G.R. No. L-15334 January 31, 1964 BOARD OF ASSESSMENT APPEALS, CITY ASSESSOR and CITY TREASURER OF QUEZON CITY,petitioners, vs. MANILA ELECTRIC COMPANY, respondent. Assistant City Attorney Jaime R. Agloro for petitioners. Ross, Selph and Carrascoso for respondent. PAREDES, J.: From the stipulation of facts and evidence adduced during the hearing, the following appear: On October 20, 1902, the Philippine Commission enacted Act No. 484 which authorized the Municipal Board of Manila to grant a franchise to construct, maintain and operate an electric street railway and electric light, heat and power system in the City of Manila and its suburbs to the person or persons making the most favorable bid. Charles M. Swift was awarded the said franchise on March 1903, the terms and conditions of which were embodied in Ordinance No. 44 approved on March 24, 1903. Respondent Manila Electric Co. (Meralco for short), became the transferee and owner of the franchise. Meralco's electric power is generated by its hydro-electric plant located at Botocan Falls, Laguna and is transmitted to the City of Manila by means of electric transmission wires, running from the province of Laguna to the said City. These electric transmission wires which carry high voltage current, are fastened to insulators attached on steel towers constructed by respondent at intervals, from its hydro-electric plant in the province of Laguna to the City of Manila. The respondent Meralco has constructed 40 of these steel towers within Quezon City, on land belonging to it. A photograph of one of these steel towers is attached to the petition for review, marked Annex A. Three steel towers were inspected by the lower court and parties and the following were the descriptions given there of by said court: The first steel tower is located in South Tatalon, España Extension, Quezon City. The findings were as follows: the ground around one of the four posts was excavated to a depth of about eight (8) feet, with an opening of about one (1) meter in diameter, decreased to about a quarter of a meter as it we deeper until it reached the bottom of the post; at the bottom of the post were two parallel steel bars attached to the leg means of bolts; the tower proper was attached to the leg three bolts; with two cross metals to prevent mobility; there was no concrete foundation but there was adobe stone underneath; as the bottom of the excavation was covered with water about three inches high, it could not be determined with certainty to whether said adobe stone was placed purposely or not, as the place abounds with this kind of stone; and the tower carried five high voltage wires without cover or any insulating materials. The second tower inspected was located in Kamuning Road, K-F, Quezon City, on land owned by the petitioner approximate more than one kilometer from the first tower. As in the first tower, the ground around one of the four legs was excavate from seven to eight (8) feet deep and one and a half (1-½) meters wide. There being very little water at the bottom, it was seen that there was no concrete foundation, but there soft adobe
Transcript
G.R. No. L-15334 January 31, 1964
BOARD OF ASSESSMENT APPEALS, CITY ASSESSOR and CITY TREASURER OF QUEZON CITY,petitioners, vs.MANILA ELECTRIC COMPANY, respondent.
Assistant City Attorney Jaime R. Agloro for petitioners.Ross, Selph and Carrascoso for respondent.
PAREDES, J.:
From the stipulation of facts and evidence adduced during the hearing, the following appear:
On October 20, 1902, the Philippine Commission enacted Act No. 484 which authorized the Municipal Board of Manila to grant a franchise to construct, maintain and operate an electric street railway and electric light, heat and power system in the City of Manila and its suburbs to the person or persons making the most favorable bid. Charles M. Swift was awarded the said franchise on March 1903, the terms and conditions of which were embodied in Ordinance No. 44 approved on March 24, 1903. Respondent Manila Electric Co. (Meralco for short), became the transferee and owner of the franchise.
