1

G.R. No. 161107 March 12, 2013

HON. MA. LOURDES C. FERNANDO, in her capacity as City Mayor of Marikina City, JOSEPHINE C.
EVANGELIST A, in her capacity as Chief, Permit Division, Office of the City Engineer, and ALFONSO
ESPIRITU, in his capacity as City Engineer of Marikina City, Petitioners,
vs.
ST. SCHOLASTICA'S COLLEGE and ST. SCHOLASTICA'S ACADEMY-MARIKINA, INC., Respondents.

DECISION

MENDOZA, J.:

Before this Court is a petition for review on certiorari under Rule 45 of the Rules of Court, which seeks to
set aside the December 1, 2003 Decision1 of the Court of Appeals (CA) in CA-G.R. SP No. 75691.

The Facts

Respondents St. Scholastica’s College (SSC) and St. Scholastica’s Academy-Marikina, Inc. (SSA-Marikina)
are educational institutions organized under the laws of the Republic of the Philippines, with principal
offices and business addresses at Leon Guinto Street, Malate, Manila, and at West Drive, Marikina
Heights, Marikina City, respectively.2

Respondent SSC is the owner of four (4) parcels of land measuring a total of 56,306.80 square meters,
located in Marikina Heights and covered by Transfer Certificate Title (TCT) No. 91537. Located within the
property are SSA-Marikina, the residence of the sisters of the Benedictine Order, the formation house of
the novices, and the retirement house for the elderly sisters. The property is enclosed by a tall concrete
perimeter fence built some thirty (30) years ago. Abutting the fence along the West Drive are buildings,
facilities, and other improvements.3

The petitioners are the officials of the City Government of Marikina. On September 30, 1994, the
Sangguniang Panlungsod of Marikina City enacted Ordinance No. 192,4 entitled "Regulating the
Construction of Fences and Walls in the Municipality of Marikina." In 1995 and 1998, Ordinance Nos.
2175 and 2006 were enacted to amend Sections 7 and 5, respectively. Ordinance No. 192, as amended, is
reproduced hereunder, as follows:
ORDINANCE No. 192
Series of 1994

ORDINANCE REGULATING THE CONSTRUCTION OF FENCES AND WALLS IN THE

MUNICIPALITY OF MARIKINA

WHEREAS, under Section 447.2 of Republic Act No. 7160 otherwise known as the Local
Government Code of 1991 empowers the Sangguniang Bayan as the local legislative body of
the municipality to "x x x Prescribe reasonable limits and restraints on the use of property
within the jurisdiction of the municipality, x x x";

WHEREAS the effort of the municipality to accelerate its economic and physical development,
coupled with urbanization and modernization, makes imperative the adoption of an ordinance
which shall embody up-to-date and modern technical design in the construction of fences of
residential, commercial and industrial buildings;

WHEREAS, Presidential Decree No. 1096, otherwise known as the National Building Code of
the Philippines, does not adequately provide technical guidelines for the construction of fences,
in terms of design, construction, and criteria;

WHEREAS, the adoption of such technical standards shall provide more efficient and effective
enforcement of laws on public safety and security;

WHEREAS, it has occurred in not just a few occasions that high fences or walls did not actually
discourage but, in fact, even protected burglars, robbers, and other lawless elements from the
view of outsiders once they have gained ingress into these walls, hence, fences not
necessarily providing security, but becomes itself a "security problem";

WHEREAS, to discourage, suppress or prevent the concealment of prohibited or unlawful acts

earlier enumerated, and as guardian of the people of Marikina, the municipal government
seeks to enact and implement rules and ordinances to protect and promote the health, safety
and morals of its constituents;

WHEREAS, consistent too, with the "Clean and Green Program" of the government, lowering
of fences and walls shall encourage people to plant more trees and ornamental plants in their
yards, and when visible, such trees and ornamental plants are expected to create an aura of a
clean, green and beautiful environment for Marikeños;

WHEREAS, high fences are unsightly that, in the past, people planted on sidewalks to
"beautify" the façade of their residences but, however, become hazards and obstructions to
pedestrians;

WHEREAS, high and solid walls as fences are considered "un-neighborly" preventing
community members to easily communicate and socialize and deemed to create "boxed-in"
mentality among the populace;

WHEREAS, to gather as wide-range of opinions and comments on this proposal, and as a

requirement of the Local Government Code of 1991 (R.A. 7160), the Sangguniang Bayan of
Marikina invited presidents or officers of homeowners associations, and commercial and
industrial establishments in Marikina to two public hearings held on July 28, 1994 and August
25, 1994;

WHEREAS, the rationale and mechanics of the proposed ordinance were fully presented to the
attendees and no vehement objection was presented to the municipal government;

NOW, THEREFORE, BE IT ORDAINED BY THE SANGGUINANG BAYAN OF MARIKINA IN

SESSION DULY ASSEMBLED:

Section 1. Coverage: This Ordinance regulates the construction of all fences, walls and gates
on lots classified or used for residential, commercial, industrial, or special purposes.

Section 2. Definition of Terms:

a. Front Yard – refers to the area of the lot fronting a street, alley or public thoroughfare.

b. Back Yard – the part of the lot at the rear of the structure constructed therein.
 c. Open fence – type of fence which allows a view of "thru-see" of the inner yard and
the improvements therein. (Examples: wrought iron, wooden lattice, cyclone wire)

d. Front gate – refers to the gate which serves as a passage of persons or vehicles
fronting a street, alley, or public thoroughfare.

Section 3. The standard height of fences or walls allowed under this ordinance are as follows:

(1) Fences on the front yard – shall be no more than one (1) meter in height. Fences in
excess of one (1) meter shall be of an open fence type, at least eighty percent (80%)
see-thru; and

(2) Fences on the side and back yard – shall be in accordance with the provisions of
P.D. 1096 otherwise known as the National Building Code.

Section 4. No fence of any kind shall be allowed in areas specifically reserved or classified as
parks.

Section 5. In no case shall walls and fences be built within the five (5) meter parking area
allowance located between the front monument line and the building line of commercial and
industrial establishments and educational and religious institutions.7

Section 6. Exemption.

(1) The Ordinance does not cover perimeter walls of residential subdivisions.

(2) When public safety or public welfare requires, the Sangguniang Bayan may allow
the construction and/or maintenance of walls higher than as prescribed herein and shall
issue a special permit or exemption.

Section 7. Transitory Provision. Real property owners whose existing fences and walls do not
conform to the specifications herein are allowed adequate period of time from the passage of
this Ordinance within which to conform, as follows:

(1) Residential houses – eight (8) years

(2) Commercial establishments – five (5) years

(3) Industrial establishments – three (3) years

(4) Educational institutions – five (5) years8 (public and privately owned)

Section 8. Penalty. Walls found not conforming to the provisions of this Ordinance shall be
demolished by the municipal government at the expense of the owner of the lot or structure.

Section 9. The Municipal Engineering Office is tasked to strictly implement this ordinance,
including the issuance of the necessary implementing guidelines, issuance of building and
fencing permits, and demolition of non-conforming walls at the lapse of the grace period herein
provided.

Section 10. Repealing Clause. All existing Ordinances and Resolutions, Rules and Regulations
inconsistent with the foregoing provisions are hereby repealed, amended or modified.
 Section 11. Separability Clause. If for any reason or reasons, local executive orders, rules and
regulations or parts thereof in conflict with this Ordinance are hereby repealed and/or modified
accordingly.

Section 12. Effectivity. This ordinance takes effect after publication.

APPROVED: September 30, 1994

(Emphases supplied)

On April 2, 2000, the City Government of Marikina sent a letter to the respondents ordering them to
demolish and replace the fence of their Marikina property to make it 80% see-thru, and, at the same time,
to move it back about six (6) meters to provide parking space for vehicles to park.9 On April 26, 2000, the
respondents requested for an extension of time to comply with the directive. 10 In response, the petitioners,
through then City Mayor Bayani F. Fernando, insisted on the enforcement of the subject ordinance.

Not in conformity, the respondents filed a petition for prohibition with an application for a writ of preliminary
injunction and temporary restraining order before the Regional Trial Court, Marikina, Branch 273 (RTC),
docketed as SCA Case No. 2000-381-MK.11

The respondents argued that the petitioners were acting in excess of jurisdiction in enforcing Ordinance
No. 192, asserting that such contravenes Section 1, Article III of the 1987 Constitution. That demolishing
their fence and constructing it six (6) meters back would result in the loss of at least 1,808.34 square
meters, worth about ₱9,041,700.00, along West Drive, and at least 1,954.02 square meters, worth roughly
₱9,770,100.00, along East Drive. It would also result in the destruction of the garbage house, covered walk,
electric house, storage house, comfort rooms, guards’ room, guards’ post, waiting area for visitors, waiting
area for students, Blessed Virgin Shrine, P.E. area, and the multi-purpose hall, resulting in the permanent
loss of their beneficial use. The respondents, thus, asserted that the implementation of the ordinance on
their property would be tantamount to an appropriation of property without due process of law; and that the
petitioners could only appropriate a portion of their property through eminent domain. They also pointed out
that the goal of the provisions to deter lawless elements and criminality did not exist as the solid concrete
walls of the school had served as sufficient protection for many years.12

The petitioners, on the other hand, countered that the ordinance was a valid exercise of police power, by
virtue of which, they could restrain property rights for the protection of public safety, health, morals, or the
promotion of public convenience and general prosperity.13

On June 30, 2000, the RTC issued a writ of preliminary injunction, enjoining the petitioners from
implementing the demolition of the fence at SSC’s Marikina property.14

Ruling of the RTC

On the merits, the RTC rendered a Decision,15 dated October 2, 2002, granting the petition and ordering
the issuance of a writ of prohibition commanding the petitioners to permanently desist from enforcing or
implementing Ordinance No. 192 on the respondents’ property.

The RTC agreed with the respondents that the order of the petitioners to demolish the fence at the SSC
property in Marikina and to move it back six (6) meters would amount to an appropriation of property which
could only be done through the exercise of eminent domain. It held that the petitioners could not take the
respondents’ property under the guise of police power to evade the payment of just compensation.

It did not give weight to the petitioners’ contention that the parking space was for the benefit of the students
and patrons of SSA-Marikina, considering that the respondents were already providing for sufficient parking
in compliance with the standards under Rule XIX of the National Building Code.

It further found that the 80% see-thru fence requirement could run counter to the respondents’ right to
privacy, considering that the property also served as a residence of the Benedictine sisters, who were
entitled to some sense of privacy in their affairs. It also found that the respondents were able to prove that
the danger to security had no basis in their case. Moreover, it held that the purpose of beautification could
not be used to justify the exercise of police power.

It also observed that Section 7 of Ordinance No. 192, as amended, provided for retroactive application. It
held, however, that such retroactive effect should not impair the respondents’ vested substantive rights over
the perimeter walls, the six-meter strips of land along the walls, and the building, structures, facilities, and
improvements, which would be destroyed by the demolition of the walls and the seizure of the strips of
land.

The RTC also found untenable the petitioners’ argument that Ordinance No. 192 was a remedial or curative
statute intended to correct the defects of buildings and structures, which were brought about by the
absence or insufficiency of laws. It ruled that the assailed ordinance was neither remedial nor curative in
nature, considering that at the time the respondents’ perimeter wall was built, the same was valid and legal,
and the ordinance did not refer to any previous legislation that it sought to correct.

The RTC noted that the petitioners could still take action to expropriate the subject property through
eminent domain.

The RTC, thus, disposed:

WHEREFORE, the petition is GRANTED. The writ of prohibition is hereby issued commanding the
respondents to permanently desist from enforcing or implementing Ordinance No. 192, Series of 1994, as
amended, on petitioners’ property in question located at Marikina Heights, Marikina, Metro Manila.

No pronouncement as to costs.

SO ORDERED.16

Ruling of the CA

In its December 1, 2003 Decision, the CA dismissed the petitioners’ appeal and affirmed the RTC decision.

The CA reasoned out that the objectives stated in Ordinance No. 192 did not justify the exercise of police
power, as it did not only seek to regulate, but also involved the taking of the respondents’ property without
due process of law. The respondents were bound to lose an unquantifiable sense of security, the beneficial
use of their structures, and a total of 3,762.36 square meters of property. It, thus, ruled that the assailed
ordinance could not be upheld as valid as it clearly invaded the personal and property rights of the
respondents and "[f]or being unreasonable, and undue restraint of trade."17

It noted that although the petitioners complied with procedural due process in enacting Ordinance No. 192,
they failed to comply with substantive due process. Hence, the failure of the respondents to attend the
public hearings in order to raise objections did not amount to a waiver of their right to question the validity
of the ordinance.

The CA also shot down the argument that the five-meter setback provision for parking was a legal
easement, the use and ownership of which would remain with, and inure to, the benefit of the respondents
for whom the easement was primarily intended. It found that the real intent of the setback provision was to
make the parking space free for use by the public, considering that such would cease to be for the
exclusive use of the school and its students as it would be situated outside school premises and beyond
the school administration’s control.

In affirming the RTC ruling that the ordinance was not a curative statute, the CA found that the petitioner
failed to point out any irregularity or invalidity in the provisions of the National Building Code that required
correction or cure. It noted that any correction in the Code should be properly undertaken by the Congress
and not by the City Council of Marikina through an ordinance.

The CA, thus, disposed:

WHEREFORE, all foregoing premises considered, the instant appeal is DENIED. The October 2, 2002
1âwphi1

Decision and the January 13, 2003 Order of the Regional Trial Court (RTC) of Marikina City, Branch 273,
granting petitioners-appellees’ petition for Prohibition in SCA Case No. 2000-381-MK are hereby
AFFIRMED.

SO ORDERED.18

Aggrieved by the decision of the CA, the petitioners are now before this Court presenting the following

ASSIGNMENT OF ERRORS

1. WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN DECLARING THAT

CITY ORDINANCE NO. 192, SERIES OF 1994 IS NOT A VALID EXERCISE OF POLICE POWER;

2. WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT THE
AFOREMENTIONED ORDINANCE IS AN EXERCISE OF THE CITY OF THE POWER OF
EMINENT DOMAIN;

3. WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN DECLARING THAT

THE CITY VIOLATED THE DUE PROCESS CLAUSE IN IMPLEMENTING ORDINANCE NO. 192,
SERIES OF 1994; AND

4. WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT THE
ABOVE-MENTIONED ORDINANCE CANNOT BE GIVEN RETROACTIVE APPLICATION.19

In this case, the petitioners admit that Section 5 of the assailed ordinance, pertaining to the five-meter
setback requirement is, as held by the lower courts, invalid. 20 Nonetheless, the petitioners argue that such
invalidity was subsequently cured by Zoning Ordinance No. 303, series of 2000. They also contend that
Section 3, relating to the 80% see-thru fence requirement, must be complied with, as it remains to be valid.

Ruling of the Court

The ultimate question before the Court is whether Sections 3.1 and 5 of Ordinance No. 192 are valid
exercises of police power by the City Government of Marikina.

"Police power is the plenary power vested in the legislature to make statutes and ordinances to promote
the health, morals, peace, education, good order or safety and general welfare of the people." 21 The State,
through the legislature, has delegated the exercise of police power to local government units, as agencies
of the State. This delegation of police power is embodied in Section 1622 of the Local Government Code of
1991 (R.A. No. 7160), known as the General Welfare Clause,23 which has two branches. "The first, known
as the general legislative power, authorizes the municipal council to enact ordinances and make
regulations not repugnant to law, as may be necessary to carry into effect and discharge the powers and
duties conferred upon the municipal council by law. The second, known as the police power proper,
authorizes the municipality to enact ordinances as may be necessary and proper for the health and safety,
prosperity, morals, peace, good order, comfort, and convenience of the municipality and its inhabitants, and
for the protection of their property."24

White Light Corporation v. City of Manila,25 discusses the test of a valid ordinance:

The test of a valid ordinance is well established. A long line of decisions including City of Manila has held
that for an ordinance to be valid, it must not only be within the corporate powers of the local government
unit to enact and pass according to the procedure prescribed by law, it must also conform to the following
substantive requirements: (1) must not contravene the

Constitution or any statute; (2) must not be unfair or oppressive; (3) must not be partial or discriminatory;
(4) must not prohibit but may regulate trade; (5) must be general and consistent with public policy; and (6)
must not be unreasonable.26

Ordinance No. 192 was passed by the City Council of Marikina in the apparent exercise of its police power.
To successfully invoke the exercise of police power as the rationale for the enactment of an ordinance and
to free it from the imputation of constitutional infirmity, two tests have been used by the Court – the rational
relationship test and the strict scrutiny test:

We ourselves have often applied the rational basis test mainly in analysis of equal protection challenges.
Using the rational basis examination, laws or ordinances are upheld if they rationally further a legitimate
governmental interest. Under intermediate review, governmental interest is extensively examined and the
availability of less restrictive measures is considered. Applying strict scrutiny, the focus is on the presence
of compelling, rather than substantial, governmental interest and on the absence of less restrictive means
for achieving that interest.27

Even without going to a discussion of the strict scrutiny test, Ordinance No. 192, series of 1994 must be
struck down for not being reasonably necessary to accomplish the City’s purpose. More importantly, it is
oppressive of private rights.

Under the rational relationship test, an ordinance must pass the following requisites as discussed in Social
Justice Society (SJS) v. Atienza, Jr.:28

As with the State, local governments may be considered as having properly exercised their police power
only if the following requisites are met: (1) the interests of the public generally, as distinguished from those
of a particular class, require its exercise and (2) the means employed are reasonably necessary for the
accomplishment of the purpose and not unduly oppressive upon individuals. In short, there must be a
concurrence of a lawful subject and lawful method.29

Lacking a concurrence of these two requisites, the police power measure shall be struck down as an
arbitrary intrusion into private rights and a violation of the due process clause.30

Section 3.1 and 5 of the assailed ordinance are pertinent to the issue at hand, to wit:

Section 3. The standard height of fences of walls allowed under this ordinance are as follows:

(1) Fences on the front yard – shall be no more than one (1) meter in height. Fences in excess of one (1)
meter shall be an open fence type, at least eighty percent (80%) see-thru;

xxx xxx xxx

Section 5. In no case shall walls and fences be built within the five (5) meter parking area allowance
located between the front monument line and the building line of commercial and industrial establishments
and educational and religious institutions.

The respondents, thus, sought to prohibit the petitioners from requiring them to (1) demolish their existing
concrete wall, (2) build a fence (in excess of one meter) which must be 80% see-thru, and (3) build the said
fence six meters back in order to provide a parking area.

Setback Requirement

The Court first turns its attention to Section 5 which requires the five-meter setback of the fence to provide
for a parking area. The petitioners initially argued that the ownership of the parking area to be created
would remain with the respondents as it would primarily be for the use of its students and faculty, and that
its use by the public on non-school days would only be incidental. In their Reply, however, the petitioners
admitted that Section 5 was, in fact, invalid for being repugnant to the Constitution.31

The Court agrees with the latter position.

The Court joins the CA in finding that the real intent of the setback requirement was to make the parking
space free for use by the public, considering that it would no longer be for the exclusive use of the
respondents as it would also be available for use by the general public. Section 9 of Article III of the 1987
Constitution, a provision on eminent domain, provides that private property shall not be taken for public use
without just compensation.

The petitioners cannot justify the setback by arguing that the ownership of the property will continue to
remain with the respondents. It is a settled rule that neither the acquisition of title nor the total destruction of
value is essential to taking. In fact, it is usually in cases where the title remains with the private owner that
inquiry should be made to determine whether the impairment of a property is merely regulated or amounts
to a compensable taking.32 The Court is of the view that the implementation of the setback requirement
would be tantamount to a taking of a total of 3,762.36 square meters of the respondents’ private property
for public use without just compensation, in contravention to the Constitution.

Anent the objectives of prevention of concealment of unlawful acts and "un-neighborliness," it is obvious
that providing for a parking area has no logical connection to, and is not reasonably necessary for, the
accomplishment of these goals.
Regarding the beautification purpose of the setback requirement, it has long been settled that the State
may not, under the guise of police power, permanently divest owners of the beneficial use of their property
solely to preserve or enhance the aesthetic appearance of the community.33 The Court, thus, finds Section
5 to be unreasonable and oppressive as it will substantially divest the respondents of the beneficial use of
their property solely for aesthetic purposes. Accordingly, Section 5 of Ordinance No. 192 is invalid.

The petitioners, however, argue that the invalidity of Section 5 was properly cured by Zoning Ordinance No.
303,34 Series of 2000, which classified the respondents’ property to be within an institutional zone, under
which a five-meter setback has been required.

The petitioners are mistaken. Ordinance No. 303, Series of 2000, has no bearing to the case at hand.

The Court notes with displeasure that this argument was only raised for the first time on appeal in this
Court in the petitioners’ Reply. Considering that Ordinance No. 303 was enacted on December 20, 2000,
the petitioners could very well have raised it in their defense before the RTC in 2002. The settled rule in this
jurisdiction is that a party cannot change the legal theory of this case under which the controversy was
heard and decided in the trial court. It should be the same theory under which the review on appeal is
conducted. Points of law, theories, issues, and arguments not adequately brought to the attention of the
lower court will not be ordinarily considered by a reviewing court, inasmuch as they cannot be raised for the
first time on appeal. This will be offensive to the basic rules of fair play, justice, and due process.35

Furthermore, the two ordinances have completely different purposes and subjects. Ordinance No. 192 aims
to regulate the construction of fences, while Ordinance No. 303 is a zoning ordinance which classifies the
city into specific land uses. In fact, the five-meter setback required by Ordinance No. 303 does not even
appear to be for the purpose of providing a parking area.

By no stretch of the imagination, therefore, can Ordinance No. 303, "cure" Section 5 of Ordinance No. 192.

In any case, the clear subject of the petition for prohibition filed by the respondents is Ordinance No. 192
and, as such, the precise issue to be determined is whether the petitioners can be prohibited from
enforcing the said ordinance, and no other, against the respondents.

80% See-Thru Fence Requirement

The petitioners argue that while Section 5 of Ordinance No. 192 may be invalid, Section 3.1 limiting the
height of fences to one meter and requiring fences in excess of one meter to be at least 80% see-thru,
should remain valid and enforceable against the respondents.

The Court cannot accommodate the petitioner.

For Section 3.1 to pass the rational relationship test, the petitioners must show the reasonable relation
between the purpose of the police power measure and the means employed for its accomplishment, for
even under the guise of protecting the public interest, personal rights and those pertaining to private
property will not be permitted to be arbitrarily invaded.36

The principal purpose of Section 3.1 is "to discourage, suppress or prevent the concealment of prohibited
or unlawful acts." The ultimate goal of this objective is clearly the prevention of crime to ensure public
safety and security. The means employed by the petitioners, however, is not reasonably necessary for the
accomplishment of this purpose and is unduly oppressive to private rights. The petitioners have not
adequately shown, and it does not appear obvious to this Court, that an 80% see-thru fence would provide
better protection and a higher level of security, or serve as a more satisfactory criminal deterrent, than a tall
solid concrete wall. It may even be argued that such exposed premises could entice and tempt would-be
criminals to the property, and that a see-thru fence would be easier to bypass and breach. It also appears
that the respondents’ concrete wall has served as more than sufficient protection over the last 40 years. `

As to the beautification purpose of the assailed ordinance, as previously discussed, the State may not,
under the guise of police power, infringe on private rights solely for the sake of the aesthetic appearance of
the community. Similarly, the Court cannot perceive how a see-thru fence will foster "neighborliness"
between members of a community.

Compelling the respondents to construct their fence in accordance with the assailed ordinance is, thus, a
clear encroachment on their right to property, which necessarily includes their right to decide how best to
protect their property.

It also appears that requiring the exposure of their property via a see-thru fence is violative of their right to
privacy, considering that the residence of the Benedictine nuns is also located within the property. The right
to privacy has long been considered a fundamental right guaranteed by the Constitution that must be
protected from intrusion or constraint. The right to privacy is essentially the right to be let alone, 37 as
governmental powers should stop short of certain intrusions into the personal life of its citizens.38 It is
inherent in the concept of liberty, enshrined in the Bill of Rights (Article III) in Sections 1, 2, 3(1), 6, 8, and
17, Article III of the 1987 Constitution.39

The enforcement of Section 3.1 would, therefore, result in an undue interference with the respondents’
rights to property and privacy. Section 3.1 of Ordinance No. 192 is, thus, also invalid and cannot be
enforced against the respondents.

No Retroactivity

Ordinance No. 217 amended Section 7 of Ordinance No. 192 by including the regulation of educational
institutions which was unintentionally omitted, and giving said educational institutions five (5) years from the
passage of Ordinance No. 192 (and not Ordinance No. 217) to conform to its provisions. 40 The petitioners
argued that the amendment could be retroactively applied because the assailed ordinance is a curative
statute which is retroactive in nature.

Considering that Sections 3.1 and 5 of Ordinance No. 192 cannot be enforced against the respondents, it is
no longer necessary to rule on the issue of retroactivity. The Court shall, nevertheless, pass upon the issue
for the sake of clarity.

"Curative statutes are enacted to cure defects in a prior law or to validate legal proceedings which would
otherwise be void for want of conformity with certain legal requirements. They are intended to supply
defects, abridge superfluities and curb certain evils. They are intended to enable persons to carry into
effect that which they have designed or intended, but has failed of expected legal consequence by reason
of some statutory disability or irregularity in their own action. They make valid that which, before the
enactment of the statute was invalid. Their purpose is to give validity to acts done that would have been
invalid under existing laws, as if existing laws have been complied with. Curative statutes, therefore, by
their very essence, are retroactive."41

The petitioners argue that Ordinance No. 192 is a curative statute as it aims to correct or cure a defect in
the National Building Code, namely, its failure to provide for adequate guidelines for the construction of
fences. They ultimately seek to remedy an insufficiency in the law. In aiming to cure this insufficiency, the
petitioners attempt to add lacking provisions to the National Building Code. This is not what is contemplated
by curative statutes, which intend to correct irregularities or invalidity in the law. The petitioners fail to point
out any irregular or invalid provision. As such, the assailed ordinance cannot qualify as curative and
retroactive in nature.

At any rate, there appears to be no insufficiency in the National Building Code with respect to parking
provisions in relation to the issue of the respondents. Paragraph 1.16.1, Rule XIX of the Rules and
Regulations of the said code requires an educational institution to provide one parking slot for every ten
classrooms. As found by the lower courts, the respondents provide a total of 76 parking slots for their 80
classrooms and, thus, had more than sufficiently complied with the law.

Ordinance No. 192, as amended, is, therefore, not a curative statute which may be applied retroactively.

Separability

Sections 3.1 and 5 of Ordinance No. 192, as amended, are, thus, invalid and cannot be enforced against
the respondents. Nonetheless, "the general rule is that where part of a statute is void as repugnant to the
Constitution, while another part is valid, the valid portion, if susceptible to being separated from the invalid,
may stand and be enforced."42 Thus, the other sections of the assailed ordinance remain valid and
enforceable.

Conclusion

Considering the invalidity of Sections 3.1 and 5, it is clear that the petitioners were acting in excess of their
jurisdiction in enforcing Ordinance No. 192 against the respondents. The CA was correct in affirming the
decision of the RTC in issuing the writ of prohibition. The petitioners must permanently desist from
enforcing Sections 3.1 and 5 of the assailed ordinance on the respondents' property in Marikina City.

WHEREFORE, the petition is DENIED. The October 2, 2002 Decision of the Regional Trial Court in SCA
Case No. 2000-381-MK is AFFIRMED but MODIFIED to read as follows:

WHEREFORE, the petition is GRANTED. The writ of prohibition is hereby issued commanding the
respondents to permanently desist from enforcing or implementing Sections 3.1 and 5 of Ordinance No.
192, Series of 1994, as amended, on the petitioners' property in question located in Marikina Heights,
Marikina, Metro Manila.

No pronouncement as to costs.

SO ORDERED.

[G.R. No. 118357. May 6, 1997]

PHILIPPINE NATIONAL BANK, petitioner, vs. COURT OF APPEALS and
INDUSTRIAL ENTERPRISES, INC., respondents.

DECISION
ROMERO, J.:

This is a petition for review on certiorari of the Decision[1] of the Court of Appeals
affirming in toto the November 27, 1992 decision[2] of the Regional Trial Court of Makati,
Branch 150 which disposed of Civil Case No. 8109, "Industrial Enterprises, Inc. v. Marinduque
Mining and Industrial Corporation, Geronimo Velasco (in his capacity as the then Minister of
Energy) and Philippine National Bank," an action for rescission of contract and damages, as
follows:

"WHEREFORE, in the light of the foregoing, and as plaintiff Industrial

Enterprises, Inc. was able to establish by preponderant evidence the allegations
in its Complaint and causes of action against defendants Marinduque Mining and
Industrial Corporation and Philippine National Bank, the Court finds both
defendants civilly liable to plaintiff and, therefore, orders them to jointly and
severally:
1. pay plaintiff the sum of P31.66 Million as of July 31, 1983, for the expenses invested
by plaintiff in the property subject of this case, as computed by Sycip, Gorres, Velayo
and Company and brought to current value per SGV formula, as agreed in the
Memorandum of Agreement;
2. pay plaintiff the sum of P37,569,733.00, for the indemnification and rehabilitation
cost, plus interest at the legal rate from March 31, 1991, until fully paid;
3. pay plaintiff the sum of P120 Million for unrealized profit for five (5) years from
August, 1983, the date of defendant MMIC's takeover of the property, to October, 1988,
when plaintiff was re-awarded the contract, plus interest at the legal rate, from the date
of this decision, until fully paid;
4. pay plaintiff an amount not less than ten (10) percent of the losses it incurred and its
unrealized profits as indicated in Numbers 1 to 3, for the injury done to plaintiff's
business standing and commercial credit;
5. pay plaintiff an amount not less than five (5) percent of the above obligation as
reimbursement to plaintiff for litigation expenses and attorney's fees; and
6. COST OF SUIT.

And finally, the extrajudicial foreclosure sale held on August 31, 1984, in
Catbalogan, Samar, over the property of plaintiff, part of the Giporlos Coal
Project, is hereby declared NULL and VOID.

SO ORDERED."

Marinduque Mining and Industrial Corporation (MMIC) was founded by Jesus S. Cabarrus
in 1949.[3] Four years later or in 1953, Cabarrus established J. Cabarrus, Inc. which
subsequently was renamed Industrial Enterprises, Inc. (IEI). During the period when most of
the facts relevant to this case transpired, Cabarrus and his family owned about 12% to 14% of
the shares of stock in the MMIC[4] where he was the President. He was also the President of
IEI.

On July 27, 1979, IEI entered into a coal operating contract with the Bureau of Energy
Development (BED), with Cabarrus and then Minister of Energy Geronimo Velasco as
signatories.[5] The contract was pursuant to the Coal Development Act of 1976 (P.D. No. 972,
as amended) and covered 2,000 hectares of two (2) coal blocks in Barrio Carbon,
Magsaysay, Eastern Samar.

While exploring this area, IEI found the adjacent areas, comprising of three (3) coal
blocks, to be likewise coal potentials. Hence, upon confirmation by the BED that these three
(3) adjacent coal blocks were in the free area, IEI filed an application for another coal
operating contract on August 12, 1981. Simultaneously, IEI applied for the conversion of its
July 27, 1979 coal operating contract from exploration to development/production. IEI also
followed up its application on the three (3) newly-discovered coal blocks. All of these coal
blocks were collectively known as the Giporlos Coal Project.
 Sometime in April, 1982, Minister Velasco informed Cabarrus that IEI's application for
exploration of the three (3) coal blocks had been disapproved and that, instead, the contract
would be awarded to MMIC. Following Cabarrus' letter of May 4, 1982 [6] requesting that the
rejection of IEI's application be made in writing, Minister Velasco wrote him a letter dated
June 2, 1982,[7] where Minister Velasco said:

"We appreciate your desire to increase Industrial Enterprises, Inc.'s (IEI)

involvement in coal development. In line, however, with the objective of
rationalizing the country's overall coal supply-demand balance, we believe that
coal users who have the capability to go into coal production themselves should,
as much as possible, be encouraged and given the preference to do so. This
ensures maximum utilization of local coal and will be beneficial to coal
producer/user in the long run. In your area of interest, therefore, we believe that
the logical coal operator should be Marinduque Mining and Industrial
Corporation (MMIC) which is now developing the Bagacay coal deposit in order
to support MMIC's coal conversion program at the Nonoc Nickel Refinery. As a
member of the board of MMIC, I am fully aware that this coal conversion
program is critical to the profitability and the survival of the Nonoc Nickel
Refinery. It is, therefore, imperative that MMIC secure its own coal supply.

Consistent with the above rationale, you are aware that MMIC Board has in fact
taken concrete steps to consolidate the Giporlos and Bagacay coal areas under
MMIC and, for this purpose, has authorized Chairman Cesar C. Zalamea to
create a committee (of which I was asked to be Chairman) to evaluate the
Giporlos coal blocks of IEI to serve as basis for their acquisition by MMIC. As
President of MMIC, you are likewise aware that the Board has recently hired the
services of SGV to make an evaluation of the proper pricing for the IEI coal
 interest to be paid for by MMIC. With these developments indicating the
imminent formal acquisition of Giporlos coal areas by MMIC, it would indeed be
inconsistent now for us to award additional coal blocks in the same area to
IEI. We believe that these additional coal areas, if at all, should be applied for
and awarded direct to MMIC.

In view of the foregoing, please be advised that we are denying IEI's application,
and we suggest instead that MMIC apply for the same blocks."

