SECOND DIVISION dismissal of the complaint, stressing that he had acted within the Both the complainant and
n the Both the complainant and the respondent complied, manifesting
A.M. No. P-11-2888               July 27, 2011
(formerly A.M. OCA I.P.I. No. 09-3252-P)
GOLDEN SUN FINANCE CORPORATION, represented by
RACHELLE L. MARMITO, Complainant,  In a Memorandum Report dated November 3, 2010,3 the OCA
vs. RICARDO R. ALBANO, Sheriff III, Metropolitan Trial
Court (MeTC), Branch 62, Makati City, Respondent.
DECISION
BRION, J.:
Ricardo R. Albano (respondent), Sheriff III, Metropolitan Trial
Court (MeTC), Branch 62, Makati City, was charged with
negligence and grave misconduct by the Golden Sun Finance
Corporation (complainant), represented by Rachelle L. Marmito,
the complainant’s Head Auditor.
THE COMPLAINT
In a verified letter-complaint dated September 1, 2009, the
complainant alleged that on January 7, 2009, it filed a complaint
for the recovery of a Honda Civic Sedan with the Regional Trial
Court (RTC), Quezon City, Branch 81, against one Lucila S.
Reyes, docketed as Civil Case No. 0964026. The subject motor
vehicle, registered in the name of Reyes, was encumbered in its
favor, as shown in the Certificate of Registration issued by the
Land Transportation Office.
The RTC decided in favor of the complainant and issued a writ of
replevin. However, the complainant found out that the motor
vehicle had already been levied upon by the respondent by virtue
of a writ of execution issued on March 27, 2009 by the MeTC,
Makati City, Branch 62, in Criminal Case Nos. 353822-23 for
violation of Batas Pambansa Bilang 22 against Reyes. It was sold
at a public auction conducted by the respondent on April 29,
2009, with the Royal Makati Credit Resource as the highest
bidder. On the same day, a Certificate of Sale was issued in favor
of the Royal Makati Credit Resource.
The complainant averred that the levy and sale of the motor
vehicle by the respondent was illegal. It claimed that the
respondent was negligent when he levied upon the motor vehicle
and proceeded with the auction sale without looking into the car’s
Certificate of Registration to determine whether it was
encumbered or not. The encumbrance on the motor vehicle having
been made prior to the suit filed by the Royal Makati Credit
Resource, the complainant posited that its claim should have
priority over the former’s claims.
Required by the Office of the Court Administrator (OCA) to
comment on the charges against him,1 the respondent contended
that he had no knowledge that the car was encumbered because
the Certificate of Registration was never shown to him. He also
had no knowledge that the car was the subject of a writ of replevin
in Civil Case No. 0964026.2 Thus, the respondent asked for the
scope of his duty as sheriff when he enforced the writ of
execution.
THE OCA’S REPORT AND RECOMMENDATION
evaluated the complaint and submitted its findings:
The encumbrance in the instant case has been properly recorded in
the Land Transportation Office and, as attested to by the
complainant, in the Register of Deeds of Rizal Province. Such
record is constructive notice of its contents and all interests, legal
and equitable, included therein. This presumption cannot be
defeated by lack of notice or knowledge of what the public record
contains any more than one may be permitted to show that he was
ignorant of the provisions of law. Hence, the respondent is
charged with knowledge of the duly registered encumbrance on
the property he levied.
In the case of Caja vs. Nanquil, the Court has declared that "the
respondent sheriff’s act of levying complainant’s real property
despite its being mortgaged is tantamount to negligence. As an
officer of the court, he knew fully well that the property cannot be
used to satisfy the judgment debt since the mortgagee is the
preferred creditor in relation to the said property."
In the instant administrative complaint, the respondent not only
levied the encumbered vehicle, but sold it in an execution sale, the
proceeds of which would not satisfy the judgment debt because of
the existing encumbrance. Thus, the implementation of the writ of
execution, although impressively carried out with such celerity
and promptness, had been to naught. It must be pointed out that
the recovery of the vehicle itself was the subject of Civil Case No.
0964026 filed by GSFC before the Quezon City Regional Trial
Court, Branch 81.
The OCA recommended that - (1) the complaint be redocketed as
a regular administrative matter, (2) the respondent be held
administratively liable for simple neglect of duty, and (3) the
respondent be suspended without pay for one (1) month and one
(1) day, with a stern warning that the commission of the same or
similar offense in the future shall be dealt with more severely.
The Court, as recommended, (a) directed that the complaint be
redocketed as a regular administrative matter, and (b) required the
parties to manifest whether they were willing to submit the case
for decision based on the pleadings/records already filed and
submitted.4
that they were submitting the case for decision based on the
pleadings/records on file.5
THE COURT’S RULING
We disagree with the OCA’s recommendation. We fail to find
sufficient basis to declare the respondent administratively liable
for simple neglect of duty.
Section 9(b), Rule 39 of the Rules of Court states the manner by
which judgments for money may be satisfied by levy:
SEC. 9. Execution of judgments for money, how enforced. —
x x x x(b) Satisfaction by levy. — If the judgment obligor cannot
pay all or part of the obligation in cash, certified bank check or
other mode of payment acceptable to the judgment obligee, the
officer shall levy upon the properties of the judgment obligor of
every kind and nature whatsoever which may be disposed of for
value and not otherwise exempt from execution giving the latter
the option to immediately choose which property or part thereof
may be levied upon, sufficient to satisfy the judgment. If the
judgment obligor does not exercise the option, the officer shall
first levy on the personal properties, if any, and then on the real
properties if the personal properties are insufficient to answer for
the judgment.
The sheriff shall sell only a sufficient portion of the personal or
real property of the judgment obligor which has been levied upon.
When there is more property of the judgment obligor than is
sufficient to satisfy the judgment and lawful fees, he must sell
only so much of the personal or real property as is sufficient to
satisfy the judgment and lawful fees.
Real property, stocks, shares, debts, credits, and other personal
property, or any interest in either real or personal property, may
be levied upon in like manner and with like effect as under a writ
of attachment.