Meralco's electric power is generated by its hydro-electric plant located at Botocan Falls, Laguna and is transmitted to the City of Manila by means of electric transmission wires, running from the province of Laguna to the said City. These electric transmission wires which carry high voltage current, are fastened to insulators attached on steel towers constructed by respondent at intervals, from its hydro-electric plant in the province of Laguna to the City of Manila. The respondent Meralco has constructed 40 of these steel towers within Quezon City, on land
belonging to it. A photograph of one of these steel towers is attached to the petition for review, marked Annex A. Three steel towers were inspected by the lower court and parties and the following were the descriptions given there of by said court:
The first steel tower is located in South Tatalon, España Extension, Quezon City. The findings were as follows: the ground around one of the four posts was excavated to a depth of about eight (8) feet, with an opening of about one (1) meter in diameter, decreased to about a quarter of a meter as it we deeper until it reached the bottom of the post; at the bottom of the post were two parallel steel bars attached to the leg means of bolts; the tower proper was attached to the leg three bolts; with two cross metals to prevent mobility; there was no concrete foundation but there was adobe stone underneath; as the bottom of the excavation was covered with water about three inches high, it could not be determined with certainty to whether said adobe stone was placed purposely or not, as the place abounds with this kind of stone; and the tower carried five high voltage wires without cover or any insulating materials.
The second tower inspected was located in Kamuning Road, K-F, Quezon City, on land owned by the petitioner approximate more than one kilometer from the first tower. As in the first tower, the ground around one of the four legs was excavate from seven to eight (8) feet deep and one and a half (1-½) meters wide. There being very little water at the bottom, it was seen that there was no concrete foundation, but there soft adobe beneath. The leg was likewise provided with two parallel steel bars bolted to a square metal frame also bolted to each corner. Like the first one, the second tower is made up of metal
rods joined together by means of bolts, so that by unscrewing the bolts, the tower could be dismantled and reassembled.
The third tower examined is located along Kamias Road, Quezon City. As in the first two towers given above, the ground around the two legs of the third tower was excavated to a depth about two or three inches beyond the outside level of the steel bar foundation. It was found that there was no concrete foundation. Like the two previous ones, the bottom arrangement of the legs thereof were found to be resting on soft adobe, which, probably due to high humidity, looks like mud or clay. It was also found that the square metal frame supporting the legs were not attached to any material or foundation.
On November 15, 1955, petitioner City Assessor of Quezon City declared the aforesaid steel towers for real property tax under Tax declaration Nos. 31992 and 15549. After denying respondent's petition to cancel these declarations, an appeal was taken by respondent to the Board of Assessment Appeals of Quezon City, which required respondent to pay the amount of P11,651.86 as real property tax on the said steel towers for the years 1952 to 1956. Respondent paid the amount under protest, and filed a petition for review in the Court of Tax Appeals (CTA for short) which rendered a decision on December 29, 1958, ordering the cancellation of the said tax declarations and the petitioner City Treasurer of Quezon City to refund to the respondent the sum of P11,651.86. The motion for reconsideration having been denied, on April 22, 1959, the instant petition for review was filed.
In upholding the cause of respondents, the CTA held that: (1) the steel towers come within the term "poles" which are declared exempt from taxes under part II paragraph 9
of respondent's franchise; (2) the steel towers are personal properties and are not subject to real property tax; and (3) the City Treasurer of Quezon City is held responsible for the refund of the amount paid. These are assigned as errors by the petitioner in the brief.
The tax exemption privilege of the petitioner is quoted hereunder:
PAR 9. The grantee shall be liable to pay the same taxes upon its real estate, buildings, plant (not including poles, wires, transformers, and insulators), machinery and personal property as other persons are or may be hereafter required by law to pay ... Said percentage shall be due and payable at the time stated in paragraph nineteen of Part One hereof, ... and shall be in lieu of all taxes and assessments of whatsoever nature and by whatsoever authority upon the privileges, earnings, income, franchise, and poles, wires, transformers, and insulators of the grantee from which taxes and assessments the grantee is hereby expressly exempted. (Par. 9, Part Two, Act No. 484 Respondent's Franchise; emphasis supplied.)
The word "pole" means "a long, comparatively slender usually cylindrical piece of wood or timber, as typically the stem of a small tree stripped of its branches; also by extension, a similar typically cylindrical piece or object of metal or the like". The term also refers to "an upright standard to the top of which something is affixed or by which something is supported; as a dovecote set on a pole; telegraph poles; a tent pole; sometimes, specifically a vessel's master (Webster's New International Dictionary 2nd Ed., p. 1907.) Along the streets, in the City of Manila, may be seen cylindrical metal poles, cubical concrete poles, and poles of the PLDT Co. which are made of two
steel bars joined together by an interlacing metal rod. They are called "poles" notwithstanding the fact that they are no made of wood. It must be noted from paragraph 9, above quoted, that the concept of the "poles" for which exemption is granted, is not determined by their place or location, nor by the character of the electric current it carries, nor the material or form of which it is made, but the use to which they are dedicated. In accordance with the definitions, pole is not restricted to a long cylindrical piece of wood or metal, but includes "upright standards to the top of which something is affixed or by which something is supported. As heretofore described, respondent's steel supports consists of a framework of four steel bars or strips which are bound by steel cross-arms atop of which are cross-arms supporting five high voltage transmission wires (See Annex A) and their sole function is to support or carry such wires.
