquired properties" covered by and subject to the deeds of
mortgage subject of foreclosure?; secondly, assuming that they are subject thereto, are the
mortgages valid and binding on the properties aforesaid inspite of the fact that they were
not registered in accordance with the provisions of the Chattel Mortgage Law?; thirdly,
assuming again that the mortgages are valid and binding upon the "after acquired
properties", what is the effect thereon, if any, of the rescission of sales entered into, on the
one hand, between DAMCO and DALCO, and between DALCO and CONNELL, on the
other?; and lastly, was the action to foreclose the mortgages premature?
A. Under the fourth paragraph of both deeds of mortgage, it is crystal clear that all
property of every nature and description taken in exchange or replacement, as well as all
buildings, machineries, fixtures, tools, equipments, and other property that the mortgagor
may acquire, construct, install, attach; or use in, to upon, or in connection with the
premises that is, its lumber concession "shall immediately be and become subject
to the lien" of both mortgages in the same manner and to the same extent as if already
included therein at the time of their execution. As the language thus used leaves no room
for doubt as to the intention of the parties, We see no useful purpose in discussing the
matter extensively. Suffice it to say that the stipulation referred to is common, and We
might say logical, in all cases where the properties given as collateral are perishable or
subject to inevitable wear and tear or were intended to be sold, or to be used thus
becoming subject to the inevitable wear and tear but with the understanding
express or implied that they shall be replaced with others to be thereafter acquired by
the mortgagor. Such stipulation is neither unlawful nor immoral, its obvious purpose
being to maintain, to the extent allowed by circumstances, the original value of the
properties given as security. Indeed, if such properties were of the nature already referred
to, it would be poor judgment on the part of the creditor who does not see to it that a
similar provision is included in the contract.
B. But defendants contend that, granting without admitting, that the deeds of mortgage in
question cover the "after acquired properties" of DALCO, the same are void and
ineffectual because they were not registered in accordance with the Chattel Mortgage
Law. In support of this and of the proposition that, even if said mortgages were valid,
they should not prejudice them, the defendants argue (1) that the deeds do not describe
the mortgaged chattels specifically, nor were they registered in accordance with the
Chattel Mortgage Law; (2) that the stipulation contained in the fourth paragraph thereof
constitutes "mere executory agreements to give a lien" over the "after acquired

properties" upon their acquisition; and (3) that any mortgage stipulation concerning "after
acquired properties" should not prejudice creditors and other third persons such as
DAMCO and CONNELL.
The stipulation under consideration strongly belies defendants contention. As adverted to
hereinbefore, it states that all property of every nature, building, machinery etc. taken in
exchange or replacement by the mortgagor "shall immediately be and become subject to
the lien of this mortgage in the same manner and to the same extent as if now included
therein". No clearer language could have been chosen.
Conceding, on the other hand, that it is the law in this jurisdiction that, to affect third
persons, a chattel mortgage must be registered and must describe the mortgaged chattels
or personal properties sufficiently to enable the parties and any other person to identify
them, We say that such law does not apply to this case.
As the mortgages in question were executed on July 13, 1950 with the old Civil Code still
in force, there can be no doubt that the provisions of said code must govern their
interpretation and the question of their validity. It happens however, that Articles 334 and
1877 of the old Civil Code are substantially reproduced in Articles 415 and 2127,
respectively, of the new Civil Code. It is, therefore, immaterial in this case whether we
take the former or the latter as guide in deciding the point under consideration.
Article 415 does not define real property but enumerates what are considered as such,
among them being machinery, receptacles, instruments or replacements intended by
owner of the tenement for an industry or works which may be carried on in a building or
on a piece of land, and shall tend directly to meet the needs of the said industry or works.
On the strength of the above-quoted legal provisions, the lower court held that inasmuch
as "the chattels were placed in the real properties mortgaged to plaintiffs, they came
within the operation of Art. 415, paragraph 5 and Art. 2127 of the New Civil Code".
We find the above ruling in agreement with our decisions on the subject:
(1) In Berkenkotter vs. Cu Unjieng, 61 Phil. 663, We held that Article 334, paragraph 5 of
the Civil Code (old) gives the character of real property to machinery, liquid containers,
instruments or replacements 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.
(2) In Cu Unjieng e Hijos vs. Mabalacat Sugar Co., 58 Phil. 439, We held that a
mortgage constituted on a sugar central includes not only the land on which it is built but
also the buildings, machinery and accessories installed at the time the mortgage was
constituted as well as the buildings, machinery and accessories belonging to the
mortgagor, installed after the constitution thereof .

It is not disputed in the case at bar that the "after acquired properties" were purchased by
DALCO in connection with, and for use in the development of its lumber concession and
that they were purchased in addition to, or in replacement of those already existing in the
premises on July 13, 1950. In Law, therefore, they must be deemed to have been
immobilized, with the result that the real estate mortgages involved herein which were
registered as such did not have to be registered a second time as chattel mortgages in
order to bind the "after acquired properties" and affect third parties.
But defendants, invoking the case of Davao Sawmill Company vs. Castillo, 61 Phil. 709,
claim that the "after acquired properties" did not become immobilized because DALCO
did not own the whole area of its lumber concession all over which said properties were
scattered.
The facts in the Davao Sawmill case, however, are not on all fours with the ones
obtaining in the present. In the former, the Davao Sawmill Company, Inc., had repeatedly
treated the machinery therein involved as personal property by executing chattel
mortgages thereon in favor of third parties, while in the present case the parties had
treated the "after acquired properties" as real properties by expressly and unequivocally
agreeing that they shall automatically become subject to the lien of the real estate
mortgages executed by them. In the Davao Sawmill decision it was, in fact, stated that
"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" (61 Phil. 112,
emphasis supplied). In the present case, the characterization of the "after acquired
properties" as real property was made not only by one but by both interested parties.
There is, therefore, more reason to hold that such consensus impresses upon the
properties the character determined by the parties who must now be held in estoppel to
question it.
Moreover, quoted in the Davao Sawmill case was that of Valdez vs. Central Altagracia,
Inc. (225 U.S. 58) where it was held that while under the general law of Puerto Rico,
machinery placed on property by a tenant does not become immobilized, yet, when the
tenant places it there pursuant to contract that it shall belong to the owner, it then
becomes immobilized as to that tenant and even as against his assignees and creditors
who had sufficient notice of such stipulation. In the case at bar it is not disputed that
DALCO purchased the "after acquired properties" to be placed on, and be used in the
development of its lumber concession, and agreed further that the same shall become
immediately subject to the lien constituted by the questioned mortgages. There is also
abundant evidence in the record that DAMCO and CONNELL had full notice of such
stipulation and had never thought of disputed validity until the present case was filed.
Consequently all of them must be deemed barred from denying that the properties in
question had become immobilized.
What We have said heretofore sufficiently disposes all the arguments adduced by
defendants in support their contention that the mortgages under foreclosure are void, and,
that, even if valid, are ineffectual as against DAMCO and CONNELL.

Now to the question of whether or not DAMCO CONNELL have rights over the "after
acquired properties" superior to the mortgage lien constituted thereon in favor of
plaintiffs. It is defendants' contention that in relation to said properties they are "unpaid
sellers"; that as such they had not only a superior lien on the "after acquired properties"
but also the right to rescind the sales thereof to DALCO.
This contention it is obvious would have validity only if it were true that DAMCO
and CONNELL were the suppliers or vendors of the "after acquired properties".
According to the record, plaintiffs did not know their exact identity and description prior
to the filing of the case bar because DALCO, in violation of its obligation under the
mortgages, had failed and refused theretofore to submit a complete list thereof. In the
course of the proceedings, however, when defendants moved to dissolve the order of
receivership and the writ of preliminary injunction issued by the lower court, they
attached to their motion the lists marked as Exhibits 1, 2 and 3 describing the properties
aforesaid. Later on, the parties agreed to consider said lists as identifying and describing
the "after acquire properties," and engaged the services of auditors to examine the books
of DALCO so as to bring out the details thereof. The report of the auditors and its
annexes (Exhibits V, V-1 V4) show that neither DAMCO nor CONNELL had supplied
any of the goods of which they respective claimed to be the unpaid seller; that all items
were supplied by different parties, neither of whom appeared to be DAMCO or
CONNELL that, in fact, CONNELL collected a 5% service charge on the net value of all
items it claims to have sold to DALCO and which, in truth, it had purchased for DALCO
as the latter's general agent; that CONNELL had to issue its own invoices in addition to
those o f the real suppliers in order to collect and justify such service charge.
Taking into account the above circumstances together with the fact that DAMCO was a
stockholder and CONNELL was not only a stockholder but the general agent of DALCO,
their claim to be the suppliers of the "after acquired required properties" would seem to
be preposterous. The most that can be claimed on the basis of the evidence is that
DAMCO and CONNELL probably financed some of the purchases. But if DALCO still
owes them any amount in this connection, it is clear that, as financiers, they can not claim
any right over the "after acquired properties" superior to the lien constituted thereon by
virtue of the deeds of mortgage under foreclosure. Indeed, the execution of the rescission
of sales mentioned heretofore appears to be but a desperate attempt to better or improve
DAMCO and CONNELL's position by enabling them to assume the role of "unpaid
suppliers" and thus claim a vendor's lien over the "after acquired properties". The
attempt, of course, is utterly ineffectual, not only because they are not the "unpaid sellers"
they claim to be but also because there is abundant evidence in the record showing that
both DAMCO and CONNELL had known and admitted from the beginning that the
"after acquired properties" of DALCO were meant to be included in the first and second
mortgages under foreclosure.
The claim that Belden, of ATLANTIC, had given his consent to the rescission, expressly
or otherwise, is of no consequence and does not make the rescission valid and legally
effective. It must be stated clearly, however, in justice to Belden, that, as a member of the

Board of Directors of DALCO, he opposed the resolution of December 15, 1952 passed
by said Board and the subsequent rescission of the sales.
Finally, defendants claim that the action to foreclose the mortgages filed on February 12,
1953 was premature because the promissory note sued upon did not fall due until April 1
of the same year, concluding from this that, when the action was commenced, the
plaintiffs had no cause of action. Upon this question the lower court says the following in
the appealed judgment;
The other is the defense of prematurity of the causes of action in that plaintiffs, as
a matter of grace, conceded an extension of time to pay up to 1 April, 1953 while
the action was filed on 12 February, 1953, but, as to this, the Court taking it that
there is absolutely no debate that Dahican Lumber Co., was insolvent as of the
date of the filing of the complaint, it should follow that the debtor thereby lost the
benefit to the period.
x x x unless he gives a guaranty or security for the debt . . . (Art. 1198, New Civil
Code);
and as the guaranty was plainly inadequate since the claim of plaintiffs reached in
the aggregate, P1,200,000 excluding interest while the aggregate price of the
"after-acquired" chattels claimed by Connell under the rescission contracts was
P1,614,675.94, Exh. 1, Exh. V, report of auditors, and as a matter of fact, almost
all the properties were sold afterwards for only P175,000.00, page 47, Vol. IV, and
the Court understanding that when the law permits the debtor to enjoy the benefits
of the period notwithstanding that he is insolvent by his giving a guaranty for the
debt, that must mean a new and efficient guaranty, must concede that the causes
of action for collection of the notes were not premature.
Very little need be added to the above. Defendants, however, contend that the lower court
had no basis for finding that, when the action was commenced, DALCO was insolvent
for purposes related to Article 1198, paragraph 1 of the Civil Code. We find, however,
that the finding of the trial court is sufficiently supported by the evidence particularly the
resolution marked as Exhibit K, which shows that on December 16, 1952 in the words
of the Chairman of the Board DALCO was "without funds, neither does it expect to
have any funds in the foreseeable future." (p. 64, record on appeal).
The remaining issues, namely, whether or not the proceeds obtained from the sale of the
"after acquired properties" should have been awarded exclusively to the plaintiffs or to
DAMCO and CONNELL, and if in law they should be distributed among said parties,
whether or not the distribution should be pro-rata or otherwise; whether or not plaintiffs
are entitled to damages; and, lastly, whether or not the expenses incidental to the
Receivership should be borne by all the parties on a pro-rata basis or exclusively by one
or some of them are of a secondary nature as they are already impliedly resolved by what
has been said heretofore.

As regard the proceeds obtained from the sale of the of after acquired properties" and the
"undebated properties", it is clear, in view of our opinion sustaining the validity of the
mortgages in relation thereto, that said proceeds should be awarded exclusively to the
plaintiffs in payment of the money obligations secured by the mortgages under
foreclosure.
On the question of plaintiffs' right to recover damages from the defendants, the law
(Articles 1313 and 1314 of the New Civil Code) provides that creditors are protected in
cases of contracts intended to defraud them; and that any third person who induces
another to violate his contract shall be liable for damages to the other contracting party.
Similar liability is demandable under Arts. 20 and 21 which may be given retroactive
effect (Arts. 225253) or under Arts. 1902 and 2176 of the Old Civil Code.
The facts of this case, as stated heretofore, clearly show that DALCO and DAMCO, after
failing to pay the fifth promissory note upon its maturity, conspired jointly with
CONNELL to violate the provisions of the fourth paragraph of the mortgages under
foreclosure by attempting to defeat plaintiffs' mortgage lien on the "after acquired
properties". As a result, the plaintiffs had to go to court to protect their rights thus
jeopardized. Defendants' liability for damages is therefore clear.
However, the measure of the damages suffered by the plaintiffs is not what the latter
claim, namely, the difference between the alleged total obligation secured by the
mortgages amounting to around P1,200,000.00, plus the stipulated interest and attorney's
fees, on the one hand, and the proceeds obtained from the sale of "after acquired
properties", and of those that were not claimed neither by DAMCO nor CONNELL, on
the other. Considering that the sale of the real properties subject to the mortgages under
foreclosure has not been effected, and considering further the lack of evidence showing
that the true value of all the properties already sold was not realized because their sale
was under stress, We feel that We do not have before Us the true elements or factors that
should determine the amount of damages that plaintiffs are entitled recover from
defendants. It is, however, our considered opinion that, upon the facts established, all the
expenses of the Receivership, which was deemed necessary to safeguard the rights of the
plaintiffs, should be borne by the defendants, jointly and severally, in the same manner
that all of them should pay to the plaintiffs, jointly a severally, attorney's fees awarded in
the appealed judgment.
In consonance with the portion of this decision concerning the damages that the plaintiffs
are entitled to recover from the defendants, the record of this case shall be remanded
below for the corresponding proceedings.
Modified as above indicated, the appealed judgment is affirmed in all other respects. With
costs.
Concepcion, C.J., Reyes, J.B.L., Regala, Makalintal, Bengzon, J.P., Zaldivar, Sanchez
and Castro, JJ., concur.

The Lawphil Project - Arellano Law Foundation

Republic of the Philippines


SUPREME COURT
Manila
EN BANC
G.R. No. L-64261 December 26, 1984
JOSE BURGOS, SR., JOSE BURGOS, JR., BAYANI SORIANO and J.
BURGOS MEDIA SERVICES, INC., petitioners,
vs.
THE CHIEF OF STAFF, ARMED FORCES OF THE PHILIPPINES, THE CHIEF,
PHILIPPINE CONSTABULARY, THE CHIEF LEGAL OFFICER,
PRESIDENTIAL SECURITY COMMAND, THE JUDGE ADVOCATE GENERAL,
ET AL., respondents.
Lorenzo M. Taada, Wigberto E. Taada, Martiniano Vivo, Augusto Sanchez,
Joker P. Arroyo, Jejomar Binay and Rene Saguisag for petitioners.
The Solicitor General for respondents.

ESCOLIN, J.:
Assailed in this petition for certiorari prohibition and mandamus with preliminary
mandatory and prohibitory injunction is the validity of two [2] search warrants
issued on December 7, 1982 by respondent Judge Ernani Cruz-Pano, Executive
Judge of the then Court of First Instance of Rizal [Quezon City], under which the
premises known as No. 19, Road 3, Project 6, Quezon City, and 784 Units C & D,
RMS Building, Quezon Avenue, Quezon City, business addresses of the
"Metropolitan Mail" and "We Forum" newspapers, respectively, were searched,
and office and printing machines, equipment, paraphernalia, motor vehicles and
other articles used in the printing, publication and distribution of the said
newspapers, as well as numerous papers, documents, books and other written
literature alleged to be in the possession and control of petitioner Jose Burgos,
Jr. publisher-editor of the "We Forum" newspaper, were seized.
Petitioners further pray that a writ of preliminary mandatory and prohibitory
injunction be issued for the return of the seized articles, and that respondents,

"particularly the Chief Legal Officer, Presidential Security Command, the Judge
Advocate General, AFP, the City Fiscal of Quezon City, their representatives,
assistants, subalterns, subordinates, substitute or successors" be enjoined from
using the articles thus seized as evidence against petitioner Jose Burgos, Jr. and
the other accused in Criminal Case No. Q- 022782 of the Regional Trial Court of
Quezon City, entitled People v. Jose Burgos, Jr. et al. 1
In our Resolution dated June 21, 1983, respondents were required to answer the petition. The plea for preliminary mandatory and
prohibitory injunction was set for hearing on June 28, 1983, later reset to July 7, 1983, on motion of the Solicitor General in behalf
of respondents.
At the hearing on July 7, 1983, the Solicitor General, while opposing petitioners' prayer for a writ of preliminary mandatory
injunction, manifested that respondents "will not use the aforementioned articles as evidence in the aforementioned case until final
2
resolution of the legality of the seizure of the aforementioned articles. ..." With this manifestation, the prayer for

preliminary prohibitory injunction was rendered moot and academic.


Respondents would have this Court dismiss the petition on the ground that petitioners had come
to this Court without having previously sought the quashal of the search warrants before
respondent judge. Indeed, petitioners, before impugning the validity of the warrants before this
Court, should have filed a motion to quash said warrants in the court that issued them. 3 But this
procedural flaw notwithstanding, we take cognizance of this petition in view of the seriousness
and urgency of the constitutional issues raised not to mention the public interest generated by the
search of the "We Forum" offices, which was televised in Channel 7 and widely publicized in all
metropolitan dailies. The existence of this special circumstance justifies this Court to exercise its
inherent power to suspend its rules. In the words of the revered Mr. Justice Abad Santos in the
case of C. Vda. de Ordoveza v. Raymundo, 4 "it is always in the power of the court [Supreme
Court] to suspend its rules or to except a particular case from its operation, whenever the
purposes of justice require it...".
Respondents likewise urge dismissal of the petition on ground of laches. Considerable stress is
laid on the fact that while said search warrants were issued on December 7, 1982, the instant
petition impugning the same was filed only on June 16, 1983 or after the lapse of a period of
more than six [6] months.
Laches is failure or negligence 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 a presumption that the party
entitled to assert it either has abandoned it or declined to assert it. 5
Petitioners, in their Consolidated Reply, explained the reason for the delay in the filing of the
petition thus:
Respondents should not find fault, as they now do [p. 1, Answer, p. 3,
Manifestation] with the fact that the Petition was filed on June 16, 1983, more
than half a year after the petitioners' premises had been raided.
The climate of the times has given petitioners no other choice. If they had waited
this long to bring their case to court, it was because they tried at first to exhaust
other remedies. The events of the past eleven fill years had taught them that
everything in this country, from release of public funds to release of detained
persons from custody, has become a matter of executive benevolence or
largesse

Hence, as soon as they could, petitioners, upon suggestion of persons close to


the President, like Fiscal Flaminiano, sent a letter to President Marcos, through
counsel Antonio Coronet asking the return at least of the printing equipment and
vehicles. And after such a letter had been sent, through Col. Balbino V. Diego,
Chief Intelligence and Legal Officer of the Presidential Security Command, they
were further encouraged to hope that the latter would yield the desired results.
After waiting in vain for five [5] months, petitioners finally decided to come to
Court. [pp. 123-124, Rollo]
Although the reason given by petitioners may not be flattering to our judicial system, We find no
ground to punish or chastise them for an error in judgment. On the contrary, the extrajudicial
efforts exerted by petitioners quite evidently negate the presumption that they had abandoned
their right to the possession of the seized property, thereby refuting the charge of laches against
them.
Respondents also submit the theory that since petitioner Jose Burgos, Jr. had used and marked
as evidence some of the seized documents in Criminal Case No. Q- 022872, he is now estopped
from challenging the validity of the search warrants. We do not follow the logic of respondents.
These documents lawfully belong to petitioner Jose Burgos, Jr. and he can do whatever he
pleases with them, within legal bounds. The fact that he has used them as evidence does not and
cannot in any way affect the validity or invalidity of the search warrants assailed in this petition.
Several and diverse reasons have been advanced by petitioners to nullify the search warrants in
question.
1. Petitioners fault respondent judge for his alleged failure to conduct an examination under oath
or affirmation of the applicant and his witnesses, as mandated by the above-quoted constitutional
provision as wen as Sec. 4, Rule 126 of the Rules of Court . 6 This objection, however, may
properly be considered moot and academic, as petitioners themselves conceded during the
hearing on August 9, 1983, that an examination had indeed been conducted by respondent judge
of Col. Abadilla and his witnesses.
2. Search Warrants No. 20-82[a] and No. 20- 82[b] were used to search two distinct places: No.
19, Road 3, Project 6, Quezon City and 784 Units C & D, RMS Building, Quezon Avenue, Quezon
City, respectively. Objection is interposed to the execution of Search Warrant No. 20-82[b] at the
latter address on the ground that the two search warrants pinpointed only one place where
petitioner Jose Burgos, Jr. was allegedly keeping and concealing the articles listed therein, i.e.,
No. 19, Road 3, Project 6, Quezon City. This assertion is based on that portion of Search Warrant
No. 20- 82[b] which states:
Which have been used, and are being used as instruments and means of
committing the crime of subversion penalized under P.D. 885 as amended and he
is keeping and concealing the same at 19 Road 3, Project 6, Quezon City.
The defect pointed out is obviously a typographical error. Precisely, two search warrants were
applied for and issued because the purpose and intent were to search two distinct premises. It
would be quite absurd and illogical for respondent judge to have issued two warrants intended for
one and the same place. Besides, the addresses of the places sought to be searched were
specifically set forth in the application, and since it was Col. Abadilla himself who headed the
team which executed the search warrants, the ambiguity that might have arisen by reason of the
typographical error is more apparent than real. The fact is that the place for which Search
Warrant No. 20- 82[b] was applied for was 728 Units C & D, RMS Building, Quezon Avenue,

Quezon City, which address appeared in the opening paragraph of the said warrant. 7 Obviously
this is the same place that respondent judge had in mind when he issued Warrant No. 20-82 [b].
In the determination of whether a search warrant describes the premises to be searched with
sufficient particularity, it has been held "that the executing officer's prior knowledge as to the place
intended in the warrant is relevant. This would seem to be especially true where the executing
officer is the affiant on whose affidavit the warrant had issued, and when he knows that the judge
who issued the warrant intended the building described in the affidavit, And it has also been said
that the executing officer may look to the affidavit in the official court file to resolve an ambiguity in
the warrant as to the place to be searched." 8
3. Another ground relied upon to annul the search warrants is the fact that although the warrants
were directed against Jose Burgos, Jr. alone, articles b belonging to his co-petitioners Jose
Burgos, Sr., Bayani Soriano and the J. Burgos Media Services, Inc. were seized.
Section 2, Rule 126 of the Rules of Court, enumerates the personal properties that may be seized
under a search warrant, to wit:
Sec. 2. Personal Property to be seized. A search warrant may be issued for
the search and seizure of the following personal property:
[a] Property subject of the offense;
[b] Property stolen or embezzled and other proceeds or fruits of
the offense; and
[c] Property used or intended to be used as the means of
committing an offense.
The above rule does not require that the property to be seized should be owned by the person
against whom the search warrant is directed. It may or may not be owned by him. In fact, under
subsection [b] of the above-quoted Section 2, one of the properties that may be seized is stolen
property. Necessarily, stolen property must be owned by one other than the person in whose
possession it may be at the time of the search and seizure. Ownership, therefore, is of no
consequence, and it is sufficient that the person against whom the warrant is directed has control
or possession of the property sought to be seized, as petitioner Jose Burgos, Jr. was alleged to
have in relation to the articles and property seized under the warrants.
4. Neither is there merit in petitioners' assertion that real properties were seized under the
disputed warrants. Under Article 415[5] of the Civil Code of the Philippines, "machinery,
receptables, 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 considered immovable property. In Davao Sawmill
Co. v. Castillo 9 where this legal provision was invoked, this Court ruled that machinery which is
movable by nature becomes immobilized when placed by the owner of the tenement, property or
plant, but not so when placed by a tenant, usufructuary, or any other person having only a
temporary right, unless such person acted as the agent of the owner.
In the case at bar, petitioners do not claim to be the owners of the land and/or building on which
the machineries were placed. This being the case, the machineries in question, while in fact
bolted to the ground remain movable property susceptible to seizure under a search warrant.

