G.R. No.

L-11658
February 15, 1918
LEUNG YEE, plaintiff-appellant,
vs.
FRANK L. STRONG MACHINERY COMPANY and J. G. WILLIAMSON, defendantsappellees.
Booram and Mahoney for appellant.Williams, Ferrier and SyCip for appellees.
CARSON, J.:
The "Compaia Agricola Filipina" bought a considerable quantity of rice-cleaning
machinery company from the defendant machinery company, and executed a
chattel mortgage thereon to secure payment of the purchase price. It included in the
mortgage deed the building of strong materials in which the machinery was
installed, without any reference to the land on which it stood. The indebtedness
secured by this instrument not having been paid when it fell due, the mortgaged
property was sold by the sheriff, in pursuance of the terms of the mortgage
instrument, and was bought in by the machinery company. The mortgage was
registered in the chattel mortgage registry, and the sale of the property to the
machinery company in satisfaction of the mortgage was annotated in the same
registry on December 29, 1913.
A few weeks thereafter, on or about the 14th of January, 1914, the "Compaia
Agricola Filipina" executed a deed of sale of the land upon which the building stood
to the machinery company, but this deed of sale, although executed in a public
document, was not registered. This deed makes no reference to the building erected
on the land and would appear to have been executed for the purpose of curing any
defects which might be found to exist in the machinery company's title to the
building under the sheriff's certificate of sale. The machinery company went into
possession of the building at or about the time when this sale took place, that is to
say, the month of December, 1913, and it has continued in possession ever since.
At or about the time when the chattel mortgage was executed in favor of the
machinery company, the mortgagor, the "Compaia Agricola Filipina" executed
another mortgage to the plaintiff upon the building, separate and apart from the
land on which it stood, to secure payment of the balance of its indebtedness to the
plaintiff under a contract for the construction of the building. Upon the failure of the
mortgagor to pay the amount of the indebtedness secured by the mortgage, the
plaintiff secured judgment for that amount, levied execution upon the building,
bought it in at the sheriff's sale on or about the 18th of December, 1914, and had
the sheriff's certificate of the sale duly registered in the land registry of the Province
of Cavite.
At the time when the execution was levied upon the building, the defendant
machinery company, which was in possession, filed with the sheriff a sworn
statement setting up its claim of title and demanding the release of the property
from the levy. Thereafter, upon demand of the sheriff, the plaintiff executed an
indemnity bond in favor of the sheriff in the sum of P12,000, in reliance upon which
the sheriff sold the property at public auction to the plaintiff, who was the highest
bidder at the sheriff's sale.
This action was instituted by the plaintiff to recover possession of the building from
the machinery company.
The trial judge, relying upon the terms of article 1473 of the Civil Code, gave
judgment in favor of the machinery company, on the ground that the company had
its title to the building registered prior to the date of registry of the plaintiff's
certificate.
Article 1473 of the Civil Code is as follows:
If the same thing should have been sold to different vendees, the ownership shall be
transfer to the person who may have the first taken possession thereof in good faith,
if it should be personal property.

Should it be real property, it shall belong to the person acquiring it who first
recorded it in the registry.
Should there be no entry, the property shall belong to the person who first took
possession of it in good faith, and, in the absence thereof, to the person who
presents the oldest title, provided there is good faith.
The registry her referred to is of course the registry of real property, and it must be
apparent that the annotation or inscription of a deed of sale of real property in a
chattel mortgage registry cannot be given the legal effect of an inscription in the
registry of real property. By its express terms, the Chattel Mortgage Law
contemplates and makes provision for mortgages of personal property; and the sole
purpose and object of the chattel mortgage registry is to provide for the registry of
"Chattel mortgages," that is to say, mortgages of personal property executed in the
manner and form prescribed in the statute. The building of strong materials in which
the rice-cleaning machinery was installed by the "Compaia Agricola Filipina" was
real property, and the mere fact that the parties seem to have dealt with it separate
and apart from the land on which it stood in no wise changed its character as real
property. It follows that neither the original registry in the chattel mortgage of the
building and the machinery installed therein, not the annotation in that registry of
the sale of the mortgaged property, had any effect whatever so far as the building
was concerned.
We conclude that the ruling in favor of the machinery company cannot be sustained
on the ground assigned by the trial judge. We are of opinion, however, that the
judgment must be sustained on the ground that the agreed statement of facts in the
court below discloses that neither the purchase of the building by the plaintiff nor his
inscription of the sheriff's certificate of sale in his favor was made in good faith, and
that the machinery company must be held to be the owner of the property under the
third paragraph of the above cited article of the code, it appearing that the company
first took possession of the property; and further, that the building and the land were
sold to the machinery company long prior to the date of the sheriff's sale to the
plaintiff.
It has been suggested that since the provisions of article 1473 of the Civil Code
require "good faith," in express terms, in relation to "possession" and "title," but
contain no express requirement as to "good faith" in relation to the "inscription" of
the property on the registry, it must be presumed that good faith is not an essential
requisite of registration in order that it may have the effect contemplated in this
article. We cannot agree with this contention. It could not have been the intention of
the legislator to base the preferential right secured under this article of the code
upon an inscription of title in bad faith. Such an interpretation placed upon the
language of this section would open wide the door to fraud and collusion. The public
records cannot be converted into instruments of fraud and oppression by one who
secures an inscription therein in bad faith. The force and effect given by law to an
inscription in a public record presupposes the good faith of him who enters such
inscription; and rights created by statute, which are predicated upon an inscription in
a public registry, do not and cannot accrue under an inscription "in bad faith," to the
benefit of the person who thus makes the inscription.
Construing the second paragraph of this article of the code, the supreme court of
Spain held in its sentencia of the 13th of May, 1908, that:
This rule is always to be understood on the basis of the good faith mentioned in the
first paragraph; therefore, it having been found that the second purchasers who
record their purchase had knowledge of the previous sale, the question is to be
decided in accordance with the following paragraph. (Note 2, art. 1473, Civ. Code,
Medina and Maranon [1911] edition.)
Although article 1473, in its second paragraph, provides that the title of conveyance
of ownership of the real property that is first recorded in the registry shall have

preference, this provision must always be understood on the basis of the good faith
mentioned in the first paragraph; the legislator could not have wished to strike it out
and to sanction bad faith, just to comply with a mere formality which, in given cases,
does not obtain even in real disputes between third persons. (Note 2, art. 1473, Civ.
Code, issued by the publishers of the La Revista de los Tribunales, 13th edition.)
The agreed statement of facts clearly discloses that the plaintiff, when he bought the
building at the sheriff's sale and inscribed his title in the land registry, was duly
notified that the machinery company had bought the building from plaintiff's
judgment debtor; that it had gone into possession long prior to the sheriff's sale; and
that it was in possession at the time when the sheriff executed his levy. The
execution of an indemnity bond by the plaintiff in favor of the sheriff, after the
machinery company had filed its sworn claim of ownership, leaves no room for doubt
in this regard. Having bought in the building at the sheriff's sale with full knowledge
that at the time of the levy and sale the building had already been sold to the
machinery company by the judgment debtor, the plaintiff cannot be said to have
been a purchaser in good faith; and of course, the subsequent inscription of the
sheriff's certificate of title must be held to have been tainted with the same defect.
Perhaps we should make it clear that in holding that the inscription of the sheriff's
certificate of sale to the plaintiff was not made in good faith, we should not be
understood as questioning, in any way, the good faith and genuineness of the
plaintiff's claim against the "Compaia Agricola Filipina." The truth is that both the
plaintiff and the defendant company appear to have had just and righteous claims
against their common debtor. No criticism can properly be made of the exercise of
the utmost diligence by the plaintiff in asserting and exercising his right to recover
the amount of his claim from the estate of the common debtor. We are strongly
inclined to believe that in procuring the levy of execution upon the factory building
and in buying it at the sheriff's sale, he considered that he was doing no more than
he had a right to do under all the circumstances, and it is highly possible and even
probable that he thought at that time that he would be able to maintain his position
in a contest with the machinery company. There was no collusion on his part with the
common debtor, and no thought of the perpetration of a fraud upon the rights of
another, in the ordinary sense of the word. He may have hoped, and doubtless he
did hope, that the title of the machinery company would not stand the test of an
action in a court of law; and if later developments had confirmed his unfounded
hopes, no one could question the legality of the propriety of the course he adopted.
But it appearing that he had full knowledge of the machinery company's claim of
ownership when he executed the indemnity bond and bought in the property at the
sheriff's sale, and it appearing further that the machinery company's claim of
ownership was well founded, he cannot be said to have been an innocent purchaser
for value. He took the risk and must stand by the consequences; and it is in this
sense that we find that he was not a purchaser in good faith.
One who purchases real estate with knowledge of a defect or lack of title in his
vendor cannot claim that he has acquired title thereto in good faith as against the
true owner of the land or of an interest therein; and the same rule must be applied
to one who has knowledge of facts which should have put him upon such inquiry and
investigation as might be necessary to acquaint him with the defects in the title of
his vendor. A purchaser cannot close his eyes to facts which should put a reasonable
man upon his guard, and then claim that he acted in good faith under the belief that
there was no defect in the title of the vendor. His mere refusal to believe that such
defect exists, or his willful closing of his eyes to the possibility of the existence of a
defect in his vendor's title, will not make him an innocent purchaser for value, if
afterwards develops that the title was in fact defective, and it appears that he had
such notice of the defects as would have led to its discovery had he acted with that
measure of precaution which may reasonably be acquired of a prudent man in a like

situation. Good faith, or lack of it, is in its analysis a question of intention; but in
ascertaining the intention by which one is actuated on a given occasion, we are
necessarily controlled by the evidence as to the conduct and outward acts by which
alone the inward motive may, with safety, be determined. So it is that "the honesty
of intention," "the honest lawful intent," which constitutes good faith implies a
"freedom from knowledge and circumstances which ought to put a person on
inquiry," and so it is that proof of such knowledge overcomes the presumption of
good faith in which the courts always indulge in the absence of proof to the contrary.
"Good faith, or the want of it, is not a visible, tangible fact that can be seen or
touched, but rather a state or condition of mind which can only be judged of by
actual or fancied tokens or signs." (Wilder vs. Gilman, 55 Vt., 504, 505; Cf. Cardenas
Lumber Co. vs. Shadel, 52 La. Ann., 2094-2098; Pinkerton Bros. Co. vs. Bromley, 119
Mich., 8, 10, 17.)
We conclude that upon the grounds herein set forth the disposing part of the
decision and judgment entered in the court below should be affirmed with costs of
this instance against the appellant. So ordered.
G.R. No. L-55729 March 28, 1983
ANTONIO PUNSALAN, JR., petitioner,
vs.
REMEDIOS VDA. DE LACSAMANA and THE HONORABLE JUDGE RODOLFO A.
ORTIZ, respondents.
Benjamin S. Benito & Associates for petitioner.
Expedito Yummul for private respondent.
MELENCIO-HERRERA, J.:
The sole issue presented by petitioner for resolution is whether or not respondent
Court erred in denying the Motion to Set Case for Pre-trial with respect to respondent
Remedios Vda. de Lacsamana as the case had been dismissed on the ground of
improper venue upon motion of co-respondent Philippine National Bank (PNB).
It appears that petitioner, Antonio Punsalan, Jr., was the former registered owner of a
parcel of land consisting of 340 square meters situated in Bamban, Tarlac. In 1963,
petitioner mortgaged said land to respondent PNB (Tarlac Branch) in the amount of
P10,000.00, but for failure to pay said amount, the property was foreclosed on
December 16, 1970. Respondent PNB (Tarlac Branch) was the highest bidder in said
foreclosure proceedings. However, the bank secured title thereto only on December
14, 1977.
In the meantime, in 1974, while the properly was still in the alleged possession of
petitioner and with the alleged acquiescence of respondent PNB (Tarlac Branch), and
upon securing a permit from the Municipal Mayor, petitioner constructed a
warehouse on said property. Petitioner declared said warehouse for tax purposes for
which he was issued Tax Declaration No. 5619. Petitioner then leased the warehouse
to one Hermogenes Sibal for a period of 10 years starting January 1975.
On July 26, 1978, a Deed of Sale was executed between respondent PNB (Tarlac
Branch) and respondent Lacsamana over the property. This contract was amended
on July 31, 1978, particularly to include in the sale, the building and improvement
thereon. By virtue of said instruments, respondent - Lacsamana secured title over
the property in her name (TCT No. 173744) as well as separate tax declarations for
the land and building. 1
On November 22, 1979, petitioner commenced suit for "Annulment of Deed of Sale
with Damages" against herein respondents PNB and Lacsamana before respondent
Court of First Instance of Rizal, Branch XXXI, Quezon City, essentially impugning the
validity of the sale of the building as embodied in the Amended Deed of Sale. In this
connection, petitioner alleged:
xxx xxx xxx

22. That defendant, Philippine National Bank, through its Branch Manager ... by
virtue of the request of defendant ... executed a document dated July 31, 1978,
entitled Amendment to Deed of Absolute Sale ... wherein said defendant bank as
Vendor sold to defendant Lacsamana the building owned by the plaintiff under Tax
Declaration No. 5619, notwithstanding the fact that said building is not owned by the
bank either by virtue of the public auction sale conducted by the Sheriff and sold to
the Philippine National Bank or by virtue of the Deed of Sale executed by the bank
itself in its favor on September 21, 1977 ...;
23. That said defendant bank fraudulently mentioned ... that the sale in its favor
should likewise have included the building, notwithstanding no legal basis for the
same and despite full knowledge that the Certificate of Sale executed by the sheriff
in its favor ... only limited the sale to the land, hence, by selling the building which
never became the property of defendant, they have violated the principle against
'pactum commisorium'.
Petitioner prayed that the Deed of Sale of the building in favor of respondent
Lacsamana be declared null and void and that damages in the total sum of
P230,000.00, more or less, be awarded to him. 2
In her Answer filed on March 4, 1980,-respondent Lacsamana averred the affirmative
defense of lack of cause of action in that she was a purchaser for value and invoked
the principle in Civil Law that the "accessory follows the principal". 3
On March 14, 1980, respondent PNB filed a Motion to Dismiss on the ground that
venue was improperly laid considering that the building was real property under
article 415 (1) of the New Civil Code and therefore section 2(a) of Rule 4 should
apply. 4
Opposing said Motion to Dismiss, petitioner contended that the action for annulment
of deed of sale with damages is in the nature of a personal action, which seeks to
recover not the title nor possession of the property but to compel payment of
damages, which is not an action affecting title to real property.
On April 25, 1980, respondent Court granted respondent PNB's Motion to Dismiss as
follows:
Acting upon the 'Motion to Dismiss' of the defendant Philippine National Bank dated
March 13, 1980, considered against the plaintiff's opposition thereto dated April 1,
1980, including the reply therewith of said defendant, this Court resolves to DISMISS
the plaintiff's complaint for improper venue considering that the plaintiff's complaint
which seeks for the declaration as null and void, the amendment to Deed of
Absolute Sale executed by the defendant Philippine National Bank in favor of the
defendant Remedios T. Vda. de Lacsamana, on July 31, 1978, involves a warehouse
allegedly owned and constructed by the plaintiff on the land of the defendant
Philippine National Bank situated in the Municipality of Bamban, Province of Tarlac,
which warehouse is an immovable property pursuant to Article 415, No. 1 of the New
Civil Code; and, as such the action of the plaintiff is a real action affecting title to
real property which, under Section 2, Rule 4 of the New Rules of Court, must be tried
in the province where the property or any part thereof lies. 5
In his Motion for Reconsideration of the aforestated Order, petitioner reiterated the
argument that the action to annul does not involve ownership or title to property but
is limited to the validity of the deed of sale and emphasized that the case should
proceed with or without respondent PNB as respondent Lacsamana had already filed
her Answer to the Complaint and no issue on venue had been raised by the latter.
On September 1, 1980,.respondent Court denied reconsideration for lack of merit.
Petitioner then filed a Motion to Set Case for Pre-trial, in so far as respondent
Lacsamana was concerned, as the issues had already been joined with the filing of
respondent Lacsamana's Answer.

