G.R. No.

L-30173 September 30, 1971

GAVINO A. TUMALAD and GENEROSA R. TUMALAD, plaintiffs-appellees,
vs.
ALBERTA VICENCIO and EMILIANO SIMEON, defendants-appellants.
Castillo & Suck for plaintiffs-appellees.
Jose Q. Calingo for defendants-appellants.

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

Case certified to this Court by the Court of Appeals (CA-G.R. No. 27824-R) for the reason that only
questions of law are involved.
This case was originally commenced by defendants-appellants in the municipal court of Manila in
Civil Case No. 43073, for ejectment. Having lost therein, defendants-appellants appealed to the
court a quo (Civil Case No. 30993) which also rendered a decision against them, the dispositive
portion of which follows:
WHEREFORE, the court hereby renders judgment in favor of the plaintiffs and
against the defendants, ordering the latter to pay jointly and severally the former a
monthly rent of P200.00 on the house, subject-matter of this action, from March 27,
1956, to January 14, 1967, with interest at the legal rate from April 18, 1956, the filing
of the complaint, until fully paid, plus attorney's fees in the sum of P300.00 and to
pay the costs.
It appears on the records that on 1 September 1955 defendants-appellants executed a chattel
mortgage in favor of plaintiffs-appellees over their house of strong materials located at No. 550 Int.
3, Quezon Boulevard, Quiapo, Manila, over Lot Nos. 6-B and 7-B, Block No. 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 herein mortgage was executed to guarantee a loan of P4,800.00
received from plaintiffs-appellees, 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 becomeimmediately due and Payable
and
the Chattel Mortgage will be enforceable in accordance with the provisions of Special
Act No. 3135, and for this purpose, the Sheriff of the City of Manila or any of his
deputies is hereby empowered and authorized to sell all the Mortgagor's property
after the necessary publication in order to settle the financial debts of P4,800.00, plus
12% yearly interest, and attorney's fees... 2
When defendants-appellants 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, plaintiffs-appellees were issued the corresponding certificate of sale. 3 Thereafter, on 18 April

1956, plaintiffs-appellant commenced Civil Case No. 43073 in the municipal court of Manila, praying,
among other things, that the house be vacated and its possession surrendered to them, and for
defendants-appellants to pay rent of P200.00 monthly from 27 March 1956 up to the time the
possession is surrendered. 4 On 21 September 1956, the municipal court rendered its decision
... ordering the defendants to vacate the premises described in the complaint;
ordering further to pay monthly the amount of P200.00 from March 27, 1956, until
such (time that) the premises is (sic) completely vacated; plus attorney's fees of
P100.00 and the costs of the suit. 5
Defendants-appellants, in their answers in both the municipal court and court a quo impugned the
legality of the chattel mortgage, claiming that they are still the owners of the house; but they waived
the right to introduce evidence, oral or documentary. Instead, they relied on their memoranda in
support of their motion to dismiss, predicated mainly on the grounds that: (a) the municipal court did
not have jurisdiction to try and decide the case because (1) the issue involved, is ownership, and (2)
there was no allegation of prior possession; and (b) failure to prove prior demand pursuant to
Section 2, Rule 72, of the Rules of Court. 6
During the pendency of the appeal to the Court of First Instance, defendants-appellants failed to
deposit the rent for November, 1956 within the first 10 days of December, 1956 as ordered in the
decision of the municipal court. As a result, the court granted plaintiffs-appellees' motion for
execution, and it was actually issued on 24 January 1957. However, the judgment regarding the
surrender of possession to plaintiffs-appellees could not be executed because the subject house had
been already demolished on 14 January 1957 pursuant to the order of the court in a separate civil
case (No. 25816) for ejectment against the present defendants for non-payment of rentals on the
land on which the house was constructed.
The motion of plaintiffs for dismissal of the appeal, execution of the supersedeas bond and
withdrawal of deposited rentals was denied for the reason that the liability therefor was disclaimed
and was still being litigated, and under Section 8, Rule 72, rentals deposited had to be held until final
disposition of the appeal. 7
On 7 October 1957, the appellate court of First Instance rendered its decision, the dispositive portion
of which is quoted earlier. The said decision was appealed by defendants to the Court of Appeals
which, in turn, certified the appeal to this Court. Plaintiffs-appellees failed to file a brief and this
appeal was submitted for decision without it.
Defendants-appellants submitted numerous assignments of error which can be condensed into two
questions, namely: .
(a) Whether the municipal court from which the case originated had jurisdiction to
adjudicate the same;
(b) Whether the defendants are, under the law, legally bound to pay rentals to the
plaintiffs during the period of one (1) year provided by law for the redemption of the
extrajudicially foreclosed house.
We will consider these questions seriatim.

(a) Defendants-appellants mortgagors question the jurisdiction of the municipal court from which the
case originated, and consequently, the appellate jurisdiction of the Court of First Instance a quo, on
the theory that the chattel mortgage is void ab initio; whence it would follow that the extrajudicial
foreclosure, and necessarily the consequent auction sale, are also void. Thus, the ownership of the
house still remained with defendants-appellants who are entitled to possession and not plaintiffsappellees. Therefore, it is argued by defendants-appellants, the issue of ownership will have to be
adjudicated first in order to determine possession. lt is contended further that ownership being in
issue, it is the Court of First Instance which has jurisdiction and not the municipal court.
Defendants-appellants predicate their theory of nullity of the chattel mortgage on two grounds, which
are: (a) that, their signatures on the chattel mortgage were obtained through fraud, deceit, or
trickery; and (b) that the subject matter of the mortgage is a house of strong materials, and, being an
immovable, it can only be the subject of a real estate mortgage and not a chattel mortgage.
On the charge of fraud, deceit or trickery, the Court of First Instance found defendants-appellants'
contentions as not supported by evidence and accordingly dismissed the charge, 8 confirming the
earlier finding of the municipal court that "the defense of ownership as well as the allegations of
fraud and deceit ... are mere allegations." 9
It has been held in Supia and Batiaco vs. Quintero and Ayala 10 that "the answer is a mere statement
of the facts which the party filing it expects to prove, but it is not evidence; 11 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, 12 wherein the
defendant was also a successful bidder in an auction sale, it was likewise held by this Court that in
detainer cases the aim 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. 13
Moreover, even granting that the charge is true, 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. 14 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.
It is claimed in the alternative by defendants-appellants that even if there was no fraud, deceit or
trickery, the chattel mortgage was still null and void ab initio because only personal properties can be
subject of a chattel mortgage. The rule about the status of buildings as immovable property is stated
in Lopez vs. Orosa, Jr. and Plaza Theatre Inc., 15 cited in Associated Insurance Surety Co., Inc. vs.
Iya, et al. 16 to the effect that
... 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 irrespective of whether or not said structure and the land on which it is
adhered to belong to the same owner.
Certain deviations, however, have been allowed for various reasons. In the case of Manarang and
Manarang vs. Ofilada, 17 this Court stated 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. 18 In the latter case, the mortgagor conveyed and transferred
to the mortgagee by way of mortgage "the following described personal property."19 The "personal
property" consisted of leasehold rights and a building. Again, in the case of Luna vs.
Encarnacion, 20 the subject of the contract designated as Chattel Mortgage was a house of mixed
materials, and this Court hold 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 the later case of Navarro vs.
Pineda, 21 this 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, No. L-11139, 23 April 1958). 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 (Evangelists vs. Abad, [CA]; 36 O.G. 2913), 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, 222 U.S. 58, cited in Davao Sawmill Co., Inc. vs. Castillo, et al.,
61 Phil. 709). 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. (Evangelista vs. Abad, Supra.) 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, [CA] 48 O.G. 5374): 22
In the contract now before Us, 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 23 the property together with its leasehold rights over the
lot on which it is constructed and participation ..." 24Although there is no specific statement referring
to the subject house as personal property, yet by ceding, selling or transferring a property by way of
chattel mortgage defendants-appellants could only have meant to convey the house as chattel, or at
least, intended to treat the same as such, so that they should not now be allowed to make an
inconsistent stand by claiming otherwise. Moreover, the subject house stood on a rented lot to which
defendats-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
personalty. Finally unlike in the Iya cases, Lopez vs. Orosa, Jr. and Plaza Theatre, Inc. 25 and Leung
Yee vs. F. L. Strong Machinery and Williamson, 26 wherein third persons assailed the validity of the
chattel mortgage, 27 it is the defendants-appellants themselves, as debtors-mortgagors, who are
attacking the validity of the chattel mortgage in this case. The doctrine of estoppel therefore applies
to the herein defendants-appellants, having treated the subject house as personalty.
(b) Turning to the question of possession and rentals of the premises in question. The Court of First
Instance noted in its decision that 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. For this reason, the said court limited itself to sentencing the
erstwhile mortgagors to pay plaintiffs a monthly rent of P200.00 from 27 March 1956 (when the

chattel mortgage was foreclosed and the house sold) until 14 January 1957 (when it was torn down
by the Sheriff), plus P300.00 attorney's fees.
Appellants mortgagors question this award, claiming that they were entitled to remain in possession
without any obligation to pay rent during the one year redemption period after the foreclosure sale,
i.e., until 27 March 1957. On this issue, We must rule for the appellants.
Chattel mortgages are covered and regulated by the Chattel Mortgage Law, Act No. 1508. 28 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 No. 3135, as amended by Act No.
4118, provided that the requirements of the law relative to notice and registration are complied
with. 29 In the instant case, the parties specifically stipulated that "the chattel mortgage will
be enforceable in accordance with the provisions of Special Act No. 3135 ... ." 30 (Emphasis
supplied).
Section 6 of the Act referred to 31 provides that the debtor-mortgagor (defendants-appellants herein)
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 32 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 Court of First Instance 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. 33 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 34 which also applies to properties
purchased in extrajudicial foreclosure proceedings. 35 Construing the said section, this Court stated in
the aforestated case of Reyes vs. Hamada.
In other words, before the expiration of the 1-year period within which the judgmentdebtor 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 judgment-debtor 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.
(Emphasis supplied)
The Hamada case reiterates the previous ruling in Chan vs. Espe. 36
Since the defendants-appellants were occupying the house at the time of the auction sale, they are
entitled to remain in possession during the period of redemption or within one year from and after 27
March 1956, the date of the auction sale, and to collect the rents or profits during the said period.

It will be noted further that in the case at bar 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 No. 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. For this reason, the same should be ordered dismissed, 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 cases. 37
It follows that the court below erred in requiring the mortgagors to pay rents for the year following the
foreclosure sale, as well as attorney's fees.
FOR THE FOREGOING REASONS, the decision appealed from is reversed and another one
entered, dismissing the complaint. With costs against plaintiffs-appellees.
Concepcion, C.J., Dizon, Makalintal, Zaldivar, Castro, Fernando, Teehankee, Barredo, Villamor and
Makasiar, JJ., concur.

G.R. No. L-17870

September 29, 1962

MINDANAO BUS COMPANY, petitioner,

vs.
THE CITY ASSESSOR & TREASURER and the BOARD OF TAX APPEALS of Cagayan de Oro
City,respondents.
Binamira, Barria and Irabagon for petitioner.
Vicente E. Sabellina for respondents.

LABRADOR, J.:
This is a petition for the review of the decision of the Court of Tax Appeals in C.T.A. Case No. 710
holding that the petitioner Mindanao Bus Company is liable to the payment of the realty tax on its
maintenance and repair equipment hereunder referred to.
Respondent City Assessor of Cagayan de Oro City assessed at P4,400 petitioner's abovementioned equipment. Petitioner appealed the assessment to the respondent Board of Tax Appeals
on the ground that the same are not realty. The Board of Tax Appeals of the City sustained the city
assessor, so petitioner herein filed with the Court of Tax Appeals a petition for the review of the
assessment.
In the Court of Tax Appeals the parties submitted the following stipulation of facts:
Petitioner and respondents, thru their respective counsels agreed to the following stipulation
of facts:
1. That petitioner is a public utility solely engaged in transporting passengers and cargoes by
motor trucks, over its authorized lines in the Island of Mindanao, collecting rates approved by
the Public Service Commission;
2. That petitioner has its main office and shop at Cagayan de Oro City. It maintains Branch
Offices and/or stations at Iligan City, Lanao; Pagadian, Zamboanga del Sur; Davao City and
Kibawe, Bukidnon Province;
3. That the machineries sought to be assessed by the respondent as real properties are the
following:
(a) Hobart Electric Welder Machine, appearing in the attached photograph, marked
Annex "A";
(b) Storm Boring Machine, appearing in the attached photograph, marked Annex "B";
(c) Lathe machine with motor, appearing in the attached photograph, marked Annex
"C";

(d) Black and Decker Grinder, appearing in the attached photograph, marked Annex
"D";
(e) PEMCO Hydraulic Press, appearing in the attached photograph, marked Annex
"E";
(f) Battery charger (Tungar charge machine) appearing in the attached photograph,
marked Annex "F"; and
(g) D-Engine Waukesha-M-Fuel, appearing in the attached photograph, marked
Annex "G".
4. That these machineries are sitting on cement or wooden platforms as may be seen in the
attached photographs which form part of this agreed stipulation of facts;
5. That petitioner is the owner of the land where it maintains and operates a garage for its
TPU motor trucks; a repair shop; blacksmith and carpentry shops, and with these
machineries which are placed therein, its TPU trucks are made; body constructed; and same
are repaired in a condition to be serviceable in the TPU land transportation business it
operates;
6. That these machineries have never been or were never used as industrial equipments to
produce finished products for sale, nor to repair machineries, parts and the like offered to the
general public indiscriminately for business or commercial purposes for which petitioner has
never engaged in, to date.1awphl.nt
The Court of Tax Appeals having sustained the respondent city assessor's ruling, and having denied
a motion for reconsideration, petitioner brought the case to this Court assigning the following errors:
1. The Honorable Court of Tax Appeals erred in upholding respondents' contention that the
questioned assessments are valid; and that said tools, equipments or machineries are
immovable taxable real properties.
2. The Tax Court erred in its interpretation of paragraph 5 of Article 415 of the New Civil
Code, and holding that pursuant thereto the movable equipments are taxable realties, by
reason of their being intended or destined for use in an industry.
3. The Court of Tax Appeals erred in denying petitioner's contention that the respondent City
Assessor's power to assess and levy real estate taxes on machineries is further restricted by
section 31, paragraph (c) of Republic Act No. 521; and
4. The Tax Court erred in denying petitioner's motion for reconsideration.
Respondents contend that said equipments, tho movable, are immobilized by destination, in
accordance with paragraph 5 of Article 415 of the New Civil Code which provides:
Art. 415. The following are immovable properties:
xxx

xxx

xxx

(5) Machinery, receptacles, instruments or implements intended by the owner of the

tenement for an industry or works which may be carried on in a building or on a piece of
land, and which tend directly to meet the needs of the said industry or works. (Emphasis
ours.)
Note that the stipulation expressly states that the equipment are placed on wooden or cement
platforms. They can be moved around and about in petitioner's repair shop. In the case of B. H.
Berkenkotter vs. Cu Unjieng, 61 Phil. 663, the Supreme Court said:
Article 344 (Now Art. 415), paragraph (5) of the Civil Code, gives the character of real
property to "machinery, liquid containers, instruments or implements intended by the owner
of any building or land for use in connection with any industry or trade being carried on
therein and which are expressly adapted to meet the requirements of such trade or industry."
If the installation of the machinery and equipment in question in the central of the Mabalacat
Sugar Co., Inc., in lieu of the other of less capacity existing therein, for its sugar and industry,
converted them into real property by reason of their purpose, it cannot be said that their
incorporation therewith was not permanent in character because, as essential and principle
elements of a sugar central, without them the sugar central would be unable to function or
carry on the industrial purpose for which it was established. Inasmuch as the central is
permanent in character, the necessary machinery and equipment installed for carrying on the
sugar industry for which it has been established must necessarily be permanent. (Emphasis
ours.)
So that movable equipments to be immobilized in contemplation of the law must first be "essential
and principal elements" of an industry or works without which such industry or works would be
"unable to function or carry on the industrial purpose for which it was established." We may here
distinguish, therefore, those movable which become immobilized by destination because they
are essential and principal elements in the industry for those which may not be so considered
immobilized because they are merely incidental, not essential and principal. Thus, cash registers,
typewriters, etc., usually found and used in hotels, restaurants, theaters, etc. are merely incidentals
and are not and should not be considered immobilized by destination, for these businesses can
continue or carry on their functions without these equity comments. Airline companies use forklifts,
jeep-wagons, pressure pumps, IBM machines, etc. which are incidentals, not essentials, and thus
retain their movable nature. On the other hand, machineries of breweries used in the manufacture of
liquor and soft drinks, though movable in nature, are immobilized because they are essential to said
industries; but the delivery trucks and adding machines which they usually own and use and are
found within their industrial compounds are merely incidental and retain their movable nature.
Similarly, the tools and equipments in question in this instant case are, by their nature, not essential
and principle municipal elements of petitioner's business of transporting passengers and cargoes by
motor trucks. They are merely incidentals acquired as movables and used only for expediency to
facilitate and/or improve its service. Even without such tools and equipments, its business may be
carried on, as petitioner has carried on, without such equipments, before the war. The transportation
business could be carried on without the repair or service shop if its rolling equipment is repaired or
serviced in another shop belonging to another.
The law that governs the determination of the question at issue is as follows:
Art. 415. The following are immovable property:
xxx

xxx

xxx

(5) Machinery, receptacles, instruments or implements intended by the owner of the

tenement for an industry or works which may be carried on in a building or on a piece of
land, and which tend directly to meet the needs of the said industry or works; (Civil Code of
the Phil.)
Aside from the element of essentiality the above-quoted provision also requires that the industry or
works be carried on in a building or on a piece of land. Thus in the case of Berkenkotter vs. Cu
Unjieng, supra, the "machinery, liquid containers, and instruments or implements" are found in a
building constructed on the land. A sawmill would also be installed in a building on land more or less
permanently, and the sawing is conducted in the land or building.
But in the case at bar the equipments in question are destined only to repair or service the
transportation business, which is not carried on in a building or permanently on a piece of land, as
demanded by the law. Said equipments may not, therefore, be deemed real property.
Resuming what we have set forth above, we hold that the equipments in question are not absolutely
essential to the petitioner's transportation business, and petitioner's business is not carried on in a
building, tenement or on a specified land, so said equipment may not be considered real estate
within the meaning of Article 415 (c) of the Civil Code.
WHEREFORE, the decision subject of the petition for review is hereby set aside and the equipment
in question declared not subject to assessment as real estate for the purposes of the real estate tax.
Without costs.
So ordered.
Bengzon, C.J., Padilla, Bautista Angelo, Reyes, J.B.L., Paredes, Dizon and Makalintal, JJ., concur.
Regala, Concepcion and Barrera JJ., took no part.

