Tsai vs. CA

9/5/2019 SUPREME COURT REPORTS ANNOTATED VOLUME 366
324 SUPREME COURT REPORTS ANNOTATED

Tsai vs. Court of Appeals
*
G.R. No. 120098. October 2, 2001.
RUBY L. TSAI, petitioner, vs. HON. COURT OF

APPEALS, EVER TEXTILE MILLS, INC. and MAMERTO
R. VILLALUZ, respondents.
*
G.R. No. 120109. October 2, 2001
PHILIPPINE BANK OF COMMUNICATIONS, petitioner,

vs. HON. COURT OF APPEALS, EVER TEXTILE MILLS
and MAMERTO R. VILLALUZ, respondents.
Appeals: The jurisdiction of the Supreme Court in a petition

for review on certiorari under Rule 45 of the Revised Rules of
Court is limited to reviewing only errors of law, not of fact, unless
the factual findings complained of are devoid of support by the
evidence on record or the assailed judgment is based on
misapprehension of facts.—Well settled is the rule that the
jurisdiction of the Supreme Court in a petition for review on
certiorari under Rule 45 of the Revised Rules of Court is limited
to reviewing only errors of law, not of fact, unless the factual
findings complained of are devoid of support by the evidence on
record or the assailed judgment is based on misapprehension of
facts. This rule is applied more stringently when the findings of
fact of the RTC is affirmed by the Court of Appeals.
Property; Mortgages; The nature of the disputed machineries,
i.e., that they were heavy, bolted or cemented on the real property
mortgaged, does not make them ipso facto immovable under
Article 415 (3) and (5) of the New Civil Code, as the parties’ intent
has to be looked into.—Petitioners 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 Article 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
www.central.com.ph/sfsreader/session/0000016cff11b381508d1a93003600fb002c009e/t/?o=False 1/20
of the contract of Real and Chattel Mortgage executed by the

parties herein gives us a contrary indication. In the case at bar,
both the trial and the appellate courts reached the same finding
that the true intention of PBCom and the owner, EVERTEX, is to
treat machinery and equipment as chattels.
______________
* SECOND DIVISION.
325
VOL. 366, OCTOBER 2, 2001 325
Same; Same; Estoppel; Even if the properties are immovable

by nature, nothing detracts the parties from treating them as
chattels to secure an obligation under the principle of estoppel.—
Too, assuming arguendo that the properties in question are
immovable by nature, nothing detracts the parties from treating
it as chattels to secure an obligation under the principle of
estoppel. As far back as Navarro v. Pineda, 9 SCRA 631 (1963), an
immovable may be considered a personal property if there is a
stipulation as when it is used as security in the payment of an
obligation where a chattel mortgage is executed over it, as in the
case at bar.
Same; Same; Same; Where the facts, taken together, evince the
conclusion that the parties’ intention is to treat the units of
machinery as chattels, a fortiori, the after-acquired properties,
which are of the same description as the units referred to earlier,
must also be treated as chattels.—In the instant case, the parties
herein: (1) executed a contract styled as “Real Estate Mortgage
and Chattel Mortgage,” instead of just “Real Estate Mortgage” if
indeed their intention is to treat all properties included therein as
immovable, and (2) attached to the said contract a separate “LIST
OF MACHINERIES & EQUIPMENT.” These facts, taken
together, evince the conclusion that the parties’ intention is to
treat these units of machinery as chattels. A fortiori, the
contested after-acquired properties, which are of the same
description as the units enumerated under the title “LIST OF
MACHINERIES & EQUIPMENT,” must also be treated as
chattels.
Same; Same; Chattel Mortgage; A chattel mortgage shall be
deemed to cover only the property described therein and not like or
substituted property thereafter acquired by the mortgagor and
placed in the same depository as the property originally

mortgaged, anything in the mortgage to the contrary
notwithstanding.—Accordingly, we find no reversible error in the
respondent appellate court’s ruling that inasmuch as the subject
mortgages were intended by the parties to involve chattels,
insofar as equipment and machinery were concerned, the Chattel
Mortgage Law applies, which provides in Section 7 thereof that:
“a chattel mortgage shall be deemed to cover only the property
described therein and not like or substituted property thereafter
acquired by the mortgagor and placed in the same depository as
the property originally mortgaged, anything in the mortgage to
the contrary notwithstanding.” And, since the disputed
machineries were acquired in 1981 and could not have been
involved in the 1975 or 1979 chattel mortgages, it was
consequently an error on the part of the Sheriff to include subject
machineries with the properties enumerated in said chattel
mortgages.
326
Sales; Purchaser in Good Faith; Well-settled is the rule that

