RUBY L. TSAI VS. HON. COURT OF APPEALS, EVER TEXTILE MILLS, INC.

FACTS:
On November 26, 1975, respondent Ever Textile Mills, Inc. (EVERTEX) obtained
a Three Million peso (P3, 000,000.00) loan from petitioner Philippine Bank of
Communications (PBCom). As security for the loan, EVERTEX executed in
favour of PBCom, a deed of Real and Chattel Mortgage over the lot under TCT
No. 372097, where its factory stands and the chattels located therein.
The real and chattel mortgage executed by EVERTEX in favour of PBCom are
the following:
o ANNEX A
Sixteen (16) set of Vayrow Knitting Machines made in Taiwan.
Two (2) set of Circular Knitting Machines made in West Germany.
Four (4) Winding Machines.
o SCHEDULE A
TCT # 372097 RIZAL
Any and all buildings and improvements now existing or hereafter
to exist on the abovementioned lot.
Fourty Eight (48) sets of Vayrow Knitting Machines
Sixteen (16) sets of Vayrow Knitting Machines
Two (2) Circular Knitting Machines
Two (2) Winding Machines
Two (2) Winding Machines
Any and all replacements, substitutions, additions, increases and
accretions to above properties.
On April 23, 1979, PBCom granted a second loan of P3, 356,000.00 to
EVERTEX. The loan was secured by a Chattel Mortgage over personal
properties enumerated in a list attached thereto. These listed properties were
similar to those listed in Annex A of the first mortgage deed.
Upon EVERTEXs failure to meet its obligation to PBCom, the latter commenced
an extrajudicial foreclosure proceedings against EVERTEX.
On December 15, 1982, the first public auction was held where petitioner PBCom
emerged as the highest bidder and a Certificate of Sale was issued in its favor on
the same date. On March 7, 1984, PBCom consolidated its ownership over the
lot and all the properties in it. In November 1986, it leased the entire factory
premises to petitioner Ruby L. Tsai. On May 3, 1988, PBCom sold the factory,
lock, stock, and barrel to Tsai, including the contested machineries.
On March 16, 1989, EVERTEX filed a complaint for annulment of sale,
reconveyance, and damages with the Regional Trial Court against PBCom.
The RTC ruled in favor of EVERTEX over Tsai and PBCom and later affirmed by
the Court of Appeals.
Tsai avers that the Court of appeals in effect made a contract for the parties by
treating the 1981 acquired units of machinery as chattels instead of real
1

properties within their earlier 1975 deed of Real and Chattel mortgage or 1979
deed of chattel mortgage. Additionally, Tsai argues that respondent court erred in
holding that the disputed 1981 machineries are not real properties.
Essentially, PBCom contends that respondent court erred in affirming the lower
courts judgment decreeing that the pieces of machinery in disputed were not
duly foreclosed and could not be legally leased nor sold to Ruby Tsai. It further
argued that the Court of Appeals pronouncement that the pieces of machinery in
question were personal properties have no factual and legal basis.
In opposition, private respondents argue that the controverted units of machinery
are not real properties but chattels, and, therefore, they were not part of the
foreclosed real properties, rendering the lease and the subsequent sale thereof
to Tsai a nullity.

ISSUE:

Whether or not the inclusion of the questioned properties in the foreclosed

properties is proper.

HELD:

No. The questioned properties are not included in the foreclosed properties.
The following are facts as found by the RTC and Court of Appeals, and later
affirmed by the Supreme Court:
The controverted machineries are not covered by or included in, either of the
two mortgages, the Real Estate and Chattel Mortgage, and the pure Chattel
Mortgage;
The said machineries were not included in the list of properties appended to the
Notice of Sale, and neither were they included in the Sheriffs Notice of Sale of
the foreclosed properties. Petitioners (Tsai) contend that the nature of the
disputed machineries, i.e., that they were heavy, bolted or cemented on the real
property mortgaged by EVERTEX to PBCom, make them ipso facto immovable
under Art. 415 (3) and (5) of the New Civil Code. This assertion however, does
not settle the issue. Mere nuts and bolts do not foreclose the controversy. We
have to look at the parties intent.
While it is true that the controverted properties appear to be immobile, a perusal
of the contract of Real and Chattel Mortgage executed by the parties herein gives
us a contradictory indication. In the case at bar, both the trial and appellate courts
reached the same finding that the true intention of PBCom and the owner,
EVERTEX, is to treat machinery and equipment as chattels.

