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.

Lopez v. Orosa [G.R. Nos. L-10817-18. February 28, 1958.] En Banc, Felix (J): 10 concur. Facts: Enrique Lopez is a resident of Balayan, Batangas, doing business as Lopez-Castelo Sawmill. Sometime in May 1946, Vicente Orosa, Jr. invited Lopez to make an investment in the theatre business (Plaza Theatre, Inc.). Although Lopez expressed his unwillingness to invest in the business, he agreed to supply the lumber necessary for the construction of the proposed theatre and at Orosa's behest and assurance that the latter would be personally liable for any account that the said construction might incur, Lopez further agreed that payment therefor would be on demand and not cash on delivery basis. Pursuant to said verbal agreement, Lopez delivered the lumber for the theater on 17 May 1946, up to 4 December of the same year. The Plaza Theatre was erected on a piece of land with an area of 679.17 m2 formerly owned by Vicente Orosa, Jr., and was acquired by the corporation on 25 September 1946. The total cost of the materials amounted to P62,255.85, of which Lopez was paid only P20,848.50, thus leaving a balance of P41,771.35. Orosa and Belarmino Rustia, corporation president, promised Lopez to obtain a bank loan to satisfy the balance, to which assurance Lopez had to accede. Unknown to him, however, as early as November 1946, the corporation already got a loan for P30,000 from the PNB with the Luzon Surety Company as surety, and the corporation in turn executed a mortgage on the land and building in favor of said company as counter-security. As the land at that time was not yet brought under the operation of the Torrens System, the mortgage on the same was registered on 16 November 1946, under Act 3344. Subsequently, when the corporation applied for the registration of the land under Act 496, such mortgage was not revealed and thus OCT O-391 was correspondingly issued on October 25, 1947, without any encumbrance appearing thereon. Vicente Orosa, Jr. executed, on 17 March 1947, an alleged "deed of assignment" of his 420 shares of stock of the Plaza Theater, Inc., at P100 per share or with a total value of P42,000 in favor of the creditor, and as the obligation still remained unsettled, Lopez filed on 12 November 1947, a complaint with the CFI Batangas (Civil Case 4501, later R-57) against Vicente Orosa Jr. and

Plaza Theatre, Inc., praying that defendants be sentenced to pay him jointly and severally the sum of P41,771.35 with legal interest from the filing of the action; that in case defendants fail to pay the same, that the building and the land covered by OCT O-391 owned by the corporation be sold at public auction and the proceeds thereof be applied to said indebtedness; or that the 420 shares of the capital stock of the Plaza Theatre, Inc., assigned by Vicente Orosa, Jr., to said plaintiff be sold at public auction for the same purpose; and for such other remedies as may be warranted by the circumstances. Plaintiff also caused the annotation of a notice of lis pendens on said properties with the Register of Deeds. The surety company, in the meantime, upon discovery that the land was already registered under the Torrens System and that there was a notice of lis pendens thereon, filed on 17 August 1948, or within the 1-year period after the issuance of the certificate of title, a petition for review of the decree of the land registration court dated 18 October 1947, in order to annotate the lights and interests of the surety company over said properties. Opposition thereto was offered by Lopez, asserting that the amount demanded by him constituted a preferred lien over the properties of the obligors; that the surety company was guilty of negligence when it failed to present an opposition to the application for registration of the property; and that if any annotation of the rights and interest of said surety would ever be made, same must be subject to the lien in his favor. The two cases were heard jointly and in a decision dated 30 October 1952, the lower Court held that Orosa and the Plaza Theatre, Inc., were jointly liable for the unpaid balance of the cost of lumber used in the construction of the building and the plaintiff thus acquired the materialman's lien over the same; the lien being merely confined to the building and did not extend to the land on which the construction was made. Plaintiff tried to secure a modification of the decision in so far as it declared that the obligation of therein defendants was joint instead of solidary and that the lien did not extend to the land, but same was denied by order of the court of 23 December 1952. The matter was thus appealed to the Court of Appeals, which affirmed the lower court's ruling, and then to the Supreme Court. The Supreme Court affirmed the decision appealed from, with costs against appellant. 1. Building is separate and distinct from land While it is true that generally, real estate connotes the land and the building constructed thereon, it is obvious that the inclusion of the building, separate and distinct from the land, in the enumeration of what may constitute real properties could mean only one thing that a building is by itself an immovable property (cf. Leung Yee v. Strong Machinery). In the absence of any specific provision of law to the contrary, a building is an immovable property, irrespective of whether or not said structure and the land on which it is adhered to belong to the same owner. 2. Article 1923 (5); Lien charged to property for which credit was made A close examination of Article 1923 (5) of the Civil Code reveals that the law gives preference to unregistered refectionary credits only with respect to the real estate upon which the refection or work was made. This being so, the inevitable conclusion must be that the lien so created attaches merely to the immovable property for the construction or repair of which the obligation was incurred. In the case at bar, the lien for the unpaid value of the lumber used in the construction of the building attaches only to said structure and to no other property of the obligors. Thus, the materialman's lien could be charged only to the building for which the credit was made or which received the benefit of refection, the interest of the mortgagee over the land is superior and cannot be made subject to the said materialman's lien. Prudential Bank v. Panis [G.R. No. L-50008. August 31, 1987.] First Division, Paras (J): 4 concur. Facts: On 19 November 1971, Fernando A. Magcale and Teodula Baluyut Magcale secured a loan of P70,000.00 from Prudential Bank. To secure payment of this loan, the Magcales executed in favor of Prudential Bank a deed of Real Estate Mortgage over a 2-storey, semi-concrete residential building with warehouse space (total area of 263 sq.m.); and granting upon the mortgagee the right of occupancy on the lot where the property is erected. A rider is also included in the deed that in the event the Sales Patent on the lot is issued of Bureau of Lands, the Register of Deeds is authorized to hold the Registration until the mortgage is cancelled or annotate the encumbrance on the title upon authority from the Secretary of Agriculture and Natural Resources, which title with annotation release in favor of the mortgage. The Real Estate Mortgage was registered under the Provisions of Act 3344 with the Registry of Deeds of Zambales on 23 November 1971. Subsequently, the Magcales secured an additional loan from Prudential Bank, secured by another deed of Real Estate Mortgage registeed with the Registry of Deeds in Olongapo City, on 2 May 1973. On 24 April 1973, the Secretary of Agriculture issued Miscellaneous Sales Patent 4776 over the parcel of land, possessory rights over which were mortgaged to rudential Bank, in favor of the Magcales. On the basis of the Patent, and upon its transcription in the Registration Book of the Province of Zambales, OCT P-2554 was issued in the name of Fernando Magcale, by the Ex-Oficio Register of Deeds of Zambales, on 15 May 1972. For failure of the Magcales to pay their obligation to the Bank after it became due, the deeds of Real Estate Mortgage were extrajudicially foreclosed. Consequent to the foreclosure was the sale of the properties mortgaged to the bank as the highest bidder in a public auction sale conducted by the City Sheriff on 12 April 1978. The auction sale was held despite written request from the Magcales through counsel, dated 29 March 1978, for the City Sheriff to desist from going with the scheduled public auction sale. The issue was raised to the CF Zambales and Olongapo City which, on 3 November 1978, declared the deeds of Real Estate Mortgage as null and void. The bank filed a motion for reconsideration on 14 December 1978, which the court denied on 10 January 1979 for lack of merit. Hence, the petition. The Supreme Court modified the decision of the CFI Zambales & Olongapo, 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.