the person who asserts the status of a purchaser in good faith and
for value has the burden of proving such assertion.—Petitioner
Tsai also argued that assuming that PBCom’s title over the
contested properties is a nullity, she is nevertheless a purchaser
in good faith and for value who now has a better right than
EVERTEX. To the contrary, however, are the factual findings and
conclusions of the trial court that she is not a purchaser in good
faith. Well-settled is the rule that the person who asserts the
status of a purchaser in good faith and for value has the burden of
proving such assertion. Petitioner Tsai failed to discharge this
burden persuasively.
Same; Same; A purchaser in good faith and for value is one
who buys the property of another without notice that some other
person has a right to or interest in such property and pays a full
and fair price for the same, at the time of purchase, or before he
has notice of the claims or interest of some other person in the
property.—A purchaser in good faith and for value is one who
buys the property of another without notice that some other person
has a right to or interest in such property and pays a full and fair
price for the same, at the time of purchase, or before he has notice
of the claims or interest of some other person in the property.
Records reveal, however, that when Tsai purchased the
controverted properties, she knew of respondent’s claim thereon.
As borne out by the records, she received the letter of respondent’s

counsel, apprising her of respondent’s claim, dated February 27,
1987. She replied thereto on March 9, 1987. Despite her
knowledge of respondent’s claim, she proceeded to buy the
contested units of machinery on May 3, 1988. Thus, the RTC did
not err in finding that she was not a purchaser in good faith.
Same; Land Titles; Torrens System; The defense of
indefeasibility of Torrens Title refers to sale of lands and not to
sale of properties situated therein; The mere fact that the lot where
a factory and disputed properties stand in a person’s name does
not automatically make such person the owner of everything found
therein.—Petitioner Tsai’s defense of indefeasibility of Torrens
Title of the lot where the disputed properties are located is
equally unavailing. This defense refers to sale of lands and not to
sale of properties situated therein. Likewise, the mere fact that
the lot where the factory and the disputed properties stand is in
PBCom’s name does not automatically make PBCom the owner of
everything found therein, especially in view of EVERTEX’s letter
to Tsai enunciating its claim.
327
VOL. 366, OCTOBER 2, 2001 327
Laches; Doctrine of Stale Demands; The doctrine of stale

demands would apply only where by reason of the lapse of time, it
would be inequitable to allow a party to enforce his legal rights.—
Petitioners’ defense of prescription and laches is less than
convincing. We find no cogent reason to disturb the consistent
findings of both courts below that the case for the reconveyance of
the disputed properties was filed within the reglementary period.
Here, in our view, the doctrine of laches does not apply. Note that
upon petitioners’ adamant refusal to heed EVERTEX’s claim,
respondent company immediately filed an action to recover
possession and ownership of the disputed properties. There is no
evidence showing any failure or neglect on its part, for an
unreasonable and unexplained length of time, to do that which, by
exercising due diligence, could or should have been done earlier.
The doctrine of stale demands would apply only where by reason
of the lapse of time, it would be inequitable to allow a party to
enforce his legal rights. Moreover, except for very strong reasons,
this Court is not disposed to apply the doctrine of laches to
prejudice or defeat the rights of an owner.
Damages; In determining actual damages, the court cannot
rely on mere assertions, speculations, conjectures or guesswork but
must depend on competent proof and on the best evidence

obtainable regarding the actual amount of loss.—Basic is the rule
that to recover actual damages, the amount of loss must not only
be capable of proof but must actually be proven with reasonable
degree of certainty, premised upon competent proof or best
evidence obtainable of the actual amount thereof. However, the
allegations of respondent company as to the amount of unrealized
rentals due them as actual damages remain mere assertions
unsupported by documents and other competent evidence. In
determining actual damages, the court cannot rely on mere
assertions, speculations, conjectures or guesswork but must
depend on competent proof and on the best evidence obtainable
regarding the actual amount of loss.
PETITIONS for review on certiorari of a decision of the

Court of Appeals.
The facts are stated in the opinion of the Court.

Eduardo C. Ong for petitioner R.L. Tsai.
Laogan, Silva, Baeza & Llantino Law Offices for
petitioner PBCom in G.R. No. 120109.
M.R. Villaluz & Associates for private respondents.
328

QUISUMBING, J.:
1
These consolidated cases assail the decision of the Court of2
Appeals in CA-G.R. CV No. 32986, affirming the decision
of the Regional Trial Court of Manila, Branch 7, in Civil
Case No. 89-48265. Also assailed is respondent court’s
resolution denying petitioners’ motion for reconsideration.
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 favor 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 as
enumerated in a schedule attached to the mortgage
contract. The pertinent portions of the Real and Chattel
Mortgage are quoted below:
MORTGAGE
(REAL AND CHATTEL)
xxx
The MORTGAGOR(S) hereby transfers) and convey(s), by way of

First Mortgage, to the MORTGAGEE, x x x certain parcel(s) of
land, together with all the buildings and improvements now
existing or which may hereafter exist thereon, situated in x x x.
“Annex A”
(Real and Chattel Mortgage executed by Ever Textile Mills in

favor of PBCommunications—continued)
LIST OF MACHINERIES & EQUIPMENT
A. Forty Eight (48) units of Vayrow Knitting Machines-

Tompkins made in Hongkong:
Serial Numbers Size of Machines
xxx
_______________
1 Rollo, G.R. No. 120109, pp. 23-45.