In determining properties to be levied upon, the Rules require the
sheriff to levy only on those "properties of the judgment debtor"
which are "not otherwise exempt from execution." For purposes
of the levy, a property is deemed to belong to the judgment debtor
if he holds a beneficial interest in such property that he can sell or
otherwise dispose of for value.6 In a contract of mortgage, the
debtor retains beneficial interest over the property
notwithstanding the encumbrance, since the mortgage only serves
to secure the fulfillment of the principal obligation. 7 Indeed, even
if the debtor defaults, this fact does not operate to vest in the
creditor the ownership of the property;8 the creditor must still
resort to foreclosure proceedings. Thus, a mortgaged property
may still be levied upon by the sheriff to satisfy the judgment
debtor’s obligations, as what happened in the present case. After
ascertaining the judgment debtor’s (Reyes’) interest over the car,
the respondent properly enforced the levy thereon — an act that,
to our mind, is in accordance with the Rules of Court.
It was thus irrelevant for the complainant to argue that had the
respondent checked the car’s certificate of registration, the
respondent would have been aware of the encumbrance. The
encumbrance, until foreclosed, will not in any way affect the
judgment debtor’s rights over the property or exempt the property
from the levy. Even the pendency of the proceeding for replevin
that the complainant instituted would not serve to prevent the
sheriff from levying on the car, since Reyes’ default and the
complainant’s right to foreclose still had to be settled in the
proceeding.9
The OCA’s recommendation was based supposedly on our ruling
in Caja v. Nanquil.10 We find, however, that the OCA has read our
ruling out of context. In that case, the Court held Sheriff Atilano
Nanquil administratively liable, not so much for levying on the
property of the judgment debtor that was already mortgaged to a
third party, but for levying on the judgment debtor’s real
properties without checking if there were other personal properties
that could satisfy the judgment debt. "[Sheriff Nanquil] should
have exhausted all means before going after the real property," 11as
required under Section 9(b), Rule 39 of the Rules of Court. We
also found Sheriff Nanquil liable for levying properties of the
judgment debtor far from and in excess of the value of the
judgment debt.12
We emphasize that a sheriff’s duty to execute a writ is simply
ministerial,13 and he is bound to perform only those tasks stated
under the Rules of Court and no more. Any interest a third party
may have on the property levied upon by the sheriff to enforce a
judgment is the third party’s responsibility to protect through the
remedies provided under Rule 39 of the Rules of Court. 14 Thus,
we can not hold the respondent liable on the ground that the
complainant cites. If at all, the respondent should have required,
as a matter of sound established practice, the production of the
certificate of registration, but this is an altogether different matter
that we do not here pass upon.
WHEREFORE, premises considered, the administrative charges
for negligence and grave misconduct against Ricardo R. Albano,
Sheriff III, Metropolitan Trial Court, Branch 62, Makati City, are
DISMISSED. Costs against the complainant Golden Sun Finance
Corporation.
SO ORDERED.
THIRD DIVISION
G.R. No. 183926               March 29, 2010
GENEROSA ALMEDA LATORRE, Petitioner,  amount as consideration for her share of the subject property.
vs.LUIS ESTEBAN LATORRE, Respondent.
RESOLUTION
NACHURA, J.:
Before this Court is a Petition for Review on Certiorari1 under
Rule 45, in relation to Rule 41, of the Rules of Civil Procedure,
assailing the decision2 of the Regional Trial Court (RTC) of
Muntinlupa City, Branch 256, dated April 29, 2008.
The facts of the case are as follows:
In October 2000, petitioner Generosa Almeda Latorre (petitioner)
filed before the RTC of Muntinlupa City a Complaint3 for
Collection and Declaration of Nullity of Deed of Absolute Sale
with application for Injunction against her own son, herein
respondent Luis Esteban Latorre (respondent), and one Ifzal Ali
(Ifzal).
Petitioner averred that, on September 28, 1999, respondent and
Ifzal entered into a Contract of Lease4 over a 1,244-square meter
real property, situated at No. 1366 Caballero St., Dasmariñas
Village, Makati City (subject property). Under the said contract,
respondent, as lessor, declared that he was the absolute and
registered owner of the subject property. Petitioner alleged that
respondent's declaration therein was erroneous because she and
respondent were co-owners of the subject property in equal
shares.
Petitioner narrated that, on March 14, 1989, she and respondent
executed their respective Deeds of Donation, conveying the
subject property in favor of The Porfirio D. Latorre Memorial &
Fr. Luis Esteban Latorre Foundation, Inc. (the Foundation). Thus,
Transfer Certificate of Title (TCT) No. 1619635 was issued in the
name of the Foundation. Subsequently, on September 2, 1994,
petitioner and respondent executed separate Deeds of Revocation
of Donation and Reconveyance of the subject property, consented
to by the Foundation, through the issuance of appropriate
corporate resolutions. However, the Deeds of Revocation were not
registered; hence, the subject property remained in the name of
the Foundation. Petitioner insisted, however, that respondent was
fully aware that the subject property was owned in common by
both of them. To protect her rights as co-owner, petitioner
formally demanded from Ifzal the payment of her share of the
rentals, which the latter, however, refused to heed.
Moreover, petitioner averred that, on or about August 16, 2000,
she discovered that respondent caused the annotation of an
adverse claim on the TCT of the subject property, claiming full
ownership over the same by virtue of a Deed of Absolute
Sale6 dated March 21, 2000, allegedly executed by petitioner in
favor of respondent. Petitioner claimed that the deed was a
falsified document; that her signature thereon was forged by
respondent; and that she never received ₱21 Million or any other
Thus, petitioner prayed that Ifzal be enjoined from paying the
rentals to respondent, and the latter from receiving said rentals;
that both Ifzal and respondent be ordered to pay petitioner her
share of the rentals; and that respondent be enjoined from
asserting full ownership over the subject property and from
committing any other act in derogation of petitioner's interests
therein. Petitioner also prayed for the payment of moral and
exemplary damages, litigation expenses, and costs of the suit.
Respondent immediately filed a Motion to Dismiss7 on the sole
ground that the venue of the case was improperly laid. He stressed
that while the complaint was denominated as one for Collection
and Declaration of Nullity of Deed of Absolute Sale with
application for Injunction, in truth the case was a real action
affecting title to and interest over the subject property.
Respondent insisted that all of petitioner's claims were anchored
on her claim of ownership over one-half (½) portion of the subject
property. Since the subject property is located in Makati City,
respondent argued that petitioner should have filed the case before
the RTC of Makati City and not of Muntinlupa City.
Ifzal also filed his motion to dismiss on the ground of want of
jurisdiction, asserting that he was immune from suit because he
was an officer of the Asian Development Bank, an international
organization.
