Chua Guan v.

Samahang Magsasaka

Summary:
This case involves an appeal from a judgment of the Court of First Instance of Nueva Ecija in an
action for a writ of mandamus. The plaintiff, Gonzalo Chua Guan, sought to compel the defendants,
Samahang Magsasaka, Inc., and its officers, to transfer shares of stock to him by canceling the old
certificates and issuing new ones. The defendants admitted all the allegations of the complaint, and
the plaintiff admitted all the special defenses in the defendants' answer. The main issue in this case
is whether the plaintiff's mortgage takes priority over the writs of attachment issued against the
shares of stock.

Doctrine:
The case discusses the application of the Chattel Mortgage Law (Act No. 1508) to shares of stock in
a corporation. It clarifies that the registration of a chattel mortgage of shares of stock in the province
where the owner resides is sufficient to give constructive notice to third parties. However, if the
property is situated in a different province from the owner's residence, the mortgage must be
registered in both the province of the owner's residence and the province where the property is
located.

FACTS:
Gonzalo H. Co Toco was the owner of 5,894 shares of the capital stock of the said corporation represented by nine
certificates. He then mortgaged said shares to Chua Chiu to guarantee the payment of a debt. The said certificates of
stock were delivered with the mortgage to the mortgagee, Chua Chiu. The said mortgage was duly registered in the
office of the register of deeds of Manila and in the office of the said corporation. Subsequently, Chua Chiu assigned
all his right and interest in said mortgage to the plaintiff and the assignment was registered in the office of the register
of deeds in the City of Manila on December 28, 1931, and in the office of the said corporation on January 4, 1932.
The debtor, Gonzalo H. Co Toco, having defaulted in the payment of said debt at maturity, the plaintiff foreclosed
said mortgage and delivered the certificates of stock and copies of the mortgage and assignment to the sheriff in
order to sell the said shares at public auction. The sheriff auctioned said 5,894 shares of stock and the plaintiff having
been the highest bidder. The sheriff executed in his favor a certificate of sale of said shares. The plaintiff tendered
the certificates of stock standing in the name of Gonzalo H. Co Toco to the proper officers of the corporation for
cancellation and demanded that they issue new certificates in the name of the plaintiff. The said officers (the
individual defendants) refused and still refuse to issue said new shares in the name of the plaintiff. Their reason is
that the chattel mortgage was not properly registered since it was not registered in place of the principal business of
the corporation.

ISSUE: Did the registration of said chattel mortgage in the registry of chattel mortgages in the office of the
register of deeds of Manila, under date of July 23, 1931, give constructive notice to the said attaching creditors?

HELD: The attaching creditors are entitled to priority over the defectively registered mortgage of the
appellant

RATIO: The property in the shares maybe deemed to be situated in the province in which the corporation has its
principal office or place of business. If this province is also the province of the owner's domicile, a single registration
is sufficient. If not, the chattel mortgage should be registered both at the owner's domicile and in the province where
the corporation has its principal office or place of business. In this sense the property mortgaged is not the certificate
but the participation and share of the owner in the assets of the corporation.

It is a common but not accurate generalization that the situs of shares of stock is at the domicile of the owner. The
term situs is not one of fixed or invariable meaning or usage. Nor should one lose sight of the difference between
the situs of the shares and the situs of the certificate of shares. The situs of shares of stock for some purposes may
be at the domicile of the owner and for others at the domicile of the corporation; and even elsewhere. It is a general
rule that for purposes of execution, attachment and garnishment, it is not the domicile of the owner of a certificate
but the domicile of the corporation which is decisive.

By analogy with the foregoing and considering the ownership of shares in a corporation as property distinct from
the certificates which are merely the evidence of such ownership, it seems to be a reasonable construction of section
4 of Act 1508 to hold that the property in the shares may be deemed to be situated in the province in which the
corporation has its principal office or place of business. If this province is also the province of the owner’s domicile,
a single registration is sufficient. If not, the chattel mortgage should be registered both at the owner’s domicile and
in the province where the corporation has its principal office or place of business. In this sense the property
mortgaged is not the certificate but the participation and share of the owner in the assets of the corporation.

