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Ladera vs. Hodges

No. 8027-R. September 23, 1952.
Reyes, J.B.L., J.
Doctrine: Article 315 of the Civil Code (now Article 415, New Civil Code) makes no distinction as to
whether the owner of the land is or is not the owner of the building.
Facts: Ladera entered into a contract with Hodges whereby the latter promised to sell a lot subject
to certain terms and conditions. In case of failure of the purchaser to make a monthly payment
within 60 days after it fell due, this contract may be taken and considered as rescinded and
annulled, in which case all sums of money paid would be considered rentals and the vendor shall
be at liberty to dispose of the parcel of land with all the improvements theron to any other person in
a manner as if this contract had never been made. After the execution of the contract, Ladera built
on a lot a house of mixed materials assessed at P4500.
Unfortunately, Ladera failed to pay the agreed installments, whereupon the appellant rescinded the
contract and filed an action for ejectment. The MTC rendered a decision upon agreement of the
parties- Ladera to vacate and surrender possession of the lot and pay P10 a month until delivery of
the premises. The court issued an alias writ of execution and pursuant thereto the sheriff levied
upon all rights, interests, and participation over your house standing on the lot. The sheriff posted
the notices of the sale but did not publish the same in a newspaper of general circulation.
At the auction sale Ladera did not attend because she had gone to Manila and the sheriff sold the
property to Avelina Magno as the highest bidder. On July 6, 1948, Hodges sold the lot to Manuel
Villa and on the same day the latter purchased the house from Magno for P200 but this last
transaction was not recorded.
Ladera returned to Iloilo after the sale and learned of its results. She went to see the sheriff and
upon the latters representation that she could redeem the property, she paid him P230 and the
sheriff issued a receipt. It does not appear, however, that this money was turned over to Hodges.
Thereupon, Ladera spouses filed an action against Hodges, the sheriff, and the judgment sale
purchasers, Magno and Villa to set aside the sale and recover the house. The lower court ruled in
favor of Ladera. Hodges et al contend that the house being built on land owned by another person
should be regarded in law as movable or personal property.
Issue: Whether the house being built on land owned by another should be regarded as movable
Held: According to Article 334 of the Civil Code (now 415), Immovable property are the following:
Lands, building, roads, and constructions of all kinds adhering to the soil; Applying the principle
Ubi lex non distinguit nec nos distinguere debemu, the law makes no distinction as to whether the
owner of the land is or is not the owner of the building. In view of the plain terms of the statute, the
only possible doubt could arise in the case of a house sold for demolition.
In the case of immovables by destination, the code requires that they be placed by the owner of
the tenement, in order to acquire the same nature or consideration of real property. In cases of

immovable by incorporation, the code nowhere requires that the attachment or incorporation be
made by the owner of the land. The only criterion is union or incorporation with the soil.
Ladera did not declare his house to be a chattel mortgage. The object of the levy or sale was real
property. The publication in a newspaper of general circulation was indispensible. It being admitted
that no publication was ever made, the execution sale was void and conferred no title on the
The alleged purchaser at the auction sale, Magno, is a mere employee of the creditor Hodges and
the low bid made by her as well as the fact that she sold the house to Villa on the same day that
Hodges sold him the land, proves that she was merely acting for and in behalf of Hodges.
It should be noted that in sales of immovables, the lack of title of the vendor taints the rights of
subsequent purchasers. Unlike in sales of chattels and personalty, in transactions covering real
property, possession in good faith is not equivalent to title.
G.R. No. L-17870

September 29, 1962


Oro City, respondents.
Binamira, Barria and Irabagon for petitioner.
Vicente E. Sabellina for respondents.

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
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
(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:



(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:



(5) Machinery, receptacles, instruments or implements intended by the owner of the tenement for
an industry or works which may be carried on in a building or on a piece of land, and which tend
directly to meet the needs of the said industry or works; (Civil Code of the Phil.)
Aside from the element of essentiality the above-quoted provision also requires that the industry or
works be carried on in a building or on a piece of land. Thus in the case of Berkenkotter vs. Cu
Unjieng, supra, the "machinery, liquid containers, and instruments or implements" are found in a
building constructed on the land. A sawmill would also be installed in a building on land more or
less permanently, and the sawing is conducted in the land or building.
But in the case at bar the equipments in question are destined only to repair or service the
transportation business, which is not carried on in a building or permanently on a piece of land, as
demanded by the law. Said equipments may not, therefore, be deemed real property.
Resuming what we have set forth above, we hold that the equipments in question are not
absolutely essential to the petitioner's transportation business, and petitioner's business is not
carried on in a building, tenement or on a specified land, so said equipment may not be considered
real estate within the meaning of Article 415 (c) of the Civil Code.
WHEREFORE, the decision subject of the petition for review is hereby set aside and the
equipment in question declared not subject to assessment as real estate for the purposes of the
real estate tax. Without costs.
So ordered.

G.R. No. L-58469

May 16, 1983


Loreto C. Baduan for petitioner.
Ramon D. Bagatsing & Assoc. (collaborating counsel) for petitioner.
Jose V. Mancella for respondent.

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
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 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 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.

G.R. No. L-11139

April 23, 1958


Gonzalo D. David for petitioner.
Raul A. Aristorenas and Benjamin Relova for respondent.
This is an appeal by certiorari from a decision of the Court of Appeals.
Briefly, the facts are: On June 4, 1949, petitioner herein, Santos Evangelista, instituted Civil Case
No. 8235 of the Court of First, Instance of Manila entitled " Santos Evangelista vs. Ricardo Rivera,"
for a sum of money. On the same date, he obtained a writ of attachment, which levied upon a
house, built by Rivera on a land situated in Manila and leased to him, by filing copy of said writ and
the corresponding notice of attachment with the Office of the Register of Deeds of Manila, on June
8, 1949. In due course, judgment was rendered in favor of Evangelista, who, on October 8, 1951,
bought the house at public auction held in compliance with the writ of execution issued in said
case. The corresponding definite deed of sale was issued to him on October 22, 1952, upon
expiration of the period of redemption. When Evangelista sought to take possession of the house,

Rivera refused to surrender it, upon the ground that he had leased the property from the Alto
Surety & Insurance Co., Inc. respondent herein and that the latter is now the true owner of
said property. It appears that on May 10, 1952, a definite deed of sale of the same house had
been issued to respondent, as the highest bidder at an auction sale held, on September 29, 1950,
in compliance with a writ of execution issued in Civil Case No. 6268 of the same court, entitled
"Alto Surety & Insurance Co., Inc. vs. Maximo Quiambao, Rosario Guevara and Ricardo Rivera," in
which judgment, for the sum of money, had been rendered in favor respondent herein, as plaintiff
therein. Hence, on June 13, 1953, Evangelista instituted the present action against respondent and
Ricardo Rivera, for the purpose of establishing his (Evangelista) title over said house, securing
possession thereof, apart from recovering damages.
In its answer, respondent alleged, in substance, that it has a better right to the house, because the
sale made, and the definite deed of sale executed, in its favor, on September 29, 1950 and May
10, 1952, respectively, precede the sale to Evangelista (October 8, 1951) and the definite deed of
sale in his favor (October 22, 1952). It, also, made some special defenses which are discussed
hereafter. Rivera, in effect, joined forces with respondent. After due trial, the Court of First Instance
of Manila rendered judgment for Evangelista, sentencing Rivera and respondent to deliver the
house in question to petitioner herein and to pay him, jointly and severally, forty pesos (P40.00) a
month from October, 1952, until said delivery, plus costs.
On appeal taken by respondent, this decision was reversed by the Court of Appeals, which
absolved said respondent from the complaint, upon the ground that, although the writ of
attachment in favor of Evangelista had been filed with the Register of Deeds of Manila prior to the
sale in favor of respondent, Evangelista did not acquire thereby a preferential lien, the attachment
having been levied as if the house in question were immovable property, although in the opinion of
the Court of Appeals, it is "ostensibly a personal property." As such, the Court of Appeals held,
"the order of attachment . . . should have been served in the manner provided in subsection (e) of
section 7 of Rule 59," of the Rules of Court, reading:
The property of the defendant shall be attached by the officer executing the order in the following
(e) Debts and credits, and other personal property not capable of manual delivery, by leaving with
the person owing such debts, or having in his possession or under his control, such credits or
other personal property, or with, his agent, a copy of the order, and a notice that the debts owing
by him to the defendant, and the credits and other personal property in his possession, or under
his control, belonging to the defendant, are attached in pursuance of such order. (Emphasis ours.)
However, the Court of Appeals seems to have been of the opinion, also, that the house of Rivera
should have been attached in accordance with subsection (c) of said section 7, as "personal
property capable of manual delivery, by taking and safely keeping in his custody", for it declared
that "Evangelists could not have . . . validly purchased Ricardo Rivera's house from the sheriff as
the latter was not in possession thereof at the time he sold it at a public auction."
Evangelista now seeks a review, by certiorari, of this decision of the Court of Appeals. In this
connection, it is not disputed that although the sale to the respondent preceded that made to
Evangelists, the latter would have a better right if the writ of attachment, issued in his favor before
the sale to the respondent, had been properly executed or enforced. This question, in turn,
depends upon whether the house of Ricardo Rivera is real property or not. In the affirmative case,
the applicable provision would be subsection (a) of section 7, Rule 59 of the Rules of Court,

pursuant to which the attachment should be made "by filing with the registrar of deeds a copy of
the order, together with a description of the property attached, and a notice that it is attached, and
by leaving a copy of such order, description, and notice with the occupant of the property, if any
there be."
Respondent maintains, however, and the Court of Appeals held, that Rivera's house is personal
property, the levy upon which must be made in conformity with subsections (c) and (e) of said
section 7 of Rule 59. Hence, the main issue before us is whether a house, constructed the lessee
of the land on which it is built, should be dealt with, for purpose, of attachment, as immovable
property, or as personal property.
It is, our considered opinion that said house is not personal property, much less a debt, credit or
other personal property not capable of manual delivery, but immovable property. As explicitly held,
in Laddera vs. Hodges (48 Off. Gaz., 5374), "a true building (not merely superimposed on the soil)
is immovable or real property, whether it is erected by the owner of the land or by usufructuary or
lessee. This is the doctrine of our Supreme Court in Leung Yee vs. Strong Machinery Company, 37
Phil., 644. And it is amply supported by the rulings of the French Court. . . ."
It is true that the parties to a deed of chattel mortgage may agree to consider a house as personal
property for purposes of said contract (Luna vs. Encarnacion, * 48 Off. Gaz., 2664; Standard Oil
Co. of New York vs. Jaramillo, 44 Phil., 630; De Jesus vs. Juan Dee Co., Inc., 72 Phil., 464).
However, this view is good only insofar as the contracting parties are concerned. It is based,
partly, upon the principle of estoppel. Neither this principle, nor said view, is applicable to strangers
to said contract. Much less is it in point where there has been no contract whatsoever, with respect
to the status of the house involved, as in the case at bar. Apart from this, in Manarang vs. Ofilada
(99 Phil., 108; 52 Off. Gaz., 3954), we held:
The question now before us, however, is: Does the fact that the parties entering into a contract
regarding a house gave said property the consideration of personal property in their contract, bind
the sheriff in advertising the property's sale at public auction as personal property? It is to be
remembered that in the case at bar the action was to collect a loan secured by a chattel mortgage
on the house. It is also to be remembered that in practice it is the judgment creditor who points out
to the sheriff the properties that the sheriff is to levy upon in execution, and the judgment creditor in
the case at bar is the party in whose favor the owner of the house had conveyed it by way of
chattel mortgage and, therefore, knew its consideration as personal property.
These considerations notwithstanding, we hold that the rules on execution do not allow, and, we
should not interpret them in such a way as to allow, the special consideration that parties to a
contract may have desired to impart to real estate, for example, as personal property, when they
are, not ordinarily so. Sales on execution affect the public and third persons. The regulation
governing sales on execution are for public officials to follow. The form of proceedings prescribed
for each kind of property is suited to its character, not to the character, which the parties have
given to it or desire to give it. When the rules speak of personal property, property which is
ordinarily so considered is meant; and when real property is spoken of, it means property which is
generally known as real property. The regulations were never intended to suit the consideration
that parties may have privately given to the property levied upon. Enforcement of regulations would
be difficult were the convenience or agreement of private parties to determine or govern the nature
of the proceedings. We therefore hold that the mere fact that a house was the subject of the chattel
mortgage and was considered as personal property by the parties does not make said house
personal property for purposes of the notice to be given for its sale of public auction. This ruling is