Makati Leasing and Finance Corp. vs. Wearever Textile Mills, Inc., No. L-58469, 122 SCRA
296 , May 16, 1983
G.R. No. L-58469 May 16, 1983
MAKATI LEASING and FINANCE CORPORATION, petitioner,
vs.
WEAREVER TEXTILE MILLS, INC., and HONORABLE COURT OF APPEALS, respondents.
Loreto C. Baduan for petitioner.
Ramon D. Bagatsing & Assoc. (collaborating counsel) for petitioner.
Jose V. Mancella for respondent.
DE CASTRO, J.:
Petition for review on certiorari of the decision of the Court of Appeals (now Intermediate Appellate
Court) promulgated on August 27, 1981 in CA-G.R. No. SP-12731, setting aside certain Orders later
specified herein, of Judge Ricardo J. Francisco, as Presiding Judge of the Court of First instance of
Rizal Branch VI, issued in Civil Case No. 36040, as wen as the resolution dated September 22, 1981
of the said appellate court, denying petitioner's motion for reconsideration.
It appears that in order to obtain financial accommodations from herein petitioner Makati Leasing
and Finance Corporation, the private respondent Wearever Textile Mills, Inc., discounted and
assigned several receivables with the former under a Receivable Purchase Agreement. To secure
the collection of the receivables assigned, private respondent executed a Chattel Mortgage over
certain raw materials inventory as well as a machinery described as an Artos Aero Dryer Stentering
Range.
Upon private respondent's default, petitioner filed a petition for extrajudicial foreclosure of the
properties mortgage to it. However, the Deputy Sheriff assigned to implement the foreclosure failed
to gain entry into private respondent's premises and was not able to effect the seizure of the
aforedescribed machinery. Petitioner thereafter filed a complaint for judicial foreclosure with the
Court of First Instance of Rizal, Branch VI, docketed as Civil Case No. 36040, the case before the
lower court.
Acting on petitioner's application for replevin, the lower court issued a writ of seizure, the
enforcement of which was however subsequently restrained upon private respondent's filing of a
motion for reconsideration. After several incidents, the lower court finally issued on February 11,
1981, an order lifting the restraining order for the enforcement of the writ of seizure and an order to
break open the premises of private respondent to enforce said writ. The lower court reaffirmed its
stand upon private respondent's filing of a further motion for reconsideration.
On July 13, 1981, the sheriff enforcing the seizure order, repaired to the premises of private
respondent and removed the main drive motor of the subject machinery.
The Court of Appeals, in certiorari and prohibition proceedings subsequently filed by herein private
respondent, set aside the Orders of the lower court and ordered the return of the drive motor seized
by the sheriff pursuant to said Orders, after ruling that the machinery in suit cannot be the subject of
replevin, much less of a chattel mortgage, because it is a real property pursuant to Article 415 of the
new Civil Code, the same being attached to the ground by means of bolts and the only way to
remove it from respondent's plant would be to drill out or destroy the concrete floor, the reason why
all that the sheriff could do to enfore the writ was to take the main drive motor of said machinery. The
appellate court rejected petitioner's argument that private respondent is estopped from claiming that
the machine is real property by constituting a chattel mortgage thereon.
A motion for reconsideration of this decision of the Court of Appeals having been denied, petitioner
has brought the case to this Court for review by writ of certiorari. It is contended by private
respondent, however, that the instant petition was rendered moot and academic by petitioner's act of
returning the subject motor drive of respondent's machinery after the Court of Appeals' decision was
promulgated.
The contention of private respondent is without merit. When petitioner returned the subject motor
drive, it made itself unequivocably clear that said action was without prejudice to a motion for

reconsideration of the Court of Appeals decision, as shown by the receipt duly signed by
respondent's representative. 1 Considering that petitioner has reserved its right to question the
propriety of the Court of Appeals' decision, the contention of private respondent that this petition has
been mooted by such return may not be sustained.
The next and the more crucial question to be resolved in this Petition is whether the machinery in
suit is real or personal property from the point of view of the parties, with petitioner arguing that it is a
personality, while the respondent claiming the contrary, and was sustained by the appellate court,
which accordingly held that the chattel mortgage constituted thereon is null and void, as contended
by said respondent.
A similar, if not Identical issue was raised in Tumalad v. Vicencio, 41 SCRA 143 where this Court,
speaking through Justice J.B.L. Reyes, ruled:
Although there is no specific statement referring to the subject house as personal property, yet by
ceding, selling or transferring a property by way of chattel mortgage defendants-appellants could
only have meant to convey the house as chattel, or at least, intended to treat the same as such, so
that they should not now be allowed to make an inconsistent stand by claiming otherwise. 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. Finally, unlike in the Iya cases, Lopez vs.
Orosa, Jr. & Plaza Theatre, Inc. & Leung Yee vs. F.L. Strong Machinery & Williamson, wherein third
persons assailed the validity of the chattel mortgage, it is the defendants-appellants themselves, as
debtors-mortgagors, who are attacking the validity of the chattel mortgage in this case. The doctrine
of estoppel therefore applies to the herein defendants-appellants, having treated the subject house
as personality.
Examining the records of the instant case, We find no logical justification to exclude the rule out, as
the appellate court did, the present case from the application of the abovequoted pronouncement. If
a house of strong materials, like what was involved in the above Tumalad case, may be considered
as personal property for purposes of executing a chattel mortgage thereon as long as the parties to
the contract so agree and no innocent third party will be prejudiced thereby, there is absolutely no
reason why a machinery, which is movable in its nature and becomes immobilized only by
destination or purpose, may not be likewise treated as such. This is really because one who has so
agreed is estopped from denying the existence of the chattel mortgage.
In rejecting petitioner's assertion on the applicability of the Tumalad doctrine, the Court of Appeals
lays stress on the fact that the house involved therein was built on a land that did not belong to the
owner of such house. But the law makes no distinction with respect to the ownership of the land on
which the house is built and We should not lay down distinctions not contemplated by law.
It must be pointed out that the characterization of the subject machinery as chattel by the private
respondent is indicative of intention and impresses upon the property the character determined by
the parties. As stated in Standard Oil Co. of New York v. Jaramillo, 44 Phil. 630, it is undeniable that
the parties to a contract may by agreement treat as personal property that which by nature would be
real property, as long as no interest of third parties would be prejudiced thereby.
Private respondent contends that estoppel cannot apply against it because it had never represented
nor agreed that the machinery in suit be considered as personal property but was merely required
and dictated on by herein petitioner to sign a printed form of chattel mortgage which was in a blank
form at the time of signing. This contention lacks persuasiveness. As aptly pointed out by petitioner
and not denied by the respondent, the status of the subject machinery as movable or immovable
was never placed in issue before the lower court and the Court of Appeals except in a supplemental
memorandum in support of the petition filed in the appellate court. Moreover, even granting that the
charge is true, such fact alone does not render a contract void ab initio, but can only be a ground for
rendering said contract voidable, or annullable pursuant to Article 1390 of the new Civil Code, by a
proper action in court. 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. On the other hand, as pointed out by
petitioner and again not refuted by respondent, the latter has indubitably benefited from said

contract. Equity dictates that one should not benefit at the expense of another. Private respondent
could not now therefore, be allowed to impugn the efficacy of the chattel mortgage after it has
benefited therefrom,
From what has been said above, the error of the appellate court in ruling that the questioned
machinery is real, not personal property, becomes very apparent. Moreover, the case of Machinery
and Engineering Supplies, Inc. v. CA, 96 Phil. 70, heavily relied upon by said court is not applicable
to the case at bar, the nature of the machinery and equipment involved therein as real properties
never having been disputed nor in issue, and they were not the subject of a Chattel Mortgage.
Undoubtedly, the Tumalad case bears more nearly perfect parity with the instant case to be the more
controlling jurisprudential authority.
WHEREFORE, the questioned decision and resolution of the Court of Appeals are hereby reversed
and set aside, and the Orders of the lower court are hereby reinstated, with costs against the private
respondent.
SO ORDERED.
Makasiar (Chairman), Aquino, Concepcion Jr., Guerrero and Escolin JJ., concur.
Abad Santos, J., concurs in the result

G.R. No. L-11139

April 23, 1958

SANTOS EVANGELISTA, petitioner,

vs.
ALTO SURETY & INSURANCE CO., INC., respondent.
Gonzalo D. David for petitioner.
Raul A. Aristorenas and Benjamin Relova for respondent.
CONCEPCION, J.:
This is an appeal by certiorari from a decision of the Court of Appeals.
Briefly, the facts are: On June 4, 1949, petitioner herein, Santos Evangelista, instituted Civil Case
No. 8235 of the Court of First, Instance of Manila entitled " Santos Evangelista vs. Ricardo Rivera,"
for a sum of money. On the same date, he obtained a writ of attachment, which 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 June 8,
1949. In due course, judgment was rendered in favor of Evangelista, who, on October 8, 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 October 22, 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. respondent herein and that the latter is now the true owner of said property. It appears
that on May 10, 1952, a definite deed of sale of the same house had been issued to respondent, as
the highest bidder at an auction sale held, on September 29, 1950, in compliance with a writ of
execution issued in Civil Case No. 6268 of the same court, entitled "Alto Surety & Insurance Co.,
Inc. vs. Maximo Quiambao, Rosario Guevara and Ricardo Rivera," in which judgment, for the sum of
money, had been rendered in favor respondent herein, as plaintiff therein. Hence, on June 13, 1953,
Evangelista instituted the present action against respondent and Ricardo Rivera, for the purpose of
establishing his (Evangelista) title over said house, securing possession thereof, apart from
recovering damages.
In its answer, respondent alleged, in substance, that it has a better right to the house, because the
sale made, and the definite deed of sale executed, in its favor, on September 29, 1950 and May 10,
1952, respectively, precede the sale to Evangelista (October 8, 1951) and the definite deed of sale in
his favor (October 22, 1952). It, also, made some special defenses which are discussed hereafter.
Rivera, in effect, joined forces with respondent. After due trial, the Court of First Instance of Manila
rendered judgment for Evangelista, sentencing Rivera and respondent to deliver the house in
question to petitioner herein and to pay him, jointly and severally, forty pesos (P40.00) a month from
October, 1952, until said delivery, plus costs.
On appeal taken by respondent, this decision was reversed by the Court of Appeals, which absolved
said respondent 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
respondent, 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, reading:
The property of the defendant shall be attached by the officer executing the order in the
following manner:
(e) Debts and credits, and other personal property not capable of manual delivery, by leaving
with the person owing such debts, or having in his possession or under his control, such
credits or other personal property, or with, his agent, a copy of the order, and a notice that
the debts owing by him to the defendant, and the credits and other personal property in his
possession, or under his control, belonging to the defendant, are attached in pursuance of
such order. (Emphasis ours.)
However, the Court of Appeals seems to have been of the opinion, also, 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
"Evangelists 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."
Evangelista now seeks a review, by certiorari, of this decision of the Court of Appeals. In this
connection, it is not disputed that although the sale to the respondent preceded that made to
Evangelists, the latter would have a better right if the writ of attachment, issued in his
favor before the sale to the respondent, had been properly executed or enforced. This question, in
turn, depends upon whether the house of Ricardo Rivera is real property or not. In the affirmative
case, the applicable provision would be subsection (a) of section 7, Rule 59 of the Rules of Court,
pursuant to which the attachment should be made "by filing with the registrar of deeds a copy of the
order, together with a description of the property attached, and a notice that it is attached, and by
leaving a copy of such order, description, and notice with the occupant of the property, if any there
be."
Respondent maintains, however, and the Court of Appeals held, that Rivera's house is personal
property, the levy upon which must be made in conformity with subsections (c) and (e) of said
section 7 of Rule 59. Hence, the main issue before us is whether a house, constructed the lessee of
the land on which it is built, should be dealt with, for purpose, of attachment, as immovable property,
or as personal property.
It is, our considered opinion that said 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 Off. Gaz., 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 usufructuary
or lessee. This is the doctrine of our Supreme Court in Leung Yee vs. Strong Machinery Company,
37 Phil., 644. And it is amply supported by the rulings of the French Court. . . ."
It is true that the 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 Off. Gaz., 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.
Much less is it in point where there has been no contractwhatsoever, with respect to the status of the

house involved, as in the case at bar. Apart from this, in Manarang vs. Ofilada (99 Phil., 108; 52 Off.
Gaz., 3954), we held:
The question now before us, however, is: Does the fact that the parties entering into a
contract regarding a house gave said property the consideration of personal property in their
contract, bind the sheriff in advertising the property's sale at public auction as personal
property? It is to be remembered that in the case at bar the action was to collect a loan
secured by a chattel mortgage on the house. It is also to be remembered that in practice it is
the judgment creditor who points out to the sheriff the properties that the sheriff is to levy
upon in execution, and the judgment creditor in the case at bar is the party in whose favor
the owner of the house had conveyed it by way of chattel mortgage and, therefore, knew its
consideration as personal property.
These considerations notwithstanding, we hold that the rules on execution do not allow, and,
we should notinterpret them in such a way as to allow, the special consideration that parties
to a contract may have desired to impart to real estate, for example, 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. When the rules speak of
personal property, property which is ordinarily so considered is meant; and when real
property is spoken of, it means property which is generally known as real property. 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. We therefore hold that the mere fact that a house was the subject of the chattel
mortgage and was considered as personal property by the parties does not make said house
personal property for purposes of the notice to be given for its sale of public auction. This
ruling is demanded by the need for a definite, orderly and well defined regulation for official
and public guidance and would prevent confusion and misunderstanding.
We, therefore, declare that 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 of 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, et al., [C.A.] Off. Gaz. 5374.)" (Emphasis ours.)
The foregoing considerations apply, with equal force, to the conditions for the levy of attachment, for
it similarly affects the public and third persons.
It is argued, however, that, even if the house in question were immovable property, its attachment by
Evangelista was void or ineffective, because, in the language of the Court of Appeals, "after
presenting a Copy of the order of attachment in the Office of the Register of Deeds, the person who
might then be in possession of the house, the sheriff took no pains to serve Ricardo Rivera, or other
copies thereof." This finding of the Court of Appeals is neither conclusive upon us, nor accurate.
The Record on Appeal, annexed to the petition for Certiorari, shows that petitioner alleged, in
paragraph 3 of the complaint, that he acquired the house in question "as a consequence of the levy

of an attachment and execution of the judgment in Civil Case No. 8235" of the Court of First Instance
of Manila. In his answer (paragraph 2), Ricardo Rivera admitted said attachment execution of
judgment. He alleged, however, by way a of special defense, that the title of respondent
"is superior to that of plaintiff because it is based on a public instrument," whereas Evangelista relied
upon a "promissory note" which "is only a private instrument"; that said Public instrument in favor of
respondent "is superior also to the judgment in Civil Case No. 8235"; and that plaintiff's claim against
Rivera amounted only to P866, "which is much below the real value" of said house, for which reason
it would be "grossly unjust to acquire the property for such an inadequate consideration."
Thus, Rivera impliedly admitted that his house had been attached, that the house had been sold to
Evangelista in accordance with the requisite formalities, and that said attachment was valid,
although allegedly inferior to the rights of respondent, and the consideration for the sale to
Evangelista was claimed to be inadequate.
Respondent, in turn, denied the allegation in said paragraph 3 of the complaint, but only " for the
reasons stated in its special defenses" namely: (1) that by virtue of the sale at public auction, and the
final deed executed by the sheriff in favor of respondent, the same became the "legitimate owner of
the house" in question; (2) that respondent "is a buyer in good faith and for value"; (3) that
respondent "took possession and control of said house"; (4) that "there was no valid attachment by
the plaintiff and/or the Sheriff of Manila of the property in question as neither took actual or
constructive possession or control of the property at any time"; and (5) "that the alleged registration
of plaintiff's attachment, certificate of sale and final deed in the Office of Register of Deeds, Manila, if
there was any, is likewise, not valid as there is no registry of transactions covering houses erected
on land belonging to or leased from another." In this manner, respondent claimed a better right,
merely under the theory that, in case of double sale of immovable property, the purchaser who first
obtains possession in good faith, acquires title, if the sale has not been "recorded . . . in the Registry
of Property" (Art. 1544, Civil Code of the Philippines), and that the writ of attachment and the notice
of attachment in favor of Evangelista should be considered unregistered, "as there is no registry of
transactions covering houses erected on land belonging to or leased from another." In fact, said
article 1544 of the Civil Code of the Philippines, governing double sales, was quoted on page 15 of
the brief for respondent in the Court of Appeals, in support of its fourth assignment of error therein, to
the effect that it "has preference or priority over the sale of the same property" to Evangelista.
In other words, there was no issue on whether copy of the writ and notice of attachment had been
served on Rivera. No evidence whatsoever, to the effect that Rivera had not been served with
copies of said writ and notice, was introduced in the Court of First Instance. In its brief in the Court of
Appeals, respondent did not aver, or even, intimate, that no such copies were served by the sheriff
upon Rivera. Service thereof on Rivera had been impliedly admitted by the defendants, in their
respective answers, and by their behaviour throughout the proceedings in the Court of First
Instance, and, as regards respondent, in the Court of Appeals. In fact, petitioner asserts in his brief
herein (p. 26) that copies of said writ and notice were delivered to Rivera, simultaneously with
copies of the complaint, upon service of summons, prior to the filing of copies of said writ and notice
with the register deeds, and the truth of this assertion has not been directly and positively
challenged or denied in the brief filed before us by respondent herein. The latter did not dare therein
to go beyond making a statement for the first time in the course of these proceedings, begun
almost five (5) years ago (June 18, 1953) reproducing substantially the aforementioned finding of
the Court of Appeals and then quoting the same.
Considering, therefore, 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-in said pleadings and briefs, as well as by

their conduct during the entire proceedings, prior to the rendition of the decision of the Court of
Appeals that Rivera had received copies of said documents; and that, for this reason, evidently,
no proof was introduced thereon, we, are of the opinion, and so hold 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 aforementioned admission by the parties, and that, accordingly, a
grave abuse of discretion was committed in making said finding, which is, furthermore, inaccurate.
Wherefore, the decision of the Court of Appeals is hereby reversed, and another one shall be
entered affirming that of the Court of First Instance of Manila, with the costs of this instance against
respondent, the Alto Surety and Insurance Co., Inc. It is so ordered.
Paras, C.J., Bengzon, Montemayor, Reyes, A., Bautista Angelo, Labrador, Reyes, J.B.L., Endencia
and Felix, JJ.,concur.

