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Leung Yee v. Strong Machinery [G.R. No. L-11658. February 15, 1918.

] First Division, Carson (J): 5 concur, 3 took no part. Facts: The "Compaia Agricola Filipina" bought rice-cleaning machinery from the 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 29 December 1913. On 14 January 1914, the "Compaia Agricola Filipina" executed a deed of sale of the land upon which the building stood to the machinery company, but this deed of sale, although executed in a public document, was not registered and made 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 "Compaia Agricola Filipina" executed another mortgage to Leung Yee upon the building, separate and apart from the land on which it stood, to secure payment of the balance of its indebtedness to Leung Yee 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, Leung Yee secured judgment for that amount, levied execution upon the building, bought it in at the sheriff's sale on or about the 18 December 1914, and had the sheriff's certificate of sale duly registered in the land registry of the Province of Cavite. At the time when the execution was levied upon the building, the 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, Leung Yee 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. The current action was instituted to recover possession of the building from the machinery company. The Court gave judgment in favor of the machinery company, relying upon Article 1473 and the fact that the company had its title to the building registered prior to the date of the registry of plaintiffs certificate. Hence the appeal. The Supreme Court affirmed the judgment with costs against the appellant. 1. Building separate from land does not affect character as real property; Registry of chattel mortgage does not affect character of the building and the machineries installed therein 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," mortgages of personal property executed in the manner and form prescribed in the statute. The building of strong materials in which the machinery was installed 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 registry of the instrument purporting to be a chattel mortgage of the building and the machinery installed therein, nor the annotation in that registry of the sale of the mortgaged property, had any effect whatever so far as the building was concerned. 2. Possession before sheriffs sale, not Article 1473 (on good faith), controlling as to ownership of property The ruling cannot be sustained on the ground of Article 1473, second paragraph, but on the ground that the agreed statement of facts discloses that neither the purchase of the building by 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. 3. Good faith an essential requisite of inscription of property in registry, even if not mentioned unlike in possession and title; Construction should not defeat the purpose of law Even if 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 in the registry, it remains an essential requisite of registration as it could not have been the intention of the legislator to base the

preferential right secured 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. 4. Construction of Article 1473 as to issue of good faith It 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 precious sale, the question is to be decided in accordance with the following paragraph. 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. 5. Bad faith: One cannot claim acquisition of title in good faith if knowledgeable of defect or lack of title 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 it afterwards develops that the title was in fact defective, and it appears that he had such notice of the defect as would have led to its discovery had he acted with that measure of precaution which may reasonably be required of a prudent man in a like situation. 6. Test of good faith Good faith, or the lack of it, is in its last analysis a question of intention; but in ascertaining the intention by which one is actuated on a given occasion, the Court is 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 vs. Miller, 108 Cal., 250; BreauxRenoudet, Cypress Lumber Co. vs. Shadel, 52 La. Ann., 2094-2098; Pinkerton Bros. Co. vs. Bromley, 119 Mich., 8, 10, 17.)

Punsalan v. vda. De Lacsamana [G.R. No. L-55729. March 28, 1983.] First Division, Melencio-Herrera (J): 5 concur Facts: Antonio Punsalan, Jr., was the former registered owner of a parcel of land consisting of 340 m2 situated in Bamban, Tarlac. In 1963, Punsalan mortgaged the land to PNB (Tarlac Branch) for P10,000.00, but for failure to pay said amount, the property was foreclosed on 16 December 1970. PNB (Tarlac Branch) was the highest bidder in said foreclosure proceedings. However, the bank secured title thereto only on 14 December 1977. In the meantime, in 1974, while the property was still in the alleged possession of Punsalan and with the alleged acquiescence of PNB (Tarlac Branch), and upon securing a permit from the Municipal Mayor, Punsalan constructed a warehouse on said property. Punsalan declared said warehouse for tax purposes for which he was issued Tax Declaration 5619. Punsalan then leased the warehouse to one Hermogenes Sibal for a period of 10 years starting January 1975. On 26 July 1978, a Deed of Sale was executed between PNB (Tarlac Branch) and Lacsamana over the property. This contract was amended on 31 July 1978, particularly to include in the sale, the building and improvement thereon. By virtue of said instruments, Lacsamana secured title over the property in her name (TCT 173744) as well as separate tax declarations for the land and building. On 22 November 1979, Punsalan commenced suit for "Annulment of Deed of Sale with Damages" against PNB and Lacsamana before the CFI Rizal, Branch XXXI, Quezon City, essentially impugning the validity of the sale of the building as embodied in the Amended Deed of Sale. The CFI dismissed the case on the ground of improper venue on 25 April 1980, finding that the warehouse allegedly owned and constructed by the plaintiff on the land of the PNB situated in the Municipality of Bamban, Province of Tarlac, which warehouse is an immovable property pursuant to Article 415 (1) of the New Civil Code; and, as such the