On March 28, 1983, Minister Velasco informed Cesar Zalamea, Chairman of the Board of
the Development Bank of the Philippines (DBP) and of the MMIC, that IEI's application for the
conversion of its coal operating contract for the Giporlos area from exploration to
development/production had been put "under advisement in the light of the ongoing
discussion for the transfer of IEI's rights and obligations" to MMIC.[8]

Thereafter, MMIC and IEI, through Chairman Zalamea and President Cabarrus,
[9] respectively, entered into a Memorandum of Agreement (MOA) whereby IEI assigned to
MMIC all its rights and interests under the July 27, 1979 coal operating contract. The MOA
provided as follows:

"NOW, THEREFORE, the parties have agreed, as hereby they agree, one with
the other, as follows:
1. That IEI, subject and conformably with the whereas clauses hereinabove stated,
hereby assigns and transfers all its rights and interests on the Coal Operating Contract
described in the first whereas clause; and MMIC shall in consideration of the above
assignment and transfer
(a) Undertake all the obligations required of IEI under said Coal Operating Contract;
(b) Reimburse all costs and expenses actually incurred as of 31 July 1983 by IEI on the
coal property and brought up to current values, as shall be audited and confirmed by
Sycip, Gorres and Velayo as of said date of 31 July 1983; and
(c) Pay to IEI the total sum equivalent to P4.17 per ton of proven and positive reserves
of coal to be confirmed by an independent geologist who shall be designated and
appointed by mutual agreement of the parties.
2. That the total sum due from MMIC to IEI under this agreement shall be paid upon the
effectivity of this agreement in the following manner
(a) An assumption by MMIC of the outstanding loan obligation (evidenced by
Promissory Note No. 1516 for P3.3 Million and Promissory Note No. 11098 for P5.0
Million) of IEI to Manila Banking Corporation which as of 31 July 1983 stands at P8.3
Million.
(b) Payment in cash to IEI of the difference between the above amount of P8.3 Million
and the sum total of subparagraphs (b) and (c) par. 1, above.
3. That this agreement shall only become binding and effective upon its approval by the
BED, which approval shall be secured jointly by MMIC and IEI."
MMIC and IEI, again through Zalamea and Cabarrus, respectively, jointly informed the
BED on August 10, 1983, that they had entered into the MOA "at the instance and suggestion
of the Hon. Minister of Energy in one of the earlier meetings of the Board of Directors of
MMIC."[10] MMIC and IEI were informed of the approval of the MOA on August 29, 1983 by the
then Acting BED Director Wenceslao R. de la Paz.[11]

MMIC took over possession and control of the two (2) coal blocks even before the MOA
was finalized. However, instead of continuing the exploration and development work actively
pursued by IEI, MMIC completely stopped all works and dismissed the work force thereon,
leaving only a caretaker crew.

Consequently, IEI made written demands to MMIC, pursuant to the MOA, for the
reimbursement of all costs and expenses it had incurred on the project which, as of July 31,
1983, had amounted to P31.66 million as audited by the Sycip, Gorres and Velayo Company.

In view of MMIC's failure to comply with its obligations under the MOA, IEI filed a
complaint against MMIC and Minister Velasco on August 7, 1984, for rescission of the MOA
and damages, before the Regional Trial Court of Makati, Branch 137. Docketed as Civil Case
No. 8109, the complaint alleged that MMIC acted in gross and evident bad faith in entering
into the MOA when it had no intention at all to operate the two (2) coal blocks and of
complying with any of its obligations under the said agreement. It likewise alleged that
Minister Velasco was instrumental in causing the assignment of the coal operating contracts
to MMIC when he did not act on complainant IEI's application for conversion of its coal
operating contract from exploration to development/production and in rejecting its application
for another coal operating contract for the exploration of additional three (3) coal blocks which
he had reserved for MMIC.

Meanwhile, on July 13, 1981, for various credit accommodations secured from the
Philippine National Bank (PNB), aggregating to four billion pesos (P4,000,000,000.00)
excluding interest and charges as of November 30, 1980, as well as from the DBP, amounting
to two billion pesos (P2,000,000,000.00), MMIC entered into a Mortgage Trust Agreement
(MTA)[12] whereby it constituted a mortgage pari passu of its assets in favor of PNB and
DBP. These assets are described in the third "whereas clause" of the MTA as follows:

"(1) all the MORTGAGOR'S assets described and covered under the Deed of
Real Estate and Chattel Mortgage executed by the MORTGAGOR in favor
of PNB dated October 9, 1978, acknowledged before Notary Public of
Manila, Lucas R. Vidad, as Doc. No. 1004, Page No. 94, Book No. VII,
Series of 1978, as amended, which are made integral parts of this Agreement
by way of reference; and

(2) additional assets of the MORTGAGOR described and identified in the list
hereto attached as Annex 'A', including assets of whatever kind, nature or
description, which the MORTGAGOR may hereafter acquire whether in
substitution of, in replenishment, or in addition thereto, (the 'Mortgaged
Properties')."[13]

Under the MTA, the PNB was constituted and appointed as the trustee tasked with
holding in trust the mortgaged properties "for the equal and ratable benefit of the Beneficiaries
in proportion to the amount of the obligation of the MORTGAGOR to each of them" as
provided therein.[14] One of the conditions of the mortgage was that:

"x x x. Should the MORTGAGORS fail to deliver said properties, as aforestated,

the TRUSTEE, through its duly authorized representative, is authorized to take
possession of said properties and bring the same to the location of any of their
respective offices or to any other place and the expenses of locating and bringing
said properties to such place shall be for the account of the MORTGAGOR and
shall form part of the sums secured by this mortgage; Provided, however, that the
TRUSTEE shall have the option of selling said properties at any place where
their respective offices shall be located or at any place where said properties may
be found."[15] (Underscoring supplied.)

The MTA also provided that:

"For the purpose of extra-judicial foreclosure, the MORTGAGOR hereby

appoints the TRUSTEE, through its duly authorized representatives, its attorney-
in-fact to sell the mortgaged properties in accordance with the provision of Act
No. 3135, as amended, and/or Act No. 1508, as amended, and subject to the
stipulations herein set forth, to sign all documents and perform any act requisite
or necessary to accomplish said purpose and to appoint their representatives or
substitutes as such attorneys-in-fact with all the powers herein conferred. In
extra-judicial foreclosure under Act No. 3135, as amended, the auction sale shall
take place in the City or Capital of the Province where the mortgaged properties
are situated. In extra-judicial foreclosure under Act No. 1508, as amended, the
auction sale shall take place in such City or Municipality as the TRUSTEE at its
option, may elect by virtue of the provisions of the first paragraph of this
Condition."[16] (Underscoring supplied.)

The MTA was amended on April 27, 1984 with PNB Senior Vice President Gerardo
Agulto, Jr. and MMIC Senior Vice President Jose Luis Javier as signatories.[17] Premised on
the fact that the mortgagor (MMIC) had "acquired additional personal and real properties,
including, but not limited to, leasehold rights on mining claims, which pursuant to the terms of
the Mortgage Trust Agreement are deemed covered by the mortgage as after-acquired
assets," the MTA amended Sec. 2.01 thereof to read as follows:

"As security for the prompt and full payment by the MORTGAGOR of the
Secured Obligations, the MORTGAGOR hereby establishes and constitutes in
favor of the MORTGAGEES a first lien and mortgage of the first rank in and to
each and every item of the Mortgaged Properties, together with any and all
substitutes or replacements for or renewals of or additions to any thereof, all of
which belong to and are in the possession of (or will belong to and will be in the
possession of) the MORTGAGOR, free and clear of any liens or encumbrances of
any nature whatsoever." (Underscoring supplied.)[18]

MMIC defaulted in the payment of its loan obligation with PNB and DBP which, as of July
15, 1984 stood at P23.55 billion. As a consequence thereof, PNB and DBP simultaneously
filed in the provinces of Rizal, Samar, Negros and Surigao, joint petitions for sale on
foreclosure under Act Nos. 1508 and 3135,[19] of the MMIC assets located at: (a) Island
Cement in Antipolo, Rizal; (b) Sipalay Copper Mine in Negros; (c) Bagacay and Giporlos Coal
Projects in Samar, and (d) Nonoc Nickel Project in Surigao. The petitions were premised
on: (1) the MOA of July 13, 1984 which delineated MMIC's mortgaged properties; (2) the April
27, 1984 amendment to the MTA in favor of DBP and PNB which included in the mortgage
MMIC's additional after-acquired assets; (3) the liabilities of MMIC secured by the mortgage
being past due, and (4) Presidential Decree No. 385 mandating PNB and DBP to institute
foreclosure proceedings when the arrearages of the borrower have exceeded twenty percent
(20%) of the principal obligation.

Deputy Sheriff Esteban G. Malindog of the Regional Trial Court in Catbalogan, Samar,
Branch XXVII, complied with the requirements of the law as to the posting and publication of
the notice of sale. Said notice, dated August 15, 1984, set for August 31, 1984 the auction
sale of the various mining equipment and other assets of MMIC, including the equipment at
the Giporlos Project.

On August 15, 1984, IEI advised PNB and DBP at their respective Manila and Makati
offices that the purchase price of the Giporlos Coal Project that it had assigned to MMIC per
the MOA, was still. unpaid.[20] However, despite said notice, the foreclosure sale proceeded
as scheduled and the various machineries and equipment of MMIC were sold to PNB as the
sole bidder for P33,940,940.00.

In its letter of September 20, 1984 to PNB and DBP, [21] IEI requested that the movable
properties in the Giporlos Coal Project which were detailed in a list attached to its August 15,
1984 letter to said banks, be excluded from the foreclosed assets of MMIC as the purchase
price thereof under the MOA had remained unpaid. IEI further informed PNB and DBP that a
suit for rescission of the assignment of the Giporlos Coal Project to MMIC (and damages) had
been filed before the Regional Trial Court of Makati.

On June 24, 1985, in view of the inclusion of the mining equipment and other movable
properties at the Giporlos Coal Project in the foreclosure sale of the assets of MMIC, IEI filed
an amended complaint impleading the PNB as an additional defendant.[22] The amended
complaint was admitted by the trial court on September 23, 1985.[23]

On April 23, 1986, the lower court[24] rendered a decision finding that:

"With respect to the plaintiff's claim against the Philippine National Bank, the
evidence on record is clear that said defendant bank is equally guilty of bad faith
because it was advised beforehand that the heavy equipment and movable
property which are part of the Giporlos Coal Project were still unpaid; however,
despite that actual knowledge or information, the said defendant bank proceeded
to extrajudicially foreclose the mortgage on the said properties; moreover, the
foreclosure proceedings were held in Catbalogan, Province of Samar, although
the said movable properties are actually found or located at Giporlos, Eastern
Samar (Exhibit 'OOO'), a province, distinct and separate from, and outside the
jurisdiction of, the Province of Samar; these foreclosure proceedings in
Catbalogan, Samar, are clearly contrary to the provisions of Act 1508, as
amended; likewise, the inclusion of the movable properties which are part of the
Giporlos Coal Project is contrary to the provisions of the last paragraph of Sec. 7
of said Act No. 1508, as amended, which provides that a chattel mortgage shall
 be determined to cover only the properties described therein and not like or
substituted property thereafter acquired by the mortgagor and placed in the same
depository as the property originally mortgaged, anything in the mortgage to the
contrary notwithstanding."[25]

Noting the futility of proceeding with the trial of the case because there was "no genuine
issue of any material facts," the lower court rendered a summary judgment disposing of Civil
Case No. 8109 as follows:

"WHEREFORE, judgment is hereby rendered:

a- declaring the memorandum agreement, Exhibit 'C' as rescinded or annulled and
without further force and effect between the parties thereto;
b- declaring and sustaining the continued efficacy and validity of the coal operating
contract, Exhibit 'A' between plaintiff and defendant BED;
c- ordering the reversion or return of the two coal blocks covered by the coal operating
contract dated July 27, 1979, Exhibit 'A', from the defendant MMIC to and in favor of
the plaintiff together with or including all the pieces of equipment MMIC received by
said defendant in virtue of the rescinded memorandum of agreement, Exhibit 'C';
d- ordering the defendant Bureau of Energy Development to issue its corresponding
formal written affirmation and confirmation of the coal operating contract, Exhibit 'A',
and to expeditiously cause the conversion thereof from exploration to
development/production or exploitation contract in favor of the plaintiff;
e- directing the Bureau of Energy Development and the Ministry of Energy to give due
course to plaintiff's application for a coal operating contract for the exploration of the
three additional coal blocks in the plaintiff's Giporlos Coal Project;
f- condemning the defendant MMIC to pay the plaintiff the amount of P3,431,645.00
representing expenditures on the two coal blocks covered by Exhibit 'A' from July 31,
1983 up to May 1984 and such further amounts from said date up to the finality of this
decision to be computed in accordance with the formula adopted in the report of Sycip,
Gorres and Velayo referred to in paragraph 14 of the Amended Complaint;
g- ordering the defendant MMIC to pay the plaintiff the sum of P6,500,000.00
representing rehabilitation expenses to be incurred by plaintiff in putting back the two
coal blocks and the pieces of equipment thereon in the same workable and operating
condition as they were at the time they were taken possession of by said defendant
MMIC and the defendant PNB shall be subsidiarily liable therefor;
h- condemning the defendants MMIC and PNB jointly and solidarily liable to pay the
plaintiff moral damages in the amount of P300,000.00, as exemplary damages
of P200,000.00 and the amount ofP200,000.00 as and for attorney's fees;
i- declaring the extra-judicial foreclosure sale executed for and in behalf of the
defendant Philippine National Bank of the mining equipment and other movable
property which are enumerated in Exh. 'OOO' and which are part of the Giporlos Coal
Project, as null and void and of no force and effect as against the plaintiff; in the event of
the loss or deterioration of the said mining equipment and other movable property, the
said defendants PNB and MMIC shall be held jointly and solidarily liable to the plaintiff
for the current market value thereof; and
j- ordering the defendants MMIC and PNB to pay the cost of this suit.
SO ORDERED."[26]
PNB and IEI filed separately motions for the reconsideration of said summary judgment.
PNB alleged that the lower court did not have jurisdiction over the subject matter and
[27]
nature of the action as the MOA between MMIC and IEI was an incident arising out of a
mining claim which was within the jurisdiction of the BED. Moreover, the validity of the
extrajudicial foreclosure proceedings which PNB effected on said properties was a genuine
material issue which was not determinable through summary judgment. Inasmuch as the
merit of the case was resolved through summary judgment, PNB was denied its constitutional
right to due process. Furthermore, the award of damages to IEI was improper as PNB was
not a party to the MOA.

For its part, IEI contended that the decision failed to award consequential damages in its
favor considering the finding that MMIC and PNB acted in bad faith and that it failed to realize
profits of about P14.5 million on the confirmed coal reserves of 3,485,915 metric tons
computed at P4.17 per metric ton.

On the other hand, the public defendant and MMIC filed their respective notices of appeal
to the then Intermediate Appellate Court.[28]

On July 14, 1986, IEI filed a motion for execution pending appeal [29] alleging that MMIC
had failed and refused to fulfill its obligations under the MOA and that it even allowed the PNB
to unlawfully foreclose the mortgage on the heavy equipment and other movable properties in
the Giporlos Coal Project. According to IEI, to allow this situation to persist would only
aggravate the damages suffered by all concerned parties. It added that the grant of the
motion for execution pending appeal would not only stop the continuing injury to the common
weal but it would also hasten the day when the coal blocks could be placed in useful
production to provide gainful employment to the people in the community. By the same token,
IEI averred, granting of the motion would accelerate realization of scarce foreign exchange
savings occasioned by the local production of a substitute energy source that would thereby
contribute to the relief of an ailing economy.

This motion was opposed by the public defendant, the MMIC and the PNB.[30] The public
defendant averred that the execution of the decision "would cause great irreparable damage
and injury to public interest" and that there were no "good reasons" of superior circumstance
that demand urgency of the execution pending appeal. MMIC opposed the motion on the
ground that the court had lost jurisdiction after the perfection of its appeal while PNB's
objection was on the ground that there were no good reasons to justify the issuance of a writ
of execution and that the issuance thereof was premature.

In its order of September 15, 1986, the lower court denied the motions for reconsideration
of IEI and PNB for lack of merit. It ordered the elevation of the records of the case to the
Court of Appeals considering that the MMIC and the public defendant had filed their notices of
appeal on time. It likewise directed the issuance of a writ of execution pending appeal to
enforce the April 23, 1986 decision upon the filing of a bond in the amount of five million
pesos (P5,000,000.00) conditioned on the payment of damages the defendants might suffer
should the court finally rule that the plaintiff was not entitled to the writ.

In granting the writ of execution, the court held that "the immediate resumption of
operation of the two coal blocks in question became imperative and is of urgent necessity at
this time when our government is in dire need of capitalization to encourage the
establishment of business to generate employment and dollar-producing energy sources." In
the court's perception, this was enough reason to entitle IEI to execution pending appeal
pursuant to Sec. 2, Rule 39 of the Rules of Court.

The corresponding writ having been issued on September 22, 1986,[31] on September 26,
1986, Pioquinto P. Villapana was appointed Special Sheriff to assist and cooperate with
Deputy Sheriff Arturo Flores in its enforcement. However, execution of the writ was curtailed.

The appeal to the Court of Appeals was docketed as CA-G.R. CV No. 12660. On October
14, 1988, IEI filed a motion to dismiss the case against Minister Velasco on the grounds of
IEI's reapplication for the two coal blocks with the Office of Energy Affairs (OEA) and its loss
of interest in pursuing the case against Minister Velasco.[32] The motion was favorably acted
upon by the Court of Appeals thereby effectively dropping Minister Velasco as a defendant in
Civil Case No. 8109 through the decision of May 29, 1989, [33] where the Court of Appeals
disposed of the appeal as follows:

"WHEREFORE, the judgment appealed from is hereby reversed and set aside
and the appeal of plaintiff Industrial Enterprises, Inc., is DISMISSED. The
complaint against the defendants Marinduque Iron Mines Corporation and
Minister of Energy is dismissed for lack of jurisdiction. The case against
defendant PNB is remanded to the lower court for further proceedings.

Cost against appellant Industrial Enterprises, Inc.

SO ORDERED."[34]

IEI elevated the decision to this Court through a petition for review on certiorari under
G.R. No. 88550 while the PNB filed in the Court of Appeals a motion for the reconsideration of
the same decision. On September 21, 1989, the Court of Appeals resolved the motion for
reconsideration with the following findings:

"Considering, therefore, that PNB was impleaded as party defendant only in

connection with its foreclosure of the mortgages on the properties of the principal
defendant MMIC, and considering that the main action against MMIC has been
 dismissed for lack of jurisdiction, there appears to be no cogent reason to
continue the case against PNB which is merely a secondary defendant. There is
thus merit in PNB's contention that since the case against MMIC has been
dismissed, the case against PNB should likewise be dismissed, considering that
PNB merely stepped into the shoes of MMIC.

Moreover, there is no privity of contract between PNB and IEI. Hence, there is
no direct cause of action by IEI against PNB independently of MMIC, it being
merely a foreclosing mortgage creditor of the latter. At any rate, the record shows
that there is an on-going litigation between MMIC stockholders and PNB before
the Regional Trial Court of Makati (Civil Case No. 9900) for the annulment of
the PNB's extra-judicial foreclosure of MMIC's mortgaged properties."[35]

Accordingly, the Court of Appeals modified its decision of May 29, 1989 by dismissing the
case against the PNB.

Meanwhile, G.R. No. 88550 was eventually decided by this Court on April 18, 1990. [36] In
denying the petition of IEI, the Court held:

"Clearly, the doctrine of primary jurisdiction finds application in this case since
the question of what coal areas should be exploited and developed and which
entity should be granted coal operating contracts over said areas involves a
technical determination by the BED as the administrative agency in possession of
the specialized expertise to act on the matter. The Trial Court does not have the
competence to decide matters concerning activities relative to the exploration,
exploitation, development and extraction of mineral resources like coal. These
issues preclude an initial judicial determination. It behooves the courts to stand
 aside even when apparently they have statutory power to proceed in recognition
of the primary jurisdiction of an administrative agency.

'One thrust of the multiplication of administrative agencies is that the

interpretation of contracts and the determination of private rights
thereunder is no longer a uniquely judicial function, exercisable only by
our regular courts' (Antipolo Realty Corp. v. National Housing Authority,
153 SCRA 399, at 407).

The application of the doctrine of primary jurisdiction, however, does not call for
the dismissal of the case below. It need only be suspended until after the matters
within the competence of the BED are threshed out and determined. Thereby, the
principal purpose behind the doctrine of primary jurisdiction is salutarily served."

Pursuant to this Decision, IEI lodged a complaint against MMIC and PNB before the
OEA. After due hearing, a decision was issued by Executive Director W. R. de la Paz on
January 25, 1991, with a decretal portion which reads:

"Wherefore, in the light of the foregoing, insofar as the Memorandum of

Agreement is concerned, such agreement may already be deemed
rescinded and of no force and effect in view of the re-award made in IEI's favor
of the same coal areas subject of this dispute. However, on the issue of the effects
and consequences of the right to claim damages for unpaid financial obligations
and such other damages incidental thereto, by one party as against the other, this
matter may be referred to the regular courts for appropriate adjudication.

Similarly, this likewise holds true insofar as the foreclosed properties involved in
this case are concerned where respondent Philippine National Bank was
 impleaded."[37]

In accordance with this ruling of the OEA, on March 1, 1991, IEI filed in the lower court a
motion to set Civil Case No. 8109 for hearing.[38] On June 17, 1991, PNB filed a motion to
dismiss[39] alleging that the issue in this case, i.e., the validity of the foreclosure of MMIC's
assets, was virtually the same issue raised before the Regional Trial Court of Makati in Civil
Case No. 9900, "Jesus S. Cabarrus, Jesus Cabarrus, Jr., Jaime T. Cabarrus, Jose Miguel
Cabarrus, Alejandro S. Pastor, Jr., Antonio U. Miranda & Manuel M. Antonio v.Development
Bank of the Philippines and Philippine National Bank," a case filed by the plaintiffs as
stockholders of MMIC in their behalf as well as in behalf of other stockholders, which prayed,
among others, that the foreclosures effected by DBP and PNB on the assets of MMIC be
declared null and void.[40]

The motion to dismiss was denied by the lower court on July 10, 1991 on the ground that
there was no substantial identity in the cause of action, the relief sought and the parties in the
two cases.[41]

As aforestated, the lower court rendered the decision of November 27, 1992 finding
MMIC and PNB jointly and severally liable to IEI for damages and declaring null and void the
August 31, 1984 extrajudicial foreclosure sale in Catbalogan, Samar. This was affirmed on
December 20, 1994 by the Court of Appeals under CA-G.R. CV No. 40836.

MMIC did not interpose an appeal from the Decision of the Court of Appeals but the PNB
filed the instant petition for review on certiorari questioning the following "conclusions" of the
Court of Appeals:

(1) there was implied conspiracy or community of design among the defendants
to ruin IEI;

(2) PNB acted in bad faith in including the IEI Giporlos equipment at the
extrajudicial foreclosure sale on August 31, 1984, and

(3) PNB is liable for a quasi-delict.

Petitioner PNB also contends that the Court of Appeals erred in not holding that (a) because
Minister Velasco had been dropped as party defendant, PNB was also absolved from liability
because it was solidarily liable with Minister Velasco, and (b) IEI's claim against PNB for
actual, consequential and moral damages including attorney's fees, litigation expenses and
costs of suit, has neither legal nor factual bases.[42]

In its comment on the petition, private respondent IEI contends in the main that the issues
raised by petitioner PNB are all factual in nature and, therefore, they have no place before
this Court. We hold otherwise.

At the core of the instant petition is the legal question of ownership of the chattels
involved at the time of foreclosure. This issue appears to have been glossed over by the
courts below. Equally appropriate for determination by this Court is the legality of the
foreclosure proceedings on the assets of the MMIC. These two issues are the keys to the
resolution of the instant petition.

Privity between MMIC and private respondent was established by the execution of the
MOA. An important issue then is whether or not the chattels mortgaged to petitioner were
covered by the MOA so as to legally subject the same chattels to MMIC's ownership and,
eventually, to the foreclosure proceedings.

The MOA was an assignment of private respondent's "rights and interests on the Coal
Operating Contract described in the first whereas clause" thereof. In its most general and
comprehensive sense, an assignment is "a transfer or making over to another of the whole of
any property, real or personal, in possession or in action, or of any estate or right therein.It
includes transfers of all kinds of property, and is peculiarly applicable to intangible personal
property and, accordingly, it is ordinarily employed to describe the transfer of non-negotiable
choses in action and of rights in or connected with property as distinguished from the
particular item or property."[43]

An assignment is a contract between the assignor and the assignee. It generally operates
by way of such contract or agreement. It is subject to the same requisites as to validity of
contracts.[44] Whether or not a transfer of a particular right or interest is an assignment or
some other transactions depends, not on the name by which it calls itself, but on the legal
effect of its provisions. This rule applies in determining whether a particular transaction is an
assignment or a sale.[45]

As the aforequoted portions of the MOA state, its subject is described in the "whereas
clauses" thereof as follows:

"WHEREAS, IEI is the duly authorized operator over two coal blocks over an
area outlined and more particularly described in Annex 'A' of the Coal Operating
Contract entered into on the 27th day of July 1979 and between the Ministry of
 Energy, through the Bureau of Energy Development ('BED'), and IEI; the Coal
Operating Contract and Annex A thereof being hereto attached and made an
integral part of this contract;"

Annex "A" of the coal operating contract is the technical description of the 2,000-hectare coal-
bearing land in Carbon, Magsaysay, Eastern Samar. Therefore, as expressed in the MOA, the
subject of the assignment was only private respondent's rights and interests over the coal
operating contract covering said coal-rich land in Eastern Samar.

However, a close scrutiny of the contract reveals that the MOA includes all tangible things
found in the coal-bearing land. Unquestionably, rights may be assigned as they are intangible
personal properties. The term "interests," on the other hand, is broader and more
comprehensive than the word "title" and its definition in a narrow sense by lexicographers as
any right in the nature of property less than title, indicates that the terms are not considered
synonymous.[46] It is practically synonymous, however, with the word "estate" which is the
totality of interest which a person has from absolute ownership down to naked possession.
[47] An "interest" in land is the legal concern of a person in the thing or property, or in the right
to some of the benefits or uses from which the property is inseparable.[48]

That the MOA conveyed to MMIC more than the title to or rights over the coal operating
contract but also the "things" covered thereby, is manifest in the manner by which the parties,
particularly private respondent IEI, implemented the MOA. It disclosed the intention to include
in the MOA the equipment and machineries used in coal exploration. This intention is evident
in the following letters of private respondent: (1) letter of April 16, 1984 to Alfredo Velayo,
President of MMIC, where private respondent, through Cabarrus, included in the conditions
for the negotiated rescission of the MOA, the payment to private respondent of the amount of
ten million pesos (P10,000,000.00) for expenses such as those for the "recondition (of) the
equipment which have been left to the elements;" [49] (2) letter of May 2, 1984 to Velayo, where
private respondent mentioned a "list of probable equipment(s) that IEI would be interested to
apply as part payment in the event of rescission of contract;" [50] (3) letter of June 4, 1984 to
Zalamea as Chairman of the Board of the MMIC,[51] where private respondent attached an
updated statement of account and the expenses for rehabilitation of equipment, and (4) letter
of August 15, 1984 to petitioner and the DBP where private respondent enclosed a copy of
"the movable properties included in said Memorandum of Agreement" of August 1983.
[52] Notably, all these listed equipment were sold at the foreclosure sale initiated by petitioner.
[53]

Also worth noting is the absence of proof that, like a good father of the family, private
respondent exerted some effort to take the chattels out of the premises upon the execution of
the MOA. All that private respondent proved, through the testimony of Cabarrus, was that the
equipment and machineries were taken over by MMIC, piled up and left to rot that trees even
grew on them.[54] Coupled with this is private respondents' failure to prove the presence of
insurmountable force[55] that would have prevented it from retrieving its equipment and
machineries from the Giporlos Project area. All these show that private respondent
considered these chattels as subjects of the MOA.

Private respondent had all the right to exclude these chattels from the MOA because they
were not expressly stipulated therein. However, its sheer inaction upon the execution of the
MOA and its subsequent admissions through the aforesaid letters, conclusively show that
these equipment and machineries were subjects of the assignment of rights to MMIC. It was
only when the foreclosure sale was about to take place that private respondent lifted a finger
to object thereto on the ground that the consideration stipulated in the MOA had not yet been
paid by MMIC.

Moreover, while the MOA was expressly a contract for the assignment of rights and
interests, it is in fact a contract of sale. Under Art. 1458 of the Civil Code, by the contract of
sale, one of the contracting parties obligates himself to transfer the ownership of and to
deliver a determinate thing, and the other to pay therefor a price certain in money or its
equivalent. By the MOA, private respondent obligated itself to transfer ownership of the coal
operating contract and the properties found therein. The coal operating contract is a
determinate thing as it has been particularly designated in the MOA. The subject of the coal
operating contract was physically segregated from all other pieces of coal-rich Eastern Samar
property by the technical description attached to said contract. [56] A list of the equipment and
machineries found on the property might not have been attached to the MOA but these were
itemized with specificity in private respondent's letter of August 15, 1984.

Private respondent delivered the properties subject of the contract to MMIC, which
immediately gained control and possession of the Giporlos Project. This is explicit in private
respondent's numerous demand letters[57] which are exemplified by its letter of February 7,
1984 to Zalamea which states:

"Considering that all details necessary to determine the final purchase price are
in place; considering that the property has already been transferred in your name;
and considering finally that cash payment is stipulated in the contract, demand is
hereby respectfully made for the payment of the purchase price
soonest."[58] (Underscoring supplied.)

Another very telling letter of private respondent is that of April 16, 1984 to Mr. Alfredo Velayo,
President of MMIC, which partly reads:

"After the Memorandum of Agreement was signed, BED promptly approved the
 transfer from IEI to MMIC. After the price was fixed with the assistance of SGV
and BED, MMIC took over the entire project last July 1983. x x x."[59]

For its part, MMIC never denied that it had taken possession and control over the
Giporlos Project. In its replies to private respondent's demand letters, MMIC in fact
acknowledged its obligations under the MOA while professing incapacity to fulfill the same.

If the MOA merely embodied an assignment of rights over the coal-operating contract and
the properties found in the Giporlos Project and not a sale thereof, then private respondent
would not have insisted on the payment of MMIC's obligations under the MOA by attaching a
statement of account to most of its demand letters. [60] In assignments, a consideration is not
always a requisite, unlike in sales. Thus, an assignee may maintain an action based on his
title and it is immaterial whether or not he paid any consideration therefor. [61] Furthermore, in
an assignment, title is transferred but possession need not be delivered. [62] In this case,
private respondent transferred possession over the subjects of the "assignment" to MMIC.

Since the MOA was actually a contract of sale, MMIC acquired ownership over the
Giporlos Project when private respondent delivered it to MMIC. Under the Civil Code, unless
the contract contains a stipulation that ownership of the thing sold shall not pass to the
purchaser until he has fully paid the price,[63] ownership of the thing sold shall be transferred
to the vendee upon the actual or constructive delivery thereof. [64] In other words, payment of
the purchase price is not essential to the transfer of ownership as long as the property sold
has been delivered.[65] Such delivery (traditio) operated to divest the vendor of title to the
property which may not be regained or recovered until and unless the contract is resolved or
rescinded in accordance with law.[66]

Consequently, the properties in the Giporlos Project were, therefore, owned by MMIC
notwithstanding its failure to pay the consideration stipulated in the MOA. Private respondent,
after such delivery and MMIC's continuous refusal to pay the consideration for the contract,
correctly opted to rescind the contract.[67] That private respondent did not succeed in
collecting payment prior to the filing of the complaint for rescission with damages is a fault
entirely attributable to MMIC which at the time, acted upon the orders of government
authorities.

It is erroneous for private respondent and the courts below to impute bad faith on the part
of petitioner for foreclosing the properties in the Giporlos Project. Petitioner was simply acting
in accordance with its rights as a mortgagee. The MTA, as amended, clearly provides that the
mortgage covers even "after- acquired" properties. Because petitioner was simply
implementing this contractual provision of the MTA, its knowledge that MMIC had not yet paid
the consideration stipulated in the MOA could not have resulted in foreclosure in bad
faith. After all, petitioner was a total stranger as regards the MOA.
 Similarly, neither may petitioner be deemed to have conspired with MMIC and
government authorities in divesting private respondent of its rights over the Giporlos
Project.Petitioner's involvement consisted in its exercising its right to foreclose the mortgage
only after the MOA, which effectively wrenched the Giporlos Project from private respondent's
control, had become a fait accompli. A lawful act, done in a lawful way, no matter how
damaging the result, never lays the basis for a claim of fraudulent conspiracy. [68] That a
scheme to favor the financially strapped MMIC over private respondent had been hatched
and was in existence when the MOA was executed is now beyond this Court's adjudicatory
power.Suffice it to state that an action may be maintained against persons who falsely and
fraudulently recommend an insolvent person as worthy of credit, by reason of which plaintiff is
induced to trust him.[69]

In view of the noninvolvement of petitioner in the alleged conspiracy to strip private

respondent of the its rights over the Giporlos Project, petitioner cannot be made solidarily
liable with the MMIC for damages. However, although petitioner's rights to foreclose the
mortgage and to subject the equipment of private respondent to the foreclosure sale are
unassailable, we find that the foreclosure proceedings fell short of the requirements of the
law.

The provision of the MTA vesting petitioner as trustee with the authority to choose the
place where the sale of the properties involved therein should be made is clearly in
contravention of the following provisions of Act No. 3135 as amended:

"SEC. 2. Said sale cannot be made legally outside the province in which the
property sold is situated; and in case the place within said province in which the
sale is to be made is the subject of stipulation, such sale shall be made in said
place or in the municipal building of the municipality in which the property or
part thereof is situated."

The Giporlos Project is situated in Eastern Samar, a province separate and distinct from
Samar where the foreclosure sale took place.[70] Hence, the foreclosure sale is null and
void.Even the Chattel Mortgage Law (Act No. 1508) relied upon by private respondent in
assailing the propriety of the public auction sale in Samar, provides that the said sale should
be made "in the municipality where the mortgagor resides" or "where the property is
situated."[71] It has not been established that petitioner considered Catbalogan, Samar where
the foreclosure sale was conducted, as its "residence."

Moreover, the designation of a special sheriff to conduct the foreclosure sale is

questionable. According to Sheriff Malindog, he was designated as a special sheriff by the
judge of the Regional Trial Court of Samar, through the clerk of court, upon the request of
petitioner's counsel, one Atty. Aliena, even though there was a sheriff in Eastern Samar.[72]

Appointment of special sheriffs for the service of writs of execution or for the purpose of
conducting a foreclosure sale under Act No. 3135 is allowed only when there is no sheriff in
the area where the property involved is located or when the sheriff himself is involved in the
action. This restriction is founded on the requirement of law that sheriffs who take delivery of
money or property in trust must be duly bonded.[73] The said situations calling for the
appointment of a special sheriff being absent in this case, the appointment of Malindog as a
special sheriff by the judge of the Regional Trial Court of Samar is unauthorized. Such lack of
authority resulted in the nullification of the foreclosure sale conducted by Malindog.

Ordinarily, by the nullification of the foreclosure sale, the properties involved would revert
to their original status of being mortgaged.[74] However, the situation in this case is an
exception to that rule. The MOA, the source of MMIC's right of ownership over the properties
sold at the foreclosure sale, has been rescinded. Consequently, petitioner should exclude
said properties from the MMIC's properties which were mortgaged pari passu to the petitioner
and DBP through the MTA. However, since the foreclosed properties had been turned over to
the Asset Privatization Trust,[75] petitioner must reimburse private respondent the value
thereof at the time of the foreclosure sale.