demanded by the need for a definite, orderly and well defined regulation for official and public
guidance and would prevent confusion and misunderstanding.
We, therefore, declare that the house of mixed materials levied upon on execution, although
subject of a contract of chattel mortgage between the owner and a third person, is real property
within the purview of Rule 39, section 16, of the Rules of Court as it has become a permanent
fixture of the land, which, is real property. (42 Am. Jur. 199-200; Leung Yee vs. Strong Machinery
Co., 37 Phil., 644; Republic vs. Ceniza, et al., 90 Phil., 544; Ladera,, et al. vs. Hodges, et al., [C.A.]
Off. Gaz. 5374.)" (Emphasis ours.)
The foregoing considerations apply, with equal force, to the conditions for the levy of attachment,
for it similarly affects the public and third persons.
It is argued, however, that, even if the house in question were immovable property, its attachment
by Evangelista was void or ineffective, because, in the language of the Court of Appeals, "after
presenting a Copy of the order of attachment in the Office of the Register of Deeds, the person
who might then be in possession of the house, the sheriff took no pains to serve Ricardo Rivera, or
other copies thereof." This finding of the Court of Appeals is neither conclusive upon us, nor
The Record on Appeal, annexed to the petition for Certiorari, shows that petitioner alleged, in
paragraph 3 of the complaint, that he acquired the house in question "as a consequence of the
levy of an attachment and execution of the judgment in Civil Case No. 8235" of the Court of First
Instance of Manila. In his answer (paragraph 2), Ricardo Rivera admitted said attachment
execution of judgment. He alleged, however, by way a of special defense, that the title of
respondent "is superior to that of plaintiff because it is based on a public instrument," whereas
Evangelista relied upon a "promissory note" which "is only a private instrument"; that said Public
instrument in favor of respondent "is superior also to the judgment in Civil Case No. 8235"; and
that plaintiff's claim against Rivera amounted only to P866, "which is much below the real value" of
said house, for which reason it would be "grossly unjust to acquire the property for such an
inadequate consideration." Thus, Rivera impliedly admitted that his house had been attached, that
the house had been sold to Evangelista in accordance with the requisite formalities, and that said
attachment was valid, although allegedly inferior to the rights of respondent, and the consideration
for the sale to Evangelista was claimed to be inadequate.
Respondent, in turn, denied the allegation in said paragraph 3 of the complaint, but only " for the
reasons stated in its special defenses" namely: (1) that by virtue of the sale at public auction, and
the final deed executed by the sheriff in favor of respondent, the same became the "legitimate
owner of the house" in question; (2) that respondent "is a buyer in good faith and for value"; (3)
that respondent "took possession and control of said house"; (4) that "there was no valid
attachment by the plaintiff and/or the Sheriff of Manila of the property in question as neither took
actual or constructive possession or control of the property at any time"; and (5) "that the alleged
registration of plaintiff's attachment, certificate of sale and final deed in the Office of Register of
Deeds, Manila, if there was any, is likewise, not valid as there is no registry of transactions
covering houses erected on land belonging to or leased from another." In this manner, respondent
claimed a better right, merely under the theory that, in case of double sale of immovable property,
the purchaser who first obtains possession in good faith, acquires title, if the sale has not been
"recorded . . . in the Registry of Property" (Art. 1544, Civil Code of the Philippines), and that the
writ of attachment and the notice of attachment in favor of Evangelista should be considered
unregistered, "as there is no registry of transactions covering houses erected on land belonging to

or leased from another." In fact, said article 1544 of the Civil Code of the Philippines, governing
double sales, was quoted on page 15 of the brief for respondent in the Court of Appeals, in support
of its fourth assignment of error therein, to the effect that it "has preference or priority over the sale
of the same property" to Evangelista.
In other words, there was no issue on whether copy of the writ and notice of attachment had been
served on Rivera. No evidence whatsoever, to the effect that Rivera had not been served with
copies of said writ and notice, was introduced in the Court of First Instance. In its brief in the Court
of Appeals, respondent did not aver, or even, intimate, that no such copies were served by the
sheriff upon Rivera. Service thereof on Rivera had been impliedly admitted by the defendants, in
their respective answers, and by their behaviour throughout the proceedings in the Court of First
Instance, and, as regards respondent, in the Court of Appeals. In fact, petitioner asserts in his brief
herein (p. 26) that copies of said writ and notice were delivered to Rivera, simultaneously with
copies of the complaint, upon service of summons, prior to the filing of copies of said writ and
notice with the register deeds, and the truth of this assertion has not been directly and positively
challenged or denied in the brief filed before us by respondent herein. The latter did not dare
therein to go beyond making a statement for the first time in the course of these proceedings,
begun almost five (5) years ago (June 18, 1953) reproducing substantially the aforementioned
finding of the Court of Appeals and then quoting the same.
Considering, therefore, that neither the pleadings, nor the briefs in the Court of Appeals, raised an
issue on whether or not copies of the writ of attachment and notice of attachment had been served
upon Rivera; that the defendants had impliedly admitted-in said pleadings and briefs, as well as by
their conduct during the entire proceedings, prior to the rendition of the decision of the Court of
Appeals that Rivera had received copies of said documents; and that, for this reason, evidently,
no proof was introduced thereon, we, are of the opinion, and so hold that the finding of the Court of
Appeals to the effect that said copies had not been served upon Rivera is based upon a
misapprehension of the specific issues involved therein and goes beyond the range of such
issues, apart from being contrary to the aforementioned admission by the parties, and that,
accordingly, a grave abuse of discretion was committed in making said finding, which is,
furthermore, inaccurate.
Wherefore, the decision of the Court of Appeals is hereby reversed, and another one shall be
entered affirming that of the Court of First Instance of Manila, with the costs of this instance
against respondent, the Alto Surety and Insurance Co., Inc. It is so ordered.
Paras, C.J., Bengzon, Montemayor, Reyes, A., Bautista Angelo, Labrador, Reyes, J.B.L.,
Endencia and Felix, JJ., concur.
G.R. No. 120098

October 2, 2001

RUBY L. TSAI, petitioner,

[G.R. No. 120109. October 2, 2001.]


These consolidated cases assail the decision1 of the Court of Appeals in CA-G.R. CV No. 32986,
affirming the decision2 of the Regional Trial Court of Manila, Branch 7, in Civil Case No. 89-48265.
Also assailed is respondent court's resolution denying petitioners' motion for reconsideration.
On November 26, 1975, respondent Ever Textile Mills, Inc. (EVERTEX) obtained a three million
peso (P3,000,000.00) loan from petitioner Philippine Bank of Communications (PBCom). As
security for the loan, EVERTEX executed in favor of PBCom, a deed of Real and Chattel Mortgage
over the lot under TCT No. 372097, where its factory stands, and the chattels located therein as
enumerated in a schedule attached to the mortgage contract. The pertinent portions of the Real
and Chattel Mortgage are quoted below:



The MORTGAGOR(S) hereby transfer(s) and convey(s), by way of First Mortgage, to the
MORTGAGEE, . . . certain parcel(s) of land, together with all the buildings and improvements now
existing or which may hereafter exist thereon, situated in . . .
"Annex A"
(Real and Chattel Mortgage executed by Ever Textile Mills in favor of PBCommunications

Forty Eight (48) units of Vayrow Knitting Machines-Tompkins made in Hongkong:

Serial Numbers

Size of Machines





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



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



Four (4) Winding Machines.





TCT # 372097 - RIZAL



Any and all buildings and improvements now existing or hereafter to exist on the abovementioned lot.
MACHINERIES & EQUIPMENT situated, located and/or installed on the above-mentioned
lot located at . . .

Forty eight sets (48) Vayrow Knitting Machines . . .


Sixteen sets (16) Vayrow Knitting Machines . . .


Two (2) Circular Knitting Machines . . .


Two (2) Winding Machines . . .


Two (2) Winding Machines . . .

Any and all replacements, substitutions, additions, increases and accretions to above



On April 23, 1979, PBCom granted a second loan of P3,356,000.00 to EVERTEX. The loan was
secured by a Chattel Mortgage over personal properties enumerated in a list attached thereto.
These listed properties were similar to those listed in Annex A of the first mortgage deed.
After April 23, 1979, the date of the execution of the second mortgage mentioned above,
EVERTEX purchased various machines and equipments.
On November 19, 1982, due to business reverses, EVERTEX filed insolvency proceedings
docketed as SP Proc. No. LP-3091-P before the defunct Court of First Instance of Pasay City,
Branch XXVIII. The CFI issued an order on November 24, 1982 declaring the corporation
insolvent. All its assets were taken into the custody of the Insolvency Court, including the collateral,
real and personal, securing the two mortgages as abovementioned.
In the meantime, upon EVERTEX's failure to meet its obligation to PBCom, the latter commenced
extrajudicial foreclosure proceedings against EVERTEX under Act 3135, otherwise known as "An
Act to Regulate the Sale of Property under Special Powers Inserted in or Annexed to Real Estate
Mortgages" and Act 1506 or "The Chattel Mortgage Law". A Notice of Sheriff's Sale was issued on
December 1, 1982.