5. The questioned search warrants were issued by respondent judge upon application of Col.
Rolando N. Abadilla Intelligence Officer of the P.C. Metrocom. 10 The application was
accompanied by the Joint Affidavit of Alejandro M. Gutierrez and Pedro U. Tango, 11 members of the
Metrocom Intelligence and Security Group under Col. Abadilla which conducted a surveillance of the premises prior to the filing of
the application for the search warrants on December 7, 1982.
It is contended by petitioners, however, that the abovementioned documents could not have provided sufficient basis for the
finding of a probable cause upon which a warrant may validly issue in accordance with Section 3, Article IV of the 1973
Constitution which provides:
SEC. 3. ... and no search warrant or warrant of arrest shall issue except upon probable cause to be
determined by the judge, or such other responsible officer as may be authorized by law, after examination
under oath or affirmation of the complainant and the witnesses he may produce, and particularly describing
the place to be searched and the persons or things to be seized.
We find petitioners' thesis impressed with merit. Probable cause for a search is defined as such facts and circumstances which
would lead a reasonably discreet and prudent man to believe that an offense has been committed and that the objects sought in
connection with the offense are in the place sought to be searched. And when the search warrant applied for is directed against a
newspaper publisher or editor in connection with the publication of subversive materials, as in the case at bar, the application
and/or its supporting affidavits must contain a specification, stating with particularity the alleged subversive material he has
published or is intending to publish. Mere generalization will not suffice. Thus, the broad statement in Col. Abadilla's application
that petitioner "is in possession or has in his control printing equipment and other paraphernalia, news publications and other
documents which were used and are all continuously being used as a means of committing the offense of subversion punishable
under Presidential Decree 885, as amended ..." 12 is a mere conclusion of law and does not satisfy the requirements of probable
cause. Bereft of such particulars as would justify a finding of the existence of probable cause, said allegation cannot serve as
basis for the issuance of a search warrant and it was a grave error for respondent judge to have done so.
Equally insufficient as basis for the determination of probable cause is the statement contained in the joint affidavit of Alejandro M.
Gutierrez and Pedro U. Tango, "that the evidence gathered and collated by our unit clearly shows that the premises abovementioned and the articles and things above-described were used and are continuously being used for subversive activities in
conspiracy with, and to promote the objective of, illegal organizations such as the Light-a-Fire Movement, Movement for Free
Philippines, and April 6 Movement." 13
In mandating that "no warrant shall issue except upon probable cause to be determined by the judge, ... after examination under
oath or affirmation of the complainant and the witnesses he may produce; 14 the Constitution requires no less than personal
knowledge by the complainant or his witnesses of the facts upon which the issuance of a search warrant may be justified. In
Alvarez v. Court of First Instance, 15 this Court ruled that "the oath required must refer to the truth of the facts within the personal
knowledge of the petitioner or his witnesses, because the purpose thereof is to convince the committing magistrate, not the
individual making the affidavit and seeking the issuance of the warrant, of the existence of probable cause." As couched, the
quoted averment in said joint affidavit filed before respondent judge hardly meets the test of sufficiency established by this Court
in Alvarez case.
Another factor which makes the search warrants under consideration constitutionally objectionable is that they are in the nature of
general warrants. The search warrants describe the articles sought to be seized in this wise:
1] All printing equipment, paraphernalia, paper, ink, photo (equipment, typewriters, cabinets, tables,
communications/recording equipment, tape recorders, dictaphone and the like used and/or connected in the
printing of the "WE FORUM" newspaper and any and all documents communication, letters and facsimile of
prints related to the "WE FORUM" newspaper.
2] Subversive documents, pamphlets, leaflets, books, and other publication to promote the objectives and
piurposes of the subversive organization known as Movement for Free Philippines, Light-a-Fire Movement
and April 6 Movement; and,
3] Motor vehicles used in the distribution/circulation of the "WE FORUM" and other subversive materials and
propaganda, more particularly,
1] Toyota-Corolla, colored yellow with Plate No. NKA 892;
2] DATSUN pick-up colored white with Plate No. NKV 969
3] A delivery truck with Plate No. NBS 524;
4] TOYOTA-TAMARAW, colored white with Plate No. PBP 665; and,

5] TOYOTA Hi-Lux, pick-up truck with Plate No. NGV 427 with marking "Bagong
Silang."
In Stanford v. State of Texas 16 the search warrant which authorized the search for "books, records, pamphlets, cards, receipts,
lists, memoranda, pictures, recordings and other written instruments concerning the Communist Party in Texas," was declared
void by the U.S. Supreme Court for being too general. In like manner, directions to "seize any evidence in connectionwith the
violation of SDC 13-3703 or otherwise" have been held too general, and that portion of a search warrant which authorized the
seizure of any "paraphernalia which could be used to violate Sec. 54-197 of the Connecticut General Statutes [the statute dealing
with the crime of conspiracy]" was held to be a general warrant, and therefore invalid. 17 The description of the articles sought to
be seized under the search warrants in question cannot be characterized differently.
In the Stanford case, the U.S. Supreme Courts calls to mind a notable chapter in English history: the era of disaccord between the
Tudor Government and the English Press, when "Officers of the Crown were given roving commissions to search where they
pleased in order to suppress and destroy the literature of dissent both Catholic and Puritan Reference herein to such historical
episode would not be relevant for it is not the policy of our government to suppress any newspaper or publication that speaks with
"the voice of non-conformity" but poses no clear and imminent danger to state security.
As heretofore stated, the premises searched were the business and printing offices of the "Metropolitan Mail" and the "We Forum
newspapers. As a consequence of the search and seizure, these premises were padlocked and sealed, with the further result that
the printing and publication of said newspapers were discontinued.
Such closure is in the nature of previous restraint or censorship abhorrent to the freedom of the press guaranteed under the
fundamental law, 18 and constitutes a virtual denial of petitioners' freedom to express themselves in print. This state of being is
patently anathematic to a democratic framework where a free, alert and even militant press is essential for the political
enlightenment and growth of the citizenry.
Respondents would justify the continued sealing of the printing machines on the ground that they have been sequestered under
Section 8 of Presidential Decree No. 885, as amended, which authorizes "the sequestration of the property of any person, natural
or artificial, engaged in subversive activities against the government and its duly constituted authorities ... in accordance with
implementing rules and regulations as may be issued by the Secretary of National Defense." It is doubtful however, if
sequestration could validly be effected in view of the absence of any implementing rules and regulations promulgated by the
Minister of National Defense.
Besides, in the December 10, 1982 issue of the Daily Express, it was reported that no less than President Marcos himself denied
the request of the military authorities to sequester the property seized from petitioners on December 7, 1982. Thus:
The President denied a request flied by government prosecutors for sequestration of the WE FORUM
newspaper and its printing presses, according to Information Minister Gregorio S. Cendana.
On the basis of court orders, government agents went to the We Forum offices in Quezon City and took a
detailed inventory of the equipment and all materials in the premises.
Cendaa said that because of the denial the newspaper and its equipment remain at the disposal of the
owners, subject to the discretion of the court. 19
That the property seized on December 7, 1982 had not been sequestered is further confirmed by the reply of then Foreign
Minister Carlos P. Romulo to the letter dated February 10, 1983 of U.S. Congressman Tony P. Hall addressed to President
20
Marcos, expressing alarm over the "WE FORUM " case.
In this reply dated February 11, 1983, Minister

Romulo stated:
2. Contrary to reports, President Marcos turned down the recommendation of our
authorities to close the paper's printing facilities and confiscate the equipment
and materials it uses. 21
IN VIEW OF THE FOREGOING, Search Warrants Nos. 20-82[a] and 20-82[b] issued by
respondent judge on December 7, 1982 are hereby declared null and void and are accordingly
set aside. The prayer for a writ of mandatory injunction for the return of the seized articles is
hereby granted and all articles seized thereunder are hereby ordered released to petitioners. No
costs.
SO ORDERED.

Fernando, C.J., Teehankee, Makasiar, Concepcion, Jr., Melencio-Herrera, Plana, Relova,


Gutierrez, Jr., De la Fuente and Cuevas, JJ., concur.
Aquino, J., took no part.

Separate Opinions

ABAD SANTOS, J., concurring


I am glad to give my concurrence to the ponencia of Mr. Justice Escolin At the
same time I wish to state my own reasons for holding that the search warrants
which are the subject of the petition are utterly void.
The action against "WE FORUM" was a naked suppression of press freedom for
the search warrants were issued in gross violation of the Constitution.
The Constitutional requirement which is expressed in Section 3, Article IV,
stresses two points, namely: "(1) that no warrant shall issue but upon probable
cause, to be determined by the judge in the manner set forth in said provision;
and (2) that the warrant shall particularly describe the things to be seized."
(Stonehill vs. Diokno, 126 Phil. 738, 747: 20 SCRA 383 [1967].)
Any search warrant is conducted in disregard of the points mentioned above will
result in wiping "out completely one of the most fundamental rights guaranteed in
our Constitution, for it would place the sanctity of the domicile and the privacy of
communication and correspondence at the mercy of the whims caprice or
passion of peace officers." (Ibid, p. 748.)
The two search warrants were issued without probable cause. To satisfy the
requirement of probable cause a specific offense must be alleged in the
application; abstract averments will not suffice. In the case at bar nothing
specifically subversive has been alleged; stated only is the claim that certain
objects were being used as instruments and means of committing the offense of
subversion punishable under P.D. No. 885, as amended. There is no mention of
any specific provision of the decree. I n the words of Chief Justice C Concepcion,
" It would be legal heresy of the highest order, to convict anybody" of violating the
decree without reference to any determinate provision thereof.
The search warrants are also void for lack of particularity. Both search warrants
authorize Col. Rolando Abadilla to seize and take possession, among other
things, of the following:

Subversive documents, pamphlets, leaflets, books and other


publication to promote the objectives and purposes of the
subversive organizations known as Movement for Free Philippines,
Light-a-Fire Movement and April 6 Movement.
The obvious question is: Why were the documents, pamphlets, leaflets, books,
etc. subversive? What did they contain to make them subversive? There is
nothing in the applications nor in the warrants which answers the questions. I
must, therefore, conclude that the warrants are general warrants which are
obnoxious to the Constitution.
In point of fact, there was nothing subversive published in the WE FORUM just
as there is nothing subversive which has been published in MALAYA which has
replaced the former and has the same content but against which no action has
been taken.
Conformably with existing jurisprudence everything seized pursuant to the
warrants should be returned to the owners and all of the items are subject to the
exclusionary rule of evidence.
Teehankee, J., concur.

Separate Opinions
ABAD SANTOS, J., concurring
I am glad to give my concurrence to the ponencia of Mr. Justice Escolin At the
same time I wish to state my own reasons for holding that the search warrants
which are the subject of the petition are utterly void.
The action against "WE FORUM" was a naked suppression of press freedom for
the search warrants were issued in gross violation of the Constitution.
The Constitutional requirement which is expressed in Section 3, Article IV,
stresses two points, namely: "(1) that no warrant shall issue but upon probable
cause, to be determined by the judge in the manner set forth in said provision;
and (2) that the warrant shall particularly describe the things to be seized."
(Stonehill vs. Diokno, 126 Phil. 738, 747: 20 SCRA 383 [1967].)
Any search warrant is conducted in disregard of the points mentioned above will
result in wiping "out completely one of the most fundamental rights guaranteed in
our Constitution, for it would place the sanctity of the domicile and the privacy of

communication and correspondence at the mercy of the whims caprice or


passion of peace officers." (Ibid, p. 748.)
The two search warrants were issued without probable cause. To satisfy the
requirement of probable cause a specific offense must be alleged in the
application; abstract averments will not suffice. In the case at bar nothing
specifically subversive has been alleged; stated only is the claim that certain
objects were being used as instruments and means of committing the offense of
subversion punishable under P.D. No. 885, as amended. There is no mention of
any specific provision of the decree. I n the words of Chief Justice C Concepcion,
" It would be legal heresy of the highest order, to convict anybody" of violating the
decree without reference to any determinate provision thereof.
The search warrants are also void for lack of particularity. Both search warrants
authorize Col. Rolando Abadilla to seize and take possession, among other
things, of the following:
Subversive documents, pamphlets, leaflets, books and other
publication to promote the objectives and purposes of the
subversive organizations known as Movement for Free Philippines,
Light-a-Fire Movement and April 6 Movement.
The obvious question is: Why were the documents, pamphlets, leaflets, books,
etc. subversive? What did they contain to make them subversive? There is
nothing in the applications nor in the warrants which answers the questions. I
must, therefore, conclude that the warrants are general warrants which are
obnoxious to the Constitution.
In point of fact, there was nothing subversive published in the WE FORUM just
as there is nothing subversive which has been published in MALAYA which has
replaced the former and has the same content but against which no action has
been taken.
Conformably with existing jurisprudence everything seized pursuant to the
warrants should be returned to the owners and all of the items are subject to the
exclusionary rule of evidence.
Teehankee, J., concur.
Footnotes
1 Petition, P. 44, Rollo.
2 Manifestation and Opposition, p. 75, Rollo.
3 Templo v. Dela Cruz, 60 SCRA 295.
4 463 Phil. 275.

5 Tijam v. Sibonghanoy, 23 SCRA 29.


6 Sec. 4, Rule 126, Rules of Court provides:
Sec. 4. Examination of the Applicant. The municipal or city judge must, before issuing the warrant,
personally examine on oath or affirmation the complainant and any witnesses he may produce and take their
deposition in writing and attach them to the record, in addition to any affidavits presented to them.
7 The opening paragraph of Search Warrant No. 20- 82 [b] reads:
"It appearing to the satisfaction of the undersigned after examination under oath of Maj. Alejandro M.
Gutierrez and Lt. Pedro U. Tango, that there are good and sufficient reason to believe that Jose Burgos, Jr.
Publisher-Editor of "WE FORUM" with office address at 784 Units C & D, RMS Building, Quezon Avenue,
Quezon City, has in his possession and control at said address the following; ... :
8 68 Am. Jur. 2d., 729.
9 61 Phil. 709. Annex "C", Petition, pp. 51-52,
10 Rollo.
11 Annex "B", Petition, pp. 53-54, Rollo.
12 Annex "C", Petition, p. 51, Rollo.
13 Annex "D", Petition, p. 54, Rollo.
14 Sec. 3, Art. IV, 1973 Constitution.
15 64 Phil. 33.
18 Sec. 9. Art. IV of the Constitution
19 Annex "K", Consolidated Reply, p. 175, Rollo.
20 Annex "L", Consolidated Reply, p. 178, Rollo.
21 Annex "M", Consolidated Reply, p. 179, Rollo.

The Lawphil Project - Arellano Law Foundation

THIRD DIVISION
[G.R. No. 137705. August 22, 2000]
SERGS PRODUCTS, INC., and SERGIO T. GOQUIOLAY, petitioners, vs.
PCI LEASING AND FINANCE, INC., respondent.
DECISION

PANGANIBAN, J.:
After agreeing to a contract stipulating that a real or immovable property be
considered as personal or movable, a party is estopped from subsequently
claiming 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
Decision1[1] of the Court of Appeals (CA)2[2] in CA-GR SP No. 47332 and its
February 26, 1999 Resolution3[3] denying reconsideration. The decretal portion of
the CA Decision reads as follows:
WHEREFORE, premises considered, the assailed Order dated February 18,
1998 and Resolution dated March 31, 1998 in Civil Case No. Q-98-33500 are
hereby AFFIRMED. The writ of preliminary injunction issued on June 15, 1998 is
hereby LIFTED.4[4]
In its February 18, 1998 Order,5[5] the Regional Trial Court (RTC) of Quezon City
(Branch 218)6[6] issued a Writ of Seizure.7[7] The March 18, 1998 Resolution8[8]
denied petitioners Motion for Special Protective Order, praying that the deputy
sheriff be enjoined from seizing immobilized or other real properties in
(petitioners) factory in Cainta, Rizal and to return to their original place whatever
immobilized machineries or equipments he may have removed. 9[9]
1[1] Rollo, pp. 177-180.
2[2] Penned by Justice Romeo A. Brawner (Division acting chairman), with the
concurrence of Justices Eloy R. Bello Jr. and Martin S. Villarama Jr.
3[3] Rollo, p. 189.
4[4] CA Decision, p. 3; rollo, p. 179.
5[5] Rollo, p. 356.
6[6] Presided by Judge Hilario L. Laqui.
7[7] Rollo, pp. 23-24.
8[8] Rollo, pp. 78-79.

The Facts
The undisputed facts are summarized by the Court of Appeals as follows: 10[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
9[9] Motion for Special Protective Order, pp. 3-4; rollo, pp. 76-77.
10[10] CA Decision, pp. 1-2; rollo, pp. 177-178.

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[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[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.
11[11] The case was deemed submitted for resolution on October 21, 1999,
upon receipt by this Court of the petitioners Memorandum signed by Atty.
Victor Basilio N. De Leon of Antonio R. Bautista & Partners. Respondents
Memorandum, which was signed by Atty. Amador F. Brioso Jr. of Perez &
Calima Law Offices, had been filed earlier on September 29, 1999.
12[12]

Petitioners Memorandum, p. 3; rollo, p. 376.

Preliminary Matter:Procedural Questions


Respondent contends that the Petition failed to indicate expressly whether it was
being filed under Rule 45 or Rule 65 of the Rules of Court. It further alleges that
the Petition erroneously impleaded Judge Hilario Laqui as respondent.
There is no question that the present recourse is under Rule 45. This conclusion
finds support in the very title of the Petition, which is Petition for Review on
Certiorari.13[13]
While Judge Laqui should not have been impleaded as a respondent, 14[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[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:
13[13] Section 1, Rule 45 of the Rules of Court.
14[14] Section 4 (a) of Rule 45 provides that the petition shall state the full
name of the parties, without impleading the lower courts or judges thereof
either as petitioners or respondents.
15[15] BA Finance v. CA, 258 SCRA 102, July 5, 1996; Filinvest Credit v. CA, 248
SCRA 549, September 27, 1995; Machinery Engineering Supply v. CA, 96 Phil.
70, October 29, 1954.

x x x....................................x x x....................................x x x
(5) Machinery, receptacles, instruments or implements intended by the owner of
the tenement for an industry or works which may be carried on in a building or on
a piece of land, and which tend directly to meet the needs of the said industry or
works;
x x x....................................x x x....................................x x x
In the present case, the machines that were the subjects of the Writ of Seizure
were placed by petitioners in the factory built on their own land. Indisputably,
they were essential and principal elements of their chocolate-making industry.
Hence, although each of them was movable or personal property on its own, all
of them have become immobilized by destination because they are essential
and principal elements in the industry. 16[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[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[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.

16[16] Mindanao Bus Co. v. City Assessor and Treasurer, 6 SCRA 197,
September 29, 1962, per Labrador, J. See also Vitug, Compendium of Civil
Law and Jurisprudence, 1986 ed., pp. 99-100.
17[17] Peoples Bank & Trust Co. v. Dahican Lumber, 20 SCRA 84, May 16,
1967; Burgos v. Chief of Staff, 133 SCRA 800, December 26, 1984; Davao
Sawmill Co. v. Castillo, 61 Phil. 709, August 7, 1935.
18[18] Chua Peng Hian v. CA, 133 SCRA 572, December 19, 1984; Standard Oil
Co. v. Jaranillo, 44 Phil. 630, March 16, 1923; Luna v. Encarnacion, 91 Phil.
531, June 30, 1952; Manarang v. Ofilada, 99 Phil. 109, May 18, 1956;
Peoples Bank & Trust Co. v. Dahican Lumber, supra.