WHEREFORE, the Decision of the Court of Appeals is hereby REVERSED and SET
ASIDE insofar as it renders petitioner solidarily liable with Marinduque Mining and Industrial
Corporation for damages and AFFIRMED insofar as it nullifies the foreclosure sale of August
31, 1984. Petitioner Philippine National Bank shall exclude the properties sold at the
foreclosure sale from the mortgaged properties of Marinduque Mining and Industrial
Corporation and return the same to private respondent Industrial Enterprises Inc. or, should
such return be not feasible, reimburse said private respondent the value thereof at the time of
the foreclosure sale.

SO ORDERED.

Regalado, (Chairman), Puno, Mendoza, and Torres, Jr., JJ., concur.

__________________________________________________________________________________

G.R. No. L-60208 December 5, 1985

PHILIPPINE NATIONAL BANK, petitioner,

vs.
THE HONORABLE COURT OF APPEALS AND DIVINA ALIM, respondents.
Juan J. Diaz, Benjamin C. del Rosario and Cesar Basa for petitioner.

ALAMPAY J.:

Civil Case No. 7927 which is an action for Annulment of Extrajudicial Foreclosure and Sale of Real
Properties and for Damages with Prayer for Preliminary Injunction was filed on April 26, 1975 by the private
respondent herein against the Philippine National Bank (PNB) in the Court of First Instance of Quezon
Province. On November 27. 1979 a decision was rendered by said court enjoining defendant Philippine
National Bank from consolidating its title over the mortgaged properties and directing said bank to allow the
private respondent, Divina B. Alim, to redeem the mortgaged properties by accepting payment from the
latter; and dismissing all the claims and counterclaims that the parties may have against each other in
connection with the case.

This decision which was appealed by the defendant PNB was affirmed on March 25, 1982 by the First
Division of the Court of Appeals in CA-G.R. No. 67131-R.

As succinctly stated in the decision of the Court of Appeals, the following material facts are not disputed.
These appear to be as follows:

... On February 2, 1968 plaintiff Divina Alim obtained a loan in the total amount of P40,000
from defendant Philippine National Bank secured by three (3) parcels of land registered in
the name of herein plaintiff and covered by the following title-

(a) Transfer Certificate of Title No.8384 of the Register of Deeds of Lucena City comprising
a house of strong materials located along the National Highway, Iyam District, Lucena City,
and a lot with an area of 540 square meters, more or less;

(b) Transfer Certificate of Title Nos. T-79631 and T-79632 of the Registry of Deeds for the
Province of Quezon, containing an area of 58 hectares each of a total of 116 hectares,
planted with coconut trees.

For failure of the plaintiff to pay her total obligation upon maturity date, defendant Philippine
National Bank extrajudicially foreclosed the mortgage properties and the Provincial Sheriff
of Quezon sold the properties at public auction on February 12, 1973. The defendant
Philippine National Bank being the only bidder in said auction sale, all the aforementioned
mortgaged properties were sold to the bank for the amount of P59,320.00 which was the
total obligation of the plaintiff as of the date of the sale. The said amount already included
the principal obligation, attorney's fees and other charges, interests on said amounts plus
costs of publication of the Sheriff's notice of auction sale. "On April 26, 1975, plaintiff
instituted the present case for the annulment of the aforesaid extrajudicial foreclosure and
sale and for damages with prayer for preliminary injunction."

From the decision rendered by the Court of First Instance of Quezon Province, it can be noted that during
the pendency of the case in the said court the parties attempted to confer with the end in view of settling
this case amicably and in the course thereof the plaintiff deposited with defendant bank a sufficient amount
to cover the loan and interest thereon as of February 12, 1973 including reimbursement for costs of
publication. Thus at the pre-trial, the parties agreed to submit the case for decision only upon the issue as
to whether or not the plaintiff should still pay interest specified in the mortgage after the auction sale on
February 12, 1973.

The defendant Philippine National Bank contends that the plaintiff is still obligated to pay the said interest
citing the provisions of Presidential Decree No. 694, as amended by Presidential Decree No. 1478,
particularly Section 25, paragraph 2 thereof.

On the other hand, plaintiff Divina Alim, the private respondent herein cites the case of the Development
Bank of the Philippines versus Jovencio A. Zaragosa, et al., 84 SCRA 668, where it was therein ruled that
when the foreclosure proceedings are completed all interests of the mortgagor are cut off from the property
and that this principle is applicable to an extrajudicial foreclosure.

In rendering the decision in favor of plaintiff Divina Alim, The trial court reasoned out—

... In the case at bar, the foreclosure and subsequent sale of the properties were valid, but
because of the timely filing of this case and in view of the Order of June 9, 1975, the
consolidated sale could not be made. In the light, therefore, of the above cited ruling of the
Supreme Court, (DBP vs. Zaragosa, et al., supra) after the public auction sale on February
12, 1973, the defendant Philippine National Bank can no longer demand payment of interest
on the property should the mortgagor exercise her right of redemption." (Annex "B" of
Petition, Record on Appeal, p. 101: parenthesis supplied)

This ruling which was sustained by the then Court of Appeals is now the subject of the Petition for Review
on certiorari presented to this Court by the Philippine National Bank.

In its petition, the PNB assails the decision of the defunct appellate court and contends that the interests
specified in the mortgage should still be added to the bid or purchase price computed from the time of the
auction sale up to the date the mortgaged properties are redeemed as clearly authorized by law. Petitioner
invokes Republic Act No. 1300, the original Charter of the PNB, Presidential Decree No. 694 (1975),
Republic Act No. 337 known as the General Banking Law and Rule 39 of the Rules of Court, all of which
petitioner PNB claims authorize the imposition of the interest specified in the mortgage.

What appears from the case records is that the extrajudicial foreclosure proceedings instituted by the PNB
was commenced on May 25, 1972, pursuant to a petition for sale under Act No. 3135 filed by its counsel
with the Provincial Sheriff for Quezon Province. But this PNB sought the freclosure and sale of the
properties of the herein private respondent and directed said Sheriff to publish the Notice of Sale in the
Quezon Times, Lucena City. In consequence of said petition the Provincial Sheriff sold at public auction the
properties of herein private respondent to the Philippine National Bank, upon the latter's bid of P59,320.00.
The corresponding Certificate of Sale was executed by the Sheriff in favor of the Philippine National Bank
on February 16, 1973.

Considering that the very step initiated by the Petitioner was a petition for Sale under Act No. 3135 (Annex
F. Complaint, Record on Appeal, Rollo, p. 26), the applicable law then would be no other than the said
statute. Act No. 3135 being a special law that governs particularly extrajudicial foreclosures, it necessarily
excludes the application in this instance of the General Banking Act and the provisions on redemption
under the Revised Charter of PNB, Presidential Decree No. 694, which was enacted only in 1975. In the
case at bar the mortgage contract was entered into in 1968. In 1968, the governing law on PNB operations
was Republic Act No. 1300 but it has been held that "Republic Act 1300 does not contemplate extrajudicial
foreclosure" (Co vs. PNB, L-51767, June 29, 1982, 114 SCRA 842, 855).
Since the applicable law is Act 3135, the provisions of Section 30, Rule 39, Rules of Court shall be
determinative of the sole issue presented in this case. Section 6 of Act 3135, as amended by Act 4018,
provides:

Sec. 6. — In all cases in which an extrajudicial sale is made under the special power
hereinbefore referred to, the debtro, his successors in interest or any judicial creditor or
judgment creditor of said debtor, or any person ahving a lein on the proeprty subsequent to
the mortgage or deed of trust under which the property is old, may redeem the same at any
time within the term of one year from and after the date of the sale; and such redemption
shall be governed by the provisions of sections four hundred and sixty-four, inclusive, of the
Code of Civil Procedure, in so far as these are not incosistent with the provision of this Act.
(emphasis supplied.)

Section hundred sixty-four to four hundred sixty-six inclusive, of the Code of Civil Procedure, became
Sections 29, 30, and 34 of Rule 39 of our Rules of Court. The same secitons were reiterated in the Revised
Rules of Court in July 1964 (Co vs. PNB, supra).

Pursuant to Section 30 of Rule 39, the redemptioner, who is the private respondent herein, "may redeeem
the property from the purchaser at any time within twelve (12) months after the sale, on paying the
prchaser the amount of his purchase, with one per centum per month interest thereon in addition, up to the
time of redemption, togethere with the amount of any assessments or taxes which the purchaser may have
paid therein after purchase and interest on such last named amount at the same interest rate; ..."

This would rightfully be so because, as stated in the case of DBP vs. Zaragosa, supra, when the
foreclosure proceedings are completed and the mortgaged property is sold to the purchaser then all
interest of the mortgagor are cut off from the property Prior to the completion of the foreclosure, the
mortgagor is liable for the interests on the mortgage. However, after the foreclosure proceedings and the
execution of the corresponding certificate of sale of the property sold at public auction in favor of the
successful bidder, the redemptioner mortgagor would be bound to pay only for the amount of the purchase
price with interests thereon at the rate of one per centum per month in addition up to the time of
redemption, together with the amount of any assessments or taxes which the purchaser may have paid
thereon after the purchase and interest on such last named amount at the same rate.

WHEREFORE, the petition in this case is hereby granted. The decision appealed from is affirmed with
modification, so as to read as follows:

(a) Making the writ of preliminary injunction issued by this Court in its Order of June 9, 1985,
permanent and irrevocable;

(b) Allowing the plaintiff to redeem the mortgaged properties by paying the amount of the
purchase with interests thereon at the rate of one per centum per month up to the date of
her deposit of the redemption price and ordering the defendant to accept payment from the
plaintiff;

(c) Dismissing all the claims and counterclaims that the parties may have against each other
in connection with this case.

No costs.
SO ORDERED.

G.R. No. L-11658 February 15, 1918

LEUNG YEE, plaintiff-appellant,

vs.
FRANK L. STRONG MACHINERY COMPANY and J. G. WILLIAMSON, defendants-appellees.

Booram and Mahoney for appellant.

Williams, Ferrier and SyCip for appellees.

CARSON, J.:

The "Compañia 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 "Compañia 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 "Compañia 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 "Compañia 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 "Compañia 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.

Arellano, C.J., Johnson, Araullo, Street and Malcolm, JJ., concur.

Torres, Avanceña and Fisher, JJ., took no part.

FIRST DIVISION

G.R. No. L-50008 August 31, 1987

PRUDENTIAL BANK, petitioner,

vs.
HONORABLE DOMINGO D. PANIS, Presiding Judge of Branch III, Court of First Instance of
Zambales and Olongapo City; FERNANDO MAGCALE & TEODULA BALUYUT-
MAGCALE, respondents.

PARAS, J.:
This is a petition for review on certiorari of the November 13, 1978 Decision * of the then Court of First Instance of
Zambales and Olongapo City in Civil Case No. 2443-0 entitled "Spouses Fernando A. Magcale and Teodula Baluyut-Magcale vs. Hon. Ramon Y. Pardo and
Prudential Bank" declaring that the deeds of real estate mortgage executed by respondent spouses in favor of petitioner bank are null and void.

The undisputed facts of this case by stipulation of the parties are as follows:

... on November 19, 1971, plaintiffs-spouses Fernando A. Magcale and Teodula Baluyut
Magcale secured a loan in the sum of P70,000.00 from the defendant Prudential Bank. To
secure payment of this loan, plaintiffs executed in favor of defendant on the aforesaid date a
deed of Real Estate Mortgage over the following described properties:

l. A 2-STOREY, SEMI-CONCRETE, residential building with warehouse spaces containing a

total floor area of 263 sq. meters, more or less, generally constructed of mixed hard wood
and concrete materials, under a roofing of cor. g. i. sheets; declared and assessed in the
name of FERNANDO MAGCALE under Tax Declaration No. 21109, issued by the Assessor
of Olongapo City with an assessed value of P35,290.00. This building is the only
improvement of the lot.

2. THE PROPERTY hereby conveyed by way of MORTGAGE includes the right of

occupancy on the lot where the above property is erected, and more particularly described
and bounded, as follows:

A first class residential land Identffied as Lot No. 720, (Ts-308, Olongapo
Townsite Subdivision) Ardoin Street, East Bajac-Bajac, Olongapo City,
containing an area of 465 sq. m. more or less, declared and assessed in the
name of FERNANDO MAGCALE under Tax Duration No. 19595 issued by
the Assessor of Olongapo City with an assessed value of P1,860.00;
bounded on the

NORTH: By No. 6, Ardoin Street

SOUTH: By No. 2, Ardoin Street

EAST: By 37 Canda Street, and

WEST: By Ardoin Street.

All corners of the lot marked by conc. cylindrical monuments

of the Bureau of Lands as visible limits. ( Exhibit "A, " also
Exhibit "1" for defendant).

Apart from the stipulations in the printed portion of the aforestated deed of
mortgage, there appears a rider typed at the bottom of the reverse side of
the document under the lists of the properties mortgaged which reads, as
follows:

AND IT IS FURTHER AGREED that in the event the Sales

Patent on the lot applied for by the Mortgagors as herein
stated is released or issued by the Bureau of Lands, the
 Mortgagors hereby authorize the Register of Deeds to hold
the Registration of same until this Mortgage is cancelled, or
to annotate this encumbrance on the Title upon authority from
the Secretary of Agriculture and Natural Resources, which
title with annotation, shall be released in favor of the herein
Mortgage.

From the aforequoted stipulation, it is obvious that the mortgagee (defendant

Prudential Bank) was at the outset aware of the fact that the mortgagors
(plaintiffs) have already filed a Miscellaneous Sales Application over the lot,
possessory rights over which, were mortgaged to it.

Exhibit "A" (Real Estate Mortgage) was registered under the Provisions of
Act 3344 with the Registry of Deeds of Zambales on November 23, 1971.

On May 2, 1973, plaintiffs secured an additional loan from defendant

Prudential Bank in the sum of P20,000.00. To secure payment of this
additional loan, plaintiffs executed in favor of the said defendant another
deed of Real Estate Mortgage over the same properties previously
mortgaged in Exhibit "A." (Exhibit "B;" also Exhibit "2" for defendant). This
second deed of Real Estate Mortgage was likewise registered with the
Registry of Deeds, this time in Olongapo City, on May 2,1973.

On April 24, 1973, the Secretary of Agriculture issued Miscellaneous Sales Patent No. 4776
over the parcel of land, possessory rights over which were mortgaged to defendant
Prudential Bank, in favor of plaintiffs. On the basis of the aforesaid Patent, and upon its
transcription in the Registration Book of the Province of Zambales, Original Certificate of
Title No. P-2554 was issued in the name of Plaintiff Fernando Magcale, by the Ex-Oficio
Register of Deeds of Zambales, on May 15, 1972.

For failure of plaintiffs to pay their obligation to defendant Bank after it became due, and
upon application of said defendant, the deeds of Real Estate Mortgage (Exhibits "A" and
"B") were extrajudicially foreclosed. Consequent to the foreclosure was the sale of the
properties therein mortgaged to defendant as the highest bidder in a public auction sale
conducted by the defendant City Sheriff on April 12, 1978 (Exhibit "E"). The auction sale
aforesaid was held despite written request from plaintiffs through counsel dated March 29,
1978, for the defendant City Sheriff to desist from going with the scheduled public auction
sale (Exhibit "D")." (Decision, Civil Case No. 2443-0, Rollo, pp. 29-31).

Respondent Court, in a Decision dated November 3, 1978 declared the deeds of Real Estate Mortgage as
null and void (Ibid., p. 35).

On December 14, 1978, petitioner filed a Motion for Reconsideration (Ibid., pp. 41-53), opposed by private
respondents on January 5, 1979 (Ibid., pp. 54-62), and in an Order dated January 10, 1979 (Ibid., p. 63),
the Motion for Reconsideration was denied for lack of merit. Hence, the instant petition (Ibid., pp. 5-28).

The first Division of this Court, in a Resolution dated March 9, 1979, resolved to require the respondents to
comment (Ibid., p. 65), which order was complied with the Resolution dated May 18,1979, (Ibid., p. 100),
petitioner filed its Reply on June 2,1979 (Ibid., pp. 101-112).
Thereafter, in the Resolution dated June 13, 1979, the petition was given due course and the parties were
required to submit simultaneously their respective memoranda. (Ibid., p. 114).

On July 18, 1979, petitioner filed its Memorandum (Ibid., pp. 116-144), while private respondents filed their
Memorandum on August 1, 1979 (Ibid., pp. 146-155).

In a Resolution dated August 10, 1979, this case was considered submitted for decision (Ibid., P. 158).

In its Memorandum, petitioner raised the following issues:

1. WHETHER OR NOT THE DEEDS OF REAL ESTATE MORTGAGE ARE VALID; AND

2. WHETHER OR NOT THE SUPERVENING ISSUANCE IN FAVOR OF PRIVATE RESPONDENTS OF

MISCELLANEOUS SALES PATENT NO. 4776 ON APRIL 24, 1972 UNDER ACT NO. 730 AND THE
COVERING ORIGINAL CERTIFICATE OF TITLE NO. P-2554 ON MAY 15,1972 HAVE THE EFFECT OF
INVALIDATING THE DEEDS OF REAL ESTATE MORTGAGE. (Memorandum for Petitioner, Rollo, p. 122).

This petition is impressed with merit.

The pivotal issue in this case is whether or not a valid real estate mortgage can be constituted on the
building erected on the land belonging to another.

The answer is in the affirmative.

In the enumeration of properties under Article 415 of the Civil Code of the Philippines, this Court ruled that,
"it is obvious that the inclusion of "building" separate and distinct from the land, in said provision of law can
only mean that a building is by itself an immovable property." (Lopez vs. Orosa, Jr., et al., L-10817-18, Feb.
28, 1958; Associated Inc. and Surety Co., Inc. vs. Iya, et al., L-10837-38, May 30,1958).

Thus, while it is true that a mortgage of land necessarily includes, in the absence of stipulation of the
improvements thereon, buildings, still a building by itself may be mortgaged apart from the land on which it
has been built. Such a mortgage would be still a real estate mortgage for the building would still be
considered immovable property even if dealt with separately and apart from the land (Leung Yee vs. Strong
Machinery Co., 37 Phil. 644). In the same manner, this Court has also established that possessory rights
over said properties before title is vested on the grantee, may be validly transferred or conveyed as in a
deed of mortgage (Vda. de Bautista vs. Marcos, 3 SCRA 438 [1961]).

Coming back to the case at bar, the records show, as aforestated that the original mortgage deed on the 2-
storey semi-concrete residential building with warehouse and on the right of occupancy on the lot where
the building was erected, was executed on November 19, 1971 and registered under the provisions of Act
3344 with the Register of Deeds of Zambales on November 23, 1971. Miscellaneous Sales Patent No.
4776 on the land was issued on April 24, 1972, on the basis of which OCT No. 2554 was issued in the
name of private respondent Fernando Magcale on May 15, 1972. It is therefore without question that the
original mortgage was executed before the issuance of the final patent and before the government was
divested of its title to the land, an event which takes effect only on the issuance of the sales patent and its
subsequent registration in the Office of the Register of Deeds (Visayan Realty Inc. vs. Meer, 96 Phil. 515;
Director of Lands vs. De Leon, 110 Phil. 28; Director of Lands vs. Jurado, L-14702, May 23, 1961; Pena
"Law on Natural Resources", p. 49). Under the foregoing considerations, it is evident that the mortgage
executed by private respondent on his own building which was erected on the land belonging to the
government is to all intents and purposes a valid mortgage.

As to restrictions expressly mentioned on the face of respondents' OCT No. P-2554, it will be noted that
Sections 121, 122 and 124 of the Public Land Act, refer to land already acquired under the Public Land Act,
or any improvement thereon and therefore have no application to the assailed mortgage in the case at bar
which was executed before such eventuality. Likewise, Section 2 of Republic Act No. 730, also a restriction
appearing on the face of private respondent's title has likewise no application in the instant case, despite its
reference to encumbrance or alienation before the patent is issued because it refers specifically to
encumbrance or alienation on the land itself and does not mention anything regarding the improvements
existing thereon.

But it is a different matter, as regards the second mortgage executed over the same properties on May 2,
1973 for an additional loan of P20,000.00 which was registered with the Registry of Deeds of Olongapo
City on the same date. Relative thereto, it is evident that such mortgage executed after the issuance of the
sales patent and of the Original Certificate of Title, falls squarely under the prohibitions stated in Sections
121, 122 and 124 of the Public Land Act and Section 2 of Republic Act 730, and is therefore null and void.

Petitioner points out that private respondents, after physically possessing the title for five years, voluntarily
surrendered the same to the bank in 1977 in order that the mortgaged may be annotated, without requiring
the bank to get the prior approval of the Ministry of Natural Resources beforehand, thereby implicitly
authorizing Prudential Bank to cause the annotation of said mortgage on their title.

However, the Court, in recently ruling on violations of Section 124 which refers to Sections 118, 120, 122
and 123 of Commonwealth Act 141, has held:

... Nonetheless, we apply our earlier rulings because we believe that as in pari delicto may
not be invoked to defeat the policy of the State neither may the doctrine of estoppel give a
validating effect to a void contract. Indeed, it is generally considered that as between parties
to a contract, validity cannot be given to it by estoppel if it is prohibited by law or is against
public policy (19 Am. Jur. 802). It is not within the competence of any citizen to barter away
what public policy by law was to preserve (Gonzalo Puyat & Sons, Inc. vs. De los Amas and
Alino supra). ... (Arsenal vs. IAC, 143 SCRA 54 [1986]).

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

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

SO ORDERED.

Teehankee, C.J., Narvasa, Cruz and Gancayco, JJ., concur.

Footnotes

EN BANC

G.R. No. L-16218 November 29, 1962

ANTONIA BICERRA, DOMINGO BICERRA, BERNARDO BICERRA, CAYETANO BICERRA, LINDA

BICERRA, PIO BICERRA and EUFRICINA BICERRA, plaintiffs-appellants,
vs.
TOMASA TENEZA and BENJAMIN BARBOSA, defendants-appellees.

Agripino Brillantes and Alberto B. Bravo for plaintiffs-appellants.

Ernesto Parol for defendants-appellees.

MAKALINTAL, J.:

This case is before us on appeal from the order of the Court of First Instance of Abra dismissing the
complaint filed by appellants, upon motion of defendants-appellate on the ground that the action was within
the exclude (original) jurisdiction of the Justice of the Peace Court of Lagangilang, of the same province.

The complaint alleges in substance that appellants were the owners of the house, worth P200.00, built on
and owned by them and situated in the said municipality Lagangilang; that sometime in January 1957
appealed forcibly demolished the house, claiming to be the owners thereof; that the materials of the house,
after it was dismantled, were placed in the custody of the barrio lieutenant of the place; and that as a result
of appellate's refusal to restore the house or to deliver the material appellants the latter have suffered
actual damages the amount of P200.00, plus moral and consequential damages in the amount of P600.00.
The relief prayed for is that "the plaintiffs be declared the owners of the house in question and/or the
materials that resulted in (sic) its dismantling; (and) that the defendants be orders pay the sum of P200.00,
plus P600.00 as damages, the costs."

The issue posed by the parties in this appeal is whether the action involves title to real property, as
appellants contend, and therefore is cognizable by the Court of First Instance (Sec. 44, par. [b], R.A. 296,
as amended), whether it pertains to the jurisdiction of the Justice of the Peace Court, as stated in the order
appealed from, since there is no real property litigated, the house having ceased to exist, and the amount
of the demand does exceed P2,000.00 (Sec. 88, id.)1

The dismissal of the complaint was proper. A house is classified as immovable property by reason of its
adherence to the soil on which it is built (Art. 415, par. 1, Civil Code). This classification holds true
regardless of the fact that the house may be situated on land belonging to a different owner. But once the
house is demolished, as in this case, it ceases to exist as such and hence its character as an immovable
likewise ceases. It should be noted that the complaint here is for recovery of damages. This is the only
positive relief prayed for by appellants. To be sure, they also asked that they be declared owners of the
dismantled house and/or of the materials. However, such declaration in no wise constitutes the relief itself
which if granted by final judgment could be enforceable by execution, but is only incidental to the real
cause of action to recover damages.

The order appealed from is affirmed. The appeal having been admitted in forma pauperis, no costs are
adjudged.

Bengzon, C.J., Padilla, Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L., Barrera, Paredes, Dizon
and Regala, JJ., concur.

Footnotes

1 This amount, cognizable by the Justice of the Peace Court, has been increased to P5,000 in R.A.
2613, enacted August 1, 1959.

The Lawphil Project - Arellano Law Foundation

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 mandamusto 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.

Araullo, C.J., Malcolm, Avanceña, Ostrand, Johns, and Romualdez, JJ., concur.

The Lawphil Project - Arellano Law Foundation

G.R. No. 127941 January 28, 1999

BIBLIA TOLEDO-BANAGA and JOVITA TAN, petitioners,

vs.
COURT OF APPEALS and CANDELARIO DAMALERIO, respondents.
MARTINEZ, J.:

The Court of Appeals (CA), in a decision penned by then justice Richard Francisco, 1 categorically declared
private respondent as the absolute owner of the land subject of this case. That decision was affirmed by
this Court, became final and executory and was remanded to the lower court for execution. But the
Register of Deeds frustrated private respondent's judicially determined right as it refused to issue
Certificates of Title in his name on the ground that the matter should be referred "en consulta" to the
Register of Deeds before petitioner's title can be canceled and a new one issued in the name of the
winning party — herein private respondent. So, for the third time, this simple redemption case which
commenced in the 1980's is again before this Court.

Here is a summary of the facts, over which there is no dispute:

In an action for redemption filed by petitioner Banaga, the trial court declared that she had lost her right to
redeem her property earlier foreclosed and which was subsequently sold at public auction to private
respondent 2Certificates of Title covering the said property were issued to private respondent over which
petitioner Banaga annotated on March 3, 1983 a notice of lis pendens. 3 On appeal by petitioner Banaga,
the CA reversed the decision of the trial court and allowed the former to redeem the property within a
certain period.4 Private respondent's petition to this Court was dismissed5 and the decision became final.

On June 11, 1992 petitioner Banaga tried to redeem the property by depositing with the trial court the
amount of redemption which was financed by her co-petitioner Tan. Private respondent opposed the
redemption arguing that it was made beyond the time given to her by the court in the earlier case However,
the lower court issued an order on August 7, 1992 upholding the redemption and ordered the Register of
Deeds to cancel private respondent's Certificates of Title and issue new titles in the name of petitioner
Banaga6 When his motion for reconsideration was denied by the trial court in an order dated January 4,
1993, private respondent filed a petition for certiorari with the CA which was docketed as CA-G.R. No.
29869. On January 11, 1993, private respondent caused the annotation of said petition as another notice
of lis pendens on the Certificates of Title. Three days later, the CA issued a temporary restraining order to
enjoin the execution of the August 7, 1992 and January 4, 1993 orders.

Meanwhile, on January 7, 1993, petitioner Banaga sold the subject property to petitioner Tan with the deed
of absolute sale mentioning private respondent's certificate of title which was not yet cancelled.
Notwithstanding the notice of lis pendens, petitioner Tan subdivided the property in question under a
subdivision plan, which she made not in her name but in the name of private respondent. There being no
preliminary injunction issue and with the expiration of the TRO, petitioner Tan asked the Register of Deeds
to issue new titles in her name. On March 24, 1993, such titles were issued in petitioner Tan's name but it
still carried the annotations of the two notices of lis pendens. Upon learning of the new title of petitioner
Tan, private respondent impleaded the former in his petition in CA-G.R. No. 29869.

On October 28, 1993, the CA set aside the August 7, 1992 and January 4, 1993 orders of the trial court and
declared private respondent absolute owner of the subject property the CA disposed of the petition as
follows:

WHEREFORE, in view of the foregoing considerations, the instant petition is hereby

GRANTED. The order issued by public respondent judge dated August 7, 1992 and January
4, 1993 are hereby order SET ASIDE and a new one is hereby entered declaring petitioner
 as the absolute owner of the parcels of land subject of redemption for failure of private
respondent to exercise the right of redemption within the thirty (30) days period previously
granted her by this court. 7

That decision became final and executory after petitioner Banaga's petition for review was dismissed by
this Court for lack of merit.8 Upon motion of private respondent, the trial court issued a writ of execution on
December 27, 1994 ordering the Register of Deeds to reinstate the Certificates of Title in the name of the
movant — herein private respondent. In its order which petitioners did not contest, the court a quo said
that:

Although there is no specific pronouncement in the decision of the Court of Appeals that
reverts the titles to the land subjects of redemption to the defendant, the fact that it declared
the petioner (Damalerio) as the absolute owner of the lands entitles him to writ of execution
issuing from this court directing the Register of Deeds to reinstate his titles to his name. As it
is implied from the decision declaring him the absolute owner of the land be reverted to him
(See Uy v. Capulong, 221, SCRA 87).

Let therefore a writ of execution issue in this case to enforce the decision of the Court of
Appeals. In this connection, the Register of Deeds of the Registry of Deeds for General
Santos City is hereby ordered to reinstate the title of Candelario B. Damalerio — Transfer
Certificates of Title No. T-19570 and T-19571, both of the Registry of Deeds from General
Santos City.9

But the Register of Deeds refused to comply with the writ of execution alleging that the Certificates of Title
issued to petitioner Tan must first be surrendered. Accordingly, private respondent moved to cite the
Register of Deeds in contempt of court which was denied, as the trial court ruled on January 11, 1995 that
the former's remedy is byconsulta to the Commissioner of Land Registration.10 In another order (dated
March 29, 1996) the trial court likewise denied private respondent's motion for the issuance of a writ of
possession ruling that the latter's remedy is a separate action to declare petitioner Tan's Certificates of Title
void. Aggrieved, private respondent again elevated the case to the CA via a petition
for certiorari and mandamus 11 assailing the above-mentioned two orders of the court a quo naming as
respondents the trial court judge, the Register of Deeds and the petitioners. On November 7, 1996, the CA
rendered a decision granting the petition and, among others, set aside the assailed orders of the trial court.
The dispositive portion of the CA decision reads:

WHEREFORE, in view of all the foregoing considerations, the petition is GRANTED.

Judgment is hereby rendered:

1. setting aside the orders of the respondent judge dated January 11, 1995 and March 29,
1996;

2. declaring the title issued to Biblia Toledo-Banaga, Jovita Tan and to those other subsequent
transferee or transferees, if any, as null and void;

3. ordering the Register of Deeds of General Santos City to issue a new certificates of title to
Candelario Damalerio over the parcels of land in question;

4. ordering the respondent court to issue writ of execution for the enforcement of this decision
and of the decision in CA-G.R. SP No. 29868 (sic), as well as writ of possession for the
 delivery to petitioner Damalerio of the Physical possession of the parcels of land subject
matter of this case.

SO ORDERED. 12

Upon denial by the CA of their motion for reconsideration, petitioners filed the instant petition
for certiorari andmandamus. The Court, however, is puzzled why petitioners, in their petition, would seek to
set aside the two orders (January 4, 1995 and March 29, 1996) of "respondent judge" who was not named
in their petition.13 Assuming this be a mere lapsus since they also confusingly refer to Banaga and Tan as
"private respondent" and to Damalerio as "petitioner",14 the petition is still utterly without merit. It is
petitioners' stand (1) that petitioner Tan is a buyer in god faith and (2) that the remedy of private respondent
to secure the titles in his name is by consulta to the Land Registration Commissioner and not through
contempt.

The Court is not convinced of the arguments proffered by petitioners.

By arguing that petitioner Tan was a buyer in good faith, petitioners in effect raise once more the issue of
ownership of the subject property. But such issue had already been clearly and categorically ruled upon by
the CA and affirmed by this Court, wherein private respondent was adjudged the rightful and absolute
owner thereof. The decision in that case bars a further repeated consideration of the very same issue that
has already been settled with finality. To once again re-open that issue through a different avenue would
defeat the existence of our courts as final arbiters of legal controversies. Having attained finality, the
decision is beyond review or modification even by this Court.15

Under the principle of res judicata, the Court and the parties, are bound by such final decision, otherwise,
there will be no end to litigation. It is to the interest of the public that there should be an end to litigation by
the parties over a subject fully and fairly adjudicated, and an individual should not be vexed twice for the
same cause. 16 All the elements of res judicata are present in this case, which are:

a. the former judgment must be final;

b. the court which rendered judgment had jurisdiction over the parties and the subject matter;

c. it must be a judgment on the merits;

d. and there must be between the first and second actions identity of parties, subject matter,
and cause of action.17

The judgment in the redemption suit had long become final and executory; there is no question that the
court had jurisdiction over the parties and the subject matter; it involves an adjudication on the merits of the
case as the court discussed and passed upon petitioner Banaga's right of redemption which she did not
timely exercise and as a consequence, lost her claim of ownership of the lot. Both petitioners and private
respondent are parties to the earlier cases, disputing the same parcel of land with both opposing parties
claiming ownership thereof. Certainly,res judicata had set in. Besides, once judgment had become final and
executory, it can no longer distributed no matter how erroneous it may be. In any case, no such error was
attributed to in this case.

Contrary to petitioners' argument, private respondent's remedy is not a direct or independent civil action for
cancellation of petitioner Tan's titles. The facts, circumstances, evidence and arguments invoked in this
derailed final and executory decision are the very same matters that will be established assuming such
independent suit is legally warranted. It does not matter whether the former case was a redemption suit
and the new one will be for cancellation of title because the test of identity of causes of action is not in its
form but whether the same evidence would support and establish the former and present causes of
action. 18

Petitioners other contention that the execution of the final and executory decision — which is to issue titles
in the name of private respondent — cannot be compelled by mandamus because of the "formality" that the
registered owner first surrenders her duplicate Certificates of Title for cancellation per Section 80 of
Presidential Decree 152919 cited by the Register of Deeds,20 bears no merit. In effect, they argue that the
winning party must wait execution until the losing party has complied with the formality of surrender of the
duplicate title. Such preposterous contention borders on the absurd and has no place in our legal system.
Precisely, the Supreme Court had already affirmed the CA's judgment that Certificates of Title be issued in
private respondent's name. To file another action just to compel the registered owner, herein petitioner Tan,
to surrender her titles constitute violation of, if not disrespect to, the orders of the highest tribunal.
Otherwise, if execution cannot be had just because the losing party will not surrender her titles, the entire
proceeding in the courts, not to say the efforts, expenses and time of the parties, would be rendered
nugatory. It is revolting to conscience to allow petitioners to further avert the satisfaction of their obligation
because of sheer literal adherence to technicality,21 or formality of surrender of the duplicate titles. The
surrender of the duplicate is implied from the executory decision since petitioners themselves were parties
thereto. Besides, as part of the execution process, it is a ministerial function of the Register of Deeds to
comply with the decision of the court to issue a title and register a property in the name of a certain person,
especially when the decision had attained finality, as in this case.

