G.R. No.

L-41643

July 31, 1935

B.H.
BERKENKOTTER, plaintiff-appellant,
vs.
CU UNJIENG E HIJOS, YEK TONG LIN FIRE AND
MARINE INSURANCE COMPANY, MABALACAT
SUGAR COMPANY and THE PROVINCE SHERIFF OF
PAMPANGA, defendants-appellees.
Briones
and
Martinez
for
appellant.
Araneta, Zaragoza and Araneta for appellees Cu Unjieng
e
Hijos.
No appearance for the other appellees.
VILLA-REAL, J.:
This is an appeal taken by the plaintiff, B.H. Berkenkotter,
from the judgment of the Court of First Instance of Manila,
dismissing said plaintiff's complaint against Cu Unjiengs e
Hijos et al., with costs.
In support of his appeal, the appellant assigns six alleged
errors as committed by the trial court in its decision in
question which will be discussed in the course of this
decision.
The first question to be decided in this appeal, which is
raised in the first assignment of alleged error, is whether
or not the lower court erred in declaring that the additional
machinery and equipment, as improvement incorporated
with the central are subject to the mortgage deed
executed in favor of the defendants Cu Unjieng e Hijos.
It is admitted by the parties that on April 26, 1926, the
Mabalacat Sugar Co., Inc., owner of the sugar central
situated in Mabalacat, Pampanga, obtained from the
defendants, Cu Unjieng e Hijos, a loan secured by a first
mortgage constituted on two parcels and land "with all its
buildings, improvements, sugar-cane mill, steel railway,
telephone line, apparatus, utensils and whatever forms
part or is necessary complement of said sugar-cane mill,
steel railway, telephone line, now existing or that may in
the future exist is said lots."
On October 5, 1926, shortly after said mortgage had been
constituted, the Mabalacat Sugar Co., Inc., decided to
increase the capacity of its sugar central by buying
additional machinery and equipment, so that instead of
milling 150 tons daily, it could produce 250. The estimated
cost of said additional machinery and equipment was
approximately P100,000. In order to carry out this plan,
B.A. Green, president of said corporation, proposed to the
plaintiff, B.H. Berkenkotter, to advance the necessary
amount for the purchase of said machinery and
equipment, promising to reimburse him as soon as he
could obtain an additional loan from the mortgagees, the
herein defendants Cu Unjieng e Hijos. Having agreed to
said proposition made in a letter dated October 5, 1926
(Exhibit E), B.H. Berkenkotter, on October 9th of the
same year, delivered the sum of P1,710 to B.A. Green,
president of the Mabalacat Sugar Co., Inc., the total
amount supplied by him to said B.A. Green having been
P25,750. Furthermore, B.H. Berkenkotter had a credit of
P22,000 against said corporation for unpaid salary. With
the loan of P25,750 and said credit of P22,000, the
Mabalacat Sugar Co., Inc., purchased the additional
machinery and equipment now in litigation.
On June 10, 1927, B.A. Green, president of the
Mabalacat Sugar Co., Inc., applied to Cu Unjieng e Hijos
for an additional loan of P75,000 offering as security the
additional machinery and equipment acquired by said
B.A. Green and installed in the sugar central after the

PROPERTY CASES

ATTY. RUBEN TALAMPAS

execution of the original mortgage deed, on April 27,

1927, together with whatever additional equipment
acquired with said loan. B.A. Green failed to obtain said
loan.
Article 1877 of the Civil Code provides as follows.
ART. 1877. A mortgage includes all natural
accessions, improvements, growing fruits, and
rents not collected when the obligation falls due,
and the amount of any indemnities paid or due
the owner by the insurers of the mortgaged
property or by virtue of the exercise of the power
of eminent domain, with the declarations,
amplifications, and limitations established by law,
whether the estate continues in the possession of
the person who mortgaged it or whether it passes
into the hands of a third person.
In the case of Bischoff vs. Pomar and Compaia General
de Tabacos (12 Phil., 690), cited with approval in the case
of Cea vs. Villanueva (18 Phil., 538), this court laid shown
the following doctrine:
1. REALTY; MORTGAGE OF REAL ESTATE
INCLUDES IMPROVEMENTS AND FIXTURES.
It is a rule, established by the Civil Code and
also by the Mortgage Law, with which the
decisions of the courts of the United States are in
accord, that in a mortgage of real estate, the
improvements on the same are included;
therefore, all objects permanently attached to a
mortgaged building or land, although they may
have been placed there after the mortgage was
constituted, are also included. (Arts. 110 and 111
of the Mortgage Law, and 1877 of the Civil Code;
decision of U.S. Supreme Court in the matter of
Royal Insurance Co. vs. R. Miller, liquidator, and
Amadeo [26 Sup. Ct. Rep., 46; 199 U.S., 353].)
2. ID.; ID.; INCLUSION OR EXCLUSION OF
MACHINERY, ETC. In order that it may be
understood that the machinery and other objects
placed upon and used in connection with a
mortgaged estate are excluded from the
mortgage, when it was stated in the mortgage
that the improvements, buildings, and machinery
that existed thereon were also comprehended, it
is indispensable that the exclusion thereof be
stipulated between the contracting parties.
The appellant contends that the installation of the
machinery and equipment claimed by him in the sugar
central of the Mabalacat Sugar Company, Inc., was not
permanent in character inasmuch as B.A. Green, in
proposing to him to advance the money for the purchase
thereof, made it appear in the letter, Exhibit E, that in
case B.A. Green should fail to obtain an additional loan
from the defendants Cu Unjieng e Hijos, said machinery
and equipment would become security therefor, said B.A.
Green binding himself not to mortgage nor encumber
them to anybody until said plaintiff be fully reimbursed for
the corporation's indebtedness to him.
Upon acquiring the machinery and equipment in question
with money obtained as loan from the plaintiff-appellant
by B.A. Green, as president of the Mabalacat Sugar Co.,
Inc., the latter became owner of said machinery and
equipment, otherwise B.A. Green, as such president,
could not have offered them to the plaintiff as security for
the payment of his credit.

JD NEU

RHEYNE ROBLEDO

Article 334, 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 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 principal 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.
Furthermore, the fact that B.A. Green bound himself to
the plaintiff B.H. Berkenkotter to hold said machinery and
equipment as security for the payment of the latter's credit
and to refrain from mortgaging or otherwise encumbering
them until Berkenkotter has been fully reimbursed
therefor, is not incompatible with the permanent character
of the incorporation of said machinery and equipment with
the sugar central of the Mabalacat Sugar Co., Inc., as
nothing could prevent B.A. Green from giving them as
security at least under a second mortgage.
As to the alleged sale of said machinery and equipment
to the plaintiff and appellant after they had been
permanently incorporated with sugar central of the
Mabalacat Sugar Co., Inc., and while the mortgage
constituted on said sugar central to Cu Unjieng e Hijos
remained in force, only the right of redemption of the
vendor Mabalacat Sugar Co., Inc., in the sugar central
with which said machinery and equipment had been
incorporated, was transferred thereby, subject to the right
of the defendants Cu Unjieng e Hijos under the first
mortgage.
For the foregoing considerations, we are of the opinion
and so hold: (1) That the installation of a machinery and
equipment in a mortgaged sugar central, in lieu of another
of less capacity, for the purpose of carrying out the
industrial functions of the latter and increasing production,
constitutes a permanent improvement on said sugar
central and subjects said machinery and equipment to the
mortgage constituted thereon (article 1877, Civil Code);
(2) that the fact that the purchaser of the new machinery
and equipment has bound himself to the person supplying
him the purchase money to hold them as security for the
payment of the latter's credit, and to refrain from
mortgaging or otherwise encumbering them does not alter
the permanent character of the incorporation of said
machinery and equipment with the central; and (3) that
the sale of the machinery and equipment in question by
the purchaser who was supplied the purchase money, as
a loan, to the person who supplied the money, after the
incorporation thereof with the mortgaged sugar central,
does not vest the creditor with ownership of said
machinery and equipment but simply with the right of
redemption.
Wherefore, finding no error in the appealed judgment, it is
affirmed in all its parts, with costs to the appellant. So
ordered

G.R. No. L-30173

September 30, 1971

GAVINO A. TUMALAD and GENEROSA R. TUMALAD,

plaintiffs-appellees,

PROPERTY CASES

ATTY. RUBEN TALAMPAS

JD NEU

RHEYNE ROBLEDO

vs.
ALBERTA VICENCIO
defendants-appellants.

and

EMILIANO

SIMEON,

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 (CAG.R. No. 27824-R) for the reason that only questions of
law are involved.
This case was originally commenced by defendantsappellants in the municipal court of Manila in Civil Case
No. 43073, for ejectment. Having lost therein, defendantsappellants 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

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.

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,

PROPERTY CASES

ATTY. RUBEN TALAMPAS

(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 defendantsappellants who are entitled to possession and not
plaintiffs-appellees. Therefore, it is argued by defendantsappellants, 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.

JD NEU

RHEYNE ROBLEDO

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,

PROPERTY CASES

ATTY. RUBEN TALAMPAS

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 ..." 24 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 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

JD NEU

RHEYNE ROBLEDO

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.

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 plaintiffsappellees.

In other words, before the expiration of the 1-year period

within which the judgment-debtor or mortgagor may
redeem the property, the purchaser thereof is not entitled,
as a matter of right, to possession of the same. Thus,
while it is true that the Rules of Court allow the purchaser
to receive the rentals if the purchased property is
occupied by tenants, he is, nevertheless, accountable to
the 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 plaintiffsappellees 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

PROPERTY CASES

ATTY. RUBEN TALAMPAS

G.R. No. L-18456

November 30, 1963

CONRADO P. NAVARRO, plaintiff-appellee,

vs.
RUFINO G. PINEDA, RAMONA REYES, ET AL.,
defendants-appellants.
Deogracias Taedo, Jr. for plaintiff-appellee.
Renato A. Santos for defendants-appellants.
PAREDES, J.:

JD NEU

RHEYNE ROBLEDO

On December 14, 1959, defendants Rufino G. Pineda

and his mother Juana Gonzales (married to Gregorio
Pineda), borrowed from plaintiff Conrado P. Navarro, the
sum of P2,500.00, payable 6 months after said date or on
June 14, 1959. To secure the indebtedness, Rufino
executed a document captioned "DEED OF REAL
ESTATE and CHATTEL MORTGAGES", whereby Juana
Gonzales, by way of Real Estate Mortgage hypothecated
a parcel of land, belonging to her, registered with the
Register of Deeds of Tarlac, under Transfer Certificate of
Title No. 25776, and Rufino G. Pineda, by way of Chattel
Mortgage, mortgaged his two-story residential house,
having a floor area of 912 square meters, erected on a lot
belonging to Atty. Vicente Castro, located at Bo. San
Roque, Tarlac, Tarlac; and one motor truck, registered in
his name, under Motor Vehicle Registration Certificate
No. A-171806. Both mortgages were contained in one
instrument, which was registered in both the Office of the
Register of Deeds and the Motor Vehicles Office of Tarlac.
When the mortgage debt became due and payable, the
defendants, after demands made on them, failed to pay.
They, however, asked and were granted extension up to
June 30, 1960, within which to pay. Came June 30,
defendants again failed to pay and, for the second time,
asked for another extension, which was given, up to July
30, 1960. In the second extension, defendant Pineda in a
document entitled "Promise", categorically stated that in
the remote event he should fail to make good the
obligation on such date (July 30, 1960), the defendant
would no longer ask for further extension and there would
be no need for any formal demand, and plaintiff could
proceed to take whatever action he might desire to
enforce his rights, under the said mortgage contract. In
spite of said promise, defendants, failed and refused to
pay the obligation.
On August 10, 1960, plaintiff filed a complaint for
foreclosure of the mortgage and for damages, which
consisted of liquidated damages in the sum of P500.00
and 12% per annum interest on the principal, effective on
the date of maturity, until fully paid.
Defendants, answering the complaint, among others,
stated
Defendants admit that the loan is overdue but deny that
portion of paragraph 4 of the First Cause of Action which
states that the defendants unreasonably failed and refuse
to pay their obligation to the plaintiff the truth being the
defendants are hard up these days and pleaded to the
plaintiff to grant them more time within which to pay their
obligation and the plaintiff refused;
WHEREFORE, in view of the foregoing it is most
respectfully prayed that this Honorable Court render
judgment granting the defendants until January 31, 1961,
within which to pay their obligation to the plaintiff.
On September 30, 1960, plaintiff presented a Motion for
summary Judgment, claiming that the Answer failed to
tender any genuine and material issue. The motion was
set for hearing, but the record is not clear what ruling the
lower court made on the said motion. On November 11,
1960, however, the parties submitted a Stipulation of
Facts,
wherein
the
defendants
admitted
the
indebtedness, the authenticity and due execution of the
Real Estate and Chattel Mortgages; that the
indebtedness has been due and unpaid since June 14,
1960; that a liability of 12% per annum as interest was
agreed, upon failure to pay the principal when due and
P500.00 as liquidated damages; that the instrument had
been registered in the Registry of Property and Motor
Vehicles Office, both of the province of Tarlac; that the

PROPERTY CASES

ATTY. RUBEN TALAMPAS

only issue in the case is whether or not the residential

house, subject of the mortgage therein, can be
considered a Chattel and the propriety of the attorney's
fees.
On February 24, 1961, the lower court held
... WHEREFORE, this Court renders decision in this
Case:
(a)
Dismissing the complaint
defendant Gregorio Pineda;

with

regard

to

(b)
Ordering defendants Juana Gonzales and the
spouses Rufino Pineda and Ramon Reyes, to pay jointly
and severally and within ninety (90) days from the receipt
of the copy of this decision to the plaintiff Conrado P.
Navarro the principal sum of P2,550.00 with 12%
compounded interest per annum from June 14, 1960,
until said principal sum and interests are fully paid, plus
P500.00 as liquidated damages and the costs of this suit,
with the warning that in default of said payment of the
properties mentioned in the deed of real estate mortgage
and chattel mortgage (Annex "A" to the complaint) be
sold to realize said mortgage debt, interests, liquidated
damages and costs, in accordance with the pertinent
provisions of Act 3135, as amended by Act 4118, and Art.
14 of the Chattel Mortgage Law, Act 1508; and
(c)
Ordering the defendants Rufino Pineda and
Ramona Reyes, to deliver immediately to the Provincial
Sheriff of Tarlac the personal properties mentioned in said
Annex "A", immediately after the lapse of the ninety (90)
days above-mentioned, in default of such payment.
The above judgment was directly appealed to this Court,
the defendants therein assigning only a single error,
allegedly committed by the lower court, to wit
In holding that the deed of real estate and chattel
mortgages appended to the complaint is valid,
notwithstanding the fact that the house of the defendant
Rufino G. Pineda was made the subject of the chattel
mortgage, for the reason that it is erected on a land that
belongs to a third person.
Appellants contend that article 415 of the New Civil Code,
in classifying a house as immovable property, makes no
distinction whether the owner of the land is or not the
owner of the building; the fact that the land belongs to
another is immaterial, it is enough that the house adheres
to the land; that in case of immovables by incorporation,
such as houses, trees, plants, etc; the Code does not
require that the attachment or incorporation be made by
the owner of the land, the only criterion being the union or
incorporation with the soil. In other words, it is claimed
that "a building is an immovable property, irrespective of
whether or not said structure and the land on which it is
adhered to, belong to the same owner" (Lopez v. Orosa,
G.R. Nos. L-10817-8, Feb. 28, 1958). (See also the case
of Leung Yee v. Strong Machinery Co., 37 Phil. 644).
Appellants argue that since only movables can be the
subject of a chattel mortgage (sec. 1, Act No. 3952) then
the mortgage in question which is the basis of the present
action, cannot give rise to an action for foreclosure,
because it is nullity. (Citing Associated Ins. Co., et al. v.
Isabel Iya v. Adriano Valino, et al., L-10838, May 30,
1958.)
The trial court did not predicate its decision declaring the
deed of chattel mortgage valid solely on the ground that
the house mortgaged was erected on the land which
belonged to a third person, but also and principally on the
doctrine of estoppel, in that "the parties have so expressly
agreed" in the mortgage to consider the house as chattel