2 Id., at 23-24.
329
VOL. 366, OCTOBER 2, 2001 329

B. Sixteen (16) sets of Vayrow Knitting Machines made in

Taiwan.
xxx
C. Two (2) Circular Knitting Machines made in West

Germany.
xxx
D. Four (4) Winding Machines.
xxx
SCHEDULE “A”
I. TCT # 372097—RIZAL
xxx
II. Any and all buildings and improvements now existing or

hereafter to exist on the above-mentioned lot.
III. MACHINERIES & EQUIPMENT situated, located and/or
installed on the above-mentioned lot located at x x x
(a) Forty eight sets (48) Vayrow Knitting Machines x x x

(b) Sixteen sets (16) Vayrow Knitting Machines x x x
(c) Two (2) Circular Knitting Machines x x x
(d) Two (2) Winding Machines x x x
(e) Two (2) Winding Machines x x x
IV. Any and all replacements, substitutions, additions,

increases and accretions to above properties.
3
xxx
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.
After April 23, 1979, the date of the execution of the
second mortgage mentioned above, EVERTEX purchased
various machines and equipments.
_______________
3 Folder of Exhibits, pp. 5-12.
330

On November 19, 1982, due to business reverses,

EVERTEX filed insolvency proceedings docketed as SP
Proc. No. LP-3091-P before the defunct Court of First
Instance of Pasay City, Branch XXVIII. The CFI issued an
order on November 24, 1982 declaring the corporation
insolvent. All its assets were taken into the custody of the
Insolvency Court, including the collateral, real and
personal, securing the two mortgages as abovementioned.
In the meantime, upon EVERTEX’s failure to meet its
obligation to PBCom, the latter commenced extrajudicial
foreclosure proceedings against EVERTEX under Act 3135,
otherwise known as “An Act to Regulate the Sale of
Property under Special Powers Inserted in or Annexed to
Real Estate Mortgages” and Act 1506 or “The Chattel
Mortgage Law.” A Notice of Sheriffs Sale was issued on

December 1, 1982.
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 December 23, 1982, another public auction was
held and again, PBCom was the highest bidder. The sheriff
issued a Certificate of Sale on the same day.
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 for P50,000.00 a month. On May 3, 1988, PBCom sold
the factory, lock, stock and barrel to Tsai for P9,000,000.00,
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, alleging inter alia
that the extrajudicial foreclosure of subject mortgage was
in violation of the Insolvency Law. EVERTEX claimed that
no rights having been transmitted to PBCom over the
assets of insolvent EVERTEX, therefore Tsai acquired no
rights over such assets sold to her, and should reconvey the
assets.
Further, EVERTEX averred that PBCom, without any
legal or factual basis, appropriated the contested
properties, which were not included in the Real and
Chattel Mortgage of November 26,
331
VOL. 366, OCTOBER 2, 2001 331

1975 nor in the Chattel Mortgage of April 23, 1979, and

neither were those properties included in the Notice of
Sheriff’s Sale dated December 1, 1982 and Certificate of
Sale dated December 15, 1982.
The disputed properties, which were valued at
P4,000,000.00, are: 14 Interlock Circular Knitting
Machines, 1 Jet Drying Equipment, 1 Dryer Equipment, 1
Raisin Equipment and 1 Heatset Equipment.
The RTC found that the lease and sale of said personal
properties were irregular and illegal because they were not
duly foreclosed nor sold at the December 15, 1982 auction
sale since these were not included in the schedules
attached to the mortgage contracts. The trial court decreed:
WHEREFORE, judgment is hereby rendered in favor of plaintiff

corporation and against the defendants:
1. Ordering the annulment of the sale executed by defendant

Philippine Bank of Communications in favor of defendant
Ruby L. Tsai on May 3, 1988 insofar as it affects the
personal properties listed in par. 9 of the complaint, and
their return to the plaintiff corporation through its
assignee, plaintiff Mamerto R. Villaluz, for disposition by
the Insolvency Court, to be done within ten (10) days from
finality of this decision;
2. Ordering the defendants to pay jointly and severally the
plaintiff corporation the sum of P5,200,000.00 as
compensation for the use and possession of the properties
in question from November 1986 to February 1991 and
P100,000.00 every month thereafter, with interest thereon
at the legal rate per annum until full payment;
plaintiff corporation the sum of P50,000.00 as and for
attorney’s fees and expenses of litigation;
plaintiffcorporation the sum of P200,000.00 by way of
exemplary damages;
5. Ordering the dismissal of the counterclaim of the
defendants; and
6. Ordering the defendants to proportionately pay the costs
of suit.
4
SO ORDERED.
______________
4 Rollo, G.R. No. 120109, pp. 23-24.
332