The RTC issued a Temporary Restraining Order dated November
6, 2000, restraining Ifzal from paying his rentals to respondent
and enjoining the latter from receiving from the former the
aforesaid rentals. The RTC also directed both Ifzal and respondent
to pay petitioner her share of the rentals, with the corresponding
order against respondent not to commit any act in derogation of
petitioner's interest over the subject property.
In its Order dated January 2, 2001, the RTC denied respondent's
motion to dismiss. The RTC ruled that the nature of an action
whether real or personal was determined by the allegations in the
complaint, irrespective of whether or not the plaintiff was entitled
to recover upon the claims asserted - a matter resolved only after,
and as a result of, a trial. Thus, trial on the merits ensued.
Undaunted, respondent filed an Answer Ad Cautelam8 dated
March 19, 2001, insisting, among others, that the case was a real
action and that the venue was improperly laid. 9 Respondent
narrated that he was a former Opus Dei priest but he left the
congregation in 1987 after he was maltreated by his Spanish
superiors. Respondent alleged that petitioner lived with him and
his family from 1988 to 2000, and that he provided for petitioner's
needs. Respondent also alleged that, for almost 20 years, the Opus
Dei divested the Latorre family of several real properties. Thus, in
order to spare the subject property from the Opus Dei, both
petitioner and respondent agreed to donate it to the Foundation. In
1994, when respondent got married and sired a son, both
petitioner and respondent decided to revoke the said donation. The
Foundation consented to the revocation. However, due to lack of
funds, the title was never transferred but remained in the name of
the Foundation.
Respondent asseverated that he and his wife took good care of
petitioner and that they provided for her needs, spending a
substantial amount of money for these needs; that because of this,
and the fact that the rentals paid for the use of the subject property
went to petitioner, both parties agreed that petitioner would
convey her share over the subject property to respondent; and that,
on March 21, 2000, petitioner executed a Deed of Absolute Sale
in favor of respondent.
Respondent further alleged that sometime in March to May 2000,
the relationship of the parties, as mother and son, deteriorated.
Petitioner left respondent's house because he and his wife
allegedly ignored, disrespected, and insulted her. 10 Respondent
claimed, however, that petitioner left because she detested his act
of firing their driver.11It was then that this case was filed against
him by petitioner.
In the meantime, in its Order dated May 15, 2003, the RTC
dismissed petitioner's claim against Ifzal because the dispute was
clearly between petitioner and respondent.
On April 29, 2008, the RTC ruled in favor of respondent,
disposing of the case in this wise:
While the case herein filed by the plaintiff involves recovery of
possession of a real property situated at 1366 Caballero St.,
Dasmariñas Village, Makati City, the same should have been filed
and tried in the Regional Trial Court of Makati City who,
undoubtedly, has jurisdiction to hear the matter as aforementioned
the same being clearly a real action.
WHEREFORE, in view of the foregoing, the above-entitled case
is hereby DISMISSED for want of jurisdiction, all in pursuance to
the above-cited jurisprudence and Rule 4 of the Rules of Court.
SO ORDERED.12
Aggrieved, petitioner filed her Motion for
Reconsideration,13 which the RTC denied in its Order14 dated July
24, 2008 for lack of merit.
Hence, this Petition, claiming that the RTC erred in treating the
venue as jurisdiction and in treating petitioner's complaint as a
real action.
While the instant case was pending resolution before this Court,
petitioner passed away on November 14, 2009. Thus, petitioner's
counsel prayed that, pending the appointment of a representative
of petitioner's estate, notices of the proceedings herein be sent to
petitioner’s other son, Father Roberto A. Latorre.15
As early as the filing of the complaint, this case had been marred
by numerous procedural infractions committed by petitioner, by
respondent, and even by the RTC, all of which cannot be
disregarded by this Court.
First. Petitioner filed her complaint with the RTC of Muntinlupa
City instead of the RTC of Makati City, the latter being the proper
venue in this case.
Sections 1 and 2, Rule 4 of the 1997 Rules of Civil Procedure
provide an answer to the issue of venue.16 Actions affecting title to
or possession of real property or an interest therein (real actions)
shall be commenced and tried in the proper court that has
territorial jurisdiction over the area where the real property is
situated. On the other hand, all other actions (personal actions)
shall be commenced and tried in the proper courts where the
plaintiff or any of the principal plaintiffs resides or where the
defendant or any of the principal defendants resides. 17 The action
in the RTC, other than for Collection, was for the Declaration of
Nullity of the Deed of Absolute Sale involving the subject
property, which is located at No. 1366 Caballero St., Dasmariñas
Village, Makati City. The venue for such action is unquestionably
the proper court of Makati City, where the real property or part
thereof lies, not the RTC of Muntinlupa City.18
In this jurisdiction, we adhere to the principle that the nature of an
action is determined by the allegations in the Complaint itself,
rather than by its title or heading.19 It is also a settled rule that
what determines the venue of a case is the primary objective for
the filing of the case.20 In her Complaint, petitioner sought the
nullification of the Deed of Absolute Sale on the strength of two
basic claims that (1) she did not execute the deed in favor of
respondent; and (2) thus, she still owned one half (½) of the
subject property. Indubitably, petitioner's complaint is a real
action involving the recovery of the subject property on the basis
of her co-ownership thereof.
Second. The RTC also committed a procedural blunder when it
denied respondent's motion to dismiss on the ground of improper
venue.
The RTC insisted that trial on the merits be conducted even when
it was awfully glaring that the venue was improperly laid, as
pointed out by respondent in his motion to dismiss. After trial, the
RTC eventually dismissed the case on the ground of lack of
jurisdiction, even as it invoked, as justification, the rules and
jurisprudence on venue. Despite the conduct of trial, the RTC
failed to adjudicate this case on the merits.
Third. Respondent also did not do very well, procedurally. When
the RTC denied his Motion to Dismiss, respondent could have
filed a petition for certiorari and/or prohibition inasmuch as the
denial of the motion was done without jurisdiction or in excess of
jurisdiction or with grave abuse of discretion amounting to lack of
jurisdiction.21 However, despite this lapse, it is clear that
respondent did not waive his objections to the fact of improper
venue, contrary to petitioner's assertion. Notably, after his motion
to dismiss was denied, respondent filed a Motion for
Reconsideration to contest such denial. Even in his Answer Ad
Cautelam, respondent stood his ground that the case ought to be
dismissed on the basis of improper venue.