Hence, in Tumalad v. Vicencio,19[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[20] also held that the machinery used in a factory and essential to
the industry, as in the present case, was a proper subject of a writ of replevin
because it was treated as personal property in a contract. Pertinent portions of
the Courts ruling are reproduced hereunder:
x x x. If a house of strong materials, like what was involved in the above
Tumalad case, may be considered as personal property for purposes of
executing a chattel mortgage thereon as long as the parties to the contract so
agree and no innocent third party will be prejudiced thereby, there is absolutely
no reason why a machinery, which is movable in its nature and becomes
immobilized only by destination or purpose, may not be likewise treated as such.
This is really because one who has so agreed is estopped from denying the
existence of the chattel mortgage.
In the present case, the Lease Agreement clearly provides that the machines in
question are to be considered as personal property. Specifically, Section 12.1 of
the Agreement reads as follows:21[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.

19[19] 41 SCRA 143, 153, September 30, 1971, per Reyes, JBL, J.
20[20] 122 SCRA 296, 300, May 16, 1983, per De Castro, J.
21[21] Rollo, p. 262.

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[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[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[24] Submitting documents supposedly showing that they own the subject
machines, petitioners also argue in their Petition that the Agreement suffers from
intrinsic ambiguity which places in serious doubt the intention of the parties and
the validity of the lease agreement itself. 25[25] In their Reply to respondents
Comment, they further allege that the Agreement is invalid. 26[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[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:

22[22] Evangelista v. Alto Surety and Insurance Co., 103 Phil. 401, April 23,
1958; Navarro v. Pineda, 9 SCRA 631, November 30, 1963.
23[23] Vitug, supra, pp. 100-101.
24[24] Petitioners Memorandum, p. 8; rollo, p. 381.
25[25] Petition, p. 10; rollo, p. 12.
26[26] Reply, p. 7; rollo, p. 301.
27[27] 209 SCRA 553, 567, June 8, 1992, per Narvasa, CJ.

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[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[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[30] is also instructive on this point. In
that case, the Deed of Chattel Mortgage, which characterized the subject
machinery as personal property, was also assailed because respondent had
allegedly been required to sign a printed form of chattel mortgage which was in
a blank form at the time of signing. The Court rejected the argument and relied
on the Deed, ruling as follows:
x x x. Moreover, even granting that the charge is true, such fact alone does not
render a contract void ab initio, but can only be a ground for rendering said
contract voidable, or annullable pursuant to Article 1390 of the new Civil Code, by
a proper action in court. There is nothing on record to show that the mortgage
has been annulled. Neither is it disclosed that steps were taken to nullify the
same. x x x
Alleged Injustice Committed on the Part of Petitioners
Petitioners contend that if the Court allows these machineries to be seized, then
its workers would be out of work and thrown into the streets. 31[31] They also
allege that the seizure would nullify all efforts to rehabilitate the corporation.
28[28] Ibid.
29[29] See Fuentes v. Court of Appeals, 268 SCRA 703, February 26, 1997.
30[30] Supra, p. 301.

Petitioners arguments do not preclude the implementation of the Writ. As earlier


discussed, law and jurisprudence support its propriety. Verily, the abovementioned 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.
Melo, (Chairman), Vitug, Purisima, and Gonzaga-Reyes, JJ., concur.

Republic of the Philippines


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

31[31] Petition, p. 16; rollo, p. 18.

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.
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.
Barredo (Chairman), Guerrero, De Castro and Escolin, JJ., concur.
Concepcion, Jr. and Abad Santos, JJ., took no part.

The Lawphil Project - Arellano Law Foundation

Republic of the Philippines


SUPREME COURT
Manila
EN BANC
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 "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 crisscross 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 hightension 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.
Bengzon, C.J., Padilla, Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L., Barrera
and Regala, JJ., concur.
Makalintal, J., concurs in the result.
Dizon, J., took no part.

The Lawphil Project - Arellano Law Foundation

Republic of the Philippines


SUPREME COURT
Manila
SECOND DIVISION
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.)
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.
Barredo (Chairman), Guerrero, De Castro and Escolin, JJ., concur.
Concepcion, Jr., J., is on leave.
Justice Abad Santos, J., took no part.

The Lawphil Project - Arellano Law Foundation

Republic of the Philippines


SUPREME COURT
Manila

EN BANC
G.R. No. L-11407

October 30, 1917

FAUSTO RUBISO and BONIFACIO GELITO, plaintiff-appellee,


vs.
FLORENTINO E. RIVERA, defendant-appellant.
Francisco Sevilla for appellant.
Salvador Q. Araullo for appellee.

TORRES, J.:
This appeal by bill of exceptions was filed by counsel for Florentino E. Rivera against the
judgment of September 6, 1915, in which the defendant and appellant was ordered to
place at the disposal of the plaintiff Fausto Rubiso the pilot boat in litigation. No special
finding was made for costs.
On April 10, 1915, counsel for plaintiff brought suit in the Court of the First Instance of
this city and alleged in the complaint that his clients were the owners of the pilot boat
named Valentina, which had been in bad condition since the year 1914 and, on the date of
the complaint, was stranded in the place called Tingloy, of the municipality of Bauan,
Batangas; that the defendant Florentino E. Rivera took charge or possession of said vessel
without the knowledge or consent of the plaintiff and refused to deliver it to them, under
claim that he was the owner thereof; and that such procedure on the defendant's part
caused the plaintiffs to suffer damages, not only because they could not proceed to repair
the vessel, but also because they were unable to derive profit from the voyages for which
said pilot boat was customarily used; and that the net amount of such uncollected profit
was P1,750. The complaint terminated with a petition that judgment be rendered by
ordering the defendant to deliver said pilot boat to the plaintiffs and indemnify them in
the amount aforementioned or in such amount as should be proven at trial, and to pay the
costs.
Counsel for the defendant entered a general and specific denial of all the facts set forth in
the complaint, with the exception of those admitted in the special defense and consisting
in that said pilot boat belonged to the concern named "Gelito and Co.," Bonifacio Gelito
being a copartner thereof to the extent of two-thirds, and the Chinaman Sy Qui, to that of
the one-third, of the value of said vessel; the subsequently Bonifacio Gelito sold his share
to his copartner Sy Qui, as attested by the instrument Exhibit A, registered in the office of
the Collector of Customs and made a part of his answer; that later said Chinaman, the
absolute owner of the vessel, sold it in turn to the defendant Rivera, according to the
public instrument, also attached to his answer as Exhibit B; and that, for the reason,
Rivera took possession of said pilot boat Valentina, as its sole owner. He therefore

petitioned that the defendant be absolved from the complaint, with the costs against the
plaintiff.
After the hearing of the case and introduction of documentary evidence, the judgment of
September 6, 1915, was rendered, from which counsel for the defendant appealed and
moved for a new trial. This motion was denied and the appellant excepted.
The record shows it to have been fully proven that Bonifacio Gelito sold his share in the
pilot boat Valentina, consisting of a two-thirds interest therein, to the Chinaman Sy Qui,
the coowner of the other one-third interest in said vessel; wherefore this vendor is no
longer entitled to exercise any action whatever in respect to the boat in question. Gelito
was one of the partnership owners of the Valentina, as in fact his name appears in the
certificate of protection issued by the Bureau of Customs, and the rights he held are
evidenced by the articles of partnership; but, the whole ownership in the vessel having
been consolidated in behalf of the Chinaman Sy Qui, this latter, in the use of his right as
the sole owner of the Valentina, sold this boat to Florentino E. Rivera for P2,500, on
January 4, 1915, which facts, are set forth in a deed ratified on the same date before a
notary. This document was registered in the Bureau of Customs on March 17th of the
same year.
On the 23d of January of that year, that is, after the sale of the boat to the defendant
Rivera, suit having been brought in the justice of the peace court against the Chinaman
Sy Qui to enforce payment of a certain sum of money, the latter's creditor Fausto Rubiso,
the herein plaintiff, acquired said vessel at a public auction sale and for the sum of
P55.45. The certificate of sale and adjudication of the boat in question was issued by the
sheriff on behalf of Fausto Rubiso, in the office of the Collector of Customs, on January
27 of the same year and was also entered in the commercial registry on the 14th of
March, following.
So that the pilot boat Valentina was twice sold: first privately by its owner Sy Qui to the
defendant Florentino E. Rivera, on January 4, 1915, and afterwards by the sheriff at
public auction in conformity with the order contained in the judgment rendered by the
justice of the peace, court, on January 23 of the same year, against the Chinaman Sy Qui
and in behalf of the plaintiff, Fausto Rubiso.
It is undeniable that the defendant Rivera acquired by purchase the pilot boat Valentina
on a date prior to that of the purchase and adjudication made at public auction, by and on
behalf of the plaintiff Rubiso; but it is no less true that the sale of the vessel by Sy Qui to
Florentino E. Rivera, on January 4, 1915, was entered in the customs registry only on
March 17, 1915, while its sale at public auction to Fausto Rubiso on the 23d of January
of the same year, 1915, was recorded in the office of the Collector of Customs on the
27th of the same month, and in the commercial registry on the 4th of March, following;
that is, the sale on behalf of the defendant Rivera was prior to that made at public auction
to Rubiso, but the registration of this latter sale was prior by many days to the sale made
to the defendant.

Article 573 of the Code of Commerce provides, in its first paragraph:


Merchant vessels constitute property which may be acquired and transferred by
any of the means recognized by law. The acquisition of a vessel must be included
in a written instrument, which shall not produce any effect with regard to third
persons if not recorded in the commercial registry.
So that, pursuany to the above-quoted article, inscription in the commercial registry was
indispensable, in order that said acquisition might affect, and produce consequences with
respect to third persons.
However, since the enactment of Act No. 1900, on May 18, 1909, said article of the Code
of Commerce was amended, as appears by section 2 of that Act, here below transcribed.
The documenting, registering, enrolling, and licensing of vessels in accordance
with the Customs Administrative Act and customs rules and regulations shall be
deemed to be a registry of vessels within the meaning of the title two of the Code
of Commerce, unless otherwise provided in said Customs Administrative Act or in
said customs rules and regulations, and the Insular Collector of Customs shall
perform the duties of commercial register concerning the registering of vessels, as
defined in title two of the Code of Commerce.
The requisite of registration in the registry, of the purchase of a vessel, is necessary and
indispensable in order that the purchaser's rights may be maintained against a claim filed
by a third person. Such registration is required both by the Code of Commerce and by Act
No. 1900. The amendment solely consisted in charging the Insular Collector of Customs,
as at present, with the fulfillment of the duties of the commercial register concerning the
registering of vessels; so that the registration of a bill of sale of a vessel shall be made in
the office of the insular Collector of Customs, who, since May 18, 1909, has been
performing the duties of the commercial register in place of this latter official.
In view of said legal provisions, it is undeniable that the defendant Florentino E. Rivera's
rights cannot prevail over those acquired by Fausto Rubiso in the ownership of the pilot
boat Valentina, inasmuch as, though the latter's acquisition of the vessel at public auction,
on January 23, 1915, was subsequent to its purchase by the defendant Rivera,
nevertheless said sale at public auction was antecedently recorded in the office of the
Collector of Customs, on January 27, and entered in the commercial registry an
unnecessary proceeding on March 4th; while the private and voluntary purchase made
by Rivera on a prior date was not recorded in the office of the Collector of Customs until
many days afterwards, that is, not until March 17, 1915.
The legal rule set down in the Mercantile Code subsists, inasmuch as the amendment
solely refers to the official who shall make the entry; but, with respect to the rights of the
two purchasers, whichever of them first registered his acquisition of the vessel is the one
entitled to enjoy the protection of the law, which considers him the absolute owner of the
purchased boat, and this latter to be free of all encumbrance and all claims by strangers

for, pursuant to article 582 of the said code, after the bill of the judicial sale at auction has
been executed and recorded in the commercial registry, all the other liabilities of the
vessel in favor of the creditors shall be considered canceled. 1awphil.net
The purchaser at public auction, Fausto Rubiso, who was careful to record his
acquisition, opportunely and on a prior date, has, according to the law, a better right than
the defendant Rivera who subsequently recorded his purchase. The latter is a third person,
who was directly affected by the registration which the plaintiff made of his acquisition.
Ships or vessels, whether moved by steam or by sail, partake, to a certain extent, of the
nature and conditions of real property, on account of their value and importance in the
world commerce; and for this reason the provisions of article 573 of the Code of
Commerce are nearly identical with those of article 1473 of the Civil Code.
With respect to the indemnity for losses and damages, requested by the plaintiff, aside
from the fact, as shown by the evidence, that, subsequent to the date when the judgment
appealed from was rendered, the vessel in question emerged unharmed from the place
where it was stranded, and was, at the time of the trial, anchored in the port of Maricaban,
the record certainly does not furnish any positive evidence of the losses and damages
alleged to have been occasioned. On the other hand, it cannot be affirmed that the
defendant acted in bad faith specifically because he acquired the vessel on a date prior to
that of its acquisition at public auction by the plaintiff Rubiso, who, for the reason
aforestated, is the true and sole owner of said pilot boat.
For the foregoing considerations, whereby the errors assigned to the judgment appealed
from are deemed to have been refuted, it is our opinion that said judgment should be, as it
is hereby, affirmed, with costs against the appellant. So ordered.
Arellano, C. J., Johnson, Carson, Street and Malcolm, JJ., concur.
Araullo, J., took no part.

The Lawphil Project - Arellano Law Foundation

Republic of the Philippines


SUPREME COURT
Manila
EN BANC
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 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).
(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.)
"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.
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 sugar-cane 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;
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.
Street, Malcolm, Villamor, Romualdez and Villa-Real., JJ., concur.

The Lawphil Project - Arellano Law Foundation

Republic of the Philippines


SUPREME COURT
Manila
EN BANC
G.R. No. L-19527

March 30, 1963

RICARDO PRESBITERO, in his capacity as Executor of the Testate Estate of


EPERIDION PRESBITERO, petitioner,
vs.
THE HON. JOSE F. FERNANDEZ, HELEN CARAM NAVA, and the
PROVINCIAL SHERIFF OF NEGROS OCCIDENTAL, respondents.
San Juan, Africa and Benedicto and Hilado and Hilado for petitioner.
Paredes, Poblador, Cruz and Nazareno and Manuel Soriano for respondents.
REYES, J.B.L., J.:
Petition for a writ of certiorari against the Court of First Instance of Negros Occidental.
It appears that during the lifetime of Esperidion Presbitero, judgment was rendered
against him by the Court of Appeals on October 14, 1959, in CA-G.R. No. 20879,
... to execute in favor of the plaintiff, within 30 days from the time this judgment
becomes final, a deed of reconveyance of Lot No. 788 of the cadastral survey of
Valladolid, free from all liens and encumbrances, and another deed of
reconveyance of a 7-hectare portion of Lot No. 608 of the same cadastral survey,
also free from all liens and encumbrances, or, upon failure to do so, to pay to the
plaintiff the value of each of the said properties, as may be determined by the
Court a quo upon evidence to be presented by the parties before it. The defendant
is further adjudged to pay to the plaintiff the value of the products received by
him from the 5-hectare portion equivalent to 20 cavans of palay per hectare every
year, or 125 cavans yearly, at the rate of P10.00 per cavan, from 1951 until

possession of the said 5-hectare portion is finally delivered to the plaintiff with
legal interest thereon from the time the complaint was filed; and to pay to the
plaintiff the sum of P1,000.00 by way of attorney's fees, plus costs.
This judgment, which became final, was a modification of a decision of the Court of First
Instance of Negros Occidental, in its Civil Case No. 3492, entitled "Helen Caram Nava,
plaintiff, versus Esperidion Presbitero, defendant."
Thereafter, plaintiff's counsel, in a letter dated December 8, 1959, sought in vain to
amicably settle the case through petitioner's son, Ricardo Presbitero. When no response
was forthcoming, said counsel asked for, and the court a quo ordered on June 9, 1960, the
issuance of a partial writ of execution for the sum of P12,250.00. On the following day,
June 10, 1960, said counsel, in another friendly letter, reiterated his previous suggestion
for an amicable settlement, but the same produced no fruitful result. Thereupon, on June
21, 1960, the sheriff levied upon and garnished the sugar quotas allotted to plantation
audit Nos. 26-237, 26-238, 26-239, 26-240 and 26-241 adhered to the Ma-ao Mill District
and "registered in the name of Esperidion Presbitero as the original plantation-owner",
furnishing copies of the writ of execution and the notice of garnishment to the manager of
the Ma-ao Sugar Central Company, Bago, Negros Occidental, and the Sugar Quota
Administration at Bacolod City, but without presenting for registration copies thereof to
the Register of Deeds.
Plaintiff Helen Caram Nava (herein respondent) then moved the court, on June 22, 1960,
to hear evidence on the market value of the lots; and after some hearings, occasionally
protracted by postponements, the trial court, on manifestation of defendant's willingness
to cede the properties in litigation, suspended the proceedings and ordered him to
segregate the portion of Lot 608 pertaining to the plaintiff from the mass of properties
belonging to the defendant within a period to expire on August 24, 1960, and to effect the
final conveyance of the said portion of Lot 608 and the whole of Lot 788 free from any
lien and encumbrance whatsoever. Because of Presbitero's failure to comply with this
order within the time set forth by the court, the plaintiff again moved on August 25, 1960
to declare the market value of the lots in question to be P2,500.00 per hectare, based on
uncontradicted evidence previously adduced. But the court, acting on a prayer of
defendant Presbitero, in an order dated August 27, 1960, granted him twenty (20) days to
finalize the survey of Lot 608, and ordered him to execute a reconveyance of Lot 788 not
later than August 31, 1960. Defendant again defaulted; and so plaintiff, on September 21,
1960, moved the court for payment by the defendant of the sum of P35,000.00 for the 14
hectares of land at P2,500.00 to the hectare, and the court, in its order dated September
24, 1960, gave the defendant until October 15, 1960 either to pay the value of the 14
hectares at the rate given or to deliver the clean titles of the lots. On October 15, 1960,
the defendant finally delivered Certificate of Title No. T-28046 covering Lot 788, but not
the title covering Lot 608 because of an existing encumbrance in favor of the Philippine
National Bank. In view thereof, Helen Caram Nava moved for, and secured on October
19, 1960, a writ of execution for P17,500.00, and on the day following wrote the sheriff
to proceed with the auction sale of the sugar quotas previously scheduled for November
5, 1960. The sheriff issued the notice of auction sale on October 20, 1960.

On October 22, 1960, death overtook the defendant Esperidion Presbitero.


Proceedings for the settlement of his estate were commenced in Special Proceedings No.
2936 of the Court of First Instance of Negros Occidental; and on November 4, 1960, the
special administrator, Ricardo Presbitero, filed an urgent motion, in Case No. 3492, to set
aside the writs of execution, and to order the sheriff to desist from holding the auction
sale on the grounds that the levy on the sugar quotas was invalid because the notice
thereof was not registered with the Register of Deeds, as for real property, and that the
writs, being for sums of money, are unenforceable since Esperidion Presbitero died on
October 22, 1960, and, therefore, could only be enforced as a money claim against his
estate.
This urgent motion was heard on November 5, 1960, but the auction sale proceeded on
the same date, ending in the plaintiff's putting up the highest bid for P34,970.11; thus, the
sheriff sold 21,640 piculs of sugar quota to her.
On November 10, 1960, plaintiff Nava filed her opposition to Presbitero's urgent motion
of November 4, 1960; the latter filed on May 4, 1961 a supplement to his urgent motion;
and on May 8 and 23, 1961, the court continued hearings on the motion, and ultimately
denied it on November 18, 1961.
On January 11, 1962, plaintiff Nava also filed an urgent motion to order the Ma-ao Sugar
Central to register the sugar quotas in her name and to deliver the rentals of these quotas
corresponding to the crop year 1960-61 and succeeding years to her. The court granted
this motion in its order dated February 3, 1962. A motion for reconsideration by
Presbitero was denied in a subsequent order under date of March 5, 1962. Wherefore,
Presbitero instituted the present proceedings for certiorari.
A preliminary restraining writ was thereafter issued by the court against the respondents
from implementing the aforesaid orders of the respondent Judge, dated February 3, 1960
and March 5, 1962, respectively. The petition further seeks the setting aside of the
sheriff's certificate of sale of the sugar quotas made out in favor of Helen Caram Nava,
and that she be directed to file the judgment credit in her favor in Civil Case No. 3492 as
a money claim in the proceedings to settle the Estate of Esperidion Presbitero.
The petitioner denies having been personally served with notice of the garnishment of the
sugar quotas, but this disclaimer cannot be seriously considered since it appears that he
was sent a copy of the notice through the chief of police of Valladolid on June 21, 1960,
as certified to by the sheriff, and that he had actual knowledge of the garnishment, as
shown by his motion of November 4, 1960 to set aside the writs of execution and to order
the sheriff to desist from holding the auction sale.
Squarely at issue in this case is whether sugar quotas are real (immovable) or personal
properties. If they be realty, then the levy upon them by the sheriff is null and void for
lack of compliance with the procedure prescribed in Section 14, Rule 39, in relation with

Section 7, Rule 59, of the Rules of Court requiring "the filing with the register of deeds a
copy of the orders together with a description of the property . . . ."
In contending that sugar quotas are personal property, the respondent, Helen Caram
Nava, invoked the test formulated by Manresa (3 Manresa, 6th Ed. 43), and opined that
sugar quotas can be carried from place to place without injury to the land to which they
are attached, and are not one of those included in Article 415 of the Civil Code; and not
being thus included, they fall under the category of personal properties:
ART. 416. The following are deemed to be personal property:
xxx

xxx

xxx

4. In general, all things which can be transported from place to place without
impairment of the real property to which they are fixed.
Wherefore, the parties respectfully pray that the foregoing stipulation of facts be
admitted and approved by this Honorable Court, without prejudice to the parties
adducing other evidence to prove their case not covered by this stipulation of
facts. 1wph1.t
Respondent likewise points to evidence she submitted that sugar quotas are, in fact,
transferred apart from the plantations to which they are attached, without impairing,
destroying, or diminishing the potentiality of either quota or plantation. She was
sustained by the lower court when it stated that "it is a matter of public knowledge and it
is universal practice in this province, whose principal industry is sugar, to transfer by
sale, lease, or otherwise, sugar quota allocations from one plantation to any other" and
that it is "specious to insist that quotas are improvements attaching to one plantation
when in truth and in fact they are no longer attached thereto for having been sold or
leased away to be used in another plantation". Respondent would add weight to her
argument by invoking the role that sugar quotas play in our modern social and economic
life, and cites that the Sugar Office does not require any registration with the Register of
Deeds for the validity of the sale of these quotas; and, in fact, those here in question were
not noted down in the certificate of title of the land to which they pertain; and that
Ricardo Presbitero had leased sugar quotas independently of the land. The respondent
cites further that the U.S.-Philippine Trade Relations Act, approved by the United States
Congress in 1946, limiting the production of unrefined sugar in the Philippines did not
allocate the quotas for said unrefined sugar among lands planted to sugarcane but among
"the sugar producing mills and plantation OWNERS", and for this reason Section 3 of
Executive Order No. 873, issued by Governor General Murphy, authorizes the lifting of
sugar allotments from one land to another by means only of notarized deeds.
While respondent's arguments are thought-provoking, they cannot stand against the
positive mandate of the pertinent statute. The Sugar Limitation Law (Act 4166, as
amended) provides

SEC. 9. The allotment corresponding to each piece of land under the provisions of
this Act shall be deemed to be an improvement attaching to the land entitled
thereto ....
and Republic Act No. 1825 similarly provides
SEC. 4. The production allowance or quotas corresponding to each piece of land under
the provisions of this Act shall be deemed to be an improvement attaching to the land
entitled thereto ....
And Executive Order No. 873 defines "plantation" as follows:
(a) The term 'plantation' means any specific area of land under sole or undivided
ownership to which is attached an allotment of centrifugal sugar.
Thus, under express provisions of law, the sugar quota allocations are accessories to land,
and can not have independent existence away from a plantation, although the latter may
vary. Indeed, this Court held in the case of Abelarde vs. Lopez, 74 Phil. 344, that even if a
contract of sale of haciendas omitted "the right, title, interest, participation, action (and)
rent" which the grantors had or might have in relation to the parcels of land sold, the sale
would include the quotas, it being provided in Section 9, Act 4166, that the allotment is
deemed an improvement attached to the land, and that at the time the contract of sale was
signed the land devoted to sugar were practically of no use without the sugar allotment.
As an improvement attached to land, by express provision of law, though not physically
so united, the sugar quotas are inseparable therefrom, just like servitudes and other real
rights over an immovable. Article 415 of the Civil Code, in enumerating what are
immovable properties, names
10. Contracts for public works, and servitudes and other real rights over
immovable property. (Emphasis supplied)
It is by law, therefore, that these properties are immovable or real, Article 416 of the Civil
Code being made to apply only when the thing (res) sought to be classified is not
included in Article 415.
The fact that the Philippine Trade Act of 1946 (U.S. Public Law 371-79th Congress)
allows transfers of sugar quotas does not militate against their immovability. Neither does
the fact that the Sugar Quota Office does not require registration of sales of quotas with
the Register of Deeds for their validity, nor the fact that allocation of unrefined sugar
quotas is not made among lands planted to sugarcane but among "the sugar producing
mills and plantation OWNERS", since the lease or sale of quotas are voluntary
transactions, the regime of which, is not necessarily identical to involuntary transfers or
levies; and there cannot be a sugar plantation owner without land to which the quota is
attached; and there can exist no quota without there being first a corresponding
plantation.