On December 15, 1982, the first public auction was held where petitioner PBCom emerged as the
highest bidder and a Certificate of Sale was issued in its favor on the same date. On December 23,
1982, another public auction was held and again, PBCom was the highest bidder. The sheriff
issued a Certificate of Sale on the same day.
On March 7, 1984, PBCom consolidated its ownership over the lot and all the properties in it. In
November 1986, it leased the entire factory premises to petitioner Ruby L. Tsai for P50,000.00 a
month. On May 3, 1988, PBCom sold the factory, lock, stock and barrel to Tsai for P9,000,000.00,
including the contested machineries.
On March 16, 1989, EVERTEX filed a complaint for annulment of sale, reconveyance, and
damages with the Regional Trial Court against PBCom, alleging inter alia that the extrajudicial
foreclosure of subject mortgage was in violation of the Insolvency Law. EVERTEX claimed that no
rights having been transmitted to PBCom over the assets of insolvent EVERTEX, therefore Tsai
acquired no rights over such assets sold to her, and should reconvey the assets.
Further, EVERTEX averred that PBCom, without any legal or factual basis, appropriated the
contested properties, which were not included in the Real and Chattel Mortgage of November 26,
1975 nor in the Chattel Mortgage of April 23, 1979, and neither were those properties included in
the Notice of Sheriff's Sale dated December 1, 1982 and Certificate of Sale . . . dated December
15, 1982.
The disputed properties, which were valued at P4,000,000.00, are: 14 Interlock Circular Knitting
Machines, 1 Jet Drying Equipment, 1 Dryer Equipment, 1 Raisin Equipment and 1 Heatset
The RTC found that the lease and sale of said personal properties were irregular and illegal
because they were not duly foreclosed nor sold at the December 15, 1982 auction sale since these
were not included in the schedules attached to the mortgage contracts. The trial court decreed:
WHEREFORE, judgment is hereby rendered in favor of plaintiff corporation and against the
Ordering the annulment of the sale executed by defendant Philippine Bank of
Communications in favor of defendant Ruby L. Tsai on May 3, 1988 insofar as it affects the
personal properties listed in par. 9 of the complaint, and their return to the plaintiff corporation
through its assignee, plaintiff Mamerto R. Villaluz, for disposition by the Insolvency Court, to be
done within ten (10) days from finality of this decision;
Ordering the defendants to pay jointly and severally the plaintiff corporation the sum of
P5,200,000.00 as compensation for the use and possession of the properties in question from
November 1986 to February 1991 and P100,000.00 every month thereafter, with interest thereon
at the legal rate per annum until full payment;
Ordering the defendants to pay jointly and severally the plaintiff corporation the sum of
P50,000.00 as and for attorney's fees and expenses of litigation;
Ordering the defendants to pay jointly and severally the plaintiff corporation the sum of
P200,000.00 by way of exemplary damages;


Ordering the dismissal of the counterclaim of the defendants; and


Ordering the defendants to proportionately pay the costs of suit.

Dissatisfied, both PBCom and Tsai appealed to the Court of Appeals, which issued its decision
dated August 31, 1994, the dispositive portion of which reads:
WHEREFORE, except for the deletion therefrom of the award; for exemplary damages, and
reduction of the actual damages, from P100,000.00 to P20,000.00 per month, from November
1986 until subject personal properties are restored to appellees, the judgment appealed from is
hereby AFFIRMED, in all other respects. No pronouncement as to costs.5
Motion for reconsideration of the above decision having been denied in the resolution of April 28,
1995, PBCom and Tsai filed their separate petitions for review with this Court.
In G.R No. 120098, petitioner Tsai ascribed the following errors to the respondent court:
In G.R. No. 120098, PBCom raised the following issues:

The principal issue, in our view, is whether or not the inclusion of the questioned properties in the
foreclosed properties is proper. The secondary issue is whether or not the sale of these properties
to petitioner Ruby Tsai is valid.
For her part, Tsai avers that the Court of Appeals in effect made a contract for the parties by
treating the 1981 acquired units of machinery as chattels instead of real properties within their
earlier 1975 deed of Real and Chattel Mortgage or 1979 deed of Chattel Mortgage.8 Additionally,
Tsai argues that respondent court erred in holding that the disputed 1981 machineries are not real
properties.9 Finally, she contends that the Court of Appeals erred in holding against petitioner's
arguments on prescription and laches10 and in assessing petitioner actual damages, attorney's
fees and expenses of litigation, for want of valid factual and legal basis.11
Essentially, PBCom contends that respondent court erred in affirming the lower court's judgment
decreeing that the pieces of machinery in dispute were not duly foreclosed and could not be legally
leased nor sold to Ruby Tsai. It further argued that the Court of Appeals' pronouncement that the
pieces of machinery in question were personal properties have no factual and legal basis. Finally,
it asserts that the Court of Appeals erred in assessing damages and attorney's fees against
In opposition, private respondents argue that the controverted units of machinery are not "real
properties" but chattels, and, therefore, they were not part of the foreclosed real properties,
rendering the lease and the subsequent sale thereof to Tsai a nullity.12
Considering the assigned errors and the arguments of the parties, we find the petitions devoid of
merit and ought to be denied.

Well settled is the rule that the jurisdiction of the Supreme Court in a petition for review on certiorari
under Rule 45 of the Revised Rules of Court is limited to reviewing only errors of law, not of fact,
unless the factual findings complained of are devoid of support by the evidence on record or the
assailed judgment is based on misapprehension of facts.13 This rule is applied more stringently
when the findings of fact of the RTC is affirmed by the Court of Appeals.14
The following are the facts as found by the RTC and affirmed by the Court of Appeals that are
decisive of the issues: (1) the "controverted machineries" are not covered by, or included in, either
of the two mortgages, the Real Estate and Chattel Mortgage, and the pure Chattel Mortgage; (2)
the said machineries were not included in the list of properties appended to the Notice of Sale, and
neither were they included in the Sheriff's Notice of Sale of the foreclosed properties.15
Petitioners contend that the nature of the disputed machineries, i.e., that they were heavy, bolted
or cemented on the real property mortgaged by EVERTEX to PBCom, make them ipso facto
immovable under Article 415 (3) and (5) of the New Civil Code. This assertion, however, does not
settle the issue. Mere nuts and bolts do not foreclose the controversy. We have to look at the
parties' intent.
While it is true that the controverted properties appear to be immobile, a perusal of the contract of
Real and Chattel Mortgage executed by the parties herein gives us a contrary indication. In the
case at bar, both the trial and the appellate courts reached the same finding that the true intention
of PBCOM and the owner, EVERTEX, is to treat machinery and equipment as chattels. The
pertinent portion of respondent appellate court's ruling is quoted below:
As stressed upon by appellees, appellant bank treated the machineries as chattels; never as real
properties. Indeed, the 1975 mortgage contract, which was actually real and chattel mortgage,
militates against appellants' posture. It should be noted that the printed form used by appellant
bank was mainly for real estate mortgages. But reflective of the true intention of appellant PBCOM
and appellee EVERTEX was the typing in capital letters, immediately following the printed caption
of mortgage, of the phrase "real and chattel." So also, the "machineries and equipment" in the
printed form of the bank had to be inserted in the blank space of the printed contract and
connected with the word "building" by typewritten slash marks. Now, then, if the machineries in
question were contemplated to be included in the real estate mortgage, there would have been no
necessity to ink a chattel mortgage specifically mentioning as part III of Schedule A a listing of the
machineries covered thereby. It would have sufficed to list them as immovables in the Deed of
Real Estate Mortgage of the land and building involved.
As regards the 1979 contract, the intention of the parties is clear and beyond question. It refers
solely to chattels. The inventory list of the mortgaged properties is an itemization of sixty-three (63)
individually described machineries while the schedule listed only machines and 2,996,880.50
worth of finished cotton fabrics and natural cotton fabrics.16
In the absence of any showing that this conclusion is baseless, erroneous or uncorroborated by
the evidence on record, we find no compelling reason to depart therefrom.
Too, assuming arguendo that the properties in question are immovable by nature, nothing detracts
the parties from treating it as chattels to secure an obligation under the principle of estoppel. As far
back as Navarro v. Pineda, 9 SCRA 631 (1963), an immovable may be considered a personal
property if there is a stipulation as when it is used as security in the payment of an obligation
where a chattel mortgage is executed over it, as in the case at bar.

In the instant case, the parties herein: (1) executed a contract styled as "Real Estate Mortgage and
Chattel Mortgage," instead of just "Real Estate Mortgage" if indeed their intention is to treat all
properties included therein as immovable, and (2) attached to the said contract a separate "LIST
OF MACHINERIES & EQUIPMENT". These facts, taken together, evince the conclusion that the
parties' intention is to treat these units of machinery as chattels. A fortiori, the contested afteracquired properties, which are of the same description as the units enumerated under the title
"LIST OF MACHINERIES & EQUIPMENT," must also be treated as chattels.
Accordingly, we find no reversible error in the respondent appellate court's ruling that inasmuch as
the subject mortgages were intended by the parties to involve chattels, insofar as equipment and
machinery were concerned, the Chattel Mortgage Law applies, which provides in Section 7 thereof
that: "a chattel mortgage shall be deemed to cover only the property described therein and not like
or substituted property thereafter acquired by the mortgagor and placed in the same depository as
the property originally mortgaged, anything in the mortgage to the contrary notwithstanding."
And, since the disputed machineries were acquired in 1981 and could not have been involved in
the 1975 or 1979 chattel mortgages, it was consequently an error on the part of the Sheriff to
include subject machineries with the properties enumerated in said chattel mortgages.
As the auction sale of the subject properties to PBCom is void, no valid title passed in its favor.
Consequently, the sale thereof to Tsai is also a nullity under the elementary principle of nemo dat
quod non habet, one cannot give what one does not have.17
Petitioner Tsai also argued that assuming that PBCom's title over the contested properties is a
nullity, she is nevertheless a purchaser in good faith and for value who now has a better right than
To the contrary, however, are the factual findings and conclusions of the trial court that she is not a
purchaser in good faith. Well-settled is the rule that the person who asserts the status of a
purchaser in good faith and for value has the burden of proving such assertion.18 Petitioner Tsai
failed to discharge this burden persuasively.
Moreover, a purchaser in good faith and for value is one who buys the property of another without
notice that some other person has a right to or interest in such property and pays a full and fair
price for the same, at the time of purchase, or before he has notice of the claims or interest of
some other person in the property.19 Records reveal, however, that when Tsai purchased the
controverted properties, she knew of respondent's claim thereon. As borne out by the records, she
received the letter of respondent's counsel, apprising her of respondent's claim, dated February
27, 1987.20 She replied thereto on March 9, 1987.21 Despite her knowledge of respondent's
claim, she proceeded to buy the contested units of machinery on May 3, 1988. Thus, the RTC did
not err in finding that she was not a purchaser in good faith.
Petitioner Tsai's defense of indefeasibility of Torrens Title of the lot where the disputed properties
are located is equally unavailing. This defense refers to sale of lands and not to sale of properties
situated therein. Likewise, the mere fact that the lot where the factory and the disputed properties
stand is in PBCom's name does not automatically make PBCom the owner of everything found
therein, especially in view of EVERTEX's letter to Tsai enunciating its claim.