G.R. No. 140707

April 22, 2003

NORGENE POTENCIANO and Spouses MANUEL JAYME and NATIVIDAD ZAFRAJAYME, petitioners,
vs.
DWIGHT "IKE" B. REYNOSO, CARLOS B. REYNOSO, MA. LOURDES B. REYNOSO, FELIPE B.
REYNOSO, CLAREBELO B. REYNOSO, VERONICA B. NEBRES and the COURT OF
APPEALS, respondents.
PANGANIBAN, J.:
The basic issue in this case revolves around the authenticity of the signatures of the alleged vendor.
Upholding the regional trial court, the Court of Appeals opted to give credence to the testimonies of
the handwriting expert and other witnesses presented by private respondents, as against the
testimony of the attorney who had notarized the Deeds of Sale. After due deliberation, this Court
finds no cogent reason to reverse the two lower courts finding of fact.
The Case
Before us is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, assailing the
May 7, 1999 Decision1 and the October 20, 1999 Resolution2 of the Court of Appeals (CA) in CA-GR
CV No. 39121. The decretal portion of the Decision reads as follows:
"WHEREFORE, [there being] no error in the decision appealed from, the same is
AFFIRMED."3
The assailed Resolution denied petitioners Motion for Reconsideration.4
The Facts
The facts of the case are summarized by the CA in this wise:
"Sometime in 1961, the late Felipe B. Pareja former Cebu City Treasurer was convicted of
the crime of murder and sentenced to life imprisonment with the accessory penalties
attendant thereto including civil interdiction. Felipe Pareja was granted a conditional pardon
by then President Ferdinand E. Marcos on 2 August 1971. On 19 October 1979, Felipe
Pareja executed a Deed of Absolute Sale covering a parcel of land and all improvements
thereon situated at Juana Osmea Ext., Capitol Site, Cebu City containing an area of four
hundred ninety three (493) square meters in favor of his illegitimate son herein defendantappellant Manuel Jayme who later claimed that the said sale was made to cover the
payments he had made for the hospitalization expenses of his father, he having been
constrained to borrow money from several people for the purpose. Before Felipe Pareja died
on August 6, 1981, he executed a Last Will and Testament dated June 24, 1976 wherein he
bequeathed to herein appellees and appellant Manuel Jayme the lot in question while at the
same time recognizing them as his illegitimate children. On 29 October 1979 or ten (10) days
after the execution of the Deed of Absolute Sale in their favor by Felipe Pareja, spouses
Manuel and Natividad Jayme executed a Deed of Absolute Sale covering the property in
favor of defendant-appellant Norgene Potenciano who eventually filed an ejectment case
against plaintiff-appellee Dwight Reynoso.

"[Plaintiff]-appellees Dwight Ike B. Reynoso, Carlos B. Reynoso, Ma. Lourdes B. Reynoso,

Felipe Harry B. Reynoso filed the instant suit as likewise illegitimate children with another
woman of the late Felipe B. Pareja while plaintiff-appellee Veronica B. Nebres aunt of the
other plaintiffs, claims to be the owner of a residential house on the said property. The
subject property is now covered by Transfer Certificate of Title No. 77221 in the name of
defendant Norgene Potenciano after cancellation of the Transfer Certificates of Title in the
name of the former registered owners Rosa and Milagros Cuenco, Felipe Pareja and finally
Manuel Jayme before registration in the name of Potenciano. Plaintiffs assailed the sale
made by their father contending that the latter was already senile and still suffering from the
accessory penalty of civil interdiction at the time of the sale. They also raise the issue of
forgery of their late fathers signature on the Deed of Sale." 5 (Citations omitted)
Ruling of the Court of Appeals
The CA affirmed the Decision of the Regional Trial Court (RTC), which ruled that the signatures of
Felipe B. Pareja on the subject Deeds of Sale had been forged. 6 Both courts gave more weight to
the testimony of the expert witness, who had testified that the signatures were indeed forgeries as
opposed to the testimony of the notary public who had notarized the questioned documents.
The RTC explained that the expert witness had examined the forgery scientifically; while the notary
public, who was the counsel of Petitioner Norgene Potenciano, was an interested
party.7 Consequently, the forged Deeds of Absolute Sale did not transfer any rights from Pareja to
the Jayme spouses or from the spouses to Potenciano.8
The CA also agreed with the RTC that Potenciano was a buyer in bad faith for not having sufficiently
investigated the property at the time he bought it, when it was then in the possession of people other
than the seller.9
Accepted by the appellate court as sufficient proof of filiation was the will, in which respondents were
recognized by their father, even if it had not yet been probated. 10 Moreover, the CA ruled that
petitioners were bound by a Joint Affidavit executed by Manuel Jayme and Dwight Reynoso
declaring that, together with the other parties, they were recognized illegitimate children of Pareja. 11
Hence, this Petition.12
The Issues
In their Memorandum,13 petitioners submit the following issues for our consideration:
"I. Whether or not the Honorable Court of Appeals gravely erred in concluding that the
documents of sale are null and void ab initio. A sub-issue would be whether or not Felipe B.
Pareja was still suffering from the accessory penalty of civil interdiction when he sold the lot
and house to Petitioner-Spouses Jayme.
"II. Whether or not the Decision of the Honorable Court of Appeals is contrary to law and
jurisprudence. It is contrary to Article 278 of the New Civil Code, and ignored the case
of Genato vs. Genato Commercial Corporation, CA-G.R. No. 22374-R, April 20, 1960; 56
O.G. 6211, requiring proof to be submitted or offered to prove the due execution of a will.

"III. Whether or not the Decision of the Court of Appeals is contrary to Article 434 of the New
Civil Code.
"IV. Whether or not the Honorable Court of Appeals gravely erred in ignoring the clear, direct
and personal testimony of the notary public, Atty. Ronald Duterte, who categorically testified
that Felipe Pareja signed the documents of sale in his presence and who ignored the wellsettled jurisprudence that a notary public is presumed to have performed his duties
according to law.
"V. Whether or not the Court of Appeals gravely erred in giving credence to the findings of
Mr. Romeo Varona, alleged document expert, when his testimony and competence has been
thoroughly impugned.
"VI. Whether or not the Court of Appeals gravely erred in concluding that Petitioner Norgene
Potenciano is a buyer in bad faith.
"VII. Whether or not the Court of Appeals gravely erred in awarding damages to private
respondents for the simple reason that private respondents miserably failed to prove their
claims as alleged in their Complaint."14
Simply stated, the issues to be resolved are as follows: (1) whether the sale of the subject property
by Pareja to the Jayme spouses and, in turn, by the spouses to Potenciano was valid and binding;
(2) whether Potenciano was a buyer in good faith; (3) whether private respondents have the
personality to demand the reconveyance of the property in question; and (4) whether private
respondents are entitled to damages.
The Courts Ruling
The Petition is unmeritorious.
First Issue:
Validity of the Deeds of Sale
Petitioners argue that the Deed of Sale dated October 19, 1979,15 between Pareja and the Jayme
spouses; and that which was dated October 29, 1979,16 this time between the Jayme spouses and
Potenciano, are both valid and enforceable. They contend that Pareja, being the absolute owner,
had the right to dispose of the house and lot in question. They dispute the finding of forgery, claiming
that the notary public is more credible than the expert witness. Further, at the time of the disposition,
Pareja was supposedly no longer suffering the accessory penalty of civil interdiction, because he
had already served the full term of his commuted sentence.
Forgery of Parejas Signature
on the Deeds of Sale
The most crucial question to be resolved in this case is the authenticity of Parejas alleged signature
on the Deed of Sale transferring the subject property to the Jayme spouses. Once the validity of this
transfer is established, then the succeeding one -- this time from the Jayme spouses to Potenciano,
in which Pareja allegedly signed as a witness -- can also be evaluated.

Preliminarily, we should stress that the remedy of appeal by certiorari under Rule 45 of the Rules of
Court contemplates only questions of law, not of fact.17 A question of law exists when there is doubt
or controversy as to what the law is on a certain state of facts. On the other hand, there is a question
of fact when the doubt or difference arises as to the truth or the falsity of the statement of facts. 18
It is not the function of this Court to analyze or weigh evidence all over again, unless there is a
showing that the findings of the lower court are totally devoid of support or are glaringly erroneous as
to constitute palpable error or grave abuse of discretion.19
The theory of forgery advanced by petitioners involves a question of fact previously raised and
satisfactorily ruled upon by the two lower courts. As a rule, the findings of fact of the CA, affirming
those of the RTC, are final and conclusive. The Supreme Court cannot review those findings on
appeal, especially when they are borne out by the records or are based on substantial evidence. 20
This application of this rule can be controverted only by the exceptions set forth in a long line of
jurisprudence,21none of which is available in the instant case. The CA competently ruled upon the
issues raised by petitioners and laid down the proper legal as well as factual bases for its Decision.
Petitioners have not given any cogent reason to question its findings that the signatures were forged.
Although Atty. Ronald Duterte, the notary public, testified to the genuineness of the signatures of
Pareja on the questioned Deeds of Sale, both the trial and the appellate courts still ruled against
petitioners. Generally, a notarized document carries the evidentiary weight conferred upon it with
respect to its due execution. Thus, a document acknowledged before a notary public has in its favor
the presumption of regularity.22
However, this presumption is not absolute and may be rebutted by clear and convincing evidence to
the contrary.23 To show that the signatures of Pareja were forged on the questioned Deeds of Sale,
petitioners presented Dwight Reynoso, who was familiar with his handwriting; and Romeo Varona, a
handwriting expert of the National Bureau of Investigation.
Varona reported fundamental divergencies between the two sets of sample signatures as follows:
"Comparative examination and analysis of the questioned signatures marked Q-1, Q-2, Q3 and the standard specimen signatures marked S-1 to S-10 inclusive reveal fundamental
divergencies in letter formation, construction, skill and other individual handwriting
characteristics."24
From these findings, he concluded that the "signatures of Felipe Pareja appearing on the Deed of
Absolute Sale marked Q-1, Q-2 and Q-3 were forged." 25
However, we are not unmindful of the rule that a finding of forgery does not depend entirely on the
testimonies of handwriting experts; the judge is still required to conduct an independent examination
of the questioned signature.26 The CA did exactly this. It conducted its own independent examination
of the signatures and concluded that the striking differences between the questioned signatures and
those admitted as genuine were readily noticeable upon inspection. 27
On the other hand, Atty. Duterte testified that Pareja had personally appeared before him and signed
the two instruments himself. The former made these categorical statements on the signature of the

latter, both as the vendor in the October 19, 1979 Deed and as a witness in that which was dated
October 29, 1979.
However, Atty. Dutertes testimony as to the latter Deed of Sale was completely belied by the other
witnesses, who testified that Pareja had signed as a witness in the latters own residence and not in
the presence of the notary public. Petitioner Potenciano himself admitted that Pareja -- being already
sickly at the time -- had signed in the latters own house and not in the presence of Notary Public
Duterte.28
Equally telling is the doubt expressed by the RTC on the notary publics motives:
"x x x. However, the Court is inclined to give more weight [to] the testimony of the expert
witness, not only because the latter explained the forgery scientifically but also for the reason
that the notary public who notarized the questioned documents was the former counsel of
defendant Potenciano."29
Thus, considering the testimonies of the various witnesses and a plain comparison of the questioned
signatures with admittedly genuine ones, the Court finds no reason to reverse the findings of the two
lower courts. Although the Deeds of Sale were public documents having in their favor the
presumption of regularity, such presumption was adequately refuted by competent witnesses and
the appellate courts visual analysis of the documents.
Since the signature of the alleged vendor was a forgery, no rights were transferred from him to the
alleged vendees. In turn, the Jayme spouses could not have conveyed ownership of the property to
Petitioner Potenciano. It is a well-settled principle that no one can give what one does not
have.30 Accordingly, one can sell only what one owns or is authorized to sell, and the buyer can
acquire no more than what the seller can transfer legally.31
Civil Interdiction
Having ruled that the signatures of Pareja on the questioned Deeds of Sale were forged, we hold
that the question of whether he was still suffering civil interdiction at the time he allegedly sold the
property now becomes irrelevant to the determination of the validity of the transactions.
Parenthetically, this Court notes that in their narration of facts, both the RTC and the CA
automatically ascribed the accessory penalty of civil interdiction to Pareja as a result of his
conviction for murder and the consequent life imprisonment imposed upon him by the Court of First
Instance of Cebu.32 We shall not rule on the correctness of the penalty, since the criminal case in
which it was imposed is not the subject of this appeal. However, we remind the lower courts that life
imprisonment and reclusion perpetua are distinct penalties.
Reclusion perpetua entails an imprisonment of at least thirty years, after which the convict becomes
eligible for pardon.33 It carries accessory penalties including civil interdiction.34 Life imprisonment, on
the other hand, has no fixed duration and carries no accessory penalties. 35 Hence, to say that Pareja
was civilly interdicted by reason of the life imprisonment imposed on him would be inaccurate.
Second Issue:
Buyer in Good Faith

Petitioners also argue that Potenciano was an innocent purchaser in good faith and for value. He
was allegedly approached by Petitioner Manuel Jayme, who wanted to sell the property in
question.36 Before buying it, the former supposedly exhausted efforts to verify the muniments of the
latters title.37 Also, even if it was still in the name of its original owners [the Cuencos], Jayme was
able to show to Potenciano the Deed of Sale that had transferred the property from the Cuencos to
Pareja and, subsequently, from Pareja to the Jayme spouses. These circumstances allegedly
showed Potencianos good faith.
We disagree. The burden of proving the status of a purchaser in good faith lies upon one who
asserts that status.38 In discharging the burden, it is not enough to invoke the ordinary presumption
of good faith.39
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 it, and who pays therefor a full and fair price at the
time of the purchase or before receiving such notice. 40
The whole evidence in this case points to the absolute lack of good faith on the part of Potenciano.
At the time he allegedly bought the property in question, no certificate of title was ever presented to
him. If we are to believe petitioners position, there were two transfers before the alleged sale to him.
The first was from the Cuencos to Pareja, while the second was from Pareja to the Jayme spouses.
As Potenciano himself stated in his testimony, when they executed the Deed of Sale on October 29,
1979, there was no certificate of title in the name of the Jayme spouses or of Pareja 41 or of the
alleged original owners, the Cuencos.42 There was simply a lot to be sold, and an ocular inspection
thereof conducted.43
The glaring lack of good faith on the part of Potenciano is more than apparent in his testimony, which
we reproduce in part hereunder:
"ATTY. GUERRERO:
Q
In other words, you relied only on the Deed of Sale from Rosa and Milagros Cuenco
to Felipe B. Pareja and from Felipe Pareja to Manuel Jayme, a duly notarized deed of sale?
WITNESS:
A

Yes, sir."
xxx

xxx

xxx

"ATTY. GUERRERO:
Q

So you only based it on the three deeds of sale?

WITNESS:
A

Yes, sir.

ATTY. GUERRERO:

Q
Now, in your deed of sale dated October 29, 1979 you also bought a house of strong
materials? which was included in the sale?
WITNESS:
A

Yes, sir.

ATTY. GUERRERO:
Q
Now, when you knew that there was no certificate of title in the name of Manuel
Jayme or when you were not shown a certificate of title in the name of Manuel Jayme did
you verify from the Register of Deeds about it?
WITNESS:
A

No, sir.

ATTY. GUERRERO:
Q
Before October 29, 1979, you did not verify about it in the office of the Register of
Deeds?
WITNESS:
A

No.

ATTY. GUERRERO:
Q

After October 29, 1979 did you go to the Register of Deeds?

WITNESS:
A

I did not go to the Register of Deeds also.

ATTY. GUERRERO:
Q

Now, what did you rely as a basis in buying the house?

WITNESS:
A
Because I trusted Ronie Duterte. He was the one who facilitated everything, on the
transaction.
ATTY. GUERRERO:
Q
Because you relied on those three deeds of sale of Cuenco to Pareja and Pareja to
Jayme, you bought the property on installment basis?

WITNESS:
A

Yes, sir.

ATTY. GUERRERO:
Q

When did you fully pay the consideration, the price of the Deed of Sale?

WITNESS:
A

I do not know whether it was fully paid because they were the ones who computed it.

ATTY. GUERRERO:
Q

Who are you referring to when you said they?

WITNESS:
A

My father.

ATTY. GUERRERO:
Q

In other words Mr. Witness, the money used to pay the land came from your father?

WITNESS:
A
pay.

Yes. If Mr. Jayme transact business with my father, then my father will be the one to

ATTY. GUERRERO:
Q
You said Mr. Witness that when you filed your answer to the complaint in this case, in
paragraph 23 thereof, you caused to be verified the existence of the certificates of title in the
Office of the Register of Deeds, that is in paragraph 23 of your answer to the complaint.
Which is true now, did you verify or did you not verify about it?
WITNESS:
A

It is only now.