1. Building separate and distinct from the land In the enumeration of properties under Article 415 of the Civil Code of the Philippines, 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). 2. Building can be mortgaged apart from the land it is built; possessory rights may be validly transferred in a deed of mortgage While 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). 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]). 3. A valid real estate mortgage may be constituted on the building erected on the land belonging to another The original mortgage was executed (19 November 1971) before the issuance of the final patent (24 April 1972) and before the government was divested of its title to the land (15 May 1972), 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; Pea, "Law on Natural Resources", p. 49). In the case at bar, it is evident that the mortgage executed by Magcale on his own building which was erected on the land belonging to the government is to all intents and purposes a valid mortgage. 4. Public land act and RA 730 not violated in first mortgage As to restrictions appearing to the Magcales title; Sections 121, 122 and 124 of the Public Land Act refer to land already acquired under the Public Land Act or any improvement thereon. Section 2 of RA 730 refers 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. Both have no application to the assailed mortgage in the case at bar; as the former, the mortgage was executed before such eventuality, and the latter, it does not encumber nor alienate the land. 5. Mortgage made after issuance of Sales Patent an OCT prohibited; Estoppel does not give validating effect to a void contract As regards the second mortgage executed, 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 RA 730, and is therefore null and void. Even if the title was voluntary surrendered to the bank for the mortgage to be annotated without the prior approval of the Ministry of Natural Resources; 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 seeks to preserve (Gonzalo Puyat & Sons, Inc. vs. De los Amas and Alino, supra; Arsenal vs. IAC, 143 SCRA 54 [1986]). Such does not, however, preclude new contracts that may be entered into in accordance with the requirements of the law. Any new transaction, however, would be subject to whatever steps the Government may take for the reversion of the land in its favor. 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; Breaux-Renoudet, Cypress Lumber Co. vs. Shadel, 52 La. Ann., 2094-2098; Pinkerton Bros. Co. vs. Bromley, 119 Mich., 8, 10, 17.) Bicerra v. Teneza [G.R. No. L-16218. November 29, 1962.] En Banc, Makalintal (J): 10 concur. Facts: The Bicerras are supposedly the owners of the house (PhP 20,000) built on a lot owned by them in Lagangilang, Abra; which the Tenezas forcibly demolished in January 1957, claiming to the owners thereof. The materials of the house were placed in the custody of the barrio lieutenant. The Bicerras filed a complaint claiming actual damages of P200, moral and consequential damages amounting to P600, and the costs. The CFI Abra dismissed the complaint claiming that the action was within the exclusive (original) jurisdiction of the Justice of the Peace Court of Lagangilang, Abra. The Supreme Court affirmed the order appealed. Having been admitted in forma pauperis, no costs were adjudged.

1. House is immovable property even if situated on land belonging to a different owner; Exception, when demolished A house is classified as immovable property by reason of its adherence to the soil on which it is built (Article 415, paragraph 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. 2. Recovery of damages not exceeding P2,000 and involving no real property belong to the Justice of the Peace Court The complaint is for recovery of damages, the only positive relief prayed for. Further, a declaration of being the owners of the dismantled house and/or of the materials 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. As this is a case for recovery of damages where the demand does not exceed PhP 2,000 and that there is no real property litigated as the house has ceased to exist, the case is within the jurisdiction of the Justice of the Peace Court (as per Section 88, RA 296 as amended) and not the CFI (Section 44, id.) Evangelista v. Alto Surety [G.R. No. L-11139. April 23, 1958.] En Banc, Concepcion (J): 9 concur Facts: On 4 June 1949, Santos Evangelista instituted Civil Case No. 8235 of the CFI Manila (Santos Evangelista vs. Ricardo Rivera) for a sum of money. On the same date, he obtained a writ of attachment, which was levied upon a house, built by Rivera on a land situated in Manila and leased to him, by filing copy of said writ and the corresponding notice of attachment with the Office of the Register of Deeds of Manila, on 8 June 1949. In due course, judgment was rendered in favor of Evangelista, who, on 8 October 1951, bought the house at public auction held in compliance with the writ of execution issued in said case. The corresponding definite deed of sale was issued to him on 22 October 1952, upon expiration of the period of redemption. When Evangelista sought to take possession of the house, Rivera refused to surrender it, upon the ground that he had leased the property from the Alto Surety & Insurance Co., Inc. and that the latter is now the true owner of said property. It appears that on 10 May 1952, a definite deed of sale of the same house had been issued to Alto Surety, as the highest bidder at an auction sale held, on 29 September 1950, in compliance with a writ of execution issued in Civil Case 6268 of the same court (Alto Surety & Insurance vs. Maximo Quiambao, Rosario Guevara and Ricardo Rivera)" in which judgment, for the sum of money, had been rendered in favor of Alto Surety. Hence, on 13 June 1953, Evangelista instituted an action against Alto Surety and Ricardo Rivera, for the purpose of establishing his title over said house, and securing possession thereof, apart from recovering damages. After due trial, the CFI Manila rendered judgment for Evangelista, sentencing Rivera and Alto Surety to deliver the house in question to Evangelista and to pay him, jointly and severally, P40.00 a month from October, 1952, until said delivery, plus costs. On appeal, the decision was reversed by the Court of Appeals, which absolved Alto Surety from the complaint, upon the ground that, although the writ of attachment in favor of Evangelista had been filed with the Register of Deeds of Manila prior to the sale in favor of Alto Surety, Evangelista did not acquire thereby a preferential lien, the attachment having been levied as if the house in question were immovable property, although, in the opinion of the Court of Appeals, it is "ostensibly a personal property." As such, the Court of Appeals held, "the order of attachment . . . should have been served in the manner provided in subsection (e) of section 7 of Rule 59," of the Rules of Court. Evangelista filed an appeal by Certiorari with the Supreme Court. The Supreme Court reversed the decision of the Court of Appeals, and another one entered affirming that of the CFI Manila, with the costs against Alto Surety & Insurance Co. 1. House is not personal, but immovable property The house is not personal property, much less a debt, credit or other personal property not capable of manual delivery, but immovable property. As explicitly held, in Laddera vs. Hodges (48 OG 5374), "a true building (not merely superimposed on the soil) is immovable or real property, whether it is erected by the owner of the land or by a usufructuary or lessee. This is the doctrine in Leung Yee vs. Strong Machinery Company, 37 Phil., 644. The opinion that the house of Rivera should have been attached in accordance with subsection (c) of said section 7, as "personal property capable of manual delivery, by taking and safely keeping in his custody", for it declared that "Evangelista could not have validly purchased Ricardo Rivera's house from the sheriff as the latter was not in possession thereof at the time he sold it at a public auction is untenable. 2. House may be considered personal property in a deed of chattel mortgage, but view is limited to parties Parties to a deed of chattel mortgage may agree to consider a house as personal property for purposes of said contract (Luna vs. Encarnacion, 48 OOG 2664; Standard Oil Co. of New York vs. Jaramillo, 44 Phil., 630; De Jesus vs. Juan Dee Co., Inc., 72 Phil., 464). However, this view is good only insofar as the contracting parties are concerned. It is based, partly, upon the principle of estoppel. Neither this principle, nor said view, is applicable to strangers to said contract. 