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RHEYNE ROBLEDO

"for its smallness and mixed materials of sawali and

wood". In construing arts. 334 and 335 of the Spanish
Civil Code (corresponding to arts. 415 and 416, N.C.C.),
for purposes of the application of the Chattel Mortgage
Law, it was held that under certain conditions, "a property
may have a character different from that imputed to it in
said articles. It is undeniable that the parties to a contract
may by agreement, treat as personal property that which
by nature would be real property" (Standard Oil Co. of
N.Y. v. Jaranillo, 44 Phil. 632-633)."There can not be any
question that a building of mixed materials may be the
subject of a chattel mortgage, in which case, it is
considered as between the parties as personal
property. ... The matter depends on the circumstances
and the intention of the parties". "Personal property may
retain its character as such where it is so agreed by the
parties interested even though annexed to the realty ...".
(42 Am. Jur. 209-210, cited in Manarang, et al. v. Ofilada,
et al., G.R. No. L-8133, May 18, 1956; 52 O.G. No. 8, p.
3954.) The view that parties to a deed of chattel
mortgagee may agree to consider a house as personal
property for the purposes of said contract, "is good only
insofar as the contracting parties are concerned. It is
based partly, upon the principles of estoppel ..."
(Evangelista v. Alto Surety, No. L-11139, Apr. 23, 1958). In
a case, a mortgage 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 (Evangelista v. Abad [CA];36
O.G. 2913), for it is now well settled that an object placed
on land by one who has only a temporary right to the
same, such as a lessee or usufructuary, does not become
immobilized by attachment (Valdez v. Central Altagracia,
222 U.S. 58, cited in Davao Sawmill Co., Inc. v. 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 is so
stipulated in the document of mortgage. (Evangelista v.
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, et al.. v. C. N. Hodges, et al., [CA]; 48
O.G. 5374). The doctrine, therefore, gathered from these
cases is that although in some instances, a house of
mixed materials has been considered as a chattel
between them, has been recognized, it has been a
constant criterion nevertheless that, with respect to third
persons, who are not parties to the contract, and specially
in execution proceedings, the house is considered as an
immovable property (Art. 1431, New Civil Code).
In the case at bar, the house in question was treated as
personal or movable property, by the parties to the
contract themselves. In the deed of chattel mortgage,
appellant Rufino G. Pineda conveyed by way of "Chattel
Mortgage" "my personal properties", a residential house
and a truck. The mortgagor himself grouped the house
with the truck, which is, inherently a movable property.
The house which was not even declared for taxation
purposes was small and made of light construction
materials: G.I. sheets roofing, sawali and wooden walls
and wooden posts; built on land belonging to another.
The cases cited by appellants are not applicable to the
present case. The Iya cases (L-10837-38, supra), refer to
a building or a house of strong materials, permanently
adhered to the land, belonging to the owner of the house
himself. In the case of Lopez v. Orosa, (L-10817-18), the
subject building was a theatre, built of materials worth
more than P62,000, attached permanently to the soil. In
these cases and in the Leung Yee case, supra, third
persons assailed the validity of the deed of chattel
mortgages; in the present case, it was one of the parties
to the contract of mortgages who assailed its validity.

PROPERTY CASES

ATTY. RUBEN TALAMPAS

CONFORMABLY WITH ALL THE FOREGOING, the

decision appealed from, should be, as it is hereby
affirmed, with costs against appellants.

SERGS
PRODUCTS,
INC.,
and
SERGIO
T.
GOQUIOLAY, petitioners, vs. PCI LEASING AND
FINANCE, INC., respondent.
DECISION
PANGANIBAN, J.:
After agreeing to a contract stipulating that a real or
immovable property be considered as personal or
movable, a party is estopped from subsequently claiming
otherwise. Hence, such property is a proper subject of a
writ of replevin obtained by the other contracting party.
The Case
Before us is a Petition for Review on Certiorari assailing
the January 6, 1999 Decision[1] of the Court of Appeals

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RHEYNE ROBLEDO

(CA)[2] in CA-GR SP No. 47332 and its February 26,

1999 Resolution[3] denying reconsideration. The decretal
portion of the CA Decision reads as follows:
WHEREFORE, premises considered, the assailed Order
dated February 18, 1998 and Resolution dated March 31,
1998 in Civil Case No. Q-98-33500 are hereby
AFFIRMED. The writ of preliminary injunction issued on
June 15, 1998 is hereby LIFTED.[4]

petitioners. It also ruled that the words of the contract are

clear and leave no doubt upon the true intention of the
contracting parties. Observing that Petitioner Goquiolay
was an experienced businessman who was not unfamiliar
with the ways of the trade, it ruled that he should have
realized the import of the document he signed. The CA
further held:

In its February 18, 1998 Order,[5] the Regional Trial Court

(RTC) of Quezon City (Branch 218)[6] issued a Writ of
Seizure.[7] The March 18, 1998 Resolution[8] denied
petitioners Motion for Special Protective Order, praying
that the deputy sheriff be enjoined from seizing
immobilized or other real properties in (petitioners) factory
in Cainta, Rizal and to return to their original place
whatever immobilized machineries or equipments he may
have removed.[9]

Furthermore, to accord merit to this petition would be to

preempt the trial court in ruling upon the case below,
since the merits of the whole matter are laid down before
us via a petition whose sole purpose is to inquire upon
the existence of a grave abuse of discretion on the part of
the [RTC] in issuing the assailed Order and Resolution.
The issues raised herein are proper subjects of a fullblown trial, necessitating presentation of evidence by both
parties. The contract is being enforced by one, and [its]
validity is attacked by the other a matter x x x which
respondent court is in the best position to determine.

The Facts

Hence, this Petition.[11]

The undisputed facts are summarized by the Court of

Appeals as follows:[10]

The Issues

On February 13, 1998, respondent PCI Leasing and

Finance, Inc. (PCI Leasing for short) filed with the RTCQC a complaint for [a] sum of money (Annex E), with an
application for a writ of replevin docketed as Civil Case
No. Q-98-33500.
On March 6, 1998, upon an ex-parte application of PCI
Leasing, respondent judge issued a writ of replevin
(Annex B) directing its sheriff to seize and deliver the
machineries and equipment to PCI Leasing after 5 days
and upon the payment of the necessary expenses.
On March 24, 1998, in implementation of said writ, the
sheriff proceeded to petitioners factory, seized one
machinery with [the] word that he [would] return for the
other machineries.
On March 25, 1998, petitioners filed a motion for special
protective order (Annex C), invoking the power of the
court to control the conduct of its officers and amend and
control its processes, praying for a directive for the sheriff
to defer enforcement of the writ of replevin.
This motion was opposed by PCI Leasing (Annex F), on
the ground that the properties [were] still personal and
therefore still subject to seizure and a writ of replevin.
In their Reply, petitioners asserted that the properties
sought to be seized [were] immovable as defined in
Article 415 of the Civil Code, the parties agreement to the
contrary notwithstanding. They argued that to give effect
to the agreement would be prejudicial to innocent third
parties. They further stated that PCI Leasing [was]
estopped from treating these machineries as personal
because the contracts in which the alleged agreement
[were] embodied [were] totally sham and farcical.
On April 6, 1998, the sheriff again sought to enforce the
writ of seizure and take possession of the remaining
properties. He was able to take two more, but was
prevented by the workers from taking the rest.
On April 7, 1998, they went to [the CA] via an original
action for certiorari.

In their Memorandum, petitioners submit the following

issues for our consideration:
A. Whether or not the machineries purchased and
imported by SERGS became real property by virtue of
immobilization.
B. Whether or not the contract between the parties is a
loan or a lease.[12]
In the main, the Court will resolve whether the said
machines are personal, not immovable, property which
may be a proper subject of a writ of replevin. As a
preliminary matter, the Court will also address briefly the
procedural points raised by respondent.
The Courts Ruling
The Petition is not meritorious.
Preliminary Matter:Procedural Questions
Respondent contends that the Petition failed to indicate
expressly whether it was being filed under Rule 45 or
Rule 65 of the Rules of Court. It further alleges that the
Petition erroneously impleaded Judge Hilario Laqui as
respondent.
There is no question that the present recourse is under
Rule 45. This conclusion finds support in the very title of
the Petition, which is Petition for Review on Certiorari.[13]
While Judge Laqui should not have been impleaded as a
respondent,[14] substantial justice requires that such
lapse by itself should not warrant the dismissal of the
present Petition. In this light, the Court deems it proper to
remove, motu proprio, the name of Judge Laqui from the
caption of the present case.
Main Issue: Nature of the Subject Machinery
Petitioners contend that the subject machines used in
their factory were not proper subjects of the Writ issued
by the RTC, because they were in fact real property.
Serious policy considerations, they argue, militate against
a contrary characterization.

Ruling of the Court of Appeals

Citing the Agreement of the parties, the appellate court
held that the subject machines were personal property,
and that they had only been leased, not owned, by

PROPERTY CASES

ATTY. RUBEN TALAMPAS

Rule 60 of the Rules of Court provides that writs of

replevin are issued for the recovery of personal property
only.[15] Section 3 thereof reads:

JD NEU

RHEYNE ROBLEDO

SEC. 3. Order. -- Upon the filing of such affidavit and

approval of the bond, the court shall issue an order and
the corresponding writ of replevin describing the personal
property alleged to be wrongfully detained and requiring
the sheriff forthwith to take such property into his custody.

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.

On the other hand, Article 415 of the Civil Code

enumerates immovable or real property as follows:

In the present case, the Lease Agreement clearly

provides that the machines in question are to be
considered as personal property. Specifically, Section
12.1 of the Agreement reads as follows:[21]

ART. 415. The following are immovable property:

x x x....................................x x x....................................x x
x
(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;

12.1 The PROPERTY is, and shall at all times be and

remain, personal property notwithstanding that the
PROPERTY or any part thereof may now be, or hereafter
become, in any manner affixed or attached to or
embedded in, or permanently resting upon, real property
or any building thereon, or attached in any manner to
what is permanent.

x x x....................................x x x....................................x x
x

Clearly then, petitioners are estopped from denying the

characterization of the subject machines as personal
property. Under the circumstances, they are proper
subjects of the Writ of Seizure.

In the present case, the machines that were the subjects

of the Writ of Seizure were placed by petitioners in the
factory built on their own land. Indisputably, they were
essential and principal elements of their chocolatemaking industry. Hence, although each of them was
movable or personal property on its own, all of them have
become immobilized by destination because they are
essential and principal elements in the industry.[16] In
that sense, petitioners are correct in arguing that the said
machines are real, not personal, property pursuant to
Article 415 (5) of the Civil Code.[17]

It should be stressed, however, that our holding -- that the

machines should be deemed personal property pursuant
to the Lease Agreement is good only insofar as the
contracting parties are concerned.[22] Hence, while the
parties are bound by the Agreement, third persons acting
in good faith are not affected by its stipulation
characterizing the subject machinery as personal.[23] In
any event, there is no showing that any specific third
party would be adversely affected.
Validity of the Lease Agreement

Be that as it may, we disagree with the submission of the

petitioners that the said machines are not proper subjects
of the Writ of Seizure.
The Court has held that contracting parties may validly
stipulate that a real property be considered as personal.
[18] After agreeing to such stipulation, they are
consequently estopped from claiming otherwise. Under
the principle of estoppel, a party to a contract is ordinarily
precluded from denying the truth of any material fact
found therein.
Hence, in Tumalad v. Vicencio,[19] the Court upheld the
intention of the parties to treat a house as a personal
property because it had been made the subject of a
chattel mortgage. The Court ruled:
x x x. 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.
Applying Tumalad, the Court in Makati Leasing and
Finance Corp. v. Wearever Textile Mills[20] also held that
the machinery used in a factory and essential to the
industry, as in the present case, was a proper subject of a
writ of replevin because it was treated as personal
property in a contract. Pertinent portions of the Courts
ruling are reproduced hereunder:
x x x. 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,

PROPERTY CASES

ATTY. RUBEN TALAMPAS

In their Memorandum, petitioners contend that the

Agreement is a loan and not a lease.[24] Submitting
documents supposedly showing that they own the subject
machines, petitioners also argue in their Petition that the
Agreement suffers from intrinsic ambiguity which places
in serious doubt the intention of the parties and the
validity of the lease agreement itself.[25] In their Reply to
respondents Comment, they further allege that the
Agreement is invalid.[26]
These arguments are unconvincing. The validity and the
nature of the contract are the lis mota of the civil action
pending before the RTC. A resolution of these questions,
therefore, is effectively a resolution of the merits of the
case. Hence, they should be threshed out in the trial, not
in the proceedings involving the issuance of the Writ of
Seizure.
Indeed, in La Tondea Distillers v. CA,[27] the Court
explained that the policy under Rule 60 was that
questions involving title to the subject property questions
which petitioners are now raising -- should be determined
in the trial. In that case, the Court noted that the remedy
of defendants under Rule 60 was either to post a counterbond or to question the sufficiency of the plaintiffs bond.
They were not allowed, however, to invoke the title to the
subject property. The Court ruled:
In other words, the law does not allow the defendant to
file a motion to dissolve or discharge the writ of seizure
(or delivery) on ground of insufficiency of the complaint or
of the grounds relied upon therefor, as in proceedings on
preliminary attachment or injunction, and thereby put at
issue the matter of the title or right of possession over the
specific chattel being replevied, the policy apparently
being that said matter should be ventilated and
determined only at the trial on the merits.[28]

JD NEU

RHEYNE ROBLEDO

Besides, these questions require a determination of facts

and a presentation of evidence, both of which have no
place in a petition for certiorari in the CA under Rule 65 or
in a petition for review in this Court under Rule 45.[29]
Reliance on the Lease Agreement
It should be pointed out that the Court in this case may
rely on the Lease Agreement, for nothing on record
shows that it has been nullified or annulled. In fact,
petitioners assailed it first only in the RTC proceedings,
which had ironically been instituted by respondent.
Accordingly, it must be presumed valid and binding as the
law between the parties.
Makati Leasing and Finance Corporation[30] is also
instructive on this point. In that case, the Deed of Chattel
Mortgage, which characterized the subject machinery as
personal property, was also assailed because respondent
had allegedly been required to sign a printed form of
chattel mortgage which was in a blank form at the time of
signing. The Court rejected the argument and relied on
the Deed, ruling as follows:
x x x. 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. x x x
Alleged Injustice Committed on the Part of Petitioners
Petitioners contend that if the Court allows these
machineries to be seized, then its workers would be out
of work and thrown into the streets.[31] They also allege
that the seizure would nullify all efforts to rehabilitate the
corporation.
Petitioners arguments do not preclude the implementation
of the Writ. As earlier discussed, law and jurisprudence
support its propriety. Verily, the above-mentioned
consequences, if they come true, should not be blamed
on this Court, but on the petitioners for failing to avail
themselves of the remedy under Section 5 of Rule 60,
which allows the filing of a counter-bond. The provision
states:
SEC. 5. Return of property. -- If the adverse party objects
to the sufficiency of the applicants bond, or of the surety
or sureties thereon, he cannot immediately require the
return of the property, but if he does not so object, he
may, at any time before the delivery of the property to the
applicant, require the return thereof, by filing with the
court where the action is pending a bond executed to the
applicant, in double the value of the property as stated in
the applicants affidavit for the delivery thereof to the
applicant, if such delivery be adjudged, and for the
payment of such sum to him as may be recovered against
the adverse party, and by serving a copy bond on the
applicant.
WHEREFORE, the Petition is DENIED and the assailed
Decision of the Court of Appeals AFFIRMED. Costs
against petitioners.

August 7, 1935

DAVAO SAW MILL CO., INC., plaintiff-appellant,

vs.
APRONIANO G. CASTILLO and DAVAO LIGHT &
POWER CO., INC., defendants-appellees.
Arsenio Suazo and Jose L. Palma Gil and Pablo Lorenzo
and Delfin Joven for appellant.
J.W. Ferrier for appellees.
MALCOLM, J.:
The issue in this case, as announced in the opening
sentence of the decision in the trial court and as set forth
by counsel for the parties on appeal, involves the
determination of the nature of the properties described in
the complaint. The trial judge found that those properties
were personal in nature, and as a consequence absolved
the defendants from the complaint, with costs against the
plaintiff.