The conclusion of the CTA that the steel supports in question are embraced in the term "poles" is not a novelty. Several courts of last resort in the United States have called these steel supports "steel towers", and they denominated these supports or towers, as electric poles. In their decisions the words "towers" and "poles" were used interchangeably, and it is well understood in that jurisdiction that a transmission tower or pole means the same thing.
In a proceeding to condemn land for the use of electric power wires, in which the law provided that wires shall be constructed upon suitable poles, this term was construed to mean either wood or metal poles and in view of the land being subject to overflow, and the necessary carrying of numerous wires and the distance between poles, the statute was interpreted to include towers or poles.
(Stemmons and Dallas Light Co. (Tex) 212 S.W. 222, 224; 32-A Words and Phrases, p. 365.)
The term "poles" was also used to denominate the steel supports or towers used by an association used to convey its electric power furnished to subscribers and members, constructed for the purpose of fastening high voltage and dangerous electric wires alongside public highways. The steel supports or towers were made of iron or other metals consisting of two pieces running from the ground up some thirty feet high, being wider at the bottom than at the top, the said two metal pieces being connected with criss-cross iron running from the bottom to the top, constructed like ladders and loaded with high voltage electricity. In form and structure, they are like the steel towers in question. (Salt River Valley Users' Ass'n v. Compton, 8 P. 2nd, 249-250.)
The term "poles" was used to denote the steel towers of an electric company engaged in the generation of hydro-electric power generated from its plant to the Tower of Oxford and City of Waterbury. These steel towers are about 15 feet square at the base and extended to a height of about 35 feet to a point, and are embedded in the cement foundations sunk in the earth, the top of which extends above the surface of the soil in the tower of Oxford, and to the towers are attached insulators, arms, and other equipment capable of carrying wires for the transmission of electric power (Connecticut Light and Power Co. v. Oxford, 101 Conn. 383, 126 Atl. p. 1).
In a case, the defendant admitted that the structure on which a certain person met his death was built for the purpose of supporting a transmission wire used for carrying high-tension electric power, but claimed that the steel towers on which it is carried were so large that their
wire took their structure out of the definition of a pole line. It was held that in defining the word pole, one should not be governed by the wire or material of the support used, but was considering the danger from any elevated wire carrying electric current, and that regardless of the size or material wire of its individual members, any continuous series of structures intended and used solely or primarily for the purpose of supporting wires carrying electric currents is a pole line (Inspiration Consolidation Cooper Co. v. Bryan 252 P. 1016).
It is evident, therefore, that the word "poles", as used in Act No. 484 and incorporated in the petitioner's franchise, should not be given a restrictive and narrow interpretation, as to defeat the very object for which the franchise was granted. The poles as contemplated thereon, should be understood and taken as a part of the electric power system of the respondent Meralco, for the conveyance of electric current from the source thereof to its consumers. If the respondent would be required to employ "wooden poles", or "rounded poles" as it used to do fifty years back, then one should admit that the Philippines is one century behind the age of space. It should also be conceded by now that steel towers, like the ones in question, for obvious reasons, can better effectuate the purpose for which the respondent's franchise was granted.