In addition, the enforcement of final and executory judgment is likewise a ministerial function of the
courts22 and does not call for the exercise of discretion. Being a ministerial duty, a writ of mandamus lies to
compel its performance.23 Moreover, it is axiomatic that where a decision on the merits is rendered and the
same has become final and executory, as in this case, the action on procedural matters or issues becomes
moot and academic. 24Thus, the so-called consulta to the Commissioner of Land Registration, which is not
applicable herein, was only a naive and belated effort resorted to by petitioners in order to delay execution.
If petitioners desire to stop the enforcement of a final and executory decision, they should have secured the
issuance of a writ of preliminary injunction, 25 but which they did not avail knowing that there exists no legal
or even equitable justifications to support it.

At any rate, the time petitioner Banaga sold the property to petitioner Tan, the latter was well aware or the
interest of private respondent over the lot. Petitioner Tan furnished the amount used by petitioner Banaga
for the attempted redemption. One who redeems in vain a property of another acquires notice that there
could be a controversy. It is for the same reason that petitioner Tan was included as party to the case filed
in court. Worse, at the time of the sale, petitioner Tan was buying property not registered in the seller's
name. This clear from the deed of absolute sale which even mentioned that the Certificates of Title is still in
the name of private respondent. It is settled that a party dealing with a registered land need not go beyond
the Certificate of Title to determine the true owner thereof so as to guard or protect her interest. She has
only to look and rely on the entries in the Certificate of Title. By looking at the title, however, petitioner Tan
cannot feigned ignorance that the property is registered in private respondent's name and not in the name
of the person selling to her. Such fact alone should have at least prompted, if not impelled her to investigate
deeper into the title of her seller — petitioner Banaga, more so when such effort would not have entailed
additional hardship, and would have been quite easy, as the titles still carried the two notices of lis
pendens.
By virtue of such notices, petitioner Tan is bound by the outcome of the litigation subject of the lis pendens.
As a transferee pendente lite, she stands exactly in. the shoes of the transferor and must respect any
judgment or decree which may be rendered for or against the transferor. Her interest is subject to the
incident or results of the pending suit, and her Certificates of Title will, in that respect, afford her no special
protection.26

To repeat, at the time of the sale, the person from whom petitioner Tan bought the property is neither the
registered owner nor was the former authorized by the latter to sell the same. She knew she was not
dealing with the registered owner or a representative of the latter. One who buys property with full
knowledge of the flaws and defects in the title of his vendor is enough proof of his bad faith27 and cannot
claim that he acquired title in good faith as against the owner or of an interest therein.28 When she
nonetheless proceeded to buy the lot, petitioner Tan gambled on the result of litigation.29 She is bound by
the outcome of her indifference with no one to blame except herself if she looses her claim as against one
who has a superior right or interest over the property. These are the undeniable and unconverted facts
found by the CA, which petitioners even quote and cite in their petition. As aptly concluded by the CA that
petitioner Tan is indeed a buyer in bad faith on which the Court agrees:

Notwithstanding her constructive and actual knowledge that Damalerio was claiming the
land, that the land was in his name, and it was involved in pending litigation. Jovita Tan
bought it from Banaga on January 7, 1993. The deed of sale recites that the parcels of land
so I were covered by Transfer Certificates of Title No. (formerly) [T-12488] T-530) and TCT
No. (formerly [T-12488] T-530) (sic) "and TCT No. (formerly P-1294) (Annex "F", Petition).
Apart from the fact that Banaga was without any TCT, as above stated, TCT No. T-12488
was petitioner's title (Annex "C", Petition). Herein private respondent Tan was buying a land
not registered in her seller's (Banaga's) name, but in that petitioner Damalerio who had
been claiming it as his own. She admitted this fact when she had the land subdivided on
February 2, 1993 not in her name but in the name of Candelario Damalerio (Annex "Q",
Reply). Evidently, she was a purchaser in bad faith because she had full knowledge of the
flaws and defects of title of her seller, Banaga . . . .

The notice of lis pendens registered on March 3, 1993 involving the land in question and
private respondent Tan's actual knowledge of the then pending Civil Case No. 2556, where
the question as to whether the redemption of the land which she financed was raised,
rendered her a purchaser in bad faith and made the decision therein binding upon her.30

Being a buyer in bad faith, petitioner Tan cannot acquire a better rights than her predecessor in
interest,31 for she merely stepped into the shoes of the latter. Such finding of bad faith is final and may not
be re-opened for the law cannot allow the parties to trifle with the courts.32

With respect to the issue of possession, such right is a necessary incident of ownership.33 The adjudication
or ownership to private respondent includes the delivery of possession since the defeated parties in this
case has not shown by what right to retain possession of the land independently of their claim of ownership
which was rejected.34 Otherwise, it would be unjust if petitioners who has no valid right over the property
will retain the same.35 Thus, the CA correctly disagreed with the trial court's order denying private
respondent's motion for writ of possession for the following reasons cited in its decision:

1. The order violates the doctrine laid down in Javier vs. Court of Appeals, 224 SCRA 704,
which ruled that the issuance of title in favor of a purchaser in bad faith does not exempt the
latter from complying with the decision adverse to his predecessor in interest, nor preclude
 him from being reached by writ of execution;

2. Private respondent Tan was a party respondent in CA-G.R. SP No. 29869, she having
been impleaded in a supplemental petition, which this Court gave due course and required
the respondents to file their answer. The fact that she did not file any pleading, nor intervene
therein did not excuse her from being bound by the decision, otherwise all that a party
respondent was to fold his arm to prevent him from being bound by a decision in a case.
Her securing titles over the land during the pendency of said case did not protect her from
the effects of said decision. The validity of tile of a purchaser of registered land depends on
whether he had knowledge, actual or constructive, of defects in the title of his vendor. If he
has such knowledge, he is a purchaser in bad faith and acquires the land subject to such
defects (. . . indicates that citations of authorities omitted) The title secured by a purchaser
in bad faith is a nullity and gave the latter no right whatsoever as against the owner (. . .).

3. Private, respondent Tan's titles and those of her predecessor, Banaga arose from the
void orders of August 7, 1992 and January 4, 1993. Since a void order could not give rise to
valid rights, said titles were also necessarily null and void (. . .).

4. Private respondents and respondent Judge executed the questioned orders of August 7,
1993 and January 4, 1993, pending review of said orders in CA-G.R. SP No. 29869. The
nullification of said orders by this out imposed upon the private respondents the obligation
to return the property to Damalerio and upon respondent Judge, upon motion for execution,
to order the cancellation of private respondents titles and the issuance of new titles to him.

5. This Court in its decision in CA-G.R. SP. No. 29869 declared petitioner Damalerio
absolute owner of the property in question. Private respondents were parties litigants in said
case, who did not claim possession of the land separately from their claim of ownership
thereof. Such being the case, the delivery of possession is considered included in this
Court's decision declaring Damalerio absolute owner of the property
(. . .), which can be enforced by writ of possession (. . .). In denying petitioner's motion for
writ of possession, the trial court violated said doctrines, and

6. Lastly, the effect of respondent Judge's order of March 29, 1996 is to re-open the
decision in CA-G.R. SP No. 29689 for re-litigation and alteration in a separate action. For
while this Court already declared that Banaga's redemption of the land financed by private
respondent Tan was invalid, and as a consequence declared Damalerio absolute owner of
the property, which was binding against private respondent Tan, as she was a respondent
therein and a purchaser pendente lite and in bad faith, the order of the respondent Court
holding that another civil action be filed to annul private respondent Tan's titles would be to
re-litigate such issues and modify or alter this Court's final decision.

The respondent Court has no authority to do so.36

WHEREFORE, premises considered, the petition is hereby DENIED and the assailed decision of the Court
of Appeals is AFFIRMED in toto with costs against petitioners. No further proceeding will be entertained in
this case.
1âwphi1.nêt

SO ORDERED.
Davide, Jr., C.J., Melo, Kapunan and Pardo JJ., concur.

Footnotes

EN BANC

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., defendants-appellees.

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 Yorkvs. 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.

Villa-Real, Imperial, Butte, and Goddard, JJ., concur.

 EN BANC

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., defendants-appellees.

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 Yorkvs. 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.

Villa-Real, Imperial, Butte, and Goddard, JJ., concur.

EN BANC

G.R. No. L-41643 July 31, 1935

B.H. BERKENKOTTER, plaintiff-appellant,

vs.
CU UNJIENG E HIJOS, YEK TONG LIN FIRE AND MARINE INSURANCE COMPANY, MABALACAT
SUGAR COMPANY and THE PROVINCE SHERIFF OF PAMPANGA, defendants-appellees.
Briones and Martinez for appellant.
Araneta, Zaragoza and Araneta for appellees Cu Unjieng e Hijos.
No appearance for the other appellees.

VILLA-REAL, J.:

This is an appeal taken by the plaintiff, B.H. Berkenkotter, from the judgment of the Court of First Instance
of Manila, dismissing said plaintiff's complaint against Cu Unjiengs e Hijos et al., with costs.

In support of his appeal, the appellant assigns six alleged errors as committed by the trial court in its
decision in question which will be discussed in the course of this decision.

The first question to be decided in this appeal, which is raised in the first assignment of alleged error, is
whether or not the lower court erred in declaring that the additional machinery and equipment, as
improvement incorporated with the central are subject to the mortgage deed executed in favor of the
defendants Cu Unjieng e Hijos.

It is admitted by the parties that on April 26, 1926, the Mabalacat Sugar Co., Inc., owner of the sugar
central situated in Mabalacat, Pampanga, obtained from the defendants, Cu Unjieng e Hijos, a loan
secured by a first mortgage constituted on two parcels and land "with all its buildings, improvements,
sugar-cane mill, steel railway, telephone line, apparatus, utensils and whatever forms part or is necessary
complement of said sugar-cane mill, steel railway, telephone line, now existing or that may in the future
exist is said lots."

On October 5, 1926, shortly after said mortgage had been constituted, the Mabalacat Sugar Co., Inc.,
decided to increase the capacity of its sugar central by buying additional machinery and equipment, so that
instead of milling 150 tons daily, it could produce 250. The estimated cost of said additional machinery and
equipment was approximately P100,000. In order to carry out this plan, B.A. Green, president of said
corporation, proposed to the plaintiff, B.H. Berkenkotter, to advance the necessary amount for the purchase
of said machinery and equipment, promising to reimburse him as soon as he could obtain an additional
loan from the mortgagees, the herein defendants Cu Unjieng e Hijos. Having agreed to said proposition
made in a letter dated October 5, 1926 (Exhibit E), B.H. Berkenkotter, on October 9th of the same year,
delivered the sum of P1,710 to B.A. Green, president of the Mabalacat Sugar Co., Inc., the total amount
supplied by him to said B.A. Green having been P25,750. Furthermore, B.H. Berkenkotter had a credit of
P22,000 against said corporation for unpaid salary. With the loan of P25,750 and said credit of P22,000,
the Mabalacat Sugar Co., Inc., purchased the additional machinery and equipment now in litigation.

On June 10, 1927, B.A. Green, president of the Mabalacat Sugar Co., Inc., applied to Cu Unjieng e Hijos
for an additional loan of P75,000 offering as security the additional machinery and equipment acquired by
said B.A. Green and installed in the sugar central after the execution of the original mortgage deed, on April
27, 1927, together with whatever additional equipment acquired with said loan. B.A. Green failed to obtain
said loan.

Article 1877 of the Civil Code provides as follows.

ART. 1877. A mortgage includes all natural accessions, improvements, growing fruits, and rents not
collected when the obligation falls due, and the amount of any indemnities paid or due the owner by
the insurers of the mortgaged property or by virtue of the exercise of the power of eminent domain,
with the declarations, amplifications, and limitations established by law, whether the estate
 continues in the possession of the person who mortgaged it or whether it passes into the hands of a
third person.

In the case of Bischoff vs. Pomar and Compañia General de Tabacos (12 Phil., 690), cited with approval in
the case of Cea vs. Villanueva (18 Phil., 538), this court laid shown the following doctrine:

1. REALTY; MORTGAGE OF REAL ESTATE INCLUDES IMPROVEMENTS AND FIXTURES. — It

is a rule, established by the Civil Code and also by the Mortgage Law, with which the decisions of
the courts of the United States are in accord, that in a mortgage of real estate, the improvements on
the same are included; therefore, all objects permanently attached to a mortgaged building or land,
although they may have been placed there after the mortgage was constituted, are also included.
(Arts. 110 and 111 of the Mortgage Law, and 1877 of the Civil Code; decision of U.S. Supreme
Court in the matter of Royal Insurance Co. vs. R. Miller, liquidator, and Amadeo [26 Sup. Ct. Rep.,
46; 199 U.S., 353].)

2. ID.; ID.; INCLUSION OR EXCLUSION OF MACHINERY, ETC. — In order that it may be

understood that the machinery and other objects placed upon and used in connection with a
mortgaged estate are excluded from the mortgage, when it was stated in the mortgage that the
improvements, buildings, and machinery that existed thereon were also comprehended, it is
indispensable that the exclusion thereof be stipulated between the contracting parties.

The appellant contends that the installation of the machinery and equipment claimed by him in the sugar
central of the Mabalacat Sugar Company, Inc., was not permanent in character inasmuch as B.A. Green, in
proposing to him to advance the money for the purchase thereof, made it appear in the letter, Exhibit E,
that in case B.A. Green should fail to obtain an additional loan from the defendants Cu Unjieng e Hijos, said
machinery and equipment would become security therefor, said B.A. Green binding himself not to mortgage
nor encumber them to anybody until said plaintiff be fully reimbursed for the corporation's indebtedness to
him.

Upon acquiring the machinery and equipment in question with money obtained as loan from the plaintiff-
appellant by B.A. Green, as president of the Mabalacat Sugar Co., Inc., the latter became owner of said
machinery and equipment, otherwise B.A. Green, as such president, could not have offered them to the
plaintiff as security for the payment of his credit.

Article 334, 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 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 principal 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.

Furthermore, the fact that B.A. Green bound himself to the plaintiff B.H. Berkenkotter to hold said
machinery and equipment as security for the payment of the latter's credit and to refrain from mortgaging or
otherwise encumbering them until Berkenkotter has been fully reimbursed therefor, is not incompatible with
the permanent character of the incorporation of said machinery and equipment with the sugar central of the
Mabalacat Sugar Co., Inc., as nothing could prevent B.A. Green from giving them as security at least under
a second mortgage.

As to the alleged sale of said machinery and equipment to the plaintiff and appellant after they had been
permanently incorporated with sugar central of the Mabalacat Sugar Co., Inc., and while the mortgage
constituted on said sugar central to Cu Unjieng e Hijos remained in force, only the right of redemption of
the vendor Mabalacat Sugar Co., Inc., in the sugar central with which said machinery and equipment had
been incorporated, was transferred thereby, subject to the right of the defendants Cu Unjieng e Hijos under
the first mortgage.

For the foregoing considerations, we are of the opinion and so hold: (1) That the installation of a machinery
and equipment in a mortgaged sugar central, in lieu of another of less capacity, for the purpose of carrying
out the industrial functions of the latter and increasing production, constitutes a permanent improvement on
said sugar central and subjects said machinery and equipment to the mortgage constituted thereon (article
1877, Civil Code); (2) that the fact that the purchaser of the new machinery and equipment has bound
himself to the person supplying him the purchase money to hold them as security for the payment of the
latter's credit, and to refrain from mortgaging or otherwise encumbering them does not alter the permanent
character of the incorporation of said machinery and equipment with the central; and (3) that the sale of the
machinery and equipment in question by the purchaser who was supplied the purchase money, as a loan,
to the person who supplied the money, after the incorporation thereof with the mortgaged sugar central,
does not vest the creditor with ownership of said machinery and equipment but simply with the right of
redemption.

Wherefore, finding no error in the appealed judgment, it is affirmed in all its parts, with costs to the
appellant. So ordered.

Malcolm, Imperial, Butte, and Goddard, JJ., concur.

The Lawphil Project - Arellano Law Foundation

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.

Bengzon, C.J., Bautista Angelo, Concepcion, Reyes, J.B.L., Barrera, Paredes, Dizon, Regala and
Makalintal, JJ.,concur.
Padilla, J., took no part.

The Lawphil Project - Arellano Law Foundation

EN BANC

G.R. No. L-17500 May 16, 1967

PEOPLE'S BANK AND TRUST CO. and ATLANTIC GULF AND PACIFIC CO. OF MANILA, plaintiffs-
appellants,
vs.
DAHICAN LUMBER COMPANY, DAHICAN AMERICAN LUMBER CORPORATION and CONNELL
BROS. CO. (PHIL.), defendants-appellants.

Angel S. Gamboa for defendants-appellants.

Laurel Law Offices for plaintiffs-appellants.

DIZON, J.:

On September 8, 1948, Atlantic Gulf & Pacific Company of Manila, a West Virginia corporation licensed to
do business in the Philippines — hereinafter referred to as ATLANTIC — sold and assigned all its rights in
the Dahican Lumber concession to Dahican Lumber Company — hereinafter referred to as DALCO — for
the total sum of $500,000.00, of which only the amount of $50,000.00 was paid. Thereafter, to develop the
concession, DALCO obtained various loans from the People's Bank & Trust Company — hereinafter
referred to as the BANK — amounting, as of July 13, 1950, to P200,000.00. In addition, DALCO obtained,
through the BANK, a loan of $250,000.00 from the Export-Import Bank of Washington D.C., evidenced by
five promissory notes of $50,000.00 each, maturing on different dates, executed by both DALCO and the
Dahican America Lumber Corporation, a foreign corporation and a stockholder of DALCO, — hereinafter
referred to as DAMCO, all payable to the BANK or its order.

As security for the payment of the abovementioned loans, on July 13, 1950 DALCO executed in favor of
the BANK — the latter acting for itself and as trustee for the Export-Import Bank of Washington D.C. — a
deed of mortgage covering five parcels of land situated in the province of Camarines Norte together with all
the buildings and other improvements existing thereon and all the personal properties of the mortgagor
located in its place of business in the municipalities of Mambulao and Capalonga, Camarines Norte (Exhibit
D). On the same date, DALCO executed a second mortgage on the same properties in favor of ATLANTIC
to secure payment of the unpaid balance of the sale price of the lumber concession amounting to the sum
of $450,000.00 (Exhibit G). Both deeds contained the following provision extending the mortgage lien to
properties to be subsequently acquired — referred to hereafter as "after acquired properties" — by the
mortgagor:

All property of every nature and description taken in exchange or replacement, and all buildings,
machinery, fixtures, tools equipment and other property which the Mortgagor may hereafter acquire,
construct, install, attach, or use in, to, upon, or in connection with the premises, shall immediately
be and become subject to the lien of this mortgage in the same manner and to the same extent as if
now included therein, and the Mortgagor shall from time to time during the existence of this
mortgage furnish the Mortgagee with an accurate inventory of such substituted and subsequently
acquired property.

Both mortgages were registered in the Office of the Register of Deeds of Camarines Norte. In addition
thereto DALCO and DAMCO pledged to the BANK 7,296 shares of stock of DALCO and 9,286 shares of
DAMCO to secure the same obligations.

Upon DALCO's and DAMCO's failure to pay the fifth promissory note upon its maturity, the BANK paid the
same to the Export-Import Bank of Washington D.C., and the latter assigned to the former its credit and the
first mortgage securing it. Subsequently, the BANK gave DALCO and DAMCO up to April 1, 1953 to pay
the overdue promissory note.

After July 13, 1950 — the date of execution of the mortgages mentioned above — DALCO purchased
various machineries, equipment, spare parts and supplies in addition to, or in replacement of some of those
already owned and used by it on the date aforesaid. Pursuant to the provision of the mortgage deeds
quoted theretofore regarding "after acquired properties," the BANK requested DALCO to submit complete
lists of said properties but the latter failed to do so. In connection with these purchases, there appeared in
the books of DALCO as due to Connell Bros. Company (Philippines) — a domestic corporation who was
acting as the general purchasing agent of DALCO — thereinafter called CONNELL — the sum of
P452,860.55 and to DAMCO, the sum of P2,151,678.34.

On December 16, 1952, the Board of Directors of DALCO, in a special meeting called for the purpose,
passed a resolution agreeing to rescind the alleged sales of equipment, spare parts and supplies by
CONNELL and DAMCO to it. Thereafter, the corresponding agreements of rescission of sale were
executed between DALCO and DAMCO, on the one hand and between DALCO and CONNELL, on the
other.

On January 13, 1953, the BANK, in its own behalf and that of ATLANTIC, demanded that said agreements
be cancelled but CONNELL and DAMCO refused to do so. As a result, on February 12, 1953; ATLANTIC
and the BANK, commenced foreclosure proceedings in the Court of First Instance of Camarines Norte
against DALCO and DAMCO. On the same date they filed an ex-parte application for the appointment of a
Receiver and/or for the issuance of a writ of preliminary injunction to restrain DALCO from removing its
properties. The court granted both remedies and appointed George H. Evans as Receiver. Upon
defendants' motion, however, the court, in its order of February 21, 1953, discharged the Receiver.

On March 2, 1953, defendants filed their answer denying the material allegations of the complaint and
alleging several affirmative defenses and a counterclaim.

On March 4 of the same year, CONNELL, filed a motion for intervention alleging that it was the owner and
possessor of some of the equipments, spare parts and supplies which DALCO had acquired subsequent to
the execution of the mortgages sought to be foreclosed and which plaintiffs claimed were covered by the
lien. In its order of March 18,1953 the Court granted the motion, as well as plaintiffs' motion to set aside the
order discharging the Receiver. Consequently, Evans was reinstated.

On April 1, 1953, CONNELL filed its answer denying the material averment of the complaint, and asserting
affirmative defenses and a counterclaim.

Upon motion of the parties the Court, on September 30, 1953, issued an order transferring the venue of the
action to the Court of First Instance of Manila where it was docketed as Civil Case No. 20987.

On August 30, 1958, upon motion of all the parties, the Court ordered the sale of all the machineries,
equipment and supplies of DALCO, and the same were subsequently sold for a total consideration of
P175,000.00 which was deposited in court pending final determination of the action. By a similar
agreement one-half (P87,500.00) of this amount was considered as representing the proceeds obtained
from the sale of the "undebated properties" (those not claimed by DAMCO and CONNELL), and the other
half as representing those obtained from the sale of the "after acquired properties".

After due trial, the Court, on July 15, 1960, rendered judgment as follows:

IN VIEW WHEREFORE, the Court:

1. Condemns Dahican Lumber Co. to pay unto People's Bank the sum of P200,000,00 with 7%
interest per annum from July 13, 1950, Plus another sum of P100,000.00 with 5% interest per
annum from July 13, 1950; plus 10% on both principal sums as attorney's fees;

2. Condemns Dahican Lumber Co. to pay unto Atlantic Gulf the sum of P900,000.00 with 4%
interest per annum from July 3, 1950, plus 10% on both principal as attorney's fees;

3. Condemns Dahican Lumber Co. to pay unto Connell Bros, the sum of P425,860.55, and to pay
unto Dahican American Lumber Co. the sum of P2,151,678.24 both with legal interest from the date
of the filing of the respective answers of those parties, 10% of the principals as attorney's fees;

4. Orders that of the sum realized from the sale of the properties of P175,000.00, after deducting
the recognized expenses, one-half thereof be adjudicated unto plaintiffs, the court no longer
specifying the share of each because of that announced intention under the stipulation of facts to
"pool their resources"; as to the other one-half, the same should be adjudicated unto both plaintiffs,
and defendant Dahican American and Connell Bros. in the proportion already set forth on page 9,
lines 21, 22 and 23 of the body of this decision; but with the understanding that whatever plaintiffs
and Dahican American and Connell Bros. should receive from the P175,000.00 deposited in the
Court shall be applied to the judgments particularly rendered in favor of each;

5. No other pronouncement as to costs; but the costs of the receivership as to the debated
properties shall be borne by People's Bank, Atlantic Gulf, Connell Bros., and Dahican American
Lumber Co., pro-rata.

On the following day, the Court issued the following supplementary decision:

IN VIEW WHEREOF, the dispositive part of the decision is hereby amended in order to add the
following paragraph 6:

6. If the sums mentioned in paragraphs 1 and 2 are not paid within ninety (90) days, the Court
 orders the sale at public auction of the lands object of the mortgages to satisfy the said mortgages
and costs of foreclosure.

From the above-quoted decision, all the parties appealed.

Main contentions of plaintiffs as appellants are the following: that the "after acquired properties" were
subject to the deeds of mortgage mentioned heretofore; that said properties were acquired from suppliers
other than DAMCO and CONNELL; that even granting that DAMCO and CONNELL were the real
suppliers, the rescission of the sales to DALCO could not prejudice the mortgage lien in favor of plaintiffs;
that considering the foregoing, the proceeds obtained from the sale of the "after acquired properties" as
well as those obtained from the sale of the "undebated properties" in the total sum of P175,000.00 should
have been awarded exclusively to plaintiffs by reason of the mortgage lien they had thereon; that damages
should have been awarded to plaintiffs against defendants, all of them being guilty of an attempt to defraud
the former when they sought to rescind the sales already mentioned for the purpose of defeating their
mortgage lien, and finally, that defendants should have been made to bear all the expenses of the
receivership, costs and attorney's fees.

On the other hand, defendants-appellants contend that the trial court erred: firstly, in not holding that
plaintiffs had no cause of action against them because the promissory note sued upon was not yet due
when the action to foreclose the mortgages was commenced; secondly, in not holding that the mortgages
aforesaid were null and void as regards the "after acquired properties" of DALCO because they were not
registered in accordance with the Chattel Mortgage Law, the court erring, as a consequence, in holding that
said properties were subject to the mortgage lien in favor of plaintiffs; thirdly, in not holding that the
provision of the fourth paragraph of each of said mortgages did not automatically make subject to such
mortgages the "after acquired properties", the only meaning thereof being that the mortgagor was willing to
constitute a lien over such properties; fourthly, in not ruling that said stipulation was void as against
DAMCO and CONNELL and in not awarding the proceeds obtained from the sale of the "after acquired
properties" to the latter exclusively; fifthly, in appointing a Receiver and in holding that the damages
suffered by DAMCO and CONNELL by reason of the depreciation or loss in value of the "after acquired
properties" placed under receivership was damnum absque injuria and, consequently, in not awarding, to
said parties the corresponding damages claimed in their counterclaim; lastly, in sentencing DALCO and
DAMCO to pay attorney's fees and in requiring DAMCO and CONNELL to pay the costs of the
Receivership, instead of sentencing plaintiffs to pay attorney's fees.

Plaintiffs' brief as appellants submit six assignments of error, while that of defendants also as appellants
submit a total of seventeen. However, the multifarious issues thus before Us may be resolved, directly or
indirectly, by deciding the following issues:

Firstly, are the so-called "after acquired properties" covered by and subject to the deeds of mortgage
subject of foreclosure?; secondly, assuming that they are subject thereto, are the mortgages valid and
binding on the properties aforesaid inspite of the fact that they were not registered in accordance with the
provisions of the Chattel Mortgage Law?; thirdly, assuming again that the mortgages are valid and binding
upon the "after acquired properties", what is the effect thereon, if any, of the rescission of sales entered
into, on the one hand, between DAMCO and DALCO, and between DALCO and CONNELL, on the other?;
and lastly, was the action to foreclose the mortgages premature?

A. Under the fourth paragraph of both deeds of mortgage, it is crystal clear that all property of every nature
and description taken in exchange or replacement, as well as all buildings, machineries, fixtures, tools,
equipments, and other property that the mortgagor may acquire, construct, install, attach; or use in, to
upon, or in connection with the premises — that is, its lumber concession — "shall immediately be and
become subject to the lien" of both mortgages in the same manner and to the same extent as if already
included therein at the time of their execution. As the language thus used leaves no room for doubt as to
the intention of the parties, We see no useful purpose in discussing the matter extensively. Suffice it to say
that the stipulation referred to is common, and We might say logical, in all cases where the properties given
as collateral are perishable or subject to inevitable wear and tear or were intended to be sold, or to be used
— thus becoming subject to the inevitable wear and tear — but with the understanding — express or
implied — that they shall be replaced with others to be thereafter acquired by the mortgagor. Such
stipulation is neither unlawful nor immoral, its obvious purpose being to maintain, to the extent allowed by
circumstances, the original value of the properties given as security. Indeed, if such properties were of the
nature already referred to, it would be poor judgment on the part of the creditor who does not see to it that
a similar provision is included in the contract.

B. But defendants contend that, granting without admitting, that the deeds of mortgage in question cover
the "after acquired properties" of DALCO, the same are void and ineffectual because they were not
registered in accordance with the Chattel Mortgage Law. In support of this and of the proposition that, even
if said mortgages were valid, they should not prejudice them, the defendants argue (1) that the deeds do
not describe the mortgaged chattels specifically, nor were they registered in accordance with the Chattel
Mortgage Law; (2) that the stipulation contained in the fourth paragraph thereof constitutes "mere
executory agreements to give a lien" over the "after acquired properties" upon their acquisition; and (3) that
any mortgage stipulation concerning "after acquired properties" should not prejudice creditors and other
third persons such as DAMCO and CONNELL.

The stipulation under consideration strongly belies defendants contention. As adverted to hereinbefore, it
states that all property of every nature, building, machinery etc. taken in exchange or replacement by the
mortgagor "shall immediately be and become subject to the lien of this mortgage in the same manner and
to the same extent as if now included therein". No clearer language could have been chosen.

Conceding, on the other hand, that it is the law in this jurisdiction that, to affect third persons, a chattel
mortgage must be registered and must describe the mortgaged chattels or personal properties sufficiently
to enable the parties and any other person to identify them, We say that such law does not apply to this
case.

As the mortgages in question were executed on July 13, 1950 with the old Civil Code still in force, there
can be no doubt that the provisions of said code must govern their interpretation and the question of their
validity. It happens however, that Articles 334 and 1877 of the old Civil Code are substantially reproduced in
Articles 415 and 2127, respectively, of the new Civil Code. It is, therefore, immaterial in this case whether
we take the former or the latter as guide in deciding the point under consideration.

Article 415 does not define real property but enumerates what are considered as such, among them being
machinery, receptacles, instruments or replacements intended by owner of the tenement for an industry or
works which may be carried on in a building or on a piece of land, and shall tend directly to meet the needs
of the said industry or works.

On the strength of the above-quoted legal provisions, the lower court held that inasmuch as "the chattels
were placed in the real properties mortgaged to plaintiffs, they came within the operation of Art. 415,
paragraph 5 and Art. 2127 of the New Civil Code".

We find the above ruling in agreement with our decisions on the subject:
(1) In Berkenkotter vs. Cu Unjieng, 61 Phil. 663, We held that Article 334, paragraph 5 of the Civil Code
(old) gives the character of real property to machinery, liquid containers, instruments or replacements
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.

(2) In Cu Unjieng e Hijos vs. Mabalacat Sugar Co., 58 Phil. 439, We held that a mortgage constituted on a
sugar central includes not only the land on which it is built but also the buildings, machinery and
accessories installed at the time the mortgage was constituted as well as the buildings, machinery and
accessories belonging to the mortgagor, installed after the constitution thereof .

It is not disputed in the case at bar that the "after acquired properties" were purchased by DALCO in
connection with, and for use in the development of its lumber concession and that they were purchased in
addition to, or in replacement of those already existing in the premises on July 13, 1950. In Law, therefore,
they must be deemed to have been immobilized, with the result that the real estate mortgages involved
herein — which were registered as such — did not have to be registered a second time as chattel
mortgages in order to bind the "after acquired properties" and affect third parties.

But defendants, invoking the case of Davao Sawmill Company vs. Castillo, 61 Phil. 709, claim that the
"after acquired properties" did not become immobilized because DALCO did not own the whole area of its
lumber concession all over which said properties were scattered.

The facts in the Davao Sawmill case, however, are not on all fours with the ones obtaining in the present. In
the former, the Davao Sawmill Company, Inc., had repeatedly treated the machinery therein involved
as personal property by executing chattel mortgages thereon in favor of third parties, while in the present
case the parties had treated the "after acquired properties" as real properties by expressly and
unequivocally agreeing that they shall automatically become subject to the lien of the real estate mortgages
executed by them. In the Davao Sawmill decision it was, in fact, stated that "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" (61 Phil. 112, emphasis supplied). In the present case, the
characterization of the "after acquired properties" as real property was made not only by one but by both
interested parties. There is, therefore, more reason to hold that such consensus impresses upon the
properties the character determined by the parties who must now be held in estoppel to question it.

Moreover, quoted in the Davao Sawmill case was that of Valdez vs. Central Altagracia, Inc. (225 U.S. 58)
where it was held that while under the general law of Puerto Rico, machinery placed on property by a
tenant does not become immobilized, yet, when the tenant places it there pursuant to contract that it shall
belong to the owner, it then becomes immobilized as to that tenant and even as against his assignees and
creditors who had sufficient notice of such stipulation. In the case at bar it is not disputed that DALCO
purchased the "after acquired properties" to be placed on, and be used in the development of its lumber
concession, and agreed further that the same shall become immediately subject to the lien constituted by
the questioned mortgages. There is also abundant evidence in the record that DAMCO and CONNELL had
full notice of such stipulation and had never thought of disputed validity until the present case was filed.
Consequently all of them must be deemed barred from denying that the properties in question had
become immobilized.

What We have said heretofore sufficiently disposes all the arguments adduced by defendants in support
their contention that the mortgages under foreclosure are void, and, that, even if valid, are ineffectual as
against DAMCO and CONNELL.
Now to the question of whether or not DAMCO CONNELL have rights over the "after acquired properties"
superior to the mortgage lien constituted thereon in favor of plaintiffs. It is defendants' contention that in
relation to said properties they are "unpaid sellers"; that as such they had not only a superior lien on the
"after acquired properties" but also the right to rescind the sales thereof to DALCO.

This contention — it is obvious — would have validity only if it were true that DAMCO and CONNELL were
the suppliers or vendors of the "after acquired properties". According to the record, plaintiffs did not know
their exact identity and description prior to the filing of the case bar because DALCO, in violation of its
obligation under the mortgages, had failed and refused theretofore to submit a complete list thereof. In the
course of the proceedings, however, when defendants moved to dissolve the order of receivership and the
writ of preliminary injunction issued by the lower court, they attached to their motion the lists marked as
Exhibits 1, 2 and 3 describing the properties aforesaid. Later on, the parties agreed to consider said lists as
identifying and describing the "after acquire properties," and engaged the services of auditors to examine
the books of DALCO so as to bring out the details thereof. The report of the auditors and its annexes
(Exhibits V, V-1 — V4) show that neither DAMCO nor CONNELL had supplied any of the goods of which
they respective claimed to be the unpaid seller; that all items were supplied by different parties, neither of
whom appeared to be DAMCO or CONNELL that, in fact, CONNELL collected a 5% service charge on the
net value of all items it claims to have sold to DALCO and which, in truth, it had purchased for DALCO as
the latter's general agent; that CONNELL had to issue its own invoices in addition to those o f the real
suppliers in order to collect and justify such service charge.