Property rule in conflict in this case

The situs of the shares is the principal office of the corporation.
Bachrach Motor v. Mariano Ledesma; Talisay Milling (Aug 1937)
Facts:
! Bachrach brought this action to recover the amount of judgments. It
appealed form the judgment declaring the right of PNB to the 6,300
stock dividends as a preferred one absolving PNB and Ledesma
form the complaint.
! It prayed that:
o The transfer certificate of stock dividends of Talisay Milling of
the PNB be declared null and void
o That Talisay Milling be ordered to cancel the entry of the
transfer of 6,300 stock dividends made by it on its books in
favor of PNB
o That Talisay Milling be order to pay Php 22K in case the
6300 stock dividends could not be sold or if the proceeds of
the sale are insufficient.
o That the defendants pay the cost of suit.
Antecedent Facts:
! Bachrach obtained judgment against Ledesma in the sum of 3K.
! The special sheriff, in compliance with the writ of execution attached
all right, title to and interest w/c Ledesma may have in any bonus,
dividend, share of stock, money or property w/c Ledesma is entitled
to receive from Talisay Milling.
o This is by virtue of the fact that Ledesma mortgaged his land
in favor of PNB to guarantee the indebtedness of Talisay
Milling or w/c defendant is entitled to receive from Talisay on
account of being a stockholder.
o The notice of attachment was served to both Ledesma and
Talisay.
! Talisay even received a copy of the notice of
attachment.
! On Oct 3, 1927, Bachrach obtained judgment against Ledesma
o Writ of execution caused attachment of Ledesma’s right of
redemption over parcels of land.
o On the day of issuance of the execution, real properties were
mortgaged to PNB to secure payment to said bank by
Ledesma of the sum of P624K
! In the same instrument of mortgage, Ledesma
mortgaged in favor of PNB shares owned by him in
Talisay Millng.
! Certificate covering 6,300 stock dividends were
delivered as security to Atty. Roman as
representative of bank PNB.
o Talisay Milling granted a bonus or compensation to the
owners of the real properties mortgaged to answer the debts
contracted by it with PNB.
! Pursuant to this, Ledesma was allotted P19K.
! PNB brought an action against Ledesma and his wife for the
recovery of mortgage credit.
o PNB amended its complaint to include Bachrach Motor as a
party because it claims to have some right to certain
properties which PNB was also claiming.
! CFI Bacolod rendered judgment in favor of PNB.
o Bachrach brought an action against Talisay to recover the
bonus or dividends declared by the corporation against
Mariano Ledesma as one of the owners of the hacienda w/c
had been mortgaged to PNB to secure obligation of Talisay.
Issues:
! WON pledge of stocks was ineffective against Bachrach because
evidence of its date was not made to appear in a public instrument.
! WON pledge could not legally exist because the certificate was not
the shares themselves.
o Certificate of stock cannot be the subject matter of the
contracts of pledge or chattel mortgage.
Held:
! The pledge of stock dividends is valid against Bachrach Motor
because the certificate was delivered to creditor bank PNB,
notwithstanding the fact that the contract DOESN'T appear in a
public instrument.
o Civ. Code provides that: no pledge shall be effective against
rd
a 3 person unless evidence of its date appears in a public
instrument.
! But this provision has been modified by Chattel
Mortgage Law (Sec 4)
! A chattel mortgage shall not be valid against any
person except the mortgagor, his
executor/administrator UNLESS the possession of
the property is delivered to and retained by the
mortgagee OR unless the mortgage is recorded in
the office of the Register of Deeds of the province in
w/c the mortgagor resides.
! Certificate of stock or of stock dividends under the corporation law
are QUASI NEGOTIABLE instruments in the sense that they may be
given in pledge or mortgage to secure an obligation.
o Petitioner Bachrach contends that pledge couldn't legally
exist because the certificate was not the shares themselves
and that the stock certificate cannot be the subject matter of
a contract of pledge or chattel mortgage.
 Malabanan v. CA
G.R. No. 179987
April 29, 2009
DECISION
TINGA, J.:

HEIRS OF MARIO MALABANAN, Petitioner, vs. REPUBLIC OF THE PHILIPPINES, Respondent .