SERGS PRODUCTS, INC., VS. PCI LEASING AND FINANCE, INC.,

FACTS:

On February 13, 1998, respondent PCI Leasing filed with the RTC-QC a
complaint for a sum of money, with an application for a writ of replevin docketed
as Civil Case No. Q 98 33500.
On March 6, 1998, upon an ex-parte application of PCI Leasing, respondent
judge issued a writ of replevin, directing its sheriff to seize and deliver the
machineries and equipment to PCI Leasing after 5 days and upon the payment of
necessary expenses.
On March 24, 1998, in implementation of said writ, the sheriff proceeded to
petitioners factory, seized one machinery with the word that he would return for
the other machineries.
Petitioner filed a motion for special protective order invoking the power of the
court to control the conduct of its officers and amend and control its processes,
praying for a directive for the sheriff to defer enforcement of the writ of replevin.
The motion was opposed by PCI on the ground that the properties were personal
and therefore still subject to seizure and writ of replevin. In their reply, petitioners
asserted that the properties were immovable as defined in Article 415 of the Civil
Code, the parties' agreement to the contrary notwithstanding. Petitioners went to
the Court of Appeals via an original action for certiorari.
The Court of Appeals ruled that the subject machines were personal property as
provided by the agreement of the parties.

ISSUE:

Whether or not the subject machines were personal, not immovable, property
which may be a subject of a writ of replevin.

HELD:

Yes. The subject machines are personal. In the present case, the machines that
were the subjects of the Writ of Seizure were placed by petitioners in the factory
built in their own land. Although each of them was movable or personal property
on its own, all of the have become immobilized by destination because they are
essential and principal elements in the industry.
In that sense, petitioners are correct in arguing that the said machines are real,
not personal, property pursuant to Art. 415 (5) of the Civil Code.
Be as it may, the Court disagreed with the submission of the petitioners that the
said machines are not proper subjects of the Writ of Seizure.

The court held that after agreeing to a contract stipulating that a real or
immovable property be considered as personal or movable, a party is estopped
from subsequently claiming otherwise. Hence, such property is a proper subject
of a writ of replevin obtained by the other contracting party.

BURGOS VS. CHIEF OF STAFF, AFP

FACTS:

On December 7, 1982, two search warrants were issued by respondent Judge

Ernani Cruz - Pao, under which the premises known as No. 19, Road 3, Project
6, Quezon City, and 784 Units C & D, RMS Building, Quezon Avenue, Quezon
City, business address of the Metropolitan Mail and We Forum newspapers,
respectively, were searched, and office and printing machines, equipment,
paraphernalia, motor vehicles and other articles used in printing, publication and
distribution of the said newspapers, as well as numerous papers, documents,
books, and other written literature alleged to be in the possession and control of
the petitioner.

ISSUE:

Whether or not the properties were seized under the disputed warrant are real
properties.

HELD:

Neither is there merit in petitioners assertion that real properties were seized
under the disputed warrants. Under Article 415 [5] of the Civil Code of the
Philippines, machinery, receptacles, instruments or implements intended by the
owner of the tenement for an industry or works which may be carried on in a
building or on a piece of land and which tend directly to meet the needs of the
said industry or works are considered immovable property. In Davao Sawmill
Co. v. Castillo where this legal provision was invoked, this Court ruled that
machinery which is movable by nature becomes immobilized when placed by the
owner of the tenement, property or plant, but not so when placed by a tenant,
usufructuary, or any other person having only a temporary right, unless such
person acted as the agent of the owner. In the case at bar, petitioners do not
claim to be the owners of the land and/or building on which the machineries were
placed. This being the case, the machineries in question, while in fact bolted to
the ground remain movable property susceptible to seizure under a search
warrant.