Taking into account the above circumstances together with the fact that DAMCO was a stockholder and
CONNELL was not only a stockholder but the general agent of DALCO, their claim to be the suppliers of
the "after acquired required properties" would seem to be preposterous. The most that can be claimed on
the basis of the evidence is that DAMCO and CONNELL probably financed some of the purchases. But if
DALCO still owes them any amount in this connection, it is clear that, as financiers, they can not claim any
right over the "after acquired properties" superior to the lien constituted thereon by virtue of the deeds of
mortgage under foreclosure. Indeed, the execution of the rescission of sales mentioned heretofore appears
to be but a desperate attempt to better or improve DAMCO and CONNELL's position by enabling them to
assume the role of "unpaid suppliers" and thus claim a vendor's lien over the "after acquired properties".
The attempt, of course, is utterly ineffectual, not only because they are not the "unpaid sellers" they claim
to be but also because there is abundant evidence in the record showing that both DAMCO and CONNELL
had known and admitted from the beginning that the "after acquired properties" of DALCO were meant to
be included in the first and second mortgages under foreclosure.

The claim that Belden, of ATLANTIC, had given his consent to the rescission, expressly or otherwise, is of
no consequence and does not make the rescission valid and legally effective. It must be stated clearly,
however, in justice to Belden, that, as a member of the Board of Directors of DALCO, he opposed the
resolution of December 15, 1952 passed by said Board and the subsequent rescission of the sales.

Finally, defendants claim that the action to foreclose the mortgages filed on February 12, 1953 was
premature because the promissory note sued upon did not fall due until April 1 of the same year,
concluding from this that, when the action was commenced, the plaintiffs had no cause of action. Upon this
question the lower court says the following in the appealed judgment;

The other is the defense of prematurity of the causes of action in that plaintiffs, as a matter of
grace, conceded an extension of time to pay up to 1 April, 1953 while the action was filed on 12
February, 1953, but, as to this, the Court taking it that there is absolutely no debate that Dahican
Lumber Co., was insolvent as of the date of the filing of the complaint, it should follow that the
 debtor thereby lost the benefit to the period.

x x x unless he gives a guaranty or security for the debt . . . (Art. 1198, New Civil Code);

and as the guaranty was plainly inadequate since the claim of plaintiffs reached in the aggregate,
P1,200,000 excluding interest while the aggregate price of the "after-acquired" chattels claimed by
Connell under the rescission contracts was P1,614,675.94, Exh. 1, Exh. V, report of auditors, and
as a matter of fact, almost all the properties were sold afterwards for only P175,000.00, page 47,
Vol. IV, and the Court understanding that when the law permits the debtor to enjoy the benefits of
the period notwithstanding that he is insolvent by his giving a guaranty for the debt, that must mean
a new and efficient guaranty, must concede that the causes of action for collection of the notes
were not premature.

Very little need be added to the above. Defendants, however, contend that the lower court had no basis for
finding that, when the action was commenced, DALCO was insolvent for purposes related to Article 1198,
paragraph 1 of the Civil Code. We find, however, that the finding of the trial court is sufficiently supported
by the evidence particularly the resolution marked as Exhibit K, which shows that on December 16, 1952 —
in the words of the Chairman of the Board — DALCO was "without funds, neither does it expect to have
any funds in the foreseeable future." (p. 64, record on appeal).

The remaining issues, namely, whether or not the proceeds obtained from the sale of the "after acquired
properties" should have been awarded exclusively to the plaintiffs or to DAMCO and CONNELL, and if in
law they should be distributed among said parties, whether or not the distribution should be pro-rata or
otherwise; whether or not plaintiffs are entitled to damages; and, lastly, whether or not the expenses
incidental to the Receivership should be borne by all the parties on a pro-rata basis or exclusively by one or
some of them are of a secondary nature as they are already impliedly resolved by what has been said
heretofore.

As regard the proceeds obtained from the sale of the of after acquired properties" and the "undebated
properties", it is clear, in view of our opinion sustaining the validity of the mortgages in relation thereto, that
said proceeds should be awarded exclusively to the plaintiffs in payment of the money obligations secured
by the mortgages under foreclosure.

On the question of plaintiffs' right to recover damages from the defendants, the law (Articles 1313 and 1314
of the New Civil Code) provides that creditors are protected in cases of contracts intended to defraud them;
and that any third person who induces another to violate his contract shall be liable for damages to the
other contracting party. Similar liability is demandable under Arts. 20 and 21 — which may be given
retroactive effect (Arts. 225253) — or under Arts. 1902 and 2176 of the Old Civil Code.

The facts of this case, as stated heretofore, clearly show that DALCO and DAMCO, after failing to pay the
fifth promissory note upon its maturity, conspired jointly with CONNELL to violate the provisions of the
fourth paragraph of the mortgages under foreclosure by attempting to defeat plaintiffs' mortgage lien on the
"after acquired properties". As a result, the plaintiffs had to go to court to protect their rights thus
jeopardized. Defendants' liability for damages is therefore clear.

However, the measure of the damages suffered by the plaintiffs is not what the latter claim, namely, the
difference between the alleged total obligation secured by the mortgages amounting to around
P1,200,000.00, plus the stipulated interest and attorney's fees, on the one hand, and the proceeds
obtained from the sale of "after acquired properties", and of those that were not claimed neither by DAMCO
nor CONNELL, on the other. Considering that the sale of the real properties subject to the mortgages under
foreclosure has not been effected, and considering further the lack of evidence showing that the true value
of all the properties already sold was not realized because their sale was under stress, We feel that We do
not have before Us the true elements or factors that should determine the amount of damages that plaintiffs
are entitled recover from defendants. It is, however, our considered opinion that, upon the facts
established, all the expenses of the Receivership, which was deemed necessary to safeguard the rights of
the plaintiffs, should be borne by the defendants, jointly and severally, in the same manner that all of them
should pay to the plaintiffs, jointly a severally, attorney's fees awarded in the appealed judgment.

In consonance with the portion of this decision concerning the damages that the plaintiffs are entitled to
recover from the defendants, the record of this case shall be remanded below for the corresponding
proceedings.

Modified as above indicated, the appealed judgment is affirmed in all other respects. With costs.

Concepcion, C.J., Reyes, J.B.L., Regala, Makalintal, Bengzon, J.P., Zaldivar, Sanchez and Castro, JJ.,
concur.

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, España 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 (1-½) 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.

Bengzon, C.J., Padilla, Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L., Barrera and Regala, JJ.,
concur.
Makalintal, J., concurs in the result.
Dizon, J., took no part.

The Lawphil Project - Arellano Law Foundation

G.R. No. L-19527 March 30, 1963

RICARDO PRESBITERO, in his capacity as Executor of the Testate Estate of EPERIDION

PRESBITERO,petitioner,
vs.
THE HON. JOSE F. FERNANDEZ, HELEN CARAM NAVA, and the PROVINCIAL SHERIFF OF
NEGROS OCCIDENTAL, respondents.

San Juan, Africa and Benedicto and Hilado and Hilado for petitioner.
Paredes, Poblador, Cruz and Nazareno and Manuel Soriano for respondents.

REYES, J.B.L., J.:

Petition for a writ of certiorari against the Court of First Instance of Negros Occidental.

It appears that during the lifetime of Esperidion Presbitero, judgment was rendered against him by the
Court of Appeals on October 14, 1959, in CA-G.R. No. 20879,

... to execute in favor of the plaintiff, within 30 days from the time this judgment becomes final, a
deed of reconveyance of Lot No. 788 of the cadastral survey of Valladolid, free from all liens and
encumbrances, and another deed of reconveyance of a 7-hectare portion of Lot No. 608 of the
same cadastral survey, also free from all liens and encumbrances, or, upon failure to do so, to pay
to the plaintiff the value of each of the said properties, as may be determined by the Court a
quo upon evidence to be presented by the parties before it. The defendant is further adjudged to
pay to the plaintiff the value of the products received by him from the 5-hectare portion equivalent to
20 cavans of palay per hectare every year, or 125 cavans yearly, at the rate of P10.00 per cavan,
from 1951 until possession of the said 5-hectare portion is finally delivered to the plaintiff with legal
interest thereon from the time the complaint was filed; and to pay to the plaintiff the sum of
P1,000.00 by way of attorney's fees, plus costs.

This judgment, which became final, was a modification of a decision of the Court of First Instance of
Negros Occidental, in its Civil Case No. 3492, entitled "Helen Caram Nava, plaintiff, versus Esperidion
Presbitero, defendant."

Thereafter, plaintiff's counsel, in a letter dated December 8, 1959, sought in vain to amicably settle the case
through petitioner's son, Ricardo Presbitero. When no response was forthcoming, said counsel asked for,
and the court a quo ordered on June 9, 1960, the issuance of a partial writ of execution for the sum of
P12,250.00. On the following day, June 10, 1960, said counsel, in another friendly letter, reiterated his
previous suggestion for an amicable settlement, but the same produced no fruitful result. Thereupon, on
June 21, 1960, the sheriff levied upon and garnished the sugar quotas allotted to plantation audit Nos. 26-
237, 26-238, 26-239, 26-240 and 26-241 adhered to the Ma-ao Mill District and "registered in the name of
Esperidion Presbitero as the original plantation-owner", furnishing copies of the writ of execution and the
notice of garnishment to the manager of the Ma-ao Sugar Central Company, Bago, Negros Occidental, and
the Sugar Quota Administration at Bacolod City, but without presenting for registration copies thereof to the
Register of Deeds.

Plaintiff Helen Caram Nava (herein respondent) then moved the court, on June 22, 1960, to hear evidence
on the market value of the lots; and after some hearings, occasionally protracted by postponements, the
trial court, on manifestation of defendant's willingness to cede the properties in litigation, suspended the
proceedings and ordered him to segregate the portion of Lot 608 pertaining to the plaintiff from the mass of
properties belonging to the defendant within a period to expire on August 24, 1960, and to effect the final
conveyance of the said portion of Lot 608 and the whole of Lot 788 free from any lien and encumbrance
whatsoever. Because of Presbitero's failure to comply with this order within the time set forth by the court,
the plaintiff again moved on August 25, 1960 to declare the market value of the lots in question to be
P2,500.00 per hectare, based on uncontradicted evidence previously adduced. But the court, acting on a
prayer of defendant Presbitero, in an order dated August 27, 1960, granted him twenty (20) days to finalize
the survey of Lot 608, and ordered him to execute a reconveyance of Lot 788 not later than August 31,
1960. Defendant again defaulted; and so plaintiff, on September 21, 1960, moved the court for payment by
the defendant of the sum of P35,000.00 for the 14 hectares of land at P2,500.00 to the hectare, and the
court, in its order dated September 24, 1960, gave the defendant until October 15, 1960 either to pay the
value of the 14 hectares at the rate given or to deliver the clean titles of the lots. On October 15, 1960, the
defendant finally delivered Certificate of Title No. T-28046 covering Lot 788, but not the title covering Lot
608 because of an existing encumbrance in favor of the Philippine National Bank. In view thereof, Helen
Caram Nava moved for, and secured on October 19, 1960, a writ of execution for P17,500.00, and on the
day following wrote the sheriff to proceed with the auction sale of the sugar quotas previously scheduled for
November 5, 1960. The sheriff issued the notice of auction sale on October 20, 1960.

On October 22, 1960, death overtook the defendant Esperidion Presbitero.

Proceedings for the settlement of his estate were commenced in Special Proceedings No. 2936 of the
Court of First Instance of Negros Occidental; and on November 4, 1960, the special administrator, Ricardo
Presbitero, filed an urgent motion, in Case No. 3492, to set aside the writs of execution, and to order the
sheriff to desist from holding the auction sale on the grounds that the levy on the sugar quotas was invalid
because the notice thereof was not registered with the Register of Deeds, as for real property, and that the
writs, being for sums of money, are unenforceable since Esperidion Presbitero died on October 22, 1960,
and, therefore, could only be enforced as a money claim against his estate.

This urgent motion was heard on November 5, 1960, but the auction sale proceeded on the same date,
ending in the plaintiff's putting up the highest bid for P34,970.11; thus, the sheriff sold 21,640 piculs of
sugar quota to her.

On November 10, 1960, plaintiff Nava filed her opposition to Presbitero's urgent motion of November 4,
1960; the latter filed on May 4, 1961 a supplement to his urgent motion; and on May 8 and 23, 1961, the
court continued hearings on the motion, and ultimately denied it on November 18, 1961.

On January 11, 1962, plaintiff Nava also filed an urgent motion to order the Ma-ao Sugar Central to register
the sugar quotas in her name and to deliver the rentals of these quotas corresponding to the crop year
1960-61 and succeeding years to her. The court granted this motion in its order dated February 3, 1962. A
motion for reconsideration by Presbitero was denied in a subsequent order under date of March 5, 1962.
Wherefore, Presbitero instituted the present proceedings for certiorari.

A preliminary restraining writ was thereafter issued by the court against the respondents from implementing
the aforesaid orders of the respondent Judge, dated February 3, 1960 and March 5, 1962, respectively.
The petition further seeks the setting aside of the sheriff's certificate of sale of the sugar quotas made out in
favor of Helen Caram Nava, and that she be directed to file the judgment credit in her favor in Civil Case
No. 3492 as a money claim in the proceedings to settle the Estate of Esperidion Presbitero.

The petitioner denies having been personally served with notice of the garnishment of the sugar quotas,
but this disclaimer cannot be seriously considered since it appears that he was sent a copy of the notice
through the chief of police of Valladolid on June 21, 1960, as certified to by the sheriff, and that he had
actual knowledge of the garnishment, as shown by his motion of November 4, 1960 to set aside the writs of
execution and to order the sheriff to desist from holding the auction sale.

Squarely at issue in this case is whether sugar quotas are real (immovable) or personal properties. If they
be realty, then the levy upon them by the sheriff is null and void for lack of compliance with the procedure
prescribed in Section 14, Rule 39, in relation with Section 7, Rule 59, of the Rules of Court requiring "the
filing with the register of deeds a copy of the orders together with a description of the property . . . ."

In contending that sugar quotas are personal property, the respondent, Helen Caram Nava, invoked the
test formulated by Manresa (3 Manresa, 6th Ed. 43), and opined that sugar quotas can be carried from
place to place without injury to the land to which they are attached, and are not one of those included in
Article 415 of the Civil Code; and not being thus included, they fall under the category of personal
properties:

ART. 416. The following are deemed to be personal property:

xxx xxx xxx

4. In general, all things which can be transported from place to place without impairment of the real
property to which they are fixed.

Wherefore, the parties respectfully pray that the foregoing stipulation of facts be admitted and
approved by this Honorable Court, without prejudice to the parties adducing other evidence to
prove their case not covered by this stipulation of facts. 1äwphï1.ñët

Respondent likewise points to evidence she submitted that sugar quotas are, in fact, transferred apart from
the plantations to which they are attached, without impairing, destroying, or diminishing the potentiality of
either quota or plantation. She was sustained by the lower court when it stated that "it is a matter of public
knowledge and it is universal practice in this province, whose principal industry is sugar, to transfer by sale,
lease, or otherwise, sugar quota allocations from one plantation to any other" and that it is "specious to
insist that quotas are improvements attaching to one plantation when in truth and in fact they are no longer
attached thereto for having been sold or leased away to be used in another plantation". Respondent would
add weight to her argument by invoking the role that sugar quotas play in our modern social and economic
life, and cites that the Sugar Office does not require any registration with the Register of Deeds for the
validity of the sale of these quotas; and, in fact, those here in question were not noted down in the
certificate of title of the land to which they pertain; and that Ricardo Presbitero had leased sugar quotas
independently of the land. The respondent cites further that the U.S.-Philippine Trade Relations Act,
approved by the United States Congress in 1946, limiting the production of unrefined sugar in the
Philippines did not allocate the quotas for said unrefined sugar among lands planted to sugarcane but
among "the sugar producing mills and plantation OWNERS", and for this reason Section 3 of Executive
Order No. 873, issued by Governor General Murphy, authorizes the lifting of sugar allotments from one
land to another by means only of notarized deeds.

While respondent's arguments are thought-provoking, they cannot stand against the positive mandate of
the pertinent statute. The Sugar Limitation Law (Act 4166, as amended) provides —

SEC. 9. The allotment corresponding to each piece of land under the provisions of this Act shall be
deemed to be an improvement attaching to the land entitled thereto ....

and Republic Act No. 1825 similarly provides —

SEC. 4. The production allowance or quotas corresponding to each piece of land under the provisions of
this Act shall be deemed to be an improvement attaching to the land entitled thereto ....

And Executive Order No. 873 defines "plantation" as follows:

(a) The term 'plantation' means any specific area of land under sole or undivided ownership to
which is attached an allotment of centrifugal sugar.

Thus, under express provisions of law, the sugar quota allocations are accessories to land, and can not
have independent existence away from a plantation, although the latter may vary. Indeed, this Court held in
the case ofAbelarde vs. Lopez, 74 Phil. 344, that even if a contract of sale of haciendas omitted "the right,
title, interest, participation, action (and) rent" which the grantors had or might have in relation to the parcels
of land sold, the sale would include the quotas, it being provided in Section 9, Act 4166, that the allotment
is deemed an improvement attached to the land, and that at the time the contract of sale was signed the
land devoted to sugar were practically of no use without the sugar allotment.

As an improvement attached to land, by express provision of law, though not physically so united, the sugar
quotas are inseparable therefrom, just like servitudes and other real rights over an immovable. Article 415
of the Civil Code, in enumerating what are immovable properties, names —

10. Contracts for public works, and servitudes and other real rights over immovable property.
(Emphasis supplied)

It is by law, therefore, that these properties are immovable or real, Article 416 of the Civil Code being made
to apply only when the thing (res) sought to be classified is not included in Article 415.

The fact that the Philippine Trade Act of 1946 (U.S. Public Law 371-79th Congress) allows transfers of
sugar quotas does not militate against their immovability. Neither does the fact that the Sugar Quota Office
does not require registration of sales of quotas with the Register of Deeds for their validity, nor the fact that
allocation of unrefined sugar quotas is not made among lands planted to sugarcane but among "the sugar
producing mills and plantation OWNERS", since the lease or sale of quotas are voluntary transactions, the
regime of which, is not necessarily identical to involuntary transfers or levies; and there cannot be a sugar
plantation owner without land to which the quota is attached; and there can exist no quota without there
being first a corresponding plantation.

Since the levy is invalid for non-compliance with law, it is impertinent to discuss the survival or non-survival
of claims after the death of the judgment debtor, gauged from the moment of actual levy. Suffice it to state
that, as the case presently stands, the writs of execution are not in question, but the levy on the quotas,
and, because of its invalidity, the levy amount to no levy at all. Neither is it necessary, or desirable, to pass
upon the conscionableness or unconscionableness of the amount produced in the auction sale as
compared with the actual value of the quotas inasmuch as the sale must necessarily be also illegal.

As to the remedial issue that the respondents have presented: that certiorari does not lie in this case
because the petitioner had a remedy in the lower court to "suspend" the auction sale, but did not avail
thereof, it may be stated that the latter's urgent motion of November 4, 1960, a day before the scheduled
sale (though unresolved by the court on time), did ask for desistance from holding the sale.

WHEREFORE, the preliminary injunction heretofore granted is hereby made permanent, and the sheriff's
certificate of sale of the sugar quotas in question declared null and void. Costs against respondent Nava.

Bengzon, C.J., Padilla, Labrador, Barrera, Paredes, Dizon and Regala, JJ., concur.
Makalintal, J., took no part.
G.R. No. L-26278 August 4, 1927

LEON SIBAL , plaintiff-appellant,

vs.
EMILIANO J. VALDEZ ET AL., defendants.
EMILIANO J. VALDEZ, appellee.

J. E. Blanco for appellant.

Felix B. Bautista and Santos and Benitez for appellee.

JOHNSON, J.:

The action was commenced in the Court of First Instance of the Province of Tarlac on the 14th day of
December 1924. The facts are about as conflicting as it is possible for facts to be, in the trial causes.

As a first cause of action the plaintiff alleged that the defendant Vitaliano Mamawal, deputy sheriff of the
Province of Tarlac, by virtue of a writ of execution issued by the Court of First Instance of Pampanga,
attached and sold to the defendant Emiliano J. Valdez the sugar cane planted by the plaintiff and his
tenants on seven parcels of land described in the complaint in the third paragraph of the first cause of
action; that within one year from the date of the attachment and sale the plaintiff offered to redeem said
sugar cane and tendered to the defendant Valdez the amount sufficient to cover the price paid by the latter,
the interest thereon and any assessments or taxes which he may have paid thereon after the purchase,
and the interest corresponding thereto and that Valdez refused to accept the money and to return the sugar
cane to the plaintiff.

As a second cause of action, the plaintiff alleged that the defendant Emiliano J. Valdez was attempting to
harvest the palay planted in four of the seven parcels mentioned in the first cause of action; that he had
harvested and taken possession of the palay in one of said seven parcels and in another parcel described
in the second cause of action, amounting to 300 cavans; and that all of said palay belonged to the plaintiff.

Plaintiff prayed that a writ of preliminary injunction be issued against the defendant Emiliano J. Valdez his
attorneys and agents, restraining them (1) from distributing him in the possession of the parcels of land
described in the complaint; (2) from taking possession of, or harvesting the sugar cane in question; and (3)
from taking possession, or harvesting the palay in said parcels of land. Plaintiff also prayed that a judgment
be rendered in his favor and against the defendants ordering them to consent to the redemption of the
sugar cane in question, and that the defendant Valdez be condemned to pay to the plaintiff the sum of
P1,056 the value of palay harvested by him in the two parcels above-mentioned ,with interest and costs.

On December 27, 1924, the court, after hearing both parties and upon approval of the bond for P6,000 filed
by the plaintiff, issued the writ of preliminary injunction prayed for in the complaint.

The defendant Emiliano J. Valdez, in his amended answer, denied generally and specifically each and
every allegation of the complaint and step up the following defenses:

(a) That the sugar cane in question had the nature of personal property and was not, therefore,
subject to redemption;

(b) That he was the owner of parcels 1, 2 and 7 described in the first cause of action of the
complaint;
 (c) That he was the owner of the palay in parcels 1, 2 and 7; and

(d) That he never attempted to harvest the palay in parcels 4 and 5.

The defendant Emiliano J. Valdez by way of counterclaim, alleged that by reason of the preliminary
injunction he was unable to gather the sugar cane, sugar-cane shoots (puntas de cana dulce) palay in said
parcels of land, representing a loss to him of P8,375.20 and that, in addition thereto, he suffered damages
amounting to P3,458.56. He prayed, for a judgment (1) absolving him from all liability under the complaint;
(2) declaring him to be the absolute owner of the sugar cane in question and of the palay in parcels 1, 2
and 7; and (3) ordering the plaintiff to pay to him the sum of P11,833.76, representing the value of the
sugar cane and palay in question, including damages.

Upon the issues thus presented by the pleadings the cause was brought on for trial. After hearing the
evidence, and on April 28, 1926, the Honorable Cayetano Lukban, judge, rendered a judgment against the
plaintiff and in favor of the defendants —

(1) Holding that the sugar cane in question was personal property and, as such, was not subject to
redemption;

(2) Absolving the defendants from all liability under the complaint; and

(3) Condemning the plaintiff and his sureties Cenon de la Cruz, Juan Sangalang and Marcos Sibal
to jointly and severally pay to the defendant Emiliano J. Valdez the sum of P9,439.08 as follows:

(a) P6,757.40, the value of the sugar cane;

(b) 1,435.68, the value of the sugar-cane shoots;

(c) 646.00, the value of palay harvested by plaintiff;

(d) 600.00, the value of 150 cavans of palay which the defendant was not able to raise by
reason of the injunction, at P4 cavan. 9,439.08 From that judgment the plaintiff appealed
and in his assignments of error contends that the lower court erred: (1) In holding that the
sugar cane in question was personal property and, therefore, not subject to redemption;

(2) In holding that parcels 1 and 2 of the complaint belonged to Valdez, as well as parcels 7 and 8,
and that the palay therein was planted by Valdez;

(3) In holding that Valdez, by reason of the preliminary injunction failed to realized P6,757.40 from
the sugar cane and P1,435.68 from sugar-cane shoots (puntas de cana dulce);

(4) In holding that, for failure of plaintiff to gather the sugar cane on time, the defendant was unable
to raise palay on the land, which would have netted him the sum of P600; and.

(5) In condemning the plaintiff and his sureties to pay to the defendant the sum of P9,439.08.

It appears from the record:

(1) That on May 11, 1923, the deputy sheriff of the Province of Tarlac, by virtue of writ of execution
 in civil case No. 20203 of the Court of First Instance of Manila (Macondray & Co., Inc. vs. Leon
Sibal),levied an attachment on eight parcels of land belonging to said Leon Sibal, situated in the
Province of Tarlac, designated in the second of attachment as parcels 1, 2, 3, 4, 5, 6, 7 and 8
(Exhibit B, Exhibit 2-A).

(2) That on July 30, 1923, Macondray & Co., Inc., bought said eight parcels of land, at the auction
held by the sheriff of the Province of Tarlac, for the sum to P4,273.93, having paid for the said
parcels separately as follows (Exhibit C, and 2-A):

Parcel
1 ..................................................................... P1.00
2 ..................................................................... 2,000.00
3 ..................................................................... 120.93
4 ..................................................................... 1,000.00
5 ..................................................................... 1.00
6 ..................................................................... 1.00
7 with the house thereon .......................... 150.00

8 ..................................................................... 1,000.00
==========
4,273.93

(3) That within one year from the sale of said parcel of land, and on the 24th day of September,
1923, the judgment debtor, Leon Sibal, paid P2,000 to Macondray & Co., Inc., for the account of the
redemption price of said parcels of land, without specifying the particular parcels to which said
amount was to applied. The redemption price said eight parcels was reduced, by virtue of said
transaction, to P2,579.97 including interest (Exhibit C and 2).

The record further shows:

(1) That on April 29, 1924, the defendant Vitaliano Mamawal, deputy sheriff of the Province of
Tarlac, by virtue of a writ of execution in civil case No. 1301 of the Province of Pampanga (Emiliano
J. Valdez vs. Leon Sibal 1.º — the same parties in the present case), attached the personal
property of said Leon Sibal located in Tarlac, among which was included the sugar cane now in
question in the seven parcels of land described in the complaint (Exhibit A).

(2) That on May 9 and 10, 1924, said deputy sheriff sold at public auction said personal properties
of Leon Sibal, including the sugar cane in question to Emilio J. Valdez, who paid therefor the sum of
P1,550, of which P600 was for the sugar cane (Exhibit A).

(3) That on April 29,1924, said deputy sheriff, by virtue of said writ of execution, also attached the
real property of said Leon Sibal in Tarlac, including all of his rights, interest and participation therein,
which real property consisted of eleven parcels of land and a house and camarin situated in one of
said parcels (Exhibit A).
 (4) That on June 25, 1924, eight of said eleven parcels, including the house and the camarin, were
bought by Emilio J. Valdez at the auction held by the sheriff for the sum of P12,200. Said eight
parcels were designated in the certificate of sale as parcels 1, 3, 4, 5, 6, 7, 10 and 11. The house
and camarin were situated on parcel 7 (Exhibit A).

(5) That the remaining three parcels, indicated in the certificate of the sheriff as parcels 2, 12, and
13, were released from the attachment by virtue of claims presented by Agustin Cuyugan and
Domiciano Tizon (Exhibit A).

(6) That on the same date, June 25, 1924, Macondray & Co. sold and conveyed to Emilio J. Valdez
for P2,579.97 all of its rights and interest in the eight parcels of land acquired by it at public auction
held by the deputy sheriff of Tarlac in connection with civil case No. 20203 of the Court of First
Instance of Manila, as stated above. Said amount represented the unpaid balance of the
redemption price of said eight parcels, after payment by Leon Sibal of P2,000 on September 24,
1923, fro the account of the redemption price, as stated above. (Exhibit C and 2).

The foregoing statement of facts shows:

(1) The Emilio J. Valdez bought the sugar cane in question, located in the seven parcels of land
described in the first cause of action of the complaint at public auction on May 9 and 10, 1924, for
P600.

(2) That on July 30, 1923, Macondray & Co. became the owner of eight parcels of land situated in
the Province of Tarlac belonging to Leon Sibal and that on September 24, 1923, Leon Sibal paid to
Macondray & Co. P2,000 for the account of the redemption price of said parcels.

(3) That on June 25, 1924, Emilio J. Valdez acquired from Macondray & Co. all of its rights and
interest in the said eight parcels of land.

(4) That on June 25, 1924, Emilio J. Valdez also acquired all of the rights and interest which Leon
Sibal had or might have had on said eight parcels by virtue of the P2,000 paid by the latter to
Macondray.

(5) That Emilio J. Valdez became the absolute owner of said eight parcels of land.

The first question raised by the appeal is, whether the sugar cane in question is personal or real property. It
is contended that sugar cane comes under the classification of real property as "ungathered products" in
paragraph 2 of article 334 of the Civil Code. Said paragraph 2 of article 334 enumerates as real property
the following: Trees, plants, and ungathered products, while they are annexed to the land or form an
integral part of any immovable property." That article, however, has received in recent years an
interpretation by the Tribunal Supremo de España, which holds that, under certain conditions, growing
crops may be considered as personal property. (Decision of March 18, 1904, vol. 97, Civil Jurisprudence of
Spain.)

Manresa, the eminent commentator of the Spanish Civil Code, in discussing section 334 of the Civil Code,
in view of the recent decisions of the supreme Court of Spain, admits that growing crops are sometimes
considered and treated as personal property. He says:

No creemos, sin embargo, que esto excluya la excepcionque muchos autores hacen tocante a la
 venta de toda cosecha o de parte de ella cuando aun no esta cogida (cosa frecuente con la uvay y
la naranja), y a la de lenas, considerando ambas como muebles. El Tribunal Supremo, en
sentencia de 18 de marzo de 1904, al entender sobre un contrato de arrendamiento de un predio
rustico, resuelve que su terminacion por desahucio no extingue los derechos del arrendario, para
recolectar o percibir los frutos correspondientes al año agricola, dentro del que nacieron aquellos
derechos, cuando el arrendor ha percibido a su vez el importe de la renta integra correspondiente,
aun cuando lo haya sido por precepto legal durante el curso del juicio, fundandose para ello, no
solo en que de otra suerte se daria al desahucio un alcance que no tiene, sino en que, y esto es lo
interesante a nuestro proposito, la consideracion de inmuebles que el articulo 334 del Codigo Civil
atribuge a los frutos pendientes, no les priva del caracter de productos pertenecientes, como tales,
a quienes a ellos tenga derecho, Ilegado el momento de su recoleccion.

xxx xxx xxx

Mas actualmente y por virtud de la nueva edicion de la Ley Hipotecaria, publicada en 16 de

diciembre de 1909, con las reformas introducidas por la de 21 de abril anterior, la hipoteca, salvo
pacto expreso que disponga lo contrario, y cualquiera que sea la naturaleza y forma de la
obligacion que garantice, no comprende los frutos cualquiera que sea la situacion en que se
encuentre. (3 Manresa, 5. edicion, pags. 22, 23.)

From the foregoing it appears (1) that, under Spanish authorities, pending fruits and ungathered products
may be sold and transferred as personal property; (2) that the Supreme Court of Spain, in a case of
ejectment of a lessee of an agricultural land, held that the lessee was entitled to gather the products
corresponding to the agricultural year, because said fruits did not go with the land but belonged separately
to the lessee; and (3) that under the Spanish Mortgage Law of 1909, as amended, the mortgage of a piece
of land does not include the fruits and products existing thereon, unless the contract expressly provides
otherwise.

An examination of the decisions of the Supreme Court of Louisiana may give us some light on the question
which we are discussing. Article 465 of the Civil Code of Louisiana, which corresponds to paragraph 2 of
article 334 of our Civil Code, provides: "Standing crops and the fruits of trees not gathered, and trees
before they are cut down, are likewise immovable, and are considered as part of the land to which they are
attached."

The Supreme Court of Louisiana having occasion to interpret that provision, held that in some cases
"standing crops" may be considered and dealt with as personal property. In the case of Lumber Co. vs.
Sheriff and Tax Collector (106 La., 418) the Supreme Court said: "True, by article 465 of the Civil Code it is
provided that 'standing crops and the fruits of trees not gathered and trees before they are cut down . . . are
considered as part of the land to which they are attached, but the immovability provided for is only one in
abstracto and without reference to rights on or to the crop acquired by others than the owners of the
property to which the crop is attached. . . . The existence of a right on the growing crop is a mobilization by
anticipation, a gathering as it were in advance, rendering the crop movable quoad the right acquired
therein. Our jurisprudence recognizes the possible mobilization of the growing crop." (Citizens'
Bank vs. Wiltz, 31 La. Ann., 244; Porche vs. Bodin, 28 La., Ann., 761; Sandel vs. Douglass, 27 La. Ann.,
629; Lewis vs. Klotz, 39 La. Ann., 267.)

"It is true," as the Supreme Court of Louisiana said in the case of Porche vs. Bodin (28 La. An., 761) that
"article 465 of the Revised Code says that standing crops are considered as immovable and as part of the
land to which they are attached, and article 466 declares that the fruits of an immovable gathered or
produced while it is under seizure are considered as making part thereof, and incurred to the benefit of the
person making the seizure. But the evident meaning of these articles, is where the crops belong to the
owner of the plantation they form part of the immovable, and where it is seized, the fruits gathered or
produced inure to the benefit of the seizing creditor.

A crop raised on leased premises in no sense forms part of the immovable. It belongs to the lessee,
and may be sold by him, whether it be gathered or not, and it may be sold by his judgment
creditors. If it necessarily forms part of the leased premises the result would be that it could not be
sold under execution separate and apart from the land. If a lessee obtain supplies to make his crop,
the factor's lien would not attach to the crop as a separate thing belonging to his debtor, but the
land belonging to the lessor would be affected with the recorded privilege. The law cannot be
construed so as to result in such absurd consequences.

In the case of Citizen's Bank vs. Wiltz (31 La. Ann., 244)the court said:

If the crop quoad the pledge thereof under the act of 1874 was an immovable, it would be
destructive of the very objects of the act, it would render the pledge of the crop objects of the act, it
would render the pledge of the crop impossible, for if the crop was an inseparable part of the realty
possession of the latter would be necessary to that of the former; but such is not the case. True, by
article 465 C. C. it is provided that "standing crops and the fruits of trees not gathered and trees
before they are cut down are likewise immovable and are considered as part of the land to which
they are attached;" but the immovability provided for is only one in abstracto and without reference
to rights on or to the crop acquired by other than the owners of the property to which the crop was
attached. The immovability of a growing crop is in the order of things temporary, for the crop passes
from the state of a growing to that of a gathered one, from an immovable to a movable. The
existence of a right on the growing crop is a mobilization by anticipation, a gathering as it were in
advance, rendering the crop movable quoad the right acquired thereon. The provision of our Code
is identical with the Napoleon Code 520, and we may therefore obtain light by an examination of the
jurisprudence of France.