In the Order of November 10, 1980 respondent Court denied said Motion to Set Case
for Pre-trial as the case was already dismissed in the previous Orders of April 25,
1980 and September 1, 1980.
Hence, this Petition for Certiorari, to which we gave due course.
We affirm respondent Court's Order denying the setting for pre-trial.
The warehouse claimed to be owned by petitioner is an immovable or real property
as provided in article 415(l) of the Civil Code. 6 Buildings are always immovable
under the Code. 7 A building treated separately from the land on which it stood is
immovable property and the mere fact that the parties to a contract seem to have
dealt with it separate and apart from the land on which it stood in no wise changed
its character as immovable property. 8
While it is true that petitioner does not directly seek the recovery of title or
possession of the property in question, his action for annulment of sale and his claim
for damages are closely intertwined with the issue of ownership of the building
which, under the law, is considered immovable property, the recovery of which is
petitioner's primary objective. The prevalent doctrine is that an action for the
annulment or rescission of a sale of real property does not operate to efface the
fundamental and prime objective and nature of the case, which is to recover said
real property. It is a real action. 9
Respondent Court, therefore, did not err in dismissing the case on the ground of
improper venue (Section 2, Rule 4) 10, which was timely raised (Section 1, Rule 16) 11.
Petitioner's other contention that the case should proceed in so far as respondent
Lacsamana is concerned as she had already filed an Answer, which did not allege
improper venue and, therefore, issues had already been joined, is likewise
untenable. Respondent PNB is an indispensable party as the validity of the Amended
Contract of Sale between the former and respondent Lacsamana is in issue. It would,
indeed, be futile to proceed with the case against respondent Lacsamana alone.
WHEREFORE, the petition is hereby denied without prejudice to the refiling of the
case by petitioner Antonio Punsalan, Jr. in the proper forum.
Costs against petitioner.
SO ORDERED.
G.R. No. L-20329
March 16, 1923
THE STANDARD OIL COMPANY OF NEW YORK, petitioner,
vs.
JOAQUIN JARAMILLO, as register of deeds of the City of Manila, respondent.
Ross, Lawrence and Selph for petitioner.City Fiscal Revilla and Assistant City Fiscal
Rodas for respondent.
STREET, J.:
This cause is before us upon demurrer interposed by the respondent, Joaquin
Jaramillo, register of deeds of the City of Manila, to an original petition of the
Standard Oil Company of New York, seeking a peremptory mandamus to compel the
respondent to record in the proper register a document purporting to be a chattel
mortgage executed in the City of Manila by Gervasia de la Rosa, Vda. de Vera, in
favor of the Standard Oil Company of New York.
It appears from the petition that on November 27, 1922, Gervasia de la Rosa, Vda.
de Vera, was the lessee of a parcel of land situated in the City of Manila and owner
of the house of strong materials built thereon, upon which date she executed a
document in the form of a chattel mortgage, purporting to convey to the petitioner
by way of mortgage both the leasehold interest in said lot and the building which
stands thereon.
The clauses in said document describing the property intended to be thus mortgage
are expressed in the following words:

Now, therefore, the mortgagor hereby conveys and transfer to the mortgage, by way
of mortgage, the following described personal property, situated in the City of
Manila, and now in possession of the mortgagor, to wit:
(1) All of the right, title, and interest of the mortgagor in and to the contract of lease
hereinabove referred to, and in and to the premises the subject of the said lease;
(2) The building, property of the mortgagor, situated on the aforesaid leased
premises.
After said document had been duly acknowledge and delivered, the petitioner
caused the same to be presented to the respondent, Joaquin Jaramillo, as register of
deeds of the City of Manila, for the purpose of having the same recorded in the book
of record of chattel mortgages. Upon examination of the instrument, the respondent
was of the opinion that it was not a chattel mortgage, for the reason that the interest
therein mortgaged did not appear to be personal property, within the meaning of the
Chattel Mortgage Law, and registration was refused on this ground only.
We are of the opinion that the position taken by the respondent is untenable; and it
is his duty to accept the proper fee and place the instrument on record. The duties of
a register of deeds in respect to the registration of chattel mortgage are of a purely
ministerial character; and no provision of law can be cited which confers upon him
any judicial or quasi-judicial power to determine the nature of any document of
which registration is sought as a chattel mortgage.
The original provisions touching this matter are contained in section 15 of the
Chattel Mortgage Law (Act No. 1508), as amended by Act No. 2496; but these have
been transferred to section 198 of the Administrative Code, where they are now
found. There is nothing in any of these provisions conferring upon the register of
deeds any authority whatever in respect to the "qualification," as the term is used in
Spanish law, of chattel mortgage. His duties in respect to such instruments are
ministerial only. The efficacy of the act of recording a chattel mortgage consists in
the fact that it operates as constructive notice of the existence of the contract, and
the legal effects of the contract must be discovered in the instrument itself in
relation with the fact of notice. Registration adds nothing to the instrument,
considered as a source of title, and affects nobody's rights except as a specifies of
notice.
Articles 334 and 335 of the Civil Code supply no absolute criterion for discriminating
between real property and personal property for purpose of the application of the
Chattel Mortgage Law. Those articles state rules which, considered as a general
doctrine, are law in this jurisdiction; but it must not be forgotten that under given
conditions property may have character different from that imputed to it in said
articles. It is undeniable that the parties to a contract may by agreement treat as
personal property that which by nature would be real property; and it is a familiar
phenomenon to see things classed as real property for purposes of taxation which on
general principle might be considered personal property. Other situations are
constantly arising, and from time to time are presented to this court, in which the
proper classification of one thing or another as real or personal property may be said
to be doubtful.
The point submitted to us in this case was determined on September 8, 1914, in an
administrative ruling promulgated by the Honorable James A. Ostrand, now a Justice
of this Court, but acting at that time in the capacity of Judge of the fourth branch of
the Court of First Instance of the Ninth Judicial District, in the City of Manila; and little
of value can be here added to the observations contained in said ruling. We
accordingly quote therefrom as follows:
It is unnecessary here to determine whether or not the property described in the
document in question is real or personal; the discussion may be confined to the
point as to whether a register of deeds has authority to deny the registration of a

document purporting to be a chattel mortgage and executed in the manner and form
prescribed by the Chattel Mortgage Law.
Then, after quoting section 5 of the Chattel Mortgage Law (Act No. 1508), his Honor
continued:
Based principally upon the provisions of section quoted the Attorney-General of the
Philippine Islands, in an opinion dated August 11, 1909, held that a register of deeds
has no authority to pass upon the capacity of the parties to a chattel mortgage
which is presented to him for record. A fortiori a register of deeds can have no
authority to pass upon the character of the property sought to be encumbered by a
chattel mortgage. Of course, if the mortgaged property is real instead of personal
the chattel mortgage would no doubt be held ineffective as against third parties, but
this is a question to be determined by the courts of justice and not by the register of
deeds.
In Leung Yee vs. Frank L. Strong Machinery Co. and Williamson (37 Phil., 644), this
court held that where the interest conveyed is of the nature of real, property, the
placing of the document on record in the chattel mortgage register is a futile act; but
that decision is not decisive of the question now before us, which has reference to
the function of the register of deeds in placing the document on record.
In the light of what has been said it becomes unnecessary for us to pass upon the
point whether the interests conveyed in the instrument now in question are real or
personal; and we declare it to be the duty of the register of deeds to accept the
estimate placed upon the document by the petitioner and to register it, upon
payment of the proper fee.
The demurrer is overruled; and unless within the period of five days from the date of
the notification hereof, the respondent shall interpose a sufficient answer to the
petition, the writ of mandamus will be issued, as prayed, but without costs. So
ordered.
G.R. No. L-40411
August 7, 1935
DAVAO SAW MILL CO., INC., plaintiff-appellant,
vs.
APRONIANO G. CASTILLO and DAVAO LIGHT & POWER CO., INC., defendantsappellees.
Arsenio Suazo and Jose L. Palma Gil and Pablo Lorenzo and Delfin Joven for
appellant.J.W. Ferrier for appellees.
MALCOLM, J.:
The issue in this case, as announced in the opening sentence of the decision in the
trial court and as set forth by counsel for the parties on appeal, involves the
determination of the nature of the properties described in the complaint. The trial
judge found that those properties were personal in nature, and as a consequence
absolved the defendants from the complaint, with costs against the plaintiff.
The Davao Saw Mill Co., Inc., is the holder of a lumber concession from the
Government of the Philippine Islands. It has operated a sawmill in the sitio of Maa,
barrio of Tigatu, municipality of Davao, Province of Davao. However, the land upon
which the business was conducted belonged to another person. On the land the
sawmill company erected a building which housed the machinery used by it. Some
of the implements thus used were clearly personal property, the conflict concerning
machines which were placed and mounted on foundations of cement. In the contract
of lease between the sawmill company and the owner of the land there appeared the
following provision:
That on the expiration of the period agreed upon, all the improvements and
buildings introduced and erected by the party of the second part shall pass to the
exclusive ownership of the party of the first part without any obligation on its part to
pay any amount for said improvements and buildings; also, in the event the party of

the second part should leave or abandon the land leased before the time herein
stipulated, the improvements and buildings shall likewise pass to the ownership of
the party of the first part as though the time agreed upon had expired: Provided,
however, That the machineries and accessories are not included in the
improvements which will pass to the party of the first part on the expiration or
abandonment of the land leased.
In another action, wherein the Davao Light & Power Co., Inc., was the plaintiff and
the Davao, Saw, Mill Co., Inc., was the defendant, a judgment was rendered in favor
of the plaintiff in that action against the defendant in that action; a writ of execution
issued thereon, and the properties now in question were levied upon as personalty
by the sheriff. No third party claim was filed for such properties at the time of the
sales thereof as is borne out by the record made by the plaintiff herein. Indeed the
bidder, which was the plaintiff in that action, and the defendant herein having
consummated the sale, proceeded to take possession of the machinery and other
properties described in the corresponding certificates of sale executed in its favor by
the sheriff of Davao.
As connecting up with the facts, it should further be explained that the Davao Saw
Mill Co., Inc., has on a number of occasions treated the machinery as personal
property by executing chattel mortgages in favor of third persons. One of such
persons is the appellee by assignment from the original mortgages.
Article 334, paragraphs 1 and 5, of the Civil Code, is in point. According to the Code,
real property consists of
1. Land, buildings, roads and constructions of all kinds adhering to the soil;
xxx
xxx
xxx
5. Machinery, liquid containers, instruments or implements intended by the owner of
any building or land for use in connection with any industry or trade being carried on
therein and which are expressly adapted to meet the requirements of such trade of
industry.
Appellant emphasizes the first paragraph, and appellees the last mentioned
paragraph. We entertain no doubt that the trial judge and appellees are right in their
appreciation of the legal doctrines flowing from the facts.
In the first place, it must again be pointed out that the appellant should have
registered its protest before or at the time of the sale of this property. It must further
be pointed out that while not conclusive, the characterization of the property as
chattels by the appellant is indicative of intention and impresses upon the property
the character determined by the parties. In this connection the decision of this court
in the case of Standard Oil Co. of New York vs. Jaramillo ( [1923], 44 Phil., 630),
whether obiter dicta or not, furnishes the key to such a situation.
It is, however not necessary to spend overly must time in the resolution of this
appeal on side issues. It is machinery which is involved; moreover, machinery not
intended by the owner of any building or land for use in connection therewith, but
intended by a lessee for use in a building erected on the land by the latter to be
returned to the lessee on the expiration or abandonment of the lease.
A similar question arose in Puerto Rico, and on appeal being taken to the United
States Supreme Court, it was held that machinery which is movable in its nature only
becomes immobilized when placed in a plant by the owner of the property or plant,
but not when so placed by a tenant, a usufructuary, or any person having only a
temporary right, unless such person acted as the agent of the owner. In the opinion
written by Chief Justice White, whose knowledge of the Civil Law is well known, it
was in part said:
To determine this question involves fixing the nature and character of the property
from the point of view of the rights of Valdes and its nature and character from the
point of view of Nevers & Callaghan as a judgment creditor of the Altagracia
Company and the rights derived by them from the execution levied on the

machinery placed by the corporation in the plant. Following the Code Napoleon, the
Porto Rican Code treats as immovable (real) property, not only land and buildings,
but also attributes immovability in some cases to property of a movable nature, that
is, personal property, because of the destination to which it is applied. "Things," says
section 334 of the Porto Rican Code, "may be immovable either by their own nature
or by their destination or the object to which they are applicable." Numerous
illustrations are given in the fifth subdivision of section 335, which is as follows:
"Machinery, vessels, instruments or implements intended by the owner of the
tenements for the industrial or works that they may carry on in any building or upon
any land and which tend directly to meet the needs of the said industry or works."
(See also Code Nap., articles 516, 518 et seq. to and inclusive of article 534,
recapitulating the things which, though in themselves movable, may be
immobilized.) So far as the subject-matter with which we are dealing machinery
placed in the plant it is plain, both under the provisions of the Porto Rican Law and
of the Code Napoleon, that machinery which is movable in its nature only becomes
immobilized when placed in a plant by the owner of the property or plant. Such
result would not be accomplished, therefore, by the placing of machinery in a plant
by a tenant or a usufructuary or any person having only a temporary right.
(Demolombe, Tit. 9, No. 203; Aubry et Rau, Tit. 2, p. 12, Section 164; Laurent, Tit. 5,
No. 447; and decisions quoted in Fuzier-Herman ed. Code Napoleon under articles
522 et seq.) The distinction rests, as pointed out by Demolombe, upon the fact that
one only having a temporary right to the possession or enjoyment of property is not
presumed by the law to have applied movable property belonging to him so as to
deprive him of it by causing it by an act of immobilization to become the property of
another. It follows that abstractly speaking the machinery put by the Altagracia
Company in the plant belonging to Sanchez did not lose its character of movable
property and become immovable by destination. But in the concrete immobilization
took place because of the express provisions of the lease under which the Altagracia
held, since the lease in substance required the putting in of improved machinery,
deprived the tenant of any right to charge against the lessor the cost such
machinery, and it was expressly stipulated that the machinery so put in should
become a part of the plant belonging to the owner without compensation to the
lessee. Under such conditions the tenant in putting in the machinery was acting but
as the agent of the owner in compliance with the obligations resting upon him, and
the immobilization of the machinery which resulted arose in legal effect from the act
of the owner in giving by contract a permanent destination to the machinery.
xxx
xxx
xxx
The machinery levied upon by Nevers & Callaghan, that is, that which was placed in
the plant by the Altagracia Company, being, as regards Nevers & Callaghan,
movable property, it follows that they had the right to levy on it under the execution
upon the judgment in their favor, and the exercise of that right did not in a legal
sense conflict with the claim of Valdes, since as to him the property was a part of the
realty which, as the result of his obligations under the lease, he could not, for the
purpose of collecting his debt, proceed separately against. (Valdes vs. Central
Altagracia [192], 225 U.S., 58.)
Finding no reversible error in the record, the judgment appealed from will be
affirmed, the costs of this instance to be paid by the appellant.
G.R. No. L-15334
January 31, 1964
BOARD OF ASSESSMENT APPEALS, CITY ASSESSOR and CITY TREASURER OF
QUEZON CITY, petitioners,
vs.
MANILA ELECTRIC COMPANY, respondent.

Assistant City Attorney Jaime R. Agloro for petitioners.Ross, Selph and Carrascoso for
respondent.
PAREDES, J.:
From the stipulation of facts and evidence adduced during the hearing, the following
appear:
On October 20, 1902, the Philippine Commission enacted Act No. 484 which
authorized the Municipal Board of Manila to grant a franchise to construct, maintain
and operate an electric street railway and electric light, heat and power system in
the City of Manila and its suburbs to the person or persons making the most
favorable bid. Charles M. Swift was awarded the said franchise on March 1903, the
terms and conditions of which were embodied in Ordinance No. 44 approved on
March 24, 1903. Respondent Manila Electric Co. (Meralco for short), became the
transferee and owner of the franchise.
Meralco's electric power is generated by its hydro-electric plant located at Botocan
Falls, Laguna and is transmitted to the City of Manila by means of electric
transmission wires, running from the province of Laguna to the said City. These
electric transmission wires which carry high voltage current, are fastened to
insulators attached on steel towers constructed by respondent at intervals, from its
hydro-electric plant in the province of Laguna to the City of Manila. The respondent
Meralco has constructed 40 of these steel towers within Quezon City, on land
belonging to it. A photograph of one of these steel towers is attached to the petition
for review, marked Annex A. Three steel towers were inspected by the lower court
and parties and the following were the descriptions given there of by said court:
The first steel tower is located in South Tatalon, Espaa Extension, Quezon City. The
findings were as follows: the ground around one of the four posts was excavated to a
depth of about eight (8) feet, with an opening of about one (1) meter in diameter,
decreased to about a quarter of a meter as it we deeper until it reached the bottom
of the post; at the bottom of the post were two parallel steel bars attached to the leg
means of bolts; the tower proper was attached to the leg three bolts; with two cross
metals to prevent mobility; there was no concrete foundation but there was adobe
stone underneath; as the bottom of the excavation was covered with water about
three inches high, it could not be determined with certainty to whether said adobe
stone was placed purposely or not, as the place abounds with this kind of stone; and
the tower carried five high voltage wires without cover or any insulating materials.
The second tower inspected was located in Kamuning Road, K-F, Quezon City, on
land owned by the petitioner approximate more than one kilometer from the first
tower. As in the first tower, the ground around one of the four legs was excavate
from seven to eight (8) feet deep and one and a half (1-) meters wide. There being
very little water at the bottom, it was seen that there was no concrete foundation,
but there soft adobe beneath. The leg was likewise provided with two parallel steel
bars bolted to a square metal frame also bolted to each corner. Like the first one, the
second tower is made up of metal rods joined together by means of bolts, so that by
unscrewing the bolts, the tower could be dismantled and reassembled.
The third tower examined is located along Kamias Road, Quezon City. As in the first
two towers given above, the ground around the two legs of the third tower was
excavated to a depth about two or three inches beyond the outside level of the steel
bar foundation. It was found that there was no concrete foundation. Like the two
previous ones, the bottom arrangement of the legs thereof were found to be resting
on soft adobe, which, probably due to high humidity, looks like mud or clay. It was
also found that the square metal frame supporting the legs were not attached to any
material or foundation.
On November 15, 1955, petitioner City Assessor of Quezon City declared the
aforesaid steel towers for real property tax under Tax declaration Nos. 31992 and
15549. After denying respondent's petition to cancel these declarations, an appeal

was taken by respondent to the Board of Assessment Appeals of Quezon City, which
required respondent to pay the amount of P11,651.86 as real property tax on the
said steel towers for the years 1952 to 1956. Respondent paid the amount under
protest, and filed a petition for review in the Court of Tax Appeals (CTA for short)
which rendered a decision on December 29, 1958, ordering the cancellation of the
said tax declarations and the petitioner City Treasurer of Quezon City to refund to
the respondent the sum of P11,651.86. The motion for reconsideration having been
denied, on April 22, 1959, the instant petition for review was filed.
In upholding the cause of respondents, the CTA held that: (1) the steel towers come
within the term "poles" which are declared exempt from taxes under part II
paragraph 9 of respondent's franchise; (2) the steel towers are personal properties
and are not subject to real property tax; and (3) the City Treasurer of Quezon City is
held responsible for the refund of the amount paid. These are assigned as errors by
the petitioner in the brief.
The tax exemption privilege of the petitioner is quoted hereunder:
PAR 9. The grantee shall be liable to pay the same taxes upon its real estate,
buildings, plant (not including poles, wires, transformers, and insulators), machinery
and personal property as other persons are or may be hereafter required by law to
pay ... Said percentage shall be due and payable at the time stated in paragraph
nineteen of Part One hereof, ... and shall be in lieu of all taxes and assessments of
whatsoever nature and by whatsoever authority upon the privileges, earnings,
income, franchise, and poles, wires, transformers, and insulators of the grantee from
which taxes and assessments the grantee is hereby expressly exempted. (Par. 9,
Part Two, Act No. 484 Respondent's Franchise; emphasis supplied.)
The word "pole" means "a long, comparatively slender usually cylindrical piece of
wood or timber, as typically the stem of a small tree stripped of its branches; also by
extension, a similar typically cylindrical piece or object of metal or the like". The
term also refers to "an upright standard to the top of which something is affixed or
by which something is supported; as a dovecote set on a pole; telegraph poles; a
tent pole; sometimes, specifically a vessel's master (Webster's New International
Dictionary 2nd Ed., p. 1907.) Along the streets, in the City of Manila, may be seen
cylindrical metal poles, cubical concrete poles, and poles of the PLDT Co. which are
made of two steel bars joined together by an interlacing metal rod. They are called
"poles" notwithstanding the fact that they are no made of wood. It must be noted
from paragraph 9, above quoted, that the concept of the "poles" for which
exemption is granted, is not determined by their place or location, nor by the
character of the electric current it carries, nor the material or form of which it is
made, but the use to which they are dedicated. In accordance with the definitions,
pole is not restricted to a long cylindrical piece of wood or metal, but includes
"upright standards to the top of which something is affixed or by which something is
supported. As heretofore described, respondent's steel supports consists of a
framework of four steel bars or strips which are bound by steel cross-arms atop of
which are cross-arms supporting five high voltage transmission wires (See Annex A)
and their sole function is to support or carry such wires.
The conclusion of the CTA that the steel supports in question are embraced in the
term "poles" is not a novelty. Several courts of last resort in the United States have
called these steel supports "steel towers", and they denominated these supports or
towers, as electric poles. In their decisions the words "towers" and "poles" were used
interchangeably, and it is well understood in that jurisdiction that a transmission
tower or pole means the same thing.
In a proceeding to condemn land for the use of electric power wires, in which the law
provided that wires shall be constructed upon suitable poles, this term was
construed to mean either wood or metal poles and in view of the land being subject
to overflow, and the necessary carrying of numerous wires and the distance between