ATTY. GUERRERO:
Q

What particular date?

WITNESS:
A

I could not remember the exact date.

ATTY. GUERRERO:
Q

But only this year?

WITNESS:
A

No.

ATTY. GUERRERO:
Q

Was it after the price was fully paid?

WITNESS:
A
After we received [the] title of the land we discovered that there was somebody who is
occupying the lot.
ATTY. GUERRERO:
Q
title?

So, you verified in the Office of the Register of Deeds only after you were given the

WITNESS:
A

Yes, sir."44

Obviously, Potenciano was shown no muniment of title covering the property he was buying, but
merely three Deeds of Sale tracing its transfer from three alleged owners, whom he did not even
know. Neither did he verify its ownership with the Register of Deeds. What utterly aggravated the
situation was the fact that he did not even care whom he was dealing with. He simply trusted a
certain Ronie Duterte, who facilitated "everything" without ascertaining the authority or legal right of
the persons he was dealing with.
Equally significant is the fact that even before executing the alleged Deed of Sale, Potenciano never
checked who was in possession of the property. He testified as follows:
"ATTY. GUERRERO:
Q
Now, after you executed the Deed of Sale or after October 29, 1979, you were
informed by Mr. Manuel Jayme that the property which you bought was possessed by third
persons, one of whom was Ike Reynoso and his family, is that correct?
WITNESS:
A

Yes, sir.

ATTY. GUERRERO:

It was only after the signing of the deed of sale?

WITNESS:
A

Yes, sir, after the execution of the deed of sale.

ATTY. GUERRERO:
Q
What did you do upon learning of the fact that it was possessed by third persons, one
of whom was Ike Reynoso and his family?
WITNESS:
A
Mr. Jayme said to me that there is nothing wrong with it because the occupants there
will just vacate the premises.
ATTY. GUERRERO:
Q
In other words, you did not pay attention to the information given to you by Mr. Jayme
that the property was possessed by third persons?
WITNESS:
A
Yes, because he said that the occupants will just vacate the premises, so I did not
mind. I trusted them.
ATTY. GUERRERO:
Q
When Manuel Jayme told you that the occupants of the property will just vacate, you
did not have a certificate of title in your name yet?
WITNESS:
A

Not yet.

ATTY. GUERRERO:
Q

Neither was there any title in the name of Jayme yet?

WITNESS:
A

Yes, sir."45

Settled is the rule that a buyer of real property that is in the possession of a person other than the
seller must be wary. A buyer who does not investigate the rights of the one in possession 46 can
hardly be regarded as a buyer in good faith.

To be sure, we cannot ascribe good faith to those who have not shown any diligence in protecting
their rights. Having ruled thus, we also hold that Potencianos right to the property he allegedly
bought must fail. He cannot take cover under the protection the law accords to purchasers in good
faith and for value.
Potenciano cannot now claim that he has already acquired a valid title to the property. To be
effective, the inscription in the registry must have been made in good faith. 47 The defense of
indefeasibility of a Torrens title does not extend to a transferee who takes it with notice of a flaw.48 A
holder in bad faith of a certificate of title is not entitled to the protection of the law, for the law cannot
be used as a shield for fraud.49
Third Issue:
Personality to Sue
Petitioners argue that the suit against them cannot be maintained by private respondents, because
the latter have not established their filiation to Pareja as their father. Petitioners further contend that
Felipe B. Parejas unprobated Last Will and Testament,50 dated June 24, 1976, cannot be used to
establish respondents filiation.
Again, we disagree with this contention. The way to prove the filiation of illegitimate children is
provided by the Family Code thus:
"Art. 175. Illegitimate children may establish their illegitimate filiation in the same way and on
the same evidence as legitimate children."51
In turn, Article 172 of the Family Code states:
"Art. 172. The filiation of legitimate children is established by any of the following:
(1) The record of birth appearing in the civil register or a final judgment; or
(2) An admission of legitimate filiation in a public document or a private handwritten
instrument and signed by the parent concerned.
In the absence of the foregoing evidence, the legitimate filiation shall be proved by:
(1) The open and continuous possession of the status of a legitimate child, or
(2) Any other means allowed by the Rules of Court and special laws."52
These provisions in relation to those in the Civil Code have been explained by this Court as follows:
"The due recognition of an illegitimate child in a record of birth, a will, a statement before a
court of record, or in any authentic writing is, in itself, a consummated act of
acknowledgment of the child, and no further court action is required."53
Justice Jose C. Vitug clarifies in unequivocal terms the process of proving filiation: "under this
[Family] Code, filiation may likewise be established by holographic as well as notarial wills, except

that they no longer need to be probated or to be strictly in conformity with the formalities thereof for
purposes of establishing filiation."54
Petitioners argument on the need for probate loses force when weighed against its purpose. In
probate proceedings, all that the law requires is the courts declaration that the external formalities
have been complied with. The will is then deemed valid and effective in the eyes of the law.55 Thus,
probate proceedings merely determine the extrinsic validity of the will56 and do not affect its contents.
Moreover, the appellate court correctly noted the following:
"x x x [P]laintiff Dwight Reynoso and defendant Manuel Jayme had executed a joint affidavit
declaring that they together with the other plaintiffs [were] recognized illegitimate children of
Felipe B. Pareja as embodied in the latters Will. This affidavit which binds Jayme as affiant
is proof of the existence of Parejas Will and effectively demolishes Jaymes posture that the
plaintiffs have no personality to institute the instant suit. x x x" 57
Petitioners are mistaken in assuming that this Joint Affidavit58 is being used by private respondents
to prove the latters filiation as illegitimate children of Pareja. The document cannot be used for that
purpose, because the children were the ones who recognized their father and not the other way
around. However, its importance lies in the fact that it prevents petitioners from denying private
respondents standing to institute the case against them.
Having admitted that Private Respondent Reynoso was indeed an illegitimate son of Pareja just like
him, Manuel Jayme cannot now claim otherwise. An admission is rendered conclusive upon the
person making it and cannot be denied as against the person relying on it. 59 Neither can petitioners
argue that such acknowledgment applies only to Jayme. Since Potenciano claims to have derived
his right from the Jayme spouses, then he is bound by Jaymes admission.
Final Issue:
Damages
Finally, petitioners contend that private respondents have no cause of action against them.
Therefore, the latter are not entitled to any award of damages.
We rule otherwise. Since the Deeds of Sale upon which petitioners based their ownership of the
questioned property are invalid, private respondents have a cause of action for moral and exemplary
damages. Likewise, they are entitled to attorneys fees and litigation expenses for having gone
through this process to protect their rights from petitioners wrongful claim of ownership of the
subject property. We find that the amounts awarded by the RTC and subsequently affirmed by the
CA are reasonable and justified under the circumstances obtaining in this case.
WHEREFORE, the Petition is hereby DENIED and the assailed Decision AFFIRMED. Costs against
petitioners.
SO ORDERED.
Puno, (Chairman), Sandoval-Gutierrez, Corona, and Carpio-Morales, JJ., concur.

G.R. No. 158121

December 12, 2007

HEIRS OF VALERIANO S. CONCHA, SR. NAMELY: TERESITA CONCHA-PARAN, VALERIANO

P. CONCHA, JR., RAMON P. CONCHA, EDUARDO P. CONCHA, REPRESENTED BY HIS LEGAL
GUARDIAN, REYNALDO P. CONCHA, ALBERTO P. CONCHA, BERNARDO P. CONCHA and
GLORIA, petitioners,
vs.
SPOUSES GREGORIO J. LUMOCSO1 and BIENVENIDA GUYA, CRISTITA J. LUMOCSO VDA.
DE DAAN, AND SPOUSES JACINTO J. LUMOCSO and BALBINA T. LUMOCSO,2 respondents.
DECISION
PUNO, C.J.:
On appeal by certiorari under Rule 45 of the Rules of Court are the decision3 and resolution4 of the
Court of Appeals (CA) in CA-G.R. SP No. 59499, annulling the resolutions 5 and order6 of the
Regional Trial Court (RTC) of Dipolog City, Branch 9, in Civil Case Nos. 5188, 5433 and 5434 which
denied the separate motions to dismiss and Joint Motion for Reconsideration filed by the
respondents.
The relevant facts are undisputed.
Petitioners, heirs of spouses Dorotea and Valeriano Concha, Sr., claim to be the rightful owners of
Lot No. 6195 (Civil Case No. 5188), a one-hectare portion of Lot No. 6196-A (Civil Case No. 5433),
and a one-hectare portion of Lot Nos. 6196-B and 7529-A (Civil Case No. 5434), all situated in
Cogon, Dipolog City, under Section 48(b) of Commonwealth Act No. 141 (C.A. No. 141), otherwise
known as the Public Land Act. Respondent siblings Gregorio Lumocso (Civil Case No. 5188),
Cristita Lumocso Vda. de Daan (Civil Case No. 5433) and Jacinto Lumocso (Civil Case No. 5434),
are the patent holders and registered owners of the subject lots.
The records show that on August 6, 1997, Valeriano Sr.7 and his children, petitioners Valeriano Jr.,
Ramon, Eduardo, Alberto, Bernardo, Teresita, Reynaldo, and Gloria, all surnamed Concha, filed a
complaint for Reconveyance and/or Annulment of Title with Damages against "Spouses Gregorio
Lomocso and Bienvenida Guya." They sought to annul Free Patent No. (IX-8)985 and the
corresponding Original Certificate of Title (OCT) No. P-22556 issued in the name of "Gregorio
Lumocso" covering Lot No. 6195. The case was raffled to the RTC of Dipolog City, Branch 9, and
docketed as Civil Case No. 5188. In their Amended Complaint, petitioners prayed that judgment be
rendered:
1. Declaring Free Patent No. (IX-8)985 and Original Certificate of Title No. 22556 issued to
defendants as null and void ab initio;
2. Declaring Lot No. 6195 or 1.19122-hectare as private property of the plaintiffs under Sec.
48(b) of CA No. 141 otherwise known as the Public Land Act as amended by RA 1942;
3. Ordering the defendant Lomocsos to reconvey the properties (sic) in question Lot No.
6195 or the 1.19122 hectares in favor of the plaintiffs within 30 days from the finality of the
decision in this case and if they refuse, ordering the Clerk of Court of this Honorable Court to
execute the deed of reconveyance with like force and effect as if executed by the
defendant[s] themselves;

4. Ordering defendant Lomocsos to pay P60,000.00 for the 21 forest trees illegally
cut; P50,000.00 for moral damages; P20,000.00 for Attorneys fees; P20,000.00 for litigation
expenses; and to pay the cost of the proceedings;
5. Declaring the confiscated three (sic) flitches kept in the area of the plaintiffs at Dampalan
San Jose, Dipolog with a total volume of 2000 board feet a[s] property of the plaintiff [they]
being cut, collected and taken from the land possessed, preserved, and owned by the
plaintiffs;
6. The plaintiffs further pray for such other reliefs and remedies which this Honorable Court
may deem just and equitable in the premises.8
On September 3, 1999, two separate complaints for Reconveyance with Damages were filed by
petitioners,9 this time against "Cristita Lomocso Vda. de Daan" for a one-hectare portion of Lot No.
6196-A and "Spouses Jacinto Lomocso and Balbina T. Lomocso" for a one-hectare portion of Lot
Nos. 6196-B and 7529-A. The two complaints were also raffled to Branch 9 of the RTC of Dipolog
City and docketed as Civil Case Nos. 5433 and 5434, respectively. In Civil Case No. 5433,
petitioners prayed that judgment be rendered:
1. Declaring [a] portion of Lot 6196-A titled under OCT (P23527) 4888 equivalent to one
hectare located at the western portion of Lot 4888 as private property of the plaintiffs under
Sec. 48(B) CA 141 otherwise known as Public Land OCT (sic) as amended by RA No. 1942;
2. Ordering the defendant to reconvey the equivalent of one (1) hectare forested portion of
her property in question in favor of the plaintiffs within 30 days from the finality of the
decision in this case segregating one hectare from OCT (P23527) 4888, located at its
Western portion and if she refuse (sic), ordering the Clerk of Court of this Honorable Court to
execute the deed of reconveyance with like force and effect, as if executed by the
defenda[n]t herself;
3. Ordering defendant to pay P30,000.00 for the 22 forest trees illegally cut; P20,000.00 for
moral damages; P20,000.00 for Attorney's fees; P20,000.00 for litigation expenses; and to
pay the cost of the proceedings.10
In Civil Case No. 5434, petitioners prayed that judgment be rendered:
1. Declaring [a] portion of Lot 7529-A under OCT (P-23207) 12870 and Lot 6196-B OCT (P20845) 4889 equivalent to one hectare located as (sic) the western portion of said lots as
private property of the plaintiffs under Sec. 48(b) of [C.A. No.] 141 otherwise know[n] as the
[P]ublic [L]and [A]ct as amended by RA 1942;
2. Ordering the defendants to reconvey the equivalent of one (1) hectare forested portion of
their properties in question in favor of the plaintiffs within 30 days from the finality of the
decision in this case segregating one hectare from OCT (P-23207) 12870 and OCT (T20845)-4889 all of defendants, located at its Western portion and if they refuse, ordering the
Clerk of Court of this Honorable Court to execute the deed of reconveyance with like force
and effect as if executed by the defendants themselves[;]
3. Ordering defendants to pay P20,000.00 for the six (6) forest trees illegally cut; P20,000.00
for moral damages; P20,000.00 for Attorney's fees; P20,000.00 for litigation expenses; and
to pay the cost of the proceedings.11

The three complaints12 commonly alleged: a) that on May 21, 1958, petitioners' parents (spouses
Valeriano Sr. and Dorotea Concha) acquired by homestead a 24-hectare parcel of land situated in
Cogon, Dipolog City; b) that since 1931, spouses Concha "painstakingly preserved" the forest in the
24-hectare land, including the excess four (4) hectares "untitled forest land" located at its eastern
portion; c) that they possessed this excess 4 hectares of land (which consisted of Lot No. 6195, onehectare portion of Lot No. 6196-A and one-hectare portion of Lot Nos. 6196-B and 7529-A)
"continuously, publicly, notoriously, adversely, peacefully, in good faith and in concept of the (sic)
owner since 1931;" d) that they continued possession and occupation of the 4-hectare land after the
death of Dorotea Concha on December 23, 1992 and Valeriano Sr. on May 12, 1999; e) that the
Concha spouses "have preserved the forest trees standing in [the subject lots] to the exclusion of the
defendants (respondents) or other persons from 1931" up to November 12, 1996 (for Civil Case No.
5188) or January 1997 (for Civil Case Nos. 5433 and 5434) when respondents, "by force,
intimidation, [and] stealth forcibly entered the premises, illegally cut, collected, [and] disposed" of 21
trees (for Civil Case No. 5188), 22 trees (for Civil Case No. 5433) or 6 trees (for Civil Case No.
5434); f) that "the land is private land or that even assuming it was part of the public domain,
plaintiffs had already acquired imperfect title thereto" under Sec. 48(b) of C.A. No. 141, as amended
by Republic Act (R.A.) No. 1942; g) that respondents allegedly cut into flitches the trees felled in Lot
No. 6195 (Civil Case No. 5188) while the logs taken from the subject lots in Civil Case Nos. 5433
and 5434 were sold to a timber dealer in Katipunan, Zamboanga del Norte; h) that respondents
"surreptitiously" filed free patent applications over the lots despite their full knowledge that petitioners
owned the lots; i) that the geodetic engineers who conducted the original survey over the lots never
informed them of the survey to give them an opportunity to oppose respondents' applications; j) that
respondents' free patents and the corresponding OCTs were issued "on account of fraud, deceit, bad
faith and misrepresentation"; and k) that the lots in question have not been transferred to an
innocent purchaser.
On separate occasions, respondents moved for the dismissal of the respective cases against them
on the same grounds of: (a) lack of jurisdiction of the RTC over the subject matters of the
complaints; (b) failure to state causes of action for reconveyance; (c) prescription; and (d) waiver,
abandonment, laches and estoppel.13 On the issue of jurisdiction, respondents contended that the
RTC has no jurisdiction over the complaints pursuant to Section 19(2) of Batas Pambansa Blg. (B.P.)
129, as amended by R.A. No. 7691, as in each case, the assessed values of the subject lots are
less than P20,000.00.
Petitioners opposed,14 contending that the instant cases involve actions the subject matters of which
are incapable of pecuniary estimation which, under Section 19(1) of B.P. 129, as amended by R.A.
7691, fall within the exclusive original jurisdiction of the RTCs. They also contended that they have
two main causes of action: for reconveyance and for recovery of the value of the trees felled by
respondents. Hence, the totality of the claims must be considered which, if computed, allegedly falls
within the exclusive original jurisdiction of the RTC.
The trial court denied the respective motions to dismiss of respondents. 15 The respondents filed a
Joint Motion for Reconsideration,16 to no avail.17
Dissatisfied, respondents jointly filed a Petition for Certiorari, Prohibition and Preliminary Injunction
with Prayer for Issuance of Restraining Order Ex Parte18 with the CA, docketed as CA-G.R. SP No.
59499. In its Decision,19 the CA reversed the resolutions and order of the trial court. It held that even
assuming that the complaints state a cause of action, the same have been barred by the statute of
limitations. The CA ruled that an action for reconveyance based on fraud prescribes in ten (10)
years, hence, the instant complaints must be dismissed as they involve titles issued for at least
twenty-two (22) years prior to the filing of the complaints. The CA found it unnecessary to resolve the
other issues.