action of the plaintiff is a real action affecting title to real property which, under Section 2, Rule 4 of the New Rules of Court, must be tried in the province where the property or any part thereof lies. Punsalan filed a Motion for Reconsideration of the Order, which the Court denied on 1 September 1980. Hence, the petition for Certiorari. The Supreme Court denied the petition without prejudice to the refilling of the case by Punsalan in the proper forum; with cost against the petitioner. 1. Buildings are always immovable under the Code Buildings are always immovable under the Code. A building treated separately from the land on which it stood is immovable property and the mere fact that the parties to a contract seem to have dealt with it separate and apart from the land on which it stood in no wise changed its character as immovable property. 2. Annulment or rescission of sale of real property does not operate to efface the objective of recovering real property Even if one does not directly seek the recovery of title or possession of the property, his action for annulment of sale and his claim for damages are closely intertwined with the issue of ownership of the building which, under the law, is considered immovable property, the recovery of which is petitioner's primary objective. The prevalent doctrine is that an action for the annulment or rescission of a sale of real property does not operate to efface the fundamental and prime objective and nature of the case, which is to recover said real property. It is a real action. 3. Lack of allegation of improper venue does not warrant case to proceed as it also require other indispensable party The contention that the case should proceed as the respondent failed to allege improper venue and, therefore, issues had already been joined, is untenable. An indispensable party exist besides the parties in the Amended Contract of Sale, the validity of which is being questioned. It would be futile to proceed with the case against one respondent alone.

Standard Oil v. Jaramillo [G.R. No. 20329. March 16, 1923.] First Division, Street (J): 6 concur Facts: On 27 November 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 Standard Oil Company of New York by way of mortgage both the leasehold interest in said lot and the building which stands thereon. After said document had been duly acknowledged and delivered, Standard Oil caused the same to be presented to 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, Jaramillo opined that it was not 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. The cause was brought to the Supreme Court upon demurrer interposed by Joaquin Jaramillo, register of deeds of the City of Manila, to an original petition of the Standard Oil Company of New York, seeking a peremptory mandamus to compel the respondent to record in the proper register a document purporting to be a chattel mortgage executed in the City of Manila by Gervasia de la Rosa, Vda. de Vera, in favor of the Standard Oil Company of New York. The Supreme Court overruled the demurrer, and ordered that unless Jaramillo interposes a sufficient answer to the petition for mandamus by Standard Oil within 5 days of notification, the writ would be issued as prayed, but without costs. 1. Jaramillo, register of deeds, does not have judicial or quasi-judicial power to determine nature of document registered as chattel mortgage Section 198 of the Administrative Code, originally of Section 15 of the Chattel Mortgage Law (Act 1508 as amended by Act 2496), does not confer upon the register of deeds any authority whatever in respect to the "qualification," as the term is used in Spanish law, of chattel mortgages. 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 species of notice. Thus, it is duty for the register of deed to accept the proper fee and place the instrument on record, as his duties in respect to the registration of chattel mortgages 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. It may be noted that in an administrative ruling by James Ostrand, Judge of the fourth branch of CFI Manila (9th Judicial District) and later Supreme Court Justice, provided the same position that the 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. The issue where the chattel mortgage is held ineffective against third parties as the mortgaged property is real instead of personal is a question determine by the courts of justice and mot by the register of deeds. 2. Article 334 and 335 of the Civil Code does not supply absolute criterion on distinction between real and personal property for purpose of the application of the Chattel Mortgage Law Article 334 and 335 of the Civil Code supply no absolute criterion for discriminating between real property and personal property for purposes 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 be 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 the Supreme Court, in which the proper classification of one thing or another as real or personal property may be said to be doubtful. 3. Issue whether interest is in nature of real property not relevant to the issue of placing the document on record in Chattel Mortgage In Leung Yee vs. Frank L. Strong Machinery Co. and Williamson (37 Phil., 644), the Supreme 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. That decision is not decisive of the question before the Supreme Court, which has reference to the function of the register of deeds in placing the document on record.