poles, the statute was interpreted to include towers or poles. (Stemmons and Dallas
Light Co. (Tex) 212 S.W. 222, 224; 32-A Words and Phrases, p. 365.)
The term "poles" was also used to denominate the steel supports or towers used by
an association used to convey its electric power furnished to subscribers and
members, constructed for the purpose of fastening high voltage and dangerous
electric wires alongside public highways. The steel supports or towers were made of
iron or other metals consisting of two pieces running from the ground up some thirty
feet high, being wider at the bottom than at the top, the said two metal pieces being
connected with criss-cross iron running from the bottom to the top, constructed like
ladders and loaded with high voltage electricity. In form and structure, they are like
the steel towers in question. (Salt River Valley Users' Ass'n v. Compton, 8 P. 2nd,
249-250.)
The term "poles" was used to denote the steel towers of an electric company
engaged in the generation of hydro-electric power generated from its plant to the
Tower of Oxford and City of Waterbury. These steel towers are about 15 feet square
at the base and extended to a height of about 35 feet to a point, and are embedded
in the cement foundations sunk in the earth, the top of which extends above the
surface of the soil in the tower of Oxford, and to the towers are attached insulators,
arms, and other equipment capable of carrying wires for the transmission of electric
power (Connecticut Light and Power Co. v. Oxford, 101 Conn. 383, 126 Atl. p. 1).
In a case, the defendant admitted that the structure on which a certain person met
his death was built for the purpose of supporting a transmission wire used for
carrying high-tension electric power, but claimed that the steel towers on which it is
carried were so large that their wire took their structure out of the definition of a
pole line. It was held that in defining the word pole, one should not be governed by
the wire or material of the support used, but was considering the danger from any
elevated wire carrying electric current, and that regardless of the size or material
wire of its individual members, any continuous series of structures intended and
used solely or primarily for the purpose of supporting wires carrying electric currents
is a pole line (Inspiration Consolidation Cooper Co. v. Bryan 252 P. 1016).
It is evident, therefore, that the word "poles", as used in Act No. 484 and
incorporated in the petitioner's franchise, should not be given a restrictive and
narrow interpretation, as to defeat the very object for which the franchise was
granted. The poles as contemplated thereon, should be understood and taken as a
part of the electric power system of the respondent Meralco, for the conveyance of
electric current from the source thereof to its consumers. If the respondent would be
required to employ "wooden poles", or "rounded poles" as it used to do fifty years
back, then one should admit that the Philippines is one century behind the age of
space. It should also be conceded by now that steel towers, like the ones in
question, for obvious reasons, can better effectuate the purpose for which the
respondent's franchise was granted.
Granting for the purpose of argument that the steel supports or towers in question
are not embraced within the term poles, the logical question posited is whether they
constitute real properties, so that they can be subject to a real property tax. The tax
law does not provide for a definition of real property; but Article 415 of the Civil Code
does, by stating the following are immovable property:
(1) Land, buildings, roads, and constructions of all kinds adhered to the soil;
xxx
xxx
xxx
(3) Everything attached to an immovable in a fixed manner, in such a way that it
cannot be separated therefrom without breaking the material or deterioration of the
object;
xxx
xxx
xxx

(5) Machinery, receptacles, instruments or implements intended by the owner of the

tenement for an industry or works which may be carried in a building or on a piece
of land, and which tends directly to meet the needs of the said industry or works;
xxx
xxx
xxx
The steel towers or supports in question, do not come within the objects mentioned
in paragraph 1, because they do not constitute buildings or constructions adhered to
the soil. They are not construction analogous to buildings nor adhering to the soil. As
per description, given by the lower court, they are removable and merely attached
to a square metal frame by means of bolts, which when unscrewed could easily be
dismantled and moved from place to place. They can not be included under
paragraph 3, as they are not attached to an immovable in a fixed manner, and they
can be separated without breaking the material or causing deterioration upon the
object to which they are attached. Each of these steel towers or supports consists of
steel bars or metal strips, joined together by means of bolts, which can be
disassembled by unscrewing the bolts and reassembled by screwing the same.
These steel towers or supports do not also fall under paragraph 5, for they are not
machineries, receptacles, instruments or implements, and even if they were, they
are not intended for industry or works on the land. Petitioner is not engaged in an
industry or works in the land in which the steel supports or towers are constructed.
It is finally contended that the CTA erred in ordering the City Treasurer of Quezon
City to refund the sum of P11,651.86, despite the fact that Quezon City is not a party
to the case. It is argued that as the City Treasurer is not the real party in interest, but
Quezon City, which was not a party to the suit, notwithstanding its capacity to sue
and be sued, he should not be ordered to effect the refund. This question has not
been raised in the court below, and, therefore, it cannot be properly raised for the
first time on appeal. The herein petitioner is indulging in legal technicalities and
niceties which do not help him any; for factually, it was he (City Treasurer) whom
had insisted that respondent herein pay the real estate taxes, which respondent paid
under protest. Having acted in his official capacity as City Treasurer of Quezon City,
he would surely know what to do, under the circumstances.
IN VIEW HEREOF, the decision appealed from is hereby affirmed, with costs against
the petitioners.
G.R. No. L-58469 May 16, 1983
MAKATI LEASING and FINANCE CORPORATION, petitioner,
vs.
WEAREVER TEXTILE MILLS, INC., and HONORABLE COURT OF APPEALS,
respondents.
Loreto C. Baduan for petitioner.
Ramon D. Bagatsing & Assoc. (collaborating counsel) for petitioner.
Jose V. Mancella for respondent.
DE CASTRO, J.:
Petition for review on certiorari of the decision of the Court of Appeals (now
Intermediate Appellate Court) promulgated on August 27, 1981 in CA-G.R. No. SP12731, setting aside certain Orders later specified herein, of Judge Ricardo J.
Francisco, as Presiding Judge of the Court of First instance of Rizal Branch VI, issued
in Civil Case No. 36040, as wen as the resolution dated September 22, 1981 of the
said appellate court, denying petitioner's motion for reconsideration.
It appears that in order to obtain financial accommodations from herein petitioner
Makati Leasing and Finance Corporation, the private respondent Wearever Textile
Mills, Inc., discounted and assigned several receivables with the former under a
Receivable Purchase Agreement. To secure the collection of the receivables
assigned, private respondent executed a Chattel Mortgage over certain raw

materials inventory as well as a machinery described as an Artos Aero Dryer

Stentering Range.
Upon private respondent's default, petitioner filed a petition for extrajudicial
foreclosure of the properties mortgage to it. However, the Deputy Sheriff assigned to
implement the foreclosure failed to gain entry into private respondent's premises
and was not able to effect the seizure of the aforedescribed machinery. Petitioner
thereafter filed a complaint for judicial foreclosure with the Court of First Instance of
Rizal, Branch VI, docketed as Civil Case No. 36040, the case before the lower court.
Acting on petitioner's application for replevin, the lower court issued a writ of
seizure, the enforcement of which was however subsequently restrained upon
private respondent's filing of a motion for reconsideration. After several incidents,
the lower court finally issued on February 11, 1981, an order lifting the restraining
order for the enforcement of the writ of seizure and an order to break open the
premises of private respondent to enforce said writ. The lower court reaffirmed its
stand upon private respondent's filing of a further motion for reconsideration.
On July 13, 1981, the sheriff enforcing the seizure order, repaired to the premises of
private respondent and removed the main drive motor of the subject machinery.
The Court of Appeals, in certiorari and prohibition proceedings subsequently filed by
herein private respondent, set aside the Orders of the lower court and ordered the
return of the drive motor seized by the sheriff pursuant to said Orders, after ruling
that the machinery in suit cannot be the subject of replevin, much less of a chattel
mortgage, because it is a real property pursuant to Article 415 of the new Civil Code,
the same being attached to the ground by means of bolts and the only way to
remove it from respondent's plant would be to drill out or destroy the concrete floor,
the reason why all that the sheriff could do to enfore the writ was to take the main
drive motor of said machinery. The appellate court rejected petitioner's argument
that private respondent is estopped from claiming that the machine is real property
by constituting a chattel mortgage thereon.
A motion for reconsideration of this decision of the Court of Appeals having been
denied, petitioner has brought the case to this Court for review by writ of certiorari.
It is contended by private respondent, however, that the instant petition was
rendered moot and academic by petitioner's act of returning the subject motor drive
of respondent's machinery after the Court of Appeals' decision was promulgated.
The contention of private respondent is without merit. When petitioner returned the
subject motor drive, it made itself unequivocably clear that said action was without
prejudice to a motion for reconsideration of the Court of Appeals decision, as shown
by the receipt duly signed by respondent's representative. 1 Considering that
petitioner has reserved its right to question the propriety of the Court of Appeals'
decision, the contention of private respondent that this petition has been mooted by
such return may not be sustained.
The next and the more crucial question to be resolved in this Petition is whether the
machinery in suit is real or personal property from the point of view of the parties,
with petitioner arguing that it is a personality, while the respondent claiming the
contrary, and was sustained by the appellate court, which accordingly held that the
chattel mortgage constituted thereon is null and void, as contended by said
respondent.
A similar, if not Identical issue was raised in Tumalad v. Vicencio, 41 SCRA 143 where
this Court, speaking through Justice J.B.L. Reyes, ruled:
Although there is no specific statement referring to the subject house as personal
property, yet by ceding, selling or transferring a property by way of chattel
mortgage defendants-appellants could only have meant to convey the house as
chattel, or at least, intended to treat the same as such, so that they should not now
be allowed to make an inconsistent stand by claiming otherwise. Moreover, the
subject house stood on a rented lot to which defendants-appellants merely had a

temporary right as lessee, and although this can not in itself alone determine the
status of the property, it does so when combined with other factors to sustain the
interpretation that the parties, particularly the mortgagors, intended to treat the
house as personality. Finally, unlike in the Iya cases, Lopez vs. Orosa, Jr. & Plaza
Theatre, Inc. & Leung Yee vs. F.L. Strong Machinery & Williamson, wherein third
persons assailed the validity of the chattel mortgage, it is the defendants-appellants
themselves, as debtors-mortgagors, who are attacking the validity of the chattel
mortgage in this case. The doctrine of estoppel therefore applies to the herein
defendants-appellants, having treated the subject house as personality.
Examining the records of the instant case, We find no logical justification to exclude
the rule out, as the appellate court did, the present case from the application of the
abovequoted pronouncement. If a house of strong materials, like what was involved
in the above Tumalad case, may be considered as personal property for purposes of
executing a chattel mortgage thereon as long as the parties to the contract so agree
and no innocent third party will be prejudiced thereby, there is absolutely no reason
why a machinery, which is movable in its nature and becomes immobilized only by
destination or purpose, may not be likewise treated as such. This is really because
one who has so agreed is estopped from denying the existence of the chattel
mortgage.
In rejecting petitioner's assertion on the applicability of the Tumalad doctrine, the
Court of Appeals lays stress on the fact that the house involved therein was built on
a land that did not belong to the owner of such house. But the law makes no
distinction with respect to the ownership of the land on which the house is built and
We should not lay down distinctions not contemplated by law.
It must be pointed out that the characterization of the subject machinery as chattel
by the private respondent is indicative of intention and impresses upon the property
the character determined by the parties. As stated in Standard Oil Co. of New York v.
Jaramillo, 44 Phil. 630, it is undeniable that the parties to a contract may by
agreement treat as personal property that which by nature would be real property,
as long as no interest of third parties would be prejudiced thereby.
Private respondent contends that estoppel cannot apply against it because it had
never represented nor agreed that the machinery in suit be considered as personal
property but was merely required and dictated on by herein petitioner to sign a
printed form of chattel mortgage which was in a blank form at the time of signing.
This contention lacks persuasiveness. As aptly pointed out by petitioner and not
denied by the respondent, the status of the subject machinery as movable or
immovable was never placed in issue before the lower court and the Court of
Appeals except in a supplemental memorandum in support of the petition filed in the
appellate court. Moreover, even granting that the charge is true, such fact alone
does not render a contract void ab initio, but can only be a ground for rendering said
contract voidable, or annullable pursuant to Article 1390 of the new Civil Code, by a
proper action in court. There is nothing on record to show that the mortgage has
been annulled. Neither is it disclosed that steps were taken to nullify the same. On
the other hand, as pointed out by petitioner and again not refuted by respondent,
the latter has indubitably benefited from said contract. Equity dictates that one
should not benefit at the expense of another. Private respondent could not now
therefore, be allowed to impugn the efficacy of the chattel mortgage after it has
benefited therefrom,
From what has been said above, the error of the appellate court in ruling that the
questioned machinery is real, not personal property, becomes very apparent.
Moreover, the case of Machinery and Engineering Supplies, Inc. v. CA, 96 Phil. 70,
heavily relied upon by said court is not applicable to the case at bar, the nature of
the machinery and equipment involved therein as real properties never having been
disputed nor in issue, and they were not the subject of a Chattel Mortgage.

Undoubtedly, the Tumalad case bears more nearly perfect parity with the instant
case to be the more controlling jurisprudential authority.
WHEREFORE, the questioned decision and resolution of the Court of Appeals are
hereby reversed and set aside, and the Orders of the lower court are hereby
reinstated, with costs against the private respondent.
SO ORDERED.
G.R. No. L-17870
September 29, 1962
MINDANAO BUS COMPANY, petitioner,
vs.
THE CITY ASSESSOR & TREASURER and the BOARD OF TAX APPEALS of
Cagayan de Oro City, respondents.
Binamira, Barria and Irabagon for petitioner.Vicente E. Sabellina for respondents.
LABRADOR, J.:
This is a petition for the review of the decision of the Court of Tax Appeals in C.T.A.
Case No. 710 holding that the petitioner Mindanao Bus Company is liable to the
payment of the realty tax on its maintenance and repair equipment hereunder
referred to.
Respondent City Assessor of Cagayan de Oro City assessed at P4,400 petitioner's
above-mentioned equipment. Petitioner appealed the assessment to the respondent
Board of Tax Appeals on the ground that the same are not realty. The Board of Tax
Appeals of the City sustained the city assessor, so petitioner herein filed with the
Court of Tax Appeals a petition for the review of the assessment.
In the Court of Tax Appeals the parties submitted the following stipulation of facts:
Petitioner and respondents, thru their respective counsels agreed to the following
stipulation of facts:
1. That petitioner is a public utility solely engaged in transporting passengers and
cargoes by motor trucks, over its authorized lines in the Island of Mindanao,
collecting rates approved by the Public Service Commission;
2. That petitioner has its main office and shop at Cagayan de Oro City. It maintains
Branch Offices and/or stations at Iligan City, Lanao; Pagadian, Zamboanga del Sur;
Davao City and Kibawe, Bukidnon Province;
3. That the machineries sought to be assessed by the respondent as real properties
are the following:
(a) Hobart Electric Welder Machine, appearing in the attached photograph, marked
Annex "A";
(b) Storm Boring Machine, appearing in the attached photograph, marked Annex "B";
(c) Lathe machine with motor, appearing in the attached photograph, marked Annex
"C";
(d) Black and Decker Grinder, appearing in the attached photograph, marked Annex
"D";
(e) PEMCO Hydraulic Press, appearing in the attached photograph, marked Annex
"E";
(f) Battery charger (Tungar charge machine) appearing in the attached photograph,
marked Annex "F"; and
(g) D-Engine Waukesha-M-Fuel, appearing in the attached photograph, marked
Annex "G".
4. That these machineries are sitting on cement or wooden platforms as may be
seen in the attached photographs which form part of this agreed stipulation of facts;
5. That petitioner is the owner of the land where it maintains and operates a garage
for its TPU motor trucks; a repair shop; blacksmith and carpentry shops, and with
these machineries which are placed therein, its TPU trucks are made; body

constructed; and same are repaired in a condition to be serviceable in the TPU land
transportation business it operates;
6. That these machineries have never been or were never used as industrial
equipments to produce finished products for sale, nor to repair machineries, parts
and the like offered to the general public indiscriminately for business or commercial
purposes for which petitioner has never engaged in, to date.1awphl.nt
The Court of Tax Appeals having sustained the respondent city assessor's ruling, and
having denied a motion for reconsideration, petitioner brought the case to this Court
assigning the following errors:
1. The Honorable Court of Tax Appeals erred in upholding respondents' contention
that the questioned assessments are valid; and that said tools, equipments or
machineries are immovable taxable real properties.
2. The Tax Court erred in its interpretation of paragraph 5 of Article 415 of the New
Civil Code, and holding that pursuant thereto the movable equipments are taxable
realties, by reason of their being intended or destined for use in an industry.
3. The Court of Tax Appeals erred in denying petitioner's contention that the
respondent City Assessor's power to assess and levy real estate taxes on
machineries is further restricted by section 31, paragraph (c) of Republic Act No.
521; and
4. The Tax Court erred in denying petitioner's motion for reconsideration.
Respondents contend that said equipments, tho movable, are immobilized by
destination, in accordance with paragraph 5 of Article 415 of the New Civil Code
which provides:
Art. 415. The following are immovable properties:
xxx
xxx
xxx
(5) Machinery, receptacles, instruments or implements intended by the owner of the
tenement for an industry or works which may be carried on in a building or on a
piece of land, and which tend directly to meet the needs of the said industry or
works. (Emphasis ours.)
Note that the stipulation expressly states that the equipment are placed on wooden
or cement platforms. They can be moved around and about in petitioner's repair
shop. In the case of B. H. Berkenkotter vs. Cu Unjieng, 61 Phil. 663, the Supreme
Court said:
Article 344 (Now Art. 415), paragraph (5) of the Civil Code, gives the character of
real property to "machinery, liquid containers, instruments or implements intended
by the owner of any building or land for use in connection with any industry or trade
being carried on therein and which are expressly adapted to meet the requirements
of such trade or industry."
If the installation of the machinery and equipment in question in the central of the
Mabalacat Sugar Co., Inc., in lieu of the other of less capacity existing therein, for its
sugar and industry, converted them into real property by reason of their purpose, it
cannot be said that their incorporation therewith was not permanent in character
because, as essential and principle elements of a sugar central, without them the
sugar central would be unable to function or carry on the industrial purpose for
which it was established. Inasmuch as the central is permanent in character, the
necessary machinery and equipment installed for carrying on the sugar industry for
which it has been established must necessarily be permanent. (Emphasis ours.)
So that movable equipments to be immobilized in contemplation of the law must
first be "essential and principal elements" of an industry or works without which
such industry or works would be "unable to function or carry on the industrial
purpose for which it was established." We may here distinguish, therefore, those
movable which become immobilized by destination because they are essential and
principal elements in the industry for those which may not be so considered
immobilized because they are merely incidental, not essential and principal. Thus,