Finally, petitioners' defense of prescription and laches is less than convincing. We find no cogent
reason to disturb the consistent findings of both courts below that the case for the reconveyance of
the disputed properties was filed within the reglementary period. Here, in our view, the doctrine of
laches does not apply. Note that upon petitioners' adamant refusal to heed EVERTEX's claim,
respondent company immediately filed an action to recover possession and ownership of the
disputed properties. There is no evidence showing any failure or neglect on its part, for an
unreasonable and unexplained length of time, to do that which, by exercising due diligence, could
or should have been done earlier. The doctrine of stale demands would apply only where by
reason of the lapse of time, it would be inequitable to allow a party to enforce his legal rights.
Moreover, except for very strong reasons, this Court is not disposed to apply the doctrine of laches
to prejudice or defeat the rights of an owner.22
As to the award of damages, the contested damages are the actual compensation, representing
rentals for the contested units of machinery, the exemplary damages, and attorney's fees.
As regards said actual compensation, the RTC awarded P100,000.00 corresponding to the unpaid
rentals of the contested properties based on the testimony of John Chua, who testified that the
P100,000.00 was based on the accepted practice in banking and finance, business and
investments that the rental price must take into account the cost of money used to buy them. The
Court of Appeals did not give full credence to Chua's projection and reduced the award to
Basic is the rule that to recover actual damages, the amount of loss must not only be capable of
proof but must actually be proven with reasonable degree of certainty, premised upon competent
proof or best evidence obtainable of the actual amount thereof.23 However, the allegations of
respondent company as to the amount of unrealized rentals due them as actual damages remain
mere assertions unsupported by documents and other competent evidence. In determining actual
damages, the court cannot rely on mere assertions, speculations, conjectures or guesswork but
must depend on competent proof and on the best evidence obtainable regarding the actual amount
of loss.24 However, we are not prepared to disregard the following dispositions of the respondent
appellate court:
. . . In the award of actual damages under scrutiny, there is nothing on record warranting the said
award of P5,200,000.00, representing monthly rental income of P100,000.00 from November 1986
to February 1991, and the additional award of P100,000.00 per month thereafter.
As pointed out by appellants, the testimonial evidence, consisting of the testimonies of Jonh (sic)
Chua and Mamerto Villaluz, is shy of what is necessary to substantiate the actual damages
allegedly sustained by appellees, by way of unrealized rental income of subject machineries and
The testimony of John Cua (sic) is nothing but an opinion or projection based on what is claimed to
be a practice in business and industry. But such a testimony cannot serve as the sole basis for
assessing the actual damages complained of. What is more, there is no showing that had
appellant Tsai not taken possession of the machineries and equipments in question, somebody
was willing and ready to rent the same for P100,000.00 a month.



Then, too, even assuming arguendo that the said machineries and equipments could have
generated a rental income of P30,000.00 a month, as projected by witness Mamerto Villaluz, the
same would have been a gross income. Therefrom should be deducted or removed, expenses for
maintenance and repairs . . . Therefore, in the determination of the actual damages or unrealized
rental income sued upon, there is a good basis to calculate that at least four months in a year, the
machineries in dispute would have been idle due to absence of a lessee or while being repaired. In
the light of the foregoing rationalization and computation, We believe that a net unrealized rental
income of P20,000.00 a month, since November 1986, is more realistic and fair.25
As to exemplary damages, the RTC awarded P200,000.00 to EVERTEX which the Court of
Appeals deleted. But according to the CA, there was no clear showing that petitioners acted
malevolently, wantonly and oppressively. The evidence, however, shows otherwise.It is a requisite
to award exemplary damages that the wrongful act must be accompanied by bad faith,26 and the
guilty acted in a wanton, fraudulent, oppressive, reckless or malevolent manner.27 As previously
stressed, petitioner Tsai's act of purchasing the controverted properties despite her knowledge of
EVERTEX's claim was oppressive and subjected the already insolvent respondent to gross
disadvantage. Petitioner PBCom also received the same letters of Atty. Villaluz, responding thereto
on March 24, 1987.28 Thus, PBCom's act of taking all the properties found in the factory of the
financially handicapped respondent, including those properties not covered by or included in the
mortgages, is equally oppressive and tainted with bad faith. Thus, we are in agreement with the
RTC that an award of exemplary damages is proper.
The amount of P200,000.00 for exemplary damages is, however, excessive. Article 2216 of the
Civil Code provides that no proof of pecuniary loss is necessary for the adjudication of exemplary
damages, their assessment being left to the discretion of the court in accordance with the
circumstances of each case.29 While the imposition of exemplary damages is justified in this case,
equity calls for its reduction. In Inhelder Corporation v. Court of Appeals, G.R. No. L-52358, 122
SCRA 576, 585, (May 30, 1983), we laid down the rule that judicial discretion granted to the courts
in the assessment of damages must always be exercised with balanced restraint and measured
objectivity. Thus, here the award of exemplary damages by way of example for the public good
should be reduced to P100,000.00.
By the same token, attorney's fees and other expenses of litigation may be recovered when
exemplary damages are awarded.30 In our view, RTC's award of P50,000.00 as attorney's fees
and expenses of litigation is reasonable, given the circumstances in these cases.
WHEREFORE, the petitions are DENIED. The assailed decision and resolution of the Court of
Appeals in CA-G.R. CV No. 32986 are AFFIRMED WITH MODIFICATIONS. Petitioners Philippine
Bank of Communications and Ruby L. Tsai are hereby ordered to pay jointly and severally Ever
Textile Mills, Inc. the following: (1) P20,000.00 per month, as compensation for the use and
possession of the properties in question from November 198631 until subject personal properties
are restored to respondent corporation; (2) P100,000.00 by way of exemplary damages, and (3)
P50,000.00 as attorney's fees and litigation expenses. Costs against petitioners.
[G.R. No. 137705. August 22, 2000]
FINANCE, INC., respondent.

After agreeing to a contract stipulating that a real or immovable property be considered as
personal or movable, a party is estopped from subsequently claiming otherwise. Hence, such
property is a proper subject of a writ of replevin obtained by the other contracting party.
The Case
Before us is a Petition for Review on Certiorari assailing the January 6, 1999 Decision[1] of the
Court of Appeals (CA)[2] in CA-GR SP No. 47332 and its February 26, 1999 Resolution[3] denying
reconsideration. The decretal portion of the CA Decision reads as follows:
WHEREFORE, premises considered, the assailed Order dated February 18, 1998 and Resolution
dated March 31, 1998 in Civil Case No. Q-98-33500 are hereby AFFIRMED. The writ of
preliminary injunction issued on June 15, 1998 is hereby LIFTED.[4]
In its February 18, 1998 Order,[5] the Regional Trial Court (RTC) of Quezon City (Branch 218)[6]
issued a Writ of Seizure.[7] The March 18, 1998 Resolution[8] denied petitioners Motion for Special
Protective Order, praying that the deputy sheriff be enjoined from seizing immobilized or other real
properties in (petitioners) factory in Cainta, Rizal and to return to their original place whatever
immobilized machineries or equipments he may have removed.[9]
The Facts
The undisputed facts are summarized by the Court of Appeals as follows:[10]
On February 13, 1998, respondent PCI Leasing and Finance, Inc. (PCI Leasing for short) filed with
the RTC-QC a complaint for [a] sum of money (Annex E), with an application for a writ of replevin
docketed as Civil Case No. Q-98-33500.
On March 6, 1998, upon an ex-parte application of PCI Leasing, respondent judge issued a writ of
replevin (Annex B) directing its sheriff to seize and deliver the machineries and equipment to PCI
Leasing after 5 days and upon the payment of the necessary expenses.
On March 24, 1998, in implementation of said writ, the sheriff proceeded to petitioners factory,
seized one machinery with [the] word that he [would] return for the other machineries.
On March 25, 1998, petitioners filed a motion for special protective order (Annex C), invoking the
power of the court to control the conduct of its officers and amend and control its processes,
praying for a directive for the sheriff to defer enforcement of the writ of replevin.
This motion was opposed by PCI Leasing (Annex F), on the ground that the properties [were] still
personal and therefore still subject to seizure and a writ of replevin.
In their Reply, petitioners asserted that the properties sought to be seized [were] immovable as
defined in Article 415 of the Civil Code, the parties agreement to the contrary notwithstanding.
They argued that to give effect to the agreement would be prejudicial to innocent third parties.
They further stated that PCI Leasing [was] estopped from treating these machineries as personal

because the contracts in which the alleged agreement [were] embodied [were] totally sham and
On April 6, 1998, the sheriff again sought to enforce the writ of seizure and take possession of the
remaining properties. He was able to take two more, but was prevented by the workers from taking
the rest.
On April 7, 1998, they went to [the CA] via an original action for certiorari.
Ruling of the Court of Appeals
Citing the Agreement of the parties, the appellate court held that the subject machines were
personal property, and that they had only been leased, not owned, by petitioners. It also ruled that
the words of the contract are clear and leave no doubt upon the true intention of the contracting
parties. Observing that Petitioner Goquiolay was an experienced businessman who was not
unfamiliar with the ways of the trade, it ruled that he should have realized the import of the
document he signed. The CA further held:
Furthermore, to accord merit to this petition would be to preempt the trial court in ruling upon the
case below, since the merits of the whole matter are laid down before us via a petition whose sole
purpose is to inquire upon the existence of a grave abuse of discretion on the part of the [RTC] in
issuing the assailed Order and Resolution. The issues raised herein are proper subjects of a fullblown trial, necessitating presentation of evidence by both parties. The contract is being enforced
by one, and [its] validity is attacked by the other a matter x x x which respondent court is in the
best position to determine.
Hence, this Petition.[11]
The Issues
In their Memorandum, petitioners submit the following issues for our consideration:
A. Whether or not the machineries purchased and imported by SERGS became real property by
virtue of immobilization.
B. Whether or not the contract between the parties is a loan or a lease.[12]
In the main, the Court will resolve whether the said machines are personal, not immovable,
property which may be a proper subject of a writ of replevin. As a preliminary matter, the Court will
also address briefly the procedural points raised by respondent.
The Courts Ruling
The Petition is not meritorious.
Preliminary Matter:Procedural Questions
Respondent contends that the Petition failed to indicate expressly whether it was being filed under
Rule 45 or Rule 65 of the Rules of Court. It further alleges that the Petition erroneously impleaded
Judge Hilario Laqui as respondent.

There is no question that the present recourse is under Rule 45. This conclusion finds support in
the very title of the Petition, which is Petition for Review on Certiorari.[13]
While Judge Laqui should not have been impleaded as a respondent,[14] substantial justice
requires that such lapse by itself should not warrant the dismissal of the present Petition. In this
light, the Court deems it proper to remove, motu proprio, the name of Judge Laqui from the caption
of the present case.
Main Issue: Nature of the Subject Machinery
Petitioners contend that the subject machines used in their factory were not proper subjects of the
Writ issued by the RTC, because they were in fact real property. Serious policy considerations,
they argue, militate against a contrary characterization.
Rule 60 of the Rules of Court provides that writs of replevin are issued for the recovery of personal
property only.[15] Section 3 thereof reads:
SEC. 3. Order. -- Upon the filing of such affidavit and approval of the bond, the court shall issue an
order and the corresponding writ of replevin describing the personal property alleged to be
wrongfully detained and requiring the sheriff forthwith to take such property into his custody.
On the other hand, Article 415 of the Civil Code enumerates immovable or real property as follows:
ART. 415. The following are immovable property:
x x x....................................x x x....................................x x x
(5) Machinery, receptacles, instruments or implements intended by the owner of the tenement for
an industry or works which may be carried on in a building or on a piece of land, and which tend
directly to meet the needs of the said industry or works;
x x x....................................x x x....................................x x x
In the present case, the machines that were the subjects of the Writ of Seizure were placed by
petitioners in the factory built on their own land. Indisputably, they were essential and principal
elements of their chocolate-making industry. Hence, although each of them was movable or
personal property on its own, all of them have become immobilized by destination because they
are essential and principal elements in the industry.[16] In that sense, petitioners are correct in
arguing that the said machines are real, not personal, property pursuant to Article 415 (5) of the
Civil Code.[17]
Be that as it may, we disagree with the submission of the petitioners that the said machines are
not proper subjects of the Writ of Seizure.
The Court has held that contracting parties may validly stipulate that a real property be considered
as personal.[18] After agreeing to such stipulation, they are consequently estopped from claiming
otherwise. Under the principle of estoppel, a party to a contract is ordinarily precluded from
denying the truth of any material fact found therein.