ENRIQUE LOPEZ VS. VICENTE OROSA, JR. and PLAZA THEATRE, INC.
FACTS:
4

Lopez is engaged in a business under the trade name Lopez Castello Sawmill.
Sometime in May 1946, Vicente Orosa, Jr. dropped at Lopez house to make an
investment in the theatre business known as Plaza Theatre, Inc.
Although Lopez expressed his unwillingness to invest on the same, he agreed to
supply the lumber necessary for the construction of the said theatre, and at
Orosas behest and assurance that the latter would be personally liable for any
account that the said construction might incur, Lpez further agreed that payment
therefor would be on demand and not cash on delivery basis.
Pursuant to said verbal agreement, Lpez delivered the lumber which was used
for the construction of the Plaza Theatre on May 17, 1946, up to December 4 of
the same year. But of the total cost of the materials amounting to P62, 255.85,
Lpez was paid only P20, 848.50, thus leaving a balance of P41, 771.35.
Due to Lopez demands, Orosa issued a deed of assignment over his shares of
stock of the Plaza Theatre, Inc. As there was still an unpaid balance, Lopez filed
a case against Orosa and Plaza Theatre. He asked that Orosa and Plaza theatre
be held liable solidarily for the unpaid balance, and in case defendants failed to
pay, the land and building should be sold in public auction with the proceeds to
be applied to the balance, or that the shares of stock be sold in public auction.
On October 30, 1952, the lower Court, after making an exhaustive and detailed
analysis of the respective stands of the parties and the evidence adduced at the
trial, held that defendants Vicente Orosa, Jr., 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 Court of Appeals affirmed the decision

ISSUE:

Whether or not the lien for the value of the materials used in the construction of
the building attaches to said structure alone and does not extend to the land on
which the building is adhered to.

HELD:

Materialman's lien attaches merely to the immovable property for the construction
or repair of which the obligation was incurred and in the case at bar, the lien in
favor of appellant 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 obligor.
Thus, the interest of the mortgagee over the land is superior to and cannot be
made subject to the said materialman's lien.

JULIAN YAP VS. HON.

INTERNATIONAL PHIL., INC.

SANTIAGO

TANADA

and

GOULDS

PUMPS

FACTS:
5

The case began in the City Court of Cebu with the filing by Goulds Pumps
International (Phils), of a complaint against Yap and his wife, seeking recovery of
P1, 459.30 representing the balance of the price and installation cost of water
pump in the latters premises.
After considering the evidence of the plaintiff, the Court renders judgement in
favor of the plaintiff and against the defendant (Yap), ordering the latter to pay to
the former the sum of P1, 459.30 with interest at the rate of 12% per annum until
fully paid.
Yap appealed to the Court of First Instance. Goulds presented evidence exparte
and judgment by default was rendered the following day by Judge Tanada
requiring Yap to pay to Goulds (1) Pl, 459.30 representing the unpaid balance of
the pump purchased by him; (2) interest of 12% per annum thereon until fully
paid; and (3) a sum equivalent to 25% of the amount due as attorney's fees and
costs and other expenses in prosecuting the action. Notice of the judgment was
served on Yap on September 1, 1969.
Thereafter, the water pump in question was levied by the sheriff and by notice
dated November 4, 1969, scheduled the execution sale thereof. But in view of
the pendency of Yap's motion for reconsideration, suspension of the sale was
directed. It appears however that a copy of the order suspending the sale was
not transmitted to the sheriff hence, the Deputy Provincial Sheriff went ahead
with the scheduled auction sale and sold the property levied on to Goulds as the
highest bidder.
Yap argues that "the sale was made without the notice required by Sec. 18, Rule
39, of the New Rules of Court," i.e., notice by publication in case of execution
sale of real property, the pump and its accessories being immovable because
attached to the ground with character of permanency (Art. 415, Civil Code).

ISSUE:
Whether or not the questioned water pump is an immovable property.
HELD:

No. Yaps argument is untenable.

The Civil Code considers as immovable, among others, anything attached to an
immovable in a fixed manner, in such a way that it cannot be separated
therefrom without breaking the material or deterioration of the object. The pump
does not fit this description. It could be, and was in fact separated from Yaps
premises without being broken or suffering deterioration. Obviously the
separation or removal of the pump involved nothing more complicated than the
loosening of bolts or dismantling of other fasteners.