Dissatisfied, both PBCom and Tsai appealed to the Court of

Appeals, which issued its decision dated August 31, 1994,
the dispositive portion of which reads:
WHEREFORE, except for the deletion therefrom of the award for

exemplary damages, and reduction of the actual damages, from
P100,000.00 to P20,000.00 per month, from November 1986 until
subject personal properties are restored to appellees, the
judgment appealed from is hereby AFFIRMED,

5
in all other
respects. No pronouncement as to costs.
Motion for reconsideration of the above decision having

been denied in the resolution of April 28, 1995, PBCom and
Tsai filed their separate petitions for review with this
Court.
In G.R. No. 120098, petitioner Tsai ascribed the
following errors to the respondent court:
THE HONORABLE COURT OF APPEALS (SECOND DIVISION)

ERRED IN EFFECT MAKING A CONTRACT FOR THE
PARTIES BY TREATING THE 1981 ACQUIRED
MACHINERIES AS CHATTELS INSTEAD OF REAL
PROPERTIES WITHIN THEIR EARLIER 1975 DEED OF REAL
AND CHATTEL MORTGAGE OR 1979 DEED OF CHATTEL
MORTGAGE.
II
THE HONORABLE COURT OF APPEALS (SECOND

DIVISION) ERRED IN HOLDING THAT THE DISPUTED 1981
MACHINERIES ARE NOT REAL PROPERTIES DEEMED
PART OF THE MORTGAGE—DESPITE THE CLEAR IMPORT
OF THE EVIDENCE AND APPLICABLE RULINGS OF THE
SUPREME COURT.
III

DIVISION) ERRED IN DEEMING PETITIONER A
PURCHASER IN BAD FAITH.
_______________
5 Id. at 45.
333
VOL. 366, OCTOBER 2, 2001 333

IV
THE HONORABLE COURT OF APPEALS (SECOND DIVISION)

ERRED IN ASSESSING PETITIONER ACTUAL DAMAGES,
ATTORNEY’S FEES AND EXPENSES OF LITIGATION—FOR
WANT OF VALID FACTUAL AND LEGAL BASIS.

DIVISION) ERRED IN HOLDING AGAINST PETITIONER’S
6
ARGUMENTS ON PRESCRIPTION AND LACHES.
In G.R. No. 120109, PBCom raised the following issues:
I.
DID THE COURT OF APPEALS VALIDLY DECREE THE

MACHINERIES LISTED UNDER PARAGRAPH 9 OF THE
COMPLAINT BELOW AS PERSONAL PROPERTY OUTSIDE
OF THE 1975 DEED OF REAL ESTATE MORTGAGE AND
EXCLUDED THEM FROM THE REAL PROPERTY
EXTRAJUDICIALLY FORECLOSED BY PBCOM DESPITE THE
PROVISION IN THE 1975 DEED THAT ALL AFTER-
ACQUIRED PROPERTIES DURING THE LIFETIME OF THE
MORTGAGE SHALL FORM PART THEREOF, AND DESPITE
THE UNDISPUTED FACT THAT SAID MACHINERIES ARE
BIG AND HEAVY, BOLTED OR CEMENTED ON THE REAL
PROPERTY MORTGAGED BY EVER TEXTILE MILLS TO
PBCOM, AND WERE ASSESSED FOR REAL ESTATE TAX
PURPOSES?
II.
CAN PBCOM, WHO TOOK POSSESSION OF THE

MACHINERIES IN QUESTION IN GOOD FAITH, EXTENDED
CREDIT FACILITIES TO EVER TEXTILE MILLS WHICH AS
OF 1982 TOTALLED P9,547,095.28, WHO HAD SPENT FOR
MAINTENANCE AND SECURITY ON THE DISPUTED
MACHINERIES AND HAD TO PAY ALL THE BACK TAXES OF
EVER TEXTILE MILLS BE LEGALLY COMPELLED TO
RETURN TO EVER THE SAID MACHINERIES OR IN LIEU
THEREOF BE ASSESSED DAMAGES. IS THAT SITUATION
7
TANTAMOUNT TO A CASE OF UNJUST ENRICHMENT?
_______________
6 Rollo, G.R. No. 120098, pp. 23-25.