SO ORDERED.

PROPERTY CASES

G.R. No. L-40411

ATTY. RUBEN TALAMPAS

JD NEU

RHEYNE ROBLEDO

10

The Davao Saw Mill Co., Inc., is the holder of a lumber

concession from the Government of the Philippine
Islands. It has operated a sawmill in the sitio of Maa,
barrio of Tigatu, municipality of Davao, Province of
Davao. However, the land upon which the business was
conducted belonged to another person. On the land the
sawmill company erected a building which housed the
machinery used by it. Some of the implements thus used
were clearly personal property, the conflict concerning
machines which were placed and mounted on
foundations of cement. In the contract of lease between
the sawmill company and the owner of the land there
appeared the following provision:
That on the expiration of the period agreed upon, all the
improvements and buildings introduced and erected by
the party of the second part shall pass to the exclusive
ownership of the party of the first part without any
obligation on its part to pay any amount for said
improvements and buildings; also, in the event the party
of the second part should leave or abandon the land
leased before the time herein stipulated, the
improvements and buildings shall likewise pass to the
ownership of the party of the first part as though the time
agreed upon had expired: Provided, however, That the
machineries and accessories are not included in the
improvements which will pass to the party of the first part
on the expiration or abandonment of the land leased.
In another action, wherein the Davao Light & Power Co.,
Inc., was the plaintiff and the Davao, Saw, Mill Co., Inc.,
was the defendant, a judgment was rendered in favor of
the plaintiff in that action against the defendant in that
action; a writ of execution issued thereon, and the
properties now in question were levied upon as
personalty by the sheriff. No third party claim was filed for
such properties at the time of the sales thereof as is
borne out by the record made by the plaintiff herein.
Indeed the bidder, which was the plaintiff in that action,
and the defendant herein having consummated the sale,
proceeded to take possession of the machinery and other
properties described in the corresponding certificates of
sale executed in its favor by the sheriff of Davao.
As connecting up with the facts, it should further be
explained that the Davao Saw Mill Co., Inc., has on a
number of occasions treated the machinery as personal
property by executing chattel mortgages in favor of third
persons. One of such persons is the appellee by
assignment from the original mortgages.
Article 334, paragraphs 1 and 5, of the Civil Code, is in
point. According to the Code, real property consists of
1. Land, buildings, roads and constructions of all kinds
adhering to the soil;
xxx

xxx

xxx

5. 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 of industry.
Appellant emphasizes the first paragraph, and appellees
the last mentioned paragraph. We entertain no doubt that
the trial judge and appellees are right in their appreciation
of the legal doctrines flowing from the facts.
In the first place, it must again be pointed out that the
appellant should have registered its protest before or at
the time of the sale of this property. It must further be
pointed out that while not conclusive, the characterization

PROPERTY CASES

ATTY. RUBEN TALAMPAS

of the property as chattels by the appellant is indicative of

intention and impresses upon the property the character
determined by the parties. In this connection the decision
of this court in the case of Standard Oil Co. of New York
vs. Jaramillo ( [1923], 44 Phil., 630), whether obiter dicta
or not, furnishes the key to such a situation.
It is, however not necessary to spend overly must time in
the resolution of this appeal on side issues. It is
machinery which is involved; moreover, machinery not
intended by the owner of any building or land for use in
connection therewith, but intended by a lessee for use in
a building erected on the land by the latter to be returned
to the lessee on the expiration or abandonment of the
lease.
A similar question arose in Puerto Rico, and on appeal
being taken to the United States Supreme Court, it was
held that machinery which is movable in its nature only
becomes immobilized when placed in a plant by the
owner of the property or plant, but not when so placed by
a tenant, a usufructuary, or any person having only a
temporary right, unless such person acted as the agent of
the owner. In the opinion written by Chief Justice White,
whose knowledge of the Civil Law is well known, it was in
part said:
To determine this question involves fixing the nature and
character of the property from the point of view of the
rights of Valdes and its nature and character from the
point of view of Nevers & Callaghan as a judgment
creditor of the Altagracia Company and the rights derived
by them from the execution levied on the machinery
placed by the corporation in the plant. Following the Code
Napoleon, the Porto Rican Code treats as immovable
(real) property, not only land and buildings, but also
attributes immovability in some cases to property of a
movable nature, that is, personal property, because of the
destination to which it is applied. "Things," says section
334 of the Porto Rican Code, "may be immovable either
by their own nature or by their destination or the object to
which they are applicable." Numerous illustrations are
given in the fifth subdivision of section 335, which is as
follows: "Machinery, vessels, instruments or implements
intended by the owner of the tenements for the industrial
or works that they may carry on in any building or upon
any land and which tend directly to meet the needs of the
said industry or works." (See also Code Nap., articles
516, 518 et seq. to and inclusive of article 534,
recapitulating the things which, though in themselves
movable, may be immobilized.) So far as the subjectmatter with which we are dealing machinery placed in
the plant it is plain, both under the provisions of the
Porto Rican Law and of the Code Napoleon, that
machinery which is movable in its nature only becomes
immobilized when placed in a plant by the owner of the
property or plant. Such result would not be accomplished,
therefore, by the placing of machinery in a plant by a
tenant or a usufructuary or any person having only a
temporary right. (Demolombe, Tit. 9, No. 203; Aubry et
Rau, Tit. 2, p. 12, Section 164; Laurent, Tit. 5, No. 447;
and decisions quoted in Fuzier-Herman ed. Code
Napoleon under articles 522 et seq.) The distinction rests,
as pointed out by Demolombe, upon the fact that one only
having a temporary right to the possession or enjoyment
of property is not presumed by the law to have applied
movable property belonging to him so as to deprive him
of it by causing it by an act of immobilization to become
the property of another. It follows that abstractly speaking
the machinery put by the Altagracia Company in the plant
belonging to Sanchez did not lose its character of
movable property and become immovable by destination.
But in the concrete immobilization took place because of
the express provisions of the lease under which the
Altagracia held, since the lease in substance required the

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11

putting in of improved machinery, deprived the tenant of

any right to charge against the lessor the cost such
machinery, and it was expressly stipulated that the
machinery so put in should become a part of the plant
belonging to the owner without compensation to the
lessee. Under such conditions the tenant in putting in the
machinery was acting but as the agent of the owner in
compliance with the obligations resting upon him, and the
immobilization of the machinery which resulted arose in
legal effect from the act of the owner in giving by contract
a permanent destination to the machinery.
xxx

xxx

xxx

The machinery levied upon by Nevers & Callaghan, that

is, that which was placed in the plant by the Altagracia
Company, being, as regards Nevers & Callaghan,
movable property, it follows that they had the right to levy
on it under the execution upon the judgment in their favor,
and the exercise of that right did not in a legal sense
conflict with the claim of Valdes, since as to him the
property was a part of the realty which, as the result of his
obligations under the lease, he could not, for the purpose
of collecting his debt, proceed separately against. (Valdes
vs. Central Altagracia [192], 225 U.S., 58.)
Finding no reversible error in the record, the judgment
appealed from will be affirmed, the costs of this instance
to be paid by the appellant.

G.R. No. L-3714

January 26, 1909

ISABELO MONTANO Y MARCIAL, petitioner-appellee,

vs.
THE INSULAR GOVERNMENT, ET AL., respondents.
THE INSULAR GOVERNMENT, appellant.
Attorney-General Araneta, for appellant.
F. Buencamino, for appellee.
TRACEY, J.:
Isabelo Montano presents a petition to the Court of Land
Registration for the inscription of a piece of land in the
barrio of Libis, municipality of Caloocan, used as a fishery
having a superficial area of 10,805 square meters, and
bounded as set out in the petition; its value according to
the last assessment being $505.05, United States
currency.
This petition was opposed by the Solicitor-General in
behalf of the Director of Lands, and by the entity known
as Obras Pias de la Sagrada Mitra, the former on the
ground that the land in question belonged to the
Government of the United States, and the latter, that it

PROPERTY CASES

ATTY. RUBEN TALAMPAS

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12

was the absolute owner of all the dry land along the
eastern boundary of the said fishery.

Bowlby, which is in itself an epitome of the American Law

of Waters, speaking of the tide lands, said:

The Court of Land Registration in its decision of

December 1, 1906, dismissed the said oppositions
without costs and decreed, after a general entry by
default, the adjudication and registration of the property
described in the petition, in favor of Isabelo Montano y
Marcial.

But Congress has never undertaken by general laws to

dispose of such lands. . . .

From this decision only counsel for the Director of Public

Lands appealed to this court. It is a kindred case to Cirilo
Mapa vs. The Insular Government, decided by this court
on February 19, 1908, reported in 10 Phil. Rep., 175.
As some discussion has arisen as to the scope of that
decision, it appears opportune to reaffirm the principle
there laid down. The issue was, whether the lands used
as a fishery , for the growth of nipa, and as salt deposits,
inland some distance from the sea, and asserted, though
not clearly proved to be overflowed at high tide could be
registered as private property on the strength of ten years'
occupation, under paragraph 6 of section 54 of Act No.
926 of the Phil. Commission. The point decided was that
such land within the meaning of the Act of Congress of
July 1, 1902, was agricultural, the reasoning leading up to
the conclusion being that congress having divided all the
public lands of the Islands into three classes it must be
included in one of the three, and being clearly neither
forest nor mineral, it must of necessity fall into two
division of agricultural land. In the concurring opinion, in
order to avoid misapprehension on the part of those not
familiar with United States land legislation and a
misunderstanding of the reach of the doctrine, it was
pointed out that under the decision of the Supreme Court
of the United States the phrase "public lands" is held to
be equivalent to "public domain," and dos not by any
means include all lands of Government ownership, but
only so much of said lands as are thrown open to private
appropriation and settlement by homestead and other like
general laws. Accordingly, "government land" and "public
domain" are not synonymous items; the first includes not
only the second, but also other lands of the Government
already reserved or devoted to public use or subject to
private right. In other words, the Government owns real
estate which is part of the "public lands" and other real
estate which is not part thereof.
This meaning attached to the phrase "public lands" by
Congress in its land legislation is settled by usage and
adjudication beyond a doubt, and without variation. It is
therefore doing the utmost violence to all rules of
construction to contend that in this law, dealing with the
same subject-matter in connection with these Islands, a
different meaning had, without indication or motive, been
imported into the words. They cannot have one meaning
in any other statute and a different and conflicting
meaning in this statute. Where property in general is
referred to therein, other and apt phrases are used in
order to include it; for instance, section 12 provides "that
all the property and rights which have been acquired in
the Phil. Islands by the United States ... are hereby
placed under the control of the Government of the said
Islands." Therefore, there is much real property belonging
to the Government which is not affected by statutes for
the settlement, prescription or sale of public lands.
Examples in point are properties occupied by public
buildings or devoted to municipal or other governmental
uses.
Among the authorities cited in the Mapa case are two,
Shively vs. Bowlby (152 U.S., 1), and Mann vs. Tacoma
Land Co. (153 U.S., 273), in which it was held that
general public land laws did not apply to land over which
the tide ebbs and flows. Mr. Justice Gray, in Shively vs.

PROPERTY CASES

ATTY. RUBEN TALAMPAS

The Congress of the United States, in disposing of the

public lands, has constantly acted upon the theory that
those lands, whether in the interior, or on the coast,
above high- water mark, may be taken up by actual
occupants, in order to encourage the settlement of the
country, but that the navigable water and the soils under
them. whether within the above the ebb and flow of the
tide, shall be and remain public highways; and being
chiefly valuable for the public purposes of commerce,
navigation, and fishery, and for the improvement
necessary to secure and promote those purposes, shall
not be granted away during the period of territorial
government. (Pp. 48 and 49.)
The conclusions of the court are in part stated as follows:
Lands under tide waters are incapable of cultivation or
improvement in the manner of lands above high-water
mark. They are of great value to the public for the
purposes of commerce, navigation, and fishery. Their
improvement by individuals, when permitted, is incidental
or subordinate to the public use and right. Therefore the
title and the control of them are vested in the sovereign
for the benefit of the whole people . . . .
Upon the acquisition of a territory by the United States,
whether by cession from one of the States, or by treaty
with a foreign country, or by discovery and settlement, the
same title and dominion passed to the United States, for
the benefit of whole people, and in trust for the several
States to be ultimately created out of the territory . . . .
The United States, while hold the country as a territory,
having all the powers both of national and municipal
government, may grant, for appropriate purposes, titles or
rights in the soil below high-water mark of tide waters. But
that have never done so in general laws. (Pp. 57 and 58.)
In Mann vs. Tacoma Land Co., it was said by Mr. Justice
Brewer (p. 284);
It is settled that the general legislation of Congress in
respect to public lands does not extend to tide lands .... It
provided that the scrip might be located on the
unoccupied and unappropriated public lands. As said in
Newhall vs. Sanger (92 U.S., 761, 763.) "The words
"public lands" are habitually used in our legislation to
described such as are subject to sale or other disposal
under general laws."
In Illinois Central R.R. Company vs. Illinois (146 U.S.,
387) Mr. Justice Field, delivering the opinion of the court,
said:
That the State holds the title tot he lands under the
navigable waters of lake Michigan within its limits, in the
same manner that the State hold title to soils under tide
water, by the common law, we have already shown, and
that title necessarily carries with it control over the waters
above them whenever the lands are subjected to use. But
it is a title different in character from that which the States
holds in lands intended for sale. It is different from the title
which the United States hold in the public lands which are
open to preemption and sale. It is a title held in trust for
the people of the States that they may enjoy the
navigation of the waters, carry on commerce over them,
and have liberty of fishing therein freed from the
obstruction or interference of private parties. The interest
of the people in the navigation of the waters and in

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commerce over them may be improved in many instances

by the erection of wharves, docks, and piers therein, for
which purpose the State may grant parcels of the
submerged lands; and so long as their disposition is
made for such purposes, no valid objections can be made
to the grants .... The control of the State for the purposes
of the trust can never be lost, except as to such parcels
as are used in promoting the interests of the public
therein, or can be disposed of without any substantial
impairment of the public interest in the lands and waters
remaining .... The State can no more abdicate its trust
over property in which the whole people are interested,
like navigable waters and soils under them, so as to leave
them entirely under the use and control of private parties,
except in the instance of parcels mentioned for the
improvement of the navigation and use of the waters, or
when parcels can be disposed of without impairment of
the public interest in what remains, that can abdicate its
police powers in the administration of government and the
preservation of the peace .... So with trusts connected
with public property, or property of a special character,
like lands under navigable waters, they can not be placed
entirely beyond the direction and control of the State.
The ownership of the navigable waters of the harbor and
the lands under them is a subject of public concern to the
whole people of the State. The trust with which they are
held, therefore, is governmental and can not be alienated,
except in those instances mentioned of parcels used in
the improvement of the interest thus held, or when
parcels can be disposed of without detriment to the public
interest in the lands and waters remaining. . . . . (Pp. 452455.)
Mr. Justice Fields quotes from an opinion by Mr. Justice
Bradley, delivered in a case in the Circuit Court, speaking
of lands under water, as follows (p. 457):
Being subject to this trust, they were publici juris; in other
words, they were held for the use of the people at large. It
is true that to utilize the fisheries, especially those of
shellfish, it was necessary to parcel them out to particular
operators, and employ the rent or consideration for the
benefit of the whole people; but this did not alter the
character of the title. The land remained subject to all
other public uses as before, especially to those of
navigation and commerce, which are always paramount
to those of public fisheries. It is also true that portions of
the submerged shoals and flats, which really interfered
with navigation, and could better subserve the purposes
of commerce by being filled up and reclaimed, were
disposed of to individuals for that purpose. But neither did
these dispositions of useless parts affect the character of
the title to the remainder.
These citations are thus given at length in order to make
clear, first, the lands under the ebb and flow of the tide of
navigable waters are not in America understood to be
included in the phrase "public lands" in Acts of Congress
of United States; nor, perforce, can they best understood
in laws of the Philippine Commission drawn immediately
under the sanction of those Acts; and second, that such
lands are under existing Congressional legislation the
subject of private ownership, any occupation therefore be
subordinate to the public purpose of navigation and
fishery. While as well in the original thirteen States in
which there was never a national public domain to which
the land laws of Congress could apply as in States more
recently created out of that domain and which upon their
formation became masters of their own land policy the
local laws govern riparian and littoral rights, subject only
to Congressional control in matters of foreign and
interstate commerce ( U.S. vs. Mission Rock Co., 189 U.
S., 391), yet, as to the unappropriated public lands
constituting the public domain the sole power of