3. House is not personal property even if subject to chattel mortgage; Rules of execution strict on the character of the properties as real and personal notwithstanding agreement of parties The rules on execution do not allow, and should not be interpreted as to allow, the special consideration that parties to a contract may have desired to impart to real estate as personal property, when they are not ordinarily so. Sales on execution affect the public and third persons. The regulation governing sales on execution are for public officials to follow. The form of proceedings prescribed for each kind of property is suited to its character, not to the character which the parties have given to it or desire to give it. The regulations were never intended to suit the consideration that parties, may have privately given to the property levied upon. Enforcement of regulations would be difficult were the convenience or agreement of private parties to determine or govern the nature of the proceedings (Manarang v. Ofilada) 4. House of mixed material levied upon on execution is real property The house of mixed materials levied upon on execution, although subject of a contract of chattel mortgage between the owner and a third person, is real property within the purview of Rule 39, section 16, of the Rules of Court as it has become a permanent fixture on the land, which is real property. (Manarang v. Ofilada, citing various sources).

5. Foregoing consideration apply to conditions for levy of attachment The foregoing considerations apply, with equal force, to the conditions for the levy of attachment, for it similarly affects the public and third persons. 6. Evidence; Conclusion, that lack of proof that the writ or notice of attachment to have been served leads to such not having been served, is inaccurate Considering that neither the pleadings, nor the briefs in the Court of Appeals, raised an issue on whether or not copies of the writ of attachment and notice of attachment had been served upon Rivera; that the defendants had impliedly admitted that Rivera had received copies of said documents; and that, for this reason, evidently, no proof was introduced thereon, the Court held that the finding of the Court of Appeals to the effect that said copies had not been served upon Rivera is based upon a misapprehension of the specific issues involved therein and goes beyond the range of such issues, apart from being contrary to the admission by the parties, and that, accordingly, a grave abuse of discretion was committed in making said finding, which is, furthermore, inaccurate. Associated Insurance & Surety v. Iya [G.R. Nos. L-10837-38. May 30, 1958.] En Banc, Felix (J): 9 concur Facts: Spouses Adriano and Lucia A. Valino were the owners and possessors of a house of strong materials constructed on Lot 3, Block 80 of the Grace Park Subdivision in Caloocan, Rizal, which they purchased on installment basis from the Philippine Realty Corporation. On 6 November 1951, to enable her to purchase on credit rice from the NARIC, Lucia Valino filed a bond (P11,000.00; AISCO Bond 971) subscribed by the Associated Insurance & Surety Co. and as counter-guaranty therefor, the Valinos executed an alleged chattel mortgage on the aforementioned house in favor of the surety company, which encumbrance was duly registered with the Chattel Mortgage Register of Rizal on 6 December 1951. It is admitted that at the time said undertaking took place, the parcel of land on which the house is erected was still registered in the name of the Philippine Realty Corporation. Having completed payment on the purchase price of the lot, the Valinos were able to secure on 18 October 1958, a certificate of title in their name (TCT 27884). Subsequently, however, or on 24 October 1952, the Valinos, to secure payment of an indebtedness in the amount of P12,000.00, executed a real estate mortgage over the lot and the house in favor of Isabel Iya, which was duly registered and annotated at the back of the certificate of title. Later, Lucia A. Valino failed to satisfy her obligation to the NARIC, the surety company was compelled to pay the same pursuant to the undertaking of the bond. The surety company demanded reimbursement from the Valinos, who failed to do so. The company foreclosed the chattel mortgage over the house as a consequence. A public sale was conducted thereafter by the Provincial Sheriff of Rizal on 26 December 1952, wherein the property was awarded to the surety company for P8,000.00, the highest bid received therefor. The surety company then caused the said house to be declared in its name for tax purposes (Tax Declaration 25128). Sometime in July 1953, the surety company learned of the existence of the real estate mortgage over the lot covered by TTC 26884 together with the improvements thereon; thus, said surety company instituted Civil Case 2162 with the CFI Manila naming Adriano and Lucia Valino and Isabel Iya, the mortgagee, as defendants. On the other hand, on 29 October 1953, Isabel Iya filed a civil action against the Valinos and the surety company (Civil Case 2504 with CFI Manila) praying for a decree of foreclosure of the land, building and improvements thereon to be sold at public auction and the proceeds applied to satisfy the demands; this pursuant to the contract of mortgage as the Valinos have failed to pay interest for more than 6 months already; the surety company included as it claims to have an interest on the residential house covered by said mortgage. The two cases were jointly heard upon agreement of the parties, who submitted the same on a stipulation of facts, after which the Court rendered judgment dated 8 March 1956, holding that the chattel mortgage in favor of the Associated Insurance & Surety was preferred and superior over the real estate mortgage subsequently executed in favor of Isabel Iya. It was ruled that as the Valinos were not yet the registered owner of the land on which the building in question was constructed at the time the first encumbrance was made, the building then was still a personalty and a chattel mortgage over the same was proper. However, as the mortgagors were already the owners of the lot at the time the contract with Isabel Iya was entered into, the building was transformed into a real property and the real estate mortgage created thereon was likewise adjudged as proper. The residential building was, therefore, ordered excluded from the foreclosure prayed for by Isabel Iya, although the latter could exercise the right of a junior encumbrancer. The spouses Valino were ordered to pay the amount demanded by said mortgagee or in their default to have the parcel of land subject of the mortgage sold at public auction for the satisfaction of Iya's claim. The Supreme Court reversed the decision of the lower court, recognized Isabel Iya's right to foreclose not only the land but also the building erected thereon, and ordered that the proceeds of the sale thereof at public auction (if the land has not yet been sold), be applied to the unsatisfied judgment in favor of Isabel Iya. The decision however is without prejudice to any right that the Associated Insurance & Surety may have against the Valinos on account of the mortgage of said building they executed in favor of said surety company. Without pronouncement as to costs. 1. Nature of property encumbered is the decisive factor in determination of preferential right The decisive factor in resolving the issue as to which of these encumbrances should receive preference over the other is the determination of the nature of the structure litigated upon, for where it be considered a personalty, the foreclosure of the chattel mortgage and the subsequent sale thereof at public auction, made in accordance with the Chattel Mortgage Law would be valid and the right acquired by the surety company therefrom would certainly deserve prior recognition; otherwise, appellant's claim for preference must be granted. 2. Building always immovable While it is true that generally, real estate connotes the land and the building constructed thereon, it is obvious that the inclusion of the building, separate and distinct from the land, in the enumeration of what may constitute real properties (Art. 415, new Civil Code) could only mean one thing: that a building is by itself an immovable property. Moreover, and in view of the absence of any specific provision to the contrary, a building is an immovable property irrespective of whether or not said structure and the land on which it is adhered to belong to the same owner." (Lopez vs. Orosa).