Davao Sawmill v. Castillo [G.R. No. 40411. August 7, 1935.] En Banc, Malcolm (J): 4 concur Facts: The Davao Saw Mill is the holder of a lumber concession from the Government. 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 stipulated that on the expiration of the period agreed upon, or if the Lessee should leave or abandon the land leased, all the improvements and buildings introduced and erected by the Lessee shall pass to the exclusive ownership of the Lessor without any obligation on its part to pay any amount for said improvements and buildings; which do not include the machineries and accessories in the improvements. In another action (Davao Light & Power vs. Davao Saw Mill), a judgment was rendered in favor of Davao Light & Power; a writ of execution issued thereon, and the properties 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 Davao Light & Power, 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. It must be noted that on a number of occasions, Davao Sawmill 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 mortgagees. Instance on how controversy arose cant be found in the case facts. Impliedly, the issue on the character of the properties arose from the consummation of a sale following the execution of the judgment in the other action, Davao Light & Power v. Davao Sawmill The trial judge found that the properties were personal in nature, and as a consequence absolved the defendants from the complaint. The issue was raised in the Supreme Court involving the determination of the nature of said properties. The Supreme Court affirmed the judgment appealed from, with costs against the appellant. 1. Standard Oil ruling key to issue on the character of the property It must be pointed out that Davao Sawmill 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 Davao Sawmill is indicative of intention and impresses upon the property the character determined by the parties. In this connection the decision of the court in the case of Standard Oil Co. of New York vs. Jaramillo ([1923], 44 Phil., 630), whether obiter dicta or not, furnishes the key to such a situation. 2. Immobilization of machinery; when placed in plant by owner 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. The distinction rests 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. 3. Concrete immobilization of lessees machinery only if lease stipulates transfer of ownership on its termination Concrete immobilization takes place because of the express provisions of the lease which requires the putting in of improved machinery, deprived the tenant of any right to charge against the lessor the cost of 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. (Valdes v. Altagracia)

Board of Assessment Appeals v. City Treasurer [G.R. No. L-15334. January 31, 1964.] En Banc, Paredes (J): 8 concur, 1 concur in result, 1 took no part. Facts: On 20 October 1902, the Philippine Commission enacted Act 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 44 approved on 24 March 1903. Meralco 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. Meralco has constructed 40 of these steel towers within Quezon City, on land belonging to it. On 15 November 1955, City Assessor of Quezon City declared the aforesaid steel towers for real property tax under Tax Declaration 31992 and 15549. After denying Meralco's petition to cancel these declarations an appeal was taken by Meralco to the Board of Assessment Appeals of Quezon City, which required Meralco to pay the amount of P11,651.86 as real property tax on the said steel towers for the years 1952 to 1956. Meralco paid the amount under protest, and filed a petition for review in the Court of Tax Appeals which rendered a decision on 29 December 1958, ordering the cancellation of the said tax declarations and the City Treasurer of Quezon City to refund to Meralco the sum of P11,651.86. The motion for reconsideration having been denied, on 22 April 1959, the petition for review was filed. The Supreme Court affirmed the decision appealed from, with costs against the petitioners. 1. Definition of pole 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 mast." (Webster's New International Dictionary, 2nd Ed. p. 1907.) Poles made of two steel bars joined together by an interlacing metal rod, are called "poles" notwithstanding the fact that they are not made of wood. 2. Steel towers, which is within the term poles, are exempted from taxes under part II, paragraph 9 of Meralcos franchise Paragraph 9 of Meralcos franchise provides 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, a 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." In the present case, Meralco's steel supports consist 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 and their sole function is to support or carry such wires. 3. Interpretation of poles so as to include towers is not a novelty; US cases The conclusion 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 have denominated these steel 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. (See Steamons v. Dallas Power & Light Co. (Text) 212 S.W. 222, 224; 32-A Words and Phrases p. 365.; Salt River Valley Users' Ass'n. v. Compton 8 p. 2nd. 249-250; and Inspiration Consolidation Cooper Co. v. Bryan, 252 p. 1016) 4. Interpretation should not be restrictive and narrow to defeat the object for which the franchise granted The word "poles", as used in Act 484 and incorporated in the Meralco'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 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 50 years ago, it would be a departure to progress in technology. Steel towers, thus, can better effectuate the purposes for which Meralco's franchise was granted. 5. Tax law does not define real property; Article 415 of the Civil Code defines by enumeration The tax law does not provide for a definition of real property; but Article 415 of the Civil Code does, by stating which are immovable property. 6. Steel towers are not immovable property under paragraph 1, 3 and 5 The steel towers or supports 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 constructions 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 or 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 on the land in which the steel supports or towers are constructed. 7. It is the duty of the City Treasurer to refund; legal technicalities cannot be availed of Indulging in legal technicalities and niceties which do not help the City Treasurer any; for, factually, it was he who had insisted that respondent herein pay the real estate taxes, which Meralco 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. Thus, he cannot be sustained in his argument that as the City Treasurer is not the real party in interest, but Quezon City, which was not made a party to the suit, notwithstanding its capacity to sue and be sued, he should not be ordered to effect the refund. The question has not been raised in the lower court and, therefore, it cannot properly be raised for the first time on appeal.