PROPERTY CASES

ATTY. RUBEN TALAMPAS

legislation is vested in Congress, which are uniformly and

consistently declined to assume the function of
authorizing or regulating private appropriation of such
rights. Therefore, in the absence of specific
Congressional legislation, it is impossible for individuals
to acquire title under the ten years provision of Act No.
926 or even through a definite grants from the local
legislature of lands beneath navigable waters in which the
tide ebbs and flows, except for wharf-age or other
purposes auxiliary to navigation or other public uses,
unless in conformity with the preexisting local law of the
Archipelago.
The matter is dwelt is upon for the reason that the late
Attorney-General in his very able brief calls attention to
the effect apprehended from the extension of the words
"agricultural lands" as used in Act No. 926 to include all
public lands not forest or mineral in character, specifying
two acts of the Philippine Commission, the validity of
which he fears might thereby be called into question. The
first of these, Act No. 1039, dedicates to use of the Navy
Department of the United States Government certain
ground and buildings in Cavite, while the other, Act No.
1654, is a fore-shore law regulating the control and
disposal of filled Government lands. If the term
"agricultural lands" be held to include all government
property not forest or mineral in character, he suggests
that these Acts, not being in conformity with the
procedure of Act No. 926, as approved by Congress,
would be invalid, and moreover, that the Philippine
Government would be seriously tied up in the
management and disposition of other lands owned by it.
Without finally passing on this question in relation to lands
the owners of which are not before us parties to this
action, it is appropriate, in answering the argument of the
law officer of the State, to point out that this consequence
appears to be avoided by the restricted sense given to
the words "public lands" or "public domain" in the Act of
Congress and in Act No. 926, as hereinbefore noted.
Neither the property affected by Act No. 1039, already in
use by the Navy Department of the United States, nor the
foreshore land mentioned in Act No. 1654, which is under
the ebb and flow of the tide, was, in so far as appears in
the Acts before us, part of the public domain to be
disposed of under sections 13, 14, 15, and 16 of the Act
of congress of July 1, 1902, and for that reason it is not
included in any of the three subdivisions of "public lands"
as agricultural or otherwise, although it was part of the
property acquired in the Philippine Islands by the United
States by the treaty of peace with Spain, which by section
12 of that Act was "placed under the control of the
Government of said Islands, to be administered for the
benefit of the inhabitants thereof." It would seem that the
validity of the Cavite Act can not be successfully assailed
on this ground, while it may well be that The Fore-shore
Act on examination will be found to fall, as to its general
purpose, within the authorization of section 11 of the Act
of Congress, whereby the duty is imposed upon the
Island government of improving the harbors and
navigable waters in the interest of commerce.
As a consequence, it follows that The Public Land Act did
not apply to the fisheries in the Mapa case, if they are to
be regarded as constituting, in a general sense, land
under tidal waters. It becomes necessary, therefore, to
refer to the character of the lands.
Although argued at different times, five of these cases
have been presented substantially together, all being
covered by one brief of the late Attorney-General in behalf
of the Government in which, with many interesting
historical and graphic citations he describes that part of
the marginal seashore of the Philippine Islands known as
manglares, with their characteristic vegetation. In brief, it

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may be said that they are mud flats, alternately washed

and exposed by the tide, in which grow various kindred
plants which will not live except when watered by the sea,
extending their roots deep into the mud and casting their
seeds, which also germinate there. These constitute the
mangrove flats of the tropics, which exist naturally, but
which are also, to some extent, cultivated by man for the
sake of the combustible wood of the mangrove and like
trees as well as for the useful nipa palm propagated
thereon. Although these flats are literally tidal lands, yet
we are of the opinion that they can not be so regarded in
the sense in which that term is used in the cases cited or
in general American Jurisprudence. The waters flowing
over them are not available for purpose of navigation, and
they "may be disposed of without impairment of the public
interest in what remains." Mr. Justice Bradley, in the
passage quoted by Mr. Justice Field, makes an exception
of submerged shoals and flats. In Railroad Company vs.
Schurmeir (74 U.S., 272) , a Government patent of public
land bordering upon a river was held to include a parcel
submerge at very high water and separated from the
mainland by a slough in which the water ran when
ordinarily high. In Mobile vs. Hallett (41 U.S., 260), at
page 266. Mr. Justice Catron remarked in his dissenting
opinion:
. . . and that a mud flat, flowed by tide water, is the
subject of grant by the Government to an individual, I
think can not well be doubted by anyone acquainted with
the southern country; when such valuable portions of it
are mud flats, in the constant course of reclamation.
In several of the older States along the Atlantic coast
such flats, either by force of ordinance, custom, judicial
construction, or local laws are held to pass under private
grants as appurtenant to the uplands. (Winslow vs.
Patten, 34 Maine, 25; Litchfield vs. Scituate, 135 Mass.,
39; People vs. New York and Staten Island Ferry Co., 68
N.Y., 71; Stevens vs. P.& N. Railroad, 5 Vroom, 34 N.J.
Law, 532.) There is even stronger reason for excepting
mud flats from the rule of tide lands in these Islands,
owing to the peculiarities of their configuration and to the
nature of the tropical growth thereon, and whatever may
be action of the tide, we do not think that in the
Philippines such of the shoals covered by this vegetation,
whether spontaneously or by cultivation, as are not
available for free navigation, or required for any other
purpose of general benefit, can be considered tidal land
reserved for public use alone, under the governmental
trust for commerce and public fishery, but on the contrary,
we regard them as public property, susceptible of a sort of
cultivation and of improvement, and as such, subject to
occupation under paragraph 6 of section 54 of the Land
Law. Instances may hereafter arise of fisheries unduly
established in what are clearly navigable waters which
would constitute a nuisance, and not be the subject of
prescription or of grant. A brief reference to the five cases
under consideration in this court, however, will serve to
show that they all fairly fall within the benefits of the law.
In the Mapa case1 the property was far from the the sea,
partly occupied as fish pond, as nipa land, and as a salt
pit. It does not appear whether it was connected with the
sea by nature or by art, or whether the tide ebbed or
flowed upon it, or whether the salt was sufficient to impart
to any portion of it a mineral character. In the Santiago
case2 there was a fishery about two thousand yards from
the sea, with which it communicated by a river, and a
portion of the inclosure was dedicated to growing the
aquatic tree called bacawan. The fishery had been
constructed by man, upon land heretofore sown with this
tree. In the Gutierrez case3 it was shown that the land
was partly highland, growing fruit trees, and partly
lowland , converted by the occupant of the upland into a
fishery by this labor. In the Baello case,4 the river running
to the sea was a hundred meters away, the salt water

PROPERTY CASES

ATTY. RUBEN TALAMPAS

therefrom reaching the lowland by means of an artificial

canal cut by the owner of the land when he gave up
cultivating bacawan thereon, an made it into a fishery. In
the Montano case, although there was a considerable
depth of water over the soil, yet before the fishery was
made, some thirty years before the trial, bacawan had
been sown and propagated in the mud by the owner who
finally sold the entire cut when he built the dikes.
All these lots, in their original state, whether near the sea
or at a distance from it inland, and whether bare or
washed by the tides, were not covered by waters
practically navigable and were filled, whether naturally or
artificially, with vegetation sometimes cultivated and in
common use for fuel and for building purposes, and they
were all adapted to fisheries or fish hatcheries by the
labor of man introducing or regulating the access of salt
water thereto. It is obvious that that all five cases are of
the same general nature and that one rule must be
applied to them all.
In this discussion of the meaning which the Congress of
the United States attached to the phrase "public lands" in
the Philippine Bill, we have assumed that it was used in
the same sense as in other laws enacted by that body. If,
however, it can be considered as employed with
reference to the peculiar conditions of the territory to
which it was to be applied and to the local law or usage
prevailing therein, the result would not be different. In
many of its general features the Spanish law of public
lands in the Philippines resembled the American.
Government property was of two kinds first, that of
public use or service, said to be of public ownership, and
second, that of having a private character or use. (Civil
Code, arts. 339 and 340.) Lands of the first class, while
they retain their public character are inalienable; those of
the second are not.
By the royal decree of February 13, 1894, it was enacted
that all "the land, soil, ground not under cultivation, and
forests in the Philippine Islands should be considered
saleable crown lands," which are not included in the four
exceptions stated, among which were "those which
belonged to the forest zones which the State desires to
hold for the Commonwealth." This corresponds in the
main to the American classification into Government
property, public lands, and forest reserve. Mineral lands
are elsewhere defined. It is to be noted, however, that in
the two languages terms ordinarily equivalent are not in
this relation employed in the same sense and that lands
de dominio publico signify quite a different thing from the
arbitrary English Phrases "public lands" or "public
domain."
The Law of Waters of 1866, which was the latest Spanish
Law of Waters extended to these Islands, provides that
private property can not be acquired in lands preserving
the character of public ownership (title 1, art. 1, par. 29),
and among the lands declared of public ownership and
use by article 1 of chapter 1 of title 5 of the same law are:
The seashore. By shore is understood the land
alternately covered and uncovered by the sea in its tidal
movement. Its interior, or land limit, is the point reached
by the highest and equinoctial tides. At those places not
affected by tides, the land limit is the highest point
reached by sea water in ordinary storms or hurricanes.
(Par. 3.)
So that under this legislation the same question also
presented itself as to what constituted seashore, which
was of public use and trust and therefore not alienable.
This question can not be said to have been settled by
official ruling at the time of the American occupation.
From the official records it appears that there were then

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pending for registration a great number of possessory

expedientes, twenty-two of which, made before April 17,
1895, were from the Province of Pampanga alone, in
which the land was described as manglares. Under the
royal decree of 1894 such manglares appear at the outset
to have been registered and considered alienable and
numbers of them were conceded by adjustment, including
considerable tracts in the town of Sexmoan and Lubao in
Pampanga. Claims having been made that on account of
the trees growing thereon they formed part of the forest
reserve and also because, being covered and uncovered
by the tide, they were part of the shore, and in either case
were inalienable, the engineer in chief of the forestry
district of the center of Luzon addressed, on January 7,
1893, a communication to the inspector general de
montes ( Forestry Department) in which he expressed an
opinion that as part of the shore they were not subject to
private ownership and asked for an early decision of the
question. On November 26, 1893, the acting inspectorgeneral notified the chief of the district of the Visayas in
Mindanao that his excellency, the governor-general, had
that they ordered all action suspended on expedientes of
manglar and nipa lands and salt marshes until the
questions involved in regard thereto should be
determined. In this condition the matter remained until the
expiration of the Spanish sovereignty.
By article 14 of the Law of Waters the right of shore
fishery was declared public, but by article 23 authority
might be granted individuals to establish shore hatcheries
for fish and shellfish, and by article 15 salt-water ponds
on private ground not communicating with the sea by
water navigable by boats were recognized as private
property, while chapter 10 permitted and regulated the
draining of swamps and marshes, both of private and of
public ownership.
Under this uncertain and somewhat unsatisfactory
condition of the law the custom had grown up of
converting manglares and nipa lands into fisheries which
became common feature of settlements along the coast
and at the time of the change of sovereignty constituted
one of the most productive industries of the Islands, the
abrogation of which would destroy vested interests and
prove a public disaster. In our opinion it was the object of
Congress not to work such a result but, on the contrary, in
furtherance of the purposes of the treaty of Paris, to
recognize and safeguard such property. Therefore, the
judgment of the Court of Land Registration is affirmed,
without costs.

G.R. No. 92013 July 25, 1990

SALVADOR H. LAUREL, petitioner,
vs.
RAMON GARCIA, as head of the Asset Privatization
Trust, RAUL MANGLAPUS, as Secretary of Foreign
Affairs, and CATALINO MACARAIG, as Executive
Secretary, respondents.
G.R. No. 92047 July 25, 1990
DIONISIO S. OJEDA, petitioner,
vs.
EXECUTIVE SECRETARY MACARAIG, JR., ASSETS
PRIVATIZATION TRUST CHAIRMAN RAMON T.
GARCIA, AMBASSADOR RAMON DEL ROSARIO, et al.,
as members of the PRINCIPAL AND BIDDING
COMMITTEES ON THE UTILIZATION/DISPOSITION
PETITION
OF
PHILIPPINE
GOVERNMENT
PROPERTIES IN JAPAN, respondents.
Arturo M. Tolentino for petitioner in 92013.

GUTIERREZ, JR., J.:

These are two petitions for prohibition seeking to enjoin
respondents, their representatives and agents from
proceeding with the bidding for the sale of the 3,179
square meters of land at 306 Roppongi, 5-Chome Minatoku Tokyo, Japan scheduled on February 21, 1990. We
granted the prayer for a temporary restraining order

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effective February 20, 1990. One of the petitioners (in

G.R. No. 92047) likewise prayes for a writ of mandamus
to compel the respondents to fully disclose to the public
the basis of their decision to push through with the sale of
the Roppongi property inspire of strong public opposition
and to explain the proceedings which effectively prevent
the participation of Filipino citizens and entities in the
bidding process.
The oral arguments in G.R. No. 92013, Laurel v. Garcia,
et al. were heard by the Court on March 13, 1990. After
G.R. No. 92047, Ojeda v. Secretary Macaraig, et al. was
filed, the respondents were required to file a comment by
the Court's resolution dated February 22, 1990. The two
petitions were consolidated on March 27, 1990 when the
memoranda of the parties in the Laurel case were
deliberated upon.
The Court could not act on these cases immediately
because the respondents filed a motion for an extension
of thirty (30) days to file comment in G.R. No. 92047,
followed by a second motion for an extension of another
thirty (30) days which we granted on May 8, 1990, a third
motion for extension of time granted on May 24, 1990 and
a fourth motion for extension of time which we granted on
June 5, 1990 but calling the attention of the respondents
to the length of time the petitions have been pending.
After the comment was filed, the petitioner in G.R. No.
92047 asked for thirty (30) days to file a reply. We noted
his motion and resolved to decide the two (2) cases.
I
The subject property in this case is one of the four (4)
properties in Japan acquired by the Philippine
government under the Reparations Agreement entered
into with Japan on May 9, 1956, the other lots being:
(1)
The Nampeidai Property at 11-24 Nampeidaimachi, Shibuya-ku, Tokyo which has an area of
approximately 2,489.96 square meters, and is at present
the site of the Philippine Embassy Chancery;
(2)
The Kobe Commercial Property at 63 Naniwacho, Kobe, with an area of around 764.72 square meters
and categorized as a commercial lot now being used as a
warehouse and parking lot for the consulate staff; and
(3)
The Kobe Residential Property at 1-980-2
Obanoyama-cho, Shinohara, Nada-ku, Kobe, a
residential lot which is now vacant.
The properties and the capital goods and services
procured from the Japanese government for national
development projects are part of the indemnification to
the Filipino people for their losses in life and property and
their suffering during World War II.
The Reparations Agreement provides that reparations
valued at $550 million would be payable in twenty (20)
years in accordance with annual schedules of
procurements to be fixed by the Philippine and Japanese
governments (Article 2, Reparations Agreement). Rep.
Act No. 1789, the Reparations Law, prescribes the
national policy on procurement and utilization of
reparations and development loans. The procurements
are divided into those for use by the government sector
and those for private parties in projects as the then
National Economic Council shall determine. Those
intended for the private sector shall be made available by
sale to Filipino citizens or to one hundred (100%) percent
Filipino-owned entities in national development projects.