3. Building cannot be divested of character as realty when constructed on land belonging to another A building certainly cannot be divested of its character of a realty by the fact that the land on which it is constructed belongs to another. To hold it the other way, the possibility is not remote that it would result in confusion, for to cloak the building with an uncertain status made dependent on the ownership of the land, would create a situation where a permanent fixture changes its nature or character as the ownership of the land changes hands. 4. Execution of a chattel mortgage over a building invalid and a nullity As personal properties could only be the subject of a chattel mortgage (Section 1, Act 3952), the execution of the chattel mortgage covering a building is clearly invalid and a nullity. While it is true that said document was correspondingly registered in the Chattel Mortgage Register, this act produced no effect whatsoever for where the interest conveyed is in the nature of a real property, the registration of the document in the registry of chattels is merely a futile act. Thus, the registration of the chattel mortgage of a building of strong materials produce no effect as far as the building is concerned (Leung Yee vs. Strong Machinery Co., 37 Phil., 644). 5. No right acquired by chattel mortgage creditor who purchases real properties in an extrajudicial foreclosure sale A mortgage creditor who purchases real properties at an extrajudicial foreclosure sale thereof by virtue of a chattel mortgage constituted in his favor, which mortgage has been declared null and void with respect to said real properties, acquires no right thereto by virtue of said sale (De la Riva vs. Ah Keo, 60 Phil., 899). Navarro v. Pineda [G.R. No. L-18456. November 30, 1963.] En Banc, Paredes (J): 8 concur Facts: On 14 December 1959, Rufino G. Pineda and his mother Juana Gonzales (married to Gregorio Pineda), borrowed from Conrado P. Navarro, the sum of P2,550.00, payable 6 months after said date or on 14 June 1959. To secure the indebtedness, Rufino executed a document captioned "Deed of Real Estate and Chattel Mortgages ", whereby Juana Gonzales, by way of Real Estate Mortgage hypothecated a parcel of land, belonging to her, registered with, the register of Deeds of Tarlac, under TCT 25776, and Rufino G. Pineda, by way of Chattel Mortgage, mortgaged his 2-story residential house, having a floor area of 912 sq.m., erected on a lot belonging to Atty. Vicente Castro, located at San Roque, Tarlac, Tarlac; and 1 motor truck, registered in his name, under Motor Vehicle Registration Certificate A-171805. Both mortgages were contained in one instrument, which was registered in both the Office of the Register of Deeds and the Motor Vehicles Office of Tarlac. The Pinedas failed to pay the mortgage debt when it became due. They were granted an extension up to 30 June 1960, but they likewise failed to pay on the said day. They were granted another extension up to 30 July 1960, but they likewise failed and refused to pay. On 10 August 1960, Navarro filed a complaint for foreclosure of the mortgage and for damages, which consisted of liquidated damages in the sum of P500.00 and 12% per annum interest on the principal, effective on the date of maturity, until fully paid. On 24 February 1961, the lower court dismissed the complaint with regards to Gregorio Pineda; ordering Juana Gonzales and spouses Rufino Pineda and Ramona Reyes to pay Conrado Navarro the sum of P2,550 with 12% compounded interest plus P500 as liquidated damages and the cost of the suit from 14 June 1960 within 90 days from receipt of the copy of the decision, else the properties mentioned in the deed of real estate and chattel mortgage be sold to realize said mortgage debt in accordance with the pertinent provisions of Act 3135 and Article 14 of Act 1508; and ordering Rufino Pineda and Ramona Reyes to deliver the personal properties to the Provincial Sheriff of Tarlac immediately after the lapse of 90 days in default of such payment. The judgment was appealed directly to the Supreme Court, questioning the lower courts decision in holding the deed of real estate and chattel mortgages appended to the complaint valid, notwithstanding that the house of Rufino Pineda was made subject of the chattel mortgage for the reason that it is erected on a land that belongs to a third person. The Supreme Court affirmed the decision appealed from, with costs against appellants. 1. Building is immovable property Article 415 of the New Civil Code, in classifying a house as immovable property, makes no distinctions whether the owner of the land is or is not the owner of the building; the fact that the land belongs to another is immaterial, it is enough that the house adheres to the land; that in case of immovables by incorporation, such as houses, trees, plants, etc; the Code does not require that the attachment or incorporation be made by the owner of the land, the only criterion being the union or incorporation with the soil. A building is an immovable property, irrespective of whether or not said structure and the land on which it is adhered to, belong to the same owner (Lopez vs. Orosa, Leung Yee vs. Strong Machinery Co.). 2. Lower Courts Decision predicated on the doctrine of estoppel and not only on the ground that the house mortgaged was erected on the land which belonged to a third person The trial court did not predicate its decision declaring the deed of chattel mortgage valid solely on the ground that the house mortgaged was erected on the land which belonged to a third person, but also and principally on the doctrine of estoppel, in that "the parties have so expressly agreed" in the mortgage to consider the house as a chattel "for its smallness and mixed materials of sawali and wood". In the present case, Rufino Pineda grouped the house with the truck which is inherently a movable property. The house which was not even declared for taxation purposes was small and made of light construction materials: G.I. sheets roofing, sawali and wooden walls and wooden posts; built on land belonging to another. Clearly, the house in question was treated as personal or movable property, by the parties to the contract themselves. 