Hence, in Tumalad v. Vicencio,[19] the Court upheld the intention of the parties to treat a house as
a personal property because it had been made the subject of a chattel mortgage. The Court ruled:
x x x. Although there is no specific statement referring to the subject house as personal property,
yet by ceding, selling or transferring a property by way of chattel mortgage defendants-appellants
could only have meant to convey the house as chattel, or at least, intended to treat the same as
such, so that they should not now be allowed to make an inconsistent stand by claiming otherwise.
Applying Tumalad, the Court in Makati Leasing and Finance Corp. v. Wearever Textile Mills[20]
also held that the machinery used in a factory and essential to the industry, as in the present case,
was a proper subject of a writ of replevin because it was treated as personal property in a contract.
Pertinent portions of the Courts ruling are reproduced hereunder:
x x x. If a house of strong materials, like what was involved in the above Tumalad case, may be
considered as personal property for purposes of executing a chattel mortgage thereon as long as
the parties to the contract so agree and no innocent third party will be prejudiced thereby, there is
absolutely no reason why a machinery, which is movable in its nature and becomes immobilized
only by destination or purpose, may not be likewise treated as such. This is really because one
who has so agreed is estopped from denying the existence of the chattel mortgage.
In the present case, the Lease Agreement clearly provides that the machines in question are to be
considered as personal property. Specifically, Section 12.1 of the Agreement reads as follows:[21]
12.1 The PROPERTY is, and shall at all times be and remain, personal property notwithstanding
that the PROPERTY or any part thereof may now be, or hereafter become, in any manner affixed
or attached to or embedded in, or permanently resting upon, real property or any building thereon,
or attached in any manner to what is permanent.
Clearly then, petitioners are estopped from denying the characterization of the subject machines
as personal property. Under the circumstances, they are proper subjects of the Writ of Seizure.
It should be stressed, however, that our holding -- that the machines should be deemed personal
property pursuant to the Lease Agreement is good only insofar as the contracting parties are
concerned.[22] Hence, while the parties are bound by the Agreement, third persons acting in good
faith are not affected by its stipulation characterizing the subject machinery as personal.[23] In any
event, there is no showing that any specific third party would be adversely affected.
Validity of the Lease Agreement
In their Memorandum, petitioners contend that the Agreement is a loan and not a lease.[24]
Submitting documents supposedly showing that they own the subject machines, petitioners also
argue in their Petition that the Agreement suffers from intrinsic ambiguity which places in serious
doubt the intention of the parties and the validity of the lease agreement itself.[25] In their Reply to
respondents Comment, they further allege that the Agreement is invalid.[26]
These arguments are unconvincing. The validity and the nature of the contract are the lis mota of
the civil action pending before the RTC. A resolution of these questions, therefore, is effectively a
resolution of the merits of the case. Hence, they should be threshed out in the trial, not in the
proceedings involving the issuance of the Writ of Seizure.

Indeed, in La Tondea Distillers v. CA,[27] the Court explained that the policy under Rule 60 was
that questions involving title to the subject property questions which petitioners are now raising -should be determined in the trial. In that case, the Court noted that the remedy of defendants
under Rule 60 was either to post a counter-bond or to question the sufficiency of the plaintiffs
bond. They were not allowed, however, to invoke the title to the subject property. The Court ruled:
In other words, the law does not allow the defendant to file a motion to dissolve or discharge the
writ of seizure (or delivery) on ground of insufficiency of the complaint or of the grounds relied upon
therefor, as in proceedings on preliminary attachment or injunction, and thereby put at issue the
matter of the title or right of possession over the specific chattel being replevied, the policy
apparently being that said matter should be ventilated and determined only at the trial on the
Besides, these questions require a determination of facts and a presentation of evidence, both of
which have no place in a petition for certiorari in the CA under Rule 65 or in a petition for review in
this Court under Rule 45.[29]
Reliance on the Lease Agreement
It should be pointed out that the Court in this case may rely on the Lease Agreement, for nothing
on record shows that it has been nullified or annulled. In fact, petitioners assailed it first only in the
RTC proceedings, which had ironically been instituted by respondent. Accordingly, it must be
presumed valid and binding as the law between the parties.
Makati Leasing and Finance Corporation[30] is also instructive on this point. In that case, the Deed
of Chattel Mortgage, which characterized the subject machinery as personal property, was also
assailed because respondent had allegedly been required to sign a printed form of chattel
mortgage which was in a blank form at the time of signing. The Court rejected the argument and
relied on the Deed, ruling as follows:
x x x. Moreover, even granting that the charge is true, such fact alone does not render a contract
void ab initio, but can only be a ground for rendering said contract voidable, or annullable pursuant
to Article 1390 of the new Civil Code, by a proper action in court. There is nothing on record to
show that the mortgage has been annulled. Neither is it disclosed that steps were taken to nullify
the same. x x x
Alleged Injustice Committed on the Part of Petitioners
Petitioners contend that if the Court allows these machineries to be seized, then its workers would
be out of work and thrown into the streets.[31] They also allege that the seizure would nullify all
efforts to rehabilitate the corporation.
Petitioners arguments do not preclude the implementation of the Writ. As earlier discussed, law
and jurisprudence support its propriety. Verily, the above-mentioned consequences, if they come
true, should not be blamed on this Court, but on the petitioners for failing to avail themselves of the
remedy under Section 5 of Rule 60, which allows the filing of a 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.
G.R. No. L-64261

December 26, 1984

SERVICES, INC., petitioners,
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.
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 resolution of the legality of the seizure of
the aforementioned articles. ..." 2 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
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
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,

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
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
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 above- mentioned 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:
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.
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,
Motor vehicles used in the distribution/circulation of the "WE FORUM" and other subversive
materials and propaganda, more particularly,

Toyota-Corolla, colored yellow with Plate No. NKA 892;


DATSUN pick-up colored white with Plate No. NKV 969


A delivery truck with Plate No. NBS 524;


TOYOTA-TAMARAW, colored white with Plate No. PBP 665; and,


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. 54197 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.
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 Marcos, expressing alarm over the "WE
FORUM " case. 20 In this reply dated February 11, 1983, Minister Romulo stated:
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.
Fernando, C.J., Teehankee, Makasiar, Concepcion, Jr., Melencio-Herrera, Plana, Relova,
Gutierrez, Jr., De la Fuente and Cuevas, JJ., concur.
G.R. Nos. L-10817-18

February 28, 1958

ENRIQUE LOPEZ, petitioner,

Nicolas Belmonte and Benjamin T. de Peralta for petitioner.
Tolentino & Garcia and D. R. Cruz for respondent Luzon Surety Co., Inc. Jose B. Macatangay for
respondent Plaza Theatre, Inc.

Enrique Lopez is a resident of Balayan, Batangas, doing business under the trade name of LopezCastelo Sawmill. Sometime in May, 1946, Vicente Orosa, Jr., also a resident of the same province,
dropped at Lopez' house and invited him to make an investment in the theatre business. It was
intimated that Orosa, his family and close friends were organizing a corporation to be known as
Plaza Theatre, Inc., that would engage in such venture. Although Lopez expressed his
unwillingness to invest of the same, he agreed to supply the lumber necessary for the construction
of the proposed theatre, and at Orosa's behest and assurance that the latter would be personally
liable for any account that the said construction might incur, Lopez further agreed that payment
therefor would be on demand and not cash on delivery basis. Pursuant to said verbal agreement,
Lopez delivered the lumber which was used for the construction of the Plaza Theatre on May 17,
1946, up to December 4 of the same year. But of the total cost of the materials amounting to
P62,255.85, Lopez was paid only P20,848.50, thus leaving a balance of P41,771.35.
We may state at this juncture that the Plaza Theatre was erected on a piece of land with an area of
679.17 square meters formerly owned by Vicente Orosa, Jr., and was acquired by the corporation
on September 25, 1946, for P6,000. As Lopez was pressing Orosa for payment of the remaining
unpaid obligation, the latter and Belarmino Rustia, the president of the corporation, promised to
obtain a bank loan by mortgaging the properties of the Plaza Theatre., out of which said amount of
P41,771.35 would be satisfied, to which assurance Lopez had to accede. Unknown to him,
however, as early as November, 1946, the corporation already got a loan for P30,000 from the
Philippine National Bank with the Luzon Surety Company as surety, and the corporation in turn
executed a mortgage on the land and building in favor of said company as counter-security. As the
land at that time was not yet brought under the operation of the Torrens System, the mortgage on
the same was registered on November 16, 1946, under Act No. 3344. Subsequently, when the
corporation applied for the registration of the land under Act 496, such mortgage was not revealed
and thus Original Certificate of Title No. O-391 was correspondingly issued on October 25, 1947,
without any encumbrance appearing thereon.
Persistent demand from Lopez for the payment of the amount due him caused Vicente Orosa, Jr.
to execute on March 17, 1947, an alleged "deed of assignment" of his 420 shares of stock of the
Plaza Theater, Inc., at P100 per share or with a total value of P42,000 in favor of the creditor, and
as the obligation still remained unsettled, Lopez filed on November 12, 1947, a complaint with the
Court of First Instance of Batangas (Civil Case No. 4501 which later became R-57) against Vicente
Orosa, Jr. and Plaza Theater, Inc., praying that defendants be sentenced to pay him jointly and
severally the sum of P41,771.35, with legal interest from the firing of the action; that in case
defendants fail to pay the same, that the building and the land covered by OCT No. O-391 owned
by the corporation be sold at public auction and the proceeds thereof be applied to said
indebtedness; or that the 420 shares of the capital stock of the Plaza Theatre, Inc., assigned by
Vicente Orosa, Jr., to said plaintiff be sold at public auction for the same purpose; and for such
other remedies as may be warranted by the circumstances. Plaintiff also caused the annotation of
a notice of lis pendens on said properties with the Register of Deeds.
Defendants Vicente Orosa, Jr. and Plaza Theatre, Inc., filed separate answers, the first denying
that the materials were delivered to him as a promoter and later treasurer of the corporation,
because he had purchased and received the same on his personal account; that the land on which
the movie house was constructed was not charged with a lien to secure the payment of the
aforementioned unpaid obligation; and that the 420 shares of stock of the Plaza Theatre, Inc., was
not assigned to plaintiff as collaterals but as direct security for the payment of his indebtedness. As