cash registers, typewriters, etc., usually found and used in hotels, restaurants,
theaters, etc. are merely incidentals and are not and should not be considered
immobilized by destination, for these businesses can continue or carry on their
functions without these equity comments. Airline companies use forklifts, jeepwagons, pressure pumps, IBM machines, etc. which are incidentals, not essentials,
and thus retain their movable nature. On the other hand, machineries of breweries
used in the manufacture of liquor and soft drinks, though movable in nature, are
immobilized because they are essential to said industries; but the delivery trucks
and adding machines which they usually own and use and are found within their
industrial compounds are merely incidental and retain their movable nature.
Similarly, the tools and equipments in question in this instant case are, by their
nature, not essential and principle municipal elements of petitioner's business of
transporting passengers and cargoes by motor trucks. They are merely incidentals
acquired as movables and used only for expediency to facilitate and/or improve its
service. Even without such tools and equipments, its business may be carried on, as
petitioner has carried on, without such equipments, before the war. The
transportation business could be carried on without the repair or service shop if its
rolling equipment is repaired or serviced in another shop belonging to another.
The law that governs the determination of the question at issue is as follows:
Art. 415. The following are immovable property:
xxx
xxx
xxx
(5) Machinery, receptacles, instruments or implements intended by the owner of the
tenement for an industry or works which may be carried on in a building or on a
piece of land, and which tend directly to meet the needs of the said industry or
works; (Civil Code of the Phil.)
Aside from the element of essentiality the above-quoted provision also requires that
the industry or works be carried on in a building or on a piece of land. Thus in the
case of Berkenkotter vs. Cu Unjieng, supra, the "machinery, liquid containers, and
instruments or implements" are found in a building constructed on the land. A
sawmill would also be installed in a building on land more or less permanently, and
the sawing is conducted in the land or building.
But in the case at bar the equipments in question are destined only to repair or
service the transportation business, which is not carried on in a building or
permanently on a piece of land, as demanded by the law. Said equipments may not,
therefore, be deemed real property.
Resuming what we have set forth above, we hold that the equipments in question
are not absolutely essential to the petitioner's transportation business, and
petitioner's business is not carried on in a building, tenement or on a specified land,
so said equipment may not be considered real estate within the meaning of Article
415 (c) of the Civil Code.
WHEREFORE, the decision subject of the petition for review is hereby set aside and
the equipment in question declared not subject to assessment as real estate for the
purposes of the real estate tax. Without costs.
So ordered.
G.R. No. L-50466 May 31, 1982
CALTEX (PHILIPPINES) INC., petitioner,
vs.
CENTRAL BOARD OF ASSESSMENT APPEALS and CITY ASSESSOR OF PASAY,
respondents.
AQUINO, J.:
This case is about the realty tax on machinery and equipment installed by Caltex
(Philippines) Inc. in its gas stations located on leased land.

The machines and equipment consists of underground tanks, elevated tank,

elevated water tanks, water tanks, gasoline pumps, computing pumps, water
pumps, car washer, car hoists, truck hoists, air compressors and tireflators. The city
assessor described the said equipment and machinery in this manner:
A gasoline service station is a piece of lot where a building or shed is erected, a
water tank if there is any is placed in one corner of the lot, car hoists are placed in
an adjacent shed, an air compressor is attached in the wall of the shed or at the
concrete wall fence.
The controversial underground tank, depository of gasoline or crude oil, is dug deep
about six feet more or less, a few meters away from the shed. This is done to
prevent conflagration because gasoline and other combustible oil are very
inflammable.
This underground tank is connected with a steel pipe to the gasoline pump and the
gasoline pump is commonly placed or constructed under the shed. The footing of the
pump is a cement pad and this cement pad is imbedded in the pavement under the
shed, and evidence that the gasoline underground tank is attached and connected
to the shed or building through the pipe to the pump and the pump is attached and
affixed to the cement pad and pavement covered by the roof of the building or shed.
The building or shed, the elevated water tank, the car hoist under a separate shed,
the air compressor, the underground gasoline tank, neon lights signboard, concrete
fence and pavement and the lot where they are all placed or erected, all of them
used in the pursuance of the gasoline service station business formed the entire
gasoline service-station.
As to whether the subject properties are attached and affixed to the tenement, it is
clear they are, for the tenement we consider in this particular case are (is) the
pavement covering the entire lot which was constructed by the owner of the
gasoline station and the improvement which holds all the properties under question,
they are attached and affixed to the pavement and to the improvement.
The pavement covering the entire lot of the gasoline service station, as well as all
the improvements, machines, equipments and apparatus are allowed by Caltex
(Philippines) Inc. ...
The underground gasoline tank is attached to the shed by the steel pipe to the
pump, so with the water tank it is connected also by a steel pipe to the pavement,
then to the electric motor which electric motor is placed under the shed. So to say
that the gasoline pumps, water pumps and underground tanks are outside of the
service station, and to consider only the building as the service station is grossly
erroneous. (pp. 58-60, Rollo).
The said machines and equipment are loaned by Caltex to gas station operators
under an appropriate lease agreement or receipt. It is stipulated in the lease
contract that the operators, upon demand, shall return to Caltex the machines and
equipment in good condition as when received, ordinary wear and tear excepted.
The lessor of the land, where the gas station is located, does not become the owner
of the machines and equipment installed therein. Caltex retains the ownership
thereof during the term of the lease.
The city assessor of Pasay City characterized the said items of gas station
equipment and machinery as taxable realty. The realty tax on said equipment
amounts to P4,541.10 annually (p. 52, Rollo). The city board of tax appeals ruled
that they are personalty. The assessor appealed to the Central Board of Assessment
Appeals.
The Board, which was composed of Secretary of Finance Cesar Virata as chairman,
Acting Secretary of Justice Catalino Macaraig, Jr. and Secretary of Local Government
and Community Development Jose Roo, held in its decision of June 3, 1977 that the
said machines and equipment are real property within the meaning of sections 3(k)
& (m) and 38 of the Real Property Tax Code, Presidential Decree No. 464, which took

effect on June 1, 1974, and that the definitions of real property and personal
property in articles 415 and 416 of the Civil Code are not applicable to this case.
The decision was reiterated by the Board (Minister Vicente Abad Santos took
Macaraig's place) in its resolution of January 12, 1978, denying Caltex's motion for
reconsideration, a copy of which was received by its lawyer on April 2, 1979.
On May 2, 1979 Caltex filed this certiorari petition wherein it prayed for the setting
aside of the Board's decision and for a declaration that t he said machines and
equipment are personal property not subject to realty tax (p. 16, Rollo).
The Solicitor General's contention that the Court of Tax Appeals has exclusive
appellate jurisdiction over this case is not correct. When Republic act No. 1125
created the Tax Court in 1954, there was as yet no Central Board of Assessment
Appeals. Section 7(3) of that law in providing that the Tax Court had jurisdiction to
review by appeal decisions of provincial or city boards of assessment appeals had in
mind the local boards of assessment appeals but not the Central Board of
Assessment Appeals which under the Real Property Tax Code has appellate
jurisdiction over decisions of the said local boards of assessment appeals and is,
therefore, in the same category as the Tax Court.
Section 36 of the Real Property Tax Code provides that the decision of the Central
Board of Assessment Appeals shall become final and executory after the lapse of
fifteen days from the receipt of its decision by the appellant. Within that fifteen-day
period, a petition for reconsideration may be filed. The Code does not provide for the
review of the Board's decision by this Court.
Consequently, the only remedy available for seeking a review by this Court of the
decision of the Central Board of Assessment Appeals is the special civil action of
certiorari, the recourse resorted to herein by Caltex (Philippines), Inc.
The issue is whether the pieces of gas station equipment and machinery already
enumerated are subject to realty tax. This issue has to be resolved primarily under
the provisions of the Assessment Law and the Real Property Tax Code.
Section 2 of the Assessment Law provides that the realty tax is due "on real
property, including land, buildings, machinery, and other improvements" not
specifically exempted in section 3 thereof. This provision is reproduced with some
modification in the Real Property Tax Code which provides:
SEC. 38. Incidence of Real Property Tax. There shall be levied, assessed and
collected in all provinces, cities and municipalities an annual ad valorem tax on real
property, such as land, buildings, machinery and other improvements affixed or
attached to real property not hereinafter specifically exempted.
The Code contains the following definitions in its section 3:
k) Improvements is a valuable addition made to property or an amelioration in its
condition, amounting to more than mere repairs or replacement of waste, costing
labor or capital and intended to enhance its value, beauty or utility or to adapt it for
new or further purposes.
m) Machinery shall embrace machines, mechanical contrivances, instruments,
appliances and apparatus attached to the real estate. It includes the physical
facilities available for production, as well as the installations and appurtenant
service facilities, together with all other equipment designed for or essential to its
manufacturing, industrial or agricultural purposes (See sec. 3[f], Assessment Law).
We hold that the said equipment and machinery, as appurtenances to the gas
station building or shed owned by Caltex (as to which it is subject to realty tax) and
which fixtures are necessary to the operation of the gas station, for without them the
gas station would be useless, and which have been attached or affixed permanently
to the gas station site or embedded therein, are taxable improvements and
machinery within the meaning of the Assessment Law and the Real Property Tax
Code.

Caltex invokes the rule that machinery which is movable in its nature only becomes
immobilized when placed in a plant by the owner of the property or plant but not
when so placed by a tenant, a usufructuary, or any person having only a temporary
right, unless such person acted as the agent of the owner (Davao Saw Mill Co. vs.
Castillo, 61 Phil 709).
That ruling is an interpretation of paragraph 5 of article 415 of the Civil Code
regarding machinery that becomes real property by destination. In the Davao Saw
Mills case the question was whether the machinery mounted on foundations of
cement and installed by the lessee on leased land should be regarded as real
property for purposes of execution of a judgment against the lessee. The sheriff
treated the machinery as personal property. This Court sustained the sheriff's action.
(Compare with Machinery & Engineering Supplies, Inc. vs. Court of Appeals, 96 Phil.
70, where in a replevin case machinery was treated as realty).
Here, the question is whether the gas station equipment and machinery
permanently affixed by Caltex to its gas station and pavement (which are
indubitably taxable realty) should be subject to the realty tax. This question is
different from the issue raised in the Davao Saw Mill case.
Improvements on land are commonly taxed as realty even though for some purposes
they might be considered personalty (84 C.J.S. 181-2, Notes 40 and 41). "It is a
familiar phenomenon to see things classed as real property for purposes of taxation
which on general principle might be considered personal property" (Standard Oil Co.
of New York vs. Jaramillo, 44 Phil. 630, 633).
This case is also easily distinguishable from Board of Assessment Appeals vs. Manila
Electric Co., 119 Phil. 328, where Meralco's steel towers were considered poles
within the meaning of paragraph 9 of its franchise which exempts its poles from
taxation. The steel towers were considered personalty because they were attached
to square metal frames by means of bolts and could be moved from place to place
when unscrewed and dismantled.
Nor are Caltex's gas station equipment and machinery the same as tools and
equipment in the repair shop of a bus company which were held to be personal
property not subject to realty tax (Mindanao Bus Co. vs. City Assessor, 116 Phil.
501).
The Central Board of Assessment Appeals did not commit a grave abuse of
discretion in upholding the city assessor's is imposition of the realty tax on Caltex's
gas station and equipment.
WHEREFORE, the questioned decision and resolution of the Central Board of
Assessment Appeals are affirmed. The petition for certiorari is dismissed for lack of
merit. No costs.
SO ORDERED.

G.R. No. 137705

August 22, 2000
SERG'S PRODUCTS, INC., and SERGIO T. GOQUIOLAY, petitioners,
vs.
PCI LEASING AND FINANCE, INC., respondent.
DECISION
PANGANIBAN, J.:
After agreeing to a contract stipulating that a real or immovable property be
considered as personal or movable, a party is estopped from subsequently claiming

otherwise. Hence, such property is a proper subject of a writ of replevin obtained by

the other contracting party.
The Case
Before us is a Petition for Review on Certiorari assailing the January 6, 1999
Decision1 of the Court of Appeals (CA) 2 in CA-GR SP No. 47332 and its February 26,
1999 Resolution3 denying reconsideration. The decretal portion of the CA Decision
reads as follows:
"WHEREFORE, premises considered, the assailed Order dated February 18, 1998 and
Resolution dated March 31, 1998 in Civil Case No. Q-98-33500 are hereby
AFFIRMED. The writ of preliminary injunction issued on June 15, 1998 is hereby
LIFTED."4
In its February 18, 1998 Order, 5 the Regional Trial Court (RTC) of Quezon City (Branch
218)6 issued a Writ of Seizure. 7 The March 18, 1998 Resolution 8 denied petitioners
Motion for Special Protective Order, praying that the deputy sheriff be enjoined "from
seizing immobilized or other real properties in (petitioners) factory in Cainta, Rizal
and to return to their original place whatever immobilized machineries or
equipments he may have removed." 9
The Facts
The undisputed facts are summarized by the Court of Appeals as follows: 10
"On February 13, 1998, respondent PCI Leasing and Finance, Inc. ("PCI Leasing" for
short) filed with the RTC-QC a complaint for [a] sum of money (Annex E), with an
application for a writ of replevin docketed as Civil Case No. Q-98-33500.
"On March 6, 1998, upon an ex-parte application of PCI Leasing, respondent judge
issued a writ of replevin (Annex B) directing its sheriff to seize and deliver the
machineries and equipment to PCI Leasing after 5 days and upon the payment of the
necessary expenses.
"On March 24, 1998, in implementation of said writ, the sheriff proceeded to
petitioners factory, seized one machinery with [the] word that he [would] return for
the other machineries.
"On March 25, 1998, petitioners filed a motion for special protective order (Annex
C), invoking the power of the court to control the conduct of its officers and amend
and control its processes, praying for a directive for the sheriff to defer enforcement
of the writ of replevin.
"This motion was opposed by PCI Leasing (Annex F), on the ground that the
properties [were] still personal and therefore still subject to seizure and a writ of
replevin.
"In their Reply, petitioners asserted that the properties sought to be seized [were]
immovable as defined in Article 415 of the Civil Code, the parties agreement to the
contrary notwithstanding. They argued that to give effect to the agreement would be
prejudicial to innocent third parties. They further stated that PCI Leasing [was]
estopped from treating these machineries as personal because the contracts in
which the alleged agreement [were] embodied [were] totally sham and farcical.
"On April 6, 1998, the sheriff again sought to enforce the writ of seizure and take
possession of the remaining properties. He was able to take two more, but was
prevented by the workers from taking the rest.
"On April 7, 1998, they went to [the CA] via an original action for certiorari."
Ruling of the Court of Appeals
Citing the Agreement of the parties, the appellate court held that the subject
machines were personal property, and that they had only been leased, not owned,
by petitioners. It also ruled that the "words of the contract are clear and leave no
doubt upon the true intention of the contracting parties." Observing that Petitioner
Goquiolay was an experienced businessman who was "not unfamiliar with the ways
of the trade," it ruled that he "should have realized the import of the document he
signed." The CA further held:

"Furthermore, to accord merit to this petition would be to preempt the trial court in
ruling upon the case below, since the merits of the whole matter are laid down
before us via a petition whose sole purpose is to inquire upon the existence of a
grave abuse of discretion on the part of the [RTC] in issuing the assailed Order and
Resolution. The issues raised herein are proper subjects of a full-blown trial,
necessitating presentation of evidence by both parties. The contract is being
enforced by one, and [its] validity is attacked by the other a matter x x x which
respondent court is in the best position to determine."
Hence, this Petition. 11
The Issues
In their Memorandum, petitioners submit the following issues for our consideration:
"A. Whether or not the machineries purchased and imported by SERGS became real
property by virtue of immobilization.
B. Whether or not the contract between the parties is a loan or a lease. "12
In the main, the Court will resolve whether the said machines are personal, not
immovable, property which may be a proper subject of a writ of replevin. As a
preliminary matter, the Court will also address briefly the procedural points raised by
respondent.
The Courts Ruling
The Petition is not meritorious.
Preliminary Matter: Procedural Questions
Respondent contends that the Petition failed to indicate expressly whether it was
being filed under Rule 45 or Rule 65 of the Rules of Court. It further alleges that the
Petition erroneously impleaded Judge Hilario Laqui as respondent.
There is no question that the present recourse is under Rule 45. This conclusion finds
support in the very title of the Petition, which is "Petition for Review on Certiorari." 13
While Judge Laqui should not have been impleaded as a respondent, 14 substantial
justice requires that such lapse by itself should not warrant the dismissal of the
present Petition. In this light, the Court deems it proper to remove, motu proprio, the
name of Judge Laqui from the caption of the present case.
Main Issue: Nature of the Subject Machinery
Petitioners contend that the subject machines used in their factory were not proper
subjects of the Writ issued by the RTC, because they were in fact real property.
Serious policy considerations, they argue, militate against a contrary
characterization.
Rule 60 of the Rules of Court provides that writs of replevin are issued for the
recovery of personal property only.15 Section 3 thereof reads:
"SEC. 3. Order. -- Upon the filing of such affidavit and approval of the bond, the court
shall issue an order and the corresponding writ of replevin describing the personal
property alleged to be wrongfully detained and requiring the sheriff forthwith to take
such property into his custody."
On the other hand, Article 415 of the Civil Code enumerates immovable or real
property as follows:
"ART. 415. The following are immovable property:
xxx
xxx
xxx
(5) Machinery, receptacles, instruments or implements intended by the owner of the
tenement for an industry or works which may be carried on in a building or on a
piece of land, and which tend directly to meet the needs of the said industry or
works;
xxx
xxx
x x x"
In the present case, the machines that were the subjects of the Writ of Seizure were
placed by petitioners in the factory built on their own land. Indisputably, they were
essential and principal elements of their chocolate-making industry. Hence, although
each of them was movable or personal property on its own, all of them have become