Since the levy is invalid for non-compliance with law, it is impertinent to discuss the
survival or non-survival of claims after the death of the judgment debtor, gauged from the
moment of actual levy. Suffice it to state that, as the case presently stands, the writs of
execution are not in question, but the levy on the quotas, and, because of its invalidity, the
levy amount to no levy at all. Neither is it necessary, or desirable, to pass upon the
conscionableness or unconscionableness of the amount produced in the auction sale as
compared with the actual value of the quotas inasmuch as the sale must necessarily be
also illegal.
As to the remedial issue that the respondents have presented: that certiorari does not lie in
this case because the petitioner had a remedy in the lower court to "suspend" the auction
sale, but did not avail thereof, it may be stated that the latter's urgent motion of November
4, 1960, a day before the scheduled sale (though unresolved by the court on time), did ask
for desistance from holding the sale.
WHEREFORE, the preliminary injunction heretofore granted is hereby made permanent,
and the sheriff's certificate of sale of the sugar quotas in question declared null and void.
Costs against respondent Nava.
Bengzon, C.J., Padilla, Labrador, Barrera, Paredes, Dizon and Regala, JJ., concur.
Makalintal, J., took no part.

The Lawphil Project - Arellano Law Foundation

Republic of the Philippines


SUPREME COURT
Manila
EN BANC
G.R. No. 6295

September 1, 1911

THE UNITED STATES, plaintiff-appellee,


vs.
IGNACIO CARLOS, defendant-appellant.
A. D. Gibbs for appellant.
Acting Attorney-General Harvey for appellee.
PER CURIAM:
The information filed in this case is as follows:

The undersigned accuses Ignacio Carlos of the crime of theft, committed as


follows:
That on, during, and between the 13th day of February, 1909, and the 3d day of
March, 1910, in the city of Manila, Philippine Islands, the said Ignacio Carlos,
with intent of gain and without violence or intimidation against the person or
force against the thing, did then and there, willfully, unlawfully, and feloniously,
take, steal , and carry away two thousand two hundred and seventy-three (2,273)
kilowatts of electric current, of the value of nine hundred and nine (909) pesos
and twenty (20) cents Philippine currency, 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; to the damage and prejudice of
the said Manila Electric Railroad and Light Company in the said sum of nine
hundred and nine (909) pesos and twenty (20) cents Philippine currency, equal to
and equivalent of 4,546 pesetas Philippine currency. All contrary to law.
(Sgd.) L. M. SOUTWORTH,
Prosecuting Attorney.
Subscribed and sworn to before me this 4th day of March, 1910, in the city of
Manila, Philippine Islands, by L. M. Southworth, prosecuting attorney for the city
of Manila.
(Sgd.) CHARLES S. LOBINGIER,
Judge, First Instance.
A preliminary investigation has heretofore been conducted in this case, under my
direction, having examined the witness under oath, in accordance with the
provisions of section 39 of Act No. 183 of the Philippine Commission, as
amended by section 2 of Act No. 612 of the Philippine Commission.
(Sgd) L. M. SOUTHWORTH,
Prosecuting Attorney.
Subscribed and sworn to before me this 4th day of March, 1910, in the city of
Manila, Philippine Islands, by L. M. Southworth, prosecuting attorney for the city
of Manila.
(Sgd.) CHARLES LOBINGIER,
Judge, First Instance.
A warrant for the arrest of the defendant was issued by the Honorable J. C. Jenkins on the
4th of March and placed in the hands of the sheriff. The sheriff's return shows that the
defendant gave bond for his appearance. On the 14th of the same month counsel for the
defendant demurrer to the complaint on the following grounds:

1 That the court has no jurisdiction over the person of the accused nor of the
offense charged because the accused has not been accorded a preliminary
investigation or examination as required by law and no court, magistrate, or other
competent authority has determined from a sworn complaint or evidence adduced
that there is probable cause to believe that a crime has been committed, or that
this defendant has committed any crime.
2 That the facts charged do not constitute a public offense.
The demurrer was overruled on the same day and the defendant having refused to plead, a
plea of not guilty was entered by direction of the court for him and the trial proceeded.
After due consideration of all the proofs presented and the arguments of counsel the trial
court found the defendant guilty of the crime charged and sentenced him to one year eight
months and twenty-one days' presidio correccional, to indemnify the offended party, The
Manila Electric Railroad and Light Company, in the sum of P865.26, to the
corresponding subsidiary imprisonment in case of insolvency and to the payment of the
costs. From this judgment the defendant appealed and makes the following assignments
of error:
I.
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 for the same reason.
II.
The court erred in declaring the accused to be guilty, in view of the evidence
submitted.
III.
The court erred in declaring that electrical energy may be stolen.
IV.
The court erred in not declaring that the plaintiff consented to the taking of the
current.
V.
The court erred in finding the accused guilty of more than one offense.
VI.

The court erred in condemning the accused to pay P865.26 to the electric
company as damages.
Exactly the same question as that raised in the first assignment of error, was after a
through examination and due consideration, decided adversely to appellant's contention
in the case of U. S. vs. Grant and Kennedy (18 Phil. Rep., 122). No sufficient reason is
presented why we should not follow the doctrine enunciated in that case.
The question raised in the second assignment of error is purely one fact. Upon this point
the trial court said:
For considerably more than a year previous to the filing of this complaint the
accused had been a consumer of electricity furnished by the Manila Electric
Railroad and Light Company for a building containing the residence of the
accused and three other residences, and which was equipped, according to the
defendant's testimony, with thirty electric lights. On March 15, 1909, the
representatives of the company, believing that more light was being used than
their meter showed, installed an additional meter (Exhibit A) on a pole outside of
defendant's house, and both it and the meter (Exhibit B) which had been
previously installed in the house were read on said date. Exhibit A read 218
kilowatt hours; Exhibit B, 745 kilowatt hours. On March 3, 1910 each was read
again, Exhibit A showing 2,718 kilowatt hours and Exhibit B, 968. It is
undisputed that the current which supplied the house passed through both meters
and the city electrician testifies that each meter was tested on the date of the last
reading and was "in good condition." The result of this registration therefore is
that while the outsider meter (Exhibit A) showed a consumption in defendant's
building of 2,500 kilowatt hours of electricity, this inside meter (Exhibit B)
showed but 223 kilowatt hours. In other words the actual consumption, according
to the outside meter, was more than ten times as great as that registered by the one
inside. Obviously this difference could not be due to normal causes, for while the
electrician called by the defense (Lanusa) testifies to the possibility of a difference
between two such meters, he places the extreme limit of such difference between
them 5 per cent. Here, as we have seen, the difference is more than 900 per cent.
Besides, according to the defendant's electrician, the outside meter should
normally run faster, while according to the test made in this case the inside meter
(Exhibit B) ran the faster. The city electrician also testifies that the electric current
could have been deflected from the inside meter by placing thereon a device
known as a "jumper" connecting the two outside wires, and there is other
testimony that there were marks on the insulation of the meter Exhibit B which
showed the use of such a device. There is a further evidence that the consumption
of 223 kilowatt hours, registered by the inside meter would not be a reasonable
amount for the number of lights installed in defendant's building during the period
in question, and the accused fails to explain why he should have had thirty lights
installed if he needed but four or five.

On the strength of this showing a search warrant was issued for the examination
of defendant's premises and was duly served by a police officer (Hartpence). He
was accompanied at the time by three employees of the Manila Electric Railroad
and Light Company, and he found there the accused, his wife and son, and
perhaps one or two others. There is a sharp conflict between the several spectators
on some points but on one there is no dispute. All agree that the "jumper" (Exhibit
C) was found in a drawer of a small cabinet in the room of defendant's house
where the meter was installed and not more than 20 feet therefrom. In the absence
of a satisfactory explanation this constituted possession on defendant's part, and
such possession, under the Code of Civil Procedure, section 334 (10), raises the
presumption that the accused was the owner of a device whose only use was to
deflect the current from the meter.
Is there any other "satisfactory explanation" of the "jumper's" presence? The only
one sought to be offered is the statement by the son of the accused, a boy of
twelve years, that he saw the "jumper" placed there by the witness Porter, an
employee of the Light Company. The boy is the only witness who so testifies and
Porter himself squarely denies it. We can not agree with counsel for the defense
that the boy's interest in the outcome of this case is less than that of the witness
for the prosecution. It seems to us that his natural desire to shield his father would
far outweight any interest such an employee like Porter would have and which, at
most, would be merely pecuniary.
There is, however, one witness whom so far as appears, has no interest in the
matter whatsoever. This is officer Hartpence, who executed the search warrant.
He testifies that after inspecting other articles and places in the building as he and
the other spectators, including the accused, approached the cabinet in which the
"jumper" was found, the officer's attention was called to the defendant's
appearance and the former noticed that the latter was becoming nervous. Where
the only two witnesses who are supposed to know anything of the matter thus
contradict each other this item of testimony by the officer is of more than ordinary
significance; for if, as the accused claims, the "jumper" was placed in the cabinet
for the first time by Porter there would be no occasion for any change of
demeanor on the part of the accused. We do not think that the officer's declination
to wait until defendant should secure a notary public shows bias. The presence of
such an official was neither required nor authorized by law and the very efficacy
of a search depends upon its swiftness.
We must also agree with the prosecuting attorney that the attending circumstances
do not strengthen the story told by the boy; that the latter would have been likely
to call out at the time he saw the "jumper" being placed in the drawer, or at least
directed his father's attention to it immediately instead of waiting, as he says, until
the latter was called by the officer. Finally, to accept the boy's story we must
believe that this company or its representatives deliberately conspired not merely
to lure the defendant into the commission of a crime but to fasten upon him a
crime which he did not commit and thus convict an innocent man by perjured

evidence. This is a much more serious charge than that contained in the complaint
and should be supported by very strong corroborating circumstances which we do
not find here. We are, accordingly, unable to consider as satisfactory defendant's
explanation of the "jumper's" presence.
The only alternative is the conclusion that the "jumper" was placed there by the
accused or by some one acting for him and that it was the instrument by which the
current was deflected from the matter Exhibit B and the Light Company deprived
of its lawful compensation.
After a careful examination of the entire record we are satisfied beyond peradventure of a
doubt that the proofs presented fully support the facts as set forth in the foregoing
finding.
Counsel for the appellant insists that the only corporeal property can be the subject of the
crime of larceny, and in the support of this proposition cites several authorities for the
purpose of showing that the only subjects of larceny are tangible, movable, chattels,
something which could be taken in possession and carried away, and which had some,
although trifling, intrinsic value, and also to show that electricity is an unknown force and
can not be a subject of larceny.
In the U. S. vs. Genato (15 Phi. Rep., 170) the defendant, the owner of the store situated
at No. 154 Escolta, Manila, was using a contrivance known as a "jumper" on the electric
meter installed by the Manila Electric Railroad and the Light Company. As a result of the
use of this "jumper" the meter, instead of making one revolution in every four seconds,
registered one in seventy-seven seconds, thereby reducing the current approximately 95
per cent. Genato was charged in the municipal court with a violation of a certain
ordinance of the city of Manila, and was sentenced to pay a fine of P200. He appealed to
the Court of First Instance, was again tried and sentenced to pay the same fine. An appeal
was taken from the judgment of the Court of First Instance to the Supreme Court on the
ground that the ordinance in question was null and void. It is true that the only question
directly presented was of the validity of the city ordinance. The court, after holding that
said ordinance was valid, said:
Even without them (ordinances), the right of ownership of electric current is
secured by articles 517 and 518 of the Penal Code; the application of these articles
in case of subtraction 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 these Islands.
Article 517 of the Penal Code above referred to reads as follows:
The following are guilty of larceny:

(1) Those who with intent of gain and without violence or intimidation against the
person, or force against things, shall take another's personal property without the
owner's consent.
And article 518 fixes the penalty for larceny in proportion to the value of the personal
property stolen.
It is true that electricity is no longer, as formerly, regarded by electricians as a fluid, but
its manifestation and effects, like those of gas, may be seen and felt. The true test of what
is a proper subject of larceny seems to be not whether the subject is corporeal, but
whether it is capable of appropriation by another than the owner.
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 III., 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.)
In the case of Commonwealth vs. Shaw, supra, the court, speaking through Chief Justice
Bigelow, said:
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. In the present case it appears that it was the property of the Boston Gas
Light Company; that it was in their possession by being confined in conduits and
tubes which belonged to them, and that the defendant severed a portion of that
which was in the pipes of the company by taking it into her house and there
consuming it. All this being proved to have been done by her secretly and with
intent to deprive the company of their property and to appropriate it to her own
use, clearly constitutes the crime of larceny.
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. So no error was
committed by the trial court in holding that electricity is a subject of larceny.
It is urged in support of the fourth assignment of error that if it be true that the appellant
did appropriate to his own use the electricity as charged he can not be held guilty of
larceny for any part of the electricity thus appropriated, after the first month, for the
reason that the complaining party, the Manila Electric Road and Light Company, knew of
this misappropriation and consented thereto.
The outside meter was installed on March 15, 1909, and read 218 kilowatt hours. On the
same day the inside meter was read and showed 745 kilowatt hours. Both meters were

again read on March 3, 1910, and the outside one showed 2,718 kilowatt hours while the
one on the inside only showed 968, the difference in consumption during this time being
2,277 kilowatt hours. The taking of this current continued over a period of one year, less
twelve days. Assuming that the company read both meters at the end of each month; that
it knew the defendant was misappropriating the current to that extent; and that t continued
to furnish the current, thereby giving the defendant an opportunity to continue the
misppropriation, still, we think, that the defendant is criminally responsible for the taking
of the whole amount, 2,277 kilowatt hours. 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 time, 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 pretense that the accused was solicited by the company or any one else to
commit the acts charged. At most there was a mere passive submission on the part of the
company that the current should be taken and no indication that it wished it 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 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. It is true, no doubt, as a
general proposition, that larceny is not committed when the property is taken with the
consent of its owner. It may be difficult in some instances to determine whether certain
acts constitute, in law, such "consent." But under the facts in the case at bar it is not
difficult to reach a conclusion that the acts performed by the plaintiff company did not
constitute a consent on its part the defendant take its property. We have been unable to
find a well considered case holding contrary opinion under similar facts, but, there are
numerous cases holding that such acts do not constitute such consent as would relieve the
taker of criminal responsibility. The fourth assignment of error is, therefore, not well
founded.
It is also contended that since the "jumper" was not used continuously, the defendant
committed not a single offense but a series of offenses. It is, no doubt, true that the
defendant did not allow the "jumper" to remain in place continuously for any number of
days as the company inspected monthly the inside meter. So the "jumper" was put on and
taken off at least monthly, if not daily, in order to avoid detection, and while the "jumper"
was off the defendant was not misappropriating the current. The complaint alleged that
the defendant did on, during, and between the 13th day of February, 1909, and the 3d of
March, 1910. willfully, unlawfully, and feloniously take, steal, and carry away 2,277
kilowatts of electric current of the value of P909. No demurrer was presented against this
complaint on the ground that more than one crime was charged. The Government had no
opportunity to amend or correct this error, if error at all. In the case of U. S. vs. Macaspac
(12 Phil. Rep., 26), the defendant received from one Joquina Punu the sum of P31.50,

with the request to deliver it to Marcelina Dy-Oco. The defendant called upon Marcelina,
but instead of delivering the said amount she asked Marcelina for P30 in the name of
Joaquina who had in no way authorized her to do so. Marcelina gave her P30, believing
that Joaquina had sent for it. Counsel for the defendant insisted that the complaint
charged his client with two different crimes of estafa in violation of section 11 of General
Orders, No. 58. In disposing of this question this court said:
The said defect constitutes one of the dilatory pleas indicated by section 21, and
the accused ought to have raised the point before the trial began. Had this been
done, the complaint might have been amended in time, because it is merely a
defect of form easily remedied. . . . Inasmuch as in the first instance the accused
did not make the corresponding dilatory plea to the irregularity of the complaint,
it must be understood that has waived such objection, and is not now entitled to
raise for the first time any question in reference thereto when submitting to this
court her assignment of errors. Apart from the fact that the defense does not
pretend that any of the essential rights of the accused have been injured, the
allegation of the defect above alluded to, which in any case would only affect
form of the complaint, can not justify a reversal of the judgment appealed from,
according to the provisions of section 10 of General Orders, No. 58.
In the case at bar it is not pointed out wherein any of the essential rights of the defendant
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
prosecuting attorney elected to cover the entire period with one charge and the accused
having been convicted for this offense, he can not again be prosecuted for the stealing of
the current at any time within that period. Then, again, we are of the opinion that the
charge was properly laid. 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. The defendant was
moved by one impulse to appropriate to his own use the current, and the means adopted
by him for the taking of the current were in the execution of a general fraudulent plan.
A person stole gas for the use of a manufactory by means of pipe, which drew off
the gas from the main without allowing it to pass through the meter. The gas from
this pipe was burnt every day, and turned off at night. The pipe was never closed
at this 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 talkings. 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.)

The value of the electricity taken by the defendant was found by the trial court to be
P865.26. This finding is fully in accordance with the evidence presented. So no error was
committed in sentencing the defendant to indemnify the company in this amount, or to
suffer the corresponding subsidiary imprisonment in case of insolvency.
The judgment being strictly in accordance with the law and the merits of the case, same is
hereby affirmed, with costs against the appellant.
Arellano, C.J., Torres, Mapa and Carson, JJ.