MACHINERY AND ENGINEERING SUPPLIES, INC. VS COURT OF APPEALS

FACTS:

Petitioner Machinery and Engineering Supplies filed a complaint for replevin for
the recovery of the machinery and equipment sold and delivered to Ipo
Limestone Co. an order was issued to seize and take immediate possession of
the properties specified in the order.
Upon carrying out the courts order, Roco, the companys President, along with a
crew of technical men and labourers, proceeded to the factory. The manager of
Ipo Limestone Co. and Torres protested against the seizure of the properties on
the ground that they are not personal properties.
However, since the sheriff contended that his duty is purely ministerial, they all
went to the factory and dismantled the equipment despite the fact that the
equipment could not be dismantled without causing damage or injuries to the
wooden frames attached to them. Consequently, they had to cut some of the
supports of the equipment which rendered its use impracticable.

ISSUE:
Whether or not the machinery and equipment in question could be the subject of
replevin.
HELD:

No. Replevin is applicable only to personal property.

The machinery and equipment in question appeared to be attached to the land,
particularly to the concrete foundation of said premises, in a fixed manner, in
such a way that the former could not be separated from the latter without
breaking the material or deterioration of the object. Hence, in order to remove the
said outfit, it became necessary not only to unbolt the same, but also to cut some
of its wooden supports.
Moreover, said machinery and equipment were intended by the owner of the
tenement for an industry carried on said immovable. For these reasons, they
were already immovable pursuant to paragraphs 3 and 5 of Article 415 of the
Civil Code.

SALVADOR LAUREL VS. RAMON GARCIA

FACTS:
7

As part of the Reparation Agreement between the Philippines and Japan, four
properties located in Japan were awarded to Philippines. These properties were
part of the indemnification to the Filipino people for their losses in life and
property and their suffering during World War II.
The property was formerly the location of the chancery of the Philippine Embassy
until it was transferred to Nampeidai on July 22, 1976 when the Roppongi
building needed major repairs.
Due to the failure of our government to provide necessary funds, the Roppongi
property has remained undeveloped.
On August 11, 1986, President Aquino created a committee to study the
disposition/utilization of Philippine government properties in Japan.
Amidst opposition by various sectors, the Executive branch of the government
has been pushing, with great vigor, its decision to sell the reparations properties
starting with Roponggi lot.
The property has twice been set for bidding at a minimum floor price of $225
million. The first bidding was a failure since only one bidder qualified. The second
one, after postponements, has not yet materialized.
Petitioner Laurel asserts that the Roppongi property and the related lots were
acquired as part of the reparations from the Japanese for diplomatic and
consular use by the Philippine government. He further states that the Roppongi
property is classified as one of public dominion, and not of private ownership
under Article 420 (2) of the Civil Code which states that those which belong to
the State, without being for public use, and are intended for some public service
or for the development of the national wealth.
On the other hand, respondents aver that the property has already become a
patrimonial property of the Stated which can be alienated because it has not
been used for public service for over thirteen (13) years.

ISSUE:
Whether or not the Roppongi property forms part of the public dominion hence
cannot be disposed or alienated.
HELD:

Yes. There can be no doubt that it is public dominion unless it is convincingly

shown that the property has become patrimonial which the respondents have
failed to do.
As property of public dominion, the Roponggi lot is outside the commerce of
man. It cannot be alienated. Its ownership for general use and enjoyment, an
application to the satisfaction of collective needs, and resides in the social group.
The purpose is not to serve the State as a juridical person, but the citizens; it is
8

intended for the common and public welfare and cannot be the object of
appropriation.
The fact that the Roppongi site has not been used for a long time for actual
Embassy service does not automatically convert it to patrimonial property. Any
such conversion happens only if the property is withdrawn from public use (Cebu
Oxygen and Acetylene Co. v. Bercilles, 66 SCRA 481 [1975]). A property
continues to be part of the public domain, not available for private appropriation
or ownership until there is a formal declaration on the part of the government to
withdraw it from being such.