Makati Leasing v. Wearever Textiles [G.R. No. L-58469. May 16, 1983.] Second Division, de Castro (J): 5 concur, 1 concur in result Facts: To obtain financial accommodations from Makati Leasing and Finance Corporation, Wearever Textile Mills, discounted and assigned several receivables with the former under a Receivable Purchase Agreement. To secure the collection of the receivables assigned, Wearever Textile executed a Chattel Mortgage over certain raw materials inventory as well as a machinery described as an Artos Aero Dryer Stentering Range. Upon Wearever's default, Makati Leasing filed a petition for extrajudicial foreclosure of the properties mortgage to it. However, the Deputy Sheriff assigned to implement the foreclosure failed to gain entry into Wearever's premises and was not able to effect the seizure of the machinery. Makati Leasing thereafter filed a complaint for judicial foreclosure with the CFI Rizal (Branch VI, Civil Case 36040). Acting on petitioner's application for replevin, the lower court issued a writ of seizure, the enforcement of which was restrained upon Wearever's filing of a motion for reconsideration. The lower court finally issued on 11 February 1981, an order lifting the restraining order for the enforcement of the writ of seizure and an order to break open the premises of Wearever to enforce said writ. The lower court reaffirmed its stand upon Wearever's filing of a further motion for reconsideration. On 13 July 1981, the sheriff enforcing the seizure order, repaired to the premises of Wearever and removed the main drive motor of the subject machinery. On 27 August 1981, the Court of Appeals, in certiorari and prohibition proceedings filed by Wearever, set aside the Orders of the lower court and ordered the return of the drive motor seized by the sheriff pursuant to said Orders, after ruling that the machinery in suit cannot be the subject of replevin, much less of a chattel mortgage, because it is a real property pursuant to Article 415 of the new Civil Code. The appellate court also rejected the argument that Wearever is estopped from claiming that the machine is real property by constituting a chattel mortgage thereon. A motion for reconsideration was filed by Makati Leasing, which was later denied. Makati Leasing brought the case to the Supreme Court by review by writ of certiorari. The Supreme Court reversed and set aside the decision and resolution of the Court of Appeals, and reinstated the orders of the lower court, with costs against Wearever Textiles. 1. Case not moot and academic with the return of the seized motor When the subject motor drive was returned, it was made unequivocably clear that said action was without prejudice to a motion for reconsideration of the Court of Appeals decision, as shown by the receipt duly signed by Wearever's representative. Considering that Makati Leasing has reserved its right to question the propriety of the CA' decision, the contention of Wearever that the petition has been mooted by such return may not be sustained. 2. Similar case; Estoppel applies to parties as having treated the house as personalty Although there is no specific statement referring to the subject house as personal property, yet by ceding, selling or transferring a property by way of chattel mortgage defendants-appellants could only have meant to convey the house as chattel, or at least, intended to treat the same as such, so that they should not now be allowed to make an inconsistent stand by claiming otherwise. Unlike in the Iya cases, Lopez vs. Orosa, Jr. & Plaza Theatre, Inc. & Leung Yee vs. F.L. Strong Machinery & Williamson, wherein third persons assailed the validity of the chattel mortgage, it is the defendants-appellants themselves, as debtors mortgagors, who are attacking the validity of the chattel mortgage in this case. The doctrine of estoppel therefore applies to the herein defendants appellants, having treated the subject house as personalty" (Tumalad v. Vicencio). One who has so agreed is estopped from denying the existence of the chattel mortgage. 3. Pronouncement on estoppel involving chattel mortgage applies to machinery There is no logical justification to exclude the rule out the present case from the application of the pronouncement in Tumalad v. Vicencio. If a house of strong materials may be considered as personal property for purposes of executing a chattel mortgage thereon as long as the parties to the contract so agree and no innocent third party will be prejudiced thereby, there is absolutely no reason why a machinery, which is movable in its nature and becomes immobilized only by destination or purpose, may not be likewise treated as such. 4. Chattel mortgage treating real property as personal property valid, as long as third parties are not prejudiced The characterization of the subject machinery as chattel is indicative of intention and impresses upon the property the character determined by the parties. As stated in Standard Oil v. Jaramillo, , it is undeniable that the parties to a contract may by agreement treat as personal property that which by nature would be real property, as long as no interest of third parties would be prejudiced thereby.

5. Equity prevents respondent to impugn the efficacy of the chattel mortgage Equity dictates that one should not benefit at the expense of another. Weareverf could not be allowed to impugn the efficacy of the chattel mortgage after it has benefited therefrom. 6. Machinery and Engineering Supplies v. CA not applicable; Tumalad case more in parity with case The case of Machinery and Engineering Supplies, Inc. v. CA, 96 Phil. 70, heavily relied upon by the Court of Appeals, is not applicable to the present case as the nature of the machinery and equipment involved therein as real properties never having been disputed nor in issue, and they were not the subject of a Chattel Mortgage. Undoubtedly, the Tumalad case bears more nearly perfect parity with the present case to be the more controlling jurisprudential authority.

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