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ATTY. RUBEN TALAMPAS

The Roppongi property was acquired from the Japanese

government under the Second Year Schedule and listed
under the heading "Government Sector", through
Reparations Contract No. 300 dated June 27, 1958. The
Roppongi property consists of the land and building "for
the Chancery of the Philippine Embassy" (Annex M-D to
Memorandum for Petitioner, p. 503). As intended, it
became the site of the Philippine Embassy until the latter
was transferred to Nampeidai on July 22, 1976 when the
Roppongi building needed major repairs. Due to the
failure of our government to provide necessary funds, the
Roppongi property has remained undeveloped since that
time.
A proposal was presented to President Corazon C.
Aquino by former Philippine Ambassador to Japan, Carlos
J. Valdez, to make the property the subject of a lease
agreement with a Japanese firm - Kajima Corporation
which shall construct two (2) buildings in Roppongi and
one (1) building in Nampeidai and renovate the present
Philippine Chancery in Nampeidai. The consideration of
the construction would be the lease to the foreign
corporation of one (1) of the buildings to be constructed in
Roppongi and the two (2) buildings in Nampeidai. The
other building in Roppongi shall then be used as the
Philippine Embassy Chancery. At the end of the lease
period, all the three leased buildings shall be occupied
and used by the Philippine government. No change of
ownership or title shall occur. (See Annex "B" to Reply to
Comment) The Philippine government retains the title all
throughout the lease period and thereafter. However, the
government has not acted favorably on this proposal
which is pending approval and ratification between the
parties. Instead, on August 11, 1986, President Aquino
created a committee to study the disposition/utilization of
Philippine government properties in Tokyo and Kobe,
Japan through Administrative Order No. 3, followed by
Administrative Orders Numbered 3-A, B, C and D.
On July 25, 1987, the President issued Executive Order
No. 296 entitling non-Filipino citizens or entities to avail of
separations' capital goods and services in the event of
sale, lease or disposition. The four properties in Japan
including the Roppongi were specifically mentioned in the
first "Whereas" clause.
Amidst opposition by various sectors, the Executive
branch of the government has been pushing, with great
vigor, its decision to sell the reparations properties
starting with the Roppongi lot. The property has twice
been set for bidding at a minimum floor price of $225
million. The first bidding was a failure since only one
bidder qualified. The second one, after postponements,
has not yet materialized. The last scheduled bidding on
February 21, 1990 was restrained by his Court. Later, the
rules on bidding were changed such that the $225 million
floor price became merely a suggested floor price.
The Court finds that each of the herein petitions raises
distinct issues. The petitioner in G.R. No. 92013 objects
to the alienation of the Roppongi property to anyone while
the petitioner in G.R. No. 92047 adds as a principal
objection the alleged unjustified bias of the Philippine
government in favor of selling the property to non-Filipino
citizens and entities. These petitions have been
consolidated and are resolved at the same time for the
objective is the same - to stop the sale of the Roppongi
property.
The petitioner in G.R. No. 92013 raises the following
issues:
(1)
Can the Roppongi property and others of its kind
be alienated by the Philippine Government?; and

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(2)
Does the Chief Executive, her officers and
agents, have the authority and jurisdiction, to sell the
Roppongi property?
Petitioner Dionisio Ojeda in G.R. No. 92047, apart from
questioning the authority of the government to alienate
the Roppongi property assails the constitutionality of
Executive Order No. 296 in making the property available
for sale to non-Filipino citizens and entities. He also
questions the bidding procedures of the Committee on
the Utilization or Disposition of Philippine Government
Properties in Japan for being discriminatory against
Filipino citizens and Filipino-owned entities by denying
them the right to be informed about the bidding
requirements.
II
In G.R. No. 92013, petitioner Laurel asserts that the
Roppongi property and the related lots were acquired as
part of the reparations from the Japanese government for
diplomatic and consular use by the Philippine
government. Vice-President Laurel states that the
Roppongi property is classified as one of public dominion,
and not of private ownership under Article 420 of the Civil
Code (See infra).
The petitioner submits that the Roppongi property comes
under "property intended for public service" in paragraph
2 of the above provision. He states that being one of
public dominion, no ownership by any one can attach to
it, not even by the State. The Roppongi and related
properties were acquired for "sites for chancery,
diplomatic, and consular quarters, buildings and other
improvements" (Second Year Reparations Schedule). The
petitioner states that they continue to be intended for a
necessary service. They are held by the State in
anticipation of an opportune use. (Citing 3 Manresa 6566). Hence, it cannot be appropriated, is outside the
commerce of man, or to put it in more simple terms, it
cannot be alienated nor be the subject matter of contracts
(Citing Municipality of Cavite v. Rojas, 30 Phil. 20 [1915]).
Noting the non-use of the Roppongi property at the
moment, the petitioner avers that the same remains
property of public dominion so long as the government
has not used it for other purposes nor adopted any
measure constituting a removal of its original purpose or
use.
The respondents, for their part, refute the petitioner's
contention by saying that the subject property is not
governed by our Civil Code but by the laws of Japan
where the property is located. They rely upon the rule of
lex situs which is used in determining the applicable law
regarding the acquisition, transfer and devolution of the
title to a property. They also invoke Opinion No. 21,
Series of 1988, dated January 27, 1988 of the Secretary
of Justice which used the lex situs in explaining the
inapplicability of Philippine law regarding a property
situated in Japan.
The respondents add that even assuming for the sake of
argument that the Civil Code is applicable, the Roppongi
property has ceased to become property of public
dominion. It has become patrimonial property because it
has not been used for public service or for diplomatic
purposes for over thirteen (13) years now (Citing Article
422, Civil Code) and because the intention by the
Executive Department and the Congress to convert it to
private use has been manifested by overt acts, such as,
among others: (1) the transfer of the Philippine Embassy
to Nampeidai (2) the issuance of administrative orders for
the possibility of alienating the four government properties
in Japan; (3) the issuance of Executive Order No. 296; (4)
the enactment by the Congress of Rep. Act No. 6657 [the

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ATTY. RUBEN TALAMPAS

Comprehensive Agrarian Reform Law] on June 10, 1988

which contains a provision stating that funds may be
taken from the sale of Philippine properties in foreign
countries; (5) the holding of the public bidding of the
Roppongi property but which failed; (6) the deferment by
the Senate in Resolution No. 55 of the bidding to a future
date; thus an acknowledgment by the Senate of the
government's intention to remove the Roppongi property
from the public service purpose; and (7) the resolution of
this Court dismissing the petition in Ojeda v. Bidding
Committee, et al., G.R. No. 87478 which sought to enjoin
the second bidding of the Roppongi property scheduled
on March 30, 1989.
III
In G.R. No. 94047, petitioner Ojeda once more asks this
Court to rule on the constitutionality of Executive Order
No. 296. He had earlier filed a petition in G.R. No. 87478
which the Court dismissed on August 1, 1989. He now
avers that the executive order contravenes the
constitutional mandate to conserve and develop the
national patrimony stated in the Preamble of the 1987
Constitution. It also allegedly violates:
(1)
The reservation of the ownership and acquisition
of alienable lands of the public domain to Filipino citizens.
(Sections 2 and 3, Article XII, Constitution; Sections 22
and 23 of Commonwealth Act 141).itc-asl
(2)
The preference for Filipino citizens in the grant of
rights, privileges and concessions covering the national
economy and patrimony (Section 10, Article VI,
Constitution);
(3)
The protection given to Filipino enterprises
against unfair competition and trade practices;
(4)
The guarantee of the right of the people to
information on all matters of public concern (Section 7,
Article III, Constitution);
(5)
The prohibition against the sale to non-Filipino
citizens or entities not wholly owned by Filipino citizens of
capital goods received by the Philippines under the
Reparations Act (Sections 2 and 12 of Rep. Act No.
1789); and
(6)
The declaration of the state policy of full public
disclosure of all transactions involving public interest
(Section 28, Article III, Constitution).
Petitioner Ojeda warns that the use of public funds in the
execution of an unconstitutional executive order is a
misapplication of public funds He states that since the
details of the bidding for the Roppongi property were
never publicly disclosed until February 15, 1990 (or a few
days before the scheduled bidding), the bidding
guidelines are available only in Tokyo, and the
accomplishment of requirements and the selection of
qualified bidders should be done in Tokyo, interested
Filipino citizens or entities owned by them did not have
the chance to comply with Purchase Offer Requirements
on the Roppongi. Worse, the Roppongi shall be sold for a
minimum price of $225 million from which price capital
gains tax under Japanese law of about 50 to 70% of the
floor price would still be deducted.
IV
The petitioners and respondents in both cases do not
dispute the fact that the Roppongi site and the three
related properties were through reparations agreements,
that these were assigned to the government sector and
that the Roppongi property itself was specifically

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designated under the Reparations Agreement to house

the Philippine Embassy.
The nature of the Roppongi lot as property for public
service is expressly spelled out. It is dictated by the terms
of the Reparations Agreement and the corresponding
contract of procurement which bind both the Philippine
government and the Japanese government.
There can be no doubt that it is of public dominion unless
it is convincingly shown that the property has become
patrimonial. This, the respondents have failed to do.
As property of public dominion, the Roppongi lot is
outside the commerce of man. It cannot be alienated. Its
ownership is a special collective ownership for general
use and enjoyment, an application to the satisfaction of
collective needs, and resides in the social group. The
purpose is not to serve the State as a juridical person, but
the citizens; it is intended for the common and public
welfare and cannot be the object of appropration. (Taken
from 3 Manresa, 66-69; cited in Tolentino, Commentaries
on the Civil Code of the Philippines, 1963 Edition, Vol. II,
p. 26).
The applicable provisions of the Civil Code are:
ART. 419. Property is either of public dominion or of
private ownership.
ART. 420. The following things are property of public
dominion
(1)
Those intended for public use, such as roads,
canals, rivers, torrents, ports and bridges constructed by
the State, banks shores roadsteads, and others of similar
character;
(2)
Those which belong to the State, without being
for public use, and are intended for some public service
or for the development of the national wealth.
ART. 421.
All other property of the State, which is
not of the character stated in the preceding article, is
patrimonial property.
The Roppongi property is correctly classified under
paragraph 2 of Article 420 of the Civil Code as property
belonging to the State and intended for some public
service.
Has the intention of the government regarding the use of
the property been changed because the lot has been Idle
for some years? Has it become patrimonial?
The fact that the Roppongi site has not been used for a
long time for actual Embassy service does not
automatically convert it to patrimonial property. Any such
conversion happens only if the property is withdrawn from
public use (Cebu Oxygen and Acetylene Co. v. Bercilles,
66 SCRA 481 [1975]). A property continues to be part of
the public domain, not available for private appropriation
or ownership until there is a formal declaration on the part
of the government to withdraw it from being such (Ignacio
v. Director of Lands, 108 Phil. 335 [1960]).
The respondents enumerate various pronouncements by
concerned public officials insinuating a change of
intention. We emphasize, however, that an abandonment
of the intention to use the Roppongi property for public
service and to make it patrimonial property under Article
422 of the Civil Code must be definite Abandonment
cannot be inferred from the non-use alone specially if the
non-use was attributable not to the government's own
deliberate and indubitable will but to a lack of financial

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ATTY. RUBEN TALAMPAS

support to repair and improve the property (See Heirs of

Felino Santiago v. Lazaro, 166 SCRA 368 [1988]).
Abandonment must be a certain and positive act based
on correct legal premises.
A mere transfer of the Philippine Embassy to Nampeidai
in 1976 is not relinquishment of the Roppongi property's
original purpose. Even the failure by the government to
repair the building in Roppongi is not abandonment since
as earlier stated, there simply was a shortage of
government funds. The recent Administrative Orders
authorizing a study of the status and conditions of
government properties in Japan were merely directives
for investigation but did not in any way signify a clear
intention to dispose of the properties.
Executive Order No. 296, though its title declares an
"authority to sell", does not have a provision in its text
expressly authorizing the sale of the four properties
procured from Japan for the government sector. The
executive order does not declare that the properties lost
their public character. It merely intends to make the
properties available to foreigners and not to Filipinos
alone in case of a sale, lease or other disposition. It
merely eliminates the restriction under Rep. Act No. 1789
that reparations goods may be sold only to Filipino
citizens and one hundred (100%) percent Filipino-owned
entities. The text of Executive Order No. 296 provides:
Section 1.
The provisions of Republic Act No. 1789,
as amended, and of other laws to the contrary
notwithstanding, the above-mentioned properties can be
made available for sale, lease or any other manner of
disposition to non-Filipino citizens or to entities owned by
non-Filipino citizens.
Executive Order No. 296 is based on the wrong premise
or assumption that the Roppongi and the three other
properties were earlier converted into alienable real
properties. As earlier stated, Rep. Act No. 1789
differentiates the procurements for the government sector
and the private sector (Sections 2 and 12, Rep. Act No.
1789). Only the private sector properties can be sold to
end-users who must be Filipinos or entities owned by
Filipinos. It is this nationality provision which was
amended by Executive Order No. 296.
Section 63 (c) of Rep. Act No. 6657 (the CARP Law)
which provides as one of the sources of funds for its
implementation, the proceeds of the disposition of the
properties of the Government in foreign countries, did not
withdraw the Roppongi property from being classified as
one of public dominion when it mentions Philippine
properties abroad. Section 63 (c) refers to properties
which are alienable and not to those reserved for public
use or service. Rep Act No. 6657, therefore, does not
authorize the Executive Department to sell the Roppongi
property. It merely enumerates possible sources of future
funding to augment (as and when needed) the Agrarian
Reform Fund created under Executive Order No. 299.
Obviously any property outside of the commerce of man
cannot be tapped as a source of funds.
The respondents try to get around the public dominion
character of the Roppongi property by insisting that
Japanese law and not our Civil Code should apply.
It is exceedingly strange why our top government officials,
of all people, should be the ones to insist that in the sale
of extremely valuable government property, Japanese law
and not Philippine law should prevail. The Japanese law its coverage and effects, when enacted, and exceptions
to its provision is not presented to the Court It is simply
asserted that the lex loci rei sitae or Japanese law should

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apply without stating what that law provides. It is a ed on

faith that Japanese law would allow the sale.
We see no reason why a conflict of law rule should apply
when no conflict of law situation exists. A conflict of law
situation arises only when: (1) There is a dispute over the
title or ownership of an immovable, such that the capacity
to take and transfer immovables, the formalities of
conveyance, the essential validity and effect of the
transfer, or the interpretation and effect of a conveyance,
are to be determined (See Salonga, Private International
Law, 1981 ed., pp. 377-383); and (2) A foreign law on
land ownership and its conveyance is asserted to conflict
with a domestic law on the same matters. Hence, the
need to determine which law should apply.
In the instant case, none of the above elements exists.
The issues are not concerned with validity of ownership
or title. There is no question that the property belongs to
the Philippines. The issue is the authority of the
respondent officials to validly dispose of property
belonging to the State. And the validity of the procedures
adopted to effect its sale. This is governed by Philippine
Law. The rule of lex situs does not apply.
The assertion that the opinion of the Secretary of Justice
sheds light on the relevance of the lex situs rule is
misplaced. The opinion does not tackle the alienability of
the real properties procured through reparations nor the
existence in what body of the authority to sell them. In
discussing who are capable of acquiring the lots, the
Secretary merely explains that it is the foreign law which
should determine who can acquire the properties so that
the constitutional limitation on acquisition of lands of the
public domain to Filipino citizens and entities wholly
owned by Filipinos is inapplicable. We see no point in
belaboring whether or not this opinion is correct. Why
should we discuss who can acquire the Roppongi lot
when there is no showing that it can be sold?
The subsequent approval on October 4, 1988 by
President Aquino of the recommendation by the
investigating committee to sell the Roppongi property was
premature or, at the very least, conditioned on a valid
change in the public character of the Roppongi property.
Moreover, the approval does not have the force and effect
of law since the President already lost her legislative
powers. The Congress had already convened for more
than a year.
Assuming for the sake of argument, however, that the
Roppongi property is no longer of public dominion, there
is another obstacle to its sale by the respondents.
There is no law authorizing its conveyance.
Section 79 (f) of the Revised Administrative Code of 1917
provides
Section 79 (f ) Conveyances and contracts to which the
Government is a party. In cases in which the
Government of the Republic of the Philippines is a party
to any deed or other instrument conveying the title to real
estate or to any other property the value of which is in
excess of one hundred thousand pesos, the respective
Department Secretary shall prepare the necessary
papers which, together with the proper recommendations,
shall be submitted to the Congress of the Philippines for
approval by the same. Such deed, instrument, or contract
shall be executed and signed by the President of the
Philippines on behalf of the Government of the
Philippines unless the Government of the Philippines
unless the authority therefor be expressly vested by law
in another officer. (Emphasis supplied)