The rule above announced, not only by the Tribunal Supremo de España but by the Supreme Court of
Louisiana, is followed in practically every state of the Union.

From an examination of the reports and codes of the State of California and other states we find that the
settle doctrine followed in said states in connection with the attachment of property and execution of
judgment is, that growing crops raised by yearly labor and cultivation are considered personal property. (6
Corpuz Juris, p. 197; 17 Corpus Juris, p. 379; 23 Corpus Juris, p. 329: Raventas vs. Green, 57 Cal., 254;
Norris vs. Watson, 55 Am. Dec., 161; Whipple vs. Foot, 3 Am. Dec., 442; 1 Benjamin on Sales, sec. 126;
McKenzie vs. Lampley, 31 Ala., 526; Crinevs. Tifts and Co., 65 Ga., 644; Gillitt vs. Truax, 27 Minn., 528;
Preston vs. Ryan, 45 Mich., 174; Freeman on Execution, vol. 1, p. 438; Drake on Attachment, sec. 249;
Mechem on Sales, sec. 200 and 763.)

Mr. Mechem says that a valid sale may be made of a thing, which though not yet actually in existence, is
reasonably certain to come into existence as the natural increment or usual incident of something already
in existence, and then belonging to the vendor, and then title will vest in the buyer the moment the thing
comes into existence. (Emerson vs. European Railway Co., 67 Me., 387; Cutting vs. Packers Exchange, 21
Am. St. Rep., 63.) Things of this nature are said to have a potential existence. A man may sell property of
which he is potentially and not actually possessed. He may make a valid sale of the wine that a vineyard is
expected to produce; or the gain a field may grow in a given time; or the milk a cow may yield during the
coming year; or the wool that shall thereafter grow upon sheep; or what may be taken at the next cast of a
fisherman's net; or fruits to grow; or young animals not yet in existence; or the good will of a trade and the
like. The thing sold, however, must be specific and identified. They must be also owned at the time by the
vendor. (Hull vs. Hull, 48 Conn., 250 [40 Am. Rep., 165].)

It is contended on the part of the appellee that paragraph 2 of article 334 of the Civil Code has been
modified by section 450 of the Code of Civil Procedure as well as by Act No. 1508, the Chattel Mortgage
Law. Said section 450 enumerates the property of a judgment debtor which may be subjected to execution.
The pertinent portion of said section reads as follows: "All goods, chattels, moneys, and other property,
both real and personal, * * * shall be liable to execution. Said section 450 and most of the other sections of
the Code of Civil Procedure relating to the execution of judgment were taken from the Code of Civil
Procedure of California. The Supreme Court of California, under section 688 of the Code of Civil Procedure
of that state (Pomeroy, p. 424) has held, without variation, that growing crops were personal property and
subject to execution.

Act No. 1508, the Chattel Mortgage Law, fully recognized that growing crops are personal property. Section
2 of said Act provides: "All personal property shall be subject to mortgage, agreeably to the provisions of
this Act, and a mortgage executed in pursuance thereof shall be termed a chattel mortgage." Section 7 in
part provides: "If growing crops be mortgaged the mortgage may contain an agreement stipulating that the
mortgagor binds himself properly to tend, care for and protect the crop while growing.

It is clear from the foregoing provisions that Act No. 1508 was enacted on the assumption that "growing
crops" are personal property. This consideration tends to support the conclusion hereinbefore stated, that
paragraph 2 of article 334 of the Civil Code has been modified by section 450 of Act No. 190 and by Act
No. 1508 in the sense that "ungathered products" as mentioned in said article of the Civil Code have the
nature of personal property. In other words, the phrase "personal property" should be understood to include
"ungathered products."

At common law, and generally in the United States, all annual crops which are raised by yearly
manurance and labor, and essentially owe their annual existence to cultivation by man, . may be
levied on as personal property." (23 C. J., p. 329.) On this question Freeman, in his treatise on the
Law of Executions, says: "Crops, whether growing or standing in the field ready to be harvested,
are, when produced by annual cultivation, no part of the realty. They are, therefore, liable to
voluntary transfer as chattels. It is equally well settled that they may be seized and sold under
execution. (Freeman on Executions, vol. p. 438.)

We may, therefore, conclude that paragraph 2 of article 334 of the Civil Code has been modified by section
450 of the Code of Civil Procedure and by Act No. 1508, in the sense that, for the purpose of attachment
and execution, and for the purposes of the Chattel Mortgage Law, "ungathered products" have the nature
of personal property. The lower court, therefore, committed no error in holding that the sugar cane in
question was personal property and, as such, was not subject to redemption.

All the other assignments of error made by the appellant, as above stated, relate to questions of fact only.
Before entering upon a discussion of said assignments of error, we deem it opportune to take special notice
of the failure of the plaintiff to appear at the trial during the presentation of evidence by the defendant. His
absence from the trial and his failure to cross-examine the defendant have lent considerable weight to the
evidence then presented for the defense.

Coming not to the ownership of parcels 1 and 2 described in the first cause of action of the complaint, the
plaintiff made a futile attempt to show that said two parcels belonged to Agustin Cuyugan and were the
identical parcel 2 which was excluded from the attachment and sale of real property of Sibal to Valdez on
June 25, 1924, as stated above. A comparison of the description of parcel 2 in the certificate of sale by the
sheriff (Exhibit A) and the description of parcels 1 and 2 of the complaint will readily show that they are not
the same.

The description of the parcels in the complaint is as follows:

1. La caña dulce sembrada por los inquilinos del ejecutado Leon Sibal 1.º en una parcela de
terreno de la pertenencia del citado ejecutado, situada en Libutad, Culubasa, Bamban, Tarlac, de
unas dos hectareas poco mas o menos de superficie.

2. La caña dulce sembrada por el inquilino del ejecutado Leon Sibal 1.º, Ilamado Alejandro
Policarpio, en una parcela de terreno de la pertenencia del ejecutado, situada en Dalayap,
Culubasa, Bamban, Tarlac de unas dos hectareas de superficie poco mas o menos." The
description of parcel 2 given in the certificate of sale (Exhibit A) is as follows:

2a. Terreno palayero situado en Culubasa, Bamban, Tarlac, de 177,090 metros cuadrados de
superficie, linda al N. con Canuto Sibal, Esteban Lazatin and Alejandro Dayrit; al E. con Francisco
Dizon, Felipe Mañu and others; al S. con Alejandro Dayrit, Isidro Santos and Melecio Mañu; y al O.
con Alejandro Dayrit and Paulino Vergara. Tax No. 2854, vador amillarado P4,200 pesos.

On the other hand the evidence for the defendant purported to show that parcels 1 and 2 of the complaint
were included among the parcels bought by Valdez from Macondray on June 25, 1924, and corresponded
to parcel 4 in the deed of sale (Exhibit B and 2), and were also included among the parcels bought by
Valdez at the auction of the real property of Leon Sibal on June 25, 1924, and corresponded to parcel 3 in
the certificate of sale made by the sheriff (Exhibit A). The description of parcel 4 (Exhibit 2) and parcel 3
(Exhibit A) is as follows:

Parcels No. 4. — Terreno palayero, ubicado en el barrio de Culubasa,Bamban, Tarlac, I. F. de

145,000 metros cuadrados de superficie, lindante al Norte con Road of the barrio of Culubasa that
goes to Concepcion; al Este con Juan Dizon; al Sur con Lucio Maño y Canuto Sibal y al Oeste con
Esteban Lazatin, su valor amillarado asciende a la suma de P2,990. Tax No. 2856.

As will be noticed, there is hardly any relation between parcels 1 and 2 of the complaint and parcel 4
(Exhibit 2 and B) and parcel 3 (Exhibit A). But, inasmuch as the plaintiff did not care to appear at the trial
when the defendant offered his evidence, we are inclined to give more weight to the evidence adduced by
him that to the evidence adduced by the plaintiff, with respect to the ownership of parcels 1 and 2 of the
compliant. We, therefore, conclude that parcels 1 and 2 of the complaint belong to the defendant, having
acquired the same from Macondray & Co. on June 25, 1924, and from the plaintiff Leon Sibal on the same
date.

It appears, however, that the plaintiff planted the palay in said parcels and harvested therefrom 190 cavans.
There being no evidence of bad faith on his part, he is therefore entitled to one-half of the crop, or 95
cavans. He should therefore be condemned to pay to the defendant for 95 cavans only, at P3.40 a cavan,
or the sum of P323, and not for the total of 190 cavans as held by the lower court.

As to the ownership of parcel 7 of the complaint, the evidence shows that said parcel corresponds to parcel
1 of the deed of sale of Macondray & Co, to Valdez (Exhibit B and 2), and to parcel 4 in the certificate of
sale to Valdez of real property belonging to Sibal, executed by the sheriff as above stated (Exhibit A).
Valdez is therefore the absolute owner of said parcel, having acquired the interest of both Macondray and
Sibal in said parcel.

With reference to the parcel of land in Pacalcal, Tarlac, described in paragraph 3 of the second cause of
action, it appears from the testimony of the plaintiff himself that said parcel corresponds to parcel 8 of the
deed of sale of Macondray to Valdez (Exhibit B and 2) and to parcel 10 in the deed of sale executed by the
sheriff in favor of Valdez (Exhibit A). Valdez is therefore the absolute owner of said parcel, having acquired
the interest of both Macondray and Sibal therein.

In this connection the following facts are worthy of mention:

Execution in favor of Macondray & Co., May 11, 1923. Eight parcels of land were attached under said
execution. Said parcels of land were sold to Macondray & Co. on the 30th day of July, 1923. Rice paid
P4,273.93. On September 24, 1923, Leon Sibal paid to Macondray & Co. P2,000 on the redemption of said
parcels of land. (See Exhibits B and C ).

Attachment, April 29, 1924, in favor of Valdez. Personal property of Sibal was attached, including the sugar
cane in question. (Exhibit A) The said personal property so attached, sold at public auction May 9 and 10,
1924. April 29, 1924, the real property was attached under the execution in favor of Valdez (Exhibit A). June
25, 1924, said real property was sold and purchased by Valdez (Exhibit A).

June 25, 1924, Macondray & Co. sold all of the land which they had purchased at public auction on the
30th day of July, 1923, to Valdez.

As to the loss of the defendant in sugar cane by reason of the injunction, the evidence shows that the sugar
cane in question covered an area of 22 hectares and 60 ares (Exhibits 8, 8-b and 8-c); that said area would
have yielded an average crop of 1039 picos and 60 cates; that one-half of the quantity, or 519 picos and 80
cates would have corresponded to the defendant, as owner; that during the season the sugar was selling at
P13 a pico (Exhibit 5 and 5-A). Therefore, the defendant, as owner, would have netted P 6,757.40 from the
sugar cane in question. The evidence also shows that the defendant could have taken from the sugar cane
1,017,000 sugar-cane shoots (puntas de cana) and not 1,170,000 as computed by the lower court. During
the season the shoots were selling at P1.20 a thousand (Exhibits 6 and 7). The defendant therefore would
have netted P1,220.40 from sugar-cane shoots and not P1,435.68 as allowed by the lower court.

As to the palay harvested by the plaintiff in parcels 1 and 2 of the complaint, amounting to 190 cavans,
one-half of said quantity should belong to the plaintiff, as stated above, and the other half to the defendant.
The court erred in awarding the whole crop to the defendant. The plaintiff should therefore pay the
defendant for 95 cavans only, at P3.40 a cavan, or P323 instead of P646 as allowed by the lower court.

The evidence also shows that the defendant was prevented by the acts of the plaintiff from cultivating about
10 hectares of the land involved in the litigation. He expected to have raised about 600 cavans of palay,
300 cavans of which would have corresponded to him as owner. The lower court has wisely reduced his
share to 150 cavans only. At P4 a cavan, the palay would have netted him P600.

In view of the foregoing, the judgment appealed from is hereby modified. The plaintiff and his sureties
Cenon de la Cruz, Juan Sangalang and Marcos Sibal are hereby ordered to pay to the defendant jointly
and severally the sum of P8,900.80, instead of P9,439.08 allowed by the lower court, as follows:
 P6,757.40 for the sugar cane;
1,220.40 for the sugar cane shoots;
323.00 for the palay harvested by plaintiff in parcels 1 and 2;
600.00 for the palay which defendant could have raised.

8,900.80
============

In all other respects, the judgment appealed from is hereby affirmed, with costs. So ordered.

Street, Malcolm, Villamor, Romualdez and Villa-Real., JJ., concur.

EN BANC

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 ofestafa 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.

Arellano, C.J., Torres, Mapa and Carson, JJ.

Separate Opinions

MORELAND, J., dissenting:

I feel myself compelled to dissent because, in my judgment, there is no evidence before this court, and
there was none before the court below, establishing the most essential element of the crime of larceny,
namely, the takingwithout the consent of the owner. As I read the record, there is no evidence showing that
the electricity alleged to have been stolen was taken without the consent of the complaining company. The
fact is that there was not a witness who testified for the prosecution who was authorized in law, or who
claimed to be authorized in fact, to testify as to whether or not the alleged taking of the electricity was
without the consent of the company or, even that said company had not been paid for all electricity taken.
Not one of them was, as a matter of law, competent to either of those facts. Not one of them was an officer
of the company. The leading witness for the people, Kay, was only an inspector of electric lights. Another,
McGeachim was an electrical engineer in the employ of the company. Another, Garcia, was an electrician
of the company. These witness all confined their testimony to technical descriptions of meters, their nature
and function, of electric light wires, the writing of defendant's house, the placing of a meter therein, the
placing of the meter outside of the house in order to detect, by comparing the readings of the two, whether
the accused was actually using more electricity than the house meter registered, the discovery that more
electricity was being used than said meter registered, and of the finding of a "jumper" in defendant's
possession. One of these witnesses testified also that he had suspected for a long time that the accused
was "stealing" electricity and that later he was "positive of it."

In order to sustain a charge of larceny under section 517 of Penal Code, it is necessary to prove that there
was a taking without the consent of the owner. This is unquestioned. The question is: Has the prosecution
proved that fact? Has it proved that the electricity alleged to have been stolen was used without the
consent of the company? Has it proved that the accused did not have a right to use electricity whether it
went through the meter or not? Has it proved, even, that the accused did not have a right to use a
"jumper?" Has it been proved that the company has not been fully paid for all the electricity which
defendant used, however obtained? Not one of these facts has been proved. The only way to determine
those questions was to ascertain the relations which existed between the accused and the company at the
time the electricity alleged to have been stolen was used by the accused. There was certainly some
relation, some contract, either express or implied, between the company and the accused or the company
would not have been supplying him the electric current. What was that relation, that contract? No one can
possibly tell by reading the record. There is not a single word in all the evidence even referring to it. Not
one of the people's witnesses mentioned it. Not one of them, very likely, knew what it really was. The
relation which a corporation bears to private persons for whom they are rendering service is determined by
the corporation itself through the acts of its officials, and not by its employees. While an employee might, as
the act of a servant, have caused the contract between the company and the accused to be signed by the
accused, it was nevertheless a contract determined and prepared by the company through its officers and
not one made by the employee; and unless the employee actually knew the terms of the contract signed by
the accused, either by having read it, if in writing, or by having heard it agreed upon, if verbal, he would not
be competent to testify to its terms except rendered so by admission of the party to be charged by it. It
nowhere appears that any of the witnesses for the prosecution had any knowledge whatever of the terms of
the contract between the company and the accused. It does not appear that any of them had ever seen it
or heard it talked about by either party thereto. The company has offered no testimony whatever on the
matter. The record is absolutely silent on that point.

This being true, how can we say that the accused committed a crime? How can we say that a given act is
criminal unless we know the relation of the parties to whom the act refers? Are we to presume an act
wrong when it may be right? Are we to say that the accused committed a wrong when we do not know
whether he did or not? If we do not know the arrangements under which the company undertook to furnish
electricity to the defendant, how do we know that the accused has not lived up to them? If we do not know
their contract, how do we know that the accused violated it?

It may be urged that the very fact that a meter was put in by the company is evidence that it was for the
company's protection. This may be true. But is it not just as proper to presume that it was put in for
defendant's protection also? Besides, it does not appear that the company really put in the matter, nor does
not appear that the company really put in the meter, nor does it even appear to whom it belonged. No more
does it appear on whose application it was put in. The witness who installed the meter in defendant's house
did not say to whom it belonged and was unable to identify the one presented by the prosecution on the
trial as the one he installed. But however these things may be, courts are not justified in "assuming" men
into state prison. The only inferences that courts are justified in drawing are those springing
from facts which are not only proved but which are of themselves sufficient to warrant the inference. The
mere fact, it is a fact, that the company placed a meter in defendant's house is not sufficient to sustain the
conclusion in a criminal case that the defendant did not have the right to use electricity which did not have
the right to use electricity which did not pass through the meter. Much less would it warrant the inference
that, in so using electricity, the defendant feloniously and criminally took, sole, and carried it awaywithout
the consent of the company. An accused is presumed innocent until contrary is proved. His guilt must be
established beyond a reasonable doubt. It is incumbent on the state to prove every fact which is essential
to the guilt of the accused, and to prove every such fact as though the whole issue rested on it. The
evidence of the prosecution must exclude every reasonable hypothesis of innocence as with his guilt, he
can not be convicted.

But what was the necessity of all this uncertainty? What was the force which prevented the company from
proving clearly and explicitly the contract between itself and the accused? What prevented it from proving
clearly, explicitly, and beyond all cavil that the electricity was taken (used) without its consent? Why did not
some competent official testify? Why did the company stand by wholly silent? Why did it leave its case to
be proved by servants who were competent to testify, and who did actually testify, so far as legal evidence
goes, only in relation to technical matters relating to meters and electric currents? Why did the prosecution
place upon this court the necessity of deducing and inferring and concluding relative to the lack of consent
of the company when a single word from the company itself would have avoided that necessity? We have
only one answer to all these questions: We do not know.
In the case of Bubster vs. Nebraska (33 Neb., 663), the accused was charged with the larceny of buggy of
the value of $75. He was found guilty. On appeal the judgment of conviction was reversed, the court
saying:

There are two serious objections to this verdict. First, the owner of the buggy, although apparently
within reach of the process of the court, was not called as a witness. Her son-in-law, who resided
with her, testifies that he did not give his consent, and very freely testifies that his mother-in-law did
not. She was within reach of the process of the court and should have been called as a witness to
prove her nonconsent.

The rule is very clearly stated in note 183, volume 1, Philips on Evidence (4th Am. ed.). A conviction
of larceny ought not to be permitted or sustained unless it appears that the property was taken
without the consent of the owner, and the owner himself should be called, particularly in a case like
that under consideration, when the acts complained of may be consistent with the utmost goodfaith.
There is a failure of proof therefore on this point.

In the case of State vs. Moon (41 Wis., 684), the accused was charged with the larceny of a mare. He was
convicted. On appeal the court reversed the judgment of conviction, saying:

In State vs. Morey (2 Wis., 494) it was held that in prosecutions of lacerny, if the owner of the
property alleged to have been stolen is known, and his attendance as a witness can be procured,
his testimony that the property was taken from him without his consent is indispensable to a
conviction. This is upon the principle that his testimony is the primary and the best evidence that the
property was taken without his consent, and hence, that secondary evidence of the fact cannot be
resorted to, until the prosecution shows it inability, after due diligence, to procure the attendance of
the owner.

In volume 1, Phillips on Evidence (5th Am., ed., note 183 sec. 635), the author says:

In all cases, and especially in this, the lacerny itself must be proved by the evidence the nature of
the case admits. . . . This should be by the testimony of the owner himself if the property was taken
from his immediate possession, or if from the actual possession of another, though a mere servant
or child of the owner, that the immediate possession was violated, and this, too, without the consent
of the person holding it. Where nonconsent is an essential ingredient in the offense, as it is here,
direct proof alone, from the person whose nonconsent is necessary, can satisfy the rule. You are to
prove a negative, and the very person who can swear directly to the necessary negative must, if
possible, always be produced. (Citing English authorities.) Other and inferior proof cannot be
resorted to till it be impossible to procure this best evidence. If one person be dead who can swear
directly to the negative, and another be alive who can yet swear to the same thing, he must be
produced. In such cases, mere presumption, prima facie or circumstantial evidence is secondary in
degree, and cannot be used until all the sources of direct evidence are exhausted.

I quote these authorities not because I agree with the doctrine as therein set forth. I quote them because
there is a principle inherent in the doctrine laid down which is recognized by all courts as having value and
effect. It is this: Failure to call an available witness possessing peculiar knowledge concerning facts
essential to a party's case, direct or rebutting, or to examine such witness as to facts covered by his special
knowledge, especially if the witness be naturally favorable to the party's contention, relying instead upon
the evidence of witnesses less familiar with the matter, gives rise to an inference, sometimes denominated
a strong presumption of law, that the testimony of such uninterrogated witness would not sustain the
contention of the party. Where the party himself is the one who fails to appear or testify, the inference is still
stronger. The nonappearance of a litigant or his failure to testify as to facts material to his case and as to
which he has especially full knowledge creates an inference that he refrains from appearing or testifying
because the truth, if made to appear, would not aid his contention; and, in connection with an equivocal
statement on the other side, which if untrue could be disapproved by his testimony, often furnishes strong
evidence of the facts asserted. As to this proposition the authorities are substantially uniform. They differ
only in the cases to which the principles are applied. A substantially full list of the authorities is given in 16
Cyclopedia of Law and Procedure (pp. 1062 to 1064, inclusive) from which the rules as stated above are
taken.

This court has recognized the value of this principle and has permitted it strongly to influence its view of the
evidence in certain cases. In the case of United States vs. Magsipoc (20 Phil. Rep., 604) one of the vital
facts which the prosecution was required to establish in order to convict the accused was that a certain
letter which the accused alleged he mailed to his daughter, who was attending a boarding school in Iloilo,
and which the daughter testified she had received, had not really been sent by the accused and received
by the daughter but, instead, had been purloined by him from the post-office after he had duly placed it
therein and after it had been taken into custody and control of the postal authorities. It was conceded that
the directress of the boarding school which the daughter was at the time attending knew positively whether
the daughter was at the time attending knew positively whether the daughter had received the letter in
question or not. This court held that, in weighing the evidence, it would take into consideration the failure of
the prosecution to produce the directress of the school as a witness in the case, she being the only person,
apart from the daughter herself, who really knew the fact.

Another those cases was that of U. S. vs. Casipong (20 Phil. Rep., 178) charged with maintaining a
concubine outside his home with public scandal. To prove the scandalous conduct charged and its publicity,
the prosecution introduced testimony, not of witnesses in the vicinity where the accused resided and where
the scandal was alleged to have occurred, but those from another barrio. No Witness living in the locality
where the public scandal was alleged to have occurred was produced. This court, in the decision of that
case on appeal, allowed itself, in weighing the evidence of the prosecution, to be strongly influenced by the
failure to produce as witnesses persons who, if there had really been public scandal, would have been the
first, if not the only ones, to know it. The court said:

In this case it would have been easy to have submitted abundant evidence that Juan Casipong
forsook his lawful wife and lived in concubinage in the village of Bolocboc with his paramour
Gregoria Hongoy, for there would have been an excess of witnesses to testify regarding the actions
performed by the defendants, actions not of isolated occurrence but carried on for many days in
slight of numerous residents scandalized by their bad example. But it is impossible to conclude
from the result of the trial that the concubinage with scandal charged against the defendants has
been proved, and therefore conviction of the alleged concubine Gregoria Hongoy is not according
to law.

In the case at bar the question of the consent of the company to the us of the electricity was the essence of
the charge. The defendant denied that he had taken the electricity without the consent of the company. The
prosecution did not present any officer of the corporation to offset this denial and the company itself,
although represented on the trial by its own private counsel, did not produce a single witness upon that
subject.

In the case of Standard Oil Co. vs. State (117 Tenn., 618), the court (p.672) said:
 But the best evidence of what his instructions to Holt were and the information he had of the
transaction at the time was made were the letters which he wrote to Holt directing him to go to
Gallatin, and the daily and semi-weekly reports made to him by Holt and Rutherford of what was
done there, which were not produced, although admitted to be then in his possession. He was
aware of the value of such evidence, as he produced a copy of his letter to Holt, condemning the
transaction, as evidence in behalf of the plaintiffs in error. The presumption always is that
competent and pertinent evidence within the knowledge or control of a party which he withholds is
against his interest and insistence. (Dunlap vs. Haynes, 4 Heisk., 476; Kirby vs.Tallmadge, 160 U.
S., 379, 16 Sup. Ct., 349, 40 L. ed., 463; Pacific Constr. Co. vs. B. W. Co., 94 Fed,, 180, 36 C. C.
A., 153)

In the case of Succession of Drysdale (127 La., 890), the court held:

When a will presented for probate is attacked on the ground that it is a forgery, and there are
pertinent facts relating to the will in the possession of the proponent, and he repeatedly fails to
testify when his testimony could clear up many clouded and doubtful things, his failure to testify
casts suspicion upon the will, especially when the one asking for the probate of the will is a principal
legatee.

In the case of Belknap vs. Sleeth (77 Kan., 164), the court (p. 172) said:

What effect should such conduct have in the consideration of a case, where the successful party
thus living beyond the jurisdiction of the court has refused to testify in a material matter in behalf of
the opposing party? It must be conceded that the benefit of all reasonable presumptions arising
from his refusal should be given to the other party. The conduct of a party in omitting to produce
evidence peculiarly within his knowledge frequently affords occasion for presumptions against him.
(Kirby vs. Tallmadge, 160 U. S., 379, 16 Sup. Ct., 349, 14 L. Ed., 463.) This rule has been often
applied where a party withholds evidence within his exclusive possession and the circumstances
are such as to impel an honest man to produce the testimony. In this case the witness not only
failed but refused to testify concerning material matters that must have been within his knowledge.

In the case of Heath vs. Waters (40 Mich., 457), it was held that:

It is to be presumed that when a witness refuses to explain what he can explain, the explanation
would be to his prejudice.

In case of Frick vs. Barbour (64 Pa. St., 120, 121), the court said:

It has been more than once said that testimony in a case often consists in what is not proved as
well as in what is proved. Where withholding testimony raises a violent presumption that a fact not
clearly proved or disproved exists, it is not error to allude to the fact of withholding, as a
circumstance strengthening the proof. That was all that was done here.

In the case of Funda vs. St. Paul City Railway Co. (71 Minn., 438), the court held:

The defendant having omitted to call its motorman as a witness, although within reach and
available, the court was, under the circumstances, justified in instructing the jury that, in weighing
the effect of the evidence actually introduced, they were at liberty to presume that the testimony of
the motorman, if introduced, would not have been favorable to the cause of defendant.
In the case of Gulf, C. & S. F. Ry. Co. vs. Ellis (54 Fed. Rep., 481), the circuit court of appeals held that:

Failure to produce the engineer as a witness to rebut the inferences raised by the circumstancial
evidence would justify the jury in assuming that his evidence, instead of rebutting such inference,
would support them.

In Wigmore on Evidence (vol. 1, sec. 285), it is said:

The consciousness indicated by the conduct may be, not an indefinite one affecting the weakness
of the cause at large, but a specific one concerning the defects of a particular element in the cause.
The failure to bring before the tribunal some circumstances, document, or witness, when either the
party himself or his opponent claims that the facts would thereby be elucidated, serves to indicate,
as the most natural inference, that the party fears to do so, and this fear is some evidence that
circumstances or document or witness, if brought, would have exposed facts unfavorable to the
party. These inferences, to be sure, cannot fairly be made except upon certain conditions; and they
are also open always to explanation by circumstances which make some other hypothesis a more
natural one than the party's fear of exposure. But the propriety of such an inference in general is not
doubted. The nonproduction of evidence that would naturally have been produced by an honest
and therefore fearless claimant permits the inference that its tenor is unfavorable to the party's
cause. . . .

Continuing this same subject the same author says:

At common law the party-opponent in a civil case was ordinarily privileged from taking the stand
(post, sec. 2217); but he was also disqualified; and hence the question could rarely arise whether
his failure to testify could justify any inference against him. But since the general abolition of both of
the privilege and the disqualification (post, secs. 2218, 577), the party has become both competent
and compellable like other witnesses; and the question plainly arises whether his conduct is to be
judged by the same standards of inference. This question naturally be answered in the affirmative. .
. . (See Aragon Coffee Co., vs. Rogers, 105 Va., 51.)

As I stated at the outset, I have been unable to find in the record of this case any proof of legal value
showing or tending to show that the electricity alleged to have been stolen was taken or used without the
consent of the company. The defendant, therefore, should be acquitted.

There are other reasons why I cannot agree to the conviction of the accused. Even though the accused to
be found to have committed the acts charged against him, it stands conceded in this case that there is a
special law passed particularly and especially to meet cases of this very kind, in which the offense is
mentioned by name and described in detail and is therein made a misdemeanor and punished as such. It is
undisputed and admitted that heretofore and ever since said act was passed cases such as the one at bar
have uniformly and invariably been cognized and punished under said act; and that this is the first attempt
ever made in these Islands to disregard utterly the plain provisions of this act, and to punish this class of
offenses under the provisions of Penal Code relating to larceny. The applicability of those provisions is, to
say the very least, extremely doubtful, even admitting that they are still in force. Even though originally
applicable, these provisions must now be held to be repealed by implication, at least so far as the city of
Manila is concerned, by the passage of the subsequent act defining the offense in question and punishing it
altogether differently.

Moreover, I do not believe that electricity, in the for in which it was delivered to the accused, is susceptible
of being stolen under the definition given by the law of these Islands to the crime of larceny.

Concisely, then, I dissent because (a) this court, by its decision in this case, has, in my judgment,
disregarded the purpose of the Legislature, clearly expressed; because (b) it has applied a general law, of
at least very doubtful application, to a situation completely dealt with, and admittedly so by a later statute
conceived and enacted solely and expressly to cover that very situation; because (c) the court makes such
application in spite of the fact that, under the general law, if it is applicable, the crime in hand is a felony
while under the later statute it is only a misdemeanor; because (d), in my judgment, the court modifies the
definition given by the Legislature to the crime of lacerny, which has been the same and has received the
same interpretation in this country and in Spain for more than two centuries; because (e) the decision
disregards, giving no importance to a positive statute which is not only the last expression of the legislative
will on the particular subject in hand, but was admittedly passed for the express purpose of covering the
very situation to which the court refuses to apply it. While the statute referred to is an act of the Municipal
Board of the city of Manila, this court has held in a recent case that said board was authorized by the
legislature to pass it. Therefore it is an Act of the Legislature of the Philippine Islands.

In this dissent I shall assert, and, I think, demonstrate three propositions, to wit:

First. That an electric current is not a tangible thing, a chattel, but is a condition, a state in which a thing or
chattel finds itself; and that a condition or state can not be stolen independently of the thing or chattel of
which it is a condition or state. That it is chattels which are subjects of lacerny and not conditions.

Second. That, even if an electric current is a tangible thing, a chattel, and capable of being stolen, in the
case at bar no electric current was taken by the defendant, and therefore none was stolen. The defendant
simply made use of the electric current, returning to the company exactly the same amount that he
received.

Third. That, even if an electric current is a tangible thing, a chattel, and capable of being stolen, the
contract between the company and the defendant was one for use and not for consumption; and all the
defendant is shown to have done, which is all he could possibly have done, was to make use of a current of
electricity and not to take or consume electricity itself .

I shall therefore maintain that there is no lacerny even though the defendant committed all the acts charged
against him.

In discussing the question whether, under the law of the Philippine Islands, an electric current is the subject
of larceny, I shall proceed upon the theory, universally accepted to-day, that electricity is nothing more or
less thanenergy. As Mr. Meadowcroft says in his A B C of Electricity, indorsed by Mr. Edison, "electricity is a
form of energy, or force, and is obtained by transforming some other form of energy into electrical energy."

In this I do not forget the theory of the "Electron" which is now being quietly investigated and studied, which
seems to tend to the conclusion that there is no difference between energy and matter, and that all matter
is simply a manifestation of energy. This theory is not established, has not been announced by any scientist
as proved, and would probably have no effect on the present discussion if it were.

Based on this accepted theory I draw the conclusion in the following pages that electricity is not the subject
of larceny under the law of the Philippine Islands.

Partida 3, title 29, law 4, thus defines "cosas muebles:"

 The term muebles is applied to all the things that men can move from one place to another, and all
those that can naturally move themselves: those that men can move from one place to another are
such as cloths, books, provisions, wine or oil, and all other things like them; and those that can
naturally move themselves are such as horses, mules, and the other beast, and cattle, fowls and
other similar things.

Partida 5 title 5, law 29, contains the following:

But all the other things which are muebles and are not annexed to the house or do not appeartain
thereto belong to the vendor and he can take them away and do what he likes with them: such are
the wardrobes, casks and the jars not fixed in the ground, and other similar things.

Article 517 of the Penal Code, in that portion defining larceny, as charged against the accused in the case
at bar, reads:

ART. 517. The following are guilty of theft:

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 (cosas muebles) without the owner's consent.

This article of the Penal Code, as is seen, employs precisely the words defined in the Partidas. The
definition of the word is clear in the law as written. It is also clear in the law as interpreted. I have not been
able to find a writer on Spanish or Roman criminal law who does not say clearly and positively that the only
property subject to lacerny is tangible movable chattels, those which occupy space, have three dimensions,
have a separate and independent existence of their own apart from everything else, and can be manually
seized and carried from one place to another. This was the unquestioned theory of the Roman criminal law
and it is the undoubted and unquestioned theory of the Spanish criminal law. Nor do I find a writer or
commentator on the Spanish or Roman Civil Law who does not define a cosa mueble in the same way.

One of the leading commentators of Spain on criminal law writes thus concerning the property subject to
robbery and lacerny:

Personal property belonging to another. — If robbery consists in the taking of a thing for the
purpose and by the means indicated in the article in question, it follows from the very nature of this
class of crimes, that only personal or movable property can be the subject thereof, because none
but such property can be the subject of the correctatio of the Romans; "Furtum since contrectatione
non fiat," says Ulpian. The abstraction, the rapine, the taking, and all the analogous terms and
expressions used in the codes, imply the necessity that the things abstracted or taken can be
carried from one place to another. Hence the legal maxim: Real property "non contractantur, sed
invaduntur." (6 Groizard, p. 47)

The act of taking is what constitutes the contrectatio and the invito domino which all the great
ancient and modern jurists consider as the common ingredient (in addition to the fraudulent
intention of gain), of the crimes of robbery and theft. From what has been said it follows that
the taking, the act of taking without violence or intimidation to the persons, or force upon the things,
for the purpose of gain and against the will of the owner, is what determines the nature of the crime
of theft as defined in paragraph 1 of this section. (6 Groizard, pp. 261, 262.)