special defense, this defendant contended that as the 420 shares of stock assigned and conveyed
by the assignor and accepted by Lopez as direct security for the payment of the amount of
P41,771.35 were personal properties, plaintiff was barred from recovering any deficiency if the
proceeds of the sale thereof at public auction would not be sufficient to cover and satisfy the
obligation. It was thus prayed that he be declared exempted from the payment of any deficiency in
case the proceeds from the sale of said personal properties would not be enough to cover the
amount sought to be collected.
Defendant Plaza Theatre, Inc., on the other hand, practically set up the same line of defense by
alleging that the building materials delivered to Orosa were on the latter's personal account; and
that there was no understanding that said materials would be paid jointly and severally by Orosa
and the corporation, nor was a lien charged on the properties of the latter to secure payment of the
same obligation. As special defense, defendant corporation averred that while it was true that the
materials purchased by Orosa were sold by the latter to the corporation, such transactions were in
good faith and for valuable consideration thus when plaintiff failed to claim said materials within 30
days from the time of removal thereof from Orosa, lumber became a different and distinct specie
and plaintiff lost whatever rights he might have in the same and consequently had no recourse
against the Plaza Theatre, Inc., that the claim could not have been refectionary credit, for such
kind of obligation referred to an indebtedness incurred in the repair or reconstruction of something
already existing and this concept did not include an entirely new work; and that the Plaza Theatre,
Inc., having been incorporated on October 14, 1946, it could not have contracted any obligation
prior to said date. It was, therefore, prayed that the complaint be dismissed; that said defendant be
awarded the sum P 5,000 for damages, and such other relief as may be just and proper in the
The surety company, in the meantime, upon discovery that the land was already registered under
the Torrens System and that there was a notice of lis pendens thereon, filed on August 17, 1948,
or within the 1-year period after the issuance of the certificate of title, a petition for review of the
decree of the land registration court dated October 18, 1947, which was made the basis of OCT
No. O-319, in order to annotate the rights and interests of the surety company over said properties
(Land Registration Case No. 17 GLRO Rec. No. 296). Opposition thereto was offered by Enrique
Lopez, asserting that the amount demanded by him constituted a preferred lien over the properties
of the obligors; that the surety company was guilty of negligence when it failed to present an
opposition to the application for registration of the property; and that if any violation of the rights
and interest of said surety would ever be made, same must be subject to the lien in his favor.
The two cases were heard jointly and in a decision dated October 30, 1952, the lower Court, after
making an exhaustive and detailed analysis of the respective stands of the parties and the
evidence adduced at the trial, held that defendants Vicente Orosa, Jr., and the Plaza Theatre, Inc.,
were jointly liable for the unpaid balance of the cost of lumber used in the construction of the
building and the plaintiff thus acquired the materialman's lien over the same. In making the
pronouncement that the lien was merely confined to the building and did not extend to the land on
which the construction was made, the trial judge took into consideration the fact that when plaintiff
started the delivery of lumber in May, 1946, the land was not yet owned by the corporation; that the
mortgage in favor of Luzon Surety Company was previously registered under Act No. 3344; that
the codal provision (Art. 1923 of the old Spanish Civil Code) specifying that refection credits are
preferred could refer only to buildings which are also classified as real properties, upon which said
refection was made. It was, however, declared that plaintiff's lien on the building was superior to
the right of the surety company. And finding that the Plaza Theatre, Inc., had no objection to the
review of the decree issued in its favor by the land registration court and the inclusion in the title of

the encumbrance in favor of the surety company, the court a quo granted the petition filed by the
latter company. Defendants Orosa and the Plaza Theatre, Inc., were thus required to pay jointly
the amount of P41,771.35 with legal interest and costs within 90 days from notice of said decision;
that in case of default, the 420 shares of stock assigned by Orosa to plaintiff be sold at public
auction and the proceeds thereof be applied to the payment of the amount due the plaintiff, plus
interest and costs; and that the encumbrance in favor of the surety company be endorsed at the
back of OCT No. O-391, with notation I that with respect to the building, said mortgage was subject
to the materialman's lien in favor of Enrique Lopez.
Plaintiff tried to secure a modification of the decision in so far as it declared that the obligation of
therein defendants was joint instead of solidary, and that the lien did not extend to the land, but
same was denied by order the court of December 23, 1952. The matter was thus appealed to the
Court of appeals, which affirmed the lower court's ruling, and then to this Tribunal. In this instance,
plaintiff-appellant raises 2 issues: (1) whether a materialman's lien for the value of the materials
used in the construction of a building attaches to said structure alone and does not extend to the
land on which the building is adhered to; and (2) whether the lower court and the Court of Appeals
erred in not providing that the material mans liens is superior to the mortgage executed in favor
surety company not only on the building but also on the land.
It is to be noted in this appeal that Enrique Lopez has not raised any question against the part of
the decision sentencing defendants Orosa and Plaza Theatre, Inc., to pay jointly the sum of
P41,771.35, so We will not take up or consider anything on that point. Appellant, however,
contends that the lien created in favor of the furnisher of the materials used for the construction,
repair or refection of a building, is also extended to the land which the construction was made, and
in support thereof he relies on Article 1923 of the Spanish Civil Code, pertinent law on the matter,
which reads as follows:
ART. 1923. With respect to determinate real property and real rights of the debtor, the following
are preferred:



5. Credits for refection, not entered or recorded, with respect to the estate upon which the refection
was made, and only with respect to other credits different from those mentioned in four preceding
It is argued that in view of the employment of the phrase real estate, or immovable property, and
inasmuch as said provision does not contain any specification delimiting the lien to the building,
said article must be construed as to embrace both the land and the building or structure adhering
thereto. We cannot subscribe to this view, for while it is true that generally, real estate connotes
the land and the building constructed thereon, it is obvious that the inclusion of the building,
separate and distinct from the land, in the enumeration of what may constitute real properties1
could mean only one thing that a building is by itself an immovable property, a doctrine already
pronounced by this Court in the case of Leung Yee vs. Strong Machinery Co., 37 Phil., 644.
Moreover, and in view of the absence of any specific provision of law to the contrary, a building is
an immovable property, irrespective of whether or not said structure and the land on which it is
adhered to belong to the same owner.
A close examination of the provision of the Civil Code invoked by appellant reveals that the law
gives preference to unregistered refectionary credits only with respect to the real estate upon

which the refection or work was made. This being so, the inevitable conclusion must be that the
lien so created attaches merely to the immovable property for the construction or repair of which
the obligation was incurred. Evidently, therefore, the lien in favor of appellant for the unpaid value
of the lumber used in the construction of the building attaches only to said structure and to no other
property of the obligors.
Considering the conclusion thus arrived at, i.e., that the materialman's lien could be charged only
to the building for which the credit was made or which received the benefit of refection, the lower
court was right in, holding at the interest of the mortgagee over the land is superior and cannot be
made subject to the said materialman's lien.
Wherefore, and on the strength of the foregoing considerations, the decision appealed from is
hereby affirmed, with costs against appellant. It is so ordered.
Paras, C.J., Bengzon, Padilla, Montemayor, Reyes, A., Bautista Angelo, Labrador, Concepcion,
Reyes, J.B.L. and Endencia, JJ., concur.
G.R. No. L-32917

July 18, 1988

JULIAN S. YAP, petitioner,

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

1968, date of the filing of the complaint; to pay the sum of P364.80 as reasonable attorney's fees,
which is equivalent " to 25% of the unpaid principal obligation; and to pay the costs, if any.
Yap appealed to the Court of First Instance. The appeal was assigned to the sala of respondent
Judge Taada. For failure to appear for pre-trial on August 28, 1968, this setting being
intransferable since the pre-trial had already been once postponed at his instance, 5 Yap was
declared in default by Order of Judge Taada dated August 28, 1969, 6 reading as follows:
When this case was called for pre-trial this morning, the plaintiff and counsel appeared, but neither
the defendants nor his counsel appeared despite the fact that they were duly notified of the pretrial set this morning. Instead he filed an Ex-Parte Motion for Postponement which this Court
received only this morning, and on petition of counsel for the plaintiff that the Ex-Parte Motion for
Postponement was not filed in accordance with the Rules of Court he asked that the same be
denied and the defendants be declared in default; .. the motion for the plaintiff being wellgrounded, the defendants are hereby declared in default and the Branch Clerk of Court hereby
authorized to receive evidence for the plaintiff and .. submit his report within ten (10) days after
reception of evidence.
Goulds presented evidence ex parte and judgment by default was rendered the following day by
Judge Taada requiring Yap to pay to Goulds (1) Pl,459.30 representing the unpaid balance of the
pump purchased by him; (2) interest of 12% per annum thereon until fully paid; and (3) a sum
equivalent to 25% of the amount due as attorney's fees and costs and other expenses in
prosecuting the action. Notice of the judgment was served on Yap on September 1, 1969. 7
On September 16, 1969 Yap filed a motion for reconsideration. 8 In it he insisted that his motion
for postponement should have been granted since it expressed his desire to explore the possibility
of an amicable settlement; that the court should give the parties time to arrive at an amicable
settlement failing which, he should be allowed to present evidence in support of his defenses
(discrepancy as to the price and breach of warranty). The motion was not verified or accompanied
by any separate affidavit. Goulds opposed the motion. Its opposition 9 drew attention to the
eleventh-hour motion for postponement of Yap which had resulted in the cancellation of the prior
hearing of June 30, 1969 despite Goulds' vehement objection, and the re-setting thereof on August
28, 1969 with intransferable character; it averred that Yap had again sought postponement of this
last hearing by another eleventh-hour motion on the plea that an amicable settlement would be
explored, yet he had never up to that time ever broached the matter, 10 and that this pattern of
seeking to obtain last-minute postponements was discernible also in the proceedings before the
City Court. In its opposition, Goulds also adverted to the examination made by it of the pump, on
instructions of the City Court, with a view to remedying the defects claimed to exist by Yap; but the
examination had disclosed the pump's perfect condition. Yap's motion for reconsideration was
denied by Order dated October 10, 1969, notice of which was received by Yap on October 4, 1969.
On October 15, 1969 Judge Taada issued an Order granting Goulds' Motion for Issuance of Writ
of Execution dated October 14, 1969, declaring the reasons therein alleged to be meritorious. 12
Yap forthwith filed an "Urgent Motion for Reconsideration of Order" dated October 17, 1969, 13
contending that the judgment had not yet become final, since contrary to Goulds' view, his motion
for reconsideration was not pro forma for lack of an affidavit of merit, this not being required under
Section 1 (a) of Rule 37 of the Rules of Court upon which his motion was grounded. Goulds
presented an opposition dated October 22, 1969. 14 It pointed out that in his motion for
reconsideration Yap had claimed to have a valid defense to the action, i.e., ".. discrepancy as to

price and breach of seller's warranty," in effect, that there was fraud on Goulds' paint; Yap's motion
for reconsideration should therefore have been supported by an affidavit of merit respecting said
defenses; the absence thereof rendered the motion for reconsideration fatally defective with the
result that its filing did not interrupt the running of the period of appeal. The opposition also drew
attention to the failure of the motion for reconsideration to specify the findings or conclusions in the
judgment claimed to be contrary to law or not supported by the evidence, making it a pro forma
motion also incapable of stopping the running of the appeal period. On October 23, 1969, Judge
Taada denied Yap's motion for reconsideration and authorized execution of the judgment. 15 Yap
sought reconsideration of this order, by another motion dated October 29, 1969. 16 This motion
was denied by Order dated January 26, 1970. 17 Again Yap moved for reconsideration, and again
was rebuffed, by Order dated April 28, 1970. 18
In the meantime the Sheriff levied on the water pump in question, 19 and by notice dated
November 4, 1969, scheduled the execution sale thereof on November 14, 1969. 20 But in view of
the pendency of Yap's motion for reconsideration of October 29, 1969, suspension of the sale was
directed by Judge Taada in an order dated November 6, 1969. 21
Counsel for the plaintiff is hereby given 10 days time to answer the Motion, dated October 29,
1969, from receipt of this Order and in the meantime, the Order of October 23, 1969, insofar as it
orders the sheriff to enforce the writ of execution is hereby suspended.
It appears however that a copy of this Order was not transmitted to the Sheriff "through oversight,
inadvertence and pressure of work" of the Branch Clerk of Court. 22 So the Deputy Provincial
Sheriff went ahead with the scheduled auction sale and sold the property levied on to Goulds as
the highest bidder. 23 He later submitted the requisite report to the Court dated November 17,
1969, 24 as well as the "Sheriffs Return of Service" dated February 13, 1970, 25 in both of which it
was stated that execution had been "partially satisfied." It should be observed that up to this time,
February, 1970, Yap had not bestirred himself to take an appeal from the judgment of August 29,
On May 9, 1970 Judge Taada ordered the issuance of an alias writ of execution on Gould's ex
parte motion therefor. 26 Yap received notice of the Order on June 11. Twelve (1 2) days later, he
filed a "Motion to Set Aside Execution Sale and to Quash Alias Writ of Execution." 27 As regards
the original, partial execution of the judgment, he argued that
"the issuance of the writ of execution on October 16, 1969 was contrary to law, the
judgment sought to be executed not being final and executory;" and
"the sale was made without the notice required by Sec. 18, Rule 39, of the New Rules of
Court," i.e., notice by publication in case of execution sale of real property, the pump and its
accessories being immovable because attached to the ground with character of permanency (Art.
415, Civil Code).
And with respect to the alias writ, he argued that it should not have issued because
"the judgment sought to be executed is null and void" as "it deprived the defendant of his
day in court" and "of due process;"