Granting for the purpose of argument that the steel supports or towers in question are not embraced within the term poles, the logical question posited is whether they constitute real properties, so that they can be subject to a real property tax. The tax law does not provide for a definition of real property; but Article 415 of the Civil Code does, by stating the following are immovable property:
(1) Land, buildings, roads, and constructions of all kinds adhered to the soil;
x x x x x x x x x
(3) Everything attached to an immovable in a fixed manner, in such a way that it cannot be separated therefrom without breaking the material or deterioration of the object;
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 in a building or on a piece of land, and which tends directly to meet the needs of the said industry or works;
x x x x x x x x x
The steel towers or supports in question, do not come within the objects mentioned in paragraph 1, because they do not constitute buildings or constructions adhered to the soil. They are not construction analogous to buildings nor adhering to the soil. As per description, given by the lower court, they are removable and merely attached to a square metal frame by means of bolts, which when unscrewed could easily be dismantled and moved from place to place. They can not be included under paragraph 3, as they are not attached to an immovable in a fixed manner, and they can be separated without breaking the material or causing deterioration upon the object to which they are attached. Each of these steel towers or supports consists of steel bars or metal strips, joined together by means of bolts, which can be disassembled by unscrewing the bolts and reassembled by screwing the same. These steel towers or supports do not also fall under paragraph
5, for they are not machineries, receptacles, instruments or implements, and even if they were, they are not intended for industry or works on the land. Petitioner is not engaged in an industry or works in the land in which the steel supports or towers are constructed.
It is finally contended that the CTA erred in ordering the City Treasurer of Quezon City to refund the sum of P11,651.86, despite the fact that Quezon City is not a party to the case. It is argued that as the City Treasurer is not the real party in interest, but Quezon City, which was not a party to the suit, notwithstanding its capacity to sue and be sued, he should not be ordered to effect the refund. This question has not been raised in the court below, and, therefore, it cannot be properly raised for the first time on appeal. The herein petitioner is indulging in legal technicalities and niceties which do not help him any; for factually, it was he (City Treasurer) whom had insisted that respondent herein pay the real estate taxes, which respondent paid under protest. Having acted in his official capacity as City Treasurer of Quezon City, he would surely know what to do, under the circumstances.
IN VIEW HEREOF, the decision appealed from is hereby affirmed, with costs against the petitioners.
Board of Assessment Appeals v. MERALCO [G.R. No. L-15334. January 31, 1964.]
Jun28
En Banc, Paredes (J): 8 concur, 1 concur in result, 1 took no part.
Facts: On 20 October 1902, the Philippine Commission enacted Act 484 which authorized the Municipal Board of Manila to grant a franchise to construct, maintain and operate an electric street railway and electric light, heat and power system in the City of Manila and its suburbs to the person or persons making the most favorable bid. Charles M. Swift was awarded the said franchise on March 1903, the terms and conditions of which were embodied in Ordinance 44 approved on 24 March 1903. Meralco became the transferee and owner of the franchise. Meralco’s electric power is generated by its hydro-electric plant located at Botocan Falls, Laguna and is transmitted to the City of Manila by means of electric transmission wires, running from the province of Laguna to the said City. These electric transmission wires which carry high voltage current, are fastened to insulators attached on steel towers constructed by respondent at intervals, from its hydroelectric plant in the province of Laguna to the City of Manila. Meralco has constructed 40 of these steel towers within Quezon City, on land belonging to it.
On 15 November 1955, City Assessor of Quezon City declared the aforesaid steel towers for real property tax under Tax Declaration 31992 and 15549. After denying Meralco’s petition to cancel these declarations an appeal was taken by Meralco to the Board of Assessment Appeals of Quezon City, which required Meralco to pay the amount of P11,651.86 as real property tax on the said steel towers for the years 1952 to 1956. Meralco paid the amount under protest, and filed a petition for review in the Court of Tax Appeals which rendered a decision on 29 December 1958, ordering the cancellation of the said tax declarations and the City Treasurer of Quezon City to refund to Meralco the sum of P11,651.86. The motion for reconsideration
having been denied, on 22 April 1959, the petition for review was filed.
Issue: Whether or not the steel towers of an electric company constitute real property for the purposes of real property tax.
Held: The steel towers of an electric company don’t constitute real property for the purposes of real property tax.
Steel towers are not immovable property under paragraph 1, 3 and 5 of Article 415.
The steel towers or supports do not come within the objects mentioned in paragraph 1, because they do not constitute buildings or constructions adhered to the soil. They are not constructions analogous to buildings nor adhering to the soil. As per description, given by the lower court, they are removable and merely attached to a square metal frame by means of bolts, which when unscrewed could easily be dismantled and moved from place to place.