Hence, this appeal in which petitioners raise the following issues, viz:
FIRST - WHETHER OR NOT RESPONDENT COURT OF APPEALS (FORMER FIRST
DIVISION) ERRED IN REVERSING THE ORDER OF THE COURT A QUO DENYING THE
MOTION FOR DISMISSAL, CONSIDERING THE DISMISSAL OF A PARTY COMPLAINT IS
PREMATURE AND TRIAL ON THE MERITS SHOULD BE CONDUCTED TO THRESH OUT
EVIDENTIARY MATTERS.
SECOND - WHETHER OR NOT THE RESPONDENT COURT OF APPEALS (FORMER
FIRST DIVISION) ERRED IN DISMISSING THE PETITIONERS' COMPLAINTS ON [THE]
GROUND OF PRESCRIPTION.
THIRD - WHETHER OR NOT THE RESPONDENT COURT OF APPEALS (FORMER FIRST
DIVISION) ERRED IN CONCLUDING THAT THERE IS NO DOCUMENTARY EVIDENCE
ON RECORD TO SHOW THAT PETITIONERS OWN THE SUBJECT FOREST PORTION
OF THE PROPERTIES ERRONEOUSLY INCLUDED IN THE TITLES OF PRIVATE
RESPONDENTS.
FOURTH - WHETHER OR NOT THE PETITION OF HEREIN PRIVATE RESPONDENTS
FILED WITH THE RESPONDENT COURT OF APPEALS (FORMER FIRST DIVISION)
SHOULD HAVE BEEN DISMISSED OUTRIGHTLY FOR PRIVATE RESPONDENTS'
THEREIN FAILURE TO COMPLY WITH THE MANDATORY REQUIREMENT OF SECTION
1 RULE 65 OF THE RULES OF COURT TO SUBMIT CERTIFIED TRUE COPIES OF THE
ASSAILED ORDERS OF THE TRIAL COURT WHICH RENDERED THEIR PETITION (CA
G.R. 59499) DEFICIENT IN FORM AND SUBSTANCE CITING THE CASE OF CATUIRA
VS. COURT OF APPEALS (172 SCRA 136).20
In their memorandum,21 respondents reiterated their arguments in the courts below that: a) the
complaints of the petitioners in the trial court do not state causes of action for reconveyance; b)
assuming the complaints state causes of action for reconveyance, the same have already been
barred by prescription; c) the RTC does not have jurisdiction over the subject matter of the instant
cases; d) the claims for reconveyance in the complaints are barred by waiver, abandonment, or
otherwise extinguished by laches and estoppel; and e) there is no special reason warranting a
review by this Court.
Since the issue of jurisdiction is determinative of the resolution of the instant case yet the CA skirted
the question, we resolved to require the parties to submit their respective Supplemental Memoranda
on the issue of jurisdiction.22
In their Supplemental Memorandum,23 petitioners contend that the nature of their complaints, as
denominated therein and as borne by their allegations, are suits for reconveyance, or annulment or
cancellation of OCTs and damages. The cases allegedly involve more than just the issue of title and
possession since the nullity of the OCTs issued to respondents and the reconveyance of the subject
properties were also raised as issues. Thus, the RTC has jurisdiction under Section 19(1) of B.P.
129, which provides that the RTC has jurisdiction "[i]n all civil actions in which the subject of the
litigation is incapable of pecuniary estimation." Petitioners cited: a) Raymundo v. CA24 which set the
criteria for determining whether an action is one not capable of pecuniary estimation; b)Swan v.
CA25 where it was held that an action for annulment of title is under the jurisdiction of the RTC;
c)Santos v. CA26 where it was similarly held that an action for annulment of title, reversion and
damages was within the jurisdiction of the RTC; and d) Commodities Storage and ICE Plant
Corporation v. CA27 where it was held that "[w]here the action affects title to the property, it should
be filed in the RTC where the property is located." Petitioners also contend that while it may be

argued that the assessed values of the subject properties are within the original jurisdiction of the
municipal trial court (MTC), they have included in their prayers "any interest included therein"
consisting of 49 felled natural grown trees illegally cut by respondents. Combining the assessed
values of the properties as shown by their respective tax declarations and the estimated value of the
trees cut, the total amount prayed by petitioners exceeds twenty thousand pesos (P20,000.00).
Hence, they contend that the RTC has jurisdiction under Section 19(2) of B.P. 129.
Jurisdiction over the subject matter is the power to hear and determine cases of the general class to
which the proceedings in question belong.28 It is conferred by law and an objection based on this
ground cannot be waived by the parties.29 To determine whether a court has jurisdiction over the
subject matter of a case, it is important to determine the nature of the cause of action and of the
relief sought.30
The trial court correctly held that the instant cases involve actions for reconveyance. 31 An action for
reconveyance respects the decree of registration as incontrovertible but seeks the transfer of
property, which has been wrongfully or erroneously registered in other persons' names, to its rightful
and legal owners, or to those who claim to have a better right. 32 There is no special ground for an
action for reconveyance. It is enough that the aggrieved party has a legal claim on the property
superior to that of the registered owner33 and that the property has not yet passed to the hands of an
innocent purchaser for value.34
The reliefs sought by the petitioners in the instant cases typify an action for reconveyance. The
following are also the common allegations in the three complaints that are sufficient to constitute
causes of action for reconveyance, viz:
(a) That plaintiff Valeriano S. Concha, Sr. together with his spouse Dorotea Concha have
painstakingly preserve[d] the forest standing in the area [of their 24-hectare homestead]
including the four hectares untitled forest land located at the eastern portion of the forest
from 1931 when they were newly married, the date they acquired this property by occupation
or possession;35
(b) That spouses Valeriano S. Concha Sr. and Dorotea P. Concha have preserved the forest
trees standing in [these parcels] of land to the exclusion of the defendants Lomocsos or
other persons from 1931 up to November 12, 1996 [for Civil Case No. 5188] and January
1997 [for Civil Case Nos. 5433 and 5434] when defendants[,] by force, intimidation, [and]
stealth[,] forcibly entered the premises, illegal[ly] cut, collected, disposed a total of [twentyone (21) trees for Civil Case No. 5188, twenty-two (22) trees for Civil Case No. 5433 and six
(6) trees for Civil Case No. 5434] of various sizes;36
(c) That this claim is an assertion that the land is private land or that even assuming it was
part of the public domain, plaintiff had already acquired imperfect title thereto under Sec.
48(b) of [C.A.] No. 141[,] otherwise known as the Public Land Act[,] as amended by [R.A.]
No. [7691];37
(d) That [respondents and their predecessors-in-interest knew when they] surreptitiously
filed38 [their respective patent applications and were issued their respective] free patents and
original certificates of title [that the subject lots belonged to the petitioners]; 39
(e) [That respondents' free patents and the corresponding original certificates of titles were
issued] on account of fraud, deceit, bad faith and misrepresentation; 40 and
(f) The land in question has not been transferred to an innocent purchaser.41

These cases may also be considered as actions to remove cloud on one's title as they are intended
to procure the cancellation of an instrument constituting a claim on petitioners' alleged title which
was used to injure or vex them in the enjoyment of their alleged title. 42
Being in the nature of actions for reconveyance or actions to remove cloud on one's title, the
applicable law to determine which court has jurisdiction is Section 19(2) of B.P. 129, as amended by
R.A. No. 7691, viz:
Section 19. Jurisdiction in Civil Cases.-- Regional Trial Courts shall exercise exclusive
original jurisdiction: x x x
(2) In all civil actions which involve the title to, or possession of, real property, or any interest
therein, where the assessed value of the property involved exceeds Twenty thousand pesos
(P20,000.00) or for civil actions in Metro Manila, where such value exceeds Fifty thousand
pesos (P50,000.00) except actions for forcible entry into and unlawful detainer of lands or
buildings, original jurisdiction over which is conferred upon the Metropolitan Trial Courts,
Municipal Trial Courts, and Municipal Circuit Trial Courts;
x x x.
In the cases at bar, it is undisputed that the subject lots are situated in Cogon, Dipolog City and their
assessed values are less than P20,000.00, to wit:

Civil Case

No. Lot No.

Assessed Value

5188

6195

P1,030.00

5433

6196-A

4,500.00

5434

6196-B

4,340.00

7529-A

1,880.00.43

Hence, the MTC clearly has jurisdiction over the instant cases.
Petitioners' contention that this case is one that is incapable of pecuniary estimation under the
exclusive original jurisdiction of the RTC pursuant to Section 19(1) of B.P. 129 is erroneous.

In a number of cases, we have held that actions for reconveyance 44 of or for cancellation of title45 to
or to quiet title46 over real property are actions that fall under the classification of cases that involve
"title to, or possession of, real property, or any interest therein."
The original text of Section 19(2) of B.P. 129 as well as its forerunner, Section 44(b) of R.A. 296, 47 as
amended, gave the RTCs (formerly courts of first instance) exclusive original jurisdiction "[i]n all
civil actions which involve the title to, or possession of, real property, or any interest therein,
except actions for forcible entry into and unlawful detainer of lands or buildings, original jurisdiction
over which is conferred upon Metropolitan Trial Courts, [MTCs], and Municipal Circuit Trial Courts
(conferred upon the city and municipal courts under R.A. 296, as amended)." Thus, under the old
law, there was no substantial effect on jurisdiction whether a case is one, the subject matter of which
was incapable of pecuniary estimation, under Section 19(1) of B.P. 129 or one involving title to
property under Section 19(2). The distinction between the two classes became crucial with the
amendment introduced by R.A. No. 769148 in 1994 which expanded the exclusive original jurisdiction
of the first level courts to include "all civil actions which involve title to, or possession of, real
property, or any interest thereinwhere the assessed value of the property or interest therein
does not exceed Twenty thousand pesos (P20,000.00) or, in civil actions in Metro Manila,
where such assessed value does not exceed Fifty thousand pesos (P50,000.00) exclusive of
interest, damages of whatever kind, attorney's fees, litigation expenses and costs." Thus,
under the present law, original jurisdiction over cases the subject matter of which involves "title to,
possession of, real property or any interest therein" under Section 19(2) of B.P. 129 is divided
between the first and second level courts, with the assessed value of the real property involved as
the benchmark. This amendment was introduced to "unclog the overloaded dockets of the RTCs
which would result in the speedier administration of justice." 49
The cases of Raymundo v. CA50 and Commodities Storage and ICE Plant Corporation v.
CA,51 relied upon by the petitioners, are inapplicable to the cases at bar. Raymundo involved a
complaint for mandatory injunction, not one for reconveyance or annulment of title. The bone of
contention was whether the case was incapable of pecuniary estimation considering petitioner's
contention that the pecuniary claim of the complaint was only attorney's fees of P10,000, hence, the
MTC had jurisdiction. The Court defined the criterion for determining whether an action is one that is
incapable of pecuniary estimation and held that the issue of whether petitioner violated the
provisions of the Master Deed and Declaration of Restriction of the Corporation is one that is
incapable of pecuniary estimation. The claim for attorney's fees was merely incidental to the principal
action, hence, said amount was not determinative of the court's jurisdiction. Nor can Commodities
Storage and ICE Plant Corporation provide any comfort to petitioners for the issue resolved by the
Court in said case was venue and not jurisdiction. The action therein was for damages, accounting
and fixing of redemption period which was filed on October 28, 1994, before the passage of R.A. No.
7691. In resolving the issue of venue, the Court held that "[w]here the action affects title to property,
it should be instituted in the [RTC] where the property is situated. The Sta. Maria Ice Plant & Cold
Storage is located in Sta. Maria, Bulacan. The venue in Civil Case No. 94-727076 was therefore
improperly laid."
Worse, the cases of Swan v. CA52 and Santos v. CA53 cited by the petitioners, contradict their own
position that the nature of the instant cases falls under Section 19(1) of B.P. 129. The complaints
in Swan and Santos were filed prior to the enactment of R.A. No. 7691. In Swan, the Court held that
the action being one for annulment of title, the RTC had original jurisdiction under Section 19(2) of
B.P. 129. In Santos, the Court similarly held that the complaint for cancellation of title, reversion and
damages is also one that involves title to and possession of real property under Section 19(2) of B.P.
129. Thus, while the Court held that the RTC had jurisdiction, the Court classified actions for
"annulment of title" and "cancellation of title, reversion and damages" as civil actions that involve
"title to, or possession of, real property, or any interest therein" under Section 19(2) of B.P. 129.

Petitioners' contention that the value of the trees cut in the subject properties constitutes "any
interest therein (in the subject properties)" that should be computed in addition to the respective
assessed values of the subject properties is unavailing. Section 19(2) of B.P. 129, as amended by
R.A. No. 7691, is clear that the RTC shall exercise jurisdiction "in all civil actions which involve the
title to, or possession of, real property, or any interest therein, where the assessed value of the
property involved exceeds Twenty thousand pesos (P20,000.00) or for civil actions in Metro
Manila, where such value exceeds Fifty thousand pesos (P50,000.00)." It is true that the
recovery of the value of the trees cut from the subject properties may be included in the term "any
interest therein." However, the law is emphatic that in determining which court has jurisdiction, it is
only the assessed value of the realty involved that should be computed. 54 In this case, there is no
dispute that the assessed values of the subject properties as shown by their tax declarations are
less than P20,000.00. Clearly, jurisdiction over the instant cases belongs not to the RTC but to the
MTC.
IN VIEW WHEREOF, the decision of the Court of Appeals is hereby AFFIRMED that the RTC of
Dipolog City, Branch 9, has no jurisdiction in Civil Case Nos. 5188, 5433 and 5434.
SO ORDERED.
Ynares-Santiago, Sandoval-Gutierrez, Corona, Azcuna, JJ., concur.

G.R. Nos. L-10817-18

February 28, 1958

ENRIQUE LOPEZ, petitioner,

vs.
VICENTE OROSA, JR., and PLAZA THEATRE, INC., respondents.
Nicolas Belmonte and Benjamin T. de Peralta for petitioner.
Tolentino & Garcia and D. R. Cruz for respondent Luzon Surety Co., Inc. Jose B. Macatangay for
respondent Plaza Theatre, Inc.
FELIX, J.:
Enrique Lopez is a resident of Balayan, Batangas, doing business under the trade name of LopezCastelo Sawmill. Sometime in May, 1946, Vicente Orosa, Jr., also a resident of the same province,
dropped at Lopez' house and invited him to make an investment in the theatre business. It was
intimated that Orosa, his family and close friends were organizing a corporation to be known as
Plaza Theatre, Inc., that would engage in such venture. Although Lopez expressed his unwillingness
to invest of the same, 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 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, Lopez was paid
only P20,848.50, thus leaving a balance of P41,771.35.
We may state at this juncture that the Plaza Theatre was erected on a piece of land with an area of
679.17 square meters formerly owned by Vicente Orosa, Jr., and was acquired by the corporation on
September 25, 1946, for P6,000. As Lopez was pressing Orosa for payment of the remaining unpaid
obligation, the latter and Belarmino Rustia, the president of the corporation, promised to obtain a
bank loan by mortgaging the properties of the Plaza Theatre., out of which said amount of
P41,771.35 would be satisfied, 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 Philippine
National Bank 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 November 16, 1946, under Act No. 3344. Subsequently, when the corporation applied
for the registration of the land under Act 496, such mortgage was not revealed and thus Original
Certificate of Title No. O-391 was correspondingly issued on October 25, 1947, without any
encumbrance appearing thereon.
Persistent demand from Lopez for the payment of the amount due him caused Vicente Orosa, Jr. to
execute on March 17, 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 November 12, 1947, a complaint with the Court of
First Instance of Batangas (Civil Case No. 4501 which later became R-57) against Vicente Orosa, Jr.
and Plaza Theater, Inc., praying that defendants be sentenced to pay him jointly and severally the
sum of P41,771.35, with legal interest from the firing of the action; that in case defendants fail to pay
the same, that the building and the land covered by OCT No. 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.
Defendants Vicente Orosa, Jr. and Plaza Theatre, Inc., filed separate answers, the first denying that
the materials were delivered to him as a promoter and later treasurer of the corporation, because he
had purchased and received the same on his personal account; that the land on which the movie
house was constructed was not charged with a lien to secure the payment of the aforementioned
unpaid obligation; and that the 420 shares of stock of the Plaza Theatre, Inc., was not assigned to
plaintiff as collaterals but as direct security for the payment of his indebtedness. As special defense,
this defendant contended that as the 420 shares of stock assigned and conveyed by the assignor
and accepted by Lopez as direct security for the payment of the amount of P41,771.35 were
personal properties, plaintiff was barred from recovering any deficiency if the proceeds of the sale
thereof at public auction would not be sufficient to cover and satisfy the obligation. It was thus
prayed that he be declared exempted from the payment of any deficiency in case the proceeds from
the sale of said personal properties would not be enough to cover the amount sought to be collected.
Defendant Plaza Theatre, Inc., on the other hand, practically set up the same line of defense by
alleging that the building materials delivered to Orosa were on the latter's personal account; and that
there was no understanding that said materials would be paid jointly and severally by Orosa and the
corporation, nor was a lien charged on the properties of the latter to secure payment of the same
obligation. As special defense, defendant corporation averred that while it was true that the materials
purchased by Orosa were sold by the latter to the corporation, such transactions were in good faith
and for valuable consideration thus when plaintiff failed to claim said materials within 30 days from
the time of removal thereof from Orosa, lumber became a different and distinct specie and plaintiff
lost whatever rights he might have in the same and consequently had no recourse against the Plaza
Theatre, Inc., that the claim could not have been refectionary credit, for such kind of obligation
referred to an indebtedness incurred in the repair or reconstruction of something already existing
and this concept did not include an entirely new work; and that the Plaza Theatre, Inc., having been
incorporated on October 14, 1946, it could not have contracted any obligation prior to said date. It
was, therefore, prayed that the complaint be dismissed; that said defendant be awarded the sum P
5,000 for damages, and such other relief as may be just and proper in the premises.
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 August 17, 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 October 18, 1947, which was made the basis of OCT No. O-319,
in order to annotate the rights and interests of the surety company over said properties (Land
Registration Case No. 17 GLRO Rec. No. 296). Opposition thereto was offered by Enrique 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 violation 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 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. In making the
pronouncement that the lien was merely confined to the building and did not extend to the land on
which the construction was made, the trial judge took into consideration the fact that when plaintiff
started the delivery of lumber in May, 1946, the land was not yet owned by the corporation; that the
mortgage in favor of Luzon Surety Company was previously registered under Act No. 3344; that the
codal provision (Art. 1923 of the old Spanish Civil Code) specifying that refection credits are
preferred could refer only to buildings which are also classified as real properties, upon which said
refection was made. It was, however, declared that plaintiff's lien on the building was superior to the
right of the surety company. And finding that the Plaza Theatre, Inc., had no objection to the review
of the decree issued in its favor by the land registration court and the inclusion in the title of the
encumbrance in favor of the surety company, the court a quo granted the petition filed by the latter
company. Defendants Orosa and the Plaza Theatre, Inc., were thus required to pay jointly the
amount of P41,771.35 with legal interest and costs within 90 days from notice of said decision; that
in case of default, the 420 shares of stock assigned by Orosa to plaintiff be sold at public auction
and the proceeds thereof be applied to the payment of the amount due the plaintiff, plus interest and
costs; and that the encumbrance in favor of the surety company be endorsed at the back of OCT No.
O-391, with notation I that with respect to the building, said mortgage was subject to the
materialman's lien in favor of Enrique Lopez.
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 the court of December 23, 1952. The matter was thus appealed to the
Court of appeals, which affirmed the lower court's ruling, and then to this Tribunal. In this instance,
plaintiff-appellant raises 2 issues: (1) whether a materialman's lien for the value of the materials used
in the construction of a building attaches to said structure alone and does not extend to the land on
which the building is adhered to; and (2) whether the lower court and the Court of Appeals erred in
not providing that the material mans liens is superior to the mortgage executed in favor surety
company not only on the building but also on the land.
It is to be noted in this appeal that Enrique Lopez has not raised any question against the part of the
decision sentencing defendants Orosa and Plaza Theatre, Inc., to pay jointly the sum of P41,771.35,
so We will not take up or consider anything on that point. Appellant, however, contends that the lien
created in favor of the furnisher of the materials used for the construction, repair or refection of a
building, is also extended to the land which the construction was made, and in support thereof he
relies on Article 1923 of the Spanish Civil Code, pertinent law on the matter, which reads as follows:
ART. 1923. With respect to determinate real property and real rights of the debtor, the
following are preferred:
xxx