"immobilized by destination because they are essential and principal elements in the
industry."16 In that sense, petitioners are correct in arguing that the said machines
are real, not personal, property pursuant to Article 415 (5) of the Civil Code. 17
Be that as it may, we disagree with the submission of the petitioners that the said
machines are not proper subjects of the Writ of Seizure.
The Court has held that contracting parties may validly stipulate that a real property
be considered as personal.18 After agreeing to such stipulation, they are
consequently estopped from claiming otherwise. Under the principle of estoppel, a
party to a contract is ordinarily precluded from denying the truth of any material fact
found therein.
Hence, in Tumalad v. Vicencio,19 the Court upheld the intention of the parties to treat
a house as a personal property because it had been made the subject of a chattel
mortgage. The Court ruled:
"x x x. Although there is no specific statement referring to the subject house as
personal property, yet by ceding, selling or transferring a property by way of chattel
mortgage defendants-appellants could only have meant to convey the house as
chattel, or at least, intended to treat the same as such, so that they should not now
be allowed to make an inconsistent stand by claiming otherwise."
Applying Tumalad, the Court in Makati Leasing and Finance Corp. v. Wearever Textile
Mills20 also held that the machinery used in a factory and essential to the industry,
as in the present case, was a proper subject of a writ of replevin because it was
treated as personal property in a contract. Pertinent portions of the Courts ruling are
reproduced hereunder:
"x x x. If a house of strong materials, like what was involved in the above Tumalad
case, may be considered as personal property for purposes of executing a chattel
mortgage thereon as long as the parties to the contract so agree and no innocent
third party will be prejudiced thereby, there is absolutely no reason why a
machinery, which is movable in its nature and becomes immobilized only by
destination or purpose, may not be likewise treated as such. This is really because
one who has so agreed is estopped from denying the existence of the chattel
mortgage."
In the present case, the Lease Agreement clearly provides that the machines in
question are to be considered as personal property. Specifically, Section 12.1 of the
Agreement reads as follows:21
"12.1 The PROPERTY is, and shall at all times be and remain, personal property
notwithstanding that the PROPERTY or any part thereof may now be, or hereafter
become, in any manner affixed or attached to or embedded in, or permanently
resting upon, real property or any building thereon, or attached in any manner to
what is permanent."
Clearly then, petitioners are estopped from denying the characterization of the
subject machines as personal property. Under the circumstances, they are proper
subjects of the Writ of Seizure.
It should be stressed, however, that our holding -- that the machines should be
deemed personal property pursuant to the Lease Agreement is good only insofar
as the contracting parties are concerned. 22 Hence, while the parties are bound by the
Agreement, third persons acting in good faith are not affected by its stipulation
characterizing the subject machinery as personal. 23 In any event, there is no showing
that any specific third party would be adversely affected.
Validity of the Lease Agreement
In their Memorandum, petitioners contend that the Agreement is a loan and not a
lease.24 Submitting documents supposedly showing that they own the subject
machines, petitioners also argue in their Petition that the Agreement suffers from
"intrinsic ambiguity which places in serious doubt the intention of the parties and

the validity of the lease agreement itself." 25 In their Reply to respondents Comment,
they further allege that the Agreement is invalid. 26
These arguments are unconvincing. The validity and the nature of the contract are
the lis mota of the civil action pending before the RTC. A resolution of these
questions, therefore, is effectively a resolution of the merits of the case. Hence, they
should be threshed out in the trial, not in the proceedings involving the issuance of
the Writ of Seizure.
Indeed, in La Tondea Distillers v. CA,27 the Court explained that the policy under
Rule 60 was that questions involving title to the subject property questions which
petitioners are now raising -- should be determined in the trial. In that case, the
Court noted that the remedy of defendants under Rule 60 was either to post a
counter-bond or to question the sufficiency of the plaintiffs bond. They were not
allowed, however, to invoke the title to the subject property. The Court ruled:
"In other words, the law does not allow the defendant to file a motion to dissolve or
discharge the writ of seizure (or delivery) on ground of insufficiency of the complaint
or of the grounds relied upon therefor, as in proceedings on preliminary attachment
or injunction, and thereby put at issue the matter of the title or right of possession
over the specific chattel being replevied, the policy apparently being that said
matter should be ventilated and determined only at the trial on the merits." 28
Besides, these questions require a determination of facts and a presentation of
evidence, both of which have no place in a petition for certiorari in the CA under Rule
65 or in a petition for review in this Court under Rule 45.29
Reliance on the Lease Agreement
It should be pointed out that the Court in this case may rely on the Lease
Agreement, for nothing on record shows that it has been nullified or annulled. In fact,
petitioners assailed it first only in the RTC proceedings, which had ironically been
instituted by respondent. Accordingly, it must be presumed valid and binding as the
law between the parties.
Makati Leasing and Finance Corporation30 is also instructive on this point. In that
case, the Deed of Chattel Mortgage, which characterized the subject machinery as
personal property, was also assailed because respondent had allegedly been
required "to sign a printed form of chattel mortgage which was in a blank form at the
time of signing." The Court rejected the argument and relied on the Deed, ruling as
follows:
"x x x. Moreover, even granting that the charge is true, such fact alone does not
render a contract void ab initio, but can only be a ground for rendering said contract
voidable, or annullable pursuant to Article 1390 of the new Civil Code, by a proper
action in court. There is nothing on record to show that the mortgage has been
annulled. Neither is it disclosed that steps were taken to nullify the same. x x x"
Alleged Injustice Committed on the Part of Petitioners
Petitioners contend that "if the Court allows these machineries to be seized, then its
workers would be out of work and thrown into the streets." 31 They also allege that
the seizure would nullify all efforts to rehabilitate the corporation.
Petitioners arguments do not preclude the implementation of the Writ.1wphi1 As
earlier discussed, law and jurisprudence support its propriety. Verily, the abovementioned consequences, if they come true, should not be blamed on this Court, but
on the petitioners for failing to avail themselves of the remedy under Section 5 of
Rule 60, which allows the filing of a counter-bond. The provision states:
"SEC. 5. Return of property. -- If the adverse party objects to the sufficiency of the
applicants bond, or of the surety or sureties thereon, he cannot immediately require
the return of the property, but if he does not so object, he may, at any time before
the delivery of the property to the applicant, require the return thereof, by filing with
the court where the action is pending a bond executed to the applicant, in double
the value of the property as stated in the applicants affidavit for the delivery thereof

to the applicant, if such delivery be adjudged, and for the payment of such sum to
him as may be recovered against the adverse party, and by serving a copy bond on
the applicant."
WHEREFORE, the Petition is DENIED and the assailed Decision of the Court of
Appeals AFFIRMED. Costs against petitioners.
SO ORDERED.

G.R. No. 137705

August 22, 2000
SERG'S PRODUCTS, INC., and SERGIO T. GOQUIOLAY, petitioners,
vs.
PCI LEASING AND FINANCE, INC., respondent.
DECISION
PANGANIBAN, J.:
After agreeing to a contract stipulating that a real or immovable property be
considered as personal or movable, a party is estopped from subsequently claiming
otherwise. Hence, such property is a proper subject of a writ of replevin obtained by
the other contracting party.
The Case
Before us is a Petition for Review on Certiorari assailing the January 6, 1999
Decision1 of the Court of Appeals (CA) 2 in CA-GR SP No. 47332 and its February 26,
1999 Resolution3 denying reconsideration. The decretal portion of the CA Decision
reads as follows:
"WHEREFORE, premises considered, the assailed Order dated February 18, 1998 and
Resolution dated March 31, 1998 in Civil Case No. Q-98-33500 are hereby
AFFIRMED. The writ of preliminary injunction issued on June 15, 1998 is hereby
LIFTED."4
In its February 18, 1998 Order, 5 the Regional Trial Court (RTC) of Quezon City (Branch
218)6 issued a Writ of Seizure. 7 The March 18, 1998 Resolution 8 denied petitioners
Motion for Special Protective Order, praying that the deputy sheriff be enjoined "from
seizing immobilized or other real properties in (petitioners) factory in Cainta, Rizal
and to return to their original place whatever immobilized machineries or
equipments he may have removed." 9
The Facts
The undisputed facts are summarized by the Court of Appeals as follows: 10
"On February 13, 1998, respondent PCI Leasing and Finance, Inc. ("PCI Leasing" for
short) filed with the RTC-QC a complaint for [a] sum of money (Annex E), with an
application for a writ of replevin docketed as Civil Case No. Q-98-33500.
"On March 6, 1998, upon an ex-parte application of PCI Leasing, respondent judge
issued a writ of replevin (Annex B) directing its sheriff to seize and deliver the
machineries and equipment to PCI Leasing after 5 days and upon the payment of the
necessary expenses.
"On March 24, 1998, in implementation of said writ, the sheriff proceeded to
petitioners factory, seized one machinery with [the] word that he [would] return for
the other machineries.
"On March 25, 1998, petitioners filed a motion for special protective order (Annex
C), invoking the power of the court to control the conduct of its officers and amend
and control its processes, praying for a directive for the sheriff to defer enforcement
of the writ of replevin.

"This motion was opposed by PCI Leasing (Annex F), on the ground that the
properties [were] still personal and therefore still subject to seizure and a writ of
replevin.
"In their Reply, petitioners asserted that the properties sought to be seized [were]
immovable as defined in Article 415 of the Civil Code, the parties agreement to the
contrary notwithstanding. They argued that to give effect to the agreement would be
prejudicial to innocent third parties. They further stated that PCI Leasing [was]
estopped from treating these machineries as personal because the contracts in
which the alleged agreement [were] embodied [were] totally sham and farcical.
"On April 6, 1998, the sheriff again sought to enforce the writ of seizure and take
possession of the remaining properties. He was able to take two more, but was
prevented by the workers from taking the rest.
"On April 7, 1998, they went to [the CA] via an original action for certiorari."
Ruling of the Court of Appeals
Citing the Agreement of the parties, the appellate court held that the subject
machines were personal property, and that they had only been leased, not owned,
by petitioners. It also ruled that the "words of the contract are clear and leave no
doubt upon the true intention of the contracting parties." Observing that Petitioner
Goquiolay was an experienced businessman who was "not unfamiliar with the ways
of the trade," it ruled that he "should have realized the import of the document he
signed." The CA further held:
"Furthermore, to accord merit to this petition would be to preempt the trial court in
ruling upon the case below, since the merits of the whole matter are laid down
before us via a petition whose sole purpose is to inquire upon the existence of a
grave abuse of discretion on the part of the [RTC] in issuing the assailed Order and
Resolution. The issues raised herein are proper subjects of a full-blown trial,
necessitating presentation of evidence by both parties. The contract is being
enforced by one, and [its] validity is attacked by the other a matter x x x which
respondent court is in the best position to determine."
Hence, this Petition. 11
The Issues
In their Memorandum, petitioners submit the following issues for our consideration:
"A. Whether or not the machineries purchased and imported by SERGS became real
property by virtue of immobilization.
B. Whether or not the contract between the parties is a loan or a lease. "12
In the main, the Court will resolve whether the said machines are personal, not
immovable, property which may be a proper subject of a writ of replevin. As a
preliminary matter, the Court will also address briefly the procedural points raised by
respondent.
The Courts Ruling
The Petition is not meritorious.
Preliminary Matter: Procedural Questions
Respondent contends that the Petition failed to indicate expressly whether it was
being filed under Rule 45 or Rule 65 of the Rules of Court. It further alleges that the
Petition erroneously impleaded Judge Hilario Laqui as respondent.
There is no question that the present recourse is under Rule 45. This conclusion finds
support in the very title of the Petition, which is "Petition for Review on Certiorari." 13
While Judge Laqui should not have been impleaded as a respondent, 14 substantial
justice requires that such lapse by itself should not warrant the dismissal of the
present Petition. In this light, the Court deems it proper to remove, motu proprio, the
name of Judge Laqui from the caption of the present case.
Main Issue: Nature of the Subject Machinery
Petitioners contend that the subject machines used in their factory were not proper
subjects of the Writ issued by the RTC, because they were in fact real property.

Serious policy considerations, they argue, militate against a contrary

characterization.
Rule 60 of the Rules of Court provides that writs of replevin are issued for the
recovery of personal property only. 15 Section 3 thereof reads:
"SEC. 3. Order. -- Upon the filing of such affidavit and approval of the bond, the court
shall issue an order and the corresponding writ of replevin describing the personal
property alleged to be wrongfully detained and requiring the sheriff forthwith to take
such property into his custody."
On the other hand, Article 415 of the Civil Code enumerates immovable or real
property as follows:
"ART. 415. The following are immovable property:
xxx
xxx
xxx
(5) Machinery, receptacles, instruments or implements intended by the owner of the
tenement for an industry or works which may be carried on in a building or on a
piece of land, and which tend directly to meet the needs of the said industry or
works;
xxx
xxx
x x x"
In the present case, the machines that were the subjects of the Writ of Seizure were
placed by petitioners in the factory built on their own land. Indisputably, they were
essential and principal elements of their chocolate-making industry. Hence, although
each of them was movable or personal property on its own, all of them have become
"immobilized by destination because they are essential and principal elements in the
industry."16 In that sense, petitioners are correct in arguing that the said machines
are real, not personal, property pursuant to Article 415 (5) of the Civil Code. 17
Be that as it may, we disagree with the submission of the petitioners that the said
machines are not proper subjects of the Writ of Seizure.
The Court has held that contracting parties may validly stipulate that a real property
be considered as personal.18 After agreeing to such stipulation, they are
consequently estopped from claiming otherwise. Under the principle of estoppel, a
party to a contract is ordinarily precluded from denying the truth of any material fact
found therein.
Hence, in Tumalad v. Vicencio,19 the Court upheld the intention of the parties to treat
a house as a personal property because it had been made the subject of a chattel
mortgage. The Court ruled:
"x x x. Although there is no specific statement referring to the subject house as
personal property, yet by ceding, selling or transferring a property by way of chattel
mortgage defendants-appellants could only have meant to convey the house as
chattel, or at least, intended to treat the same as such, so that they should not now
be allowed to make an inconsistent stand by claiming otherwise."
Applying Tumalad, the Court in Makati Leasing and Finance Corp. v. Wearever Textile
Mills20 also held that the machinery used in a factory and essential to the industry,
as in the present case, was a proper subject of a writ of replevin because it was
treated as personal property in a contract. Pertinent portions of the Courts ruling are
reproduced hereunder:
"x x x. If a house of strong materials, like what was involved in the above Tumalad
case, may be considered as personal property for purposes of executing a chattel
mortgage thereon as long as the parties to the contract so agree and no innocent
third party will be prejudiced thereby, there is absolutely no reason why a
machinery, which is movable in its nature and becomes immobilized only by
destination or purpose, may not be likewise treated as such. This is really because
one who has so agreed is estopped from denying the existence of the chattel
mortgage."

In the present case, the Lease Agreement clearly provides that the machines in
question are to be considered as personal property. Specifically, Section 12.1 of the
Agreement reads as follows:21
"12.1 The PROPERTY is, and shall at all times be and remain, personal property
notwithstanding that the PROPERTY or any part thereof may now be, or hereafter
become, in any manner affixed or attached to or embedded in, or permanently
resting upon, real property or any building thereon, or attached in any manner to
what is permanent."
Clearly then, petitioners are estopped from denying the characterization of the
subject machines as personal property. Under the circumstances, they are proper
subjects of the Writ of Seizure.
It should be stressed, however, that our holding -- that the machines should be
deemed personal property pursuant to the Lease Agreement is good only insofar
as the contracting parties are concerned. 22 Hence, while the parties are bound by the
Agreement, third persons acting in good faith are not affected by its stipulation
characterizing the subject machinery as personal. 23 In any event, there is no showing
that any specific third party would be adversely affected.
Validity of the Lease Agreement
In their Memorandum, petitioners contend that the Agreement is a loan and not a
lease.24 Submitting documents supposedly showing that they own the subject
machines, petitioners also argue in their Petition that the Agreement suffers from
"intrinsic ambiguity which places in serious doubt the intention of the parties and
the validity of the lease agreement itself." 25 In their Reply to respondents Comment,
they further allege that the Agreement is invalid. 26
These arguments are unconvincing. The validity and the nature of the contract are
the lis mota of the civil action pending before the RTC. A resolution of these
questions, therefore, is effectively a resolution of the merits of the case. Hence, they
should be threshed out in the trial, not in the proceedings involving the issuance of
the Writ of Seizure.
Indeed, in La Tondea Distillers v. CA,27 the Court explained that the policy under
Rule 60 was that questions involving title to the subject property questions which
petitioners are now raising -- should be determined in the trial. In that case, the
Court noted that the remedy of defendants under Rule 60 was either to post a
counter-bond or to question the sufficiency of the plaintiffs bond. They were not
allowed, however, to invoke the title to the subject property. The Court ruled:
"In other words, the law does not allow the defendant to file a motion to dissolve or
discharge the writ of seizure (or delivery) on ground of insufficiency of the complaint
or of the grounds relied upon therefor, as in proceedings on preliminary attachment
or injunction, and thereby put at issue the matter of the title or right of possession
over the specific chattel being replevied, the policy apparently being that said
matter should be ventilated and determined only at the trial on the merits." 28
Besides, these questions require a determination of facts and a presentation of
evidence, both of which have no place in a petition for certiorari in the CA under Rule
65 or in a petition for review in this Court under Rule 45.29
Reliance on the Lease Agreement
It should be pointed out that the Court in this case may rely on the Lease
Agreement, for nothing on record shows that it has been nullified or annulled. In fact,
petitioners assailed it first only in the RTC proceedings, which had ironically been
instituted by respondent. Accordingly, it must be presumed valid and binding as the
law between the parties.
Makati Leasing and Finance Corporation30 is also instructive on this point. In that
case, the Deed of Chattel Mortgage, which characterized the subject machinery as
personal property, was also assailed because respondent had allegedly been
required "to sign a printed form of chattel mortgage which was in a blank form at the

time of signing." The Court rejected the argument and relied on the Deed, ruling as
follows:
"x x x. Moreover, even granting that the charge is true, such fact alone does not
render a contract void ab initio, but can only be a ground for rendering said contract
voidable, or annullable pursuant to Article 1390 of the new Civil Code, by a proper
action in court. There is nothing on record to show that the mortgage has been
annulled. Neither is it disclosed that steps were taken to nullify the same. x x x"
Alleged Injustice Committed on the Part of Petitioners
Petitioners contend that "if the Court allows these machineries to be seized, then its
workers would be out of work and thrown into the streets." 31 They also allege that
the seizure would nullify all efforts to rehabilitate the corporation.
Petitioners arguments do not preclude the implementation of the Writ.1wphi1 As
earlier discussed, law and jurisprudence support its propriety. Verily, the abovementioned consequences, if they come true, should not be blamed on this Court, but
on the petitioners for failing to avail themselves of the remedy under Section 5 of
Rule 60, which allows the filing of a counter-bond. The provision states:
"SEC. 5. Return of property. -- If the adverse party objects to the sufficiency of the
applicants bond, or of the surety or sureties thereon, he cannot immediately require
the return of the property, but if he does not so object, he may, at any time before
the delivery of the property to the applicant, require the return thereof, by filing with
the court where the action is pending a bond executed to the applicant, in double
the value of the property as stated in the applicants affidavit for the delivery thereof
to the applicant, if such delivery be adjudged, and for the payment of such sum to
him as may be recovered against the adverse party, and by serving a copy bond on
the applicant."
WHEREFORE, the Petition is DENIED and the assailed Decision of the Court of
Appeals AFFIRMED. Costs against petitioners.
SO ORDERED.