3. Property may have a character different from that imputed to it by parties in a contract, but such property remains in its actual character as regards third persons who are not parties in the contract; Summary of relevant cases In construing Arts. 334 and 335 of the Spanish Civil Code (corresponding to Arts. 415 and 416, N.C.C.), for purposes of the application of the Chattel Mortgage Law, it was held that under certain conditions, a property may have a 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 (Standard Oil vs. Jaranillo). "There can not be any question that a building of mixed materials may be the subject of a chattel mortgage, in which case, it is considered as between the parties as personal property. The matter depends on the circumstances and the intention of the parties. Personal property may retain its character as such where it is so agreed by the parties interested even though annexed to the realty". (42 Am. Jur. 209-210, cited in Manarang, et al. vs. Ofilada, et al.). The view that parties to a deed of chattel mortgage may agree to consider a house as personal property for the purposes of said contract, is good only insofar as the contracting parties are concerned. It is based, partly, upon the principles of estoppel (Evangelista vs. Alto Surety). In a case, a mortgaged house built on a rented land, was held to be a personal property not only because the deed of mortgage considered. it as such, but also because it did not form an integral part of the land (Evangelista vs. Abad, [CA]), for it is now well settled that an object placed on land by one who has only a temporary right to the same, such as a lessee or usufructuary, does not become immobilized by attachment (Valdez vs. Central Altagracia, cited in Davao Sawmill vs. Castillo). Hence, if a house belonging to a person stands on a rented land belonging to another person, it may be mortgaged as a personal property if so stipulated in the document of mortgage. It should be noted, however, that the principle is predicated on statements by the owner declaring his house to be a chattel, a conduct that may conceivably estop him from subsequent claiming otherwise (Ladera, et al. vs. C.W. Hodges, et al., [CA]). The doctrine, therefore, gathered from these cases is that although in some instances, a house of mixed materials has been considered as a chattel between the parties and that the validity of the contract between them, has been recognized, it has been a constant criterion nevertheless that, with respect to third persons, who are not parties to the contract, and specially in execution proceedings, the house is considered as an immovable property (Art. 1431, New Civil Code). 4. Cases cited are not applicable The cases cited by appellants are not applicable to the present case. The Iya cases refer to a building or a house of strong materials, permanently adhered to the land, belonging to the owner of the house himself. In the case of Lopez vs. Orosa, the subject building was a theater, built of materials worth more than P62,000.00 attached permanently to the soil. In these two cases and in the Leung Yee Case, third persons assailed the validity of the deed of chattel mortgages; in the present case, it was one of the parties to the contract of mortgages who assailed its validity. 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. Manarang v. Ofilada [G.R. No. L-8133. May 18, 1956.] En Banc, Labrador (J): 10 concur Facts: On 8 September 951, Lucia D. Manarang obtained a loan of P200 from Ernesto Esteban, and to secure its payment she executed a chattel mortgage over a house of mixed materials erected on a lot on Alvarado Street, Manila. As Manarang did not pay the loan as agreed upon, Esteban brought an action against her in the municipal court of Manila for its recovery, alleging that the loan was secured by a chattel mortgage on her property. Judgment having been entered in Esteban's favor, execution was issued against the same property mortgaged. Before the property could be sold Manarang offered to pay the sum of P277 (amount of the judgment of P250, the interest thereon, the costs, and the sheriff's fees), but the sheriff refused the tender unless the additional amount of P260 representing the publication of the notice of sale in two newspapers be paid also. So the Manarangs brought the suit to compel the sheriff to accept the amount of P277 as full payment of the judgment and to annul the published notice of sale. It is to be noted that in the complaint filed in the municipal court, a copy of the chattel mortgage is attached and mention made of its registration, and in the prayer request is made that the house mortgaged be sold at public auction to satisfy the debt. It is also important to note that the house mortgaged was levied upon at Manarang's request. The case facts do not mention circumstances of the case as decided in the municipal court to elevate the case to the Court of First Instance The Court of First Instance denied the petition, holding that although real property may sometimes be considered as personal property, the sheriff was in duty bound to cause the publication of the notice of its sale in order to make the sale valid or to prevent its being declared void or voidable. The Supreme Court affirmed the judgment appealed, with costs. 1. Building is real property, general rule; exceptions The general principle of law is that a building permanently fixed to the freehold becomes a part of it, that prima facie a house is real estate, belonging to the owner of the land on which it stands, even though it was erected against the will of the landowner, or without his consent. The general rule does not apply (1) where the improvement is made with the consent of the landowner, and pursuant to an understanding either expressed or implied that it shall remain personal property, or (2) to a building which is wrongfully removed from the land and placed on the land of the person removing it. 2. Criterion to determine property as personal or real Among the principal criteria for determining whether property remains personally or becomes realty are annexation to the soil, either actual or construction, and the intention of the parties. 3. Personal property may retain character by agreement Personal property may retain its character as such where it is so agreed by the parties interested even though annexed to the realty, or where it is affixed in the soil to be used for a particular purpose for a short period and then removed as soon as it has served its purpose. 4. Building of mixed materials may be subject of a chattel mortgage A building of mixed materials may be the subject of a chattel mortgage, in which case it is considered as between the parties as personal property. (see Luna vs. Encarnacion 48 OG No. 7, p. 2664; Standard Oil vs. Jaranillo, 44 Phil., 630; and De Jesus vs. Guan Dee Co. 72 Phil., 464). The matter depends on the circumstances and the intention of the parties. 5. Real and personal property are real and personal property as they mean ordinarily under the Rules of Execution The rules on execution do not allow, and should not be interpreted as to allow, the special consideration that parties to a contract may have desired to impart to real estate as personal property, when they are not ordinarily so. Sales on execution affect the public and third persons. The regulation governing sales on execution are for public officials to follow. The form of proceedings prescribed for each kind of property is suited to its character, not to the character which the parties have given to it or desire to give it. The regulations were never intended to suit the consideration that parties, may have privately given to the property levied upon. Enforcement of regulations would be difficult were the convenience or agreement of private parties to determine or govern the nature of the proceedings. 6. House of mixed material levied upon on execution is real property The house of mixed materials levied upon on execution, although subject of a contract of chattel mortgage between the owner and a third person, is real property within the purview of Rule 39, section 16, of the Rules of Court as it has become a permanent fixture on the land, which is real property. (42 Am. Jur. 199-200; Leung Yee vs. Strong Machinery Co., 37 Phil., 644; Republic vs. Ceniza, et al., 90 Phil., 544; Ladera, et al. vs. Hodges [C. A], 48 OG 5374.).