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ATTY. RUBEN TALAMPAS

The requirement has been retained in Section 48, Book I

of the Administrative Code of 1987 (Executive Order No.
292).
SEC. 48.
Official Authorized to Convey Real
Property. Whenever real property of the Government is
authorized by law to be conveyed, the deed of
conveyance shall be executed in behalf of the
government by the following:
(1)
For property belonging to and titled in the name
of the Republic of the Philippines, by the President,
unless the authority therefor is expressly vested by law in
another officer.
(2)
For property belonging to the Republic of the
Philippines but titled in the name of any political
subdivision or of any corporate agency or instrumentality,
by the executive head of the agency or instrumentality.
(Emphasis supplied)
It is not for the President to convey valuable real property
of the government on his or her own sole will. Any such
conveyance must be authorized and approved by a law
enacted by the Congress. It requires executive and
legislative concurrence.
Resolution No. 55 of the Senate dated June 8, 1989,
asking for the deferment of the sale of the Roppongi
property does not withdraw the property from public
domain much less authorize its sale. It is a mere
resolution; it is not a formal declaration abandoning the
public character of the Roppongi property. In fact, the
Senate Committee on Foreign Relations is conducting
hearings on Senate Resolution No. 734 which raises
serious policy considerations and calls for a fact-finding
investigation of the circumstances behind the decision to
sell the Philippine government properties in Japan.
The resolution of this Court in Ojeda v. Bidding
Committee, et al., supra, did not pass upon the
constitutionality of Executive Order No. 296. Contrary to
respondents' assertion, we did not uphold the authority of
the President to sell the Roppongi property. The Court
stated that the constitutionality of the executive order was
not the real issue and that resolving the constitutional
question was "neither necessary nor finally determinative
of the case." The Court noted that "[W]hat petitioner
ultimately questions is the use of the proceeds of the
disposition of the Roppongi property." In emphasizing that
"the decision of the Executive to dispose of the Roppongi
property to finance the CARP ... cannot be questioned" in
view of Section 63 (c) of Rep. Act No. 6657, the Court did
not acknowledge the fact that the property became
alienable nor did it indicate that the President was
authorized to dispose of the Roppongi property. The
resolution should be read to mean that in case the
Roppongi property is re-classified to be patrimonial and
alienable by authority of law, the proceeds of a sale may
be used for national economic development projects
including the CARP.
Moreover, the sale in 1989 did not materialize. The
petitions before us question the proposed 1990 sale of
the Roppongi property. We are resolving the issues raised
in these petitions, not the issues raised in 1989.
Having declared a need for a law or formal declaration to
withdraw the Roppongi property from public domain to
make it alienable and a need for legislative authority to
allow the sale of the property, we see no compelling
reason to tackle the constitutional issues raised by
petitioner Ojeda.

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The Court does not ordinarily pass upon constitutional

questions unless these questions are properly raised in
appropriate cases and their resolution is necessary for
the determination of the case (People v. Vera, 65 Phil. 56
[1937]). The Court will not pass upon a constitutional
question although properly presented by the record if the
case can be disposed of on some other ground such as
the application of a statute or general law (Siler v.
Louisville and Nashville R. Co., 213 U.S. 175, [1909],
Railroad Commission v. Pullman Co., 312 U.S. 496
[1941]).
The petitioner in G.R. No. 92013 states why the Roppongi
property should not be sold:
The Roppongi property is not just like any piece of
property. It was given to the Filipino people in reparation
for the lives and blood of Filipinos who died and suffered
during the Japanese military occupation, for the suffering
of widows and orphans who lost their loved ones and
kindred, for the homes and other properties lost by
countless Filipinos during the war. The Tokyo properties
are a monument to the bravery and sacrifice of the
Filipino people in the face of an invader; like the
monuments of Rizal, Quezon, and other Filipino heroes,
we do not expect economic or financial benefits from
them. But who would think of selling these monuments?
Filipino honor and national dignity dictate that we keep
our properties in Japan as memorials to the countless
Filipinos who died and suffered. Even if we should
become paupers we should not think of selling them. For
it would be as if we sold the lives and blood and tears of
our countrymen. (Rollo- G.R. No. 92013, p.147)
The petitioner in G.R. No. 92047 also states:
Roppongi is no ordinary property. It is one ceded by the
Japanese government in atonement for its past
belligerence for the valiant sacrifice of life and limb and
for deaths, physical dislocation and economic devastation
the whole Filipino people endured in World War II.
It is for what it stands for, and for what it could never bring
back to life, that its significance today remains undimmed,
inspire of the lapse of 45 years since the war ended,
inspire of the passage of 32 years since the property
passed on to the Philippine government.
Roppongi is a reminder that cannot should not be
dissipated ... (Rollo-92047, p. 9)
It is indeed true that the Roppongi property is valuable not
so much because of the inflated prices fetched by real
property in Tokyo but more so because of its symbolic
value to all Filipinos veterans and civilians alike.
Whether or not the Roppongi and related properties will
eventually be sold is a policy determination where both
the President and Congress must concur. Considering the
properties' importance and value, the laws on conversion
and disposition of property of public dominion must be
faithfully followed.
WHEREFORE, IN VIEW OF THE FOREGOING, the
petitions are GRANTED. A writ of prohibition is issued
enjoining the respondents from proceeding with the sale
of the Roppongi property in Tokyo, Japan. The February
20, 1990 Temporary Restraining Order is made
PERMANENT.
SO ORDERED.

FEDERICO
GEMINIANO,
MARIA
GEMINIANO,
ERNESTO GEMINIANO, ASUNCION GEMINIANO,
LARRY GEMINIANO, and MARLYN GEMINIANO,
petitioners, vs. COURT OF APPEALS, DOMINADOR
NICOLAS, and MARY A. NICOLAS, respondents.
DECISION
DAVIDE, JR., J.:
This petition for review on certiorari has its origins in Civil
Case No. 9214 of Branch 3 of the Municipal Trial Court in
Cities (MTCC) in Dagupan City for unlawful detainer and
damages. The petitioners ask the Court to set aside the
decision of the Court of Appeals affirming the decision of
Branch 40 of the Regional Trial Court (RTC) of Dagupan
City, which, in turn, reversed the MTCC; ordered the
petitioners to reimburse the private respondents the value
of the house in question and other improvements; and
allowed the latter to retain the premises until
reimbursement was made.
It appears that Lot No. 3765-B-1 containing an area of
314 square meters was originally owned by the
petitioners' mother, Paulina Amado vda. de Geminiano.
On a 12-square-meter portion of that lot stood the
petitioners' unfinished bungalow, which the petitioners
sold in November 1978 to the private respondents for the
sum of P6,000.00, with an alleged promise to sell to the
latter that portion of the lot occupied by the house.
Subsequently, the petitioners' mother executed a contract
of lease over a 126 square-meter portion of the lot,
including that portion on which the house stood, in favor
of the private respondents for P40.00 per month for a
period of seven years commencing on 15 November
1978.[1] The private respondents then introduced
additional improvements and registered the house in their
names. After the expiration of the lease contract in
November 1985, however, the petitioners' mother refused
to accept the monthly rentals.
It turned out that the lot in question was the subject of a
suit, which resulted in its acquisition by one Maria Lee in

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ATTY. RUBEN TALAMPAS

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1972. In 1982, Lee sold the lot to Lily Salcedo, who in

turn sold it in 1984 to the spouses Agustin and Ester
Dionisio.
On 14 February 1992, the Dionisio spouses executed a
Deed of Quitclaim over the said property in favor of the
petitioners.[2] As such, the lot was registered in the
latter's names.[3]
On 9 February 1993, the petitioners sent, via registered
mail, a letter addressed to private respondent Mary
Nicolas demanding that she vacate the premises and pay
the rentals in arrears within twenty days from notice.[4]
Upon failure of the private respondents to heed the
demand, the petitioners filed with the MTCC of Dagupan
City a complaint for unlawful detainer and damages.
During the pre-trial conference, the parties agreed to
confine the issues to: (1) whether there was an implied
renewal of the lease which expired in November 1985; (2)
whether the lessees were builders in good faith and
entitled to reimbursement of the value of the house and
improvements; and (3) the value of the house.
The parties then submitted their respective position
papers and the case was heard under the Rule on
Summary Procedure.
On the first issue, the court held that since the petitioners'
mother was no longer the owner of the lot in question at
the time the lease contract was executed in 1978, in view
of its acquisition by Maria Lee as early as 1972, there
was no lease to speak of, much less, a renewal thereof.
And even if the lease legally existed, its implied renewal
was not for the period stipulated in the original contract,
but only on a month-to-month basis pursuant to Article
1687 of the Civil Code. The refusal of the petitioners'
mother to accept the rentals starting January 1986 was
then a clear indication of her desire to terminate the
monthly lease. As regards the petitioners' alleged failed
promise to sell to the private respondents the lot occupied
by the house, the court held that such should be litigated
in a proper case before the proper forum, not an
ejectment case where the only issue was physical
possession of the property.
The court resolved the second issue in the negative,
holding that Articles 448 and 546 of the Civil Code, which
allow possessors in good faith to recover the value of
improvements and retain the premises until reimbursed,
did not apply to lessees like the private respondents,
because the latter knew that their occupation of the
premises would continue only during the life of the lease.
Besides, the rights of the private respondents were
specifically governed by Article 1678, which allows
reimbursement of up to one-half of the value of the useful
improvements, or removal of the improvements should
the lessor refuse to reimburse.
On the third issue, the court deemed as conclusive the
private respondents' allegation that the value of the house
and improvements was P180,000.00, there being no
controverting evidence presented.
The trial court thus ordered the private respondents to
vacate the premises, pay the petitioners P40.00 a month
as reasonable compensation for their stay thereon from
the filing of the complaint on 14 April 1993 until they
vacated, and to pay the sum of P1,000.00 as attorney's
fees, plus costs.[5]
On appeal by the private respondents, the RTC of
Dagupan City reversed the trial court's decision and
rendered a new judgment: (1) ordering the petitioners to

PROPERTY CASES

ATTY. RUBEN TALAMPAS

reimburse the private respondents for the value of the

house and improvements in the amount of P180,000.00
and to pay the latter P10,000.00 as attorney's fees and
P2,000.00 as litigation expenses; and (2) allowing the
private respondents to remain in possession of the
premises until they were fully reimbursed for the value of
the house.[6] It ruled that since the private respondents
were assured by the petitioners that the lot they leased
would eventually be sold to them, they could be
considered builders in good faith, and as such, were
entitled to reimbursement of the value of the house and
improvements with the right of retention until
reimbursement had been made.
On appeal, this time by the petitioners, the Court of
Appeals affirmed the decision of the RTC[7] and denied[8]
the petitioners' motion for reconsideration. Hence, the
present petition.
The Court is confronted with the issue of which provision
of law governs the case at bench: Article 448 or Article
1678 of the Civil Code? The said articles read as follows:
Art. 448. The owner of the land on which anything has
been built, sown or planted in good faith, shall have the
right to appropriate as his own the works, sowing or
planting, after payment of the indemnity provided for in
articles 546 and 548, or to oblige the one who built or
planted to pay the price of the land, and the one who
sowed, the proper rent. However, the builder or planter
cannot be obliged to buy the land if its value is
considerably more than that of the building or trees. In
such case, he shall pay reasonable rent, if the owner of
the land does not choose to appropriate the building or
trees after proper indemnity. The parties shall agree upon
the terms of the lease and in case of disagreement, the
court shall fix the terms thereof.
xxx xxx xxx
Art. 1678. If the lessee makes, in good faith, useful
improvements which are suitable to the use for which the
lease is intended, without altering the form or substance
of the property leased, the lessor upon the termination of
the lease shall pay the lessee one-half of the value of the
improvements at that time. Should the lessor refuse to
reimburse said amount, the lessee may remove the
improvements, even though the principal thing may suffer
damage thereby. He shall not, however, cause any more
impairment upon the property leased than is necessary.
With regard to ornamental expenses, the lessee shall not
be entitled to any reimbursement, but he may remove the
ornamental objects, provided no damage is caused to the
principal thing, and the lessor does not choose to retain
them by paying their value at the time the lease is
extinguished.
The crux of the said issue then is whether the private
respondents are builders in good faith or mere lessees.
The private respondents claim they are builders in good
faith, hence, Article 448 of the Civil Code should apply.
They rely on the lack of title of the petitioners' mother at
the time of the execution of the contract of lease, as well
as the alleged assurance made by the petitioners that the
lot on which the house stood would be sold to them.
It has been said that while the right to let property is an
incident of title and possession, a person may be a lessor
and occupy the position of a landlord to the tenant
although he is not the owner of the premises let.[9] After
all, ownership of the property is not being transferred,[10]
only the temporary use and enjoyment thereof.[11]

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In this case, both parties admit that the land in question

was originally owned by the petitioners' mother. The land
was allegedly acquired later by one Maria Lee by virtue of
an extrajudicial foreclosure of mortgage. Lee, however,
never sought a writ of possession in order that she gain
possession of the property in question.[12] The
petitioners' mother therefore remained in possession of
the lot.
It is undisputed that the private respondents came into
possession of a 126 square-meter portion of the said lot
by virtue of a contract of lease executed by the
petitioners' mother in their favor. The juridical relation
between the petitioners' mother as lessor, and the private
respondents as lessees, is therefore well-established,
and carries with it a recognition of the lessor's title.[13]
The private respondents, as lessees who had undisturbed
possession for the entire term under the lease, are then
estopped to deny their landlord's title, or to assert a better
title not only in themselves, but also in some third person
while they remain in possession of the leased premises
and until they surrender possession to the landlord.[14]
This estoppel applies even though the lessor had no title
at the time the relation of lessor and lessee was created,
[15] and may be asserted not only by the original lessor,
but also by those who succeed to his title.[16]
Being mere lessees, the private respondents knew that
their occupation of the premises would continue only for
the life of the lease. Plainly, they cannot be considered as
possessors nor builders in good faith.[17]
In a plethora of cases,[18] this Court has held that Article
448 of the Civil Code, in relation to Article 546 of the
same Code, which allows full reimbursement of useful
improvements and retention of the premises until
reimbursement is made, applies only to a possessor in
good faith, i.e., one who builds on land with the belief that
he is the owner thereof. It does not apply where one's
only interest is that of a lessee under a rental contract;
otherwise, it would always be in the power of the tenant to
"improve" his landlord out of his property.

Article 1678 of the Civil Code which allows

reimbursement to the extent of one-half of the value of
the useful improvements.
It must be stressed, however, that the right to indemnity
under Article 1678 of the Civil Code arises only if the
lessor opts to appropriate the improvements. Since the
petitioners refused to exercise that option,[20] the private
respondents cannot compel them to reimburse the onehalf value of the house and improvements. Neither can
they retain the premises until reimbursement is made.
The private respondents' sole right then is to remove the
improvements without causing any more impairment upon
the property leased than is necessary.[21]
WHEREFORE, judgment is hereby rendered GRANTING
the instant petition; REVERSING and SETTING ASIDE
the decision of the Court of Appeals of 27 January 1995
in CA-G.R. SP No. 34337; and REINSTATING the
decision of Branch 3 of the Municipal Trial Court in Cities
of Dagupan City in Civil Case No. 9214 entitled "Federico
Geminiano, et al. vs. Dominador Nicolas, et al."
Costs against the private respondents.
SO ORDERED.

G.R. No. L-28721

October 5, 1928

MARTIN MENDOZA and NATALIO ENRIQUEZ, plaintiffsappellees,

vs.
MANUEL DE GUZMAN, defendant-appellant.
MAX B. SOLIS, intervenor-appellant.
Juan S. Rustia for appellants.
Godofredo Reyes for appellees.