7 Rollo, G.R. No. 120109. pp. 9-10.
334

The principal issue, in our view, is whether or not the

inclusion of the questioned properties in the foreclosed
properties is proper. The secondary issue is whether or not

the sale of these properties to petitioner Ruby Tsai is valid.
For her part, 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
properties within their earlier 1975 deed of Real and8
Chattel Mortgage or 1979 deed of Chattel Mortgage.
Additionally, Tsai argues that respondent court erred in
holding that9
the disputed 1981 machineries are not real
properties. Finally, she contends that the Court of Appeals
erred in holding against10
petitioner’s arguments on
prescription and laches and in assessing petitioner actual
damages, attorney’s fees and expenses 11
of litigation, for
want of valid factual and legal basis.
Essentially, PBCom contends that respondent court
erred in affirming the lower court’s judgment decreeing
that the pieces of machinery in dispute 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.
Finally, it asserts that the Court of Appeals erred in
assessing damages and attorney’s fees against PBCom.
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 12
lease and the
subsequent sale thereof to Tsai a nullity.
Considering the assigned errors and the arguments of
the parties, we find the petitions devoid of merit and ought
to be denied.
Well settled is the rule that the jurisdiction of the
Supreme Court in a petition for review on certiorari under
Rule 45 of the Revised Rules of Court is limited to
reviewing only errors of law,
_______________
8 Rollo, G.R. No. 120098, p. 25.

9 Id. at 33.
10 Id. at 49.
11 Id. at 44.
12 Id. at 133.
335
VOL. 366, OCTOBER 2, 2001 335

not of fact, unless the factual findings complained of are

devoid of support by the evidence on record or the 13
assailed
judgment is based on misapprehension of facts. This rule
is applied more stringently when the findings
14
of fact of the
RTC is affirmed by the Court of Appeals.
The following are the facts as found by the RTC and
affirmed by the Court of Appeals that are decisive of the
issues: (1) 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; (2) the said machineries were not included in the
list of properties appended to the Notice of Sale, and
neither were they included 15
in the Sheriff’s Notice of Sale of
the foreclosed properties.
Petitioners 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 Article 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
contrary indication. In the case at bar, both the trial and
the appellate courts reached the same finding that the true
intention of PBCom and the owner, EVERTEX, is to treat
machinery and equipment as chattels. The pertinent
portion of respondent appellate court’s ruling is quoted
below:
As stressed upon by appellees, appellant bank treated the

machineries as chattels; never as real properties. Indeed, the 1975
mortgage contract, which was actually real and chattel mortgage,
militates against appellants’ posture. It should be noted that the
printed form used by appellant bank was mainly for real estate
mortgages. But reflective of the true intention of appellant PBCOM
and appellee EVERTEX was the typing in
_______________
13 Congregation of the Religious of the Virgin Mary v. Court of Appeals, 291

SCRA 385, 391-392 (1998).
14 Manlapaz vs. Court of Appeals, 147 SCRA 236, 239 (1987).
15 Rollo, G.R. No. 120109, pp. 62-63.
336

capital letters, immediately following the printed caption of

mortgage, of the phrase “real and chattel.” So also, the
“machineries and equipment” in the printed form of the bank had
to be inserted in the blank space of the printed contract and
connected with the word “building” by typewritten slash marks.
Now, then, if the machineries in question were contemplated to be
included in the real estate mortgage, there would have been no
necessity to ink a chattel mortgage specifically mentioning as part
III of Schedule A a listing of the machineries covered thereby. It
would have sufficed to list them as immovables in the Deed of
Real Estate Mortgage of the land and building involved.
As regards the 1979 contract, the intention of the parties is
clear and beyond question. It refers solely to chattels. The
inventory list of the mortgaged properties is an itemization of
sixty-three (63) individually described machineries while the
schedule listed only machines and 2,996,880.50
16
worth of finished
cotton fabrics and natural cotton fabrics.
In the absence of any showing that this conclusion is

baseless, erroneous or uncorroborated by the evidence on
record, we find no compelling reason to depart therefrom.
Too, assuming arguendo that the properties in question
are immovable by nature, nothing detracts the parties from
treating it as chattels to secure an obligation under the
principle of estoppel. As far back as Navarro v. Pineda, 9
SCRA 631 (1963), an immovable may be considered a
personal property if there is a stipulation as when it is used
as security in the payment of an obligation where a chattel
mortgage is executed over it, as in the case at bar.
In the instant case, the parties herein: (1) executed a
contract styled as “Real Estate Mortgage and Chattel
Mortgage,” instead of just “Real Estate Mortgage” if indeed
their intention is to treat all properties included therein as
immovable, and (2) attached to the said contract a separate
“LIST OF MACHINERIES & EQUIPMENT.” These facts,
taken together, evince the conclusion that the parties’
intention is to treat these units of machinery as chattels. A
fortiori, the contested after-acquired properties, which are
of the same description as the units enumerated under the
title “LIST OF MACHINERIES & EQUIPMENT,” must
also be treated as chattels.
_______________
16 Rollo, G.R. No. 120098, pp. 68-69.
337
VOL. 366, OCTOBER 2, 2001 337