Piansay v. David [G.R. No. L-19468. October 30, 1964.] En Banc, Cocnepcion (J): 10 concur Facts: On 11 December 1943, Conrado S. David received a loan of P3,000 with interest at 12% per annum from Claudia B. Vda. de Uy Kim, and to secure the payment of the same, David executed a chattel mortgage on a house situated at 1259 Sande Street, Tondo, Manila. The chattel mortgage was registered with the Register of Deeds of Manila on 19 December 1948. On 10 February 1953, the mortgaged house was sold at public auction to satisfy the indebtedness to Claudia B. Vda. de Uy Kim, and the house was sold to Claudia B. Vda. de Uy Kim in the said foreclosure proceedings. On 22 March 1954, Vda. de Uy Kim sold the same house to Salvador Piansay for P5,000.00. On 22 November 1949, David mortgaged the said house to Marcos Mangubat. On 1 March 1956, Mangubat filed a complaint against David with the CFI Manila (Civil Case 29078), for the collection of the loan of P2,000. On 24 March 1956, the complaint was amended to include Piansay and Vda. de Uy Kim as party defendants and praying that auction sale of 10 February 1953 and the deed of absolute sale between Vda. De Uy Kim and Piansay be annulled. The Court ordered David to pay Mangubat the sum of P2,000, damages and attorneys fees; but dismissed the case against Uy Kim and Piansay. The case was appealed to the Court of Appeals, which affirmed the decision but setting aside the award of damages in favor of Uy Kim. In the execution of Civil Case 29078, which was affirmed by the Court of Appeals (CA-GR 21797-R), the house which had been bought by Uy Kim at the foreclosure proceedings and sold by her to Piansay was levied upon at the instance of Mangubat. To prevent the sale at public auction of the house in question, Piansay and Uy Kim filed a petition for certiorari and mandamus with preliminary injunction in the CA (CA-GR 28974-R, Claudia B. Vda. de Uy Kim and Salvador Piansay vs. Hon. Judge Jesus Y. Perez, et al.). Acting upon the said petition, the CA denied the petition to lift or discharge the writ of execution on 28 April 1961. Thereupon, or on 31 July 1961, Piansay and Uy Kim instituted the present action at the CFI Manila (Civil Case 47664), against David and Mangubat. After due hearing the lower court issued the order appealed from granting said motion and dismissing the complaint, with costs against the Piansay and Uy Kim. A reconsideration of said order having been denied, Piansay and Uy Kim interposed an appeal directly to the Supreme Court. The Supreme Court affirmed the orders affirmed from, with costs against Piansay and Vda. De Uy Kim. 1. Building and construction partake the nature of the principal thing, i.e. land Since it is a rule in the law that buildings and constructions are regarded as mere accessories to the land (following the Roman maxim omne quod solo inaedificatur solo credit) it is logical that said accessories should partake of the nature of the principal thing, which is the land, forming, as they do, but a single object (res) with it in contemplation of law (Ladera v. Hodges). 2. Act of registering in Chattel Mortgage register of an interest in the nature of real property is futile Tthe registration of the document in the registry of chattels is merely a futile act, where the interest conveyed is in the nature of real property. The registration of the chattel mortgage of a building of strong materials produced no effect as far as the building is concerned (Leung Yee vs. Strong Machinery Co., cited in Ladera v. Hodges). 3. No right acquired by chattel Mortgage creditor who purchase real property at extra-judicial foreclosure sale A mortgage creditor who purchases real properties at an extra- judicial foreclosure sale thereof by virtue of a chattel mortgage constituted in his favor, which mortgage has been declared null and void with respect to said real properties, acquires no right thereto by virtue of said sale'. (De la Riva vs. Ah Kee, cited in Ladera v. Hodges). In the present case, Uy Kim had no right to foreclose the alleged chattel mortgage constituted in her favor, because it was in reality a mere contract of an unsecured loan. It follows that the Sheriff was not authorized to sell the house as a result of the foreclosure of such chattel mortgage. And Uy Kim could not have acquired the house at public auction, she could not have sold it validly to Salvador Piansay. 4. House may be levied upon as it remained the property of mortgage debtor The mere fact that the dispositive part of the decision in Civil Case 29078 states that the complaint is dismissed with respect to defendants Claudia B. de Uy Kim, Leonardo Uy Kim and Salvador Piansay is of no moment because the chattel mortgage executed by David in favor of Claudia B. de Uy Kim might not be annulled but still it did not transmit any right from David to Uy Kim. Piansay in Civil Case 47664 cannot assail the right of Mangubat to levy execution upon the house in question because it had remained the property of defendant David. 5. Chattel mortgage of a house between parties is valid, but does not bind third persons; Plaintiffs have no cause of action Regardless of the validity of a contract constituting a chattel mortgage on a house, as between the parties to said contract (Standard Oil Co. of N.Y. vs. Jaramillo), the same cannot and does not bind third persons, who are not parties to the aforementioned contract or their privies (Leung Yee vs. Strong Machinery Co.; Evangelista vs. Alto Surety; Navarro vs. Pineda). As a consequence, the sale of the house in question in the proceedings for the extra-judicial foreclosure of said chattel mortgage, is null and void insofar as defendant Mangubat is concerned, and did not confer upon Mrs. Uy Kim, as buyer in said sale, any dominical right in and to said house (De la Riva vs. Ah Yee), so that she could not have transmitted to her assignee, Piansay, any such right as against Mangubat. In short, plaintiffs have no cause of action against the defendants herein. Tumalad v. Vicencio [G.R. No. L-30173. September 30, 1971.] En Banc, Reyes JBL (J): 10 concur Facts: On 1 September 1955 Vicencio and Simeon, defendants-appellants, executed a chattel mortgage in favor of the Tumalads, plaintiff-appellees over their house of strong materials located at 550 Int. 3, Quezon Boulevard, Quiapo, Manila, over Lot 6-B and 7-B, Block 2554, which were being rented from Madrigal & Company, Inc. The mortgage was registered in the Registry of Deeds