The material act of taking is, therefore, an element of the crime which cannot be replaced by any
 other equivalent element. From this principle important consequences follow which we need not
now stop to consider for the reason that in speaking of the crime of robbery we have already
discussed the subject at great length. Immovable and incorporeal things cannot be the subject of
the theft for the reason that in neither the one or the other is it possible to effect the contrectatio,
that is to say, the material act of laying hands on them for the purpose of removing the same, taxing
the same or abstracting the same. Hence the legal maxims: "Furtum non committitur in rebus
immobilibus and Res incorporales nec tradi possideri possunt, ita contectavit nec aufferri." (6
Groizard, p. 266.)

Criticising an opinion of the supreme court of Spain which held that illuminating gas was a subject of
lacerny, the same writer says:

The owner of a certain store who had entered into a contract with a gas company whereby he
substantially agreed to pay for the consumption of the amount of gas which passed through a
meter, surreptitiously placed a pipe which he connected with the branch from the main pipe before it
reached the meter and used the same for burning more lights than those for which he actually paid.
The supreme court of Madrid convicted the defendant of the crime of estafa but the supreme court
of Spain reversed the judgment, holding that he should be convicted of theft. The only reason which
the supreme court had for so deciding was that the owner of the store had taken personal
property belonging to another without the latter's consent, thereby committing the crime not
of estafa but of consummated theft. But in our judgment, considering the sense and import of the
section under consideration, it cannot be properly said that the owner of the store took the gas
because in order to do this it would have been necessary that the said fluid were capable of being
taken or transported, in other words, that the contrectatio, the meaning of which we have already
sufficiently explained, should have taken place.

Gas is not only intangible and therefore impossible of being the subject of contrectatio, of
being seized, removed, or transported from one place to another by the exercise of the means
purely natural which man employs in taking possession of property belonging to another, but, by
reason of its nature, it is necessary that it be kept in tank, or that it be transmitted through tubes or
pipes which by reason of their construction, or by reason of the building to which the same may be
attached, partake of the nature of immovable property. There is no means, therefore, of abstracting
gas from a tank, from a tunnel or from a pipe which conveys the fluid to a building, for the purpose
of being consumed therein, unless the receptacle containing the same is broken, or the tank or pipe
bored, and other tubes or pipes are connected therewith at the point of the opening or fracture by
means of which the gas can conveyed to a place different from that for which it was originally
intended.

This exposition, interpretation, if you choose to call it such, has a further foundation in our old laws
which have not been changed but rather preserved in the definition of movable an immovable
property given by the Civil Code. According to Law, I Title XVII, Partida II, personal property means
those things which live and move naturally by themselves, and those which are neither living nor
can naturally move, but which may be removed; and Law IV, Title XXIX, Partida III, defines personal
property as that which man can move or take from one place to another, and those things which
naturally by themselves can move. Finally, corporeal things, according to Law I, Title III, Partida III,
are those which may be the subject of possession with the assistance of the body, and incorporeal
those which cannot be physically seized, and cannot be properly possessed. From these definitions
it follows that unless we do violence to the plain language of these definitions, it would be
impossible to admit that gas is a corporeal thing, and much less that it is movable property. (6
 Groizard, pp. 268, 269.)

If the holding that gas, which is unquestionably a physical entity having a separate and independent
existence and occupying space, has approached the verge of unstealable property so closely that the
ablest of Spain commentators believes that there is grave danger of the complete destruction of the ancient
legislative definition of stealable property by judicial interpretation, what would be said in regard to a
decision holding that an electric current is a subject of lacerny?

It may be well to add just here, although it may be somewhat out of its regular order, what the author above
quoted regards was the crime actually committed in the case he was discussing. He says:

For us, for the reasons hereinbefore set out, it would be more in harmony with the principles and
legal texts which determine the nature of the crimes of theft and estafa, to assign the latter
designation to the fraudulent act which he have heretofore examined and which substantially
consists in the alteration, by means of a fraudulent method, of the system established by an
agreement to supply a store with illuminating gas and to determine the amount consumed for
lighting and heating and pay its just value. We respect, however, the reasons to the contrary
advanced in the hope that the supreme court in subsequent judgments will definitely fix the
jurisprudence on the subject.

Nor can the abusive use of a thing determine the existence of the crime under consideration. A
bailee or pledgee who disposes of the thing, bail or pledge entrusted to his custody for his own
benefit is not guilty of lacerny for the reason that both contracts necessarily imply the voluntary
delivery of the thing by the owner thereof and a lawful possession of the same prior to the abusive
use of it.

Not even a denial of the existence of the bailment or contract of pledge with of gain constitutes the
crime of lacerny for the reason that the material act of taking possession of the property without the
consent of the owner is lacking. (6 Groizard, p. 269.)

That under the Roman and Spanish law property to be the subject of lacerny must be a tangible
chattel which has a separate independent existence of its own apart from everything else, which has three
dimensions an occupies space so that it may of itself be bodily seized and carried away, is not an open
question. That that was also the doctrine of the common law is equally beyond question.

In the consideration of this case the great difficulty lies in confusing the appearance with the thing, in
confounding the analogy with the things analogous. It is said that the analogy between electricity and real
liquids or gas is absolutely complete; that liquids and gases pass through pipes from the place of
manufacture to the place of use; and the electric current, in apparently the same manner, passes through a
wire from the plant to the lamp; that it is measured by a meter like liquids and gas; that it can be diverted or
drawn from the wire in which the manufacturer has placed it, to the light in the possession of another; that a
designing and unscrupulous person may, by means of a wire surreptiously and criminally transfer from a
wire owned by another all the electricity which it contains precisely as he might draw molasses from a
barrel for his personal use. And the question is triumphantly put, "how can you escape the inevitable results
of this analogy?" The answer is that it is an analogy and nothing more. It is an appearance. The wire from
which the electricity was drawn has lost nothing. It is exactly the same entity. It weighs the same, has just
as many atoms, arranged in exactly the same way, is just as hard and just as durable. It exactly the same
thing as it was before it received the electricity, at the time it had it, and after it was withdrawn from it. The
difference between a wire before and after the removal of the electricity is simply a difference ofcondition.
Being charged with electricity it had a quality or condition which was capable of being transferred to some
other body and, in the course of that transfer, of doing work or performing service. A body in an elevated
position is in a condition different from a body at sea level or at the center of the earth. It has the quality of
being able to do something, to perform some service by the mere change of location. It has potential
energy, measured by the amount of work required to elevated it. The weight or monkey of a pile driver is
the same weight when elevated 50 feet in air as it is when it lies on top of the pile 50 feet below, but it has
altogether a different quality. When elevated it is capable of working for man by driving a pile. When lying
on top of the pile, or at sea level, it has no such quality. The question is, "can you steal that quality?"

Two pile drivers, owned by different persons, are located near each other. The one owner has, by means of
his engine and machinery, raised his weight to its highest elevation, ready to deliver a blow. While this
owner is absent over night the owner of the other pile driver, surreptiously and with evil design and intent,
unlocks the weight and, by means of some mechanical contrivance, takes advantage of its fall in such a
way that the energy thus produced raised the weight of his own pile driver to an elevation of forty feet,
where it remains ready, when released, to perform service for him. What has happened? Exactly the same
thing, essentially, as happened when the electric charge of one battery is transferred to another. The
condition which was inherent in the elevated weight was transferred to the weight which was not elevated;
that is, the potential energy which was a condition or quality of the elevated weight was by a wrongful act
transferred to another. But was that condition or quality stolen in the sense that it was a subject of lacerny
as that crime is defined the world over? Would the one who stole the battery after it had been elevated to
the ceiling, or the weight of the pile driver after it had been elevated 50 feet in the air, be guilty of a different
offense than if he stole those chattels before such elevation? Not at all. The weight elevated had more
value, in a sense, than one not elevated; and the quality of elevation is considered only in fixing value. It
has nothing whatever to do with the nature of the crime committed. It is impossible to steal
a quality or conditionapart from the thing or chattel of which it is a quality or condition of a thing affects
the value of the thing. It is impossible to steal value. The thing, the chattel is that which is stolen. Its quality
or condition is that which, with other circumstances, goes to make the value.

A mill owner has collected a large amount of water in a dam at such an elevation as to be capable of
running his mill for a given time. A neighboring mill owner secretly introduces a pipe in the dam and
conveys the water to his own mill, using it for his own benefit. He may have stolen the water, but did he
steal the head, the elevation of the water above the wheel? The fact that the water had a head made it
more valuable and that fact would be taken into consideration in fixing the penalty which ought to be
imposed for the offense; but it has nothing whatever to do with determining the nature of the offense of
which the man would be charged.

Larceny cannot be committed against qualities or conditions. It is committed solely against

chattels, tangible things. A given chattel is a compromise result of all its properties, qualities, or conditions.
None of the qualities which go make up the complete thing is the subject of larceny. One cannot steal from
a roof the quality of shedding rain, although he may bore it full of holes and thus spoil that quality; and this,
no matter how much he might be benefit thereby himself. If, in a country where black horses were very
dear and white horses very cheap, one, by a subtle process, took from a black horse the quality of being
black and transferred that quality to his own horse, which formerly was white, thereby greatly increasing its
value and correspondingly decreasing the value of the other horse which by the process was made white,
would he be guilty of larceny? Would he be guilty of larceny who, with intent to gain, secretly and furtively
and with the purpose of depriving the true owner of his property, took from a bar of steal belonging to
another the quality of being hard, stiff and unyielding and transferred that quality to a willow wand
belonging to himself? Is he guilty of larceny who, with intent to defraud and to benefit himself
correspondingly, takes from a copper wire belonging to another the quality of being electrified and transfers
that quality to an electric light? An electric current is either a tangible thing, a chattel of and by itself, with a
perfect, separate and independent existence, or else it is a mere quality, property or condition of
some tangible thing orchattel which does have such an existence. The accepted theory to-day is, and it is
that which must control, that electricity is not a tangible thing or chattel, that it has no qualities of its own,
that it has no dimensions, that it is imponderable, impalpable, intangible, invisible, unweighable, weightless,
colorless, tasteless, odorless, has no form, no mass, cannot be measured, does not occupy space, and
has no separate existence. It is, must be, therefore, simply a quality, a condition, a property of
some tangible thing or chattel which has all or most of those qualities which electricity has not. Being
merely the quality of a thing and not the thing itself , it cannot be the subject of larceny.

To repeat" As we know it, electricity is nothing more or less than a condition of matter. It has no existence
apart from the thing of which it is condition. In other words, it has no separate, independent existence. It is
immaterial, imponderable, impalpable, intangible, invisible, weightless and immeasurable, is tasteless,
odorless, and colorless. It has no dimensions and occupies no space. It is the energy latent in a live herself
is the power potential in the arm of a laborer. It is the force stored in the wound-up spring. It is an agency,
not a "cosa mueble." It is a movement and not a chattel. It is energy and not a body. It is what the
laborer expends and not what he produces. It is strength striped by an unknown process from arms of men
and atoms of coal, collected and marshalled at a given place under the mysterious leash of metal, ready to
spring like a living servant to the work of its master. It is not a chattel, it is life. It is as incapable of being
stolen, by itself, as the energy latent in a live horse. It is as impossible to steal an electric current as it is to
steal the energy hidden in a wound-up watch spring. One may steal the horse and with it the energy which
is a quality of the horse. One may steal a watch and with it the energy which is a property of the wound-up.
But can we say that one can steal the energy in the watch spring separate from the spring itself, or
electricity apart from the wire of which it is a quality or condition?

A laborer was stored up in his muscles the capacity to do a day's work. He has potential energy packed
away in little cells or batteries all through his body. With the proper mechanism he can enter a room which
it is desired to light with electricity and, by using the stored-up energy of his body on the mechanism, light
the room by transforming the energy of his muscles into the electricity which illuminates the room. We
have, then, a laborer who, by moving his hands and arms in connection with the appropriate machinery, is
able to light the room in which he is at the time. What causes the light? The energy in the laborer's muscles
is transformed into light by means of the intermediate phenomenon known as electricity. As a concrete
result, we have the energy in the laborer's muscles transmuted into light. Now, is the energy passing
through the wire, more capable of being stolen than the energy in the muscles of the laborer? Or is the light
or heat any more or less a subject of larceny than the electric current of which they are a manifestation?
Could the energy which performed the day's work be stolen? Could the electric current which lighted the
room be stolen apart from the wire of which it was a quality? One might kidnap the laborer and with him the
energy which constitutes his life; but can we say that the energy, of itself, is the subject of separate
larceny? But, it the laborer's energy cannot be stolen while it resides in and is a quality of his arm, can the
same energy any more be stolen when it resides in and is a quality of a wire in the form of electricity? If so,
just where is the dividing line, where is the point at which this kinetic energy ceases to be incapable of
being separately stolen and becomes a subject to theft? Is it at the crank by which the laborer turns the
machine? Is it at the armature, the conductor, the fields coils, the field magnet, the commutator, the
brushes, the driving pulley, or the belt tightener? Is it where the current enters what is called the electric-
light wire, or is it where it enters the bulb or arc and produces the light? In other words, at what point does
the untealable laborer's energy become stealable electric energy?

An electric-light wire placed in a house for the purpose of furnishing light for the same has its precise
counterpart in a laborer placed therein for the same purpose. Like the laborer, it is filled with energy which
will, when released, perform the service intended. The wire is simply a means of transmitting the energy of
the laborer's muscles, and that stored in tons of coal which he handles, from the electric plant or factory to
the house where the light is produced. The wire simply avoids the necessity of the laborer being in the very
house where he produces the light. Instead of being there, he, by means of the so-called electric-light wire,
is located at a distance, but produces the light in exactly the same way, transmitting his energy for that
purpose. The wire stands in exactly the same relation to the person in whose house it is put as would a
laborer who had been sent to that house to render services. The energy may be diverted from the purpose
for which it was intended, or a wrong account given of theamount of work performed by that energy; but it is
impossible to steal, take and carry the energy away. One cannot steal days' works; and that is all an
electric current is. One may use those days' works in hoeing corn when it has been agreed that they shall
be used in picking cotton; but that is not larceny of the days' works, as larceny has been defined by the
jurisprudence of every country, Or, one may report to the owner of those days' works that he had used
three of them when in reality he used thirty and pay him accordingly, but that is not larceny of the twenty-
seven.

But, it is argued, the illustration is not a fair one; energy in a laborer's arm or in the muscles of a horse or in
a wound-up spring is, so far as its capability of being stolen is concerned, quite different from energy which
has been separated from the arms of the laborer or the muscles of the horse and driven through a wire;
from such wire electricity may be drawn like water from a barrel; and while it is impossible to steal the
energy of a man or a horse because it would destroy the life of the animal, an entirely different question is
presented when the energy has actually been separated from those animals and confined in a wire.

This argument has several fundamental defects. In the first place, it assumes the whole question at issue.
By asserting that electricity is separable from the object of which it is a quality or state is to assume that
electricity is a material thing, which the real question to be resolved. In the second place, if electricity is in
the real sense of that term, separable from the object to which it belongs, then it must be admitted that it is
capable of separate and independent existence apart from any other object. This is not so. It is not only
admitted but contended by every scientist who has touched this subject that electricity is incapable of an
independent existence apart from some given material object. In the third place, this argument overlooks
the fact, even if we assume that it can be separated, that the thing when separated is not the same thing
that it was before separation; in other words, when the so-called separation occurs there is not only a
transference of energy from the horse to the battery but there is also a transformation. In the horse it is
muscular energy. In the wire it is electrical energy. In the horse it is potential. In the wire kinetic. It is not the
same thing in the wire that it was in the horse. In the fourth place, the argument makes the stealability of a
thing depend not on its nature but on where it is located. This is an assumption wholly unwarranted and
impossible under the law. To say that whether or not a thing is stealable depends not on its nature but on
where it is located is absurd. A diamond ring in a burglar-proof safe is as much a subject of larceny, under
the definition of the law, as if it lay in an open showcase. If energy is stealable at all, and it must be
remembered that I am proceeding, as we must necessarily proceed upon the accepted theory that
electricity is nothing more or less than energy, it is so by reason of its nature and by reason of its residing in
a battery rather than in a horse; and if it is stealable by virtue of its nature it can be stolen from the horse as
well as from the battery or wire. A thing is subject to larceny because, and only because, it is a cosa
mueble, not because it is inside a horse, a wire or a safe. If it is a cosa mueble it is the subject of larceny
although it be located on the moon; and if it is not a cosa mueble it is not subject to lacerny although it be
placed in a den of thieves. The difficulty or ease of getting at a thing has nothing whatever to do with its
stealability. In the fifth place, this argument overlooks the very important fact, to be dealt with more at
length later, that the electric current used by the accused was returned to the company, after use,
absolutely undiminished in quantity.
What, then, is the difference between corn, for example, and an electric current? It is this. One is a cosa
mueblewhile the other is not; one is produced by a wholly different process from the other and from wholly
different materials, if we may call materials those changes which result in the immaterial thing called an
electric current; in the case of corn we deal not with the quality or energy of corn, but with corn as a
composite and concrete result of all its qualities and uses; we deal with a tangible thing, a chattel, and not
with a condition or quality of a tangible thing; we deal with things instead of ideas, — with things which
exist separate and independent and which do not depend, as does electricity, wholly upon some body not
only for the capability of manifesting its existence, but also for very existence itself ; because we deal with
something which changes its form but never its nature as a physical entity. It is always a chattel, a tangible
thing, a cosa mueble.

On the other hand, in the case of the electric current we deal not with a thing, a chattel a cosa mueble, but
with acondition or quality, a property of a cosa mueble; with an idea which always, before it has any
significance of meaning whatever, associates itself with an entity, a body or chattel, as
a characteristic or quality of such body or chattel; with lines of force which are merely and solely a quality,
a property, a characteristic of the magnet, instead of which grains of corn which are absolute entities,
independent of and apart from everything else, and not merecharacteristic or qualities of some entity of
body which does not exist as an absolute physical entity in itself; with the horse and the violet and not
their perfume; with the lily and not its beauty; with the clouds and not their color; with entities and not
accidents; with realities and not the imponderable, impalpable ideas and qualities which make up the
reality.

As he already been said, the difficulty in the elucidation of the question comes from the confusion
of qualities withthings, of appearances with realities. Apparently an electric current does things. It produces
phenomena. It, therefore, appears to be something. But it must not be forgotten that many times
appearances are deceitful. They do not always insure realities. It is not judicial to say that, because a
thing looks so, it is so. It is not judicial to say that, simply because it looks as if one committed larceny,
therefore he is guilty of larceny. Before we may legallyconvict one of larceny, we must know exactly what
he did. Justice is not founded on guess work nor on appearances. Men's right are preserved by definitions,
and definitions are founded on facts, not fancies, on realities, not appearances. Because, when one taps
an electrically charged wire belonging to another and, by means of a contrivance, transfers the charge to
his own uses, it looks as if he was stealing something, is not sufficient to convict him of larceny. We must
first know what larceny is, as well as what an electric current is, and what is meant by its use in producing
light. To know what larceny is we must know what legislators and judges during the development of
jurisprudence have always said and agreed it is. In other words, we must know itsdefinition. It approaches
tyranny to convict one of murder when is actually guilty of homicide only. Yet the only thing which separates
the two crimes is a definition. It is wrong to convict one of robbery who is guilty only of larceny. Yet these
two crimes are distinguished only by a definition. If, as in the case at bar, whether or not one is declared a
felon and is sent to prison for one year eight months and twenty-one days, is forever disqualified from
holding public office and of exercising the right of suffrage, or whether, instead, he is declared guilty of a
misdemeanor simply and punished lightly with no accompanying disqualifications, depends upon whether
he has committed larceny as defined by the Penal Code or whether he has merely violated a city
ordinance, the question whether he actually committed larceny or not begins to assume importance. It
assumes importance not only to him but to society as well. If a court to-day palpably modifies a definition in
order to convict an offender of larceny, how can society be assured that tomorrow the same court will not
modify some other definition to convict a citizen of treason? When definitions are destroyed no man is
secure in his person or his property. When men act on appearances instead of realities justice will be
shortlived. A whale looks like a fish, acts like a fish, swims like a fish and lives all its life in the water like a
fish. But it is not a fish. It is an animal. It is air-breathing, warm-blooded, and viviparous, and suckles its
young. Now, if whether or not a whale is a fish or an animal is the potent factor determining whether a man
goes to state prison as a felon with all the deplorable consequences resulting, or whether he is lightly
sentenced as a mere misdemeanant, is it not of the supremest importance to determine whether a whale is
a fish or an animal? I am informed that it used to be a common sight in The New York Zoological Gardens
to see Mr. Crowley, the large and extremely intelligent chimpanzee, dressed in faultless attire, sit at the
table and take his food and wine like a gentleman. Children believed him to be a man; and many intelligent
grown people honestly believed that he was as much man as chimpanzee. But if the officials of the city of
New York had been indicted for kidnapping, based upon the seizure and forcible detention of Mr. Crowley,
would it not have been of the most solemn importance to them to throw away appearances and determine
accurately what Mr. Crowley really was? And in case of doubt as to what he was, could they not justly have
demanded the benefit of that doubt?

So, where one who diverted an electric current has been accused by reason thereof of the crime of larceny,
which crime, it being admitted, can be committed only against tangible things, chattels, is it not of the very
greatest importance to determine what an electric current is, that is, whether it is a tangible thing, a chattel,
or not and what is the nature and meaning of the process by which it transforms itself into electric light?
And in case of doubt as what it is, cannot the accused justly demand the benefit of that doubt? To convict
one of larceny it is not sufficient to show merely that a wrongful act has been done; but it must appear that
a wrongful act of a particular kind has been committed. To constitute larceny it must be proved that the
wrongful act was committed against chattels, against tangible things, which were seized upon and
asported by the one accused. In the case at bar it has not been shown that the accused laid unlawful
hands upon and asported a tangible thing, a chattel, una cosa mueble. The very least that the prosecution
must necessarily admit is that no one knows what electricity really is. That being so, it seems to me to be a
contradiction of terms to say that larceny, which must admittedly be committed against a known thing, can
be committed against a thing absolutely unknown. At least it would seem that there is a grave doubt about
the definition of larceny covering wrongful acts relative to an electric current; and by reason of that
doubt the conviction ought not to be sustained. And if it is true, as I have herein attempted to show, that,
under the prevailing and generally accepted theory, electricity is nothing more or less than a condition, a
quality, a property of some tangible thing, some chattel or body, then, certainly, the charge of larceny must
fall, as that crime can be committed only against the thing and not against a quality of the thing.

Although the only question in this case is whether electricity is such a tangible thing, as can, under the
definition of lacerny contained in the Penal Code, be the subject of lacerny, nevertheless the court
dismissed that question substantially without discussion, the only reference thereto being the following:

I is true that electricity is no longer, as formerly, regarded by electricians as a fluid, but its
manifestations and effects, like those of gas, may be seen and felt. The true test of what is a proper
subject of lacerny seems to be not whether the subject is incorporeal, but whether it is capable of
appropriation by another than the owner.

xxx xxx xxx

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 lacerny.

The statement fail to touch the essential question involved and is wholly beside the point for the following
reasons, lying aside for the moment the nature of the act which the accused actually committed, assuming
that he committed the act described by the witnesses for the prosecution:
In the first place, as I understand the law , the statement is not quite correct that, in the Philippine Islands,
"the true test of what is a proper subject of lacerny seems to be not whether the subject is corporeal or
incorporeal, but whether it is capable of appropriation," unless the word "appropriation" has the same
meaning as the word "taking"used in the article of the Penal Code defining larceny. If the court intended to
use the word "appropriation" in the sense of "taking," then its use was unnecessary and may be
misleading. If it did not so intend, then the rule of law laid down by the court is not as I understand the law
to be. An appropriation in addition to or different from thetaking is not an essential of lacerny anywhere.
Wharton says that "lacerny id is the fraudulent taking and carrying away of a thing without claim of right,
with the intention of converting it to a use other than that of the owner and without his consent." Article 517
of the Penal Code provides that they shall be guilty of lacerny "who . . . take (toman) (not appropriate)
another's cosas muebles (movable chattels) without the owner's consent." Unless, therefore, the word
"appropriation" is used in the same sense as "taking," the paragraph in the court's decision above quoted
does not contain a correct statement of the law. If it means the same thing then the use of the word in no
way enlightens the situation; for it is just as difficult to determine whether a cosa mueble can
be appropriatedas it is to determine whether it can be taken. The question before us is whether or not
electricity is such a cosa mueble that it can be taken under the law of lacerny. To substitute in that problem
the word "appropriation" for the word "taking" does not laid in its solution in the slightest degree when it is
admitted that the word substituted means exactly the same thing as the word in the place of which it was
substituted.

An illustration will serve further to show the fallacy inherent in the statement quoted: Let us suppose that
the Penal Code defined larceny thus: "Any person who, with intent to gain, takes from another his cake
without his consent shall be guilty of lacerny." Let us suppose that some one should then defined the
subject of lacerny as anything, corporeal or incorporeal, which can be "appropriated." It would be obvious
that such definition would be erroneous, for the reason that, while pie is as capable of being "appropriated"
as cake, still, under the terms of the law, lacerny cannot be committed against pie. So that where the
statute prescribes that the only thing subject to larceny is a cosa mueble and the definition of the subject of
larceny is claimed to be anything that can be "appropriated," the answer at once is that such definition is
inaccurate under the law as it may be too broad. There may be some things which can be "appropriated"
that are not cosas muebles.

In the second place, the quoted paragraph from the court's decision contains another error in the statement
of the law. I am of the opinion that, under the common law, and I am sure under the Spanish law, the
statement that "the true test of what is a proper subject of larceny seems to be not whether the subject is
corporeal or incorporeal . . ." is not accurate. Professor Beale, of Harvard, says in his article on larceny that
—

At common law the only subjects of larceny were tangible, movable chattels; something which
could be taken in possession and carried away, and which had some, although trifling, intrinsic
value. Any substance which has length, breadth, and thickness may be the subject of larceny. . . . A
chose in action being in its essence intangible could not be the subject of larceny at common law
and the paper evidence of the chose in action was considered merged with it.

Wharton says:

Choses in action, including bonds and notes of all classes according to the common law are not the
subject of larceny, being mere rights of action, having no corporeal existence; . . . .

I have already quoted at length from writers on the Spanish and Roman law to show that only tangible,
corporealchattels can be the subject of larceny.

In the third place, by entirely begging the question, it leaves the whole proposition of whether electricity is a
subject of larceny not only unsolved but wholly untouched. As we have already seen, the word
"appropriation" nowhere appears in subdivision 1 of the Penal Code in connection with larceny. But if it
were there used in connection with such crime, it would necessarily refer entirely to a cosa mueble as that
is the only thing under that article which is the subject of larceny and, therefore of "appropriation." So that,
before we can possibly know whether a thing is capable of appropriation or not under the Penal Code, we
must know whether that thing is or is not a cosa mueble, as that, as we have said, is the only thing that can
be taken or appropriated in committing the crime of larceny. But, as is readily seen, that brings us right
back to the question we started with, What is a cosa mueble? It is more than apparent, therefore, that the
quoted paragraph adds nothing whatever to the discussion.

In the fourth place, the word "appropriation" in the paragraph quoted is there used with a complete
misapprehension of its meaning as found in the article of the Civil Code from which it is taken. Articles 334
and 335 of the Civil Code seek to divide all property capable of appropriation into classes. They read:

ART. 334. Son bienes immuebles:

1.º Las tierras, edificios, caminos y construcciones de todo genero adheridas al suelo.

xxx xxx xxx

This article has ten subdivision dealing with all kinds of real property. It is not necessary to quote it all at
this time.

The English of the part quoted is as follows:

ART. 334. Real property consists of

1. Lands, buildings, roads, and constructions of all kinds adherent to the soil.

xxx xxx xxx

ART. 335. Se reputan bienes muebles los susceptibles de apropiacion no comprendidos en el

capitulo anterior, y en general todos los que se pueden transportar de un punto a otro sin
menoscabo de la cosa immueble a que estuvieron unidos.

This article in English is as follows:

ART. 335. Personal property is considered anything susceptible of appropriation and not included in
the foregoing chapter, and, in general, all that which can be carried from one place to another
without damage to the real estate to which it may be attached.

As is seen from the terms of the articles, two expressions are used in defining "bienes muebles," one of
elimination and other of description. The clause of elimination provides that all property subject
to appropriation shall be personal property except that property described in article 334. But this description
was found to be too broad. It included too much; and it was, therefore, necessary to make use of a limiting
or restricting clause in connection with the exclusion clause. To that the article further provided that
appropriable property shall be, "in general, all property which can be carried from one place to another."
Under this restricting clause, then, property to bepersonal property must be not only property not included
in article 334 but also property which can be transported from one place to another. It must fulfill two
requirements instead of one. Besides, under the Spanish law, real property is as much subject to
appropriation as personal property. The word in Spanish seems to be broader than its legal use in English.

From the foregoing it is plain that property to be personal property must not only be susceptible of
appropriation, which the court in the quoted paragraph claims is the only requirement, but it must also be
capable of being of itself manually seized and transported from one place to another.

This presents the fourth reason why I say that the proposition laid down by the court in the quoted
paragraph is laid down under a complete misapprehension of the definition of una cosa mueble.

And finally, the word "appropriate" which the court has used is found in subdivision 2 of article 517 of the
Penal Code. It provides that those are guilty of larceny, "who, finding a thing (una cosa mueble) lost and
knowing its owner, appropriate it with intent to gain." The signification which the word here has is quite
different from that of the word "take" (toman) used in the first subdivision, being considerably limited in its
reach. As used here it is very like "convert." There is no removal from the possession of the owner, as in
the first paragraph. In the Penal Code the word "taking" means something more than "appropriation." It
means a removal from the possession of the owner — a transportation or asportation of the thing from one
place to another — from the possession of the owner to the possession of the theft; while "appropriation"
means, rather, the making use of the converting of the property after the taking is complete, or without any
"taking" at all. Under the Spanish law, while real estate is not, of course, subject to asportation, to "taking,"
and, therefore, not the subject of larceny, it is subject to "appropriation." In the same way while electricity is,
under the Spanish and Roman laws, wholly incapable of seizure and asportation, of the manual "taking"
the trespass essential to larceny, it may possibly, in one or another sense of the word, be subject to
appropriation." If at one extreme of the scale of things, namely, real estate, the thing is too tangible to be
stolen, is it not logical to expect that at the opposite extreme the thing, electricity, for example, may be
found too intangible to be stolen?

We have seen that, in all the history of Roman and Spanish jurisprudence, the crime of larceny has been
confined to tangible things, to chattels, which have an independent existence of their own; which have
three dimensions; which occupy space; which are capable of having a trespass committed against
themselves; which can be, of themselves and alone, taken physically into possession and carried away
(asported).

We have that the fact that electricity is not such a thing is admitted by all.

And we have asked the question, "How, then, can the charge of larceny be sustained?"

But let as assume, for the sake of argument, that electricity is a tangible thing, like water, for instance. Still
the crime committed, if any, is not lacerny. Let us modify the illustration already given of the surreptitious
removal by A of water stored in a dam by B for milling purposes. Let us suppose that B has built a reservoir
on an elevated portion of his farm for the storage of water for irrigating purposes. He has built ditches or
conduits from the reservoir to every part of his farm to carry the water to the places needed. During the dry
season while B is engaged in irrigating his lands A surreptitiously and with intent to gain, constructs a small
mill upon one of the conduits and utilizes the rapid fall and swift flow of the water to operate his mill. For
many months A thus takes advantages of B's conduit and water and enriches himself by reason thereof.
Did A commit the crime larceny? The water, every drop of it, after being used by A, went to its work of
irrigating the lands of B, pausing only long enough to turn the water wheel of A's mill. Certainly then, no
water was stolen. A simply made use of the "head," the fall of the water. If anything was stolen it was the
"head," the elevation of the water, the energy developed by its passage from high to low ground. This is
precisely what happens when an electric current passes through an electric bulb or arc and produces light.
Whether the current operates one light of one hundred, the volume, the amperage, of the current, that is,
the quantity of it, if we may use the term (and it must be remembered that I am assuming electricity to be a
tangible thing and will speak accordingly) remains exactly the same. The volume or quantity of the
electricity is just the same when it comes out of the hundredth light as it was when it entered the first. While
there is a difference between the current as it comes from the last light and as it entered the first, it is
simply one of condition, or state. All of the electricity is still there. Like the water; it has simply lost its
"head," its energy. It has been deprived of its pressure, of its electro-motive force; but it is the same old
electricity, in the same old quantity. So that, when the accused in the case at bar, by means of a "jumper,"
burned thirty lights, instead of the three for which he paid the company, he was not stealing electricity.
Exactly as much electricity went back into the company's wire after serving the twenty-seven lights for
which he did not pay as came out of that wire in the first place. The defendant took nothing;
he used something. In larceny there must be a taking. Here there is only a use. Electricity is a utility, not
a thing. The company, in the cease at bar, lost no more than did the owner of the irrigation system in the
example heretofore given. As no water was taken, so no electricity was taken. The same amount of water
remained to the owner after its use by A. The same amount of electricity remained to the company after its
use by the defendant.

The well-known Italian author, Avv. Umberto Pipia, in his very able work entitled "L' Electricita nel Diritto"
puts the question thus (translation of Mr. Percy R. Angell, Manila, 1911):

From the point of view of the jurist can electricity be stolen? A person connects a deflecting wire to
the main conduit of electricity; he thus makes a secondary circuit in which he introduces a
resistance and profits by the electro-motive power which is developed, to supply his lamps or put
his motor in movement. In such case can we apply article 402 of the Penal Code, which provides
that whoever takes possession of movable property of another in order to derive profit thereby,
taking it from the place where he finds it without the consent of the owner, is punished
with reclusion up to three years?

The author then refers to the decisions of certain course of Europe which hold that electricity is stealable,
and continues:

The Roman court of cassation has lost sight of that fundamental principle of interpretation of law (a
principle which it ought to have had well in mind before applying to a new manifestations of force
legislative provisions enacted in view of totally different cases) by which penal laws do not
extend beyond the cases and the times in them expressed. Nulla poena sine lege, is the rule in
terms of penal law, unless we wish to bring about a deplorable confusion of powers, and the
judiciary desires to usurp the authority of the legislator. If in the written laws gaps or breaks are
encountered, it is the duty of the court to point them out to the legislator, to the end that he take the
necessary measures; but it is not lawful for him by analogous interpretation to apply a penal
provision where such has not been explicitly enacted.