FACTS: On 20 February 1998, Mario Malabanan filed an application for land registration before the RTC of
Cavite-Tagaytay, covering a parcel of land situated in Silang Cavite. Malabanan claimed that he had purchased the
property from Eduardo Velazco, and that he and his predecessors-in-interest had been in open, notorious, and
continuous adverse and peaceful possession of the land for more than thirty (30) years. Velazco testified that the
property was originally belonged to a twenty-two hectare property owned by his great-grandfather and upon his
death, his four sons inherited the property and divided it among themselves. Part of this property was later sold to
Malabanan. Among the evidence presented by Malabanan during trial was a Certification dated 11 June 2001,
issued by the Community Environment & Natural Resources Office, Department of Environment and Natural
Resources (CENRO-DENR), which stated that the subject property was “verified to be within the Alienable or
Disposable land per Land Classification.” The RTC approved the application for registration.

The Republic interposed an appeal to the Court of Appeals, arguing that Malabanan had failed to prove that the
property belonged to the alienable and disposable land of the public domain, and that the RTC had erred in finding
that he had been in possession of the property in the manner and for the length of time required by law for
confirmation of imperfect title. The CA reversed the RTC ruling and dismissed the application.

ISSUES: W/N petitioners can apply for Land Registration pursuant to:
a. PD 1529 Sec. 14(1) in relation with the Public Land Act Se. 48 (B)
b. PD 1529 in relation with Art. 1137 of the Civil Code

HELD: The Pertition is denied.

(1) In connection with Section 14(1) of the Property Registration Decree, Section 48(b) of the Public Land Act
recognizes and confirms that “those who by themselves or through their predecessors in interest have been in
open, continuous, exclusive, and notorious possession and occupation of alienable and disposable lands of the
public domain, under a
bona fide claim of acquisition of ownership, since June 12, 1945” have acquired ownership of, and registrable title
to, such lands based on the length and quality of their possession.

(a) Since Section 48(b) merely requires possession since 12 June 1945 and does not require that the lands should have been alienable and
disposable during the entire period of possession, the possessor is entitled to secure judicial confirmation of his title thereto as soon as it is
declared alienable and disposable, subject to the timeframe imposed by Section 47 of the Public Land Act.

(2) In complying with Section 14(2) of the Property Registration Decree, consider that under the Civil Code,
prescription is recognized as a mode of acquiring ownership of patrimonial property. However, public domain lands
become only patrimonial property not only with a declaration that these are alienable or disposable. There must
also be an express government manifestation that the property is already patrimonial or no longer retained for
public service or the development of national wealth. And only when the property has become patrimonial can
the prescriptive period for the acquisition of property of the public dominion begin to run.

(a) Patrimonial property is private property of the government. The person acquires ownership of patrimonial property by prescription under
the Civil Code is entitled to
secure registration thereof under Section 14(2) of the Property Registration Decree.

(b) There are two kinds of prescription by which patrimonial property may be acquired, one ordinary and other extraordinary. Under ordinary
acquisitive prescription, a person acquires ownership of a patrimonial property through possession for at least ten (10) years, in good faith and
with just title. Under extraordinary acquisitive prescription, a
person’s uninterrupted adverse possession of patrimonial property for at least thirty (30) years, regardless of good faith or just title, ripens into
ownership.

It is clear that the evidence of petitioners is insufficient to establish that he has acquired ownership over the subject
property under Section 48(b) of the Public Land Act. There is no substantive evidence to establish that Malabanan
or petitioners as his predecessors-in-interest have been in possession of the property since 12 June 1945 or earlier.
The earliest that petitioners can date back their possession, according to their own evidence—the Tax Declarations
they presented in particular—is to the year 1948. Thus, they cannot avail themselves of registration under Section
14(1) of the Property Registration Decree.