of Manila on 2 September 1955. The mortgage was executed to guarantee a loan of P4,800.00 received from the Tumalads, payable within one year at 12% per annum. The mode of payment was P150.00 monthly, starting September, 1955, up to July 1956, and the lump sum of P3,150 was payable on or before August, 1956. It was also agreed that default in the payment of any of the amortizations would cause the remaining unpaid balance to become immediately due and payable, the Chattel Mortgage enforceable, and the Sheriff of Manila authorized the Mortgagors property after necessary publication. When Vicencio and Simeon defaulted in paying, the mortgage was extrajudicially foreclosed, and on 27 March 1956, the house was sold at public auction pursuant to the said contract. As highest bidder, the Tumalads were issued the corresponding certificate of sale. On 18 April 1956, the Tumalads commenced Civil Case 43073 in the municipal court of Manila, praying, among other things, that the house be vacated and its possession surrendered to them, and for Vicencio and Simeon to pay rent of P200.00 monthly from 27 March 1956 up to the time the possession is surrendered. On 21 September 1956, the municipal court rendered its decision in favor of the Tumalads. Having lost therein, appealed to the court a quo (Civil Case 30993) which also rendered a decision against them. On appeal, the case was certified to the Supreme Court by the Court of Appeals (CA-G.R. No. 27824-R) for the reason that only questions of law are involved. Plaintiffs-appellees failed to file a brief and this appeal was submitted for decision without it. Nearly a year after the foreclosure sale the mortgaged house had been demolished on 14 and 15 January 1957 by virtue of a decision obtained by the lessor of the land on which the house stood. The Supreme Court reversed the decision appealed from and entered another dismissing the complaint, with costs against plaintiffs-appellees. 1. Answer a mere statement and not evidence; Allegations or averments determines jurisdiction It has been held in Supia and Batiaco vs. Quintero and Ayala that "the answer is a mere statement of the facts which the party filing it expects to prove, but it is not evidence; and further, that when the question to be determined is one of title, the Court is given the authority to proceed with the hearing of the cause until this fact is clearly established. In the case of Sy vs. Dalman, wherein the defendant was also a successful bidder in an auction sale, it was likewise held by the Court that in detainer cases the claim of ownership "is a matter of defense and raises an issue of fact which should be determined from the evidence at the trial." What determines jurisdiction are the allegations or averments in the complaint and the relief asked for. 2. Fraud and deceit renders a contract voidable or annullable, and not void ab initio; Claim of ownership by virtue of voidable contract fails without evidence that steps were made to annul the same Fraud or deceit does not render a contract void ab initio, and can only be a ground for rendering the contract voidable or annullable pursuant to Article 1390 of the New Civil Code, by a proper action in court. In the present case, the charge of fraud, deceit or trickery, the conterntions are not supported by evidence. Further, there is nothing on record to show that the mortgage has been annulled. Neither is it disclosed that steps were taken to nullify the same. Hence, defendants-appellants' claim of ownership on the basis of a voidable contract which has not been voided fails. 3. Buildings as immovable The rule about the status of buildings as immovable property is stated in Lopez vs. Orosa, Jr. and Plaza Theatre, Inc., cited in Associated Insurance Surety Co., Inc. vs. Iya, et al. 16 to the effect that the inclusion of the building, separate and distinct from the land, in the enumeration of what may constitute real properties (art. 415, New Civil Code) could only mean one thing that a building is by itself an immovable property irrespective of whether or not said structure and the land on which it is adhered to belong to the same owner. 4. Deviations allowed, parties treatment of real property as personal property; cases Certain deviations, however, have been allowed for various reasons. In the case of Manarang and Manarang vs. Ofilada, it was held that "it is undeniable that the parties to a contract may by agreement treat as personal property that which by ,nature would be real property", citing Standard Oil Company of New York vs. Jaramillo. In the latter case, the mortgagor conveyed and transferred to the mortgagee by way of mortgage "the following described personal property." The "personal property" consisted of leasehold rights and a building. In the case of Luna vs. Encarnacion, the subject of the contract designated as Chattel Mortgage was a house of mixed materials, and the Court held therein that it was a valid Chattel mortgage because it was so expressly designated and specifically that the property given as security "is a house of mixed materials, which by its very nature is considered personal property." In Navarro vs. Pineda, the Court stated that the view that parties to a deed of chattel mortgage may agree to consider a house as personal property for the purposes of said contract, 'is good only insofar as the contracting parties are concerned. It is based, partly, upon the principle of estoppel' (Evangelista vs. Alto Surety). In a case, a mortgaged house built on a rented land was held to be a personal property, not only because the deed of mortgage considered it as such, but also because it did not form part of the land, for it is now settled that an object placed on land by one who had only a temporary right to the same, such as the lessee or usufructuary, does not become immobilized by attachment (Valdez vs. Central Altagracia, cited in Davao Sawmill vs. Castillo). Hence, if a house belonging to a person stands on a rented land belonging to another person, it may be mortgaged as a personal property as so stipulated in the document of mortgage. It should be noted, however that the principle is predicated on statements by the owner declaring his house to be a chattel, a conduct that may conceivably estop him from subsequently claiming otherwise. (Ladera vs. C.N. Hodges). 5. House treated by parties as chattel; factors to determine In the contract, the house on rented land is not only expressly designated as Chattel Mortgage; it specifically provides that "the mortgagor voluntarily cedes, sells and transfers by way of Chattel Mortgage the property together with its leasehold rights over the lot on which it is constructed and participation;" whcih could only have meant to convey the house as chattel, or at least, intended to treat the same as such, so that they should not now be allowed to make an inconsistent stand by claiming otherwise. Moreover, the subject house stood on a rented lot to which defendants-appellants merely had a temporary right as lessee, and although this can not in itself alone determine the status of the property, it does so when combined with other factors to sustain the interpretation that the parties, particularly the mortgagors, intended to treat the house as personality.