Finally, petitioner came directly to this Court on a Petition for
Review on Certiorari under Rule 45, in relation to Rule 41, of the
Rules of Civil Procedure on alleged pure questions of law. In
Murillo v. Consul,22 we laid down a doctrine that was later
adopted by the 1997 Revised Rules of Civil Procedure. In that
case, this Court had the occasion to clarify the three (3) modes of
appeal from decisions of the RTC, namely: (1) ordinary appeal or
appeal by writ of error, where judgment was rendered in a civil or
criminal action by the RTC in the exercise of its original
jurisdiction; (2) petition for review, where judgment was rendered
by the RTC in the exercise of its appellate jurisdiction; and (3)
petition for review to the Supreme Court.
The first mode of appeal, governed by Rule 41, is brought to the
Court of Appeals (CA) on questions of fact or mixed questions of
fact and law. The second mode of appeal, covered by Rule 42, is
brought to the CA on questions of fact, of law, or mixed questions
of fact and law. The third mode of appeal, provided in Rule 45, is
filed with the Supreme Court only on questions of law.
A question of law arises when there is doubt as to what the law is
on a certain state of facts, while there is a question of fact when
the doubt arises as to the truth or falsity of the alleged facts. 23 Our
ruling in Velayo-Fong v. Velayo24 is instructive:
A question of law arises when there is doubt as to what the law is
on a certain state of facts, while there is a question of fact when
the doubt arises as to the truth or falsity of the alleged facts. For a
question to be one of law, the same must not involve an
examination of the probative value of the evidence presented by
the litigants or any of them. The resolution of the issue must rest
solely on what the law provides on the given set of circumstances.
Once it is clear that the issue invites a review of the evidence
presented, the question posed is one of fact. Thus, the test of
whether a question is one of law or of fact is not the appellation
given to such question by the party raising the same; rather, it is
whether the appellate court can determine the issue raised without
reviewing or evaluating the evidence, in which case, it is a
question of law; otherwise it is a question of fact. 25
In her Reply to respondent’s Comment,26 petitioner prayed that
this Court decide the case on the merits. To do so, however,
would require the examination by this Court of the probative
value of the evidence presented,
taking into account the fact that the RTC failed to adjudicate this
controversy on the merits. This, unfortunately, we cannot do. It
thus becomes exceedingly clear that the filing of the case directly
with this Court ran afoul of the doctrine of hierarchy of courts.
Pursuant to this doctrine, direct resort from the lower courts to the
Supreme Court will not be entertained unless the appropriate
remedy sought cannot be obtained in the lower tribunals. This
Court is a court of last resort, and must so remain if it is to
satisfactorily perform the functions assigned to it by the
Constitution and by immemorial tradition.27
Accordingly, we find no merit in the instant petition. Neither do
we find any reversible error in the trial court’s dismissal of the
case ostensibly for want of jurisdiction, although the trial court
obviously meant to dismiss the case on the ground of improper
venue.
WHEREFORE, the instant Petition is DENIED. No costs.
SO ORDERED.
EN BANC
G.R. No. L-30173 September 30, 1971
GAVINO A. TUMALAD and GENEROSA R.
TUMALAD, plaintiffs-appellees,  vacated and its possession surrendered to them, and for
vs. ALBERTA VICENCIO and EMILIANO
SIMEON, defendants-appellants.
REYES, J.B.L., J.:
Case certified to this Court by the Court of Appeals (CA-G.R. No.
27824-R) for the reason that only questions of law are involved.
This case was originally commenced by defendants-appellants in
the municipal court of Manila in Civil Case No. 43073, for
ejectment. Having lost therein, defendants-appellants appealed to
the court a quo (Civil Case No. 30993) which also rendered a
decision against them, the dispositive portion of which follows:
WHEREFORE, the court hereby renders judgment in favor of the
plaintiffs and against the defendants, ordering the latter to pay
jointly and severally the former a monthly rent of P200.00 on the
house, subject-matter of this action, from March 27, 1956, to
January 14, 1967, with interest at the legal rate from April 18,
1956, the filing of the complaint, until fully paid, plus attorney's
fees in the sum of P300.00 and to pay the costs.
It appears on the records that on 1 September 1955 defendants-
appellants executed a chattel mortgage in favor of plaintiffs-
appellees over their house of strong materials located at No. 550
Int. 3, Quezon Boulevard, Quiapo, Manila, over Lot Nos. 6-B and
7-B, Block No. 2554, which were being rented from Madrigal &
Company, Inc. The mortgage was registered in the Registry of
Deeds of Manila on 2 September 1955. The herein mortgage was
executed to guarantee a loan of P4,800.00 received from
plaintiffs-appellees, payable within one year at 12% per annum.
The mode of payment was P150.00 monthly, starting September,
1955, up to July 1956, and the lump sum of P3,150 was payable
on or before August, 1956. It was also agreed that default in the
payment of any of the amortizations, would cause the remaining
unpaid balance to becomeimmediately due and Payable and —
“the Chattel Mortgage will be enforceable in accordance with the
provisions of Special Act No. 3135, and for this purpose, the
Sheriff of the City of Manila or any of his deputies is hereby
empowered and authorized to sell all the Mortgagor's property
after the necessary publication in order to settle the financial debts
of P4,800.00, plus 12% yearly interest, and attorney's fees... 2
When defendants-appellants defaulted in paying, the mortgage
was extrajudicially foreclosed, and on 27 March 1956, the house
was sold at public auction pursuant to the said contract. As highest
bidder, plaintiffs-appellees were issued the corresponding
certificate of sale.3 Thereafter, on 18 April 1956, plaintiffs-
appellant commenced Civil Case No. 43073 in the municipal
court of Manila, praying, among other things, that the house be
defendants-appellants to pay rent of P200.00 monthly from 27
March 1956 up to the time the possession is surrendered.4 On 21
September 1956, the municipal court rendered its decision —
... ordering the defendants to vacate the premises described in the
complaint; ordering further to pay monthly the amount of P200.00
from March 27, 1956, until such (time that) the premises is (sic)
completely vacated; plus attorney's fees of P100.00 and the costs
of the suit.5
Defendants-appellants, in their answers in both the municipal
court and court a quo impugned the legality of the chattel
mortgage, claiming that they are still the owners of the house; but
they waived the right to introduce evidence, oral or documentary.