xxx

xxx

5. Credits for refection, not entered or recorded, with respect to the estate upon which the
refection was made, and only with respect to other credits different from those mentioned in
four preceding paragraphs.
It is argued that in view of the employment of the phrase real estate, or immovable property, and
inasmuch as said provision does not contain any specification delimiting the lien to the building, said
article must be construed as to embrace both the land and the building or structure adhering thereto.
We cannot subscribe to this view, for 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 1 could mean only one thing
that a building is by itself an immovable property, a doctrine already pronounced by this Court in
the case of Leung Yee vs. Strong Machinery Co., 37 Phil., 644. Moreover, and in view of 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.
A close examination of the provision of the Civil Code invoked by appellant 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. Evidently, therefore, 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
obligors.
Considering the conclusion thus arrived at, i.e., that 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 lower court
was right in, holding at the interest of the mortgagee over the land is superior and cannot be made
subject to the said materialman's lien.
Wherefore, and on the strength of the foregoing considerations, the decision appealed from is
hereby affirmed, with costs against appellant. It is so ordered.
Paras, C.J., Bengzon, Padilla, Montemayor, Reyes, A., Bautista Angelo, Labrador, Concepcion,
Reyes, J.B.L. and Endencia, JJ., concur.

G.R. No. 87917 August 7, 1990

SPS. JUAN B. DULOS and MARIA C. DULOS petitioners,
vs.
COURT OF APPEALS, SPS. MARIANO NOCOM and ANACORETA NOCOM and SPS.
LORENZO ONG ENG CHONG and CARMEN SOCO, and DEPUTY SHERIFF HONORIO SANTOS
of the Office of the Sheriff of Makati, Metro Manila, respondents.
Santiago, Acosta, Arevalo & Associates for petitioners.
Melecio Virgilio Emata Law Office collaborating counsel for petitioners.
Arturo S. Santos for private respondents.

CRUZ, J.:
By this special civil action of certiorari and prohibition, the spouses Juan and Maria Dulos would
have this Court nullify the resolution of the respondent court dated April 27, 1989, denying their
application for a writ of preliminary injunction against the enforcement of the decision of the
Metropolitan Trial Court of Las Pias dated October 4, 1988.
On June 24, 1988, the spouses Dulos were sued for forcible entry by the spouses Mariano and
Anacoreta Nocom, private respondents herein, in the Metropolitan Trial Court of Las Pias. The case
was set for a pre-trial conference on August 18, 1988, with due notice to both parties.
Earlier, on August 16, 1988, the petitioners had filed a complaint against the private respondents for
annulment of sale, reconveyance of title, and various other reliefs plus a writ of preliminary
injunction. This was docketed as Civil Case No. 881663 in the Regional Trial Court of Makati. On
August 17, 1988, the petitioners filed a motion for the suspension of the proceedings in the forcible
entry case on the ground that there was a prejudicial question of ownership involved in the
annulment case. The petitioners' counsel, Atty. Pedro S. Ravelo, set August 18, 1988, for the hearing
of the motion at the pre-trial conference scheduled on the same date.
Neither petitioners nor their counsel appeared on that date. However, one Ananita Rectra manifested
at the hearing that she was duly authorized by virtue of a special power of attorney to represent
petitioner Juan Dulos, her brother, who was then confined at the Manila Doctors Hospital after
having undergone a femur operation. The petitioners were nonetheless declared in default. Judge
Alfredo R. Enriquez denied the motion for the suspension of the proceedings, holding that the issue
of ownership was not a prejudicial question in the ejectment case. The evidence of the private
respondents was subsequently received in the absence of the petitioners.
On October 4, 1988, judgment was rendered in favor of the private respondents, the dispositive
portion reading as follows:
WHEREFORE, the Court finds the eviction of defendants to be warranted and
accordingly hereby renders judgment in favor of the plaintiffs, ordering defendants as
follows:

1. and all persons claiming right under them to vacate the portion of plaintiffs'
property covered by TCT No. S-55015 situated at Bo. Ibayo Las Pias MM, and to
remove structures and improvements thereon and to restore to plaintiff peaceful
possession thereof;
2. ordering defendants to pay the sum of P20,000.00 as reasonable compensation
for the use of property beginning April 1988 and every month thereafter until
defendants shall have completely vacated the property;
3. ordering defendants to pay the plaintiffs the sum of P10,000.00; and
4. ordering defendants to pay the cost of the suit.
The petitioners received a copy of this decision on October 10, 1988. They filed a motion for
reconsideration on October 18, 1988, which was denied in an order dated November 17, 1988.
Instead of taking an appeal, the petitioners filed on December 9, 1988, a special civil action
for certiorari and prohibition with preliminary injunction with the Regional Trial Court of Makati
praying for the nullification of the said judgment and the earlier order declaring them in default.
On December 19, 1988, while that case was pending, the private respondents moved for the
immediate execution of the judgment of the Metropolitan Trial Court on the ground that no appeal
had been filed with the proper court and the decision had become final and executory. The motion
was granted, and the writ of execution was issued on February 8, 1989.
On February 16, 1989, the petition for certiorari, etc. was dismissed on the grounds that: (1) the
petitioners had been properly declared in default for failure to appear at the scheduled hearing; (2)
the filing of the action for nullification in the Regional Trial Court was not a valid reason for the
suspension of the hearing in the Metropolitan Trial Court; (3) the motion for reconsideration was
fatally defective because it was not verified and accompanied by an affidavit of merit; and (4) the
grant of the motion for suspension or postponement was discretionary upon the court. 1
On March 20, 1989, on motion of the private respondents, the Metropolitan Trial Court issued a writ
of demolition.
The petitioners then elevated the matter to the Court of Appeals in a petition for certiorari and
prohibition with preliminary injunction. In its order dated April 27, 1989, the respondent court denied
the application for preliminary injunction, 2 prompting the petitioners to come to this Court
on certiorari.
Praying for a nullification of the said order and the proceedings held before the MTC, they argue
that:
(a) The pre-trial conference of August 18, 1988, was the first hearing set for the
purpose and with the appearance of the representative in the person of Mrs. Rectra,
duly armed with a notarized hospital certification attesting to the confinement of
petitioner Juan Dulos and a special power-of-attorney authorizing her to appear as
representative of petitioner Juan Dulos during the conference, Judge Enriquez
should not have outrightly declared petitioners in default.

(b) An affidavit of merit under the circumstances was no longer necessary since the
default order was anchored upon petitioners' failure to appear during the pre-trial
(citing the case of Lucero v. Dacayo, 22 SCRA 1004).
(c) Petitioners have been in actual physical possession of the subject land from the
time the said property was acquired in 1979 by petitioner Maria Dulos from her coheirs by virtue of the sale of hereditary rights until the same was assigned to Dulos
Realty in 1973 long before the execution of the simulated sale in favor of private
respondents in 1977.
(d) As the August 18, 1988 Order was issued without or in excess of jurisdiction, the
same is null and void and all proceedings subsequent thereto were also a nullity,
there is no judgment to speak of, hence there is nothing to appeal.
For their part, the private respondents assert that: (1) Rectra did not file her special power of
attorney with the Metropolitan Trial Court; (2) the petitioners did not do anything to have the order of
default set aside; (3) the deed of sale sought to be nullified was executed way back on July 1, 1977,
and the complaint for nullification was filed only eleven years and nine months later; (4) petitioner
Maria Dulos could have appeared at the pre-trial hearing but failed to do so without any explanation
whatsoever; and (5) certiorari cannot be a substitute for the lost right of appeal.
The Court gave due course to the petition and required the parties to submit simultaneous
memoranda. After considering the issues and their arguments in their respective memoranda, we
find the petition to be without merit.
First of all, it is clear that a case may be dismissed for failure of a party to appear at the pre-trial
conference, as authorized by Rule 20, Section 2, of the Rules of Court, thus:
Sec. 2. A party who fails to appear at a pre-trial conference may be non-suited or
considered as in default.
Rectra did appear at the scheduled hearing but did not present to the court her power of attorney to
represent Juan Dulos or even the medical certificate of his operation. In their memorandum, the
petitioners say Maria Dulos did not appear for herself because the spouses Dulos had long been
separated. However, the Dulos lawyer did not show up either although it was he who had asked that
his motion to suspend proceedings be set on the date of the pre-trial conference. The averment that
Atty. Ravelo was already 73 years old at the time is a flimsy excuse for carelessness nor do we
accept the explanation that he was then attending to several detention prisoners. At any rate, the
petitioners could have availed themselves of other counsel if their counsel then was unable to
represent them at the conference.
Secondly, the denial of the application for preliminary injunction was justified because the petitioners
did not employ the proper remedy prescribed by the Rules of Court. As enumerated in Lina v. Court
of Appeals, 3 the remedies available to a defendant declared in default are:
1. The defendant in default may, at any time after discovery thereof and before judgment, file a
motion under oath to set aside the order of default on the ground that was failure to answer or
appear on the date set for pre-trial was due to fraud, accident, mistake or excusable negligence, and
that he has a meritorious defense;

2. If the judgment has already been rendered when the defendant discovered the default, but before
the same has become final and executory, he may file a petition for new trial under Sec. 1(a) of Rule
37;
3. If the defendant discovered the default after the judgment has become final and executory, he
may file a petition for relief under Sec. 2, Rule 38; and
4. He may also appeal from the judgment rendered against him as contrary to the evidence or the
law, even if no petition to set aside the order of default has been presented by him.
The petitioners did not avail themselves of any of the above remedies. Instead, after taking no action
whatsoever for all of sixty days, they filed a motion for reconsideration of the decision dated October
4, 1988, and, when this was denied, went to the Regional Trial Court on certiorari and prohibition. As
we held in the Lina case:
... where the judgment rendered by the respondent court is the one sought to be
annulled, a petition for relief, under Rule 38, which is a remedy in the ordinary course
of law, could have been just as plain, adequate and speedy as certiorari ...
No less significant is the fact that the judgment of the metropolitan trial court had already become
final and executory because of the petitioners' failure to appeal therefrom on time. They were served
with notice of the judgment on October 10, 1988, and filed a motion for reconsideration on October
18, 1988, which was denied on November 17, 1988. They therefore had until December 10, 1988,
within which to perfect their appeal. They did not.
Instead, they filed the petition for certiorari in the Regional Trial Court, which correctly dismissed it. It
is settled that the special civil action of certiorari is not and cannot be made a substitute for an
appeal, where the latter remedy is available, 4 as in this case. The filing of the petition
for certiorari did not therefore suspend the period for appeal or prevent the judgment from becoming
final.
It is also noteworthy that the petitioners made no move to set aside the order of default rendered by
the Metropolitan Trial Court although they were aware of it. Rectra was present when the said order
was dictated in open court on August 18, 1988. It is reasonable to assume she immediately informed
her brother, who had sent her there precisely to represent him at the proceedings. Even so, the
petitioners did nothing until the judgment by default was rendered against them by Judge Enriquez
on October 4, 1988. All of forty-six days had elapsed from the order of default when the judgment of
default was rendered.
The petitioners now contend that they could not have taken any action prior to the rendition of the
judgment because they had never been furnished with copies of the order declaring them in default.
This is unacceptable. It is obvious the petitioners have failed to take into account the following
pertinent provisions of the Rules of Court concerning notices in case a party is declared in default:
Rule 18, Sec. 2. Effect of order of default. Except as provided in Section 9 of Rule
13, a party declared in default shall not be entitled to notice of subsequent
proceedings, nor to take part in the trial.

Rule 13, Sec. 9. Service upon party in default. No service of papers other than
substantially amended or supplemental pleadings and final orders or judgments shall
be necessary on a party in default unless he files a motion to set aside the order of
default in which event he shall be entitled to notice of all further processings
regardless of whether the order of default is set aside or not.
Rule 18, Sec. 3. Relief from order of default. A party declared in default may at
any time after discovery thereof and before judgment file a motion under oath to set
aside the order of default upon proper showing that his failure to answer was due to
fraud, accident, mistake or excusable neglect and that he has a meritorious defense.
In such case the order of default may be set aside on such terms and conditions as
the judge may impose in the interest of justice.
The term used in the last quoted section is discovery, not notice. And this is so because the
defendant declared in default is not entitled to "notice of subsequent proceedings" under the
preceding rules.
In Suzara v. Caluag, 5 this Court held that a motion for reconsideration of a judgment of default may
be considered a petition for relief under Section 2 of Rule 38 only if the following requisites are
present: (1) it must be verified; (2) it must be filed within 60 days from the time petitioner learns of
the decision but not more than 6 months from entry thereof, and (3) in case of failure to file an
answer, the motion must be accompanied by affidavits of merit showing the fraud, accident, mistake
and excusable negligence relied upon.
We held in Yap v. Taada 6 that a motion for reconsideration may be considered a motion for new
trial under Sec. 2, Rule 37, if it is accompanied by an affidavit of merit. Since petitioners assert that
their rights were impaired because they were prevented from presenting evidence of their defenses,
it was a fatal omission for them not to attach to their motion an affidavit of merit, i.e., an affidavit
showing the facts constituting the valid defense which the movant may prove in case a new trial is
granted. The requirement of such an affidavit is essential because a new trial would be only a waste
of the time of the court if the complaint turns out to be groundless or the defense ineffective.
The motion for reconsideration filed by the petitioners on October 18, 1988, with the Metropolitan
Trial Court, and which is Annex "H" of the petition, was not verified. It does not appear also that it
was accompanied by an affidavit of merit as required by the Rules.
While this Court did declare in Continental Leaf Tobacco v. Intermediate Appellate Court, 7 "that
judgments by default are not looked upon with favor," the default judgment in that case was set aside
because there was excusable neglect. Besides, the petitioners had a meritorious defense which
justified a relaxation of the procedural rules to allow full hearing on the substantive issues raised.
Such circumstances have not been clearly shown in the case before us.
A little more familiarity with our rules of procedure could have avoided the predicament in which the
petitioners now find themselves. Unfortunately, the Court cannot give them any relief. They have not
justified a relaxation of the said rules. While it is true that a litigation is not a game of technicalities, it
is equally true that every case must be prosecuted in accordance with the prescribed procedure, to
insure an orderly administration of justice. It is this symbiosis between form and substance that
guarantees that desirable result.

WHEREFORE, the petition is DISMISSED, with costs against the petitioner. It is so ordered.
Narvasa (Chairman), Gancayco, Grio Aquino and Medialdea, JJ., concur.

