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Star Two (SPV-AMC), Inc., vs Paper City Corporation of the Philippines, G.R. No.

 A Second Supplemental Indenture to the MTI was executed to increase the amount of
169211, March 6, 2013 the loan secured against the existing properties composed of land, building,
machineries and equipments and inventories described in Annexes "A" and "B."
 Finally, a Third Supplemental Indenture to the MTI was executed to increase the
For review is a Petition for Review on Certiorari filed by Rizal Commercial Banking existing loan obligation with an additional security composed of a newly constructed
Corporation now substituted by Star Two (SPV-AMC), Inc. two-storey building and other improvements, machineries and equipments located in
the existing plant site.
 Respondent Paper City is a domestic corporation engaged in the manufacture of paper  Paper City was able to comply with its loan obligations but economic crisis ensued
products. Paper City applied for and was granted loans and credit accommodations in which made it difficult for Paper City to meet the terms of its obligations leading to
peso and dollar denominations by RCBC secured by 4 Deeds of Continuing Chattel payment defaults. Consequently, RCBC filed a Petition for Extrajudicial Foreclosure.
Mortgages on its machineries and equipments found inside its paper plants.  The petition was for the extra-judicial foreclosure of eight parcels of land including all
 However, a unilateral Cancellation of Deed of Continuing Chattel Mortgage on improvements thereon which were sold in favor of the creditor banks RCBC, Union
Inventory of Merchandise/Stocks-in-Trade was executed by RCBC over the Bank and Metrobank as the highest bidders.
merchandise and stocks-in-trade covered by the continuing chattel mortgages. This foreclosure sale prompted Paper City to file a Complaint against the creditor banks alleging
 RCBC, Metrobank and Union Bank (creditor banks with RCBC instituted as the trustee that the extra-judicial sale of the properties and plants was null and void due to lack of prior
bank) entered into a Mortgage Trust Indenture (MTI) with Paper City. In the said MTI, notice and attendance of gross and evident bad faith on the part of the creditor banks.
Paper City acquired an additional P170, 000,000.00 from the creditor banks in addition
to the previous loan from RCBC amounting to P110, 000,000.00. Acting on the said motion, the trial court issued an Order denying the prayer and ruled that the
machineries and equipments were included in the annexes and form part of the MTI.
 The old loan of P110,000,000.00 was partly secured by various parcels of land situated
in Valenzuela City. The new loan obligation of P170,000,000.00 would be secured by Paper City filed its Motion for Reconsideration which was favorably granted by the trial court
the same five (5) Deeds of Real Estate Mortgage and additional real and personal with justification that the disputed machineries and equipments are chattels by agreement of the
properties described in an annex to MTI, Annex "B" which covered the machineries parties through their inclusion in the four Deeds of Chattel Mortgage and the deed of
and equipments of Paper City. cancellation executed by RCBC was not valid because it was done unilaterally and without the
consent of Paper City.
Annex "A"
A. Office Building The CA affirmed the Order.
Building 1, 2, 3, 4, and 5
Boiler House ISSUE:
Workers’ Quarter/Restroom
Canteen Whether the subsequent contracts of the parties such as Mortgage Trust Indenture as well as the
Guardhouse, Parking Shed, Elevated Guard subsequent supplementary amendments included in its coverage of mortgaged properties the
Post and other amenities subject machineries and equipment; and
B. Pollution Tank Nos. 1 and 2.
Reserve Water Tank and Swimming Pool Whether or not the subject machineries and equipment were considered real properties and
Waste Water Treatment Tank should therefore be included in the extra-judicial foreclosure which in turn were sold to
Elevated Concrete Water Tank the banks.
And other Improvements listed in Annex "A"
C. Power Plants Nos. 1 and 2
Fabrication Building Petition was granted.
Various Fuel, Water Tanks and Pumps
1. Repeatedly, the parties stipulated that the properties mortgaged by Paper City to RCBC
Annex "B" are various parcels of land including the buildings and existing improvements thereon as
D. D. Material Handling Equipment well as the machineries and equipments, which as stated in the granting clause of the
Paper Plant No. 3 original mortgage, are "more particularly described and listed that is to say, the real and
 The MTI was later amended to increase the contributions of the RCBC and Union personal properties listed in Annexes ‘A’ and ‘B’ x x x of which the Paper City is the
Bank. As a consequence, they executed a Deed of Amendment to MTI but still included lawful and registered owner." Significantly, Annexes "A" and "B" are itemized listings of
as part of the mortgaged properties by way of a first mortgage the various machineries the buildings, machineries and equipments typed single spaced in twenty-seven pages of
and equipments located in and bolted to and/or forming part of buildings. the document made part of the records. As held in Gateway Electronics Corp. v. Land
Bank of the Philippines,49 the rule in this jurisdiction is that the contracting parties may
establish any agreement, term, and condition they may deem advisable, provided they are
not contrary to law, morals or public policy. The right to enter into lawful contracts
constitutes one of the liberties guaranteed by the Constitution.

2. Contrary to the finding of the CA, the Extra-Judicial Foreclosure of Mortgage includes the
machineries and equipments of respondent. Considering that the Indenture which is the
instrument of the mortgage that was foreclosed exactly states through the Deed of
Amendment that the machineries and equipments listed in Annexes "A" and "B" form part
of the improvements listed and located on the parcels of land subject of the mortgage, such
machineries and equipments are surely part of the foreclosure of the "real estate properties,
including all improvements thereon" as prayed for in the petition. The real estate
mortgages which specifically included the machineries and equipments were subsequent
to the chattel mortgages. Without doubt, the real estate mortgages superseded the earlier
chattel mortgages.

The real estate mortgage over the machineries and equipments is even in full accord with
the classification of such properties by the Civil Code of the Philippines as immovable
property. Thus:

Article 415. The following are immovable property:

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


(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;
G.R. NO. 155076 (JANUARY 13, 2009)
Personal Property


Philippine Long Distance Telephone Company (PLDT) filed a complaint for theft under Article
308 of the Revised Penal Code against Baynet Co., Ltd. (Baynet) for stealing its
business. PLDT alleged that Baynet offered phone cards to people in Japan to call their friends
and relatives in the Philippines using PLDT's facilities and equipment.


Whether or not the PLDT's business of providing telecommunication services is a personal

property under Article 308 of the Revised Penal Code.


No, PLDT's business of providing telecommunication services is not a personal property under
Article 308 of the Revised Penal Code.

Personal property under the Revised Penal Code covers both tangible and intangible properties
but must be considered with the word "take" in the law. There is "taking" of personal property,
and theft is consummated when the offender unlawfully acquires possession of personal
property even if for a short time; or if such property is under the dominion and control of the
thief. The statutory definition of "taking" clearly indicates that not all personal properties may
be the proper subjects of theft. The general rule is that only movable properties, which have
physical or material existence and susceptible of occupation by another are proper subjects of
theft. Movable properties under Article 308 of the Revised Penal Code should be distinguished
from the rights or interest to which they relate to. While the rights or interests are properties,
they are not considered personal properties under Article 308 of the Revised Penal Code.

PLDT's business is intangible and cannot be taken by another and not the proper subjects of
theft because they are without form or substance.