Neither can petitioners properly invoke Section 14(2) as basis for registration. While the subject property was
declared as alienable or disposable in 1982, there is no competent evidence that is no longer intended for public
use service or for the development of the national evidence, conformably with Article 422 of the Civil Code. The
classification of the
subject property as alienable and disposable land of the public domain does not change its status as property of
the public dominion under Article 420(2) of the Civil Code. Thus, it is insusceptible to acquisition by prescription.

Republic vs Lat vda de Castillo et al.

G.R. No. L-69002 June 30, 1988
Facts:
In 1951, the late Modesto Castillo applied for the registration of two parcels of land, Lots 1 and 2, located in
Banadero, Tanauan, Batangas, as the true and absolute owner of the land with the improvements thereon, which
was issued to him by the Register of Deeds of Batangas. He was married to Amanda Lat.

By virtue of an instrument dated in March 1960, the two parcels of land with Original Certificate of Title (OCT)
were consolidated and divided into Lots 1 to 9 which was covered by Transfer Certificate of Title (TCT). After the
death of Modesto Castillo on August 31, 1960, Amanda Lat Vda. de Castillo, et al., executed a deed of partition
and assumption of mortgage in favor of Florencio L. Castillo, et al., as a result of which Original Certificate of
Title was cancelled, and in lieu thereof, new transfer certificates of title (TCT) were issued to the following
appellants-defendants.

The Republic of the Philippines filed Civil Case No. 2044 with the lower court for the annulment of the certificates
of title issued to defendants Amanda Lat Vda. de Castillo, et al., as heirs/successors of Modesto Castillo, and for
the reversion of the lands covered thereby (Lots 1 and 2, Psu-119166) to the State.

It was alleged that said lands had always formed part of the Taal Lake and being of public ownership, it could not
be the subject of registration as private property. They alleged in their answer that the Government's action was
already barred by the decision of the registration court; that the action has prescribed; and that the government was
estopped from questioning the ownership and possession of appellants.
The then Court of First Instance of Batangas, Branch VI, decided that the Register of Deeds of Batangas to order
the cancellation of the OCT in the name of Modesto Castillo and the subsequent TCT issued over the property in
the names of the defendants. Lots Nos. 1 and 2 of Plan Psu-19166 are hereby declared public lands belonging to
the state. Without pronouncement as to costs.
Defendants appealed their case. The Court of Appeals, in a decision promulgated on April 26,1984, reversed and
set aside the appealed decision, and dismissed the complaint.
Issue:
The sole issue raised in this case is whether or not the decision of the Land Registration Court involving shore lands
constitutes res adjudicata.
Held:
There is no question that one of the requisites of res judicata is that the court rendering the final judgment must
have jurisdiction over the subject matter (Ramos v. Pablo, 146 SCRA 24 [1986]; that shores are properties of the
public domain intended for public use (Article 420, Civil Code) and, therefore, not registrable.