"said judgment is incomplete and vague" because there is no starting point for computation
of the interest imposed, or a specification of the "other expenses incurred in prosecuting this case"
which Yap had also been ordered to pay;
"said judgment is defective because it contains no statement of facts but a mere recital of
the evidence; and
"there has been a change in the situation of the parties which makes execution unjust and
inequitable" because Yap suffered damages by reason of the illegal execution.
Goulds filed an opposition on July 6, 1970. Yap's motion was thereafter denied by Order dated
September 16, 1970. Judge Taada pointed out that the motion had "become moot and academic"
since the decision of August 29, 1969, "received by the defendant on September 1, 1969 had long
become final when the Order for the Issuance of a Writ of Execution was promulgated on October
15, 1969." His Honor also stressed that
The defendant's Motion for Reconsideration of the Courts decision was in reality one for new trial.
Regarded as motion for new trial it should allege the grounds for new trial, provided for in the
Rules of Court, to be supported by affidavit of merits; and this the defendant failed to do. If the
defendant sincerely desired for an opportunity to submit to an amicable settlement, which he failed
to do extra judicially despite the ample time before him, he should have appeared in the pre- trial to
achieve the same purpose.
Judge Taada thereafter promulgated another Order dated September 21, 1970 granting a motion
of Goulds for completion of execution of the judgment of August 29, 1969 to be undertaken by the
City Sheriff of Cebu. Once more, Yap sought reconsideration. He submitted a "Motion for
Reconsideration of Two Orders" dated October 13, 1970, 28 seeking the setting aside not only of
this Order of September 21, 1970 but also that dated September 16, 1970, denying his motion to
set aside execution dated June 23, 1970. He contended that the Order of September 21, 1970
(authorizing execution by the City Sheriff) was premature, since the 30-day period to appeal from
the earlier order of September 16, 1970 (denying his motion to set aside) had not yet expired. He
also reiterated his view that his motion for reconsideration dated September 15, 1969 did not
require that it be accompanied by an affidavit of merits. This last motion was also denied for "lack
of merits," by Order dated November 21, 1970. 29
On December 3, 1970, Yap filed a "Notice of Appeal" manifesting his intention to appeal to the
Supreme Court on certiorari only on questions of law, "from the Order ... of September 16, 1970 ...
and from the Order ... of November 21, 1970, ... pursuant to sections 2 and 3 of Republic Act No.
5440." He filed his petition for review with this Court on January 5, 1971, after obtaining an
extension therefor. 30
The errors of law he attributes to the Court a quo are the following: 31
refusing to invalidate the execution pursuant to its Order of October 16, 1969 although the
judgment had not then become final and executory and despite its being incomplete and vague;
ignoring the fact that the execution sale was carried out although it (the Court) had itself
ordered suspension of execution on November 6, 1969;

declining to annul the execution sale of the pump and accessories subject of the action
although made without the requisite notice prescribed for the sale of immovables; and
refusing to allow the petitioner to prove irregularities in the process of execution which had
resulted in damages to him.
Notice of the Trial Court's judgment was served on Yap on September 1, 1969. His motion for
reconsideration thereof was filed 15 days thereafter, on September 16, 1969. Notice of the Order
denying the motion was received by him on October 14, 1969. The question is whether or not the
motion for reconsideration which was not verified, or accompanied by an affidavit of merits
(setting forth facts constituting his meritorious defenses to the suit) or other sworn statement
(stating facts excusing his failure to appear at the pre-trial was pro forma and consequently had
not interrupted the running of the period of appeal. It is Yap's contention that his motion was not
pro forma for lack of an affidavit of merits, such a document not being required by Section 1 (a) of
Rule 37 of the Rules of Court upon which his motion was based. This is incorrect.
Section 2, Rule 37 precisely requires that when the motion for new trial is founded on Section 1 (a),
it should be accompanied by an affidavit of merit.



When the motion is made for the causes mentioned in subdivisions (a) and (b) of the preceding
section, it shall be proved in the manner provided for proof of motions. Affidavit or affidavits of
merits shall also be attached to a motion for the cause mentioned in subdivision (a) which may be
rebutted by counter-affidavits.


xxx 32

Since Yap himself asserts that his motion for reconsideration is grounded on Section 1 (a) of Rule
37, 33 i.e., fraud, accident, mistake or excusable negligence which ordinary prudence could not
have guarded against and by reason of which ... (the) aggrieved party has probably been impaired
in his rights" this being in any event clear from a perusal of the motion which theorizes that he
had "been impaired in his rights" because he was denied the right to present evidence of his
defenses (discrepancy as to price and breach of warranty) it was a fatal omission to fail to
attach to his motion an affidavit of merits, i.e., an affidavit "showing the facts (not conclusions)
constituting the valid x x defense which the movant may prove in case a new trial is granted." 34
The requirement of such an affidavit is essential because obviously "a new trial would be a waste
of the court's time if the complaint turns out to be groundless or the defense ineffective." 35
In his motion for reconsideration, Yap also contended that since he had expressed a desire to
explore the possibility of an amicable settlement, the Court should have given him time to do so,
instead of declaring him in default and thereafter rendering judgment by default on Gould's ex
parte evidence.
The bona fides of this desire to compromise is however put in doubt by the attendant
circumstances. It was manifested in an eleventh-hour motion for postponement of the pre-trial
which had been scheduled with intransferable character since it had already been earlier
postponed at Yap's instance; it had never been mentioned at any prior time since commencement
of the litigation; such a possible compromise (at least in general or preliminary terms) was certainly
most appropriate for consideration at the pre-trial; in fact Yap was aware that the matter was

indeed a proper subject of a pre-trial agenda, yet he sought to avoid appearance at said pre-trial
which he knew to be intransferable in character. These considerations and the dilatory tactics thus
far attributable to him-seeking postponements of hearings, or failing to appear therefor despite
notice, not only in the Court of First Instance but also in the City Court proscribe belief in the
sincerity of his avowed desire to negotiate a compromise. Moreover, the disregard by Yap of the
general requirement that "(n)otice of a motion shall be served by the applicant to all parties
concerned at least three (3) days before the hearing thereof, together with a copy of the motion,
and of any affidavits and other papers accompanying it," 36 for which no justification whatever has
been offered, also militates against the bona fides of Yap's expressed wish for an amicable
settlement. The relevant circumstances do not therefore justify condemnation, as a grave abuse of
discretion, or a serious mistake, of the refusal of the Trial Judge to grant postponement upon this
proferred ground.
The motion for reconsideration did not therefore interrupt the running of the period of appeal. The
time during which it was pending before the court from September 16, 1969 when it was filed
with the respondent Court until October 14, 1969 when notice of the order denying the motion was
received by the movant could not be deducted from the 30-day period of appeal. 37 This is the
inescapable conclusion from a consideration of Section 3 of Rule 41 which in part declares that,
"The "time during which a motion to set aside the judgment or order or for a new trial has been
pending shall be deducted, unless such motion fails to satisfy the requirements of Rule 37. 38
Notice of the judgment having been received by Yap on September 1, 1969, and the period of
appeal therefrom not having been interrupted by his motion for reconsideration filed on September
16, 1969, the reglementary period of appeal expired thirty (30) days after September 1, 1969, or on
October 1, 1969, without an appeal being taken by Yap. The judgment then became final and
executory; Yap could no longer take an appeal therefrom or from any other subsequent orders;
and execution of judgment correctly issued on October 15, 1969, "as a matter of right." 39
The next point discussed by Yap, that the judgment is incomplete and vague, is not well taken. It is
true that the decision does not fix the starting time of the computation of interest on the judgment
debt, but this is inconsequential since that time is easily determinable from the opinion, i.e., from
the day the buyer (Yap) defaulted in the payment of his obligation, 40 on May 31, 1968. 41 The
absence of any disposition regarding his counterclaim is also immaterial and does not render the
judgment incomplete. Yap's failure to appear at the pre-trial without justification and despite notice,
which caused the declaration of his default, was a waiver of his right to controvert the plaintiff s
proofs and of his right to prove the averments of his answer, inclusive of the counterclaim therein
pleaded. Moreover, the conclusion in the judgment of the merit of the plaintiff s cause of action was
necessarily and at the same time a determination of the absence of merit of the defendant's claim
of untenability of the complaint and of malicious prosecution.
Yap's next argument that the water pump had become immovable property by its being installed in
his residence is also untenable. The Civil Code considers as immovable property, among others,
anything "attached to an immovable in a fixed manner, in such a way that it cannot be separated
therefrom without breaking the material or deterioration of the object." 42 The pump does not fit
this description. It could be, and was in fact separated from Yap's premises without being broken
or suffering deterioration. Obviously the separation or removal of the pump involved nothing more
complicated than the loosening of bolts or dismantling of other fasteners.
Yap's last claim is that in the process of the removal of the pump from his house, Goulds' men had
trampled on the plants growing there, destroyed the shed over the pump, plugged the exterior

casings with rags and cut the electrical and conduit pipes; that he had thereby suffered actualdamages in an amount of not less than P 2,000.00, as well as moral damages in the sum of P
10,000.00 resulting from his deprivation of the use of his water supply; but the Court had refused to
allow him to prove these acts and recover the damages rightfully due him. Now, as to the loss of
his water supply, since this arose from acts legitimately done, the seizure on execution of the water
pump in enforcement of a final and executory judgment, Yap most certainly is not entitled to claim
moral or any other form of damages therefor.
WHEREFORE, the petition is DENIED and the appeal DISMISSED, and the Orders of September
16, 1970 and November 21, 1970 subject thereof, AFFIRMED in toto. Costs against petitioner.
Cruz, Gancayco, Grio-Aquino and Medialdea, JJ., concur.
G.R. No. L-7057