Separate Opinions
MORELAND, J., dissenting:
I feel myself compelled to dissent because, in my judgment, there is no evidence before
this court, and there was none before the court below, establishing the most essential
element of the crime of larceny, namely, the taking without the consent of the owner. As I
read the record, there is no evidence showing that the electricity alleged to have been
stolen was taken without the consent of the complaining company. The fact is that there
was not a witness who testified for the prosecution who was authorized in law, or who
claimed to be authorized in fact, to testify as to whether or not the alleged taking of the
electricity was without the consent of the company or, even that said company had not
been paid for all electricity taken. Not one of them was, as a matter of law, competent to
either of those facts. Not one of them was an officer of the company. The leading witness
for the people, Kay, was only an inspector of electric lights. Another, McGeachim was an
electrical engineer in the employ of the company. Another, Garcia, was an electrician of
the company. These witness all confined their testimony to technical descriptions of
meters, their nature and function, of electric light wires, the writing of defendant's house,
the placing of a meter therein, the placing of the meter outside of the house in order to
detect, by comparing the readings of the two, whether the accused was actually using
more electricity than the house meter registered, the discovery that more electricity was
being used than said meter registered, and of the finding of a "jumper" in defendant's
possession. One of these witnesses testified also that he had suspected for a long time that
the accused was "stealing" electricity and that later he was "positive of it."
In order to sustain a charge of larceny under section 517 of Penal Code, it is necessary to
prove that there was a taking without the consent of the owner. This is unquestioned. The
question is: Has the prosecution proved that fact? Has it proved that the electricity alleged
to have been stolen was used without the consent of the company? Has it proved that the
accused did not have a right to use electricity whether it went through the meter or not?
Has it proved, even, that the accused did not have a right to use a "jumper?" Has it been
proved that the company has not been fully paid for all the electricity which defendant
used, however obtained? Not one of these facts has been proved. The only way to
determine those questions was to ascertain the relations which existed between the

accused and the company at the time the electricity alleged to have been stolen was used
by the accused. There was certainly some relation, some contract, either express or
implied, between the company and the accused or the company would not have been
supplying him the electric current. What was that relation, that contract? No one can
possibly tell by reading the record. There is not a single word in all the evidence even
referring to it. Not one of the people's witnesses mentioned it. Not one of them, very
likely, knew what it really was. The relation which a corporation bears to private persons
for whom they are rendering service is determined by the corporation itself through the
acts of its officials, and not by its employees. While an employee might, as the act of a
servant, have caused the contract between the company and the accused to be signed by
the accused, it was nevertheless a contract determined and prepared by the company
through its officers and not one made by the employee; and unless the employee actually
knew the terms of the contract signed by the accused, either by having read it, if in
writing, or by having heard it agreed upon, if verbal, he would not be competent to testify
to its terms except rendered so by admission of the party to be charged by it. It nowhere
appears that any of the witnesses for the prosecution had any knowledge whatever of the
terms of the contract between the company and the accused. It does not appear that any of
them had ever seen it or heard it talked about by either party thereto. The company has
offered no testimony whatever on the matter. The record is absolutely silent on that point.
This being true, how can we say that the accused committed a crime? How can we say
that a given act is criminal unless we know the relation of the parties to whom the act
refers? Are we to presume an act wrong when it may be right? Are we to say that the
accused committed a wrong when we do not know whether he did or not? If we do not
know the arrangements under which the company undertook to furnish electricity to the
defendant, how do we know that the accused has not lived up to them? If we do not know
their contract, how do we know that the accused violated it?
It may be urged that the very fact that a meter was put in by the company is evidence that
it was for the company's protection. This may be true. But is it not just as proper to
presume that it was put in for defendant's protection also? Besides, it does not appear that
the company really put in the matter, nor does not appear that the company really put in
the meter, nor does it even appear to whom it belonged. No more does it appear on whose
application it was put in. The witness who installed the meter in defendant's house did not
say to whom it belonged and was unable to identify the one presented by the prosecution
on the trial as the one he installed. But however these things may be, courts are not
justified in "assuming" men into state prison. The only inferences that courts are justified
in drawing are those springing from facts which are not only proved but which are of
themselves sufficient to warrant the inference. The mere fact, it is a fact, that the
company placed a meter in defendant's house is not sufficient to sustain the conclusion in
a criminal case that the defendant did not have the right to use electricity which did not
have the right to use electricity which did not pass through the meter. Much less would it
warrant the inference that, in so using electricity, the defendant feloniously and criminally
took, sole, and carried it away without the consent of the company. An accused is
presumed innocent until contrary is proved. His guilt must be established beyond a
reasonable doubt. It is incumbent on the state to prove every fact which is essential to the

guilt of the accused, and to prove every such fact as though the whole issue rested on it.
The evidence of the prosecution must exclude every reasonable hypothesis of innocence
as with his guilt, he can not be convicted.
But what was the necessity of all this uncertainty? What was the force which prevented
the company from proving clearly and explicitly the contract between itself and the
accused? What prevented it from proving clearly, explicitly, and beyond all cavil that the
electricity was taken (used) without its consent? Why did not some competent official
testify? Why did the company stand by wholly silent? Why did it leave its case to be
proved by servants who were competent to testify, and who did actually testify, so far as
legal evidence goes, only in relation to technical matters relating to meters and electric
currents? Why did the prosecution place upon this court the necessity of deducing and
inferring and concluding relative to the lack of consent of the company when a single
word from the company itself would have avoided that necessity? We have only one
answer to all these questions: We do not know.
In the case of Bubster vs. Nebraska (33 Neb., 663), the accused was charged with the
larceny of buggy of the value of $75. He was found guilty. On appeal the judgment of
conviction was reversed, the court saying:
There are two serious objections to this verdict. First, the owner of the buggy,
although apparently within reach of the process of the court, was not called as a
witness. Her son-in-law, who resided with her, testifies that he did not give his
consent, and very freely testifies that his mother-in-law did not. She was within
reach of the process of the court and should have been called as a witness to prove
her nonconsent.
The rule is very clearly stated in note 183, volume 1, Philips on Evidence (4th
Am. ed.). A conviction of larceny ought not to be permitted or sustained unless it
appears that the property was taken without the consent of the owner, and the
owner himself should be called, particularly in a case like that under
consideration, when the acts complained of may be consistent with the utmost
goodfaith. There is a failure of proof therefore on this point.
In the case of State vs. Moon (41 Wis., 684), the accused was charged with the larceny of
a mare. He was convicted. On appeal the court reversed the judgment of conviction,
saying:
In State vs. Morey (2 Wis., 494) it was held that in prosecutions of lacerny, if the
owner of the property alleged to have been stolen is known, and his attendance as
a witness can be procured, his testimony that the property was taken from him
without his consent is indispensable to a conviction. This is upon the principle
that his testimony is the primary and the best evidence that the property was taken
without his consent, and hence, that secondary evidence of the fact cannot be
resorted to, until the prosecution shows it inability, after due diligence, to procure
the attendance of the owner.

In volume 1, Phillips on Evidence (5th Am., ed., note 183 sec. 635), the author says:
In all cases, and especially in this, the lacerny itself must be proved by the
evidence the nature of the case admits. . . . This should be by the testimony of the
owner himself if the property was taken from his immediate possession, or if from
the actual possession of another, though a mere servant or child of the owner, that
the immediate possession was violated, and this, too, without the consent of the
person holding it. Where nonconsent is an essential ingredient in the offense, as it
is here, direct proof alone, from the person whose nonconsent is necessary, can
satisfy the rule. You are to prove a negative, and the very person who can swear
directly to the necessary negative must, if possible, always be produced. (Citing
English authorities.) Other and inferior proof cannot be resorted to till it be
impossible to procure this best evidence. If one person be dead who can swear
directly to the negative, and another be alive who can yet swear to the same thing,
he must be produced. In such cases, mere presumption, prima facie or
circumstantial evidence is secondary in degree, and cannot be used until all the
sources of direct evidence are exhausted.
I quote these authorities not because I agree with the doctrine as therein set forth. I quote
them because there is a principle inherent in the doctrine laid down which is recognized
by all courts as having value and effect. It is this: Failure to call an available witness
possessing peculiar knowledge concerning facts essential to a party's case, direct or
rebutting, or to examine such witness as to facts covered by his special knowledge,
especially if the witness be naturally favorable to the party's contention, relying instead
upon the evidence of witnesses less familiar with the matter, gives rise to an inference,
sometimes denominated a strong presumption of law, that the testimony of such
uninterrogated witness would not sustain the contention of the party. Where the party
himself is the one who fails to appear or testify, the inference is still stronger. The
nonappearance of a litigant or his failure to testify as to facts material to his case and as to
which he has especially full knowledge creates an inference that he refrains from
appearing or testifying because the truth, if made to appear, would not aid his contention;
and, in connection with an equivocal statement on the other side, which if untrue could be
disapproved by his testimony, often furnishes strong evidence of the facts asserted. As to
this proposition the authorities are substantially uniform. They differ only in the cases to
which the principles are applied. A substantially full list of the authorities is given in 16
Cyclopedia of Law and Procedure (pp. 1062 to 1064, inclusive) from which the rules as
stated above are taken.
This court has recognized the value of this principle and has permitted it strongly to
influence its view of the evidence in certain cases. In the case of United States vs.
Magsipoc (20 Phil. Rep., 604) one of the vital facts which the prosecution was required to
establish in order to convict the accused was that a certain letter which the accused
alleged he mailed to his daughter, who was attending a boarding school in Iloilo, and
which the daughter testified she had received, had not really been sent by the accused and
received by the daughter but, instead, had been purloined by him from the post-office
after he had duly placed it therein and after it had been taken into custody and control of

the postal authorities. It was conceded that the directress of the boarding school which the
daughter was at the time attending knew positively whether the daughter was at the time
attending knew positively whether the daughter had received the letter in question or not.
This court held that, in weighing the evidence, it would take into consideration the failure
of the prosecution to produce the directress of the school as a witness in the case, she
being the only person, apart from the daughter herself, who really knew the fact.
Another those cases was that of U. S. vs. Casipong (20 Phil. Rep., 178) charged with
maintaining a concubine outside his home with public scandal. To prove the scandalous
conduct charged and its publicity, the prosecution introduced testimony, not of witnesses
in the vicinity where the accused resided and where the scandal was alleged to have
occurred, but those from another barrio. No Witness living in the locality where the
public scandal was alleged to have occurred was produced. This court, in the decision of
that case on appeal, allowed itself, in weighing the evidence of the prosecution, to be
strongly influenced by the failure to produce as witnesses persons who, if there had really
been public scandal, would have been the first, if not the only ones, to know it. The court
said:
In this case it would have been easy to have submitted abundant evidence that
Juan Casipong forsook his lawful wife and lived in concubinage in the village of
Bolocboc with his paramour Gregoria Hongoy, for there would have been an
excess of witnesses to testify regarding the actions performed by the defendants,
actions not of isolated occurrence but carried on for many days in slight of
numerous residents scandalized by their bad example. But it is impossible to
conclude from the result of the trial that the concubinage with scandal charged
against the defendants has been proved, and therefore conviction of the alleged
concubine Gregoria Hongoy is not according to law.
In the case at bar the question of the consent of the company to the us of the electricity
was the essence of the charge. The defendant denied that he had taken the electricity
without the consent of the company. The prosecution did not present any officer of the
corporation to offset this denial and the company itself, although represented on the trial
by its own private counsel, did not produce a single witness upon that subject.
In the case of Standard Oil Co. vs. State (117 Tenn., 618), the court (p.672) said:
But the best evidence of what his instructions to Holt were and the information he
had of the transaction at the time was made were the letters which he wrote to
Holt directing him to go to Gallatin, and the daily and semi-weekly reports made
to him by Holt and Rutherford of what was done there, which were not produced,
although admitted to be then in his possession. He was aware of the value of such
evidence, as he produced a copy of his letter to Holt, condemning the transaction,
as evidence in behalf of the plaintiffs in error. The presumption always is that
competent and pertinent evidence within the knowledge or control of a party
which he withholds is against his interest and insistence. (Dunlap vs. Haynes, 4

Heisk., 476; Kirby vs. Tallmadge, 160 U. S., 379, 16 Sup. Ct., 349, 40 L. ed., 463;
Pacific Constr. Co. vs. B. W. Co., 94 Fed,, 180, 36 C. C. A., 153)
In the case of Succession of Drysdale (127 La., 890), the court held:
When a will presented for probate is attacked on the ground that it is a forgery,
and there are pertinent facts relating to the will in the possession of the proponent,
and he repeatedly fails to testify when his testimony could clear up many clouded
and doubtful things, his failure to testify casts suspicion upon the will, especially
when the one asking for the probate of the will is a principal legatee.
In the case of Belknap vs. Sleeth (77 Kan., 164), the court (p. 172) said:
What effect should such conduct have in the consideration of a case, where the
successful party thus living beyond the jurisdiction of the court has refused to
testify in a material matter in behalf of the opposing party? It must be conceded
that the benefit of all reasonable presumptions arising from his refusal should be
given to the other party. The conduct of a party in omitting to produce evidence
peculiarly within his knowledge frequently affords occasion for presumptions
against him. (Kirby vs. Tallmadge, 160 U. S., 379, 16 Sup. Ct., 349, 14 L. Ed.,
463.) This rule has been often applied where a party withholds evidence within
his exclusive possession and the circumstances are such as to impel an honest
man to produce the testimony. In this case the witness not only failed but refused
to testify concerning material matters that must have been within his knowledge.
In the case of Heath vs. Waters (40 Mich., 457), it was held that:
It is to be presumed that when a witness refuses to explain what he can explain,
the explanation would be to his prejudice.
In case of Frick vs. Barbour (64 Pa. St., 120, 121), the court said:
It has been more than once said that testimony in a case often consists in what is
not proved as well as in what is proved. Where withholding testimony raises a
violent presumption that a fact not clearly proved or disproved exists, it is not
error to allude to the fact of withholding, as a circumstance strengthening the
proof. That was all that was done here.
In the case of Funda vs. St. Paul City Railway Co. (71 Minn., 438), the court held:
The defendant having omitted to call its motorman as a witness, although within
reach and available, the court was, under the circumstances, justified in
instructing the jury that, in weighing the effect of the evidence actually
introduced, they were at liberty to presume that the testimony of the motorman, if
introduced, would not have been favorable to the cause of defendant.

In the case of Gulf, C. & S. F. Ry. Co. vs. Ellis (54 Fed. Rep., 481), the circuit court of
appeals held that:
Failure to produce the engineer as a witness to rebut the inferences raised by the
circumstancial evidence would justify the jury in assuming that his evidence,
instead of rebutting such inference, would support them.
In Wigmore on Evidence (vol. 1, sec. 285), it is said:
The consciousness indicated by the conduct may be, not an indefinite one
affecting the weakness of the cause at large, but a specific one concerning the
defects of a particular element in the cause. The failure to bring before the tribunal
some circumstances, document, or witness, when either the party himself or his
opponent claims that the facts would thereby be elucidated, serves to indicate, as
the most natural inference, that the party fears to do so, and this fear is some
evidence that circumstances or document or witness, if brought, would have
exposed facts unfavorable to the party. These inferences, to be sure, cannot fairly
be made except upon certain conditions; and they are also open always to
explanation by circumstances which make some other hypothesis a more natural
one than the party's fear of exposure. But the propriety of such an inference in
general is not doubted. The nonproduction of evidence that would naturally have
been produced by an honest and therefore fearless claimant permits the inference
that its tenor is unfavorable to the party's cause. . . .
Continuing this same subject the same author says:
At common law the party-opponent in a civil case was ordinarily privileged from
taking the stand (post, sec. 2217); but he was also disqualified; and hence the
question could rarely arise whether his failure to testify could justify any
inference against him. But since the general abolition of both of the privilege and
the disqualification (post, secs. 2218, 577), the party has become both competent
and compellable like other witnesses; and the question plainly arises whether his
conduct is to be judged by the same standards of inference. This question
naturally be answered in the affirmative. . . . (See Aragon Coffee Co., vs. Rogers,
105 Va., 51.)
As I stated at the outset, I have been unable to find in the record of this case any proof of
legal value showing or tending to show that the electricity alleged to have been stolen
was taken or used without the consent of the company. The defendant, therefore, should
be acquitted.
There are other reasons why I cannot agree to the conviction of the accused. Even though
the accused to be found to have committed the acts charged against him, it stands
conceded in this case that there is a special law passed particularly and especially to meet
cases of this very kind, in which the offense is mentioned by name and described in detail
and is therein made a misdemeanor and punished as such. It is undisputed and admitted

that heretofore and ever since said act was passed cases such as the one at bar have
uniformly and invariably been cognized and punished under said act; and that this is the
first attempt ever made in these Islands to disregard utterly the plain provisions of this
act, and to punish this class of offenses under the provisions of Penal Code relating to
larceny. The applicability of those provisions is, to say the very least, extremely doubtful,
even admitting that they are still in force. Even though originally applicable, these
provisions must now be held to be repealed by implication, at least so far as the city of
Manila is concerned, by the passage of the subsequent act defining the offense in question
and punishing it altogether differently.
Moreover, I do not believe that electricity, in the for in which it was delivered to the
accused, is susceptible of being stolen under the definition given by the law of these
Islands to the crime of larceny.
Concisely, then, I dissent because (a) this court, by its decision in this case, has, in my
judgment, disregarded the purpose of the Legislature, clearly expressed; because (b) it
has applied a general law, of at least very doubtful application, to a situation completely
dealt with, and admittedly so by a later statute conceived and enacted solely and
expressly to cover that very situation; because (c) the court makes such application in
spite of the fact that, under the general law, if it is applicable, the crime in hand is a
felony while under the later statute it is only a misdemeanor; because (d), in my
judgment, the court modifies the definition given by the Legislature to the crime of
lacerny, which has been the same and has received the same interpretation in this country
and in Spain for more than two centuries; because (e) the decision disregards, giving no
importance to a positive statute which is not only the last expression of the legislative
will on the particular subject in hand, but was admittedly passed for the express purpose
of covering the very situation to which the court refuses to apply it. While the statute
referred to is an act of the Municipal Board of the city of Manila, this court has held in a
recent case that said board was authorized by the legislature to pass it. Therefore it is an
Act of the Legislature of the Philippine Islands.
In this dissent I shall assert, and, I think, demonstrate three propositions, to wit:
First. That an electric current is not a tangible thing, a chattel, but is a condition, a state in
which a thing or chattel finds itself; and that a condition or state can not be stolen
independently of the thing or chattel of which it is a condition or state. That it is chattels
which are subjects of lacerny and not conditions.
Second. That, even if an electric current is a tangible thing, a chattel, and capable of
being stolen, in the case at bar no electric current was taken by the defendant, and
therefore none was stolen. The defendant simply made use of the electric current,
returning to the company exactly the same amount that he received.
Third. That, even if an electric current is a tangible thing, a chattel, and capable of being
stolen, the contract between the company and the defendant was one for use and not for
consumption; and all the defendant is shown to have done, which is all he could possibly

have done, was to make use of a current of electricity and not to take or consume
electricity itself .
I shall therefore maintain that there is no lacerny even though the defendant committed
all the acts charged against him.
In discussing the question whether, under the law of the Philippine Islands, an electric
current is the subject of larceny, I shall proceed upon the theory, universally accepted today, that electricity is nothing more or less than energy. As Mr. Meadowcroft says in his
A B C of Electricity, indorsed by Mr. Edison, "electricity is a form of energy, or force,
and is obtained by transforming some other form of energy into electrical energy."
In this I do not forget the theory of the "Electron" which is now being quietly investigated
and studied, which seems to tend to the conclusion that there is no difference between
energy and matter, and that all matter is simply a manifestation of energy. This theory is
not established, has not been announced by any scientist as proved, and would probably
have no effect on the present discussion if it were.
Based on this accepted theory I draw the conclusion in the following pages that electricity
is not the subject of larceny under the law of the Philippine Islands.
Partida 3, title 29, law 4, thus defines "cosas muebles:"
The term muebles is applied to all the things that men can move from one place to
another, and all those that can naturally move themselves: those that men can
move from one place to another are such as cloths, books, provisions, wine or oil,
and all other things like them; and those that can naturally move themselves are
such as horses, mules, and the other beast, and cattle, fowls and other similar
things.
Partida 5 title 5, law 29, contains the following:
But all the other things which are muebles and are not annexed to the house or do
not appeartain thereto belong to the vendor and he can take them away and do
what he likes with them: such are the wardrobes, casks and the jars not fixed in
the ground, and other similar things.
Article 517 of the Penal Code, in that portion defining larceny, as charged against the
accused in the case at bar, reads:
ART. 517. The following are guilty of theft:
1. Those who, with intent of gain and without violence or intimidation against the
person or force against things, shall take another's personal property (cosas
muebles) without the owner's consent.

This article of the Penal Code, as is seen, employs precisely the words defined in the
Partidas. The definition of the word is clear in the law as written. It is also clear in the law
as interpreted. I have not been able to find a writer on Spanish or Roman criminal law
who does not say clearly and positively that the only property subject to lacerny is
tangible movable chattels, those which occupy space, have three dimensions, have a
separate and independent existence of their own apart from everything else, and can be
manually seized and carried from one place to another. This was the unquestioned theory
of the Roman criminal law and it is the undoubted and unquestioned theory of the
Spanish criminal law. Nor do I find a writer or commentator on the Spanish or Roman
Civil Law who does not define a cosa mueble in the same way.
One of the leading commentators of Spain on criminal law writes thus concerning the
property subject to robbery and lacerny:
Personal property belonging to another. If robbery consists in the taking of a
thing for the purpose and by the means indicated in the article in question, it
follows from the very nature of this class of crimes, that only personal or movable
property can be the subject thereof, because none but such property can be the
subject of the correctatio of the Romans; "Furtum since contrectatione non fiat,"
says Ulpian. The abstraction, the rapine, the taking, and all the analogous terms
and expressions used in the codes, imply the necessity that the things abstracted or
taken can be carried from one place to another. Hence the legal maxim: Real
property "non contractantur, sed invaduntur." (6 Groizard, p. 47)
The act of taking is what constitutes the contrectatio and the invito domino which
all the great ancient and modern jurists consider as the common ingredient (in
addition to the fraudulent intention of gain), of the crimes of robbery and theft.
From what has been said it follows that the taking, the act of taking without
violence or intimidation to the persons, or force upon the things, for the purpose
of gain and against the will of the owner, is what determines the nature of the
crime of theft as defined in paragraph 1 of this section. (6 Groizard, pp. 261, 262.)
The material act of taking is, therefore, an element of the crime which cannot be
replaced by any other equivalent element. From this principle important
consequences follow which we need not now stop to consider for the reason that
in speaking of the crime of robbery we have already discussed the subject at great
length. Immovable and incorporeal things cannot be the subject of the theft for
the reason that in neither the one or the other is it possible to effect the
contrectatio, that is to say, the material act of laying hands on them for the
purpose of removing the same, taxing the same or abstracting the same. Hence the
legal maxims: "Furtum non committitur in rebus immobilibus and Res
incorporales nec tradi possideri possunt, ita contectavit nec aufferri." (6
Groizard, p. 266.)
Criticising an opinion of the supreme court of Spain which held that illuminating gas was
a subject of lacerny, the same writer says:

The owner of a certain store who had entered into a contract with a gas company
whereby he substantially agreed to pay for the consumption of the amount of gas
which passed through a meter, surreptitiously placed a pipe which he connected
with the branch from the main pipe before it reached the meter and used the same
for burning more lights than those for which he actually paid. The supreme court
of Madrid convicted the defendant of the crime of estafa but the supreme court of
Spain reversed the judgment, holding that he should be convicted of theft. The
only reason which the supreme court had for so deciding was that the owner of
the store had taken personal property belonging to another without the latter's
consent, thereby committing the crime not of estafa but of consummated theft.
But in our judgment, considering the sense and import of the section under
consideration, it cannot be properly said that the owner of the store took the gas
because in order to do this it would have been necessary that the said fluid were
capable of being taken or transported, in other words, that the contrectatio, the
meaning of which we have already sufficiently explained, should have taken
place.
Gas is not only intangible and therefore impossible of being the subject of
contrectatio, of being seized, removed, or transported from one place to another
by the exercise of the means purely natural which man employs in taking
possession of property belonging to another, but, by reason of its nature, it is
necessary that it be kept in tank, or that it be transmitted through tubes or pipes
which by reason of their construction, or by reason of the building to which the
same may be attached, partake of the nature of immovable property. There is no
means, therefore, of abstracting gas from a tank, from a tunnel or from a pipe
which conveys the fluid to a building, for the purpose of being consumed therein,
unless the receptacle containing the same is broken, or the tank or pipe bored, and
other tubes or pipes are connected therewith at the point of the opening or fracture
by means of which the gas can conveyed to a place different from that for which it
was originally intended.
This exposition, interpretation, if you choose to call it such, has a further
foundation in our old laws which have not been changed but rather preserved in
the definition of movable an immovable property given by the Civil Code.
According to Law, I Title XVII, Partida II, personal property means those things
which live and move naturally by themselves, and those which are neither living
nor can naturally move, but which may be removed; and Law IV, Title XXIX,
Partida III, defines personal property as that which man can move or take from
one place to another, and those things which naturally by themselves can move.
Finally, corporeal things, according to Law I, Title III, Partida III, are those which
may be the subject of possession with the assistance of the body, and incorporeal
those which cannot be physically seized, and cannot be properly possessed. From
these definitions it follows that unless we do violence to the plain language of
these definitions, it would be impossible to admit that gas is a corporeal thing,
and much less that it is movable property. (6 Groizard, pp. 268, 269.)