Accordingly, we find no reversible error in the respondent

appellate court’s ruling that inasmuch as the subject
mortgages were intended by the parties to involve chattels,
insofar as equipment and machinery were concerned, the
Chattel Mortgage Law applies, which provides in Section 7
thereof that: “a chattel mortgage shall be deemed to cover
only the property described therein and not like or
substituted property thereafter acquired by the mortgagor
and placed in the same depository as the property originally
mortgaged, anything in the mortgage to the contrary
notwithstanding.”
And, since the disputed machineries were acquired in
1981 and could not have been involved in the 1975 or 1979
chattel mortgages, it was consequently an error on the part
of the Sheriff to include subject machineries with the
properties enumerated in said chattel mortgages.
As the auction sale of the subject properties to PBCom is
void, no valid title passed in its favor. Consequently, the
sale thereof to Tsai is also a nullity under the elementary
principle of nemo dat
17
quod non habet, one cannot give what
one does not have.
Petitioner Tsai also argued that assuming that PBCom’s
title over the contested properties is a nullity, she is
nevertheless a purchaser in good faith and for value who
now has a better right than EVERTEX.
To the contrary, however, are the factual findings and
conclusions of the trial court that she is not a purchaser in
good faith. Well-settled is the rule that the person who
asserts the status of a purchaser in good faith
18
and for value
has the burden of proving such assertion. Petitioner Tsai
failed to discharge this burden persuasively.
Moreover, a purchaser in good faith and for value is one
who buys the property of another without notice that some
other person has a right to or interest in such property and
pays a full and fair price for the same, at the time of
purchase, or before he has notice
_______________
17 Segura vs. Segura, 165 SCRA 368, 375 (1988); Noel vs. Court of
Appeals, G.R. No. 59550, 240 SCRA 78, 88 (1995).
18 Mathay v. Court of Appeals, 295 SCRA 556, 575 (1988).
338

of the claims
19
or interest of some other person in the
property. Records reveal, however, that when Tsai
purchased the controverted properties, she knew of
respondent’s claim thereon. As borne out by the records,
she received the letter of respondent’s counsel, apprising
20
her of respondent’s claim, dated February
21
27, 1987. She
replied thereto on March 9, 1987. Despite her knowledge
of respondent’s claim, she proceeded to buy the contested
units of machinery on May 3, 1988. Thus, the RTC did not
err in finding that she was not a purchaser in good faith.
Petitioner Tsai’s defense of indefeasibility of Torrens
Title of the lot where the disputed properties are located is
equally unavailing. This defense refers to sale of lands and
not to sale of properties situated therein. Likewise, the
mere fact that the lot where the factory and the disputed
properties stand is in PBCom’s name does not
automatically make PBCom the owner of everything found
therein, especially in view of EVERTEX’s letter to Tsai
enunciating its claim.
Finally, petitioners’ defense of prescription and laches is
less than convincing. We find no cogent reason to disturb
the consistent findings of both courts below that the case
for the reconveyance of the disputed properties was filed
within the reglementary period. Here, in our view, the
doctrine of laches does not apply. Note that upon
petitioners’ adamant refusal to heed EVERTEX’s claim,
respondent company immediately filed an action to recover
possession and ownership of the disputed properties. There
is no evidence showing any failure or neglect on its part, for
an unreasonable and unexplained length of time, to do that
which, by exercising due diligence, could or should have
been done earlier. The doctrine of stale demands would
apply only where by reason of the lapse of time, it would be
inequitable to allow a party to enforce his legal rights.
Moreover, except for very strong reasons, this Court is not
disposed to apply the doctrine 22
of laches to prejudice or
defeat the rights of an owner.
_______________
19 Diaz-Duarte vs. Ong, 298 SCRA 388, 397 (1998).

20 Exhibit “U”, Folder of Exhibits, p. 64.
21 Exhibit “V”, Id. at 66.

22 Noel vs. Court of Appeals, 240 SCRA 78, 90 (1995).
339
VOL. 366, OCTOBER 2, 2001 339

As to the award of damages, the contested damages are the

actual compensation, representing rentals for the contested
units of machinery, the exemplary damages, and attorney’s
fees.
As regards said actual compensation, the RTC awarded
P100,000.00 corresponding to the unpaid rentals of the
contested properties based on the testimony of John Chua,
who testified that the P100,000.00 was based on the
accepted practice in banking and finance, business and
investments that the rental price must take into account
the cost of money used to buy them. The Court of Appeals
did not give full credence to Chua’s projection and reduced
the award to P20,000.00.
Basic is the rule that to recover actual damages, the
amount of loss must not only be capable of proof but must
actually be proven with reasonable degree of certainty,
premised upon competent proof 23
or best evidence obtainable
of the actual amount thereof. However, the allegations of
respondent company as to the amount of unrealized rentals
due them as actual damages remain mere assertions
unsupported by documents and other competent evidence.
In determining actual damages, the court cannot rely on
mere assertions, speculations, conjectures or guesswork but
must depend on competent proof and on the best 24
evidence
obtainable regarding the actual amount of loss. However,
we are not prepared to disregard the following dispositions
of the respondent appellate court:
. . . In the award of actual damages under scrutiny, there is