October 29, 1954


VILLARAMA, respondents.
Vicente J. Francisco for petitioner.
Capistrano and Capistrano for respondents.
This is an appeal by certiorari, taken by petitioner Machinery and Engineering Supplies Inc., from a
decision of the Court of Appeals denying an original petition for certiorari filed by said petitioner
against Hon. Potenciano Pecson, Ipo Limestone Co., Inc., and Antonio Villarama, the respondents
The pertinent facts are set forth in the decision of the Court of Appeals, from which we quote:
On March 13, 1953, the herein petitioner filed a complaint for replevin in the Court of First Instance
of Manila, Civil Case No. 19067, entitled "Machinery and Engineering Supplies, Inc., Plaintiff, vs.
Ipo Limestone Co., Inc., and Dr. Antonio Villarama, defendants", for the recovery of the machinery
and equipment sold and delivered to said defendants at their factory in barrio Bigti, Norzagaray,
Bulacan. Upon application ex-parte of the petitioner company, and upon approval of petitioner's
bond in the sum of P15,769.00, on March 13,1953, respondent judge issued an order,
commanding the Provincial Sheriff of Bulacan to seize and take immediate possession of the
properties specified in the order (Appendix I, Answer). On March 19, 1953, two deputy sheriffs of
Bulacan, the said Ramon S. Roco, and a crew of technical men and laborers proceeded to Bigti,
for the purpose of carrying the court's order into effect. Leonardo Contreras, Manager of the
respondent Company, and Pedro Torres, in charge thereof, met the deputy sheriffs, and Contreras
handed to them a letter addressed to Atty. Leopoldo C. Palad, ex-oficio Provincial Sheriff of
Bulacan, signed by Atty. Adolfo Garcia of the defendants therein, protesting against the seizure of
the properties in question, on the ground that they are not personal properties. Contending that the
Sheriff's duty is merely ministerial, the deputy sheriffs, Roco, the latter's crew of technicians and
laborers, Contreras and Torres, went to the factory. Roco's attention was called to the fact that the
equipment could not possibly be dismantled without causing damages or injuries to the wooden
frames attached to them. As Roco insisted in dismantling the equipment on his own responsibility,

alleging that the bond was posted for such eventuality, the deputy sheriffs directed that some of
the supports thereof be cut (Appendix 2). On March 20, 1953, the defendant Company filed an
urgent motion, with a counter-bond in the amount of P15,769, for the return of the properties
seized by the deputy sheriffs. On the same day, the trial court issued an order, directing the
Provincial Sheriff of Bulacan to return the machinery and equipment to the place where they were
installed at the time of the seizure (Appendix 3). On March 21, 1953, the deputy sheriffs returned
the properties seized, by depositing them along the road, near the quarry, of the defendant
Company, at Bigti, without the benefit of inventory and without re-installing hem in their former
position and replacing the destroyed posts, which rendered their use impracticable. On March 23,
1953, the defendants' counsel asked the provincial Sheriff if the machinery and equipment,
dumped on the road would be re-installed tom their former position and condition (letter, Appendix
4). On March 24, 1953, the Provincial Sheriff filed an urgent motion in court, manifesting that Roco
had been asked to furnish the Sheriff's office with the expenses, laborers, technical men and
equipment, to carry into effect the court's order, to return the seized properties in the same way
said Roco found them on the day of seizure, but said Roco absolutely refused to do so, and asking
the court that the Plaintiff therein be ordered to provide the required aid or relieve the said Sheriff
of the duty of complying with the said order dated March 20, 1953 (Appendix 5). On March 30,
1953, the trial court ordered the Provincial Sheriff and the Plaintiff to reinstate the machinery and
equipment removed by them in their original condition in which they were found before their
removal at the expense of the Plaintiff (Appendix 7). An urgent motion of the Provincial Sheriff
dated April 15, 1953, praying for an extension of 20 days within which to comply with the order of
the Court (appendix 10) was denied; and on May 4, 1953, the trial court ordered the Plaintiff
therein to furnish the Provincial Sheriff within 5 days with the necessary funds, technical men,
laborers, equipment and materials to effect the repeatedly mentioned re-installation (Appendix 13).
(Petitioner's brief, Appendix A, pp. I-IV.)
Thereupon petitioner instituted in the Court of Appeals civil case G.R. No. 11248-R, entitled
"Machinery and Engineering Supplies, Inc. vs. Honorable Potenciano Pecson, Provincial Sheriff of
Bulacan, Ipo Limestone Co., Inc., and Antonio Villarama." In the petition therein filed, it was
alleged that, in ordering the petitioner to furnish the provincial sheriff of Bulacan "with necessary
funds, technical men, laborers, equipment and materials, to effect the installation of the machinery
and equipment" in question, the Court of Firs Instance of Bulacan had committed a grave abuse if
discretion and acted in excess of its jurisdiction, for which reason it was prayed that its order to this
effect be nullified, and that, meanwhile, a writ of preliminary injunction be issued to restrain the
enforcement o said order of may 4, 1953. Although the aforementioned writ was issued by the
Court of Appeals, the same subsequently dismissed by the case for lack of merit, with costs
against the petitioner, upon the following grounds:
While the seizure of the equipment and personal properties was ordered by the respondent Court,
it is, however, logical to presume that said court did not authorize the petitioner or its agents to
destroy, as they did, said machinery and equipment, by dismantling and unbolting the same from
their concrete basements, and cutting and sawing their wooden supports, thereby rendering them
unserviceable and beyond repair, unless those parts removed, cut and sawed be replaced, which
the petitioner, not withstanding the respondent Court's order, adamantly refused to do. The
Provincial Sheriff' s tortious act, in obedience to the insistent proddings of the president of the
Petitioner, Ramon S. Roco, had no justification in law, notwithstanding the Sheriffs' claim that his
duty was ministerial. It was the bounden duty of the respondent Judge to give redress to the
respondent Company, for the unlawful and wrongful acts committed by the petitioner and its
agents. And as this was the true object of the order of March 30, 1953, we cannot hold that same
was within its jurisdiction to issue. The ministerial duty of the Sheriff should have its limitations. The

Sheriff knew or must have known what is inherently right and inherently wrong, more so when, as
in this particular case, the deputy sheriffs were shown a letter of respondent Company's attorney,
that the machinery were not personal properties and, therefore, not subject to seizure by the terms
of the order. While it may be conceded that this was a question of law too technical to decide on
the spot, it would not have costs the Sheriff much time and difficulty to bring the letter to the court's
attention and have the equipment and machinery guarded, so as not to frustrate the order of
seizure issued by the trial court. But acting upon the directives of the president of the Petitioner, to
seize the properties at any costs, in issuing the order sought to be annulled, had not committed
abuse of discretion at all or acted in an arbitrary or despotic manner, by reason of passion or
personal hostility; on the contrary, it issued said order, guided by the well known principle that of
the property has to be returned, it should be returned in as good a condition as when taken
(Bachrach Motor Co., Inc., vs. Bona, 44 Phil., 378). If any one had gone beyond the scope of his
authority, it is the respondent Provincial Sheriff. But considering that fact that he acted under the
pressure of Ramon S. Roco, and that the order impugned was issued not by him, but by the
respondent Judge, We simply declare that said Sheriff' act was most unusual and the result of a
poor judgment. Moreover, the Sheriff not being an officer exercising judicial functions, the writ may
not reach him, for certiorari lies only to review judicial actions.
The Petitioner complains that the respondent Judge had completely disregarded his manifestation
that the machinery and equipment seized were and still are the Petitioner's property until fully paid
for and such never became immovable. The question of ownership and the applicability of Art. 415
of the new Civil Code are immaterial in the determination of the only issue involved in this case. It
is a matter of evidence which should be decided in the hearing of the case on the merits. The
question as to whether the machinery or equipment in litigation are immovable or not is likewise
immaterial, because the only issue raised before the trial court was whether the Provincial Sheriff
of Bulacan, at the Petitioner's instance, was justified in destroying the machinery and in refusing to
restore them to their original form , at the expense of the Petitioner. Whatever might be the legal
character of the machinery and equipment, would not be in any way justify their justify their
destruction by the Sheriff's and the said Petitioner's. (Petitioner's brief, Appendix A, pp. IV-VII.)
A motion for reconsideration of this decision of the Court of Appeals having been denied ,
petitioner has brought the case to Us for review by writ of certiorari. Upon examination of the
record, We are satisfied, however that the Court of Appeals was justified in dismissing the case.
The special civil action known as replevin, governed by Rule 62 of Court, is applicable only to
"personal property".
Ordinarily replevin may be brought to recover any specific personal property unlawfully taken or
detained from the owner thereof, provided such property is capable of identification and delivery;
but replevin will not lie for the recovery of real property or incorporeal personal property. (77 C. J.
S. 17) (Emphasis supplied.)
When the sheriff repaired to the premises of respondent, Ipo Limestone Co., Inc., machinery and
equipment in question appeared to be attached to the land, particularly to the concrete foundation
of said premises, in a fixed manner, in such a way that the former could not be separated from the
latter "without breaking the material or deterioration of the object." Hence, in order to remove said
outfit, it became necessary, not only to unbolt the same, but , also, to cut some of its wooden
supports. Moreover, said machinery and equipment were "intended by the owner of the tenement
for an industry" carried on said immovable and tended." For these reasons, they were already
immovable property pursuant to paragraphs 3 and 5 of Article 415 of Civil Code of the Philippines,

which are substantially identical to paragraphs 3 and 5 of Article 334 of the Civil Code of Spain. As
such immovable property, they were not subject to replevin.
In so far as an article, including a fixture annexed by a tenant, is regarded as part of the realty, it is
not the subject for personality; . . . .
. . . the action of replevin does not lie for articles so annexed to the realty as to be part as to be
part thereof, as, for example, a house or a turbine pump constituting part of a building's cooling
system; . . . (36 C. J. S. 1000 & 1001)
Moreover, as the provincial sheriff hesitated to remove the property in question, petitioner's agent
and president, Mr. Ramon Roco, insisted "on the dismantling at his own responsibility," stating
that., precisely, "that is the reason why plaintiff posted a bond ." In this manner, petitioner clearly
assumed the corresponding risks.
Such assumption of risk becomes more apparent when we consider that, pursuant to Section 5 of
Rule 62 of the Rules of Court, the defendant in an action for replevin is entitled to the return of the
property in dispute upon the filing of a counterbond, as provided therein. In other words, petitioner
knew that the restitution of said property to respondent company might be ordered under said
provision of the Rules of Court, and that, consequently, it may become necessary for petitioner to
meet the liabilities incident to such return.
Lastly, although the parties have not cited, and We have not found, any authority squarely in point
obviously real property are not subject to replevin it is well settled that, when the restitution of
what has been ordered, the goods in question shall be returned in substantially the same condition
as when taken (54 C.J., 590-600, 640-641). Inasmuch as the machinery and equipment involved in
this case were duly installed and affixed in the premises of respondent company when petitioner's
representative caused said property to be dismantled and then removed, it follows that petitioner
must also do everything necessary to the reinstallation of said property in conformity with its
original condition.
Wherefore, the decision of the Court of Appeals is hereby affirmed, with costs against the
petitioner. So ordered.
Pablo, Bengzon, Padilla, Montemayor, Reyes, A., Jugo, Bautista Angelo and Reyes, J.B.L., JJ.,
Paras, C.J., concurs in the result.
Capitol Wireless v. Prov Treasurer of Batangas