LEVY MACASIANO VS. HON. ROBERTO DIOKNO

FACTS:

On June 13, 1990, the respondent municipality passed Ordinance No. 86, Series
of 1990 which authorized the closure of J. Gabriel, G.G. Cruz, Bayanihan, Lt.
Garcia Extension and Opena Streets located at Baclaran, Paraaque, Metro
Manila and the establishment of a flea market thereon.
The said ordinance was approved by the municipal council pursuant to MMC
Ordinance No. 2, Series of 1979, authorizing and regulating the use of certain
city and/or municipal streets, roads and open spaces within Metropolitan Manila
as sites for flea market and/or vending areas, under certain terms and conditions.
Thereafter, the municipal council of Paranaque issued a resolution authorizing
Paranaque Mayor Walfrido N. Ferrer to enter into a contract with any service
cooperative for the establishment, operation, maintenance and management of
flea markets and/or vending areas.
By virtue of this, respondent municipality and respondent Palanyag, a
service cooperative, entered into an agreement whereby the latter
shall operate, maintain and manage the flea market in the
aforementioned streets with the obligation to remit dues to the
treasury of the municipal government of Paranaque. Consequently,
market stalls were put up by Palanyag on the said streets.
Petitioner Brig. Gen. Macasiano, PNP Superintendent of the
Metropolitan Traffic Command, ordered the destruction and
confiscation of stalls along the aforementioned streets.
Hence, respondent municipality and Palanyag filed with the trial court
a joint petition for prohibition and mandamus with damages and prayer
for preliminary injunction, to which the petitioner filed his
memorandum/opposition to the issuance of the writ of preliminary
injunction. The Trial then upheld the validity of the ordinance in
question.

ISSUE:

Whether or not an ordinance or resolution issued by the municipal

council of Paranaque authorizing the lease and use of public streets or
thoroughfares as sites for flea markets is valid.
HELD:

No. The abovementioned streets are used for public service and are therefore
considered public properties of respondent municipality. Properties of the local
government which are devoted to public service are deemed public and are
under the absolute control of the Congress (Province of Zamboanga del Norte v.
City of Zamboanga, L24440, March 28, 1968, 22 SCRA 1334). Hence, local
governments have no authority whatsoever to control or regulate the use of
public properties unless specific authority is vested upon them by Congress.
Art. 424 of the Civil Code lays down the basic principle that properties of public
dominion devoted to public use and made available to the public in general are
outside the commerce of man and cannot be disposed of or leased by the local
government unit to private persons.
Aside from the requirement of due process which should be complied with before
closing a road, street or park, the closure should be for the sole purpose of
withdrawing the road or other public property from public use when
circumstances show that such property is no longer intended or necessary for
public use or public service. When it is already withdrawn from public use, the
property then becomes patrimonial property of the local government unit
concerned (Article 422, Civil Code Cebu Oxygen, etc. et al. v. Bercilles, et
al., G.R. No. L40474, August 29, 1975, 66 SCRA 481). It is only then that the
respondent municipality can use or convey them for any purpose for which other
real property belonging to the local unit concerned might be lawfully used or
conveyed in accordance with the last sentence of Section 10, Chapter II of Blg.
337, known as Local Government Code.

REPUBLIC OF THE PHILIPPINES VS. COURT OF APPEALS

FACTS:

Sometime in December 1972, respondent Morato filed a Free Patent Application

No. III 3 8186 B on a parcel of land with an area of 1,265 square meters
situated at Pinagtellaran, Caluag, Quezon.
The patent was approved by the Register of Deeds of Quezon at Lucena City.
The free patent and the title specifically mandate that the land shall not be
alienated nor encumbered within five (5) years from the date of the issuance of
the patent.
Thereafter, it was established that the subject land is a portion of the Calauag
Bay, five (5) to six (6) feet deep under water during high tide and two (2) feet
deep at low tide, and not suitable to vegetation.
10

Moreover, on October 24, 1974, a portion of the land was mortgaged by

respondent Morato to respondents Nenita Co and Antonio Quilatan for
P10,000.00 (pp. 2, 25, Folder of Exhibits). The spouses Quilatan constructed a
house on the land. Another portion of the land was leased to Perfecto Advincula
on February 2, 1976 at P100.00 a month, where a warehouse was constructed.
On November 5, 1978, petitioner filed an amended complaint against
respondents Morato, spouses Nenita Co and Antonio Quilatan, and the Register
of Deeds of Quezon for the cancellation of title and reversion of a parcel of land
to the public domain, subject of a free patent in favor of respondent Morato, on
the grounds that the land is a foreshore land and was mortgaged and leased
within the fiveyear prohibitory period.
After trial, the lower court, on December 28, 1983, rendered a decision
dismissing petitioners complaint. The lower court ruled that there was no
violation of the 5 year period ban against alienating or encumbering the land,
because the land was merely leased and not alienated.
The Court of Appeal affirmed the decision of the trial court.