nothing on record warranting the said award of P5,200,000.00,
representing monthly rental income of P100,000.00 from
November 1986 to February 1991, and the additional award of
P100,000.00 per month thereafter.
As pointed out by appellants, the testimonial evidence,
consisting of the testimonies of Jonh (sic) Chua and Mamerto
Villaluz, is shy of what is necessary to substantiate the actual
damages allegedly sustained by appellees, by way of unrealized
rental income of subject machineries and equipments.
_______________
23 Ace Haulers Corporation v. CA, et al., G.R. No. 127934, August 23,
2000, p. 11, 338 SCRA 572.
24 Barzaga vs. Court of Appeals, 268 SCRA 105, 113-114 (1997).
340

The testimony of John Cua (sic) is nothing but an opinion or

projection based on what is claimed to be a practice in business
and industry. But such a testimony cannot serve as the sole basis
for assessing the actual damages complained of. What is more,
there is no showing that had appellant Tsai not taken possession
of the machineries and equipments in question, somebody was
willing and ready to rent the same for P100,000.00 a month.
xxx
Then, too, even assuming arguendo that the said machineries
and equipments could have generated a rental income of
P30,000.00 a month, as projected by witness Mamerto
Villaluz,’the same would have been a gross income. Therefrom
should be deducted or removed, expenses for maintenance and
repairs. . . . Therefore, in the determination of the actual damages
or unrealized rental income sued upon, there is a good basis to
calculate that at least four months in a year, the machineries in
dispute would have been idle due to absence of a lessee or while
being repaired. In the light of the foregoing rationalization and
computation, We believe that a net unrealized rental income of
P20,000.00
25
a month, since November 1986, is more realistic and
fair.
As to exemplary damages, the RTC awarded P200,000.00

to EVERTEX which the Court of Appeals deleted. But
according to the CA, there was no clear showing that
petitioners acted malevolently, wantonly and oppressively.
The evidence, however, shows otherwise.
It is a requisite to award exemplary damages26 that the
wrongful act must be accompanied by bad faith, and the
guilty acted in a wanton, 27
fraudulent, oppressive, reckless
or malevolent manner. As previously stressed, petitioner
Tsai’s act of purchasing the controverted properties despite
her knowledge of EVERTEX’s claim was oppressive and
subjected the already insolvent respondent to gross
disadvantage. Petitioner PBCom also received the same
letters28 of Atty. Villaluz, responding thereto on March 24,
1987. Thus, PBCom’s act of taking all the properties found
in the factory of the financially handicapped respondent,
including those proper-
_______________
25 Rollo, G.R. No. 120109, pp. 43-44.

26 “J” Marketing Corp. vs. Sia, Jr., 285 SCRA 580, 583-584 (1998).
27 Cervantes vs. Court of Appeals, 304 SCRA 25, 33 (1997).
28 Exhibit “X”, Folder of Exhibits, p. 69.
341
VOL. 366, OCTOBER 2, 2001 341

ties not covered by or included in the mortgages, is equally

oppressive and tainted with bad faith. Thus, we are in
agreement with the RTC that an award of exemplary
damages is proper.
The amount of P200,000.00 for exemplary damages is,
however, excessive. Article 2216 of the Civil Code provides
that no proof of pecuniary loss is necessary for the
adjudication of exemplary damages, their assessment being
left to the discretion of the court
29
in accordance with the
circumstances of each case. While the imposition of
exemplary damages is justified in this case, equity calls for
its reduction. In Inhelder Corporation v. Court of Appeals,
G.R. No. L-52358, 122 SCRA 576, 585, (May 30, 1983), we
laid down the rule that judicial discretion granted to the
courts in the assessment of damages must always be
exercised wrtti balanced restraint and measured
objectivity. Thus, here the award of exemplary damages by
way of example for the public good should be reduced to
P100,000.00.
By the same token, attorney’s fees and other expenses of
litigation30may be recovered when exemplary damages are
awarded. In our view, RTC’s award of P50,000.00 as
attorney’s fees and expenses of litigation is reasonable,
given the circumstances in these cases.
WHEREFORE, the petitions are DENIED. The assailed
decision and resolution of the Court of Appeals in CA-G.R.
CV No. 32986 are AFFIRMED WITH MODIFICATIONS.
Petitioners Philippine Bank of Communications and Ruby
L. Tsai are hereby ordered to pay jointly and severally Ever
Textile Mills, Inc., the following: (1) P20,000.00 per month,
as compensation for the use and possession 31
of the
properties in question from November 1986 until subject
personal properties are restored to respondent corporation;
(2)
_______________
29 Art. 2216. Civil Code. No proof of pecuniary loss is necessary in order

that moral, nominal, temperate, liquidated or exemplary damages may be
adjudicated. The assessment of such damages, except liquidated ones, is
left to the discretion of the court, according to the circumstances of each
case.
30 Vital-Gozon v. Court of Appeals, 292 SCRA 124, 147 (1998).
31 The time when PBCom leased the disputed properties to Tsai, CA
Rollo, p. 34.
342