Instead, they relied on their memoranda in support of their motion
to dismiss, predicated mainly on the grounds that: (a) the
municipal court did not have jurisdiction to try and decide the
case because (1) the issue involved, is ownership, and (2) there
was no allegation of prior possession; and (b) failure to prove
prior demand pursuant to Section 2, Rule 72, of the Rules of
Court.6
During the pendency of the appeal to the Court of First Instance,
defendants-appellants failed to deposit the rent for November,
1956 within the first 10 days of December, 1956 as ordered in the
decision of the municipal court. As a result, the court granted
plaintiffs-appellees' motion for execution, and it was actually
issued on 24 January 1957. However, the judgment regarding the
surrender of possession to plaintiffs-appellees could not be
executed because the subject house had been already demolished
on 14 January 1957 pursuant to the order of the court in a separate
civil case (No. 25816) for ejectment against the present
defendants for non-payment of rentals on the land on which the
house was constructed.
The motion of plaintiffs for dismissal of the appeal, execution of
the supersedeas bond and withdrawal of deposited rentals was
denied for the reason that the liability therefor was disclaimed and
was still being litigated, and under Section 8, Rule 72, rentals
deposited had to be held until final disposition of the appeal. 7
On 7 October 1957, the appellate court of First Instance rendered
its decision, the dispositive portion of which is quoted earlier. The
said decision was appealed by defendants to the Court of Appeals
which, in turn, certified the appeal to this Court. Plaintiffs-
appellees failed to file a brief and this appeal was submitted for
decision without it.
Defendants-appellants submitted numerous assignments of error
which can be condensed into two questions, namely: .
(a) Whether the municipal court from which the case originated
had jurisdiction to adjudicate the same;
(b) Whether the defendants are, under the law, legally bound to
pay rentals to the plaintiffs during the period of one (1) year
provided by law for the redemption of the extrajudicially
foreclosed house.
We will consider these questions seriatim.
(a) Defendants-appellants mortgagors question the jurisdiction of
the municipal court from which the case originated, and
consequently, the appellate jurisdiction of the Court of First
Instance a quo, on the theory that the chattel mortgage is void ab
initio; whence it would follow that the extrajudicial foreclosure,
and necessarily the consequent auction sale, are also void. Thus,
the ownership of the house still remained with defendants-
appellants who are entitled to possession and not plaintiffs-
appellees. Therefore, it is argued by defendants-appellants, the
issue of ownership will have to be adjudicated first in order to
determine possession. lt is contended further that ownership being
in issue, it is the Court of First Instance which has jurisdiction and
not the municipal court.
Defendants-appellants predicate their theory of nullity of the
chattel mortgage on two grounds, which are: (a) that, their
signatures on the chattel mortgage were obtained through fraud,
deceit, or trickery; and (b) that the subject matter of the mortgage
is a house of strong materials, and, being an immovable, it can
only be the subject of a real estate mortgage and not a chattel
mortgage.
On the charge of fraud, deceit or trickery, the Court of First
Instance found defendants-appellants' contentions as not
supported by evidence and accordingly dismissed the
charge,8 confirming the earlier finding of the municipal court that
"the defense of ownership as well as the allegations of fraud and
deceit ... are mere allegations."9
It has been held in Supia and Batiaco vs. Quintero and
Ayala10 that "the answer is a mere statement of the facts which the
party filing it expects to prove, but it is not evidence;11 and further,
that when the question to be determined is one of title, the Court is
given the authority to proceed with the hearing of the cause until
this fact is clearly established. In the case of Sy vs.
Dalman,12 wherein the defendant was also a successful bidder in
an auction sale, it was likewise held by this Court that in detainer
cases the aim of ownership "is a matter of defense and raises an
issue of fact which should be determined from the evidence at the
trial." What determines jurisdiction are the allegations or
averments in the complaint and the relief asked for. 13
Moreover, even granting that the charge is true, fraud or deceit
does not render a contract void ab initio, and can only be a ground
for rendering the contract voidable or annullable pursuant to
Article 1390 of the New Civil Code, by a proper action in
court. 14 There is nothing on record to show that the mortgage has
been annulled. Neither is it disclosed that steps were taken to
nullify the same. Hence, defendants-appellants' claim of
ownership on the basis of a voidable contract which has not been
voided fails.
It is claimed in the alternative by defendants-appellants that even
if there was no fraud, deceit or trickery, the chattel mortgage was
still null and void ab initio because only personal properties can
be subject of a chattel mortgage. The rule about the status of
buildings as immovable property is stated in Lopez vs. Orosa, Jr.
and Plaza Theatre Inc.,15cited in Associated Insurance Surety Co.,
Inc. vs. Iya, et al. 16 to the effect that —
... it is obvious that the inclusion of the building, separate and
distinct from the land, in the enumeration of what may constitute
real properties (art. 415, New Civil Code) could only mean one
thing — that a building is by itself an immovable
property irrespective of whether or not said structure and the land
on which it is adhered to belong to the same owner.
Certain deviations, however, have been allowed for various
reasons. In the case of Manarang and Manarang vs.
Ofilada,17 this Court stated that "it is undeniable that the parties to
a contract may by agreement treat as personal property that which
by nature would be real property", citing Standard Oil Company
of New York vs. Jaramillo. 18 In the latter case, the mortgagor
conveyed and transferred to the mortgagee by way of mortgage
"the following described personal property." 19 The "personal
property" consisted of leasehold rights and a building. Again, in
the case of Luna vs. Encarnacion,20 the subject of the contract
designated as Chattel Mortgage was a house of mixed materials,
and this Court hold therein that it was a valid Chattel mortgage
because it was so expressly designated and specifically that the
property given as security "is a house of mixed materials, which
by its very nature is considered personal property." In the later
case of Navarro vs. Pineda,21 this Court stated that —
The view that parties to a deed of chattel mortgage may agree to
consider a house as personal property for the purposes of said
contract, "is good only insofar as the contracting parties are
concerned. It is based, partly, upon the principle of estoppel"
(Evangelista vs. Alto Surety, No. L-11139, 23 April 1958). In a
case, a mortgaged house built on a rented land was held to be a
personal property, not only because the deed of mortgage
considered it as such, but also because it did not form part of the
land (Evangelists vs. Abad, [CA]; 36 O.G. 2913), for it is now
settled that an object placed on land by one who had only a
temporary right to the same, such as the lessee or usufructuary,
does not become immobilized by attachment (Valdez vs. Central
Altagracia, 222 U.S. 58, cited in Davao Sawmill Co., Inc. vs.