G.R. No. L-7057

October 29, 1954

MACHINERY & ENGINEERING SUPPLIES, INC., petitioner,

vs.
THE HONORABLE COURT OF APPEALS, HON. POTENCIANO PECSON, JUDGE OF THE
COURT OF FIRST INSTANCE OF MANILA, IPO LIMESTONE CO., INC., and ANTONIO
VILLARAMA, respondents.
Vicente J. Francisco for petitioner.
Capistrano and Capistrano for respondents.
CONCEPCION, J.:
This is an appeal by certiorari, taken by petitioner Machinery and Engineering Supplies Inc., from a
decision of the Court of Appeals denying an original petition for certiorari filed by said petitioner
against Hon. Potenciano Pecson, Ipo Limestone Co., Inc., and Antonio Villarama, the respondents
herein.
The pertinent facts are set forth in the decision of the Court of Appeals, from which we quote:
On March 13, 1953, the herein petitioner filed a complaint for replevin in the Court of First
Instance of Manila, Civil Case No. 19067, entitled "Machinery and Engineering Supplies,
Inc., Plaintiff, vs. Ipo Limestone Co., Inc., and Dr. Antonio Villarama, defendants", for the
recovery of the machinery and equipment sold and delivered to said defendants at their
factory in barrio Bigti, Norzagaray, Bulacan. Upon application ex-parte of the petitioner
company, and upon approval of petitioner's bond in the sum of P15,769.00, on March
13,1953, respondent judge issued an order, commanding the Provincial Sheriff of Bulacan to
seize and take immediate possession of the properties specified in the order (Appendix I,
Answer). On March 19, 1953, two deputy sheriffs of Bulacan, the said Ramon S. Roco, and a
crew of technical men and laborers proceeded to Bigti, for the purpose of carrying the court's
order into effect. Leonardo Contreras, Manager of the respondent Company, and Pedro
Torres, in charge thereof, met the deputy sheriffs, and Contreras handed to them a letter
addressed to Atty. Leopoldo C. Palad, ex-oficio Provincial Sheriff of Bulacan, signed by Atty.
Adolfo Garcia of the defendants therein, protesting against the seizure of the properties in
question, on the ground that they are not personal properties. Contending that the Sheriff's
duty is merely ministerial, the deputy sheriffs, Roco, the latter's crew of technicians and
laborers, Contreras and Torres, went to the factory. Roco's attention was called to the fact
that the equipment could not possibly be dismantled without causing damages or injuries to
the wooden frames attached to them. As Roco insisted in dismantling the equipment on his
own responsibility, alleging that the bond was posted for such eventuality, the deputy sheriffs
directed that some of the supports thereof be cut (Appendix 2). On March 20, 1953, the
defendant Company filed an urgent motion, with a counter-bond in the amount of P15,769,
for the return of the properties seized by the deputy sheriffs. On the same day, the trial court

issued an order, directing the Provincial Sheriff of Bulacan to return the machinery and
equipment to the place where they were installed at the time of the seizure (Appendix 3). On
March 21, 1953, the deputy sheriffs returned the properties seized, by depositing them along
the road, near the quarry, of the defendant Company, at Bigti, without the benefit of inventory
and without re-installing hem in their former position and replacing the destroyed posts,
which rendered their use impracticable. On March 23, 1953, the defendants' counsel asked
the provincial Sheriff if the machinery and equipment, dumped on the road would be reinstalled tom their former position and condition (letter, Appendix 4). On March 24, 1953, the
Provincial Sheriff filed an urgent motion in court, manifesting that Roco had been asked to
furnish the Sheriff's office with the expenses, laborers, technical men and equipment, to carry
into effect the court's order, to return the seized properties in the same way said Roco found
them on the day of seizure, but said Roco absolutely refused to do so, and asking the court
that the Plaintiff therein be ordered to provide the required aid or relieve the said Sheriff of
the duty of complying with the said order dated March 20, 1953 (Appendix 5). On March 30,
1953, the trial court ordered the Provincial Sheriff and the Plaintiff to reinstate the machinery
and equipment removed by them in their original condition in which they were found before
their removal at the expense of the Plaintiff (Appendix 7). An urgent motion of the Provincial
Sheriff dated April 15, 1953, praying for an extension of 20 days within which to comply with
the order of the Court (appendix 10) was denied; and on May 4, 1953, the trial court ordered
the Plaintiff therein to furnish the Provincial Sheriff within 5 days with the necessary funds,
technical men, laborers, equipment and materials to effect the repeatedly mentioned reinstallation (Appendix 13). (Petitioner's brief, Appendix A, pp. I-IV.)
Thereupon petitioner instituted in the Court of Appeals civil case G.R. No. 11248-R, entitled
"Machinery and Engineering Supplies, Inc. vs. Honorable Potenciano Pecson, Provincial Sheriff of
Bulacan, Ipo Limestone Co., Inc., and Antonio Villarama." In the petition therein filed, it was alleged
that, in ordering the petitioner to furnish the provincial sheriff of Bulacan "with necessary funds,
technical men, laborers, equipment and materials, to effect the installation of the machinery and
equipment" in question, the Court of Firs Instance of Bulacan had committed a grave abuse if
discretion and acted in excess of its jurisdiction, for which reason it was prayed that its order to this
effect be nullified, and that, meanwhile, a writ of preliminary injunction be issued to restrain the
enforcement o said order of may 4, 1953. Although the aforementioned writ was issued by the Court
of Appeals, the same subsequently dismissed by the case for lack of merit, with costs against the
petitioner, upon the following grounds:
While the seizure of the equipment and personal properties was ordered by the respondent
Court, it is, however, logical to presume that said court did not authorize the petitioner or its
agents to destroy, as they did, said machinery and equipment, by dismantling and unbolting
the same from their concrete basements, and cutting and sawing their wooden supports,
thereby rendering them unserviceable and beyond repair, unless those parts removed, cut
and sawed be replaced, which the petitioner, not withstanding the respondent Court's order,
adamantly refused to do. The Provincial Sheriff' s tortious act, in obedience to the insistent
proddings of the president of the Petitioner, Ramon S. Roco, had no justification in law,
notwithstanding the Sheriffs' claim that his duty was ministerial. It was the bounden duty of
the respondent Judge to give redress to the respondent Company, for the unlawful and
wrongful acts committed by the petitioner and its agents. And as this was the true object of
the order of March 30, 1953, we cannot hold that same was within its jurisdiction to issue.
The ministerial duty of the Sheriff should have its limitations. The Sheriff knew or must have
known what is inherently right and inherently wrong, more so when, as in this particular case,
the deputy sheriffs were shown a letter of respondent Company's attorney, that the

machinery were not personal properties and, therefore, not subject to seizure by the terms of
the order. While it may be conceded that this was a question of law too technical to decide
on the spot, it would not have costs the Sheriff much time and difficulty to bring the letter to
the court's attention and have the equipment and machinery guarded, so as not to frustrate
the order of seizure issued by the trial court. But acting upon the directives of the president
of the Petitioner, to seize the properties at any costs, in issuing the order sought to be
annulled, had not committed abuse of discretion at all or acted in an arbitrary or despotic
manner, by reason of passion or personal hostility; on the contrary, it issued said order,
guided by the well known principle that of the property has to be returned, it should be
returned in as good a condition as when taken (Bachrach Motor Co., Inc., vs. Bona, 44 Phil.,
378). If any one had gone beyond the scope of his authority, it is the respondent Provincial
Sheriff. But considering that fact that he acted under the pressure of Ramon S. Roco, and
that the order impugned was issued not by him, but by the respondent Judge, We simply
declare that said Sheriff' act was most unusual and the result of a poor judgment. Moreover,
the Sheriff not being an officer exercising judicial functions, the writ may not reach him,
forcertiorari lies only to review judicial actions.
The Petitioner complains that the respondent Judge had completely disregarded his
manifestation that the machinery and equipment seized were and still are the Petitioner's
property until fully paid for and such never became immovable. The question of ownership
and the applicability of Art. 415 of the new Civil Code are immaterial in the determination of
the only issue involved in this case. It is a matter of evidence which should be decided in the
hearing of the case on the merits. The question as to whether the machinery or equipment in
litigation are immovable or not is likewise immaterial, because the only issue raised before
the trial court was whether the Provincial Sheriff of Bulacan, at the Petitioner's instance, was
justified in destroying the machinery and in refusing to restore them to their original form , at
the expense of the Petitioner. Whatever might be the legal character of the machinery and
equipment, would not be in any way justify their justify their destruction by the Sheriff's and
the said Petitioner's. (Petitioner's brief, Appendix A, pp. IV-VII.)
A motion for reconsideration of this decision of the Court of Appeals having been denied , petitioner
has brought the case to Us for review by writ of certiorari. Upon examination of the record, We are
satisfied, however that the Court of Appeals was justified in dismissing the case.
The special civil action known as replevin, governed by Rule 62 of Court, is applicable only to
"personal property".
Ordinarily replevin may be brought to recover any specific personal property unlawfully taken
or detained from the owner thereof, provided such property is capable of identification and
delivery; but replevin will not lie for the recovery of real property or incorporeal personal
property. (77 C. J. S. 17) (Emphasis supplied.)
When the sheriff repaired to the premises of respondent, Ipo Limestone Co., Inc., 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 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 and tended." For these reasons, they were already

immovable property pursuant to paragraphs 3 and 5 of Article 415 of Civil Code of the Philippines,
which are substantially identical to paragraphs 3 and 5 of Article 334 of the Civil Code of Spain. As
such immovable property, they were not subject to replevin.
In so far as an article, including a fixture annexed by a tenant, is regarded as part of the
realty, it is not the subject for personality; . . . .
. . . the action of replevin does not lie for articles so annexed to the realty as to be part as to
be part thereof, as, for example, a house or a turbine pump constituting part of a building's
cooling system; . . . (36 C. J. S. 1000 & 1001)
Moreover, as the provincial sheriff hesitated to remove the property in question, petitioner's agent
and president, Mr. Ramon Roco, insisted "on the dismantling at his own responsibility," stating that.,
precisely, "that is the reason why plaintiff posted a bond ." In this manner, petitioner clearly assumed
the corresponding risks.
Such assumption of risk becomes more apparent when we consider that, pursuant to Section 5 of
Rule 62 of the Rules of Court, the defendant in an action for replevin is entitled to the return of the
property in dispute upon the filing of a counterbond, as provided therein. In other words, petitioner
knew that the restitution of said property to respondent company might be ordered under said
provision of the Rules of Court, and that, consequently, it may become necessary for petitioner to
meet the liabilities incident to such return.
Lastly, although the parties have not cited, and We have not found, any authority squarely in point
obviously real property are not subject to replevin it is well settled that, when the restitution of
what has been ordered, the goods in question shall be returned in substantially the same condition
as when taken (54 C.J., 590-600, 640-641). Inasmuch as the machinery and equipment involved in
this case were duly installed and affixed in the premises of respondent company when petitioner's
representative caused said property to be dismantled and then removed, it follows that petitioner
must also do everything necessary to the reinstallation of said property in conformity with its original
condition.
Wherefore, the decision of the Court of Appeals is hereby affirmed, with costs against the petitioner.
So ordered.
Pablo, Bengzon, Padilla, Montemayor, Reyes, A., Jugo, Bautista Angelo and Reyes, J.B.L.,
JJ., concur.
Paras, C.J., concurs in the result.

G.R. No. 168557

February 16, 2007

FELS ENERGY, INC., Petitioner,

vs.
THE PROVINCE OF BATANGAS and
THE OFFICE OF THE PROVINCIAL ASSESSOR OF BATANGAS, Respondents.
x----------------------------------------------------x
G.R. No. 170628

February 16, 2007

NATIONAL POWER CORPORATION, Petitioner,

vs.
LOCAL BOARD OF ASSESSMENT APPEALS OF BATANGAS, LAURO C. ANDAYA, in his
capacity as the Assessor of the Province of Batangas, and the PROVINCE OF BATANGAS
represented by its Provincial Assessor, Respondents.
DECISION
CALLEJO, SR., J.:
Before us are two consolidated cases docketed as G.R. No. 168557 and G.R. No. 170628, which
were filed by petitioners FELS Energy, Inc. (FELS) and National Power Corporation (NPC),
respectively. The first is a petition for review on certiorari assailing the August 25, 2004 Decision 1 of
the Court of Appeals (CA) in CA-G.R. SP No. 67490 and its Resolution 2 dated June 20, 2005; the
second, also a petition for review on certiorari, challenges the February 9, 2005 Decision 3 and
November 23, 2005 Resolution4 of the CA in CA-G.R. SP No. 67491. Both petitions were dismissed
on the ground of prescription.
The pertinent facts are as follows:
On January 18, 1993, NPC entered into a lease contract with Polar Energy, Inc. over 3x30 MW
diesel engine power barges moored at Balayan Bay in Calaca, Batangas. The contract,
denominated as an Energy Conversion Agreement5 (Agreement), was for a period of five years.
Article 10 reads:
10.1 RESPONSIBILITY. NAPOCOR shall be responsible for the payment of (a) all taxes, import
duties, fees, charges and other levies imposed by the National Government of the Republic of the
Philippines or any agency or instrumentality thereof to which POLAR may be or become subject to
or in relation to the performance of their obligations under this agreement (other than (i) taxes
imposed or calculated on the basis of the net income of POLAR and Personal Income Taxes of its
employees and (ii) construction permit fees, environmental permit fees and other similar fees and
charges) and (b) all real estate taxes and assessments, rates and other charges in respect of the
Power Barges.6
Subsequently, Polar Energy, Inc. assigned its rights under the Agreement to FELS. The NPC initially
opposed the assignment of rights, citing paragraph 17.2 of Article 17 of the Agreement.

On August 7, 1995, FELS received an assessment of real property taxes on the power barges from
Provincial Assessor Lauro C. Andaya of Batangas City. The assessed tax, which likewise covered
those due for 1994, amounted to P56,184,088.40 per annum. FELS referred the matter to NPC,
reminding it of its obligation under the Agreement to pay all real estate taxes. It then gave NPC the
full power and authority to represent it in any conference regarding the real property assessment of
the Provincial Assessor.
In a letter7 dated September 7, 1995, NPC sought reconsideration of the Provincial Assessors
decision to assess real property taxes on the power barges. However, the motion was denied on
September 22, 1995, and the Provincial Assessor advised NPC to pay the assessment. 8 This
prompted NPC to file a petition with the Local Board of Assessment Appeals (LBAA) for the setting
aside of the assessment and the declaration of the barges as non-taxable items; it also prayed that
should LBAA find the barges to be taxable, the Provincial Assessor be directed to make the
necessary corrections.9
In its Answer to the petition, the Provincial Assessor averred that the barges were real property for
purposes of taxation under Section 199(c) of Republic Act (R.A.) No. 7160.
Before the case was decided by the LBAA, NPC filed a Manifestation, informing the LBAA that the
Department of Finance (DOF) had rendered an opinion10 dated May 20, 1996, where it is clearly
stated that power barges are not real property subject to real property assessment.
On August 26, 1996, the LBAA rendered a Resolution11 denying the petition. The fallo reads:
WHEREFORE, the Petition is DENIED. FELS is hereby ordered to pay the real estate tax in the
amount ofP56,184,088.40, for the year 1994.
SO ORDERED.12
The LBAA ruled that the power plant facilities, while they may be classified as movable or personal
property, are nevertheless considered real property for taxation purposes because they are installed
at a specific location with a character of permanency. The LBAA also pointed out that the owner of
the bargesFELS, a private corporationis the one being taxed, not NPC. A mere agreement making
NPC responsible for the payment of all real estate taxes and assessments will not justify the
exemption of FELS; such a privilege can only be granted to NPC and cannot be extended to FELS.
Finally, the LBAA also ruled that the petition was filed out of time.
Aggrieved, FELS appealed the LBAAs ruling to the Central Board of Assessment Appeals (CBAA).
On August 28, 1996, the Provincial Treasurer of Batangas City issued a Notice of Levy and Warrant
by Distraint13over the power barges, seeking to collect real property taxes amounting
to P232,602,125.91 as of July 31, 1996. The notice and warrant was officially served to FELS on
November 8, 1996. It then filed a Motion to Lift Levy dated November 14, 1996, praying that the
Provincial Assessor be further restrained by the CBAA from enforcing the disputed assessment
during the pendency of the appeal.
On November 15, 1996, the CBAA issued an Order14 lifting the levy and distraint on the properties of
FELS in order not to preempt and render ineffectual, nugatory and illusory any resolution or
judgment which the Board would issue.

Meantime, the NPC filed a Motion for Intervention15 dated August 7, 1998 in the proceedings before
the CBAA. This was approved by the CBAA in an Order16 dated September 22, 1998.
During the pendency of the case, both FELS and NPC filed several motions to admit bond to
guarantee the payment of real property taxes assessed by the Provincial Assessor (in the event that
the judgment be unfavorable to them). The bonds were duly approved by the CBAA.
On April 6, 2000, the CBAA rendered a Decision17 finding the power barges exempt from real
property tax. The dispositive portion reads:
WHEREFORE, the Resolution of the Local Board of Assessment Appeals of the Province of
Batangas is hereby reversed. Respondent-appellee Provincial Assessor of the Province of Batangas
is hereby ordered to drop subject property under ARP/Tax Declaration No. 018-00958 from the List
of Taxable Properties in the Assessment Roll. The Provincial Treasurer of Batangas is hereby
directed to act accordingly.
SO ORDERED.18
Ruling in favor of FELS and NPC, the CBAA reasoned that the power barges belong to NPC; since
they are actually, directly and exclusively used by it, the power barges are covered by the
exemptions under Section 234(c) of R.A. No. 7160.19 As to the other jurisdictional issue, the CBAA
ruled that prescription did not preclude the NPC from pursuing its claim for tax exemption in
accordance with Section 206 of R.A. No. 7160. The Provincial Assessor filed a motion for
reconsideration, which was opposed by FELS and NPC.
In a complete volte face, the CBAA issued a Resolution20 on July 31, 2001 reversing its earlier
decision. The fallo of the resolution reads:
WHEREFORE, premises considered, it is the resolution of this Board that:
(a) The decision of the Board dated 6 April 2000 is hereby reversed.
(b) The petition of FELS, as well as the intervention of NPC, is dismissed.
(c) The resolution of the Local Board of Assessment Appeals of Batangas is hereby affirmed,
(d) The real property tax assessment on FELS by the Provincial Assessor of Batangas is
likewise hereby affirmed.
SO ORDERED.21
FELS and NPC filed separate motions for reconsideration, which were timely opposed by the
Provincial Assessor. The CBAA denied the said motions in a Resolution 22 dated October 19, 2001.
Dissatisfied, FELS filed a petition for review before the CA docketed as CA-G.R. SP No. 67490.
Meanwhile, NPC filed a separate petition, docketed as CA-G.R. SP No. 67491.
On January 17, 2002, NPC filed a Manifestation/Motion for Consolidation in CA-G.R. SP No. 67490
praying for the consolidation of its petition with CA-G.R. SP No. 67491. In a Resolution 23 dated
February 12, 2002, the appellate court directed NPC to re-file its motion for consolidation with CA-

G.R. SP No. 67491, since it is the ponente of the latter petition who should resolve the request for
reconsideration.
NPC failed to comply with the aforesaid resolution. On August 25, 2004, the Twelfth Division of the
appellate court rendered judgment in CA-G.R. SP No. 67490 denying the petition on the ground of
prescription. The decretal portion of the decision reads:
WHEREFORE, the petition for review is DENIED for lack of merit and the assailed Resolutions
dated July 31, 2001 and October 19, 2001 of the Central Board of Assessment Appeals are
AFFIRMED.
SO ORDERED.24
On September 20, 2004, FELS timely filed a motion for reconsideration seeking the reversal of the
appellate courts decision in CA-G.R. SP No. 67490.
Thereafter, NPC filed a petition for review dated October 19, 2004 before this Court, docketed as
G.R. No. 165113, assailing the appellate courts decision in CA-G.R. SP No. 67490. The petition
was, however, denied in this Courts Resolution25 of November 8, 2004, for NPCs failure to
sufficiently show that the CA committed any reversible error in the challenged decision. NPC filed a
motion for reconsideration, which the Court denied with finality in a Resolution 26 dated January 19,
2005.
Meantime, the appellate court dismissed the petition in CA-G.R. SP No. 67491. It held that the right
to question the assessment of the Provincial Assessor had already prescribed upon the failure of
FELS to appeal the disputed assessment to the LBAA within the period prescribed by law. Since
FELS had lost the right to question the assessment, the right of the Provincial Government to collect
the tax was already absolute.
NPC filed a motion for reconsideration dated March 8, 2005, seeking reconsideration of the February
5, 2005 ruling of the CA in CA-G.R. SP No. 67491. The motion was denied in a Resolution 27 dated
November 23, 2005.
The motion for reconsideration filed by FELS in CA-G.R. SP No. 67490 had been earlier denied for
lack of merit in a Resolution28 dated June 20, 2005.
On August 3, 2005, FELS filed the petition docketed as G.R. No. 168557 before this Court, raising
the following issues:
A.
Whether power barges, which are floating and movable, are personal properties and therefore, not
subject to real property tax.
B.
Assuming that the subject power barges are real properties, whether they are exempt from real
estate tax under Section 234 of the Local Government Code ("LGC").
C.