If the holding that gas, which is unquestionably a physical entity having a separate and
independent existence and occupying space, has approached the verge of unstealable
property so closely that the ablest of Spain commentators believes that there is grave
danger of the complete destruction of the ancient legislative definition of stealable
property by judicial interpretation, what would be said in regard to a decision holding
that an electric current is a subject of lacerny?
It may be well to add just here, although it may be somewhat out of its regular order,
what the author above quoted regards was the crime actually committed in the case he
was discussing. He says:
For us, for the reasons hereinbefore set out, it would be more in harmony with the
principles and legal texts which determine the nature of the crimes of theft and
estafa, to assign the latter designation to the fraudulent act which he have
heretofore examined and which substantially consists in the alteration, by means
of a fraudulent method, of the system established by an agreement to supply a
store with illuminating gas and to determine the amount consumed for lighting
and heating and pay its just value. We respect, however, the reasons to the
contrary advanced in the hope that the supreme court in subsequent judgments
will definitely fix the jurisprudence on the subject.
Nor can the abusive use of a thing determine the existence of the crime under
consideration. A bailee or pledgee who disposes of the thing, bail or pledge
entrusted to his custody for his own benefit is not guilty of lacerny for the reason
that both contracts necessarily imply the voluntary delivery of the thing by the
owner thereof and a lawful possession of the same prior to the abusive use of it.
Not even a denial of the existence of the bailment or contract of pledge with of
gain constitutes the crime of lacerny for the reason that the material act of taking
possession of the property without the consent of the owner is lacking. (6
Groizard, p. 269.)
That under the Roman and Spanish law property to be the subject of lacerny must be a
tangible chattel which has a separate independent existence of its own apart from
everything else, which has three dimensions an occupies space so that it may of itself be
bodily seized and carried away, is not an open question. That that was also the doctrine of
the common law is equally beyond question.
In the consideration of this case the great difficulty lies in confusing the appearance with
the thing, in confounding the analogy with the things analogous. It is said that the
analogy between electricity and real liquids or gas is absolutely complete; that liquids and
gases pass through pipes from the place of manufacture to the place of use; and the
electric current, in apparently the same manner, passes through a wire from the plant to
the lamp; that it is measured by a meter like liquids and gas; that it can be diverted or
drawn from the wire in which the manufacturer has placed it, to the light in the
possession of another; that a designing and unscrupulous person may, by means of a wire

surreptiously and criminally transfer from a wire owned by another all the electricity
which it contains precisely as he might draw molasses from a barrel for his personal use.
And the question is triumphantly put, "how can you escape the inevitable results of this
analogy?" The answer is that it is an analogy and nothing more. It is an appearance. The
wire from which the electricity was drawn has lost nothing. It is exactly the same entity.
It weighs the same, has just as many atoms, arranged in exactly the same way, is just as
hard and just as durable. It exactly the same thing as it was before it received the
electricity, at the time it had it, and after it was withdrawn from it. The difference
between a wire before and after the removal of the electricity is simply a difference of
condition. Being charged with electricity it had a quality or condition which was capable
of being transferred to some other body and, in the course of that transfer, of doing work
or performing service. A body in an elevated position is in a condition different from a
body at sea level or at the center of the earth. It has the quality of being able to do
something, to perform some service by the mere change of location. It has potential
energy, measured by the amount of work required to elevated it. The weight or monkey
of a pile driver is the same weight when elevated 50 feet in air as it is when it lies on top
of the pile 50 feet below, but it has altogether a different quality. When elevated it is
capable of working for man by driving a pile. When lying on top of the pile, or at sea
level, it has no such quality. The question is, "can you steal that quality?"
Two pile drivers, owned by different persons, are located near each other. The one owner
has, by means of his engine and machinery, raised his weight to its highest elevation,
ready to deliver a blow. While this owner is absent over night the owner of the other pile
driver, surreptiously and with evil design and intent, unlocks the weight and, by means of
some mechanical contrivance, takes advantage of its fall in such a way that the energy
thus produced raised the weight of his own pile driver to an elevation of forty feet, where
it remains ready, when released, to perform service for him. What has happened? Exactly
the same thing, essentially, as happened when the electric charge of one battery is
transferred to another. The condition which was inherent in the elevated weight was
transferred to the weight which was not elevated; that is, the potential energy which was a
condition or quality of the elevated weight was by a wrongful act transferred to another.
But was that condition or quality stolen in the sense that it was a subject of lacerny as that
crime is defined the world over? Would the one who stole the battery after it had been
elevated to the ceiling, or the weight of the pile driver after it had been elevated 50 feet in
the air, be guilty of a different offense than if he stole those chattels before such
elevation? Not at all. The weight elevated had more value, in a sense, than one not
elevated; and the quality of elevation is considered only in fixing value. It has nothing
whatever to do with the nature of the crime committed. It is impossible to steal a quality
or condition apart from the thing or chattel of which it is a quality or condition of a thing
affects the value of the thing. It is impossible to steal value. The thing, the chattel is that
which is stolen. Its quality or condition is that which, with other circumstances, goes to
make the value.
A mill owner has collected a large amount of water in a dam at such an elevation as to be
capable of running his mill for a given time. A neighboring mill owner secretly introduces
a pipe in the dam and conveys the water to his own mill, using it for his own benefit. He

may have stolen the water, but did he steal the head, the elevation of the water above the
wheel? The fact that the water had a head made it more valuable and that fact would be
taken into consideration in fixing the penalty which ought to be imposed for the offense;
but it has nothing whatever to do with determining the nature of the offense of which the
man would be charged.
Larceny cannot be committed against qualities or conditions. It is committed solely
against chattels, tangible things. A given chattel is a compromise result of all its
properties, qualities, or conditions. None of the qualities which go make up the complete
thing is the subject of larceny. One cannot steal from a roof the quality of shedding rain,
although he may bore it full of holes and thus spoil that quality; and this, no matter how
much he might be benefit thereby himself. If, in a country where black horses were very
dear and white horses very cheap, one, by a subtle process, took from a black horse the
quality of being black and transferred that quality to his own horse, which formerly was
white, thereby greatly increasing its value and correspondingly decreasing the value of
the other horse which by the process was made white, would he be guilty of larceny?
Would he be guilty of larceny who, with intent to gain, secretly and furtively and with the
purpose of depriving the true owner of his property, took from a bar of steal belonging to
another the quality of being hard, stiff and unyielding and transferred that quality to a
willow wand belonging to himself? Is he guilty of larceny who, with intent to defraud and
to benefit himself correspondingly, takes from a copper wire belonging to another the
quality of being electrified and transfers that quality to an electric light? An electric
current is either a tangible thing, a chattel of and by itself, with a perfect, separate and
independent existence, or else it is a mere quality, property or condition of some tangible
thing or chattel which does have such an existence. The accepted theory to-day is, and it
is that which must control, that electricity is not a tangible thing or chattel, that it has no
qualities of its own, that it has no dimensions, that it is imponderable, impalpable,
intangible, invisible, unweighable, weightless, colorless, tasteless, odorless, has no form,
no mass, cannot be measured, does not occupy space, and has no separate existence. It is,
must be, therefore, simply a quality, a condition, a property of some tangible thing or
chattel which has all or most of those qualities which electricity has not. Being merely the
quality of a thing and not the thing itself , it cannot be the subject of larceny.
To repeat" As we know it, electricity is nothing more or less than a condition of matter. It
has no existence apart from the thing of which it is condition. In other words, it has no
separate, independent existence. It is immaterial, imponderable, impalpable, intangible,
invisible, weightless and immeasurable, is tasteless, odorless, and colorless. It has no
dimensions and occupies no space. It is the energy latent in a live herself is the power
potential in the arm of a laborer. It is the force stored in the wound-up spring. It is an
agency, not a "cosa mueble." It is a movement and not a chattel. It is energy and not a
body. It is what the laborer expends and not what he produces. It is strength striped by an
unknown process from arms of men and atoms of coal, collected and marshalled at a
given place under the mysterious leash of metal, ready to spring like a living servant to
the work of its master. It is not a chattel, it is life. It is as incapable of being stolen, by
itself, as the energy latent in a live horse. It is as impossible to steal an electric current as
it is to steal the energy hidden in a wound-up watch spring. One may steal the horse and

with it the energy which is a quality of the horse. One may steal a watch and with it the
energy which is a property of the wound-up. But can we say that one can steal the energy
in the watch spring separate from the spring itself, or electricity apart from the wire of
which it is a quality or condition?
A laborer was stored up in his muscles the capacity to do a day's work. He has potential
energy packed away in little cells or batteries all through his body. With the proper
mechanism he can enter a room which it is desired to light with electricity and, by using
the stored-up energy of his body on the mechanism, light the room by transforming the
energy of his muscles into the electricity which illuminates the room. We have, then, a
laborer who, by moving his hands and arms in connection with the appropriate
machinery, is able to light the room in which he is at the time. What causes the light? The
energy in the laborer's muscles is transformed into light by means of the intermediate
phenomenon known as electricity. As a concrete result, we have the energy in the
laborer's muscles transmuted into light. Now, is the energy passing through the wire,
more capable of being stolen than the energy in the muscles of the laborer? Or is the light
or heat any more or less a subject of larceny than the electric current of which they are a
manifestation? Could the energy which performed the day's work be stolen? Could the
electric current which lighted the room be stolen apart from the wire of which it was a
quality? One might kidnap the laborer and with him the energy which constitutes his life;
but can we say that the energy, of itself, is the subject of separate larceny? But, it the
laborer's energy cannot be stolen while it resides in and is a quality of his arm, can the
same energy any more be stolen when it resides in and is a quality of a wire in the form
of electricity? If so, just where is the dividing line, where is the point at which this kinetic
energy ceases to be incapable of being separately stolen and becomes a subject to theft?
Is it at the crank by which the laborer turns the machine? Is it at the armature, the
conductor, the fields coils, the field magnet, the commutator, the brushes, the driving
pulley, or the belt tightener? Is it where the current enters what is called the electric-light
wire, or is it where it enters the bulb or arc and produces the light? In other words, at
what point does the untealable laborer's energy become stealable electric energy?
An electric-light wire placed in a house for the purpose of furnishing light for the same
has its precise counterpart in a laborer placed therein for the same purpose. Like the
laborer, it is filled with energy which will, when released, perform the service intended.
The wire is simply a means of transmitting the energy of the laborer's muscles, and that
stored in tons of coal which he handles, from the electric plant or factory to the house
where the light is produced. The wire simply avoids the necessity of the laborer being in
the very house where he produces the light. Instead of being there, he, by means of the
so-called electric-light wire, is located at a distance, but produces the light in exactly the
same way, transmitting his energy for that purpose. The wire stands in exactly the same
relation to the person in whose house it is put as would a laborer who had been sent to
that house to render services. The energy may be diverted from the purpose for which it
was intended, or a wrong account given of the amount of work performed by that energy;
but it is impossible to steal, take and carry the energy away. One cannot steal days' works;
and that is all an electric current is. One may use those days' works in hoeing corn when
it has been agreed that they shall be used in picking cotton; but that is not larceny of the

days' works, as larceny has been defined by the jurisprudence of every country, Or, one
may report to the owner of those days' works that he had used three of them when in
reality he used thirty and pay him accordingly, but that is not larceny of the twenty-seven.
But, it is argued, the illustration is not a fair one; energy in a laborer's arm or in the
muscles of a horse or in a wound-up spring is, so far as its capability of being stolen is
concerned, quite different from energy which has been separated from the arms of the
laborer or the muscles of the horse and driven through a wire; from such wire electricity
may be drawn like water from a barrel; and while it is impossible to steal the energy of a
man or a horse because it would destroy the life of the animal, an entirely different
question is presented when the energy has actually been separated from those animals
and confined in a wire.
This argument has several fundamental defects. In the first place, it assumes the whole
question at issue. By asserting that electricity is separable from the object of which it is a
quality or state is to assume that electricity is a material thing, which the real question to
be resolved. In the second place, if electricity is in the real sense of that term, separable
from the object to which it belongs, then it must be admitted that it is capable of separate
and independent existence apart from any other object. This is not so. It is not only
admitted but contended by every scientist who has touched this subject that electricity is
incapable of an independent existence apart from some given material object. In the third
place, this argument overlooks the fact, even if we assume that it can be separated, that
the thing when separated is not the same thing that it was before separation; in other
words, when the so-called separation occurs there is not only a transference of energy
from the horse to the battery but there is also a transformation. In the horse it is muscular
energy. In the wire it is electrical energy. In the horse it is potential. In the wire kinetic. It
is not the same thing in the wire that it was in the horse. In the fourth place, the argument
makes the stealability of a thing depend not on its nature but on where it is located. This
is an assumption wholly unwarranted and impossible under the law. To say that whether
or not a thing is stealable depends not on its nature but on where it is located is absurd. A
diamond ring in a burglar-proof safe is as much a subject of larceny, under the definition
of the law, as if it lay in an open showcase. If energy is stealable at all, and it must be
remembered that I am proceeding, as we must necessarily proceed upon the accepted
theory that electricity is nothing more or less than energy, it is so by reason of its nature
and by reason of its residing in a battery rather than in a horse; and if it is stealable by
virtue of its nature it can be stolen from the horse as well as from the battery or wire. A
thing is subject to larceny because, and only because, it is a cosa mueble, not because it is
inside a horse, a wire or a safe. If it is a cosa mueble it is the subject of larceny although
it be located on the moon; and if it is not a cosa mueble it is not subject to lacerny
although it be placed in a den of thieves. The difficulty or ease of getting at a thing has
nothing whatever to do with its stealability. In the fifth place, this argument overlooks the
very important fact, to be dealt with more at length later, that the electric current used by
the accused was returned to the company, after use, absolutely undiminished in quantity.
What, then, is the difference between corn, for example, and an electric current? It is this.
One is a cosa mueble while the other is not; one is produced by a wholly different process

from the other and from wholly different materials, if we may call materials those
changes which result in the immaterial thing called an electric current; in the case of corn
we deal not with the quality or energy of corn, but with corn as a composite and concrete
result of all its qualities and uses; we deal with a tangible thing, a chattel, and not with a
condition or quality of a tangible thing; we deal with things instead of ideas, with
things which exist separate and independent and which do not depend, as does electricity,
wholly upon some body not only for the capability of manifesting its existence, but also
for very existence itself ; because we deal with something which changes its form but
never its nature as a physical entity. It is always a chattel, a tangible thing, a cosa
mueble.
On the other hand, in the case of the electric current we deal not with a thing, a chattel a
cosa mueble, but with a condition or quality, a property of a cosa mueble; with an idea
which always, before it has any significance of meaning whatever, associates itself with
an entity, a body or chattel, as a characteristic or quality of such body or chattel; with
lines of force which are merely and solely a quality, a property, a characteristic of the
magnet, instead of which grains of corn which are absolute entities, independent of and
apart from everything else, and not mere characteristic or qualities of some entity of
body which does not exist as an absolute physical entity in itself; with the horse and the
violet and not their perfume; with the lily and not its beauty; with the clouds and not their
color; with entities and not accidents; with realities and not the imponderable, impalpable
ideas and qualities which make up the reality.
As he already been said, the difficulty in the elucidation of the question comes from the
confusion of qualities with things, of appearances with realities. Apparently an electric
current does things. It produces phenomena. It, therefore, appears to be something. But it
must not be forgotten that many times appearances are deceitful. They do not always
insure realities. It is not judicial to say that, because a thing looks so, it is so. It is not
judicial to say that, simply because it looks as if one committed larceny, therefore he is
guilty of larceny. Before we may legally convict one of larceny, we must know exactly
what he did. Justice is not founded on guess work nor on appearances. Men's right are
preserved by definitions, and definitions are founded on facts, not fancies, on realities,
not appearances. Because, when one taps an electrically charged wire belonging to
another and, by means of a contrivance, transfers the charge to his own uses, it looks as if
he was stealing something, is not sufficient to convict him of larceny. We must first know
what larceny is, as well as what an electric current is, and what is meant by its use in
producing light. To know what larceny is we must know what legislators and judges
during the development of jurisprudence have always said and agreed it is. In other
words, we must know its definition. It approaches tyranny to convict one of murder when
is actually guilty of homicide only. Yet the only thing which separates the two crimes is a
definition. It is wrong to convict one of robbery who is guilty only of larceny. Yet these
two crimes are distinguished only by a definition. If, as in the case at bar, whether or not
one is declared a felon and is sent to prison for one year eight months and twenty-one
days, is forever disqualified from holding public office and of exercising the right of
suffrage, or whether, instead, he is declared guilty of a misdemeanor simply and punished
lightly with no accompanying disqualifications, depends upon whether he has committed

larceny as defined by the Penal Code or whether he has merely violated a city ordinance,
the question whether he actually committed larceny or not begins to assume importance.
It assumes importance not only to him but to society as well. If a court to-day palpably
modifies a definition in order to convict an offender of larceny, how can society be
assured that tomorrow the same court will not modify some other definition to convict a
citizen of treason? When definitions are destroyed no man is secure in his person or his
property. When men act on appearances instead of realities justice will be shortlived. A
whale looks like a fish, acts like a fish, swims like a fish and lives all its life in the water
like a fish. But it is not a fish. It is an animal. It is air-breathing, warm-blooded, and
viviparous, and suckles its young. Now, if whether or not a whale is a fish or an animal is
the potent factor determining whether a man goes to state prison as a felon with all the
deplorable consequences resulting, or whether he is lightly sentenced as a mere
misdemeanant, is it not of the supremest importance to determine whether a whale is a
fish or an animal? I am informed that it used to be a common sight in The New York
Zoological Gardens to see Mr. Crowley, the large and extremely intelligent chimpanzee,
dressed in faultless attire, sit at the table and take his food and wine like a gentleman.
Children believed him to be a man; and many intelligent grown people honestly believed
that he was as much man as chimpanzee. But if the officials of the city of New York had
been indicted for kidnapping, based upon the seizure and forcible detention of Mr.
Crowley, would it not have been of the most solemn importance to them to throw away
appearances and determine accurately what Mr. Crowley really was? And in case of
doubt as to what he was, could they not justly have demanded the benefit of that doubt?
So, where one who diverted an electric current has been accused by reason thereof of the
crime of larceny, which crime, it being admitted, can be committed only against tangible
things, chattels, is it not of the very greatest importance to determine what an electric
current is, that is, whether it is a tangible thing, a chattel, or not and what is the nature
and meaning of the process by which it transforms itself into electric light? And in case of
doubt as what it is, cannot the accused justly demand the benefit of that doubt? To convict
one of larceny it is not sufficient to show merely that a wrongful act has been done; but it
must appear that a wrongful act of a particular kind has been committed. To constitute
larceny it must be proved that the wrongful act was committed against chattels, against
tangible things, which were seized upon and asported by the one accused. In the case at
bar it has not been shown that the accused laid unlawful hands upon and asported a
tangible thing, a chattel, una cosa mueble. The very least that the prosecution must
necessarily admit is that no one knows what electricity really is. That being so, it seems to
me to be a contradiction of terms to say that larceny, which must admittedly be
committed against a known thing, can be committed against a thing absolutely unknown.
At least it would seem that there is a grave doubt about the definition of larceny covering
wrongful acts relative to an electric current; and by reason of that doubt the conviction
ought not to be sustained. And if it is true, as I have herein attempted to show, that, under
the prevailing and generally accepted theory, electricity is nothing more or less than a
condition, a quality, a property of some tangible thing, some chattel or body, then,
certainly, the charge of larceny must fall, as that crime can be committed only against the
thing and not against a quality of the thing.

Although the only question in this case is whether electricity is such a tangible thing, as
can, under the definition of lacerny contained in the Penal Code, be the subject of lacerny,
nevertheless the court dismissed that question substantially without discussion, the only
reference thereto being the following:
I 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.
The true test of what is a proper subject of lacerny seems to be not whether the
subject is incorporeal, but whether it is capable of appropriation by another than
the owner.
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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. So no
error was committed by the trial court in holding that electricity is a subject of
lacerny.
The statement fail to touch the essential question involved and is wholly beside the point
for the following reasons, lying aside for the moment the nature of the act which the
accused actually committed, assuming that he committed the act described by the
witnesses for the prosecution:
In the first place, as I understand the law , the statement is not quite correct that, in the
Philippine Islands, "the true test of what is a proper subject of lacerny seems to be not
whether the subject is corporeal or incorporeal, but whether it is capable of
appropriation," unless the word "appropriation" has the same meaning as the word
"taking" used in the article of the Penal Code defining larceny. If the court intended to
use the word "appropriation" in the sense of "taking," then its use was unnecessary and
may be misleading. If it did not so intend, then the rule of law laid down by the court is
not as I understand the law to be. An appropriation in addition to or different from the
taking is not an essential of lacerny anywhere. Wharton says that "lacerny id is the
fraudulent taking and carrying away of a thing without claim of right, with the intention
of converting it to a use other than that of the owner and without his consent." Article 517
of the Penal Code provides that they shall be guilty of lacerny "who . . . take (toman) (not
appropriate) another's cosas muebles (movable chattels) without the owner's consent."
Unless, therefore, the word "appropriation" is used in the same sense as "taking," the
paragraph in the court's decision above quoted does not contain a correct statement of the
law. If it means the same thing then the use of the word in no way enlightens the
situation; for it is just as difficult to determine whether a cosa mueble can be
appropriated as it is to determine whether it can be taken. The question before us is
whether or not electricity is such a cosa mueble that it can be taken under the law of
lacerny. To substitute in that problem the word "appropriation" for the word "taking" does
not laid in its solution in the slightest degree when it is admitted that the word substituted
means exactly the same thing as the word in the place of which it was substituted.