G.R. No. L-30173 September 30, 1971

GAVINO A. TUMALAD and GENEROSA R. TUMALAD, plaintiffs-appellees,
vs.
ALBERTA VICENCIO and EMILIANO SIMEON, defendants-appellants.
Castillo & Suck for plaintiffs-appellees.
Jose Q. Calingo for defendants-appellants.
REYES, J.B.L., J.:
Case certified to this Court by the Court of Appeals (CA-G.R. No. 27824-R) for the
reason that only questions of law are involved.
This case was originally commenced by defendants-appellants in the municipal court
of Manila in Civil Case No. 43073, for ejectment. Having lost therein, defendantsappellants 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 vacated and its possession surrendered to them, and
for defendants-appellants to pay rent of P200.00 monthly from 27 March 1956 up to
the time the possession is surrendered. 4 On 21 September 1956, the municipal
court rendered its decision
... ordering the defendants to vacate the premises described in the complaint;
ordering further to pay monthly the amount of P200.00 from March 27, 1956, until
such (time that) the premises is (sic) completely vacated; plus attorney's fees of
P100.00 and the costs of the suit. 5
Defendants-appellants, in their answers in both the municipal court and court a quo
impugned the legality of the chattel mortgage, claiming that they are still the
owners of the house; but they waived the right to introduce evidence, oral or
documentary. Instead, they relied on their memoranda in support of their motion to
dismiss, predicated mainly on the grounds that: (a) the municipal court did not have
jurisdiction to try and decide the case because (1) the issue involved, is ownership,
and (2) there was no allegation of prior possession; and (b) failure to prove prior
demand pursuant to Section 2, Rule 72, of the Rules of Court. 6
During the pendency of the appeal to the Court of First Instance, defendantsappellants failed to deposit the rent for November, 1956 within the first 10 days of
December, 1956 as ordered in the decision of the municipal court. As a result, the
court granted plaintiffs-appellees' motion for execution, and it was actually issued on
24 January 1957. However, the judgment regarding the surrender of possession to
plaintiffs-appellees could not be executed because the subject house had been
already demolished on 14 January 1957 pursuant to the order of the court in a
separate civil case (No. 25816) for ejectment against the present defendants for
non-payment of rentals on the land on which the house was constructed.
The motion of plaintiffs for dismissal of the appeal, execution of the supersedeas
bond and withdrawal of deposited rentals was denied for the reason that the liability
therefor was disclaimed and was still being litigated, and under Section 8, Rule 72,
rentals deposited had to be held until final disposition of the appeal. 7
On 7 October 1957, the appellate court of First Instance rendered its decision, the
dispositive portion of which is quoted earlier. The said decision was appealed by
defendants to the Court of Appeals which, in turn, certified the appeal to this Court.

Plaintiffs-appellees failed to file a brief and this appeal was submitted for decision
without it.
Defendants-appellants submitted numerous assignments of error which can be
condensed into two questions, namely: .
(a) Whether the municipal court from which the case originated had jurisdiction to
adjudicate the same;
(b) Whether the defendants are, under the law, legally bound to pay rentals to the
plaintiffs during the period of one (1) year provided by law for the redemption of the
extrajudicially foreclosed house.
We will consider these questions seriatim.
(a) Defendants-appellants mortgagors question the jurisdiction of the municipal
court from which the case originated, and consequently, the appellate jurisdiction of
the Court of First Instance a quo, on the theory that the chattel mortgage is void ab
initio; whence it would follow that the extrajudicial foreclosure, and necessarily the
consequent auction sale, are also void. Thus, the ownership of the house still
remained with defendants-appellants who are entitled to possession and not
plaintiffs-appellees. Therefore, it is argued by defendants-appellants, the issue of
ownership will have to be adjudicated first in order to determine possession. lt is
contended further that ownership being in issue, it is the Court of First Instance
which has jurisdiction and not the municipal court.
Defendants-appellants predicate their theory of nullity of the chattel mortgage on
two grounds, which are: (a) that, their signatures on the chattel mortgage were
obtained through fraud, deceit, or trickery; and (b) that the subject matter of the
mortgage is a house of strong materials, and, being an immovable, it can only be
the subject of a real estate mortgage and not a chattel mortgage.
On the charge of fraud, deceit or trickery, the Court of First Instance found
defendants-appellants' contentions as not supported by evidence and accordingly
dismissed the charge, 8 confirming the earlier finding of the municipal court that "the
defense of ownership as well as the allegations of fraud and deceit ... are mere
allegations." 9
It has been held in Supia and Batiaco vs. Quintero and Ayala 10 that "the answer is a
mere statement of the facts which the party filing it expects to prove, but it is not
evidence; 11 and further, that when the question to be determined is one of title, the
Court is given the authority to proceed with the hearing of the cause until this fact is
clearly established. In the case of Sy vs. Dalman, 12 wherein the defendant was also
a successful bidder in an auction sale, it was likewise held by this Court that in
detainer cases the aim of ownership "is a matter of defense and raises an issue of
fact which should be determined from the evidence at the trial." What determines
jurisdiction are the allegations or averments in the complaint and the relief asked for.
13

Moreover, even granting that the charge is true, fraud or deceit does not render a
contract void ab initio, and can only be a ground for rendering the contract voidable
or annullable pursuant to Article 1390 of the New Civil Code, by a proper action in
court. 14 There is nothing on record to show that the mortgage has been annulled.
Neither is it disclosed that steps were taken to nullify the same. Hence, defendantsappellants' claim of ownership on the basis of a voidable contract which has not
been voided fails.
It is claimed in the alternative by defendants-appellants that even if there was no
fraud, deceit or trickery, the chattel mortgage was still null and void ab initio
because only personal properties can be subject of a chattel mortgage. The rule
about the status of buildings as immovable property is stated in Lopez vs. Orosa, Jr.
and Plaza Theatre Inc., 15 cited in Associated Insurance Surety Co., Inc. vs. Iya, et al.
16
to the effect that

... it is obvious that the inclusion of the building, separate and distinct from the land,
in the enumeration of what may constitute real properties (art. 415, New Civil Code)
could only mean one thing that a building is by itself an immovable property
irrespective of whether or not said structure and the land on which it is adhered to
belong to the same owner.
Certain deviations, however, have been allowed for various reasons. In the case of
Manarang and Manarang vs. Ofilada, 17 this Court stated that "it is undeniable that
the parties to a contract may by agreement treat as personal property that which by
nature would be real property", citing Standard Oil Company of New York vs.
Jaramillo. 18 In the latter case, the mortgagor conveyed and transferred to the
mortgagee by way of mortgage "the following described personal property." 19 The
"personal property" consisted of leasehold rights and a building. Again, in the case
of Luna vs. Encarnacion, 20 the subject of the contract designated as Chattel
Mortgage was a house of mixed materials, and this Court hold therein that it was a
valid Chattel mortgage because it was so expressly designated and specifically that
the property given as security "is a house of mixed materials, which by its very
nature is considered personal property." In the later case of Navarro vs. Pineda, 21
this Court stated that
The view that parties to a deed of chattel mortgage may agree to consider a house
as personal property for the purposes of said contract, "is good only insofar as the
contracting parties are concerned. It is based, partly, upon the principle of estoppel"
(Evangelista vs. Alto Surety, No. L-11139, 23 April 1958). In a case, a mortgaged
house built on a rented land was held to be a personal property, not only because
the deed of mortgage considered it as such, but also because it did not form part of
the land (Evangelists vs. Abad, [CA]; 36 O.G. 2913), for it is now settled that an
object placed on land by one who had only a temporary right to the same, such as
the lessee or usufructuary, does not become immobilized by attachment (Valdez vs.
Central Altagracia, 222 U.S. 58, cited in Davao Sawmill Co., Inc. vs. Castillo, et al., 61
Phil. 709). Hence, if a house belonging to a person stands on a rented land belonging
to another person, it may be mortgaged as a personal property as so stipulated in
the document of mortgage. (Evangelista vs. Abad, Supra.) It should be noted,
however that the principle is predicated on statements by the owner declaring his
house to be a chattel, a conduct that may conceivably estop him from subsequently
claiming otherwise. (Ladera vs. C.N. Hodges, [CA] 48 O.G. 5374): 22
In the contract now before Us, the house on rented land is not only expressly
designated as Chattel Mortgage; it specifically provides that "the mortgagor ...
voluntarily CEDES, SELLS and TRANSFERS by way of Chattel Mortgage 23 the property
together with its leasehold rights over the lot on which it is constructed and
participation ..." 24 Although there is no specific statement referring to the subject
house as personal property, yet by ceding, selling or transferring a property by way
of chattel mortgage defendants-appellants could only have meant to convey the
house as chattel, or at least, intended to treat the same as such, so that they should
not now be allowed to make an inconsistent stand by claiming otherwise. Moreover,
the subject house stood on a rented lot to which defendats-appellants merely had a
temporary right as lessee, and although this can not in itself alone determine the
status of the property, it does so when combined with other factors to sustain the
interpretation that the parties, particularly the mortgagors, intended to treat the
house as personalty. Finally unlike in the Iya cases, Lopez vs. Orosa, Jr. and Plaza
Theatre, Inc. 25 and Leung Yee vs. F. L. Strong Machinery and Williamson, 26 wherein
third persons assailed the validity of the chattel mortgage, 27 it is the defendantsappellants themselves, as debtors-mortgagors, who are attacking the validity of the
chattel mortgage in this case. The doctrine of estoppel therefore applies to the
herein 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 (defendantsappellants 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 judgmentdebtor 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 plaintiffsappellees' 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.
G.R. No. L-17898
October 31, 1962
PASTOR D. AGO, petitioner,
vs.
THE HON. COURT OF APPEALS, HON. MONTANO A. ORTIZ, Judge of the
Court of First Instance of Agusan, THE PROVINCIAL SHERIFF OF SURIGAO
and GRACE PARK ENGINEERING, INC., respondents.
Jose M. Luison for petitioner.Norberto J. Quisumbing for respondent Grace Park
Engineering, Inc.The Provincial Fiscal of Surigao for respondent Sheriff of Surigao.
LABRABOR, J.:
Appeal by certiorari to review the decision of respondent Court of Appeals in CA-G.R.
No. 26723-R entitled "Pastor D. Ago vs. The Provincial Sheriff of Surigao, et al." which
in part reads:
In this case for certiorari and prohibition with preliminary injunction, it appears from
the records that the respondent Judge of the Court of First Instance of Agusan
rendered judgment (Annex "A") in open court on January 28, 1959, basing said
judgment on a compromise agreement between the parties.
On August 15, 1959, upon petition, the Court of First Instance issued a writ of
execution.
Petitioner's motion for reconsideration dated October 12, 1959 alleges that he, or his
counsel, did not receive a formal and valid notice of said decision, which motion for
reconsideration was denied by the court below in the order of November 14, 1959.
Petitioner now contends that the respondent Judge exceeded in his jurisdiction in
rendering the execution without valid and formal notice of the decision.
A compromise agreement is binding between the parties and becomes the law
between them. (Gonzales vs. Gonzales G.R. No. L-1254, May 21, 1948, 81 Phil. 38;
Martin vs. Martin, G.R. No. L-12439, May 22, 1959) .
It is a general rule in this jurisdiction that a judgment based on a compromise
agreement is not appealable and is immediately executory, unless a motion is filed
on the ground fraud, mistake or duress. (De los Reyes vs. Ugarte, 75 Phil. 505;
Lapena vs. Morfe, G.R. No. L-10089, July 31, 1957)
Petitioner's claim that he was not notified or served notice of the decision is
untenable. The judgment on the compromise agreement rendered by the court
below dated January 28, 1959, was given in open court. This alone is a substantial
compliance as to notice. (De los Reyes vs. Ugarte, supra)
IN VIEW THEREOF, we believe that the lower court did not exceed nor abuse its
jurisdiction in ordering the execution of the judgment. The petition for certiorari is
hereby dismissed and the writ of preliminary injunction heretofore dissolved, with
costs against the petitioner.
IT IS SO ORDERED.

The facts of the case may be briefly stated as follows: In 1957, petitioner Pastor D.
Ago bought sawmill machineries and equipments from respondent Grace Park
Engineer domineering, Inc., executing a chattel mortgage over said machineries and
equipments to secure the payment of balance of the price remaining unpaid of
P32,000.00, which petitioner agreed to pay on installment basis.
Petitioner Ago defaulted in his payment and so, in 1958 respondent Grace Park
Engineering, Inc. instituted extra-judicial foreclosure proceedings of the mortgage. To
enjoin said foreclosure, petitioner herein instituted Special Civil Case No. 53 in the
Court of First Instance of Agusan. The parties to the case arrived at a compromise
agreement and submitted the same in court in writing, signed by Pastor D. Ago and
the Grace Park Engineering, Inc. The Hon. Montano A. Ortiz, Judge of the Court of
First Instance of Agusan, then presiding, dictated a decision in open court on January
28, 1959.
Petitioner continued to default in his payments as provided in the judgment by
compromise, so Grace Park Engineering, Inc. filed with the lower court a motion for
execution, which was granted by the court on August 15, 1959. A writ of execution,
dated September 23, 1959, later followed.
The herein respondent, Provincial Sheriff of Surigao, acting upon the writ of
execution issued by the lower court, levied upon and ordered the sale of the sawmill
machineries and equipments in question. These machineries and equipments had
been taken to and installed in a sawmill building located in Lianga, Surigao del Sur,
and owned by the Golden Pacific Sawmill, Inc., to whom, petitioner alleges, he had
sold them on February 16, 1959 (a date after the decision of the lower court but
before levy by the Sheriff).
Having been advised by the sheriff that the public auction sale was set for December
4, 1959, petitioner, on December 1, 1959, filed the petition for certiorari and
prohibition with preliminary injunction with respondent Court of Appeals, alleging
that a copy of the aforementioned judgment given in open court on January 28, 1959
was served upon counsel for petitioner only on September 25, 1959 (writ of
execution is dated September 23, 1959); that the order and writ of execution having
been issued by the lower court before counsel for petitioner received a copy of the
judgment, its resultant last order that the "sheriff may now proceed with the sale of
the properties levied constituted a grave abuse of discretion and was in excess of its
jurisdiction; and that the respondent Provincial Sheriff of Surigao was acting illegally
upon the allegedly void writ of execution by levying the same upon the sawmill
machineries and equipments which have become real properties of the Golden
Pacific sawmill, Inc., and is about to proceed in selling the same without prior
publication of the notice of sale thereof in some newspaper of general circulation as
required by the Rules of Court.
The Court of Appeals, on December 8, 1959, issued a writ of preliminary injunction
against the sheriff but it turned out that the latter had already sold at public auction
the machineries in question, on December 4, 1959, as scheduled. The respondent
Grace Park Engineering, Inc. was the only bidder for P15,000.00, although the
certificate sale was not yet executed. The Court of Appeals constructed the sheriff to
suspend the issuance of a certificate of sale of the said sawmill machineries and
equipment sold by him on December 4, 1959 until the final decision of the case. On
November 9, 1960 the Court of Appeals rendered the aforequoted decision.
Before this Court, petitioner alleges that the Court of Appeals erred (1) in holding
that the rendition of judgment on compromise in open court on January 1959 was a
sufficient notice; and (2) in not resolving the other issues raised before it, namely,
(a) the legality of the public auction sale made by the sheriff, and (b) the nature of
the machineries in question, whether they are movables or immovables.
The Court of Appeals held that as a judgment was entered by the court below in
open court upon the submission of the compromise agreement, the parties may be

considered as having been notified of said judgment and this fact constitutes due
notice of said judgment. This raises the following legal question: Is the order dictated
in open court of the judgment of the court, and is the fact the petitioner herein was
present in open court was the judgment was dictated, sufficient notice thereof? The
provisions of the Rules of Court decree otherwise. Section 1 of Rule 35 describes the
manner in which judgment shall be rendered, thus:
SECTION 1. How judgment rendered. All judgments determining the merits of
cases shall be in writing personally and directly prepared by the judge, and signed
by him, stating clearly and distinctly the facts and the law on which it is based, filed
with the clerk of the court.
The court of first instance being a court of record, in order that a judgment may be
considered as rendered, must not only be in writing, signed by the judge, but it must
also be filed with the clerk of court. The mere pronouncement of the judgment in
open court with the stenographer taking note thereof does not, therefore, constitute
a rendition of the judgment. It is the filing of the signed decision with the clerk of
court that constitutes rendition. While it is to be presumed that the judgment that
was dictated in open court will be the judgment of the court, the court may still
modify said order as the same is being put into writing. And even if the order or
judgment has already been put into writing and signed, while it has not yet been
delivered to the clerk for filing it is still subject to amendment or change by the
judge. It is only when the judgment signed by the judge is actually filed with the
clerk of court that it becomes a valid and binding judgment. Prior thereto, it could
still be subject to amendment and change and may not, therefore, constitute the
real judgment of the court.
Regarding the notice of judgment, the mere fact that a party heard the judge
dictating the judgment in open court, is not a valid notice of said judgment. If
rendition thereof is constituted by the filing with the clerk of court of a signed copy
(of the judgment), it is evident that the fact that a party or an attorney heard the
order or judgment being dictated in court cannot be considered as notice of the real
judgment. No judgment can be notified to the parties unless it has previously been
rendered. The notice, therefore, that a party has of a judgment that was being
dictated is of no effect because at the time no judgment has as yet been signed by
the judge and filed with the clerk.
Besides, the Rules expressly require that final orders or judgments be served
personally or by registered mail. Section 7 of Rule 27 provides as follows:
SEC. 7. Service of final orders or judgments. Final orders or judgments shall be
served either personally or by registered mail.
In accordance with this provision, a party is not considered as having been served
with the judgment merely because he heard the judgment dictating the said
judgment in open court; it is necessary that he be served with a copy of the signed
judgment that has been filed with the clerk in order that he may legally be
considered as having been served with the judgment.
For all the foregoing, the fact that the petitioner herein heard the trial judge
dictating the judgment in open court, is not sufficient to constitute the service of
judgement as required by the above-quoted section 7 of Rule 2 the signed judgment
not having been served upon the petitioner, said judgment could not be effective
upon him (petitioner) who had not received it. It follows as a consequence that the
issuance of the writ of execution null and void, having been issued before petitioner
her was served, personally or by registered mail, a copy of the decision.
The second question raised in this appeal, which has been passed upon by the Court
of Appeals, concerns the validity of the proceedings of the sheriff in selling the
sawmill machineries and equipments at public auction with a notice of the sale
having been previously published.