Castillo, et al., 61 Phil. 709). Hence, if a house belonging to a
person stands on a rented land belonging to another person, it may
be mortgaged as a personal property as so stipulated in the
document of mortgage. (Evangelista vs. Abad, Supra.) It should
be noted, however that the principle is predicated on statements
by the owner declaring his house to be a chattel, a conduct that
may conceivably estop him from subsequently claiming otherwise.
(Ladera vs. C.N. Hodges, [CA] 48 O.G. 5374): 22
In the contract now before Us, the house on rented land is not only
expressly designated as Chattel Mortgage; it specifically provides
that "the mortgagor ... voluntarily CEDES, SELLS and
TRANSFERS by way of Chattel Mortgage23 the property together
with its leasehold rights over the lot on which it is constructed and
participation ..." 24 Although there is no specific statement
referring to the subject house as personal property, yet by ceding,
selling or transferring a property by way of chattel
mortgage defendants-appellants could only have meant to convey
the house as chattel, or at least, intended to treat the same as such,
so that they should not now be allowed to make an inconsistent
stand by claiming otherwise. Moreover, the subject house stood
on a rented lot to which defendats-appellants merely had a
temporary right as lessee, and although this can not in itself alone
determine the status of the property, it does so when combined
with other factors to sustain the interpretation that the parties,
particularly the mortgagors, intended to treat the house as
personalty. Finally unlike in the Iya cases, Lopez vs. Orosa, Jr.
and Plaza Theatre, Inc. 25 and Leung Yee vs. F. L. Strong
Machinery and Williamson, 26 wherein third persons assailed the
validity of the chattel mortgage,27 it is the defendants-appellants
themselves, as debtors-mortgagors, who are attacking the validity
of the chattel mortgage in this case. The doctrine of estoppel
therefore applies to the herein defendants-appellants, having
treated the subject house as personalty.
(b) Turning to the question of possession and rentals of the
premises in question. The Court of First Instance noted in its
decision that nearly a year after the foreclosure sale the mortgaged
house had been demolished on 14 and 15 January 1957 by virtue
of a decision obtained by the lessor of the land on which the house
stood. For this reason, the said court limited itself to sentencing
the erstwhile mortgagors to pay plaintiffs a monthly rent of
P200.00 from 27 March 1956 (when the chattel mortgage was
foreclosed and the house sold) until 14 January 1957 (when it was
torn down by the Sheriff), plus P300.00 attorney's fees.
Appellants mortgagors question this award, claiming that they
were entitled to remain in possession without any obligation to
pay rent during the one year redemption period after the
foreclosure sale, i.e., until 27 March 1957. On this issue, We must
rule for the appellants.
Chattel mortgages are covered and regulated by the Chattel
Mortgage Law, Act No. 1508.28 Section 14 of this Act allows the
mortgagee to have the property mortgaged sold at public auction
through a public officer in almost the same manner as that
allowed by Act No. 3135, as amended by Act No. 4118, provided
that the requirements of the law relative to notice and registration
are complied with. 29 In the instant case, the parties specifically
stipulated that "the chattel mortgage will be enforceable in
accordance with the provisions of Special Act No.
3135 ... ." 30(Emphasis supplied).
Section 6 of the Act referred to 31 provides that the debtor-
mortgagor (defendants-appellants herein) may, at any time within
one year from and after the date of the auction sale, redeem the
property sold at the extra judicial foreclosure sale. Section 7 of the
same Act 32 allows the purchaser of the property to obtain from
the court the possession during the period of redemption: but the
same provision expressly requires the filing of a petition with the
proper Court of First Instance and the furnishing of a bond. It is
only upon filing of the proper motion and the approval of the
corresponding bond that the order for a writ of possession issues
as a matter of course. No discretion is left to the court. 33 In the
absence of such a compliance, as in the instant case, the purchaser
can not claim possession during the period of redemption as a
matter of right. In such a case, the governing provision is Section
34, Rule 39, of the Revised Rules of Court 34 which also applies
to properties purchased in extrajudicial foreclosure
proceedings.35 Construing the said section, this Court stated in the
aforestated case of Reyes vs. Hamada.
“In other words, before the expiration of the 1-year period within
which the judgment-debtor or mortgagor may redeem the
property, the purchaser thereof is not entitled, as a matter of right,
to possession of the same. Thus, while it is true that the Rules of
Court allow the purchaser to receive the rentals if the purchased
property is occupied by tenants, he is, nevertheless, accountable to
the judgment-debtor or mortgagor as the case may be, for the
amount so received and the same will be duly credited against the
redemption price when the said debtor or mortgagor effects the
redemption. Differently stated, the rentals receivable from
tenants, although they may be collected by the purchaser during
the redemption period, do not belong to the latter but still pertain
to the debtor of mortgagor. The rationale for the Rule, it seems, is
to secure for the benefit of the debtor or mortgagor, the payment
of the redemption amount and the consequent return to him of his
properties sold at public auction. (Emphasis supplied)
The Hamada case reiterates the previous ruling in Chan vs. Espe.36
Since the defendants-appellants were occupying the house at the
time of the auction sale, they are entitled to remain in possession
during the period of redemption or within one year from and after
27 March 1956, the date of the auction sale, and to collect the
rents or profits during the said period.
It will be noted further that in the case at bar the period of
redemption had not yet expired when action was instituted in the
court of origin, and that plaintiffs-appellees did not choose to take
possession under Section 7, Act No. 3135, as amended, which is
the law selected by the parties to govern the extrajudicial
foreclosure of the chattel mortgage. Neither was there an
allegation to that effect. Since plaintiffs-appellees' right to possess
was not yet born at the filing of the complaint, there could be no
violation or breach thereof. Wherefore, the original complaint
stated no cause of action and was prematurely filed. For this
reason, the same should be ordered dismissed, even if there was
no assignment of error to that effect. The Supreme Court is
clothed with ample authority to review palpable errors not
assigned as such if it finds that their consideration is necessary in
arriving at a just decision of the cases. 37
It follows that the court below erred in requiring the mortgagors to
pay rents for the year following the foreclosure sale, as well as
attorney's fees.