An illustration will serve further to show the fallacy inherent in the statement quoted: Let
us suppose that the Penal Code defined larceny thus: "Any person who, with intent to
gain, takes from another his cake without his consent shall be guilty of lacerny." Let us
suppose that some one should then defined the subject of lacerny as anything, corporeal
or incorporeal, which can be "appropriated." It would be obvious that such definition
would be erroneous, for the reason that, while pie is as capable of being "appropriated" as
cake, still, under the terms of the law, lacerny cannot be committed against pie. So that
where the statute prescribes that the only thing subject to larceny is a cosa mueble and the
definition of the subject of larceny is claimed to be anything that can be "appropriated,"
the answer at once is that such definition is inaccurate under the law as it may be too
broad. There may be some things which can be "appropriated" that are not cosas muebles.
In the second place, the quoted paragraph from the court's decision contains another error
in the statement of the law. I am of the opinion that, under the common law, and I am sure
under the Spanish law, the statement that "the true test of what is a proper subject of
larceny seems to be not whether the subject is corporeal or incorporeal . . ." is not
accurate. Professor Beale, of Harvard, says in his article on larceny that
At common law the only subjects of larceny were tangible, movable chattels;
something which could be taken in possession and carried away, and which had
some, although trifling, intrinsic value. Any substance which has length, breadth,
and thickness may be the subject of larceny. . . . A chose in action being in its
essence intangible could not be the subject of larceny at common law and the
paper evidence of the chose in action was considered merged with it.
Wharton says:
Choses in action, including bonds and notes of all classes according to the
common law are not the subject of larceny, being mere rights of action, having no
corporeal existence; . . . .
I have already quoted at length from writers on the Spanish and Roman law to show that
only tangible, corporeal chattels can be the subject of larceny.
In the third place, by entirely begging the question, it leaves the whole proposition of
whether electricity is a subject of larceny not only unsolved but wholly untouched. As we
have already seen, the word "appropriation" nowhere appears in subdivision 1 of the
Penal Code in connection with larceny. But if it were there used in connection with such
crime, it would necessarily refer entirely to a cosa mueble as that is the only thing under
that article which is the subject of larceny and, therefore of "appropriation." So that,
before we can possibly know whether a thing is capable of appropriation or not under the
Penal Code, we must know whether that thing is or is not a cosa mueble, as that, as we
have said, is the only thing that can be taken or appropriated in committing the crime of
larceny. But, as is readily seen, that brings us right back to the question we started with,
What is a cosa mueble? It is more than apparent, therefore, that the quoted paragraph
adds nothing whatever to the discussion.

In the fourth place, the word "appropriation" in the paragraph quoted is there used with a
complete misapprehension of its meaning as found in the article of the Civil Code from
which it is taken. Articles 334 and 335 of the Civil Code seek to divide all property
capable of appropriation into classes. They read:
ART. 334. Son bienes immuebles:
1. Las tierras, edificios, caminos y construcciones de todo genero adheridas al
suelo.
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This article has ten subdivision dealing with all kinds of real property. It is not necessary
to quote it all at this time.
The English of the part quoted is as follows:
ART. 334. Real property consists of
1. Lands, buildings, roads, and constructions of all kinds adherent to the soil.
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ART. 335. Se reputan bienes muebles los susceptibles de apropiacion no


comprendidos en el capitulo anterior, y en general todos los que se pueden
transportar de un punto a otro sin menoscabo de la cosa immueble a que
estuvieron unidos.
This article in English is as follows:
ART. 335. Personal property is considered anything susceptible of appropriation
and not included in the foregoing chapter, and, in general, all that which can be
carried from one place to another without damage to the real estate to which it
may be attached.
As is seen from the terms of the articles, two expressions are used in defining "bienes
muebles," one of elimination and other of description. The clause of elimination provides
that all property subject to appropriation shall be personal property except that property
described in article 334. But this description was found to be too broad. It included too
much; and it was, therefore, necessary to make use of a limiting or restricting clause in
connection with the exclusion clause. To that the article further provided that
appropriable property shall be, "in general, all property which can be carried from one
place to another." Under this restricting clause, then, property to be personal property
must be not only property not included in article 334 but also property which can be
transported from one place to another. It must fulfill two requirements instead of one.

Besides, under the Spanish law, real property is as much subject to appropriation as
personal property. The word in Spanish seems to be broader than its legal use in English.
From the foregoing it is plain that property to be personal property must not only be
susceptible of appropriation, which the court in the quoted paragraph claims is the only
requirement, but it must also be capable of being of itself manually seized and
transported from one place to another.
This presents the fourth reason why I say that the proposition laid down by the court in
the quoted paragraph is laid down under a complete misapprehension of the definition of
una cosa mueble.
And finally, the word "appropriate" which the court has used is found in subdivision 2 of
article 517 of the Penal Code. It provides that those are guilty of larceny, "who, finding a
thing (una cosa mueble) lost and knowing its owner, appropriate it with intent to gain."
The signification which the word here has is quite different from that of the word "take"
(toman) used in the first subdivision, being considerably limited in its reach. As used here
it is very like "convert." There is no removal from the possession of the owner, as in the
first paragraph. In the Penal Code the word "taking" means something more than
"appropriation." It means a removal from the possession of the owner a transportation
or asportation of the thing from one place to another from the possession of the owner
to the possession of the theft; while "appropriation" means, rather, the making use of the
converting of the property after the taking is complete, or without any "taking" at all.
Under the Spanish law, while real estate is not, of course, subject to asportation, to
"taking," and, therefore, not the subject of larceny, it is subject to "appropriation." In the
same way while electricity is, under the Spanish and Roman laws, wholly incapable of
seizure and asportation, of the manual "taking" the trespass essential to larceny, it may
possibly, in one or another sense of the word, be subject to appropriation." If at one
extreme of the scale of things, namely, real estate, the thing is too tangible to be stolen, is
it not logical to expect that at the opposite extreme the thing, electricity, for example, may
be found too intangible to be stolen?
We have seen that, in all the history of Roman and Spanish jurisprudence, the crime of
larceny has been confined to tangible things, to chattels, which have an independent
existence of their own; which have three dimensions; which occupy space; which are
capable of having a trespass committed against themselves; which can be, of themselves
and alone, taken physically into possession and carried away (asported).
We have that the fact that electricity is not such a thing is admitted by all.
And we have asked the question, "How, then, can the charge of larceny be sustained?"
But let as assume, for the sake of argument, that electricity is a tangible thing, like water,
for instance. Still the crime committed, if any, is not lacerny. Let us modify the
illustration already given of the surreptitious removal by A of water stored in a dam by B
for milling purposes. Let us suppose that B has built a reservoir on an elevated portion of

his farm for the storage of water for irrigating purposes. He has built ditches or conduits
from the reservoir to every part of his farm to carry the water to the places needed.
During the dry season while B is engaged in irrigating his lands A surreptitiously and
with intent to gain, constructs a small mill upon one of the conduits and utilizes the rapid
fall and swift flow of the water to operate his mill. For many months A thus takes
advantages of B's conduit and water and enriches himself by reason thereof. Did A
commit the crime larceny? The water, every drop of it, after being used by A, went to its
work of irrigating the lands of B, pausing only long enough to turn the water wheel of A's
mill. Certainly then, no water was stolen. A simply made use of the "head," the fall of the
water. If anything was stolen it was the "head," the elevation of the water, the energy
developed by its passage from high to low ground. This is precisely what happens when
an electric current passes through an electric bulb or arc and produces light. Whether the
current operates one light of one hundred, the volume, the amperage, of the current, that
is, the quantity of it, if we may use the term (and it must be remembered that I am
assuming electricity to be a tangible thing and will speak accordingly) remains exactly
the same. The volume or quantity of the electricity is just the same when it comes out of
the hundredth light as it was when it entered the first. While there is a difference between
the current as it comes from the last light and as it entered the first, it is simply one of
condition, or state. All of the electricity is still there. Like the water; it has simply lost its
"head," its energy. It has been deprived of its pressure, of its electro-motive force; but it is
the same old electricity, in the same old quantity. So that, when the accused in the case at
bar, by means of a "jumper," burned thirty lights, instead of the three for which he paid
the company, he was not stealing electricity. Exactly as much electricity went back into
the company's wire after serving the twenty-seven lights for which he did not pay as
came out of that wire in the first place. The defendant took nothing; he used something.
In larceny there must be a taking. Here there is only a use. Electricity is a utility, not a
thing. The company, in the cease at bar, lost no more than did the owner of the irrigation
system in the example heretofore given. As no water was taken, so no electricity was
taken. The same amount of water remained to the owner after its use by A. The same
amount of electricity remained to the company after its use by the defendant.
The well-known Italian author, Avv. Umberto Pipia, in his very able work entitled "L'
Electricita nel Diritto" puts the question thus (translation of Mr. Percy R. Angell, Manila,
1911):
From the point of view of the jurist can electricity be stolen? A person connects a
deflecting wire to the main conduit of electricity; he thus makes a secondary
circuit in which he introduces a resistance and profits by the electro-motive power
which is developed, to supply his lamps or put his motor in movement. In such
case can we apply article 402 of the Penal Code, which provides that whoever
takes possession of movable property of another in order to derive profit thereby,
taking it from the place where he finds it without the consent of the owner, is
punished with reclusion up to three years?
The author then refers to the decisions of certain course of Europe which hold that
electricity is stealable, and continues:

The Roman court of cassation has lost sight of that fundamental principle of
interpretation of law (a principle which it ought to have had well in mind before
applying to a new manifestations of force legislative provisions enacted in view of
totally different cases) by which penal laws do not extend beyond the cases and
the times in them expressed. Nulla poena sine lege, is the rule in terms of penal
law, unless we wish to bring about a deplorable confusion of powers, and the
judiciary desires to usurp the authority of the legislator. If in the written laws
gaps or breaks are encountered, it is the duty of the court to point them out to the
legislator, to the end that he take the necessary measures; but it is not lawful for
him by analogous interpretation to apply a penal provision where such has not
been explicitly enacted.
In the unanimous opinion of jurist, two elements are necessary to constitute the
crime of theft, legally speaking; the first is the taking possession of the personal
(movable) property of another, contrectatio, and the taking away of the thing from
the place where it is found without the consent of the person to whom it belongs,
ablatio.
Now we have conclusively shown that electric current is not a thing, but a state, a
vibration following certain converging waves. It can not therefore be taken
possession of as the personal property of another. A person who unlawfully uses
electric current for his personal enjoyment places himself in a state of unlawful
enjoyment of a utility, but he does not take possession of personal property. It was
a grave error, that of the court of cassation, in holding electric current to be a
thing imprisoned in wires, and composed of particles that can be subtracted. In
connecting a second circuit one does not subtract electric current; not a particle of
electric energy enters into the possession of the so-called thief ; the same amount
in amperes that was found and derived on connecting the second circuit, is found
at the end of this circuit. The current has only suffered a diminution of potential;
while continuing to be of the same volume, it becomes less adapted for the use
intended, because having overcome a resistance, it has lost in potential, its
electro-motive power.
. . . It leaves the circuit in the same amount in which it entered. Only its power for
work has diminished. Not a single particle or molecule of electric current is taken
by such abusive use, only the state of undulation. The movement that first follows
the principal, and then the second circuit, and by these undulations the so-called
thief illegally derives benefit. But the extraordinary provisions of crime are not
applicable to all illegal actions.
Another powerful argument in favor of my position is this: That in no case of
usurpation, the using of things protected by law (diritto) that are not material
things , do we speak of theft. To repress abuses the legislator has been obliged to
establish special provisions of law, but has explicitly recognized those relating to
theft to be inapplicable. A trade-mark, trade-name, modello de fabrica, a scientific
or artistic work, undoubtedly constitute objects of law similar to things; form the

contents of various juridical relations; have more or less economic value; pertain
to the patrimony of the person who has produced them or brought them into
being. If a third person makes use of the trade-mark or trade-name, the scientific
work or artistic production of another, nobody denies that he takes possession of a
utility that does not belong to him; that by the very illegal act he derives profit,
and at the same time diminishes the patrimony of the person having legitimate
rights herein. But with all that, it has never occurred to anyone to bring an action
for theft against the usurper of the firm name, the counterfeit of the trade-mark or
the plagiarist. The legislator, desiring to protect this new species of property, has
provided special repressive measures; but in their absence, the courts can not
apply the actio furti, because it is not applicable to cases and conditions other than
those provided for.
If this be so, why different conceptions on the score of electricity? Here likewise,
there is no subtraction of personal property, but the illegal use of an advantage, of
the right pertaining to another, which remain however unchanged. Hence the legal
solution should be the same.
The second and not less essential condition of theft is that of the ablatio, the
necessity of taking the thing from the place where it is found. But here we have
nothing of that; the current is deviated from its course, true, but it returns to the
place where it was undiminished. The statement in the foregoing decision that
there are particles transportable from place to place is exact; the undulation is in
itself, it has its own efficiency, but it is neither taken away nor subtracted. It has
been justly said that all that is done is to erect a bridge over which the undulations
of the particles are transported in the wire attached, but nothing corporeal passes
from one wire to another, since not one of the vibrating particles moves with the
current which flows through the connected wire.
Consequently, in whatever aspect the question is considered the presumption of
theft grows less. In fine, although there be a usurpation of a utility to the prejudice
of another, it should not be held to constitute theft, because that is the vulgar, not
the legal conception. That in civil and commercial law we may resort to
analogous interpretation, and that, in the absence of special provisions we should
apply the rules which govern similar matters and analogous cases, there is no
doubt. The courts can not refuse to say what the law is (dire ie diritto) nor dismiss
the litigants on the pretext that the law had made no provision for their case; and it
is from this concept that electricity, as a rule, in the various relations where it
constitutes the object, is considered to be a thing, with all the attributes of such.
But the penal law is restrictive; under certain aspects it is exceptional. Here we
have to do with limitations and restrictions on the most sacred rights of persons,
the right to liberty, the right to honor. And these rights can not be abridged
without definite and explicit provisions of the law. Where these are lacking we
can pray, as I do, that they be supplied, but a decision in such case is an arbitrary
act (arbitro), not justice: nulla poena sine lege.

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So on the wrongful use of electric current; profit is derived from its high potential
which is produced by the work and expenditure of money on the part of the
furnishing company; the current is returned exactly as it was delivered except it
has lost a certain amount of electromotive power that was illegally
(antigiuridicamente) employed to overcome the resistance introduced by the third
party.
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. . . Penal law must be strictly construed (e di interpretazione restrittiva). It


punishes the contractatio of a movable thing which is taken from the place where
it is found without the consent of the owner. In the proposition under discussion,
we have not to do with movable things, there is no true transporting to another
place; therefore the figura giuridica of theft is wanting.
It can not be doubted that by movable things is meant even liquids and fluids,
because these are material, concrete, and corporeal things, but their physical
external manifestations can not affect the juridical relation . But in our case there
is not a thing, fluid or liquid; there is a state of undulation, of movement, which
one uses illegally, assuming however the obligation to indemnify for all the
damages resulting from his illicit action, but there is no theft, any more than there
would be where a person applied a pulley to the shaft of an engine in order to put
his own machinery in motion, so far as there would be no appropriation. The
current which injuriously traverse the lamp or electric motor is not appropriated or
destroyed by the person who uses it; it flows out from the lights and continues its
course in the circuit undiminished in intensity; it has only lost part of its power,
because, having encountered a resistance, it has developed certain energy to
overcome it, energy which has produced light, traction, or mechanical work.
Nor may it be said that electricity would then be deprived of any legal protection.
Do we not have articles 1511 et seq. of the Civil Code that provide for fraud? Is
there not the civil crime and quasi crime? To protect electric energy is it necessary
to imprison one who uses it antigiuridicamente, while the letter of the law does
not consent? In any case it is known that adducere inconveniens non est solvere
argumentum. As in the laws of our country provision is made for the illegal use of
a firm name, trade-mark and works of genius (l' ingegno); in England, where
provision has been made for the matter we are discussing they have enacted a law
imposing severe penalties upon persons who illegally use electric energy, and I
am of the first to applaud them. But let there be laws, not merely judicial opinion
(arbitria di interpretati).
Nor does it avail to urge that when we have to do with benefits that are useful to
man, which serve his ends, that he can appropriate, these benefits are considered
as things in the eyes of the law. But it is necessary to make a distinction. From the

standpoint of the civil law, they are, because a wide and analogous construction is
permissible and permitted; but from that of the penal law, they are not, because
such construction is expressly forbidden by article 4 of the preliminary provisions
of the Civil Code.
If a trade-mark is not a benefit to man, in what does it serve him? Is not a literary
or artistic production such? Does not the counterfeiter illegally appropriate such
benefits? But if it is required to inflict criminal penalties upon him, a special law
must be enacted; the provisions relative to theft can be applied in his case.
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Nor is it a conclusive argument to say that the manufacturer spends large sums of
money and erects costly machinery to generate the electricity, and when others
steal it from him, such action, according to juridical conscience and social morals,
constitutes theft.
Let us suppose an individual acquires a ticket of admission, and enters a hall
where there is being produced a play of some sort. He, on the strength of the legal
negotiation with the impresario and the acquisition of the ticket has a right to the
most ample enjoyment that his optical and acoustic senses are able to realize. But
he arranges a phonograph and a cinematograph, and surreptitiously fixes and
appropriates part of the acoustic and visual enjoyment that does not belong to
him, takes it outside of the theater and later avails himself thereof to his benefit by
reproducing the harmony of the sounds and the optical illusion of the scene. Is he
liable for theft?
From the standpoint of the doctrine I am combating, he is. The impresario has
sacrificed money or work to produce the spectacle. Our friend has the right to
enjoy it to the limit of the capacity of his organs of vision and hearing, but beyond
that. By means of suitable instruments he has caught up the sounds, movements,
and colors for the purpose of gain, and he commits a theft because there enter the
correctatio and the ablatio.
From the point of view of the law he is not. He would be held to reimburse the
impresario for all damages, but he can not be called a thieft, nor be punished as
such. The sounds and forms of light are states, not things; therefore they can not
form subjects of theft.
And if this is so, the same conclusion must be reached with respect to electricity.
The supreme court of the German Empire, sitting at Leipsic, October 20, 1896, in a
decision holding that electricity was not a subject of larceny, said:
The court below found that the act did not constitute theft or unlawful
appropriation, because electricity is not to be considered a thing within the

meaning of paragraph 242 of the Penal Code, and because by things the law
means portions of material nature; that corporeal existence is an essential
ingredient of the thing. Even the Penal Code starts from this principle. Incorporeal
things, as for example rights, intellectual products and machine power are not
subjects of theft. The same must be said of electricity. Experts say that the science
is not yet determined. We well know what must be done to produce electric
energy, but we do not comprehend these vital operations, any more than we
understand what is that makes the muscles of the human arm capable of exerting
force. In the conclusions of the Court of First Instance there is no error of law.
That court starts from the principle that the corporal existence of the thing must be
the essential element to come within the meaning of article 242. This assumption
is not based upon the precepts of the Civil Code, but, rather, upon the idea which
is at the bottom of the Penal Code, namely, the movable and independent thing,
which presupposes the corporeality of the object. If then, under articles 242 and
245, the condition precedent to the commission of larceny is that the object of
theft or unlawful appropriation be a piece or portion of material substance in
either a solid or liquid state, or in form of gas, the Court of First Instance
committed no error in finding there was neither theft nor illegal appropriation.
Whether or not the notation of a thing, in the sense of the penal laws, requires
something corporeal, is a question of law; but the question whether electricity is a
substance, a corporeal thing, or a force, a movement of a minute particles, is a
question of fact that can not be decided by the rules of law, but by physical
research alone. The consideration of the great importance of electricity in
commercial life and the place awaiting it among the vital conveniences and the
fact of its having commercial value, is not an argument to prove that electricity is
a corporeal thing, because the quality of being a vital convenience and having
commercial value does not constitute a necessary standard of corporelity, since
force, operations, intellectual products are vital conveniences (beni) and have
commercial value. When, in the jurisprudence of the day the need for penal laws
for punishment of unjust appropriation of electric current becomes apparent, the
legislator should provide them. The courts can not be called upon to supply the
lack of legal provisions by analogous applications of rules not made to fit the
circumstance. In penal law the principle nulla poena sine is supreme.
These authorities fully support my contention that electricity is not stealable under the
provisions of the Spanish Penal Code. They also support the proposition that even if
electricity is a tangible thing, like water, and therefore stealable, the crime, if any,
committed by the defendant in this case is not larceny, because the company had just as
much electricity after the illegal act as it had before. In other words, it has lost no
electricity. Having lost no electricity it can not charge anyone with stealing it. If a
thousand lights were burned, no more electricity would be consumed than if one light
were burned, just as, no more water is consumed in running a thousand water wheels
placed one below another than in running one. Just as much water flows over the
thousandth wheel as flowed over the first. In the same manner there is just as much
electricity flowing out of the thousandth light as flowed into the first. Just as in using the
water, nothing is consumed but the head, the quantity of water remaining the same, so, in