MALCOLM, J.:
Anent the alleged promise of the petitioners to sell the lot
occupied by the private respondents' house, the same
was not substantiated by convincing evidence. Neither
the deed of sale over the house nor the contract of lease
contained an option in favor of the respondent spouses to
purchase the said lot. And even if the petitioners indeed
promised to sell, it would not make the private
respondents possessors or builders in good faith so as to
be covered by the provisions of Article 448 of the Civil
Code. The latter cannot raise the mere expectancy of
ownership of the aforementioned lot because the alleged
promise to sell was not fulfilled nor its existence even
proven. The first thing that the private respondents should
have done was to reduce the alleged promise into writing,
because under Article 1403 of the Civil Code, an
agreement for the sale of real property or an interest
therein is unenforceable, unless some note or
memorandum thereof be produced. Not having taken any
steps in order that the alleged promise to sell may be
enforced, the private respondents cannot bank on that
promise and profess any claim nor color of title over the
lot in question.
There is no need to apply by analogy the provisions of
Article 448 on indemnity as was done in Pecson vs. Court
of Appeals,[19] because the situation sought to be
avoided and which would justify the application of that
provision, is not present in this case. Suffice it to say, "a
state of forced co-ownership" would not be created
between the petitioners and the private respondents. For,
as correctly pointed out by the petitioners, the rights of
the private respondents as lessees are governed by

PROPERTY CASES

ATTY. RUBEN TALAMPAS

This case calls for the application of articles 361, 435,

and 454 of the Civil Code to the proven facts.
On November 6, 1916, Leandra Solis and her husband
Bernardo Solis brought an action in the Court of First
Instance of Tayabas against Martin Mendoza for the
recovery of a certain piece of land. Judgment was
rendered in that case absolving Mendoza from the
complaint, and this judgment was subsequently affirmed
by the Supreme Court. 1 When the case was remanded
to the court of origin, the trial judge issued an order
requiring the provincial sheriff immediately to dissolve the
preliminary writ of injunction and to put Mendoza in the
possession of the land. By virtue of this order, Mendoza
was in fact put in possession of the property.
In the cadastral proceedings of the municipality of
Sariaya, Tayabas, the piece of land above-mentioned was
identified as lot No. 687. In the decision rendered in the
cadastral case, this lot was adjudicated in favor of Martin
Mendoza and Natalio Enriquez in equal parts pro indiviso
subject to the right of retention on the part of Manuel de
Guzman until he shall have been indemnified for the
improvements existing on the land. By virtue of this
judgment, De Guzman presented a motion requesting the
issuance of a writ of possession for lot No. 687 in his
favor which was granted on June 25, 1924. From the time
Leandra Solis and Bernardo Solis, as well as Manuel de
Guzman who was working on the land, were ejected
therefrom, Martin Mendoza possessed it until June 25,
1924, when de Guzman obtained the writ of possession

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above- mentioned. Since then De Guzman has had

dominion over the land.
Being unable to come to an agreement as to the amount
which should be allowed for the improvements made on
the land, Martin Mendoza and Natalio Enriquez began an
action requesting the court to (a) fix the value of the
necessary and useful expenses incurred by Manuel de
Guzman in introducing the improvements; (b) require the
defendant to render an accounting of the fruits received
by him and order that the value of the fruits be applied to
the payment of the necessary and useful expenses; and
(c) decree the restitution of the possession to the
plaintiffs. To the complaint, the defendant filed an answer
in the form of a general denial with special defenses and
appended a counter-claim and crosscomplaint, in which a
total of P6,000 was asked. During the pendency of the
case, Bernardo Solis, or Max. B. Solis, one of the persons
who was ejected from the land, asked leave to intervene,
alleging, among other things, that De Guzman, in
consideration of the sum of P5,000, had transferred all his
rights in the improvements and in the lot to him with the
exception of two hundred coconut trees. This petition was
granted by the trial court.
When the case was called for trial, the parties entered
into the follwing stipulation:
1. That the plaintiffs are the owners and proprietors of the
land described in the second paragraph of the complaint.
2. That a decree of registration has been issued on said
land in the terms set forth in paragraph 3 of the complaint.
3. That the defendant Manuel de Guzman is the one who
has been in possession and enjoyment of the land from
June 25, 1924, up to the present time by virtue of a writ of
possession obtained by him from the Court of Land
Registration.
4. That the defendant has made improvements on said
land be planting coconut trees thereon.
5. That the plaintiff Martin Mendoza is the one who has
been in possession and enjoyment of said property and
its improvements since December 16, 1916, by virtue of a
writ of possession in civil case No. 356 until said
pssession was transferred to the defendant Manuel de
Guzman.
6. That from March 20, 1920, the plaintiff Natalio Enriquez
has been in possession and enjoyment of a portion of the
land, the subject matter of the complaint herein, by virtue
of a deed of sale executed in his favor by Attorney
Agustin Alvarez, who, in turn, acquired it from the other
plaintiff Martin Mendoza, until June 25, 1924.
The parties desire to submit, as they do submit, under
this stipulation of facts the following questions:
(a) The amount of the indemnity to be paid to the
defendant for the improvements made by him on said lot
and the basis upon which said amount shall be fixed.
(b) Whether or not the defendant is obliged to render an
account of the fruits received by him from June 25, 1924,
until the improvements are delivered after same have
been paid for. 1awph!l.net
(c) Whether the value of said fruits and products received
by the defendant shall be applied to the indemnity to
which he is entitled, or whether said defendant is obliged
to deliver to the plaintiffs the remainder in case of excess.

PROPERTY CASES

ATTY. RUBEN TALAMPAS

(d) Whether or not the defendant has the right to be paid

by the plaintiffs in whole or in part for the value of the
fruits received by Martin Mendoza and Natalio Enriquez
from the respective dates that they were in possession
and enjoyment of the land until June 25, 1924.
The parties at the same time that they submit to the court
for decision the questions presented in the above
stipulation reserve to themselves, whatever said decision
may be, the right to present later their evidence in support
of their respective views with respect to the amount of the
indemnity.
After the preliminary questions have been decided, the
parties request that commissioners be appointed to
receive said evidence with respect to the amount of the
indemnity in accordance with the views of both parties.
The trial court resolved the questions presented by
holding (1) that in accordance with the provisions of
articles 435 and 454 in relation with article 361 of the Civil
Code, the value of the "indemnization" to be paid to the
defendant should be fixed according to the necessary and
useful expenses incurred by him in introducing "las
plantaciones en cuestion"; (2) that the plaintiffs as the
owner of the property have the right to make their own
"las plantaciones hechas por el demandado" upon
payment in the form indicated in No. 1, the defendant
having the right to retain the land until the expenditures
have been refunded; (3) that the defendant is obliged to
render a detail and just account of the fruits and other
profits received by him from the property for their due
application; and (4) that the value of the fruits received by
the defendant should first be applied to the payment of
the "indemnizacion," and in that it exceeds the value of
the "indemnizacion," the excess shall be returned to the
plaintiffs. With respect to the last question as to whether
or not the plaintiffs are obliged to return to the defendant
the value of the fruits received by them before the
defendant took possession of the land, the trial court
abstained from making any pronouncement for the
reason that the circumstances under which the plaintiffs
acquired possession and the defendant again acquired it
were not before him, the parties needing to submit their
evidence with respect to this point.
At the trial which followed and at the instance of the
parties, two commissioners were appinted with
instructions to inspect the land and to count the number
of coconut trees planted thereon, determining the number
of fruit-bearing trees and those that are not fruit-bearing
as well as the condition of the same. After trial, Judge of
First Instance Gloria rendered judgment declaring (a) that
the defendant Manuel de Guzman and the intervenor
Bernardo Solis have the right to collect from the plaintiffs
Martin Mendoza and Natalio Enriquez the sum of P2,046
as compensation for the necessary and useful
expenditures in the proportion of 20 per cent for Manuel
de Guzman and 80 per cent for Bernardo Solis; and (b)
that Manuel de Guzman and Bernardo Solis are obliged
to pay to the plaintiffs the sum of P666.93 per annum
from June 25, 1924, one-fifth of this amount to be paid by
Manuel de Guzman and the other four-fifths by Bernardo
Solis. As on the date when this judgment was rendered,
that is on September 23, 1927, the amount that the
plaintiffs were required to pay to the defendant and
intervenor exceeded the amount that the latter were to
pay the former, the defendant and intervenor were
ordered to deliver the land and its improvement as soon
as the plaintiffs have paid the difference, without special
pronouncement as to costs.
The appeal of the defendant and intervenor is based on
fourteen assigned errors relating to both questions of fact
and of law. The question of fact mainly concerns the

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amount to be paid as "indemnizacion" in the form of

necessary and useful expenditures incurred by the
defendant. The question of law mainly concerns the
interpretation of articles 361, 453, and 454 of the Civil
Code. Counsel for the appellants has presented a learned
brief divided into three chapters. Counsel for the
appellees has countered with an equally helpful brief in
which the fourteen assigned errors are reduced for
purposes of arguments to four fundamental questions. It
would not be profitable and it is not necessary to follow
opposing counsel into all of their refinements of fact and
law.
As to the facts, the findings of the trial judge should be
given effect. An examination of the evidence shows that
these findings are fully substantiated. Our only doubt has
been as to the just value for each coconut tree now found
on the land. However, everything considered, we have at
last determined that we would not be justified in changing
the value per tree of P2 as fixed in the trial court. With
respect to the fruits received by the defendant while the
land was in his possession, the finding in the trial court is
correct.
With the facts as above indicated, little time need be
taken to discuss the points of law. Article 361 of the Civil
Code in the original Spanish text uses the word
"indemnizacion." However one may speculate as to the
true meaning of the term "indemnizacion" whether
correctly translated as "compensation" or "indemnity," the
amount of the "indemnizacion" is the amount of the
expenditures mentioned in articles 453 and 454 of the
Civil Code, which in the present case is the amount of the
necessary and useful expenditures incurred by the
defendant. Necessary expenses have been variously
described by the Spanish commentators as those made
for the preservation of the thing (4 Manresa's
Comentarios al Codigo Civil, p. 258); as those without
which the thing would deteriorate or be lost (Scaevola's
Comentarios al Codigo Civil, p.408); as those that
augment the income of the things upon which they are
expanded (4 Manresa's Comentarios al Codigo Civil, p.
261; 8 Scaevola's Comentarios al Codigo Civil, p. 416).
Among the necessary expenditures are those incurred for
cultivation, production, upkeep, etc. (4 Manresa's
Comentarios al Codigo Civil, p. 257). Here the plaintiffs
have chosen to take the improvements introduced on the
land and are disposed to pay the amount of the
necessary and useful expenses incurred by the
defendant. Inasmuch as the retentionist, who is not
exactly a posessor in good faith with in the meaning of
the law, seeks to be reimbursed for the necessary and
useful expenditures, it is only just that he should account
to the owners of the estate for any rents, fruits, or crops
he has gathered from it.
In brief, therefore, and with special reference to the
decision appealed from, the errors assigned on appeal,
and the argument of counsel as addressed to the
decision in the lower court and the assignment of errors,
we may say that we are content to make the findings of
fact and law of Judge Gloria in the lower court the
findings of fact and law in the appellate court.
Based on the foregoing considerations, the judgment
appealed from will be affirmed, with the costs of this
instance against the appellants.

PROPERTY CASES

ATTY. RUBEN TALAMPAS

DESAMPARADO VDA. DE NAZARENO and LETICIA

NAZARENO TAPIA, petitioners, vs. THE COURT OF
APPEALS, MR. & MRS. JOSE SALASALAN, MR. &
MRS. LEO RABAYA, AVELINO LABIS, HON. ROBERTO
G. HILARIO, ROLLEO I. IGNACIO, ALBERTO M.
GILLERA and HON. ABELARDO G. PALAD, JR., in their
official and/or private capacities, respondents.
SYLLABUS
1. CIVIL LAW; OWNERSHIP; RIGHTS OF ACCESSION
WITH RESPECT TO IMMOVABLE PROPERTY;
ARTICLE 457; REQUISITES.- In the case of Meneses vs.
CA, this Court held that accretion, as a mode of acquiring
property under Art. 457 of the Civil Code, requires the
concurrence of these requisites: (1) that the deposition of
soil or sediment be gradual and imperceptible; (2) that it
be the result of the action of the waters of the river (or
sea); and (3) that the land where accretion takes place is
adjacent to the banks of rivers (or the sea coast). These
are called the rules on alluvion which if present in a case,
give to the owners of lands adjoining the banks of rivers
or streams any accretion gradually received from the
effects of the current of waters.
2. ID.; ID.; ID.; ID.; ID.; NOT PRESENT IN CASE AT
BAR.- Where the accretion was formed by the dumping of
boulders, soil and other filling materials on portions of the
Balacanas Creek and the Cagayan River bounding
petitioner's land, it cannot be claimed that the
accumulation was gradual and imperceptible, resulting
from the action of the waters or the current of the creek
and the river. In Hilario vs. City of Manila, this Court held
that the word current indicates the participation of the
body of water in the ebb and flow of waters due to high
and low tide. Not having met the first and second
requirements of the rules of alluvion, petitioners cannot
claim the rights of a riparian owner.
3. ID.; ID.; ID.; ID.; ID.; THAT DEPOSIT IS DUE TO THE
CURRENT OF THE RIVER, MANDATORY.- In Republic
vs. CA, this Court ruled that the requirement that the
deposit should be due to the effect of the current of the
river is indispensable. This excludes from Art. 457 of the
Civil Code all deposits caused by human intervention.
Putting it differently, alluvion must be the exclusive work
of nature. Thus, in Tiongco vs. Director of Lands, et al.,
where the land was not formed solely by the natural effect
of the water current of the river bordering said land but is
also the consequence of the direct and deliberate

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intervention of man, it was deemed a man-made

accretion and, as such, part of the public domain. In the
case at bar, the subject land was the direct result of the
dumping of sawdust by the Sun Valley Lumber Co.
consequent to its sawmill operations.
4. ID.; PUBLIC LANDS; FINDINGS AS SUCH BY THE
BUREAU OF LANDS, RESPECTED.- The mere filing of
the Miscellaneous Sales Application constituted an
admission that the land being applied for was public land,
having been the subject of a Survey Plan wherein said
land was described as an orchard. Furthermore, the
Bureau of Lands classified the subject land as an
accretion area which was formed by deposits of sawdust
in the Balacanas Creek and the Cagayan river, in
accordance with the ocular inspection conducted by the
Bureau of Lands. This Court has often enough held that
findings of administrative agencies which have acquired
expertise because their jurisdiction is confined to specific
matters are generally accorded not only respect but even
finality. Again, when said factual findings are affirmed by
the Court of Appeals, the same are conclusive on the
parties and not reviewable by this Court.
5. ID.; PUBLIC LAND LAW; JURISDICTION OVER
PUBLIC LANDS.- Having determined that the subject
land is public land, a fortiori, the Bureau of Lands, as well
as the Office of the Secretary of Agriculture and Natural
Resources have jurisdiction over the same in accordance
with the Public Land Law. Under Sections 3 and 4
thereof, the Director of Lands has jurisdiction, authority
and control over public lands. Here respondent Palad as
Director of Lands, is authorized to exercise executive
control over any form of concession, disposition and
management of the lands of the public domain. He may
issue decisions and orders as he may see fit under the
circumstances as long as they are based on the findings
of fact. In the case of Calibo vs. Ballesteros, this Court
held that where, in the disposition of public lands, the
Director of Lands bases his decision on the evidence thus
presented, he clearly acts within his jurisdiction, and if he
errs in appraising the evidence, the error is one of
judgment, but not an act of grave abuse of discretion
annullable by certiorari.
6.
ADMINISTRATIVE
LAW;
ADMINISTRATIVE
REMEDIES; EXHAUSTED IN CASE AT BAR.- The
administrative
remedies
have
been
exhausted.
Petitioners could not have intended to appeal to
respondent Ignacio as an Officer-In-Charge of the Bureau
of Lands. The decision being appealed from was the
decision of respondent Hilario who was the Regional
Director of the Bureau of Lands. Said decision was made
"for and by authority of the Director of Lands." It would be
incongruous to appeal the decision of the Regional
Director of the Bureau of Lands acting for the Director of
the Bureau of Lands to an Officer-In-Charge of the
Bureau of Lands. In any case, respondent Ignacio's
official designation was "Undersecretary of the
Department of Agriculture and Natural Resources." He
was only an "Officer-In-Charge" of the Bureau of Lands.
When he acted on the late Antonio Nazareno's motion for
reconsideration by affirming or adopting respondent
Hilario's decision, he was acting on said motion as an
Undersecretary on behalf of the Secretary of the
Department. In the case of Hamoy vs. Secretary of
Agriculture and Natural Resources, this Court held that
the Undersecretary of Agriculture and Natural Resources
may modify, adopt, or set aside the orders or decisions of
the Director of Lands with respect to questions involving
public lands under the administration and control of the
Bureau of Lands and the Department of Agriculture and
Natural Resources. He cannot, therefore, be said to have
acted beyond the bounds of his jurisdiction under
Sections 3, 4 and 5 of Commonwealth Act No. 141.