FOR THE FOREGOING REASONS, the decision appealed from
is reversed and another one entered, dismissing the complaint.
With costs against plaintiffs-appellees.
FIRST DIVISION
G.R. No. L-50008 August 31, 1987
PRUDENTIAL BANK, petitioner,  All corners of the lot marked by conc. cylindrical monuments of
vs. HONORABLE DOMINGO D. PANIS, Presiding Judge of
Branch III, Court of First Instance of Zambales and
Olongapo City; FERNANDO MAGCALE & TEODULA
BALUYUT-MAGCALE, respondents.
PARAS, J.:
This is a petition for review on certiorari of the November 13,
1978 Decision * of the then Court of First Instance of Zambales
and Olongapo City in Civil Case No. 2443-0 entitled "Spouses
Fernando A. Magcale and Teodula Baluyut-Magcale vs. Hon.
Ramon Y. Pardo and Prudential Bank" declaring that the deeds of
real estate mortgage executed by respondent spouses in favor of
petitioner bank are null and void.
The undisputed facts of this case by stipulation of the parties are
as follows:
... on November 19, 1971, plaintiffs-spouses Fernando A.
Magcale and Teodula Baluyut Magcale secured a loan in the sum
of P70,000.00 from the defendant Prudential Bank. To secure
payment of this loan, plaintiffs executed in favor of defendant on
the aforesaid date a deed of Real Estate Mortgage over the
following described properties:
l. A 2-STOREY, SEMI-CONCRETE, residential building with
warehouse spaces containing a total floor area of 263 sq. meters,
more or less, generally constructed of mixed hard wood and
concrete materials, under a roofing of cor. g. i. sheets; declared
and assessed in the name of FERNANDO MAGCALE under Tax
Declaration No. 21109, issued by the Assessor of Olongapo City
with an assessed value of P35,290.00. This building is the only
improvement of the lot.
2. THE PROPERTY hereby conveyed by way of MORTGAGE
includes the right of occupancy on the lot where the above
property is erected, and more particularly described and bounded,
as follows:
A first class residential land Identffied as Lot No. 720, (Ts-308,
Olongapo Townsite Subdivision) Ardoin Street, East Bajac-Bajac,
Olongapo City, containing an area of 465 sq. m. more or less,
declared and assessed in the name of FERNANDO MAGCALE
under Tax Duration No. 19595 issued by the Assessor of
Olongapo City with an assessed value of P1,860.00; bounded on
the
NORTH: By No. 6, Ardoin Street
SOUTH: By No. 2, Ardoin Street
EAST: By 37 Canda Street, and
WEST: By Ardoin Street.
the Bureau of Lands as visible limits. ( Exhibit "A, " also Exhibit
"1" for defendant).
Apart from the stipulations in the printed portion of the
aforestated deed of mortgage, there appears a rider typed at the
bottom of the reverse side of the document under the lists of the
properties mortgaged which reads, as follows:
AND IT IS FURTHER AGREED that in the event the Sales
Patent on the lot applied for by the Mortgagors as herein stated is
released or issued by the Bureau of Lands, the Mortgagors hereby
authorize the Register of Deeds to hold the Registration of same
until this Mortgage is cancelled, or to annotate this encumbrance
on the Title upon authority from the Secretary of Agriculture and
Natural Resources, which title with annotation, shall be released
in favor of the herein Mortgage.
From the aforequoted stipulation, it is obvious that the mortgagee
(defendant Prudential Bank) was at the outset aware of the fact
that the mortgagors (plaintiffs) have already filed a Miscellaneous
Sales Application over the lot, possessory rights over which, were
mortgaged to it.
Exhibit "A" (Real Estate Mortgage) was registered under the
Provisions of Act 3344 with the Registry of Deeds of Zambales
on November 23, 1971.
On May 2, 1973, plaintiffs secured an additional loan from
defendant Prudential Bank in the sum of P20,000.00. To secure
payment of this additional loan, plaintiffs executed in favor of the
said defendant another deed of Real Estate Mortgage over the
same properties previously mortgaged in Exhibit "A." (Exhibit
"B;" also Exhibit "2" for defendant). This second deed of Real
Estate Mortgage was likewise registered with the Registry of
Deeds, this time in Olongapo City, on May 2,1973.
On April 24, 1973, the Secretary of Agriculture issued
Miscellaneous Sales Patent No. 4776 over the parcel of land,
possessory rights over which were mortgaged to defendant
Prudential Bank, in favor of plaintiffs. On the basis of the
aforesaid Patent, and upon its transcription in the Registration
Book of the Province of Zambales, Original Certificate of Title
No. P-2554 was issued in the name of Plaintiff Fernando Magcale,
by the Ex-Oficio Register of Deeds of Zambales, on May 15,
1972.
For failure of plaintiffs to pay their obligation to defendant Bank
after it became due, and upon application of said defendant, the
deeds of Real Estate Mortgage (Exhibits "A" and "B") were
extrajudicially foreclosed. Consequent to the foreclosure was the
sale of the properties therein mortgaged to defendant as the
highest bidder in a public auction sale conducted by the defendant
City Sheriff on April 12, 1978 (Exhibit "E"). The auction sale
aforesaid was held despite written request from plaintiffs through
counsel dated March 29, 1978, for the defendant City Sheriff to
desist from going with the scheduled public auction sale (Exhibit
"D")." (Decision, Civil Case No. 2443-0, Rollo, pp. 29-31).
Respondent Court, in a Decision dated November 3, 1978
declared the deeds of Real Estate Mortgage as null and void
(Ibid., p. 35).
On December 14, 1978, petitioner filed a Motion for
Reconsideration (Ibid., pp. 41-53), opposed by private
respondents on January 5, 1979 (Ibid., pp. 54-62), and in an Order
dated January 10, 1979 (Ibid., p. 63), the Motion for
Reconsideration was denied for lack of merit. Hence, the instant
petition (Ibid., pp. 5-28).
The first Division of this Court, in a Resolution dated March 9,
1979, resolved to require the respondents to comment (Ibid., p.
65), which order was complied with the Resolution dated May
18,1979, (Ibid., p. 100), petitioner filed its Reply on June 2,1979
(Ibid., pp. 101-112).
Thereafter, in the Resolution dated June 13, 1979, the petition was
given due course and the parties were required to submit
simultaneously their respective memoranda. (Ibid., p. 114).
On July 18, 1979, petitioner filed its Memorandum (Ibid., pp.