Thus, it has long been settled that portions of the foreshore or of the territorial waters and beaches cannot be
registered. Their inclusion in a certificate of title does not convert the same into properties of private ownership or
confer title upon the registrant (Republic v. Ayala y Cia, 14 SCRA, 259 [1965], citing the cases of Dizon, et al. v.
Bayona, et al., 98 Phil. 943; and Dizon, et al. v. Rodriguez, et al., 13 SCRA 704).
But an important bone of contention is the nature of the lands involved in this case.
Petitioner contends "that "Lots 1 and 2, PSU-119166 had always formed part of the Taal Lake, washed and
inundated by the waters thereof. Consequently, the same were not subject to registration, being outside the
commerce of men; and that since the lots in litigation are of public domain (Art. 502), par. 4 Civil Code) the
registration court (of 1951) did not have jurisdiction to adjudicate said lands as private property, hence, res judicata
does not apply. (Rollo, pp. 37-38).
The Government presented both oral and documentary evidence.
Lakeshore land or lands adjacent to the lake, like the lands in question must be differentiated from foreshore land or
that part of the land adjacent to the sea which is alternately covered and left dry by the ordinary flow of the tides
(Castillo, Law on Natural Resources, Fifth Edition, 1954, p. 67).
Such distinction draws importance from the fact that accretions on the bank of a lake, like Laguna de Bay, belong to
the owners of the estate to which they have been added (Gov't. v. Colegio de San Jose, 53 Phil. 423) while accretion
on a sea bank still belongs to the public domain, and is not available for private ownership until formally declared
by the government to be no longer needed for public use (Ignacio v. Director of Lands, 108 Phil. 335 [1960]).
But said distinction will not help private respondents because there is no accretion shown to exist in the case at bar.
On the contrary, it was established that the occupants of the lots who were engaged in duck raising filled up the area
with shells and sand to make it habitable.
The defense of long possession is likewise not available in this case because, as already ruled by this Court, mere
possession of land does not by itself automatically divest the land of its public character (Cuevas v. Pineda, 143
SCRA 674 [1968]).
PREMISES CONSIDERED, the April 26,1984 Decision of the then Intermediate Appellate Court is hereby SET
ASIDE and REVERSED and the February 6,1976 Decision of the then Court of First Instance of Batangas is hereby
AFFIRMED and REINSTATED. SO ORDERED.

Republic v. Lat Vda. de Castillo

GR 69002, Jan. 30, 1988

Lots which had always formed part of a lake, washed and inundated by the waters thereof are not subject to
registration, being outside the commerce of men. Since the lots are of public domain (Art. 502, par. 4, Civil Code),
the registration court does not have jurisdiction to adjudicate said lots as private property, hence res judicata does
not apply.

MENDOZA v NAVARETTE, GR 82531 SEPT 30, 1992

TOPIC: Article 420, Free Patent over private land is void
FACTS:

Plaintiff filed a complaint for annulment of title, partition, and damages against respondents alleging that Teodoro
Mendoza owner of a parcel of land in Bulacan died intestate and that the only legal heirs of Teodoro are his wife,
his 2 children, plaintiff and defendant and that they executed an Extra-Judicial Settlement of the Estate, partitioning:
¾ to plaintiff & ¼ to his wife with defendant waiving her right to her share and that upon the death of Teodoro’s
wife the wife sold her share to defendant and that only recently plaintiff discovered that Defendant applied for Free
Patent with the Bureau of Lands for the entire lot to be named under defendant’s husband.
Defendant’s defense is that plaintiff’s cause of action has been barred by the Statute of Limitations as the application
for title has already been 10 years prior to the complaint and that the prescriptive period is only 4 years from such
date while petitioner claims that the 4 year period from the discovery of fraud has not yet elapsed. The trial court
said that prescription does not run against co-owners.

ISSUE:
Who has the better title in this case?

RULING:
Petitioner Mendoza has a better title in this case. Co-ownership is not at all involved in this case this is very clear
from the allegations in the complaint which unmistakably show that whatever co-ownership existed among the heirs
of Teodoro Mendoza over the estate he left behind was terminated when said heirs executed the deed of extrajudicial
settlement. The private ownership of land is not affected by the issuance of a free patent over the same land because
the Public Land Act applies only to lands of the public domain.
Now, a certificate of title fraudulently secured is null and void ab initio if the fraud consisted in misrepresenting that
the land is part of the public domain. Being null and void, the free patent granted and the subsequent titles produce
no legal effects whatsoever. A free patent which purports to convey land to which the Government did not have any
title at the time of its issuance does not vest any title in the patentee as against the true owner. Besides, the petitioner’s
open, public, adverse and exclusive possession of the ¾ portion of the property and its illegal inclusion in the Free
Patent and Original Certificate of Title issued to defendant’s husband give the former a cause of action for quieting
of title, which is imprescriptible in favor of a person in possession of the property.
RACHEL C. CELESTIAL v. JESSE CACHOPERO

Facts:

Petitioner Rachel Celestial is the sister of defendant Jesse Cachopero. They had a dispute over a
piece of land which was a dried-up creek, as Cachopero was trying to obtain a Miscellaneous Sales
Application (MSA) to the Department of Environment and Natural Resources (DENR) alleging that he
had been the owner of that land whereon he built a house and other improvements. However, Celestial
protests that she has preferential right over the land because it is adjacent to and is the only outlet from
her house. According to the Bureau of Land, the land in dispute was a creek and is therefore outside the
commerce of man. The first MSA was denied by the Municipal Trial Court (MTC) prompting Cachopero
to obtain another MSA which was granted by the DENR. Due to conflicting interests of the parties, the
land in dispute must be sold in a public auction.