using electricity, nothing is consumed but the head (the pressure, the potential, the
electro-motive force), the electricity itself remaining undiminished. No electricity was
taken. It was used and then returned to its owner.
For a clear understanding of this problem, and a logical and philosophical, as well as
legal, solution thereof, we must never, for a moment, forget the fact that the real contract
between the company and the defendant was one to furnish labor and services; a lease, if
you please, of an agency, a contract of precisely the same nature as one by which the
company lets to the defendant the use of one of the company's workmen to turn by hand,
in the defendant's own house, an electrical machine and thereby produce light for
defendant's use. This is the crux of the whole question. While no contract was proved we
know of necessity, from the principles which underlie and govern electric lighting, that
the contract must have been as above stated. If the defendant should require the laborer
thus placed in his house to work overtime and should not pay the company therefor, thus
taking advantage of the situation, there would be no larceny. To be sure, the defendant
would return the workman to the company fatigued and reduced in strength by reason of
the overtime he had required him to put in, but it would be the same workman which he
had received. It is this which shows the absurdity of the claim that the defendant in this
case is guilty of larceny. The company never intended to sell the workman to the
defendant and the defendant never expected to buy him. It was the use that was the basis
of the contract. In exactly the same manner the company never intended to sell electricity
to the defendant and the defendant never intended to buy electricity. The basis of the
contract was the use of electricity. Just as the laborer was returned by defendant to the
company fatigued and reduced in strength by reason of the overtime which the defendant
had wrongfully and illegally required him to put in, so the current of electricity was
returned by the defendant to the company fatigued and reduced in strength by reason of
the lights which the defendant had wrongfully and illegally caused it to supply; and just
as, notwithstanding the reduction in strength, it was the same identical workman returned
that was sent out, so the electric current returned to the company after the illegal use by
defendant was the same identical current which the company had furnished him. Where
then, is the foundation for the charge of larceny?
Let us now see what are the results of the holding of the court that electricity is subject to
larceny.
The Spanish Law of the Philippine Islands has not been changed by any legislative
enactment. A cosa mueble is the same now as it was in the days of the Partidas. No
legislature has changed the law of larceny as it came from the jurisprudence of Rome and
Spain. Nor has any legislature touched the law of the personal chattel to give it a new
definition or one which changes its ancient signification. Its present definition is the same
as that given by Sanchez Roman, Pacheco, Scaevola, Manresa, and Groizard as drawn
form the decrees of kings and acts of legislatures. That definition having been framed by
the lawmaking power of Spain, from the Partidas down to the Penal Code, it ought not to
be changed by any agency short of the lawmaking power of the United States. The
substance and nature of crime ought not to be changed by courts in a country where

crimes are purely statutory. It has the appearance of a usurpation of the functions of the
lawmaking body, an unwarrantable assumption of the legislative attributes.
The holding of the court in this case is, in effect, an amendment to the Penal Code. It has
changed materially the definition of a cosa mueble and, therefore, of the crime of larceny,
as made by the lawmaking bodies of Spain and the United States. I do not assert that the
courts have not the right to determine whether a given set of facts do or do not fulfill the
definition of a given crime. What I do say is that the very greatest care should be
exercised in cases which may involved as a consequence of their decision the changing of
the scope of the substantive law of crime. The fact, admitted by all, that whether the
phenomenon which we call electricity really is a "cosa mueble," under the accepted
definition of that word, is open to doubt, should give us pause. Before holding that
electricity is a cosa mueble, the fact whether it is or not ought to be substantially free
from doubt, This is particularly true in a country where crimes are purely statutory, and in
which, therefore, the legislature is presumed to have had in mind in framing its definition
of "cosas muebles" only such chattels, or those of the same nature, as were known to the
legislature at the time it acted. At the time the Penal Code became operative substantially
nothing was known by those who created if of the phenomenon, electricity. It is more
than clear that at the time of the enactment of the laws relating to larceny, of which article
517 of the Penal Code is a reproduction, nothing whatever was known of that
phenomenon. We have, therefore, no means of knowing what would have been the
legislative action in relation thereto. The legislative authorities of those times might have
treated it as substantially every other legislative body has treated it that has touched the
question; namely, as a thing separate and distinct from chattels, and unlawful acts
affecting it and its use as crimes distinct from the crimes against tangible property, such
as robbery and larceny. In this jurisdiction the legislature is the only authority for the
definition of the crime. Where a new situation arises by virtue of discoveries which reveal
agencies never known before, and whose real nature is unknown even to the discoverers
the legislature is the body to take the initiative in determining the position of such
agencies among the affairs of men, unless they clearly fall within a class already
established and defined; and it appears that some legislative bodies have done that very
thing and have passed special laws touching the place which should be given electricity
in the civil and criminal law. This was done here by the passage of the ordinance of the
city of Manila. The fact that legislatures in many jurisdictions have enacted special laws
relative to electricity is the very clearest proof that there was the gravest doubt among
learned men of the applicability of existing laws to acts committed against the rights of
producers of electricity. The legislature of the Islands having acted through the council of
the city of Manila and by such action made illegal acts against the producers of electricity
a special crime wholly distinct from larceny, such act should be conclusive on this court
as to the legislative intent.
Section 649 of the Revised Ordinance of the city of Manila provides in part:
No person shall, for any purpose whatsoever, use or enjoy the benefits of any
device by means of which he may fraudulently obtain any current of electricity or
any telephone or telegraph service; and the existence in any building or premises

of any such device shall, in the absence of satisfactory explanation, be deemed


sufficient evidence of such use by the person benefiting thereby.
This section was enacted under the authority of the Legislature of the Philippine Islands,
as was section 930 of said ordinances, by the terms of which one was violates the
provisions of section 649 "shall be punished by a fine of not more than two hundred
pesos or by imprisonment for not more than six months, or both such fine and
imprisonment, in the discretion of the court, for each offense."
Articles 517 and 518 of the Penal Code read in part as follows:
ART. 517. The following are guilty of theft:
1. Those who, with intent of gain and without violence or intimidation against the
person or force against the things, shall take another's personal property (cosa
mueble) without the owner's consent.
xxx

xxx

xxx

ART. 518. Those guilty of theft shall be punished:


1. With the penalty of presidio correccional in its medium and maximum degrees
if the value of the stolen property should exceed 6,250 pesetas.
2. With the penalty of presidio correccional in its minimum and medium degrees
should it not exceed 6,250, pesetas and be more than 1,250 pesetas.
3. With arresto mayor in its medium degree to presidio correccional in its
minimum degree should it not exceed 1,250 pesetas and be more than 250
pesetas.
4. With arresto mayor to its fullest extent should it be more than 25 but not
exceed 250 pesetas.
5. With arresto mayor in its minimum and medium degrees if it should not exceed
25 pesetas; if exceeding 25 and not more than 65 pesetas, a theft of nutritious
grains, fruits, or wood shall be punished with a fine of room 325 to 500 pesetas.
Under subdivision 2 of the article last quoted, which is the paragraph under which the
accused is punished in the case at bar, the penalty prescribed is from six months and one
day to four years and two months. The accused in this case was actually sentenced to one
year eight months and twenty-one days of presidio correccional, to indemnify the
company in the sum of P865.26, to the corresponding subsidiary imprisonment in case of
failure to pay said sum, and to the accessory penalties provided by law.

Having before us these two laws, we may now see to what untoward and unfortunate
results the majority opinion leads us in holding that a person who commits a crime
against an electric current can be punished under either, or both, of two different statutes.
As we have seen already there is, relatively speaking, an enormous difference in the
penalties prescribed by said law. That imposed by the ordinance of the city of Manila can
not in any event exceed six months' imprisonment and a fine of P200; while that provided
in the Penal Code may be as severe as four years and two months imprisonment, with
indemnity equal to the value of the property stolen, with corresponding subsidiary
imprisonment in case of nonpayment. To this must be added all those accessory penalties
prescribed by the code, such as suspension from any public office, profession or trade,
and from the right the suffrage. To me it is wholly unbelievable that, under the
circumstances of this case and the nature of the offense itself, it was the intention of the
legislative authority to permit the concurrent existence of two laws, both in force,
punishing the same crime with penalties which bear no relation to each other and which
are widely different in severity. Note what results from such a holding. Prosecution under
the ordinance must be in the municipal court. Prosecution under the Penal Code may be in
the municipal court or it may be and generally must be, as in this case, in the Court of
First Instance. But it is certain that, under the ordinance, every case may be prosecuted in
the municipal court, whatever the value of the electricity taken; or, if the value is
sufficient, the prosecution may be brought in the Court of First Instance. The selection of
the court is left to the complaint. This means that the complaint is able to say within
certain limits what punishment shall be inflicted; for, if he desires that the accused shall
be lightly punished he will bring the action in the municipal court, which he always can
do if he wish, and if he desires to punish him very severely he will bring it in the Court of
First Instance, which he can generally do if he cares to. It is incoceivable that the
legislature intended that such a condition should exist. It is in violation of every sense of
fairness, is against every rule of statutory construction, and is clearly inimical to public
policy. To assert that the complaining in which he shall prosecute the accused but also, in
effect, the crime of which he shall be charged, as the decision in this case holds in effect,
is to assert a proposition, the bare statement of which is its own completest refutation.
For these reasons the judgment of conviction should be reversed.
The Lawphil Project - Arellano Law Foundation

Republic of the Philippines


SUPREME COURT
Manila
SECOND DIVISION

G.R. No. 73246 March 2, 1993


DIRECTOR OF LANDS AND DIRECTOR OF FOREST DEVELOPMENT, petitioners,
vs.
INTERMEDIATE APPELLATE COURT AND J. ANTONIO ARANETA, respondents.
The Solicitor General for petitioners.
Jimenez, Leynes & Associates for private respondent.

NOCON, J.:
For review before Us is the decision of the Court of Appeals in the land registration case entitled J. Antonio Araneta v. The Director
1
of Lands and Director of Forest Development, AC-G.R. CV. No. 00636, affirming the lower court's approval of the

application for registration of a parcel of land in favor of applicant therein, J. Antonio Araneta.
Evidence show that the land involved is actually an island known as Tambac Island in Lingayen
Gulf. Situated in the Municipality of Bani, Pangasinan, the area consists of 187,288 square
meters, more or less. The initial application for registration was filed for Pacific Farms, Inc. under
the provisions of the Land Registration Act, Act No. 496, as amended.
The Republic of the Philippines, thru the Director of Lands opposed the application alleging that
the applicant, Pacific Farms, Inc. does not possess a fee simple title to the land nor did its
predecessors possess the land for at least thirty (30) years immediately preceding the filing of
application. The opposition likewise specifically alleged that the applicant is a private corporation
disqualified under the (1973) new Philippine Constitution from acquiring alienable lands of the
public domain citing Section 11, Article 14. 2
The Director of Forest Development also entered its opposition alleging that the land is within the
unclassified public land and, hence, inalienable. Other private parties also filed their oppositions,
but were subsequently withdrawn.
In an amended application, Pacific Farms, Inc. filed a manifestation-motion to change the
applicant from Pacific Farms, Inc. to J. Antonio Araneta. Despite the supposed amendment, there
was no republication.
Evidence presented by the applicant include the testimony of Placido Orlando, fishery guard of
Pacific Farms, Inc., who said he has known the disputed land since he attained the age of reason
for some forty (40) years now; that when he first came to know the property it was then owned by
and in the possession of Paulino Castelo, Juan Ambrosio and Julio Castelo, and later on the
whole island was bought by Atty. Vicente Castelo who in turn sold it to J. Antonio Araneta.
Deposition by oral examination of Araneta was also presented, together with documents of sale,
tax declarations and receipts, and survey of property. Applicant, however, failed to present the
tracing cloth plan and instead submitted to the court certified copies thereof.
While this case is pending here in Court, respondent filed an Omnibus Motion for Substitution of
private respondent. 3 Apparently, Antonio Araneta had assigned his rights to and interest in
Tambac Island to Amancio R. Garcia 4 who in turn assigned his rights and interest in the same
property to Johnny A. Khonghun whose nationality was not alleged in the pleadings.

On October 4, 1979, the trial court rendered a decision adjudicating the subject property to J.
Antonio Araneta. On appeal to the then Intermediate Appellate Court, the decision of the lower
court was affirmed on December 12, 1985.
Petitioners raised the following errors:
I. The lower court erred in adjudicating the lands subject of registration to
applicant-appellee despite his failure to present the original tracing cloth plan the
submission of which is a statutory requirement of mandatory character.
II. The lower court erred in not denying registration in favor of J. Antonio Araneta
since the amendment of the application was simply an attempt to avoid the
application of the constitutional provision disqualifying a private corporation
the Pacific Farms, Inc. in this case from acquiring lands of public domain.
III. The lower court erred in not declaring the land known as the "Tambac Island"
not subject of registration it being an island formed on the seas.
IV. The lower court erred in adjudicating the land to the applicant under the
provisions of Presidential Decree No. 1529, otherwise known as the Property
Registration Decree, despite absence of any specific invocation of this law in the
original and amended application.
V. The lower court erred in not granting the government's motion for
reconsideration at least to enable it to present proof of the status of the land as
within the unclassified public forest, and hence beyond the court's jurisdiction to
adjudicate as private property.
VI. The lower court erred in not declaring that the applicant has failed to
overthrow the presumption that the land is a portion of the public domain
belonging to the Republic of the Philippines.
From the foregoing it appears that the more important issues are: 1) whether the presentation of
the tracing cloth plan is necessary; and 2) whether the land known as "Tambac Island" can be
subject to registration.
By mere consideration of the first assignment of error, We can right away glean the merit of the
petition.
Respondent claims that the tracing cloth plan is with the files of the Land Registration
Commission, and the only evidence that can be presented to that fact is the request for the
issuance of a certified copy thereof and the certified copy issued pursuant to the request. 5
Respondent further argues that failure of the petitioners to object to the presentation of the
certified copy of the tracing cloth plan was the basis of the trial court's denial of petitioner's motion
for reconsideration.
In a very recent decision of this Court, entitled The Director of Lands v. The Honorable
Intermediate Appellate Court and Lino Anit, 6 We have ruled that the submission of the tracing
cloth plan is a mandatory requirement for registration. Reiterating Our ruling in Director of Lands
v. Reyes, 7 We asserted that failure to submit in evidence the original tracing cloth plan is fatal it
being a statutory requirement of mandatory character.

It is of no import that petitioner failed to object to the presentation of the certified copy of the said
plan. What is required is the original tracing cloth plan of the land applied for and objection to
such requirement cannot be waived either expressly or impliedly. 8 This case is no different from
the case of Director of Lands v. Reyes, supra wherein We said that if the original tracing cloth
plan was indeed with the Land Registration Commission, there is no reason why the applicant
cannot easily retrieve the same and submit it in evidence, it being an essential requirement for
registration.
As to the second assignment of error, We are inclined to agree with petitioners that the
amendment of the application from the name of Pacific Farms Inc., as applicant, to the name of J.
Antonio Araneta Inc., was a mere attempt to evade disqualification. Our Constitution, whether the
1973 9 or
1987, 10 prohibits private corporations or associations from holding alienable lands of the public
domain except by lease. Apparently realizing such prohibition, respondent amended its
application to conform with the mandates of the law.
However, We cannot go along with petitioners' position that the absence of republication of an
amended application for registration is a jurisdictional flaw. We should distinguish. Amendments
to the application may be due to change in parties or substantial change in the boundaries or
increase in the area of the land applied for.
In the former case, neither the Land Registration Act, as amended, nor Presidential Decree No.
1529, otherwise known as the Property Registration Decree, requires republication and
registration may be allowed by the court at any stage of the proceeding upon just and reasonable
terms. 11 On the other hand, republication is required if the amendment is due to substantial
change in the boundaries or increase in the area of the land applied for.
As to the fourth assignment of error. We do not see any relevant dispute in the lower court's
application of Presidential Decree No. 1529, instead of Act No. 496, in adjudicating the land to the
then applicant, assuming that the land involved is registrable. Both laws are existing and can
stand together. P.D. 1529 was enacted to codify the various laws relative to registration of
property, in order to facilitate effective implementation of said laws. 12
The third, fifth and sixth assignment of errors are likewise meritorious and shall be discussed
forthwith together.
Respondent asserts that contrary to the allegation of petitioners, the reports of the District Land
Officer of Dagupan City, Land Inspector Perfecto Daroy and Supervising Land Examiner Teodoro
P. Nieva show that the subject property is an unclassified public land, not forest land. This claim is
rather misleading. The report of Supervising Land Examiner Nieva specifically states that the
"land is within the unclassified forest land" under the administrative jurisdiction of the then Bureau
of Forest Development. 13 This was based on the reports of Land Inspector Daroy and District
Land Officer Feliciano Liggayu.
Lands of the public domain are classified under three main categories, namely: Mineral, Forest
and Disposable or Alienable Lands. 14 Under the Commonwealth Constitution, only agricultural
lands were allowed to be alienated. Their disposition was provided for under Commonwealth Act
No. 141 (Secs. 6-7), which states 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. Mineral and Timber or forest lands are not
subject to private ownership unless they are first reclassified as agricultural lands and so released
for alienation. 15 In the absence of such classification, the land remains as unclassified land until
released therefrom and rendered open to disposition. Courts have no authority to do so. 16

This is in consonance with the Regalian doctrine that all lands of the public domain belong to the
State, and that the State is the source of any asserted right to ownership in land and charged with
the conservation of such patrimony. Under the Regalian Doctrine, all lands not otherwise
appearing to be clearly within private ownership are presumed to belong to the State. Hence, a
positive act of the government is needed to declassify a forest land into alienable or disposable
land for agricultural or other purposes. 17
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 that the land subject of the application is
alienable or disposable. 18
Unless the applicant succeeds in showing by convincing evidence that the property involved was
acquired by him or his ancestors either by composition title from the Spanish Government or by
possessory information title, or any other means for the proper acquisition of public lands, the
property must be held to be part of the public domain. The applicant must present evidence and
persuasive proof to substantiate his claim. 19
In this particular case, respondent presented proof that as early as 1921, the subject property has
been declared for tax purposes with receipts attached, in the names of respondent's
predecessors-in-interest. Nevertheless, in that span of time there had been no attempt to register
the same either under Act 496 or under the Spanish Mortgage Law. It is also rather intriguing that
Vicente Castelo who acquired almost 90% of the property from Alejo Ambrosia, et al. on June 18,
1958 and from Julio Castelo on June 19, 1958 immediately sold the same to applicant J. Antonio
Araneta on 3 July 1958.
According to the report of Land Investigator Daroy, the land was declared for taxation purposes in
the name of Vicente Castelo only in 1958 and the purported old tax declarations are not on file
with the Provincial Assessor's Office.
In any case tax declarations and receipts are not conclusive evidence of ownership or of the right
to possess land when not supported by evidence. 20 The fact that the disputed property may have
been declared for taxation purposes in the names of the applicants or of their predecessors-ininterest way back in 1921 does not necessarily prove ownership. They are merely indicia of a
claim of ownership. 21
Respondent's contention that the BFD, LC Map No. 681, certified on August 8, 1927 which was
the basis of the report and recommendation of the Land Examiner, is too antiquated; that it
cannot be conclusively relied upon and was not even presented in evidence, is not well taken. As
We have said in the case of Director of Lands v. CA: 22
And the fact that BF Map LC No. 673 dated March 1, 1927 showing subject
property to be within unclassified region was not presented in evidence will not
operate against the State considering the stipulation between the parties and
under the well-settled rule that the State cannot be estopped by the omission,
mistake or error of its officials or agents, if omission there was, in fact.
Respondent even admitted that Tambac Island is still an unclassified public land as of 1927 and
remains to be unclassified.
Since the subject property is still unclassified, whatever possession
the applicant may have had and however long, cannot ripen into private ownership. 23 The
conversion of subject property does not automatically render the property as alienable and
disposable.

In effect what the courts a quo have done is to release the subject property from the unclassified
category, which is beyond their competence and jurisdiction. We reiterate that the classification of
public lands is an exclusive prerogative of the Executive Department of the Government and not
of the Courts. In the absence of such classification, the land remains unclassified until released
therefrom and rendered open to disposition. 24
In fairness to respondent, the petitioners should seriously consider the matter of the
reclassification of the land in question. The attempt of people to have disposable lands they have
been tilling for generations titled in their name should not only be viewed with understanding
attitude, but as a matter of policy encouraged. 25
WHEREFORE, the petition is hereby GRANTED and the decisions of the courts a quo are
REVERSED.
SO ORDERED.
Narvasa, C.J., Padilla, Regalado and Campos, Jr., JJ., concur.

# Footnotes
1 Justice Ramon G. Gaviola, Jr., ponente; Justices Eduardo R. Caquioa and Ma. Rosario Quetulio-Losa,
concurring.
2 Now Section 3, Art. XII of the 1987 Constitution.
3 Rollo, p. 125.
4 Rollo, p. 128.
5 Rollo, p. 83.
6 G.R. No. 65663, October 16, 1992.
7 68 SCRA 177.
8 Director of Lands v. IAC and Anit, supra.
9 Sec. 11, Art. XIV.
10 Sec. 3, Art. XII.
11 Sec. 23 of the Land Registration Act; Sec. 19 of the Property Registration Decree.
12 Preamble, P.D. 1529.
13 Original Records, Par. 5, p. 78.
14 Sec. 6, Commonwealth Act 141.
15 Director of Forestry v. Villareal, G.R. No. 32266, 27 Feb. 89.
16 Manalo vs. Intermediate Appellate Court, G.R. No. 64753, 172 SCRA 795.
17 Director of Lands, et al. v. Aquino, G.R. No. 31688, 192 SCRA 296.

18 Director vs. Aquino, Ibid.


19 Republic v. Sayo, G.R. No. 60413, 191 SCRA 71.
20 Director of Lands v. Court of Appeals, G.R. No. L-50340, 133 SCRA 701; Baez v. Court of Appeals, G.R.
No. L-30351, 56 SCRA 15.
21 Municipality of Antipolo v. Zapanta, G.R. No. L-65334, 133 SCRA 820; Municipality of Santiago Isabela v.
Court of Appeals, 120 SCRA 734; Elumbaring v. Elumbaring, 12 Phil 384.
22 Director of Lands v. CA and Valeriano, G.R. No. 58867, 129 SCRA 689 (1984); Republic v. Court of
Appeals, 89 SCRA 648.
23 Dir. of Lands v. CA, 129 SCRA 689, Adorable v. Director of Lands, 107 Phil. 401, Republic v. Court of
Appeals, 89 SCRA 648.
24 Yngson v. Sec. of Agriculture and Natural Resources, 123 SCRA 441, Republic v. Court of Appeals, 99
SCRA 742.
25 Director of Lands v. Funtillar, 142 SCRA 57.

The Lawphil Project - Arellano Law Foundation