116-144), while private respondents filed their Memorandum on
August 1, 1979 (Ibid., pp. 146-155).
In a Resolution dated August 10, 1979, this case was considered
submitted for decision (Ibid., P. 158).
In its Memorandum, petitioner raised the following issues:
1. WHETHER OR NOT THE DEEDS OF REAL ESTATE
MORTGAGE ARE VALID; AND
2. WHETHER OR NOT THE SUPERVENING ISSUANCE IN
FAVOR OF PRIVATE RESPONDENTS OF
MISCELLANEOUS SALES PATENT NO. 4776 ON APRIL 24,
1972 UNDER ACT NO. 730 AND THE COVERING
ORIGINAL CERTIFICATE OF TITLE NO. P-2554 ON MAY
15,1972 HAVE THE EFFECT OF INVALIDATING THE
DEEDS OF REAL ESTATE MORTGAGE. (Memorandum for
Petitioner, Rollo, p. 122).
This petition is impressed with merit.
The pivotal issue in this case is whether or not a valid real estate
mortgage can be constituted on the building erected on the land
belonging to another.
The answer is in the affirmative.
In the enumeration of properties under Article 415 of the Civil
Code of the Philippines, this Court ruled that, "it is obvious that
the inclusion of "building" separate and distinct from the land, in
said provision of law can only mean that a building is by itself an
immovable property." (Lopez vs. Orosa, Jr., et al., L-10817-18,
Feb. 28, 1958; Associated Inc. and Surety Co., Inc. vs. Iya, et al.,
L-10837-38, May 30,1958).
Thus, while it is true that a mortgage of land necessarily includes,
in the absence of stipulation of the improvements thereon,
buildings, still a building by itself may be mortgaged apart from
the land on which it has been built. Such a mortgage would be still
a real estate mortgage for the building would still be considered
immovable property even if dealt with separately and apart from
the land (Leung Yee vs. Strong Machinery Co., 37 Phil. 644). In
the same manner, this Court has also established that possessory
rights over said properties before title is vested on the grantee,
may be validly transferred or conveyed as in a deed of mortgage
(Vda. de Bautista vs. Marcos, 3 SCRA 438 [1961]).
Coming back to the case at bar, the records show, as aforestated
that the original mortgage deed on the 2-storey semi-concrete
residential building with warehouse and on the right of occupancy
on the lot where the building was erected, was executed on
November 19, 1971 and registered under the provisions of Act
3344 with the Register of Deeds of Zambales on November 23,
1971. Miscellaneous Sales Patent No. 4776 on the land was issued
on April 24, 1972, on the basis of which OCT No. 2554 was
issued in the name of private respondent Fernando Magcale on
May 15, 1972. It is therefore without question that the original
mortgage was executed before the issuance of the final patent and
before the government was divested of its title to the land, an
event which takes effect only on the issuance of the sales patent
and its subsequent registration in the Office of the Register of
Deeds (Visayan Realty Inc. vs. Meer, 96 Phil. 515; Director of
Lands vs. De Leon, 110 Phil. 28; Director of Lands vs. Jurado, L-
14702, May 23, 1961; Pena "Law on Natural Resources", p. 49).
Under the foregoing considerations, it is evident that the mortgage
executed by private respondent on his own building which was
erected on the land belonging to the government is to all intents
and purposes a valid mortgage.
As to restrictions expressly mentioned on the face of respondents'
OCT No. P-2554, it will be noted that Sections 121, 122 and 124
of the Public Land Act, refer to land already acquired under the
Public Land Act, or any improvement thereon and therefore have
no application to the assailed mortgage in the case at bar which
was executed before such eventuality. Likewise, Section 2 of
Republic Act No. 730, also a restriction appearing on the face of
private respondent's title has likewise no application in the instant
case, despite its reference to encumbrance or alienation before the
patent is issued because it refers specifically to encumbrance or
alienation on the land itself and does not mention anything
regarding the improvements existing thereon.
But it is a different matter, as regards the second mortgage
executed over the same properties on May 2, 1973 for an
additional loan of P20,000.00 which was registered with the
Registry of Deeds of Olongapo City on the same date. Relative
thereto, it is evident that such mortgage executed after the
issuance of the sales patent and of the Original Certificate of Title,
falls squarely under the prohibitions stated in Sections 121, 122
and 124 of the Public Land Act and Section 2 of Republic Act
730, and is therefore null and void.
Petitioner points out that private respondents, after physically
possessing the title for five years, voluntarily surrendered the
same to the bank in 1977 in order that the mortgaged may be
annotated, without requiring the bank to get the prior approval of
the Ministry of Natural Resources beforehand, thereby implicitly
authorizing Prudential Bank to cause the annotation of said
mortgage on their title.
However, the Court, in recently ruling on violations of Section
124 which refers to Sections 118, 120, 122 and 123 of
Commonwealth Act 141, has held:
... Nonetheless, we apply our earlier rulings because we believe
that as in pari delicto may not be invoked to defeat the policy of
the State neither may the doctrine of estoppel give a validating
effect to a void contract. Indeed, it is generally considered that as
between parties to a contract, validity cannot be given to it by
estoppel if it is prohibited by law or is against public policy (19
Am. Jur. 802). It is not within the competence of any citizen to
barter away what public policy by law was to preserve (Gonzalo
Puyat & Sons, Inc. vs. De los Amas and Alino supra). ... (Arsenal
vs. IAC, 143 SCRA 54 [1986]).

This pronouncement covers only the previous transaction already

alluded to and does not pass upon any new contract between the
parties (Ibid), as in the case at bar. It should not preclude new
contracts that may be entered into between petitioner bank and
private respondents that are in accordance with the requirements
of the law. After all, private respondents themselves declare that
they are not denying the legitimacy of their debts and appear to be
open to new negotiations under the law (Comment; Rollo, pp. 95-
96). Any new transaction, however, would be subject to whatever
steps the Government may take for the reversion of the land in its
favor.

PREMISES CONSIDERED, the decision of the Court of First

Instance of Zambales & Olongapo City is hereby MODIFIED,
declaring that the Deed of Real Estate Mortgage for P70,000.00 is
valid but ruling that the Deed of Real Estate Mortgage for an
additional loan of P20,000.00 is null and void, without prejudice
to any appropriate action the Government may take against
private respondents.

SO ORDERED.