The record shows that after petitioner herein Pastor D. Ago had purchased the
sawmill machineries and equipments he assigned the same to the Golden Pacific
Sawmill, Inc. in payment of his subscription to the shares of stock of said
corporation. Thereafter the sawmill machinery and equipments were installed in a
building and permanently attached to the ground. By reason of such installment in a
building, the said sawmill machineries and equipment became real estate properties
in accordance with the provision of Art. 415 (5) of the Civil Code, thus:
ART. 415. The following are immovable property:
xxx
xxx
xxx
(5) Machinery, receptacles, instruments or implements tended by the owner of the
tenement for an industry or works which may be carried on in a building or on a
piece of land, and which tend directly to meet the needs of the said industry or
works;
This Court in interpreting a similar question raised before it in the case of
Berkenkotter vs. Cu Unjieng e Hijos, 61 Phil. 683, held that the installation of the
machine and equipment in the central of the Mabalacat Sugar Co., Inc. for use in
connection with the industry carried by the company, converted the said machinery
and equipment into real estate by reason of their purpose. Paraphrasing language of
said decision we hold that by the installment of the sawmill machineries in the
building of the Gold Pacific Sawmill, Inc., for use in the sawing of logs carried on in
said building, the same became a necessary and permanent part of the building or
real estate on which the same was constructed, converting the said machineries and
equipments into real estate within the meaning of Article 415(5) above-quoted of the
Civil Code of the Philippines.
Considering that the machineries and equipments in question valued at more than
P15,000.00 appear to have been sold without the necessary advertisement of sale
by publication in a newspaper, as required in Sec. 16 of Rule 39 of the Rules of
Court, which is as follows:
SEC. 16. Notice of sale of property on execution. Before the sale of property on
execution, notice thereof must be given as follows:
xxx
xxx
xxx
(c) In case of real property, by posting a similar notice particularly describing the
property for twenty days in three public places in the municipality or city where the
property is situated, and also where the property is to be sold, and, if the assessed
value of the property exceeds four hundred pesos, by publishing a copy of the notice
once a week, for the same period, in some newspaper published or having general
circulation in the province, if there be one. If there are newspapers published in the
province in both the English and Spanish languages, then a like publication for a like
period shall be made in one newspaper published in the English language, and in
one published in the Spanish language.
the sale made by the sheriff must be declared null and void.
WHEREFORE, the decision of the Court of Appeals sought to be reviewed is hereby
set aside and We declare that the issuance of the writ of execution in this case
against the sawmill machineries and equipments purchased by petitioner Pastor D.
Ago from the Grace Park Engineering, Inc., as well as the sale of the same by the
Sheriff of Surigao, are null and void. Costs shall be against the respondent Grace
Park Engineering, Inc.
G.R. No. 6295
September 1, 1911
THE UNITED STATES, plaintiff-appellee,
vs.
IGNACIO CARLOS, defendant-appellant.
A. D. Gibbs for appellant. Acting Attorney-General Harvey for appellee.
PER CURIAM:

The information filed in this case is as follows:

The undersigned accuses Ignacio Carlos of the crime of theft, committed as follows:
That on, during, and between the 13th day of February, 1909, and the 3d day of
March, 1910, in the city of Manila, Philippine Islands, the said Ignacio Carlos, with
intent of gain and without violence or intimidation against the person or force
against the thing, did then and there, willfully, unlawfully, and feloniously, take, steal
, and carry away two thousand two hundred and seventy-three (2,273) kilowatts of
electric current, of the value of nine hundred and nine (909) pesos and twenty (20)
cents Philippine currency, the property of the Manila Electric Railroad and Light
Company, a corporation doing business in the Philippine Islands, without the consent
of the owner thereof; to the damage and prejudice of the said Manila Electric
Railroad and Light Company in the said sum of nine hundred and nine (909) pesos
and twenty (20) cents Philippine currency, equal to and equivalent of 4,546 pesetas
Philippine currency. All contrary to law.
(Sgd.) L. M. SOUTWORTH,
Prosecuting Attorney.
Subscribed and sworn to before me this 4th day of March, 1910, in the city of Manila,
Philippine Islands, by L. M. Southworth, prosecuting attorney for the city of Manila.
(Sgd.) CHARLES S. LOBINGIER,
Judge, First Instance.
A preliminary investigation has heretofore been conducted in this case, under my
direction, having examined the witness under oath, in accordance with the
provisions of section 39 of Act No. 183 of the Philippine Commission, as amended by
section 2 of Act No. 612 of the Philippine Commission.
(Sgd) L. M. SOUTHWORTH,
Prosecuting Attorney.
Subscribed and sworn to before me this 4th day of March, 1910, in the city of Manila,
Philippine Islands, by L. M. Southworth, prosecuting attorney for the city of Manila.
(Sgd.) CHARLES LOBINGIER,
Judge, First Instance.
A warrant for the arrest of the defendant was issued by the Honorable J. C. Jenkins
on the 4th of March and placed in the hands of the sheriff. The sheriff's return shows
that the defendant gave bond for his appearance. On the 14th of the same month
counsel for the defendant demurrer to the complaint on the following grounds:
1 That the court has no jurisdiction over the person of the accused nor of the offense
charged because the accused has not been accorded a preliminary investigation or
examination as required by law and no court, magistrate, or other competent
authority has determined from a sworn complaint or evidence adduced that there is
probable cause to believe that a crime has been committed, or that this defendant
has committed any crime.
2 That the facts charged do not constitute a public offense.
The demurrer was overruled on the same day and the defendant having refused to
plead, a plea of not guilty was entered by direction of the court for him and the trial
proceeded.
After due consideration of all the proofs presented and the arguments of counsel the
trial court found the defendant guilty of the crime charged and sentenced him to one
year eight months and twenty-one days' presidio correccional, to indemnify the
offended party, The Manila Electric Railroad and Light Company, in the sum of
P865.26, to the corresponding subsidiary imprisonment in case of insolvency and to
the payment of the costs. From this judgment the defendant appealed and makes
the following assignments of error:
I.

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

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

After a careful examination of the entire record we are satisfied beyond

peradventure of a doubt that the proofs presented fully support the facts as set forth
in the foregoing finding.
Counsel for the appellant insists that the only corporeal property can be the subject
of the crime of larceny, and in the support of this proposition cites several
authorities for the purpose of showing that the only subjects of larceny are tangible,
movable, chattels, something which could be taken in possession and carried away,
and which had some, although trifling, intrinsic value, and also to show that
electricity is an unknown force and can not be a subject of larceny.
In the U. S. vs. Genato (15 Phi. Rep., 170) the defendant, the owner of the store
situated at No. 154 Escolta, Manila, was using a contrivance known as a "jumper" on
the electric meter installed by the Manila Electric Railroad and the Light Company. As
a result of the use of this "jumper" the meter, instead of making one revolution in
every four seconds, registered one in seventy-seven seconds, thereby reducing the
current approximately 95 per cent. Genato was charged in the municipal court with a
violation of a certain ordinance of the city of Manila, and was sentenced to pay a fine
of P200. He appealed to the Court of First Instance, was again tried and sentenced to
pay the same fine. An appeal was taken from the judgment of the Court of First
Instance to the Supreme Court on the ground that the ordinance in question was null
and void. It is true that the only question directly presented was of the validity of the
city ordinance. The court, after holding that said ordinance was valid, said:
Even without them (ordinances), the right of ownership of electric current is secured
by articles 517 and 518 of the Penal Code; the application of these articles in case of
subtraction of gas, a fluid used for lighting, and in some respects resembling
electricity, is confirmed by the rule laid down in the decisions of the supreme court
of Spain January 20, 1887, and April 1, 1897, construing and enforcing the provisions
of articles 530 and 531 of the penal code of that country, articles identical with
articles 517 and 518 of the code in force in these Islands.
Article 517 of the Penal Code above referred to reads as follows:
The following are guilty of larceny:
(1) Those who with intent of gain and without violence or intimidation against the
person, or force against things, shall take another's personal property without the
owner's consent.
And article 518 fixes the penalty for larceny in proportion to the value of the
personal property stolen.
It is true that electricity is no longer, as formerly, regarded by electricians as a fluid,
but its manifestation and effects, like those of gas, may be seen and felt. The true
test of what is a proper subject of larceny seems to be not whether the subject is
corporeal, but whether it is capable of appropriation by another than the owner.
It is well-settled that illuminating gas may be the subject of larceny, even in the
absence of a statute so providing. (Decisions of supreme court of Spain, January 20,
1887, and April 1, 1897, supra; also (England) Queen vs. Firth, L. R. 1 C. C., 172, 11
Cox C. C., 234; Queen vs. White, 3 C. & K., 363, 6 Cox C. C., 213; Woods vs. People,
222 III., 293, 7 L. R. A., 520; Commonwealth vs. Shaw, 4 Allen (Mass), 308; State vs.
Wellman, 34 Minn., 221, N. W. Rep., 385, and 25 Cyc., p. 12, note 10.)
In the case of Commonwealth vs. Shaw, supra, the court, speaking through Chief
Justice Bigelow, said:
There is nothing in the nature of gas used for illuminating purposes which renders it
incapable of being feloniously taken and carried away. It is a valuable article of
merchandise, bought and sold like other personal property, susceptible of being
severed from a mass or larger quantity, and of being transported from place to
place. In the present case it appears that it was the property of the Boston Gas Light
Company; that it was in their possession by being confined in conduits and tubes
which belonged to them, and that the defendant severed a portion of that which was

in the pipes of the company by taking it into her house and there consuming it. All
this being proved to have been done by her secretly and with intent to deprive the
company of their property and to appropriate it to her own use, clearly constitutes
the crime of larceny.
Electricity, the same as gas, is a valuable article of merchandise, bought and sold
like other personal property and is capable of appropriation by another. So no error
was committed by the trial court in holding that electricity is a subject of larceny.
It is urged in support of the fourth assignment of error that if it be true that the
appellant did appropriate to his own use the electricity as charged he can not be
held guilty of larceny for any part of the electricity thus appropriated, after the first
month, for the reason that the complaining party, the Manila Electric Road and Light
Company, knew of this misappropriation and consented thereto.
The outside meter was installed on March 15, 1909, and read 218 kilowatt hours. On
the same day the inside meter was read and showed 745 kilowatt hours. Both
meters were again read on March 3, 1910, and the outside one showed 2,718
kilowatt hours while the one on the inside only showed 968, the difference in
consumption during this time being 2,277 kilowatt hours. The taking of this current
continued over a period of one year, less twelve days. Assuming that the company
read both meters at the end of each month; that it knew the defendant was
misappropriating the current to that extent; and that t continued to furnish the
current, thereby giving the defendant an opportunity to continue the
misppropriation, still, we think, that the defendant is criminally responsible for the
taking of the whole amount, 2,277 kilowatt hours. The company had a contract with
the defendant to furnish him with current for lighting purposes. It could not stop the
misappropriation without cutting off the current entirely. It could not reduce the
current so as to just furnish sufficient for the lighting of two, three, or five lights, as
claimed by the defendant that he used during the most of this time, but the current
must always be sufficiently strong to furnish current for the thirty lights, at any time
the defendant desired to use them.
There is no pretense that the accused was solicited by the company or any one else
to commit the acts charged. At most there was a mere passive submission on the
part of the company that the current should be taken and no indication that it
wished it to be taken, and no knowledge by the defendant that the company wished
him to take the current, and no mutual understanding between the company and the
defendant, and no measures of inducement of any kind were employed by the
company for the purpose of leading the defendant into temptation, and no
preconcert whatever between him and company. The original design to
misappropriate this current was formed by the defendant absolutely independent of
any acts on the part of the company or its agents. It is true, no doubt, as a general
proposition, that larceny is not committed when the property is taken with the
consent of its owner. It may be difficult in some instances to determine whether
certain acts constitute, in law, such "consent." But under the facts in the case at bar
it is not difficult to reach a conclusion that the acts performed by the plaintiff
company did not constitute a consent on its part the defendant take its property. We
have been unable to find a well considered case holding contrary opinion under
similar facts, but, there are numerous cases holding that such acts do not constitute
such consent as would relieve the taker of criminal responsibility. The fourth
assignment of error is, therefore, not well founded.
It is also contended that since the "jumper" was not used continuously, the
defendant committed not a single offense but a series of offenses. It is, no doubt,
true that the defendant did not allow the "jumper" to remain in place continuously
for any number of days as the company inspected monthly the inside meter. So the
"jumper" was put on and taken off at least monthly, if not daily, in order to avoid
detection, and while the "jumper" was off the defendant was not misappropriating

the current. The complaint alleged that the defendant did on, during, and between
the 13th day of February, 1909, and the 3d of March, 1910. willfully, unlawfully, and
feloniously take, steal, and carry away 2,277 kilowatts of electric current of the value
of P909. No demurrer was presented against this complaint on the ground that more
than one crime was charged. The Government had no opportunity to amend or
correct this error, if error at all. In the case of U. S. vs. Macaspac (12 Phil. Rep., 26),
the defendant received from one Joquina Punu the sum of P31.50, with the request
to deliver it to Marcelina Dy-Oco. The defendant called upon Marcelina, but instead
of delivering the said amount she asked Marcelina for P30 in the name of Joaquina
who had in no way authorized her to do so. Marcelina gave her P30, believing that
Joaquina had sent for it. Counsel for the defendant insisted that the complaint
charged his client with two different crimes of estafa in violation of section 11 of
General Orders, No. 58. In disposing of this question this court said:
The said defect constitutes one of the dilatory pleas indicated by section 21, and the
accused ought to have raised the point before the trial began. Had this been done,
the complaint might have been amended in time, because it is merely a defect of
form easily remedied. . . . Inasmuch as in the first instance the accused did not make
the corresponding dilatory plea to the irregularity of the complaint, it must be
understood that has waived such objection, and is not now entitled to raise for the
first time any question in reference thereto when submitting to this court her
assignment of errors. Apart from the fact that the defense does not pretend that any
of the essential rights of the accused have been injured, the allegation of the defect
above alluded to, which in any case would only affect form of the complaint, can not
justify a reversal of the judgment appealed from, according to the provisions of
section 10 of General Orders, No. 58.
In the case at bar it is not pointed out wherein any of the essential rights of the
defendant have been prejudiced by reason of the fact that the complaint covered
the entire period. If twelve distinct and separate complaints had been filed against
the defendant, one for each month, the sum total of the penalties imposed might
have been very much greater than that imposed by the court in this case. The
covering of the entire period by one charge has been beneficial, if anything, and not
prejudicial to the rights of the defendant. The prosecuting attorney elected to cover
the entire period with one charge and the accused having been convicted for this
offense, he can not again be prosecuted for the stealing of the current at any time
within that period. Then, again, we are of the opinion that the charge was properly
laid. The electricity was stolen from the same person, in the same manner, and in
the same place. It was substantially one continuous act, although the "jumper"
might have been removed and replaced daily or monthly. The defendant was moved
by one impulse to appropriate to his own use the current, and the means adopted by
him for the taking of the current were in the execution of a general fraudulent plan.
A person stole gas for the use of a manufactory by means of pipe, which drew off the
gas from the main without allowing it to pass through the meter. The gas from this
pipe was burnt every day, and turned off at night. The pipe was never closed at this
junction with the main, and consequently always remained full of gas. It was held,
that if the pipe always remained full, there was, in fact, a continuous taking of the
gas and not a series of separate talkings. It was held also that even if the pipe had
not been kept full, the taking would have been continuous, as it was substantially all
one transaction. (Regina vs. Firth, L. R., 1 C. C., 172; 11 Cox C. C., 234. Cited on p.
758 of Wharton's Criminal Law, vol. 1, 10th ed.)
The value of the electricity taken by the defendant was found by the trial court to be
P865.26. This finding is fully in accordance with the evidence presented. So no error
was committed in sentencing the defendant to indemnify the company in this
amount, or to suffer the corresponding subsidiary imprisonment in case of
insolvency.

The judgment being strictly in accordance with the law and the merits of the case,
same is hereby affirmed, with costs against the appellant.