People vs. De Guzman
P100,000.00 by way of exemplary damages, and (3)

P50,000.00 as attorney’s fees and litigation expenses. Costs
against petitioners.
SO ORDERED.
Bellosillo (Chairman), Mendoza, Buena and De

Leon, Jr., JJ., concur.
Petitions denied, judgment and resolution affirmed with

modifications.
Notes.—One who deals with property subject of a notice

of lis pendens cannot invoke the right of a purchaser in
good faith—neither can he acquire better rights than those
of his predecessor in interest. (Yu vs. Court of Appeals, 251
SCRA 509 [1995])
Where a purchases was fully aware of another person’s
possession of the lot he purchased, he cannot successfully
pretend later to be an innocent purchaser for value. (Heirs
of Teodoro dela Cruz vs. Court of Appeals, 298 SCRA 172
[1998])
——o0o——
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9/5/2019 SUPREME COURT REPORTS ANNOTATED VOLUME 366

324 SUPREME COURT REPORTS ANNOTATED

RUBY L. TSAI, petitioner, vs. HON. COURT OF

PHILIPPINE BANK OF COMMUNICATIONS, petitioner,

Appeals: The jurisdiction of the Supreme Court in a petition

of the contract of Real and Chattel Mortgage executed by the

VOL. 366, OCTOBER 2, 2001 325

Tsai vs. Court of Appeals

Same; Same; Estoppel; Even if the properties are immovable

placed in the same depository as the property originally

326 SUPREME COURT REPORTS ANNOTATED

Tsai vs. Court of Appeals

Sales; Purchaser in Good Faith; Well-settled is the rule that

As borne out by the records, she received the letter of respondent’s

VOL. 366, OCTOBER 2, 2001 327

Tsai vs. Court of Appeals

Laches; Doctrine of Stale Demands; The doctrine of stale

must depend on competent proof and on the best evidence

PETITIONS for review on certiorari of a decision of the

The facts are stated in the opinion of the Court.

328 SUPREME COURT REPORTS ANNOTATED

The MORTGAGOR(S) hereby transfers) and convey(s), by way of

(Real and Chattel Mortgage executed by Ever Textile Mills in

LIST OF MACHINERIES & EQUIPMENT

A. Forty Eight (48) units of Vayrow Knitting Machines-

Serial Numbers Size of Machines

1 Rollo, G.R. No. 120109, pp. 23-45.

VOL. 366, OCTOBER 2, 2001 329

B. Sixteen (16) sets of Vayrow Knitting Machines made in

C. Two (2) Circular Knitting Machines made in West

D. Four (4) Winding Machines.

II. Any and all buildings and improvements now existing or

(a) Forty eight sets (48) Vayrow Knitting Machines x x x

IV. Any and all replacements, substitutions, additions,

On April 23, 1979, PBCom granted a second loan of

3 Folder of Exhibits, pp. 5-12.

330 SUPREME COURT REPORTS ANNOTATED

On November 19, 1982, due to business reverses,

Mortgage Law.” A Notice of Sheriffs Sale was issued on

VOL. 366, OCTOBER 2, 2001 331

1975 nor in the Chattel Mortgage of April 23, 1979, and

WHEREFORE, judgment is hereby rendered in favor of plaintiff

1. Ordering the annulment of the sale executed by defendant

4 Rollo, G.R. No. 120109, pp. 23-24.

332 SUPREME COURT REPORTS ANNOTATED

Dissatisfied, both PBCom and Tsai appealed to the Court of

WHEREFORE, except for the deletion therefrom of the award for

judgment appealed from is hereby AFFIRMED,

Motion for reconsideration of the above decision having

THE HONORABLE COURT OF APPEALS (SECOND DIVISION)

THE HONORABLE COURT OF APPEALS (SECOND

THE HONORABLE COURT OF APPEALS (SECOND

VOL. 366, OCTOBER 2, 2001 333

THE HONORABLE COURT OF APPEALS (SECOND DIVISION)

THE HONORABLE COURT OF APPEALS (SECOND

In G.R. No. 120109, PBCom raised the following issues:

DID THE COURT OF APPEALS VALIDLY DECREE THE

CAN PBCOM, WHO TOOK POSSESSION OF THE

6 Rollo, G.R. No. 120098, pp. 23-25.

334 SUPREME COURT REPORTS ANNOTATED