ISSUE:
Whether or not there is a violation of the prohibition of the patent, and thus, the
certificate of title issued to Respondent Morato should cancelled and annulled.
HELD:

Yes. Title must be cancelled and annulled.

The express provision of Section 118 of Commonwealth Act 141 and in
conformity with the prohibition of the patent, any transfer or alienation of a free
patent or homestead within five years from the issuance of the patent is
prescribed. Such transfer nullifies said alienation and constitutes a cause for the
reversion of the property of the State.
Moreover, even if only part of the property has been sold or alienated within the
prohibited period of five years from the issuance of the patent, such alienation is
a sufficient cause for the reversion of the whole estate to the State. As a
condition for the grant of a free patent to an applicant, the law requires that the
land should not be encumbered, sold or alienated within five years from the
issuance of the patent. The sale or the alienation of part of the homestead
violates that condition.

THE PROVINCE OF ZAMBOANGA DEL NORTE VS. CITY OF ZAMBOANGA

FACTS:

On June 6, 1952, Republic Act 711 was approved dividing the province of
Zamboanga into two (2): Zamboanga del Norte and Zamboanga del Sur. As to
11

how the assets and obligations of the old province were to be divided between
the two ones, Sec. 6 of that law provides: "Upon the approval of this Act, the
funds, assets and other properties and the obligations of the province of
Zamboanga shall be divided equitably between the Province of Zamboanga del
Norte and the Province of Zamboanga del Sur by the President of the
Philippines, upon the recommendation of the Auditor General."
Consequently, Republic Act 3039 was approved providing that all buildings,
properties and assets belonging to the former province of Zamboanga and
located within the City of Zamboanga are hereby transferred, free of charge, in
favor of the said City of Zamboanga.
This constrained plaintiff-appellee Zamboanga del Norte to file on March 5, 1962,
a complaint entitled "Declaratory Relief with Preliminary Mandatory Injunction" in
theCourt of First Instance of Zamboanga del Norte against defendants-appellants
Zamboanga City, the Secretary of Finance and the Commissioner of Internal
Revenue. It was prayed that Republic Act 3039 be declared unconstitutional for
depriving plaintiff province of property without due process and just
compensation.
Included in the properties were the capital site and capitol building, certain school
sites, hospital and leprosarium sites, and high school playground.
On June 4, 1962, the lower court ordered the issuance of preliminary injunction
as prayed for. The judgement was rendered declaring Republic Act. No. 3039
unconstitutional insofar as it deprives plaintiff Zamboanga del Norte of its private
properties.

ISSUE:
Whether or not the properties mentioned are properties for public use
or patrimonial.
HELD:

If the property is owned by the municipality in its public and governmental

capacity, the property is public and Congress has absolute control over it. But if
the property is owned in its private or proprietary capacity, then it is patrimonial
and Congress has no absolute control. The municipality cannot be deprived of it
without due process and payment of just compensation.
Under the principles constituting the law of Municipal Corporations, all those of
the 50 properties in question which are devoted to public service are deemed
public, the rest remain patrimonial.
Regarding the several buildings existing on the lots above-mentioned,
the records do not disclose whether they were constructed at the
expense of the former Province of Zamboanga. Considering however
the fact that said buildings must have been erected even before 1936
when Commonwealth Act 39 was enacted and the further fact that
12

provinces then had no power to authorize construction of buildings

such as those in the case at bar at their own expense, it can be
assumed that said buildings were erected by the National Government,
using national funds. Hence, Congress could very well dispose of said
buildings in the same manner that it did with the lots in question.

13