G.R. No. 155076

January 13, 2009
LUIS MARCOS P. LAUREL, Petitioner,
vs.
HON. ZEUS C. ABROGAR, Presiding Judge of the Regional Trial Court,
Makati City, Branch 150, PEOPLE OF THE PHILIPPINES & PHILIPPINE LONG
DISTANCE TELEPHONE COMPANY Respondents.
RESOLUTION
YNARES-SANTIAGO, J.:
On February 27, 2006, this Courts First Division rendered judgment in this case as
follows:
IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The assailed Orders of
the Regional Trial Court and the Decision of the Court of Appeals are REVERSED and
SET ASIDE. The Regional Trial Court is directed to issue an order granting the motion
of the petitioner to quash the Amended Information.
SO ORDERED.1
By way of brief background, petitioner is one of the accused in Criminal Case No. 992425, filed with the Regional Trial Court of Makati City, Branch 150. The Amended
Information charged the accused with theft under Article 308 of the Revised Penal
Code, committed as follows:
On or about September 10-19, 1999, or prior thereto in Makati City, and within the
jurisdiction of this Honorable Court, the accused, conspiring and confederating
together and all of them mutually helping and aiding one another, with intent to gain
and without the knowledge and consent of the Philippine Long Distance Telephone
(PLDT), did then and there willfully, unlawfully and feloniously take, steal and use the
international long distance calls belonging to PLDT by conducting International
Simple Resale (ISR), which is a method of routing and completing international long
distance calls using lines, cables, antenae, and/or air wave frequency which connect
directly to the local or domestic exchange facilities of the country where the call is
destined, effectively stealing this business from PLDT while using its facilities in the
estimated amount of P20,370,651.92 to the damage and prejudice of PLDT, in the
said amount.
CONTRARY TO LAW.2
Petitioner filed a "Motion to Quash (with Motion to Defer Arraignment)," on the
ground that the factual allegations in the Amended Information do not constitute the
felony of theft. The trial court denied the Motion to Quash the Amended Information,
as well petitioners subsequent Motion for Reconsideration.
Petitioners special civil action for certiorari was dismissed by the Court of Appeals.
Thus, petitioner filed the instant petition for review with this Court.
In the above-quoted Decision, this Court held that the Amended Information does
not contain material allegations charging petitioner with theft of personal property
since international long distance calls and the business of providing
telecommunication or telephone services are not personal properties under Article
308 of the Revised Penal Code.
Respondent Philippine Long Distance Telephone Company (PLDT) filed a Motion for
Reconsideration with Motion to Refer the Case to the Supreme Court En Banc. It
maintains that the Amended Information charging petitioner with theft is valid and

sufficient; that it states the names of all the accused who were specifically charged
with the crime of theft of PLDTs international calls and business of providing
telecommunication or telephone service on or about September 10 to 19, 1999 in
Makati City by conducting ISR or International Simple Resale; that it identifies the
international calls and business of providing telecommunication or telephone service
of PLDT as the personal properties which were unlawfully taken by the accused; and
that it satisfies the test of sufficiency as it enabled a person of common
understanding to know the charge against him and the court to render judgment
properly.
PLDT further insists that the Revised Penal Code should be interpreted in the context
of the Civil Codes definition of real and personal property. The enumeration of real
properties in Article 415 of the Civil Code is exclusive such that all those not
included therein are personal properties. Since Article 308 of the Revised Penal Code
used the words "personal property" without qualification, it follows that all "personal
properties" as understood in the context of the Civil Code, may be the subject of
theft under Article 308 of the Revised Penal Code. PLDT alleges that the international
calls and business of providing telecommunication or telephone service are personal
properties capable of appropriation and can be objects of theft.
PLDT also argues that "taking" in relation to theft under the Revised Penal Code does
not require "asportation," the sole requisite being that the object should be capable
of "appropriation." The element of "taking" referred to in Article 308 of the Revised
Penal Code means the act of depriving another of the possession and dominion of a
movable coupled with the intention, at the time of the "taking," of withholding it with
the character of permanency. There must be intent to appropriate, which means to
deprive the lawful owner of the thing. Thus, the term "personal properties" under
Article 308 of the Revised Penal Code is not limited to only personal properties which
are "susceptible of being severed from a mass or larger quantity and of being
transported from place to place."
PLDT likewise alleges that as early as the 1930s, international telephone calls were
in existence; hence, there is no basis for this Courts finding that the Legislature
could not have contemplated the theft of international telephone calls and the
unlawful transmission and routing of electronic voice signals or impulses emanating
from such calls by unlawfully tampering with the telephone device as within the
coverage of the Revised Penal Code.
According to respondent, the "international phone calls" which are "electric currents
or sets of electric impulses transmitted through a medium, and carry a pattern
representing the human voice to a receiver," are personal properties which may be
subject of theft. Article 416(3) of the Civil Code deems "forces of nature" (which
includes electricity) which are brought under the control by science, are personal
property.
In his Comment to PLDTs motion for reconsideration, petitioner Laurel claims that a
telephone call is a conversation on the phone or a communication carried out using
the telephone. It is not synonymous to electric current or impulses. Hence, it may
not be considered as personal property susceptible of appropriation. Petitioner
claims that the analogy between generated electricity and telephone calls is
misplaced. PLDT does not produce or generate telephone calls. It only provides the
facilities or services for the transmission and switching of the calls. He also insists
that "business" is not personal property. It is not the "business" that is protected but
the "right to carry on a business." This right is what is considered as property. Since
the services of PLDT cannot be considered as "property," the same may not be
subject of theft.
The Office of the Solicitor General (OSG) agrees with respondent PLDT that
"international phone calls and the business or service of providing international
phone calls" are subsumed in the enumeration and definition of personal property

under the Civil Code hence, may be proper subjects of theft. It noted that the cases
of United States v. Genato,3 United States v. Carlos4 and United States v.
Tambunting,5 which recognized intangible properties like gas and electricity as
personal properties, are deemed incorporated in our penal laws. Moreover, the theft
provision in the Revised Penal Code was deliberately couched in broad terms
precisely to be all-encompassing and embracing even such scenario that could not
have been easily anticipated.
According to the OSG, prosecution under Republic Act (RA) No. 8484 or the Access
Device Regulations Act of 1998 and RA 8792 or the Electronic Commerce Act of
2000 does not preclude prosecution under the Revised Penal Code for the crime of
theft. The latter embraces unauthorized appropriation or use of PLDTs international
calls, service and business, for personal profit or gain, to the prejudice of PLDT as
owner thereof. On the other hand, the special laws punish the surreptitious and
advanced technical means employed to illegally obtain the subject service and
business. Even assuming that the correct indictment should have been under RA
8484, the quashal of the information would still not be proper. The charge of theft as
alleged in the Information should be taken in relation to RA 8484 because it is the
elements, and not the designation of the crime, that control.
Considering the gravity and complexity of the novel questions of law involved in this
case, the Special First Division resolved to refer the same to the Banc.
We resolve to grant the Motion for Reconsideration but remand the case to the trial
court for proper clarification of the Amended Information.
Article 308 of the Revised Penal Code provides:
Art. 308. Who are liable for theft. Theft is committed by any person who, with
intent to gain but without violence against, or intimidation of persons nor force upon
things, shall take personal property of another without the latters consent.
The elements of theft under Article 308 of the Revised Penal Code are as follows: (1)
that there be taking of personal property; (2) that said property belongs to another;
(3) that the taking be done with intent to gain; (4) that the taking be done without
the consent of the owner; and (5) that the taking be accomplished without the use of
violence against or intimidation of persons or force upon things.
Prior to the passage of the Revised Penal Code on December 8, 1930, the definition
of the term "personal property" in the penal code provision on theft had been
established in Philippine jurisprudence. This Court, in United States v. Genato, United
States v. Carlos, and United States v. Tambunting, consistently ruled that any
personal property, tangible or intangible, corporeal or incorporeal, capable of
appropriation can be the object of theft.
Moreover, since the passage of the Revised Penal Code on December 8, 1930, the
term "personal property" has had a generally accepted definition in civil law. In
Article 335 of the Civil Code of Spain, "personal property" is defined as "anything
susceptible of appropriation and not included in the foregoing chapter (not real
property)." Thus, the term "personal property" in the Revised Penal Code should be
interpreted in the context of the Civil Code provisions in accordance with the rule on
statutory construction that where words have been long used in a technical sense
and have been judicially construed to have a certain meaning, and have been
adopted by the legislature as having a certain meaning prior to a particular statute,
in which they are used, the words used in such statute should be construed
according to the sense in which they have been previously used. 6 In fact, this Court
used the Civil Code definition of "personal property" in interpreting the theft
provision of the penal code in United States v. Carlos.
Cognizant of the definition given by jurisprudence and the Civil Code of Spain to the
term "personal property" at the time the old Penal Code was being revised, still the
legislature did not limit or qualify the definition of "personal property" in the Revised
Penal Code. Neither did it provide a restrictive definition or an exclusive enumeration

of "personal property" in the Revised Penal Code, thereby showing its intent to retain
for the term an extensive and unqualified interpretation.1avvphi1.zw+
Consequently, any property which is not included in the enumeration of real
properties under the Civil Code and capable of appropriation can be the subject of
theft under the Revised Penal Code.
The only requirement for a personal property to be the object of theft under the
penal code is that it be capable of appropriation. It need not be capable of
"asportation," which is defined as "carrying away." 7 Jurisprudence is settled that to
"take" under the theft provision of the penal code does not require asportation or
carrying away.8
To appropriate means to deprive the lawful owner of the thing. 9 The word "take" in
the Revised Penal Code includes any act intended to transfer possession which, as
held in the assailed Decision, may be committed through the use of the offenders
own hands, as well as any mechanical device, such as an access device or card as in
the instant case. This includes controlling the destination of the property stolen to
deprive the owner of the property, such as the use of a meter tampering, as held in
Natividad v. Court of Appeals, 10 use of a device to fraudulently obtain gas, as held in
United States v. Tambunting, and the use of a jumper to divert electricity, as held in
the cases of United States v. Genato, United States v. Carlos, and United States v.
Menagas.11
As illustrated in the above cases, appropriation of forces of nature which are brought
under control by science such as electrical energy can be achieved by tampering
with any apparatus used for generating or measuring such forces of nature,
wrongfully redirecting such forces of nature from such apparatus, or using any
device to fraudulently obtain such forces of nature. In the instant case, petitioner
was charged with engaging in International Simple Resale (ISR) or the unauthorized
routing and completing of international long distance calls using lines, cables,
antennae, and/or air wave frequency and connecting these calls directly to the local
or domestic exchange facilities of the country where destined.
As early as 1910, the Court declared in Genato that ownership over electricity (which
an international long distance call consists of), as well as telephone service, is
protected by the provisions on theft of the Penal Code. The pertinent provision of the
Revised Ordinance of the City of Manila, which was involved in the said case, reads
as follows:
Injury to electric apparatus; Tapping current; Evidence. No person shall destroy,
mutilate, deface, or otherwise injure or tamper with any wire, meter, or other
apparatus installed or used for generating, containing, conducting, or measuring
electricity, telegraph or telephone service, nor tap or otherwise wrongfully deflect or
take any electric current from such wire, meter, or other apparatus.
No person shall, for any purpose whatsoever, use or enjoy the benefits of any device
by means of which he may fraudulently obtain any current of electricity or any
telegraph or telephone service; and the existence in any building premises of any
such device shall, in the absence of satisfactory explanation, be deemed sufficient
evidence of such use by the persons benefiting thereby.
It was further ruled that even without the above ordinance the acts of subtraction
punished therein are covered by the provisions on theft of the Penal Code then in
force, thus:
Even without them (ordinance), the right of the ownership of electric current is
secured by articles 517 and 518 of the Penal Code; the application of these articles
in cases of subtraction of gas, a fluid used for lighting, and in some respects
resembling electricity, is confirmed by the rule laid down in the decisions of the
supreme court of Spain of January 20, 1887, and April 1, 1897, construing and
enforcing the provisions of articles 530 and 531 of the Penal Code of that country,
articles 517 and 518 of the code in force in these islands.

The acts of "subtraction" include: (a) tampering with any wire, meter, or other
apparatus installed or used for generating, containing, conducting, or measuring
electricity, telegraph or telephone service; (b) tapping or otherwise wrongfully
deflecting or taking any electric current from such wire, meter, or other apparatus;
and (c) using or enjoying the benefits of any device by means of which one may
fraudulently obtain any current of electricity or any telegraph or telephone service.
In the instant case, the act of conducting ISR operations by illegally connecting
various equipment or apparatus to private respondent PLDTs telephone system,
through which petitioner is able to resell or re-route international long distance calls
using respondent PLDTs facilities constitutes all three acts of subtraction mentioned
above.
The business of providing telecommunication or telephone service is likewise
personal property which can be the object of theft under Article 308 of the Revised
Penal Code. Business may be appropriated under Section 2 of Act No. 3952 (Bulk
Sales Law), hence, could be object of theft:
Section 2. Any sale, transfer, mortgage, or assignment of a stock of goods, wares,
merchandise, provisions, or materials otherwise than in the ordinary course of trade
and the regular prosecution of the business of the vendor, mortgagor, transferor, or
assignor, or any sale, transfer, mortgage, or assignment of all, or substantially all, of
the business or trade theretofore conducted by the vendor, mortgagor, transferor or
assignor, or all, or substantially all, of the fixtures and equipment used in and about
the business of the vendor, mortgagor, transferor, or assignor, shall be deemed to
be a sale and transfer in bulk, in contemplation of the Act. x x x.
In Strochecker v. Ramirez,12 this Court stated:
With regard to the nature of the property thus mortgaged which is one-half interest
in the business above described, such interest is a personal property capable of
appropriation and not included in the enumeration of real properties in article 335 of
the Civil Code, and may be the subject of mortgage.
Interest in business was not specifically enumerated as personal property in the Civil
Code in force at the time the above decision was rendered. Yet, interest in business
was declared to be personal property since it is capable of appropriation and not
included in the enumeration of real properties. Article 414 of the Civil Code provides
that all things which are or may be the object of appropriation are considered either
real property or personal property. Business is likewise not enumerated as personal
property under the Civil Code. Just like interest in business, however, it may be
appropriated. Following the ruling in Strochecker v. Ramirez, business should also be
classified as personal property. Since it is not included in the exclusive enumeration
of real properties under Article 415, it is therefore personal property. 13
As can be clearly gleaned from the above disquisitions, petitioners acts constitute
theft of respondent PLDTs business and service, committed by means of the
unlawful use of the latters facilities. In this regard, the Amended Information
inaccurately describes the offense by making it appear that what petitioner took
were the international long distance telephone calls, rather than respondent PLDTs
business.
A perusal of the records of this case readily reveals that petitioner and respondent
PLDT extensively discussed the issue of ownership of telephone calls. The
prosecution has taken the position that said telephone calls belong to respondent
PLDT. This is evident from its Comment where it defined the issue of this case as
whether or not "the unauthorized use or appropriation of PLDT international
telephone calls, service and facilities, for the purpose of generating personal profit
or gain that should have otherwise belonged to PLDT, constitutes theft." 14
In discussing the issue of ownership, petitioner and respondent PLDT gave their
respective explanations on how a telephone call is generated. 15 For its part,
respondent PLDT explains the process of generating a telephone call as follows:

38. The role of telecommunication companies is not limited to merely providing the
medium (i.e. the electric current) through which the human voice/voice signal of the
caller is transmitted. Before the human voice/voice signal can be so transmitted, a
telecommunication company, using its facilities, must first break down or decode the
human voice/voice signal into electronic impulses and subject the same to further
augmentation and enhancements. Only after such process of conversion will the
resulting electronic impulses be transmitted by a telecommunication company,
again, through the use of its facilities. Upon reaching the destination of the call, the
telecommunication company will again break down or decode the electronic
impulses back to human voice/voice signal before the called party receives the
same. In other words, a telecommunication company both converts/reconverts the
human voice/voice signal and provides the medium for transmitting the same.
39. Moreover, in the case of an international telephone call, once the electronic
impulses originating from a foreign telecommunication company country (i.e. Japan)
reaches the Philippines through a local telecommunication company (i.e. private
respondent PLDT), it is the latter which decodes, augments and enhances the
electronic impulses back to the human voice/voice signal and provides the medium
(i.e. electric current) to enable the called party to receive the call. Thus, it is not true
that the foreign telecommunication company provides (1) the electric current which
transmits the human voice/voice signal of the caller and (2) the electric current for
the called party to receive said human voice/voice signal.
40. Thus, contrary to petitioner Laurels assertion, once the electronic impulses or
electric current originating from a foreign telecommunication company (i.e. Japan)
reaches private respondent PLDTs network, it is private respondent PLDT which
decodes, augments and enhances the electronic impulses back to the human
voice/voice signal and provides the medium (i.e. electric current) to enable the
called party to receive the call. Without private respondent PLDTs network, the
human voice/voice signal of the calling party will never reach the called party. 16
In the assailed Decision, it was conceded that in making the international phone
calls, the human voice is converted into electrical impulses or electric current which
are transmitted to the party called. A telephone call, therefore, is electrical energy. It
was also held in the assailed Decision that intangible property such as electrical
energy is capable of appropriation because it may be taken and carried away.
Electricity is personal property under Article 416 (3) of the Civil Code, which
enumerates "forces of nature which are brought under control by science." 17
Indeed, while it may be conceded that "international long distance calls," the matter
alleged to be stolen in the instant case, take the form of electrical energy, it cannot
be said that such international long distance calls were personal properties
belonging to PLDT since the latter could not have acquired ownership over such
calls. PLDT merely encodes, augments, enhances, decodes and transmits said calls
using its complex communications infrastructure and facilities. PLDT not being the
owner of said telephone calls, then it could not validly claim that such telephone
calls were taken without its consent. It is the use of these communications facilities
without the consent of PLDT that constitutes the crime of theft, which is the unlawful
taking of the telephone services and business.
Therefore, the business of providing telecommunication and the telephone service
are personal property under Article 308 of the Revised Penal Code, and the act of
engaging in ISR is an act of "subtraction" penalized under said article. However, the
Amended Information describes the thing taken as, "international long distance
calls," and only later mentions "stealing the business from PLDT" as the manner by
which the gain was derived by the accused. In order to correct this inaccuracy of
description, this case must be remanded to the trial court and the prosecution
directed to amend the Amended Information, to clearly state that the property
subject of the theft are the services and business of respondent PLDT.

Parenthetically, this amendment is not necessitated by a mistake in charging the

proper offense, which would have called for the dismissal of the information under
Rule 110, Section 14 and Rule 119, Section 19 of the Revised Rules on Criminal
Procedure. To be sure, the crime is properly designated as one of theft. The purpose
of the amendment is simply to ensure that the accused is fully and sufficiently
apprised of the nature and cause of the charge against him, and thus guaranteed of
his rights under the Constitution.
ACCORDINGLY, the motion for reconsideration is GRANTED. The assailed Decision
dated February 27, 2006 is RECONSIDERED and SET ASIDE. The Decision of the
Court of Appeals in CA-G.R. SP No. 68841 affirming the Order issued by Judge Zeus
C. Abrogar of the Regional Trial Court of Makati City, Branch 150, which denied the
Motion to Quash (With Motion to Defer Arraignment) in Criminal Case No. 99-2425
for theft, is AFFIRMED. The case is remanded to the trial court and the Public
Prosecutor of Makati City is hereby DIRECTED to amend the Amended Information to
show that the property subject of the theft were services and business of the private
offended party.
SO ORDERED.