6. Estoppel; Party in chattel mortgage cannot question validity of chattel mortgage entered into Inlike in the Iya cases, Lopez vs. Orosa, Jr. and Plaza Theatreand Leung Yee vs. F. L. Strong Machinery and 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 defendantsappellants, having treated the subject house as personalty. 7. Chattel mortgage covered by Act 1508, Chattel Mortgage Law Chattel mortgages are covered and regulated by the Chattel Mortgage Law, Act 1508. Section 14 of this Act allows the mortgagee to have the property mortgaged sold at public auction through a public officer in almost the same manner as that allowed by Act 3135, as amended by Act 4118, provided that the requirements of the law relative to notice and registration are complied with. In the present case, the parties specifically stipulated that "the chattel mortgage will be enforceable in accordance with the provisions of Special Act 3135. 8. Mortgagors entitled to remain in possession without rent within redemption period Nearly a year after the foreclosure sale the mortgaged house had been demolished on 14 and 15 January 1957 by virtue of a decision obtained by the lessor of the land on which the house stood. The CFI sentenced the mortgagors to pay a monthly rent of P200.00 from the time the chattel mortgage was foreclosed until when it was torn down by the sheriff. The Court ruled that the mortgagors were entitled to remain in possession without any obligation to pay rent during the one year redemption period after the foreclosure sale. Section 6 of Act 3135 provides that the debtor-mortgagor may, at any time within one year from and after the date of the auction sale, redeem the property sold at the extra judicial foreclosure sale. Section 7 of the same Act allows the purchaser of the property to obtain from the court the possession during the period of redemption: but the same provision expressly requires the filing of a petition with the proper CFI and the furnishing of a bond. It is only upon filing of the proper motion and the approval of the corresponding bond that the order for a writ of possession issues as a matter of course. No discretion is left to the court. In the absence of such a compliance, as in the instant case, the purchaser can not claim possession during the period of redemption as a matter of right. In such a case, the governing provision is Section 34, Rule 39, of the Revised Rules of Court which also applies to properties purchased in extrajudicial foreclosure proceedings. 9. Rentals received during redemption period credited to redemption price Before the expiration of the 1-year period within which the judgment-debtor or mortgagor may redeem the property, the purchaser thereof is not entitled, as a matter of right, to possession of the same. Thus, while it is true that the Rules of Court allow the purchaser to receive the rentals if the purchased property is occupied by tenants, he is, nevertheless, accountable to the judgmentdebtor or mortgagor as the case may be, for the amount so received and the same will be duly credited against the redemption price when the said debtor or mortgagor effects the redemption. Differently stated, the rentals receivable from tenants, although they may be collected by the purchaser during the redemption period, do not belong to the latter but still pertain to the debtor of mortgagor. The rationale for the Rule, it seems, is to secure for the benefit of the debtor or mortgagor, the payment of the redemption amount and the consequent return to him of his properties sold at public auction. (Reyes vs. Hamada, reiterating Chan v. Espe) 10. Case prematurely filed The period of redemption had not yet expired when action was instituted in the court of origin, and that plaintiffs-appellees did not choose to take possession under Section 7, Act 3135, as amended, which is the law selected by the parties to govern the extrajudicial foreclosure of the chattel mortgage. Neither was there an allegation to that effect. Since plaintiffs-appellees' right to possess was not yet born at the filing of the complaint, there could be no violation or breach thereof. Wherefore, the original complaint stated no cause of action and was prematurely filed. 11. Courts authority to review errors not assigned Even if there was no assignment of error to that effect, the Supreme Court is clothed with ample authority to review palpable errors not assigned as such if it finds that their consideration is necessary in arriving at a just decision of the case. Chua Peng Hian v. CA [G.R. No. 60015. December 19, 1984.] Second Division, Aquino (J): 4 concur, 1 took no part. Facts: Miguel C. Veneracion owned a 2,194 sq.m. lot located at 787 Melencio Street, Cabanatuan City. He leased it in 1948 to Patrick Chua Peng Hian for 10 years. The lease was renewed for another 10 years. Chua constructed on that lot a 2-storey building, the ground floor being the sawmill and the second floor as residence. On 25 May 1968, after the second lease agreement had expired, Veneracion leased to Chua 1,850 square meters of the lot for 3 years or from 1 May 1968 to 1 May 1971 at the monthly rental of P1,500. The new lease contract stipulates that the lease shall terminate automatically without extension and the lessee shall vacate and surrender the premises without any obstruction thereon; that in the event that the Lessee fails to surrender and vacate the leased premises at the expiration of this lease on May 1, 1971, and/or to remove his buildings and improvements, same shall automatically remain as property of the Lessor without the necessity of executing a Deed of Transfer or conveyance of the aforementioned properties; that this document will serve as Deed of Transfer and Conveyance of the above mentioned buildings and improvements in favor of the Lessor; and that the Lessee shall pay the Lessor "compensatory damages" of P20,000 plus attorney's fee of P2,000 should the Lessor seek judicial relief by reason of Lessee's non-fulfillment or violation of the terms of the lease. On 6 February 1969 Veneracion died. After the third lease contract expired or on 1 May 1971, Veneracion's heirs demanded that Chua vacate the premises and pay the accrued rentals. Chua did not comply with their demand. On 11 April 1972, the Veneracions filed in the CFI Nueva Ecija an action for specific performance against Chua. The trial court rendered a decision from which both parties appealed. On 30 October 1980, the Appellate Court rendered judgment ordering Chua and his family to vacate the land in question; to convey the buildings and improvements existing on the land to the Veneracion heirs and to pay the monthly rental of P1,500 from June, 1971 until he delivers possession thereof and the amount of P20,000 as compensatory damages plus P2,000 as attorney's fee. Chua appealed to the Supreme Court.

The Supreme Court affirmed the judgment of the Court of Appeals; with costs against the petitioner. 1. CFI has jurisdiction over issue on rights of parties to a building constructed on land Where the issues raised before the inferior court do not only involve possession of the lot but also the rights of the parties to the building constructed thereon, the Court of First Instance and not the municipal or city court has jurisdiction over the case (Ortigas and Co., Ltd. Partnership vs. Court of Appeals, G.R. No. 52488, July 25, 1981, 106 SCRA 121). 2. CFI has jurisdiction as action for specific performance is not capable of pecuniary The action sought was for specific performance of the stipulations of a lease contract. It was not capable of pecuniary estimation. It was within the exclusive original jurisdiction of the Court of First Instance (De Jesus vs. Garcia, 125 Phil. 965; Lapitan vs. Scandia, Inc., L-24668, July 31, 1968, 24 SCRA 479). 3. Building and improvements on leased land treated as personal property The building and improvements on the leased land may be treated as personal properties (Standard Oil Co. of New York vs. Jaramillo, 44 Phil. 630; Luna vs. Encarnacion, 91 Phil. 531; Manarang vs. Ofilada, 99 Phil. 108; Tumalad vs. Vicencio, L-30173, September 30, 1971, 41 SCRA 143, 152-3). Alienation in the contract of lease of the Lessees improvements is not a disposition of conjugal realty without the wife's consent. 4. Stipulation that Lessor would become owner of improvements is valid The validity of a stipulation that the lessor would become the owner of the improvements constructed by the lessee on the leased land has been sustained (Lao Chit vs. Security Bank & Trust Co. and Consolidated Investment, Inc., 105 Phil. 490; Co Bun Kin vs. Liongson, 100 Phil. 1091). 5. Contract is the law between the parties. The case is governed by the lease contract which is the law between the parties. The four-year extension of the lease made by the trial court and the amount of damages do not merit any serious consideration. 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 o