Assuming arguendo that the subject power barges are subject to real estate tax, whether or not it
should be NPC which should be made to pay the same under the law.
D.
Assuming arguendo that the subject power barges are real properties, whether or not the same is
subject to depreciation just like any other personal properties.
E.
Whether the right of the petitioner to question the patently null and void real property tax assessment
on the petitioners personal properties is imprescriptible.29
On January 13, 2006, NPC filed its own petition for review before this Court (G.R. No. 170628),
indicating the following errors committed by the CA:
I
THE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT THE APPEAL TO THE LBAA
WAS FILED OUT OF TIME.
II
THE COURT OF APPEALS GRAVELY ERRED IN NOT HOLDING THAT THE POWER BARGES
ARE NOT SUBJECT TO REAL PROPERTY TAXES.
III
THE COURT OF APPEALS GRAVELY ERRED IN NOT HOLDING THAT THE ASSESSMENT ON
THE POWER BARGES WAS NOT MADE IN ACCORDANCE WITH LAW.30
Considering that the factual antecedents of both cases are similar, the Court ordered the
consolidation of the two cases in a Resolution31 dated March 8, 2006.
1awphi1.net

In an earlier Resolution dated February 1, 2006, the Court had required the parties to submit their
respective Memoranda within 30 days from notice. Almost a year passed but the parties had not
submitted their respective memoranda. Considering that taxesthe lifeblood of our economyare
involved in the present controversy, the Court was prompted to dispense with the said pleadings,
with the end view of advancing the interests of justice and avoiding further delay.
In both petitions, FELS and NPC maintain that the appeal before the LBAA was not time-barred.
FELS argues that when NPC moved to have the assessment reconsidered on September 7, 1995,
the running of the period to file an appeal with the LBAA was tolled. For its part, NPC posits that the
60-day period for appealing to the LBAA should be reckoned from its receipt of the denial of its
motion for reconsideration.
Petitioners contentions are bereft of merit.
Section 226 of R.A. No. 7160, otherwise known as the Local Government Code of 1991, provides:

SECTION 226. Local Board of Assessment Appeals. Any owner or person having legal interest in
the property who is not satisfied with the action of the provincial, city or municipal assessor in the
assessment of his property may, within sixty (60) days from the date of receipt of the written notice of
assessment, appeal to the Board of Assessment Appeals of the province or city by filing a petition
under oath in the form prescribed for the purpose, together with copies of the tax declarations and
such affidavits or documents submitted in support of the appeal.
We note that the notice of assessment which the Provincial Assessor sent to FELS on August 7,
1995, contained the following statement:
If you are not satisfied with this assessment, you may, within sixty (60) days from the date of receipt
hereof, appeal to the Board of Assessment Appeals of the province by filing a petition under oath on
the form prescribed for the purpose, together with copies of ARP/Tax Declaration and such affidavits
or documents submitted in support of the appeal.32
Instead of appealing to the Board of Assessment Appeals (as stated in the notice), NPC opted to file
a motion for reconsideration of the Provincial Assessors decision, a remedy not sanctioned by law.
The remedy of appeal to the LBAA is available from an adverse ruling or action of the provincial, city
or municipal assessor in the assessment of the property. It follows then that the determination made
by the respondent Provincial Assessor with regard to the taxability of the subject real properties falls
within its power to assess properties for taxation purposes subject to appeal before the LBAA. 33
We fully agree with the rationalization of the CA in both CA-G.R. SP No. 67490 and CA-G.R. SP No.
67491. The two divisions of the appellate court cited the case of Callanta v. Office of the
Ombudsman,34 where we ruled that under Section 226 of R.A. No 7160, 35 the last action of the local
assessor on a particular assessment shall be the notice of assessment; it is this last action which
gives the owner of the property the right to appeal to the LBAA. The procedure likewise does not
permit the property owner the remedy of filing a motion for reconsideration before the local assessor.
The pertinent holding of the Court in Callanta is as follows:
x x x [T]he same Code is equally clear that the aggrieved owners should have brought their appeals
before the LBAA. Unfortunately, despite the advice to this effect contained in their respective notices
of assessment, the owners chose to bring their requests for a review/readjustment before the city
assessor, a remedy not sanctioned by the law. To allow this procedure would indeed invite corruption
in the system of appraisal and assessment. It conveniently courts a graft-prone situation where
values of real property may be initially set unreasonably high, and then subsequently reduced upon
the request of a property owner. In the latter instance, allusions of a possible covert, illicit trade-off
cannot be avoided, and in fact can conveniently take place. Such occasion for mischief must be
prevented and excised from our system.36
For its part, the appellate court declared in CA-G.R. SP No. 67491:
x x x. The Court announces: Henceforth, whenever the local assessor sends a notice to the owner or
lawful possessor of real property of its revised assessed value, the former shall no longer have any
jurisdiction to entertain any request for a review or readjustment. The appropriate forum where the
aggrieved party may bring his appeal is the LBAA as provided by law. It follows ineluctably that the
60-day period for making the appeal to the LBAA runs without interruption. This is what We held in
SP 67490 and reaffirm today in SP 67491.37
To reiterate, if the taxpayer fails to appeal in due course, the right of the local government to collect
the taxes due with respect to the taxpayers property becomes absolute upon the expiration of the

period to appeal.38 It also bears stressing that the taxpayers failure to question the assessment in
the LBAA renders the assessment of the local assessor final, executory and demandable, thus,
precluding the taxpayer from questioning the correctness of the assessment, or from invoking any
defense that would reopen the question of its liability on the merits.39
In fine, the LBAA acted correctly when it dismissed the petitioners appeal for having been filed out of
time; the CBAA and the appellate court were likewise correct in affirming the dismissal. Elementary
is the rule that the perfection of an appeal within the period therefor is both mandatory and
jurisdictional, and failure in this regard renders the decision final and executory.40
In the Comment filed by the Provincial Assessor, it is asserted that the instant petition is barred by
res judicata; that the final and executory judgment in G.R. No. 165113 (where there was a final
determination on the issue of prescription), effectively precludes the claims herein; and that the filing
of the instant petition after an adverse judgment in G.R. No. 165113 constitutes forum shopping.
FELS maintains that the argument of the Provincial Assessor is completely misplaced since it was
not a party to the erroneous petition which the NPC filed in G.R. No. 165113. It avers that it did not
participate in the aforesaid proceeding, and the Supreme Court never acquired jurisdiction over it. As
to the issue of forum shopping, petitioner claims that no forum shopping could have been committed
since the elements of litis pendentia or res judicata are not present.
We do not agree.
Res judicata pervades every organized system of jurisprudence and is founded upon two grounds
embodied in various maxims of common law, namely: (1) public policy and necessity, which makes it
to the interest of the
State that there should be an end to litigation republicae ut sit litium; and (2) the hardship on the
individual of being vexed twice for the same cause nemo debet bis vexari et eadem causa. A
conflicting doctrine would subject the public peace and quiet to the will and dereliction of individuals
and prefer the regalement of the litigious disposition on the part of suitors to the preservation of the
public tranquility and happiness.41 As we ruled in Heirs of Trinidad De Leon Vda. de Roxas v. Court
of Appeals:42
x x x An existing final judgment or decree rendered upon the merits, without fraud or collusion, by a
court of competent jurisdiction acting upon a matter within its authority is conclusive on the rights
of the parties and their privies. This ruling holds in all other actions or suits, in the same or any other
judicial tribunal of concurrent jurisdiction, touching on the points or matters in issue in the first suit.
xxx
Courts will simply refuse to reopen what has been decided. They will not allow the same parties or
their privies to litigate anew a question once it has been considered and decided with finality.
Litigations must end and terminate sometime and somewhere. The effective and efficient
administration of justice requires that once a judgment has become final, the prevailing party should
not be deprived of the fruits of the verdict by subsequent suits on the same issues filed by the same
parties.
This is in accordance with the doctrine of res judicata which has the following elements: (1) the
former judgment must be final; (2) the court which rendered it had jurisdiction over the subject matter
and the parties; (3) the judgment must be on the merits; and (4) there must be between the first and

the second actions, identity of parties, subject matter and causes of action. The application of the
doctrine of res judicata does not require absolute identity of parties but merely substantial identity of
parties. There is substantial identity of parties when there is community of interest or privity of
interest between a party in the first and a party in the second case even if the first case did not
implead the latter.43
To recall, FELS gave NPC the full power and authority to represent it in any proceeding regarding
real property assessment. Therefore, when petitioner NPC filed its petition for review docketed as
G.R. No. 165113, it did so not only on its behalf but also on behalf of FELS. Moreover, the assailed
decision in the earlier petition for review filed in this Court was the decision of the appellate court in
CA-G.R. SP No. 67490, in which FELS was the petitioner. Thus, the decision in G.R. No. 165116 is
binding on petitioner FELS under the principle of privity of interest. In fine, FELS and NPC are
substantially "identical parties" as to warrant the application of res judicata. FELSs argument that it
is not bound by the erroneous petition filed by NPC is thus unavailing.
On the issue of forum shopping, we rule for the Provincial Assessor. Forum shopping exists when,
as a result of an adverse judgment in one forum, a party seeks another and possibly favorable
judgment in another forum other than by appeal or special civil action or certiorari. There is also
forum shopping when a party institutes two or more actions or proceedings grounded on the same
cause, on the gamble that one or the other court would make a favorable disposition. 44
Petitioner FELS alleges that there is no forum shopping since the elements of res judicata are not
present in the cases at bar; however, as already discussed, res judicata may be properly applied
herein. Petitioners engaged in forum shopping when they filed G.R. Nos. 168557 and 170628 after
the petition for review in G.R. No. 165116. Indeed, petitioners went from one court to another trying
to get a favorable decision from one of the tribunals which allowed them to pursue their cases.
It must be stressed that an important factor in determining the existence of forum shopping is the
vexation caused to the courts and the parties-litigants by the filing of similar cases to claim
substantially the same reliefs.45 The rationale against forum shopping is that a party should not be
allowed to pursue simultaneous remedies in two different fora. Filing multiple petitions or complaints
constitutes abuse of court processes, which tends to degrade the administration of justice, wreaks
havoc upon orderly judicial procedure, and adds to the congestion of the heavily burdened dockets
of the courts.46
Thus, there is forum shopping when there exist: (a) identity of parties, or at least such parties as
represent the same interests in both actions, (b) identity of rights asserted and relief prayed for, the
relief being founded on the same facts, and (c) the identity of the two preceding particulars is such
that any judgment rendered in the pending case, regardless of which party is successful, would
amount to res judicata in the other.47
Having found that the elements of res judicata and forum shopping are present in the consolidated
cases, a discussion of the other issues is no longer necessary. Nevertheless, for the peace and
contentment of petitioners, we shall shed light on the merits of the case.
As found by the appellate court, the CBAA and LBAA power barges are real property and are thus
subject to real property tax. This is also the inevitable conclusion, considering that G.R. No. 165113
was dismissed for failure to sufficiently show any reversible error. Tax assessments by tax examiners
are presumed correct and made in good faith, with the taxpayer having the burden of proving
otherwise.48 Besides, factual findings of administrative bodies, which have acquired expertise in their
field, are generally binding and conclusive upon the Court; we will not assume to interfere with the
sensible exercise of the judgment of men especially trained in appraising property. Where the judicial

mind is left in doubt, it is a sound policy to leave the assessment undisturbed. 49 We find no reason to
depart from this rule in this case.
In Consolidated Edison Company of New York, Inc., et al. v. The City of New York, et al., 50 a power
company brought an action to review property tax assessment. On the citys motion to dismiss, the
Supreme Court of New York held that the barges on which were mounted gas turbine power plants
designated to generate electrical power, the fuel oil barges which supplied fuel oil to the power plant
barges, and the accessory equipment mounted on the barges were subject to real property taxation.
Moreover, Article 415 (9) of the New Civil Code provides that "[d]ocks and structures which, though
floating, are intended by their nature and object to remain at a fixed place on a river, lake, or coast"
are considered immovable property. Thus, power barges are categorized as immovable property by
destination, being in the nature of machinery and other implements intended by the owner for an
industry or work which may be carried on in a building or on a piece of land and which tend directly
to meet the needs of said industry or work.51
Petitioners maintain nevertheless that the power barges are exempt from real estate tax under
Section 234 (c) of R.A. No. 7160 because they are actually, directly and exclusively used by
petitioner NPC, a government- owned and controlled corporation engaged in the supply, generation,
and transmission of electric power.
We affirm the findings of the LBAA and CBAA that the owner of the taxable properties is petitioner
FELS, which in fine, is the entity being taxed by the local government. As stipulated under Section
2.11, Article 2 of the Agreement:
OWNERSHIP OF POWER BARGES. POLAR shall own the Power Barges and all the fixtures,
fittings, machinery and equipment on the Site used in connection with the Power Barges which have
been supplied by it at its own cost. POLAR shall operate, manage and maintain the Power Barges
for the purpose of converting Fuel of NAPOCOR into electricity.52
It follows then that FELS cannot escape liability from the payment of realty taxes by invoking its
exemption in Section 234 (c) of R.A. No. 7160, which reads:
SECTION 234. Exemptions from Real Property Tax. The following are exempted from payment of
the real property tax:
xxx
(c) All machineries and equipment that are actually, directly and exclusively used by local water
districts and government-owned or controlled corporations engaged in the supply and distribution of
water and/or generation and transmission of electric power; x x x
Indeed, the law states that the machinery must be actually, directly and exclusively used by the
government owned or controlled corporation; nevertheless, petitioner FELS still cannot find solace in
this provision because Section 5.5, Article 5 of the Agreement provides:
OPERATION. POLAR undertakes that until the end of the Lease Period, subject to the supply of the
necessary Fuel pursuant to Article 6 and to the other provisions hereof, it will operate the Power
Barges to convert such Fuel into electricity in accordance with Part A of Article 7. 53

It is a basic rule that obligations arising from a contract have the force of law between the parties.
Not being contrary to law, morals, good customs, public order or public policy, the parties to the
contract are bound by its terms and conditions.54
Time and again, the Supreme Court has stated that taxation is the rule and exemption is the
exception.55 The law does not look with favor on tax exemptions and the entity that would seek to be
thus privileged must justify it by words too plain to be mistaken and too categorical to be
misinterpreted.56 Thus, applying the rule of strict construction of laws granting tax exemptions, and
the rule that doubts should be resolved in favor of provincial corporations, we hold that FELS is
considered a taxable entity.
The mere undertaking of petitioner NPC under Section 10.1 of the Agreement, that it shall be
responsible for the payment of all real estate taxes and assessments, does not justify the exemption.
The privilege granted to petitioner NPC cannot be extended to FELS. The covenant is between
FELS and NPC and does not bind a third person not privy thereto, in this case, the Province of
Batangas.
It must be pointed out that the protracted and circuitous litigation has seriously resulted in the local
governments deprivation of revenues. The power to tax is an incident of sovereignty and is unlimited
in its magnitude, acknowledging in its very nature no perimeter so that security against its abuse is
to be found only in the responsibility of the legislature which imposes the tax on the constituency
who are to pay for it.57 The right of local government units to collect taxes due must always be upheld
to avoid severe tax erosion. This consideration is consistent with the State policy to guarantee the
autonomy of local governments58 and the objective of the Local Government Code that they enjoy
genuine and meaningful local autonomy to empower them to achieve their fullest development as
self-reliant communities and make them effective partners in the attainment of national goals. 59
In conclusion, we reiterate that the power to tax is the most potent instrument to raise the needed
revenues to finance and support myriad activities of the local government units for the delivery of
basic services essential to the promotion of the general welfare and the enhancement of peace,
progress, and prosperity of the people.60
WHEREFORE, the Petitions are DENIED and the assailed Decisions and Resolutions AFFIRMED.
SO ORDERED.
ROMEO J. CALLEJO, SR.
Associate Justice
WE CONCUR:
CONSUELO YNARES-SANTIAGO
Associate Justice

MA. ALICIA AUSTRIA-MARTINEZ

Asscociate Justice

MINITA V. CHICO-NAZARIO
Associate Justice
ATT E S TATI O N
I attest that the conclusions in the above Decision had been reached in consultation before the case
was assigned to the writer of the opinion of the Courts Division.

CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson
C E R TI F I C ATI O N
Pursuant to Section 13, Article VIII of the Constitution and the Division Chairpersons Attestation, it is
hereby certified that the conclusions in the above decision were reached in consultation before the
case was assigned to the writer of the opinion of the Courts Division.
REYNATO S. PUNO
Chief Justice