Cachopero then filed a petition for certiorari, prohibition and mandamus against the DENR with the
Regional Trial Court (RTC) but was denied. On appeal, the Court of Appeals reversed and set aside the
decision of the RTC.

Celestial contends that the RTC had no jurisdiction over Cachopero‘s petition for certiorari as it is
in the nature of an appeal falling within the jurisdiction of the CA and that the Cachopero has not
exhausted all administrative remedies.

ISSUE:

(a) Whether or not the RTC has jurisdiction over petition for certiorari, mandamus and prohibition

(b) Whether or not the land in question owned by one of the parties when it is classified as outside the
commerce of man

HELD:

RTCs have concurrent jurisdiction with the CA and SC over original petitions for certiorari,
prohinition and mandamus.

Celestial has apparently confused the separate and distinct remedies of an appeal (i.e. through a petition
for review of a decision of a quasi judicial agency under Rule 43 of the Rules of Court) and a special civil
action for certiorari (i.e. through a petition for review under Rule 65 of the Rules of Court).

Concomitantly, appellate jurisdiction is separate and distinct from the jurisdiction to issue the prerogative
writ of certiorari. An appellate jurisdiction refers to a process which is a continuation of the original suit
and not a commencement of a new action. In contrast, to invoke a court’s jurisdiction to issue the writ of
certiorari requires the commencement of a new and original action therefore, independent of the
proceedings which gave rise to the questioned decision or order. As correctly held by the Court of Appeals,
the RTCs have concurrent jurisdiction with the Court of Appeals and the Supreme Court over original
petitions for certiorari, prohibition and mandamus under Section 21 of B.P. 129.

The Court finds no reason to disturb the Court of Appeals’ conclusion that the instant case falls under the
recognized exceptions to the rule on exhaustion of administrative remedies, which provides “that such is
inapplicable if (1) it should appear that an irreparable injury or damage will be suffered by a party if he
should await, before taking court action, the final action of the administrative official concerned on the
matter as a result of a patently illegal order or (2) where appeal would not prove to be speedy and adequate
remedy”.

This requirement of prior exhaustion of administrative remedies is not absolute, there being instances
when it may be dispensed with and judicial action may be validly resorted to immediately, among which
are: 1) when the question raised is purely legal; 2) when the administrative body is in estoppel; 3) when
the act complained of is patently illegal; 4) when there is urgent need for judicial intervention; 5) when
the claim involved is small; 6) when irreparable damage will be suffered; 7) when there is no other plain,
speedy and adequate remedy; 8) when strong public interest is involved; and 9) in quo warranto
proceedings.
A dried up creek is property of public dominion and not susceptible to acquisitive
prescription

As for Celestial‘s claim of ownership over the subject land, admittedly a dried-up bed of the Salunayan
Creek, based on (1) her alleged long term adverse possession and that of her predecessor-in-interest,
Marcelina Basadre, even prior to October 22, 1966, when she purchased the adjoining property from the
latter, and (2) the right of accession under Art. 370 of the Spanish Civil Code of 1889 and/or Article 461
of the Civil Code, the same must fail.

Since property of public dominion is outside the commerce of man and not susceptible to private
appropriation and acquisitive prescription, the adverse possession which may be the basis of a grant of
title in the confirmation of an imperfect title refers only to alienable or disposable portions of the public
domain. It is only after the Government has declared the land to be alienable and disposable agricultural
land that the year of entry, cultivation and exclusive and adverse possession can be counted for purposes
of an imperfect title.