PROPERTY CASES

ATTY. RUBEN TALAMPAS

APPEARANCES OF COUNSEL
Manolo L. Tagarda, Sr. for petitioners.
Arturo R. Legaspi for private respondents.
DECISION
ROMERO, J.:
Petitioners Desamparado Vda. de Nazareno and Leticia
Nazareno Tapia challenge the decision of the Court of
Appeals which affirmed the dismissal of petitioners'
complaint by the Regional Trial Court of Misamis Oriental,
Branch 22. The complaint was for annulment of the
verification, report and recommendation, decision and
order of the Bureau of Lands regarding a parcel of public
land.
The only issue involved in this petition is whether or not
petitioners exhausted administrative remedies before
having recourse to the courts.
The subject of this controversy is a parcel of land situated
in Telegrapo, Puntod, Cagayan de Oro City. Said land
was formed as a result of sawdust dumped into the driedup Balacanas Creek and along the banks of the Cagayan
river.
Sometime in 1979, private respondents Jose Salasalan
and Leo Rabaya leased the subject lots on which their
houses stood from one Antonio Nazareno, petitioners'
predecessor-in-interest. In the latter part of 1982, private
respondents allegedly stopped paying rentals. As a result,
Antonio Nazareno and petitioners filed a case for
ejectment with the Municipal Trial Court of Cagayan de
Oro City, Branch 4. A decision was rendered against
private respondents, which decision was affirmed by the
Regional Trial Court of Misamis Oriental, Branch 20.
The case was remanded to the municipal trial court for
execution of judgment after the same became final and
executory. Private respondents filed a case for annulment
of judgment before the Regional Trial Court of Misamis
Oriental, Branch 24 which dismissed the same. Antonio
Nazareno and petitioners again moved for execution of
judgment but private respondents filed another case for
certiorari with prayer for restraining order and/or writ of
preliminary injunction with the Regional Trial Court of
Misamis Oriental, Branch 25 which was likewise
dismissed. The decision of the lower court was finally
enforced with the private respondents being ejected from
portions of the subject lots they occupied.
Before he died, Antonio Nazareno caused the approval by
the Bureau of Lands of the survey plan designated as
Plan Csd-106-00571 with a view to perfecting his title
over the accretion area being claimed by him. Before the
approved survey plan could be released to the applicant,
however, it was protested by private respondents before
the Bureau of Lands.
In compliance with the order of respondent District Land
Officer Alberto M. Gillera, respondent Land Investigator
Avelino G. Labis conducted an investigation and rendered
a report to the Regional Director recommending that
Survey Plan No. MSI-10-06-000571-D (equivalent to Lot
No. 36302, Cad. 237) in the name of Antonio Nazareno,
be cancelled and that private respondents be directed to
file appropriate public land applications.
Based on said report, respondent Regional Director of the
Bureau of Lands Roberto Hilario rendered a decision
ordering the amendment of the survey plan in the name
of Antonio Nazareno by segregating therefrom the areas
occupied by the private respondents who, if qualified,

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may file public land applications covering their respective

portions.
Antonio Nazareno filed a motion for reconsideration with
respondent Rolleo Ignacio, Undersecretary of the
Department of Natural Resources and Officer-in-Charge
of the Bureau of Lands who denied the motion.
Respondent Director of Lands Abelardo Palad then
ordered him to vacate the portions adjudicated to private
respondents and remove whatever improvements they
have introduced thereon. He also ordered that private
respondents be placed in possession thereof.
Upon the denial of the late Antonio Nazareno's motion for
reconsideration, petitioners Desamparado Vda. de
Nazareno and Leticia Tapia Nazareno, filed a case before
the RTC, Branch 22 for annulment of the following: order
of investigation by respondent Gillera, report and
recommendation by respondent Labis, decision by
respondent Hilario, order by respondent Ignacio affirming
the decision of respondent Hilario and order of execution
by respondent Palad. The RTC dismissed the complaint
for failure to exhaust administrative remedies which
resulted in the finality of the administrative decision of the
Bureau of Lands.
On appeal, the Court of Appeals affirmed the decision of
the RTC dismissing the complaint. Applying Section 4 of
C.A. No. 141, as amended, it contended that the approval
of the survey plan belongs exclusively to the Director of
Lands. Hence, factual findings made by the Metropolitan
Trial Court respecting the subject land cannot be held to
be controlling as the preparation and approval of said
survey plans belong to the Director of Lands and the
same shall be conclusive when approved by the
Secretary of Agriculture and Natural Resources.[1]
Furthermore, the appellate court contended that the
motion for reconsideration filed by Antonio Nazareno
cannot be considered as an appeal to the Office of the
Secretary of Agriculture and Natural Resources, as
mandated by C.A. No. 141 inasmuch as the same had
been acted upon by respondent Undersecretary Ignacio
in his capacity as Officer-in-Charge of the Bureau of
Lands and not as Undersecretary acting for the Secretary
of Agriculture and Natural Resources. For the failure of
Antonio Nazareno to appeal to the Secretary of
Agriculture and Natural Resources, the present case
does not fall within the exception to the doctrine of
exhaustion of administrative remedies. It also held that
there was no showing of oppressiveness in the manner in
which the orders were issued and executed.
Hence, this petition.
Petitioners assign the following errors:
I. PUBLIC RESPONDENT COURT OF APPEALS IN A
WHIMSICAL, ARBITRARY AND CAPRICIOUS MANNER
AFFIRMED THE DECISION OF THE LOWER COURT
WHICH IS CONTRARY TO THE PREVAILING FACTS
AND THE LAW ON THE MATTER;
II. PUBLIC RESPONDENT COURT OF APPEALS IN A
WHIMSICAL, ARBITRARY AND CAPRICIOUS MANNER
AFFIRMED THE DECISION OF THE LOWER COURT
DISMISSING THE ORIGINAL CASE WHICH FAILED TO
CONSIDER THAT THE EXECUTION ORDER OF
PUBLIC RESPONDENT ABELARDO G. PALAD, JR.,
DIRECTOR OF LANDS, MANILA, PRACTICALLY
CHANGED THE DECISION OF PUBLIC RESPONDENT
ROBERTO HILARIO, REGIONAL DIRECTOR, BUREAU
OF LANDS, REGION 10, THUS MAKING THE CASE
PROPER SUBJECT FOR ANNULMENT WELL WITHIN
THE JURISDICTION OF THE LOWER COURT.

PROPERTY CASES

ATTY. RUBEN TALAMPAS

The resolution of the above issues, however, hinges on

the question of whether or not the subject land is public
land. Petitioners claim that the subject land is private land
being an accretion to his titled property, applying Article
457 of the Civil Code which provides:
"To the owners of lands adjoining the banks of rivers
belong the accretion which they gradually receive from
the effects of the current of the waters."
In the case of Meneses v. CA,[2] this Court held that
accretion, as a mode of acquiring property under Art. 457
of the Civil Code, requires the concurrence of these
requisites: (1) that the deposition of soil or sediment be
gradual and imperceptible; (2) that it be the result of the
action of the waters of the river (or sea); and (3) that the
land where accretion takes place is adjacent to the banks
or rivers (or the sea coast). These are called the rules on
alluvion which if present in a case, give to the owners of
lands adjoining the banks of rivers or streams any
accretion gradually received from the effects of the
current of waters.
For petitioners to insist on the application of these rules
on alluvion to their case, the above-mentioned requisites
must be present. However, they admit that the accretion
was formed by the dumping of boulders, soil and other
filling materials on portions of the Balacanas Creek and
the Cagayan River bounding their land.[3] It cannot be
claimed, therefore, that the accumulation of such
boulders, soil and other filling materials was gradual and
imperceptible, resulting from the action of the waters or
the current of the Balacanas Creek and the Cagayan
River. In Hilario v. City of Manila,[4] this Court held that
the word "current" indicates the participation of the body
of water in the ebb and flow of waters due to high and low
tide. Petitioners' submission not having met the first and
second requirements of the rules on alluvion, they cannot
claim the rights of a riparian owner.
In any case, this court agrees with private respondents
that petitioners are estopped from denying the public
character of the subject land, as well as the jurisdiction of
the Bureau of Lands when the late Antonio Nazareno filed
his Miscellaneous Sales Application MSA (G-6) 571.[5]
The mere filing of said Application constituted an
admission that the land being applied for was public land,
having been the subject of Survey Plan No. MSI-10-06000571-D (Equivalent to Lot No. 36302, Cad-237) which
was conducted as a consequence of Antonio Nazareno's
Miscellaneous Sales Application wherein said land was
described as an orchard. Said description by Antonio
Nazareno was, however, controverted by respondent
Labis in his investigation report to respondent Hilario
based on the findings of his ocular inspection that said
land actually covers a dry portion of Balacanas Creek and
a swampy portion of Cagayan River. The investigation
report also states that except for the swampy portion
which is fully planted to nipa palms, the whole area is fully
occupied by a part of a big concrete bodega of petitioners
and several residential houses made of light materials,
including those of private respondents which were
erected by themselves sometime in the early part of
1978.[6]
Furthermore, the Bureau of Lands classified the subject
land as an accretion area which was formed by deposits
of sawdust in the Balacanas Creek and the Cagayan
river, in accordance with the ocular inspection conducted
by the Bureau of Lands.[7] This Court has often enough
held that findings of administrative agencies which have
acquired expertise because their jurisdiction is confined to
specific matters are generally accorded not only respect
but even finality.[8] Again, when said factual findings are

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affirmed by the Court of Appeals, the same are conclusive

on the parties and not reviewable by this Court.[9]
It is this Court's irresistible conclusion, therefore, that the
accretion was man-made or artificial. In Republic v. CA,
[10] this Court ruled that the requirement that the deposit
should be due to the effect of the current of the river is
indispensable. This excludes from Art. 457 of the Civil
Code all deposits caused by human intervention. Putting
it differently, alluvion must be the exclusive work of
nature. Thus, in Tiongco v. Director of Lands, et al.,[11]
where the land was not formed solely by the natural effect
of the water current of the river bordering said land but is
also the consequence of the direct and deliberate
intervention of man, it was deemed a man-made
accretion and, as such, part of the public domain.
In the case at bar, the subject land was the direct result of
the dumping of sawdust by the Sun Valley Lumber Co.
consequent to its sawmill operations.[12] Even if this
Court were to take into consideration petitioners'
submission that the accretion site was the result of the
late Antonio Nazareno's labor consisting in the dumping
of boulders, soil and other filling materials into the
Balacanas Creek and Cagayan River bounding his land,
[13] the same would still be part of the public domain.
Having determined that the subject land is public land, a
fortiori, the Bureau of Lands, as well as the Office of the
Secretary of Agriculture and Natural Resources have
Jurisdiction over the same in accordance with the Public
Land Law. Accordingly, the court a quo dismissed
petitioners' complaint for non-exhaustion of administrative
remedies which ruling the Court of Appeals affirmed.
However, this Court agrees with petitioners that
administrative
remedies
have
been
exhausted.
Petitioners could not have intended to appeal to
respondent Ignacio as an Officer-in-Charge of the Bureau
of Lands. The decision being appealed from was the
decision of respondent Hilario who was the Regional
Director of The Bureau of Lands. Said decision was made
"for and by authority of the Director of Lands."[14] It would
be incongruous to appeal the decision of the Regional
Director of the Bureau of Lands acting for the Director of
the Bureau of Lands to an Officer-In-Charge of the
Bureau of Lands.
In any case, respondent Rolleo Ignacio's official
designation was "Undersecretary of the Department of
Agriculture and Natural Resources." He was only an
"Officer-In-Charge" of the Bureau of Lands. When he
acted on the late Antonio Nazareno's motion for
reconsideration by affirming or adopting respondent's
Hilario's decision, he was acting on said motion as an
Undersecretary on behalf of the Secretary of the
Department. In the case of Hamoy v. Secretary of
Agriculture and Natural Resources,[15] This Court held
that the Undersecretary of Agriculture and Natural
Resources may modify, adopt, or set aside the orders or
decisions of the Director of Lands with respect to
questions involving public lands under the administration
and control of the Bureau of Lands and the Department of
Agriculture and Natural Resources. He cannot therefore,
be said to have acted beyond the bounds of his
jurisdiction under Sections 3, 4 and 5 of Commonwealth
Act No. 141.[16]
As borne out by the administrative findings, the
controverted land is public land, being an artificial
accretion of sawdust. As such, the Director of Lands has
jurisdiction, authority and control over the same, as
mandated under Sections 3 and 4 of the Public Land Law
(C.A. No. 141) which states, thus:

PROPERTY CASES

ATTY. RUBEN TALAMPAS

"Sec. 3. The Secretary of Agriculture and Natural

Resources shall be the exclusive officer charged with
carrying out the provisions of this Act through the Director
of Lands who shall act under his immediate control.
Sec. 4. Subject to said control, the Director of Lands shall
have direct executive control of the survey, classification,
lease, sale or any other form of concession or disposition
and management of the lands of the public domain, and
his decisions as to questions of fact shall be conclusive
when approved by the Secretary of Agriculture and
Natural Resources."
In connection with the second issue, petitioners ascribe
whim, arbitrariness or capriciousness in the execution
order of public respondent Abelardo G. Palad, the
Director of Lands. This Court finds otherwise since said
decision was based on the conclusive finding that the
subject land was public land. Thus, this Court agrees with
the Court of Appeals that the Director of Lands acted
within his rights when he issued the assailed execution
order, as mandated by the aforecited provisions.
Petitioners' allegation that respondent Palad's execution
order directing them to vacate the subject land practically
changed respondent Hilario's decision is baseless. It is
incorrect for petitioners to assume that respondent Palad
awarded portions of the subject land to private
respondents Salasalans and Rayabas as they had not yet
been issued patents or titles over the subject land. The
execution order merely directed the segregation of
petitioners' titled lot from the subject land which was
actually being occupied by private respondents before
they were ejected from it. Based on the finding that
private respondents were actually in possession or were
actually occupying the subject land instead of petitioners,
respondent Palad, being the Director of Lands and in the
exercise of this administrative discretion, directed
petitioners to vacate the subject land on the ground that
private respondents have a preferential right, being the
occupants thereof.
While private respondents may not have filed their
application over the land occupied by them, they
nevertheless filed their protest or opposition to petitioners'
Miscellaneous Sales Application, the same being
preparatory to the filing of an application as they were in
fact directed to do so. In any case, respondent Palad's
execution order merely implements respondent Hilario's
order. It should be noted that petitioners' own application
still has to be given due course.[17]
As Director of lands, respondent Palad is authorized to
exercise executive control over any form of concession,
disposition and management of the lands of the public
domain.[18] He may issue decisions and orders as he
may see fit under the circumstances as long as they are
based on the findings of fact.
In the case of Calibo v. Ballesteros,[19] this Court held
that where, in the disposition of public lands, the Director
of Lands bases his decision on the evidence thus
presented, he clearly acts within his jurisdiction, and if he
errs in appraising the evidence, the error is one of
judgment, but not an act or grave abuse of discretion
annullable by certiorari. Thus, except for the issue of nonexhaustion of administrative remedies, this Court finds no
reversible error nor grave abuse of discretion in the
decision of the Court of Appeals.
WHEREFORE, the petition is DISMISSED for lack of
merit.
SO ORDERED.

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