In the unanimous opinion of jurist, two elements are necessary to constitute the crime of theft,
legally speaking; the first is the taking possession of the personal (movable) property of
another, contrectatio, and the taking away of the thing from the place where it is found without the
consent of the person to whom it belongs, ablatio.
Now we have conclusively shown that electric current is not a thing, but a state, a vibration
following certain converging waves. It can not therefore be taken possession of as the personal
property of another. A person who unlawfully uses electric current for his personal enjoyment places
himself in a state of unlawful enjoyment of a utility, but he does not take possession of personal
property. It was a grave error, that of the court of cassation, in holding electric current to be a thing
imprisoned in wires, and composed of particles that can be subtracted. In connecting a second
circuit one does not subtract electric current; not a particle of electric energy enters into the
possession of the so-called thief ; the same amount in amperes that was found and derived on
connecting the second circuit, is found at the end of this circuit. The current has only suffered a
diminution of potential; while continuing to be of the same volume, it becomes less adapted for the
use intended, because having overcome a resistance, it has lost in potential, its electro-motive
power.

. . . It leaves the circuit in the same amount in which it entered. Only its power for work has
diminished. Not a single particle or molecule of electric current is taken by such abusive use, only
the state of undulation. The movement that first follows the principal, and then the second circuit,
and by these undulations the so-called thief illegally derives benefit. But the extraordinary
provisions of crime are not applicable to all illegal actions.

Another powerful argument in favor of my position is this: That in no case of usurpation, the using of
things protected by law (diritto) that are not material things , do we speak of theft. To repress
abuses the legislator has been obliged to establish special provisions of law, but has explicitly
recognized those relating to theft to be inapplicable. A trade-mark, trade-name, modello de fabrica,
a scientific or artistic work, undoubtedly constitute objects of law similar to things; form the contents
of various juridical relations; have more or less economic value; pertain to the patrimony of the
person who has produced them or brought them into being. If a third person makes use of the
trade-mark or trade-name, the scientific work or artistic production of another, nobody denies that
he takes possession of a utility that does not belong to him; that by the very illegal act he derives
profit, and at the same time diminishes the patrimony of the person having legitimate rights herein.
But with all that, it has never occurred to anyone to bring an action for theft against the usurper of
the firm name, the counterfeit of the trade-mark or the plagiarist. The legislator, desiring to protect
this new species of property, has provided special repressive measures; but in their absence, the
courts can not apply the actio furti, because it is not applicable to cases and conditions other than
those provided for.

If this be so, why different conceptions on the score of electricity? Here likewise, there is no
subtraction of personal property, but the illegal use of an advantage, of the right pertaining to
another, which remain however unchanged. Hence the legal solution should be the same.

The second and not less essential condition of theft is that of the ablatio, the necessity of taking the
thing from the place where it is found. But here we have nothing of that; the current is deviated from
its course, true, but it returns to the place where it was undiminished. The statement in the
foregoing decision that there are particles transportable from place to place is exact; the undulation
is in itself, it has its own efficiency, but it is neither taken away nor subtracted. It has been justly said
that all that is done is to erect a bridge over which the undulations of the particles are transported in
the wire attached, but nothing corporeal passes from one wire to another, since not one of the
vibrating particles moves with the current which flows through the connected wire.

Consequently, in whatever aspect the question is considered the presumption of theft grows less. In
fine, although there be a usurpation of a utility to the prejudice of another, it should not be held to
constitute theft, because that is the vulgar, not the legal conception. That in civil and commercial
law we may resort to analogous interpretation, and that, in the absence of special provisions we
should apply the rules which govern similar matters and analogous cases, there is no doubt. The
courts can not refuse to say what the law is (dire ie diritto) nor dismiss the litigants on the pretext
that the law had made no provision for their case; and it is from this concept that electricity, as a
rule, in the various relations where it constitutes the object, is considered to be a thing, with all the
attributes of such. But the penal law is restrictive; under certain aspects it is exceptional. Here we
have to do with limitations and restrictions on the most sacred rights of persons, the right to liberty,
the right to honor. And these rights can not be abridged without definite and explicit provisions of
the law. Where these are lacking we can pray, as I do, that they be supplied, but a decision in such
case is an arbitrary act (arbitro), not justice: nulla poena sine lege.

xxx xxx xxx

So on the wrongful use of electric current; profit is derived from its high potential which is produced
by the work and expenditure of money on the part of the furnishing company; the current is returned
exactly as it was delivered except it has lost a certain amount of electromotive power that was
illegally (antigiuridicamente) employed to overcome the resistance introduced by the third party.

xxx xxx xxx

. . . Penal law must be strictly construed (e di interpretazione restrittiva). It punishes the contractatio
of a movable thing which is taken from the place where it is found without the consent of the owner.
In the proposition under discussion, we have not to do with movable things, there is no true
transporting to another place; therefore the figura giuridica of theft is wanting.

It can not be doubted that by movable things is meant even liquids and fluids, because these are
material, concrete, and corporeal things, but their physical external manifestations can not affect
the juridical relation . But in our case there is not a thing, fluid or liquid; there is a state of
undulation, of movement, which one uses illegally, assuming however the obligation to indemnify
for all the damages resulting from his illicit action, but there is no theft, any more than there would
be where a person applied a pulley to the shaft of an engine in order to put his own machinery in
motion, so far as there would be no appropriation. The current which injuriously traverse the lamp
or electric motor is not appropriated or destroyed by the person who uses it; it flows out from the
lights and continues its course in the circuit undiminished in intensity; it has only lost part of its
power, because, having encountered a resistance, it has developed certain energy to overcome it,
energy which has produced light, traction, or mechanical work.

Nor may it be said that electricity would then be deprived of any legal protection. Do we not have
articles 1511 et seq. of the Civil Code that provide for fraud? Is there not the civil crime and quasi
crime? To protect electric energy is it necessary to imprison one who uses it antigiuridicamente,
while the letter of the law does not consent? In any case it is known that adducere inconveniens
non est solvere argumentum. As in the laws of our country provision is made for the illegal use of a
firm name, trade-mark and works of genius (l' ingegno); in England, where provision has been
made for the matter we are discussing they have enacted a law imposing severe penalties upon
persons who illegally use electric energy, and I am of the first to applaud them. But let there be
laws, not merely judicial opinion (arbitria di interpretati).
 Nor does it avail to urge that when we have to do with benefits that are useful to man, which serve
his ends, that he can appropriate, these benefits are considered as things in the eyes of the law.
But it is necessary to make a distinction. From the standpoint of the civil law, they are, because a
wide and analogous construction is permissible and permitted; but from that of the penal law, they
are not, because such construction is expressly forbidden by article 4 of the preliminary provisions
of the Civil Code.

If a trade-mark is not a benefit to man, in what does it serve him? Is not a literary or artistic
production such? Does not the counterfeiter illegally appropriate such benefits? But if it is required
to inflict criminal penalties upon him, a special law must be enacted; the provisions relative to theft
can be applied in his case.

xxx xxx xxx

Nor is it a conclusive argument to say that the manufacturer spends large sums of money and
erects costly machinery to generate the electricity, and when others steal it from him, such action,
according to juridical conscience and social morals, constitutes theft.

Let us suppose an individual acquires a ticket of admission, and enters a hall where there is being
produced a play of some sort. He, on the strength of the legal negotiation with the impresario and
the acquisition of the ticket has a right to the most ample enjoyment that his optical and acoustic
senses are able to realize. But he arranges a phonograph and a cinematograph, and surreptitiously
fixes and appropriates part of the acoustic and visual enjoyment that does not belong to him, takes
it outside of the theater and later avails himself thereof to his benefit by reproducing the harmony of
the sounds and the optical illusion of the scene. Is he liable for theft?

From the standpoint of the doctrine I am combating, he is. The impresario has sacrificed money or
work to produce the spectacle. Our friend has the right to enjoy it to the limit of the capacity of his
organs of vision and hearing, but beyond that. By means of suitable instruments he has caught up
the sounds, movements, and colors for the purpose of gain, and he commits a theft because there
enter the correctatio and theablatio.

From the point of view of the law he is not. He would be held to reimburse the impresario for all
damages, but he can not be called a thieft, nor be punished as such. The sounds and forms of light
are states, not things; therefore they can not form subjects of theft.

And if this is so, the same conclusion must be reached with respect to electricity.

The supreme court of the German Empire, sitting at Leipsic, October 20, 1896, in a decision holding that
electricity was not a subject of larceny, said:

The court below found that the act did not constitute theft or unlawful appropriation, because
electricity is not to be considered a thing within the meaning of paragraph 242 of the Penal Code,
and because by things the law means portions of material nature; that corporeal existence is an
essential ingredient of the thing. Even the Penal Code starts from this principle. Incorporeal things,
as for example rights, intellectual products and machine power are not subjects of theft. The same
must be said of electricity. Experts say that the science is not yet determined. We well know what
must be done to produce electric energy, but we do not comprehend these vital operations, any
more than we understand what is that makes the muscles of the human arm capable of exerting
 force. In the conclusions of the Court of First Instance there is no error of law. That court starts from
the principle that the corporal existence of the thing must be the essential element to come within
the meaning of article 242. This assumption is not based upon the precepts of the Civil Code, but,
rather, upon the idea which is at the bottom of the Penal Code, namely, the movable and
independent thing, which presupposes the corporeality of the object. If then, under articles 242 and
245, the condition precedent to the commission of larceny is that the object of theft or unlawful
appropriation be a piece or portion of material substance in either a solid or liquid state, or in form
of gas, the Court of First Instance committed no error in finding there was neither theft nor illegal
appropriation. Whether or not the notation of a thing, in the sense of the penal laws, requires
something corporeal, is a question of law; but the question whether electricity is a substance, a
corporeal thing, or a force, a movement of a minute particles, is a question of fact that can not be
decided by the rules of law, but by physical research alone. The consideration of the great
importance of electricity in commercial life and the place awaiting it among the vital conveniences
and the fact of its having commercial value, is not an argument to prove that electricity is a
corporeal thing, because the quality of being a vital convenience and having commercial value does
not constitute a necessary standard of corporelity, since force, operations, intellectual products are
vital conveniences (beni) and have commercial value. When, in the jurisprudence of the day the
need for penal laws for punishment of unjust appropriation of electric current becomes apparent,
the legislator should provide them. The courts can not be called upon to supply the lack of legal
provisions by analogous applications of rules not made to fit the circumstance. In penal law the
principle nulla poena sine is supreme.

These authorities fully support my contention that electricity is not stealable under the provisions of the
Spanish Penal Code. They also support the proposition that even if electricity is a tangible thing, like water,
and therefore stealable, the crime, if any, committed by the defendant in this case is not larceny, because
the company had just as much electricity after the illegal act as it had before. In other words, it has lost no
electricity. Having lost no electricity it can not charge anyone with stealing it. If a thousand lights were
burned, no more electricity would be consumed than if one light were burned, just as, no more water is
consumed in running a thousand water wheels placed one below another than in running one. Just as
much water flows over the thousandth wheel as flowed over the first. In the same manner there is just as
much electricity flowing out of the thousandth light as flowed into the first. Just as in using the water,
nothing is consumed but the head, the quantity of water remaining the same, so, in using electricity, nothing
is consumed but the head (the pressure, the potential, the electro-motive force), theelectricity itself
remaining undiminished. No electricity was taken. It was used and then returned to its owner.

For a clear understanding of this problem, and a logical and philosophical, as well as legal, solution thereof,
we must never, for a moment, forget the fact that the real contract between the company and the defendant
was one to furnish labor and services; a lease, if you please, of an agency, a contract of precisely the same
nature as one by which the company lets to the defendant the use of one of the company's workmen to
turn by hand, in the defendant's own house, an electrical machine and thereby produce light for defendant's
use. This is the crux of the whole question. While no contract was proved we know of necessity, from the
principles which underlie and govern electric lighting, that the contract must have been as above stated. If
the defendant should require the laborer thus placed in his house to work overtime and should not pay the
company therefor, thus taking advantage of the situation, there would be no larceny. To be sure, the
defendant would return the workman to the company fatigued and reduced in strength by reason of the
overtime he had required him to put in, but it would be the same workman which he had received. It is this
which shows the absurdity of the claim that the defendant in this case is guilty of larceny. The company
never intended to sell the workman to the defendant and the defendant never expected to buy him. It was
the use that was the basis of the contract. In exactly the same manner the company never intended to sell
electricity to the defendant and the defendant never intended to buy electricity. The basis of the contract
was the use of electricity. Just as the laborer was returned by defendant to the company fatigued and
reduced in strength by reason of the overtime which the defendant had wrongfully and illegally required him
to put in, so the current of electricity was returned by the defendant to the company fatigued and reduced in
strength by reason of the lights which the defendant had wrongfully and illegally caused it to supply; and
just as, notwithstanding the reduction in strength, it was the same identical workman returned that was sent
out, so the electric current returned to the company after the illegal use by defendant was the same
identical current which the company had furnished him. Where then, is the foundation for the charge of
larceny?

Let us now see what are the results of the holding of the court that electricity is subject to larceny.

The Spanish Law of the Philippine Islands has not been changed by any legislative enactment. A cosa
mueble is the same now as it was in the days of the Partidas. No legislature has changed the law of
larceny as it came from the jurisprudence of Rome and Spain. Nor has any legislature touched the law of
the personal chattel to give it a new definition or one which changes its ancient signification. Its present
definition is the same as that given by Sanchez Roman, Pacheco, Scaevola, Manresa, and Groizard as
drawn form the decrees of kings and acts of legislatures. That definition having been framed by
the lawmaking power of Spain, from the Partidas down to the Penal Code, it ought not to be changed by
any agency short of the lawmaking power of the United States. The substance and nature of crime ought
not to be changed by courts in a country where crimes are purely statutory. It has the appearance of a
usurpation of the functions of the lawmaking body, an unwarrantable assumption of the legislative
attributes.

The holding of the court in this case is, in effect, an amendment to the Penal Code. It has changed
materially the definition of a cosa mueble and, therefore, of the crime of larceny, as made by the lawmaking
bodies of Spain and the United States. I do not assert that the courts have not the right to determine
whether a given set of facts do or do not fulfill the definition of a given crime. What I do say is that the very
greatest care should be exercised in cases which may involved as a consequence of their decision the
changing of the scope of the substantive law of crime. The fact, admitted by all, that whether the
phenomenon which we call electricity really is a "cosa mueble," under the accepted definition of that
word, is open to doubt, should give us pause. Before holding that electricity is a cosa mueble, the fact
whether it is or not ought to be substantially free from doubt, This is particularly true in a country where
crimes are purely statutory, and in which, therefore, the legislature is presumed to have had in mind in
framing its definition of "cosas muebles" only such chattels, or those of the same nature, as were known to
the legislature at the time it acted. At the time the Penal Code became operative substantially nothing was
known by those who created if of the phenomenon, electricity. It is more than clear that at the time of the
enactment of the laws relating to larceny, of which article 517 of the Penal Code is a reproduction, nothing
whatever was known of that phenomenon. We have, therefore, no means of knowing what would have
been the legislative action in relation thereto. The legislative authorities of those times might have treated it
as substantially every other legislative body has treated it that has touched the question; namely, as a thing
separate and distinct from chattels, and unlawful acts affecting it and its use as crimes distinct from the
crimes against tangible property, such as robbery and larceny. In this jurisdiction the legislature is the only
authority for the definition of the crime. Where a new situation arises by virtue of discoveries which reveal
agencies never known before, and whose real nature is unknown even to the discoverers the legislature is
the body to take the initiative in determining the position of such agencies among the affairs of men, unless
they clearly fall within a class already established and defined; and it appears that some legislative bodies
have done that very thing and have passed special laws touching the place which should be given
electricity in the civil and criminal law. This was done here by the passage of the ordinance of the city of
Manila. The fact that legislatures in many jurisdictions have enacted special laws relative to electricity is the
very clearest proof that there was the gravest doubt among learned men of the applicability of existing laws
to acts committed against the rights of producers of electricity. The legislature of the Islands having acted
through the council of the city of Manila and by such action made illegal acts against the producers of
electricity a special crime wholly distinct from larceny, such act should be conclusive on this court as to the
legislative intent.

Section 649 of the Revised Ordinance of the city of Manila provides in part:

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 telephone or telegraph service;
and the existence in any building or premises of any such device shall, in the absence of
satisfactory explanation, be deemed sufficient evidence of such use by the person benefiting
thereby.

This section was enacted under the authority of the Legislature of the Philippine Islands, as was section
930 of said ordinances, by the terms of which one was violates the provisions of section 649 "shall be
punished by a fine of not more than two hundred pesos or by imprisonment for not more than six months,
or both such fine and imprisonment, in the discretion of the court, for each offense."

Articles 517 and 518 of the Penal Code read in part as follows:

ART. 517. The following are guilty of theft:

1. Those who, with intent of gain and without violence or intimidation against the person or force
against the things, shall take another's personal property (cosa mueble) without the owner's
consent.

xxx xxx xxx

ART. 518. Those guilty of theft shall be punished:

1. With the penalty of presidio correccional in its medium and maximum degrees if the value of the
stolen property should exceed 6,250 pesetas.

2. With the penalty of presidio correccional in its minimum and medium degrees should it not
exceed 6,250,pesetas and be more than 1,250 pesetas.

3. With arresto mayor in its medium degree to presidio correccional in its minimum degree should it
not exceed 1,250 pesetas and be more than 250 pesetas.

4. With arresto mayor to its fullest extent should it be more than 25 but not exceed 250 pesetas.

5. With arresto mayor in its minimum and medium degrees if it should not exceed 25 pesetas; if
exceeding 25 and not more than 65 pesetas, a theft of nutritious grains, fruits, or wood shall be
punished with a fine of room 325 to 500 pesetas.

Under subdivision 2 of the article last quoted, which is the paragraph under which the accused is punished
in the case at bar, the penalty prescribed is from six months and one day to four years and two months.
The accused in this case was actually sentenced to one year eight months and twenty-one days of presidio
correccional, to indemnify the company in the sum of P865.26, to the corresponding subsidiary
imprisonment in case of failure to pay said sum, and to the accessory penalties provided by law.

Having before us these two laws, we may now see to what untoward and unfortunate results the majority
opinion leads us in holding that a person who commits a crime against an electric current can be punished
under either, or both, of two different statutes. As we have seen already there is, relatively speaking, an
enormous difference in the penalties prescribed by said law. That imposed by the ordinance of the city of
Manila can not in any event exceed six months' imprisonment and a fine of P200; while that provided in the
Penal Code may be as severe as four years and two months imprisonment, with indemnity equal to the
value of the property stolen, with corresponding subsidiary imprisonment in case of nonpayment. To this
must be added all those accessory penalties prescribed by the code, such as suspension from any public
office, profession or trade, and from the right the suffrage. To me it is wholly unbelievable that, under the
circumstances of this case and the nature of the offense itself, it was the intention of the legislative
authority to permit the concurrent existence of two laws, both in force, punishing the same crime with
penalties which bear no relation to each other and which are widely different in severity. Note what results
from such a holding. Prosecution under the ordinance must be in the municipal court. Prosecution under
the Penal Code may be in the municipal court or it may be and generally must be, as in this case, in the
Court of First Instance. But it is certain that, under the ordinance, every case may be prosecuted in the
municipal court, whatever the value of the electricity taken; or, if the value is sufficient, the prosecution may
be brought in the Court of First Instance. The selection of the court is left to the complaint. This means that
thecomplaint is able to say within certain limits what punishment shall be inflicted; for, if he desires that the
accused shall be lightly punished he will bring the action in the municipal court, which he always can do if
he wish, and if he desires to punish him very severely he will bring it in the Court of First Instance, which he
can generally do if he cares to. It is incoceivable that the legislature intended that such a condition should
exist. It is in violation of every sense of fairness, is against every rule of statutory construction, and is
clearly inimical to public policy. To assert that the complaining in which he shall prosecute the accused but
also, in effect, the crime of which he shall be charged, as the decision in this case holds in effect, is to
assert a proposition, the bare statement of which is its own completest refutation.

For these reasons the judgment of conviction should be reversed.

G.R. No. 18520 September 26, 1922

INVOLUNTARY INSOLVENCY OF PAUL STROCHECKER, appellee,

vs.
ILDEFONSO RAMIREZ, creditor and appellant.
WILLIAM EDMONDS, assignee.

Lim & Lim for appellant.

Ross & Lawrence and Antonio T. Carrascoso, jr., for the Fidelity & Surety Co.

ROMUALDEZ, J.:
The question at issue in this appeal is, which of the two mortgages here in question must be given
preference? Is it the one in favor of the Fidelity & Surety Co., or that in favor of Ildefonso Ramirez. The first
was declared by the trial court to be entitled to preference.

In the lower court there were three mortgagees each of whom claimed preference. They were the two
above mentioned and Concepcion Ayala. The latter's claim was rejected by the trial court, and from that
ruling she did not appeal.

There is no question as to the priority in time of the mortgage in favor of the Fidelity & Surety Co. which
was executed on March 10, 1919, and registered in due time in the registry of property, that in favor of the
appellant being dated September 22, 1919, and registered also in the registry.

The appellant claims preference on these grounds: (a) That the first mortgage above-mentioned is not valid
because the property which is the subject-matter thereof is not capable of being mortgaged, and the
description of said property is not sufficient; and (b) that the amount due the appellant is a purchase price,
citing article 1922 of the Civil Code in support thereof, and that his mortgage is but a modification of the
security given by the debtor on February 15, 1919, that is, prior to the mortgage executed in favor of the
Fidelity & Surety Co.

As to the first ground, the thing that was mortgaged to this corporation is described in the document as
follows:

. . . his half interest in the drug business known as Antigua Botica Ramirez (owned by Srta. Dolores
del Rosario and the mortgagor herein referred to as the partnership), located at Calle Real Nos.
123 and 125, District of Intramuros, Manila, Philippine Islands.

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. All
personal property may be mortgaged. (Sec. 2, Act No. 1508.)

The description contained in the document is sufficient. The law (sec. 7, Act No. 1508) requires only a
description of the following nature:

The description of the mortgaged property shall be such as to enable the parties to the mortgage,
or any other person, after reasonable inquiry and investigation, to identify the same.

Turning to the second error assigned, numbers 1, 2, and 3 of article 1922 of the Civil Code invoked by the
appellant are not applicable. Neither he, as debtor, nor the debtor himself, is in possession of the property
mortgaged, which is, and since the registration of the mortgage has been, legally in possession of the
Fidelity & Surety Co. (Sec. 4, Act No. 1508; Meyers vs. Thein, 15 Phil., 303.)

In no way can the mortgage executed in favor of the appellant on September 22, 1919, be given effect as
of February 15, 1919, the date of the sale of the drug store in question. On the 15th of February of that
year, there was a stipulation about a persons security, but not a mortgage upon any property, and much
less upon the property in question.

Moreover, the appellant cannot deny the preferential character of the mortgage in favor of the Fidelity &
Surety Co. because in the very document executed in his favor it was stated that his mortgage was
a second mortgage, subordinate to the one made in favor of the Fidelity & Surety Co.

The judgment appealed from is affirmed with costs against the appellant. So ordered.

Araullo, C.J., Street, Malcolm, Avanceña, Villamor, Ostrand and Johns, JJ., concur.

The Lawphil Project - Arellano Law Foundation

G.R. No. 161811 April 12, 2006

THE CITY OF BAGUIO, MAURICIO DOMOGAN, and ORLANDO GENOVE, Petitioners,

vs.
FRANCISCO NIÑO, JOSEFINA NIÑO, EMMANUEL NIÑO, and EURLIE OCAMPO, Respondents.

DECISION

CARPIO MORALES, J.:

The Bureau of Lands awarded on May 13, 1966 to Narcisa A. Placino (Narcisa) a parcel of land identified
as Lot No. 10 (the lot) located at Saint Anthony Road, Dominican-Mirador Barangay, Baguio City.

Francisco Niño (Niño), one of the herein respondents, who has been occupying the lot, contested the
award by filing a Petition Protest on December 23, 1975 before the Bureau of Lands.

The Director of Lands dismissed the Petition Protest by Order of November 11, 1976.

Niño appealed the dismissal all the way to the Supreme Court but he did not succeed.

The decision of the Director of Lands dated November 11, 1976 having become final and executory,1 the
then-Executive Director of the Department of Environment and Natural Resources-Cordillera Autonomous
Region (DENR-CAR), on petition of Narcisa, issued an Order of Execution dated February 1, 1993
directing the Community Environment and Natural Resources Office (CENRO) Officer to enforce the
decision "by ordering Petitioner Niño and those acting in his behalf to refrain from continuously occupying
the area and remove whatever improvements they may have introduced thereto."2

Attempts to enforce the Order of Execution failed, prompting Narcisa to file a complaint for ejectment
before the Baguio City Municipal Trial Court in Cities (MTCC). The MTCC dismissed Narcisa’s complaint,
however, by Order3of August 7, 1996.

Narcisa’s counsel, Atty. Edilberto Claravall (Atty. Claravall), later petitioned the DENR-CAR for the issuance
of a Special Order authorizing the City Sheriff of Baguio, the City Police Station, and the Demolition Team
of the City Government to demolish or remove the improvements on the lot introduced by Niño. The DENR-
CAR denied the petition, citing lack of jurisdiction over the City Sheriff of Baguio, the City Police Station,
and the Demolition Team of the City Government. The DENR-CAR also invoked Section 14 (now Section
10 (d)) of Rule 39 of the Rules of Court.4

Atty. Claravall thereupon moved to have the Order of Execution previously issued by the DENR-CAR
amended, which was granted. As amended, the Order of Execution addressed to the CENRO Officer read:

WHEREFORE, pursuant to the provisions of Section 1844 of the Revised Administrative Code as amended
by Act No. 3077, you are hereby enjoined to enforce the aforementioned order, with the assistance upon
request of the City Sheriff of Baguio City, the Demolition Team of Baguio City and the Baguio City Police
Station, by Ordering Petitioner Niño and those acting in his behalf to refrain from continuously occupying
the area and remove whatever improvements they may have introduced thereto.

xxxx

SO ORDERED.5 (Emphasis and underscoring supplied)

The DENR-CENRO, together with the Demolition Team of Baguio City and the Baguio City police, desisted,
however, in their earlier attempt to enforce the Amended Order of Execution.6

On July 16, 1997, the Demolition Team of Baguio City headed by Engineer Orlando Genove and the
Baguio City Police, on orders of then Baguio City Police Officer-In-Charge (OIC) Donato Bacquian, started
demolishing the houses of Niño and his herein co-respondents.7

The demolition was, however, temporarily stopped upon the instructions of DENR-CENR Officer Guillermo
Fianza, who later advised Niño that the DENR-CENRO would implement the Amended Order of Execution
on August 4, 1997.8

Niño and his wife Josefina Niño thereupon filed a Petition 9 for Certiorari and Prohibition with Prayer for
Temporary Restraining Order before the Regional Trial Court (RTC) of Baguio City against Guillermo
Fianza, Teofilo Olimpo of the DENR-CENRO, Mayor Mauricio Domogan (hereafter petitioner), Atty.
Claravall, Engr. Orlando Genove (hereafter petitioner), Rolando Angara, and Police Officer Donato
Bacquian challenging the Amended Order of Execution issued by the DENR-CENRO. 1avvphil.net

The Niño spouses later filed an Amended Petition10 by impleading Emmanuel Niño and Eurlie Ocampo as
therein co-petitioners and the City of Baguio (hereafter petitioner) and Narcisa as therein additional
respondents, and further praying for damages.

Branch 6 of the Baguio RTC dismissed the petition of Niño et al. (hereafter respondents) for lack of
merit.11Respondents’ Motion for Reconsideration12 having been denied, they filed a Petition for
Review13 under Rule 42 of the Rules before the Court of Appeals.

By Decision14 of December 11, 2002, the Court of Appeals granted the Petition for Review, holding that
Sec. 10(d) of Rule 39 of the Rules reading:

SEC. 10. Execution of judgments for specific act.

xxxx

(d) Removal of improvements on property subject of execution. — When the property subject of the
execution contains improvements constructed or planted by the judgment obligor or his agent, the officer
shall not destroy, demolish or remove said improvements except upon special order of the court, issued
upon motion of the judgment obligee after due hearing and after the former has failed to remove the same
within a reasonable time fixed by the court. (Underscoring supplied)

applies.

Thus disposed the appellate court:

WHEREFORE, the instant appeal is hereby GRANTED and the Orders dated September 24, 1997 and
November 23, 1998 are hereby SET ASIDE. Public respondent City Mayor Mauricio Domogan thru the
Demolition Team and City Engineer’s Office are hereby ordered to cease and desist from enforcing the
amended order of executionissued by Oscar N. Hamada, Regional Executive Director of the Department of
Environmental and Natural Resources, concerning the demolition or removal of the structures made by
petitioners until private respondent applied for a special order abovementioned with the proper court. 1avvphil.net

SO ORDERED.15 (Underscoring supplied)

Respondents filed before the appellate court an Ex-Parte Motion for Reconsideration 16 on January 9,
2003, alleging that some of the reliefs they prayed for in their petition were left unacted upon. 17 Petitioners
too filed a Motion for Reconsideration18 on January 28, 2003, raising the following grounds:

1. THE HONORABLE COURT FAILED TO CONSIDER THAT THE CITY MAYOR HAS THE
POWER TO ORDER THE DEMOLITION OF ILLEGALLY-BUILT STRUCTURES;

2. THE HONORABLE COURT GRAVELY ERRED IN GIVING DUE COURSE TO THE PETITION
FOR REVIEW;

3. THE HONORABLE COURT MISAPPLIED SEC. 10 (d), RULE 39 of the RULES OF

COURT.19(Underscoring supplied)

In support of the first ground, petitioners raised before the appellate court, in their Motion for
Reconsideration, for the first time, the power of the City Mayor to validly order the demolition of a structure
constructed without a building permit pursuant to Sec. 455(b) 3(vi) of the Local Government Code of 1991
in relation to the National Building Code of the Philippines.

Alleging that respondents built their house without the required entry and building permits, petitioners
argued that the City Mayor may order the demolition of a house without a special court order.20

The Court of Appeals denied both parties’ motions for reconsideration by Resolution 21 of December 17,
2003.

Hence, the present petition of the City of Baguio, Mayor Domogan (now a Congressman), and Orlando
Genove, faulting the appellate court:

1. . . . IN RULING THAT A SPECIAL COURT ORDER IS NEEDED FOR THE DEMOLITION OF

RESPONDENTS’ STRUCTURES;

2. . . . IN APPLYING SEC. 10(d) RULE 39 OF THE RULES OF COURT IN THIS CASE;

 3. . . . IN ENTERTAINING RESPONDENTS’ PETITION FOR REVIEW.22

The petition fails.

While it is noted that respondent’s appeal to the Court of Appeals was erroneously brought under Rule 42
of the Rules of Court, instead of under Rule 41, the RTC having rendered the questioned decision in the
exercise of its original, not appellate, jurisdiction, this Court overlooks the error in view of the merits of
respondents’ case.23

Petitioners’ contention that the enforcement of the Amended Order of Execution does not need a hearing
and court order which Sec. 10(d) of Rule 39 of the Rules of Court requires does not lie. That an
administrative agency which is clothed with quasi-judicial functions issued the Amended Order of Execution
is of no moment, since the requirement in Sec. 10 (d) of Rule 39 of the Rules of Court echoes the
constitutional provision that "no person shall be deprived of life, liberty or property without due process of
law, nor shall any person be denied the equal protection of the laws."24

Antipolo Realty Corporation v. National Housing Authority teaches:

In general, the quantum of judicial or quasi-judicial powers which an administrative agency may exercise is
defined in the enabling act of such agency. In other words, the extent to which an administrative entity may
exercise such powers depends largely, if not wholly, on the provisions of the statute creating or
empowering such agency.25(Underscoring supplied)

There is, however, no explicit provision granting the Bureau of Lands (now the Land Management Bureau)
or the DENR (which exercises control over the Land Management Bureau) the authority to issue an order
of demolition26— which the Amended Order of Execution, in substance, is.

Indeed,

[w]hile the jurisdiction of the Bureau of Lands is confined to the determination of the respective rights of
rival claimants to public lands or to cases which involve the disposition of public lands, the power to
determine who has the actual, physical possession or occupation or the better right of possession
over public lands remains with the courts.

The rationale is evident. The Bureau of Lands does not have the wherewithal to police public lands. Neither
does it have the means to prevent disorders or breaches of peace among the occupants. Its power is
clearly limited to disposition and alienation and while it may decide disputes over possession, this is but in
aid of making the proper awards. The ultimate power to resolve conflicts of possession is recognized
to be within the legal competence of the civil courts and its purpose is to extend protection to the
actual possessors and occupants with a view to quell social unrest.27 (Emphasis added)

Consequently, this Court held:28

x x x the power to order the sheriff to remove improvements and turn over the possession of the
land to the party adjudged entitled thereto, belongs only to the courts of justice and not to the
Bureau of Lands.29 (Emphasis and underscoring supplied)

In fine, it is the court sheriff which is empowered to remove improvements introduced by respondents on,
and turn over possession of, the lot to Narcisa.
Petitioners’ invocation of the City Mayor’s authority under Sec. 455(b) 3(vi) of the Local Government Code
to order the demolition or removal of an illegally constructed house, building, or structure within the period
prescribed by law or ordinance and their allegation that respondents’ structures were constructed without
building permits30were not raised before the trial court. Petitioners having, for the first time, invoked said
section of the Local Government Code and respondents’ lack of building entry permits in their Motion for
Reconsideration of the Court of Appeals’ decision, it was correctly denied of merit, 31 it being settled that
matters, theories or arguments not brought out in the proceedings below will ordinarily not be considered
by a reviewing court as they cannot be raised for the first time on appeal.32

WHEREFORE, the petition is DISMISSED. The questioned Decision and Resolution of the Court of
Appeals areAFFIRMED.

No pronouncement as to costs.

SO ORDERED.

CONCHITA CARPIO MORALES

Associate Justice

WE CONCUR:

LEONARDO A. QUISUMBING
Associate Justice
Chairperson
ANTONIO T. CARPIO DANTE O. TINGA
Associate Justice Asscociate Justice

PRESBITERO J. VELASCO, JR.

Associate Justice

ATTE S TATI O N

I attest that the conclusions in the above Decision were reached in consultation before the case was
assigned to the writer of the opinion of the Court’s Division.

LEONARDO A. QUISUMBING
Associate Justice
Chairperson

C E RTI F I CATI O N

Pursuant to Article VIII, Section 13 of the Constitution, and the Division Chairman’s Attestation, it is hereby
certified that the conclusions in the above Decision were reached in consultation before the case was
assigned to the writer of the opinion of the Court.

ARTEMIO V. PANGANIBAN
Chief Justice
Footnotes

1 RTC records, pp. 8-9.

2 Id. at 16.

3 Id. at 8-11.

4 Section 10(d) of Rule 39 reads:

SEC. 10. Execution of judgments for specific act.

xxxx

(d) Removal of improvements on property subject of execution. — When the property

subject of the execution contains improvements constructed or planted by the judgment
obligor or his agent, the officer shall not destroy, demolish or remove said improvements
except upon special order of the court, issued upon motion of the judgment obligee after
due hearing and after the former has failed to remove the same within a reasonable time
fixed by the court.