They cannot be included under paragraph 3, as they are not attached to an immovable in a fixed manner, and they can be separated without breaking the material or causing deterioration upon the object to which they are attached. Each of these steel towers or supports consists of steel bars or metal strips, joined together by means of bolts, which can be disassembled by unscrewing the bolts and reassembled by screwing the same.
These steel towers or supports do not also fall under paragraph 5, for they are not machineries or receptacles, instruments or implements, and even if they were, they are not intended for industry or works on the land.
Petitioner is not engaged in an industry or works on the land in which the steel supports or towers are constructed.
The Supreme Court affirmed the decision appealed from, with costs against the petitioner
G.R. No. L-47943 May 31, 1982
MANILA ELECTRIC COMPANY, petitioner, vs.CENTRAL BOARD OF ASSESSMENT APPEALS, BOARD OF ASSESSMENT APPEALS OF BATANGAS and PROVINCIAL ASSESSOR OF BATANGAS, respondents.
AQUINO, J.:
This case is about the imposition of the realty tax on two oil storage tanks installed in 1969 by Manila Electric Company on a lot in San Pascual, Batangas which it leased in 1968 from Caltex (Phil.), Inc. The tanks are within the Caltex refinery compound. They have a total capacity of 566,000 barrels. They are used for storing fuel oil for Meralco's power plants.
According to Meralco, the storage tanks are made of steel plates welded and assembled on the spot. Their bottoms rest on a foundation consisting of compacted earth as the outermost layer, a sand pad as the intermediate layer and a two-inch thick bituminous asphalt stratum as the top layer. The bottom of each tank is in contact with the asphalt layer,
The steel sides of the tank are directly supported underneath by a circular wall made of concrete, eighteen inches thick, to prevent the tank from sliding. Hence, according to Meralco, the tank is not attached to its foundation. It is not anchored or welded to the concrete circular wall. Its bottom plate is not attached to any part of the foundation by bolts, screws or similar devices. The tank merely sits on its foundation. Each empty tank can be
floated by flooding its dike-inclosed location with water four feet deep. (pp. 29-30, Rollo.)
On the other hand, according to the hearing commissioners of the Central Board of Assessment Appeals, the area where the two tanks are located is enclosed with earthen dikes with electric steel poles on top thereof and is divided into two parts as the site of each tank. The foundation of the tanks is elevated from the remaining area. On both sides of the earthen dikes are two separate concrete steps leading to the foundation of each tank.
Tank No. 2 is supported by a concrete foundation with an asphalt lining about an inch thick. Pipelines were installed on the sides of each tank and are connected to the pipelines of the Manila Enterprises Industrial Corporation whose buildings and pumping station are near Tank No. 2.
The Board concludes that while the tanks rest or sit on their foundation, the foundation itself and the walls, dikes and steps, which are integral parts of the tanks, are affixed to the land while the pipelines are attached to the tanks. (pp. 60-61, Rollo.) In 1970, the municipal treasurer of Bauan, Batangas, on the basis of an assessment made by the provincial assessor, required Meralco to pay realty taxes on the two tanks. For the five-year period from 1970 to 1974, the tax and penalties amounted to P431,703.96 (p. 27, Rollo). The Board required Meralco to pay the tax and penalties as a condition for entertaining its appeal from the adverse decision of the Batangas board of assessment appeals.
The Central Board of Assessment Appeals (composed of Acting Secretary of Finance Pedro M. Almanzor as chairman and Secretary of Justice Vicente Abad Santos and
Secretary of Local Government and Community Development Jose Roño as members) in its decision dated November 5, 1976 ruled that the tanks together with the foundation, walls, dikes, steps, pipelines and other appurtenances constitute taxable improvements.
Meralco received a copy of that decision on February 28, 1977. On the fifteenth day, it filed a motion for reconsideration which the Board denied in its resolution of November 25, 1977, a copy of which was received by Meralco on February 28, 1978.
On March 15, 1978, Meralco filed this special civil action of certiorari to annul the Board's decision and resolution. It contends that the Board acted without jurisdiction and committed a grave error of law in holding that its storage tanks are taxable real property.
Meralco contends that the said oil storage tanks do not fall within any of the kinds of real property enumerated in article 415 of the Civil Code and, therefore, they cannot be categorized as realty by nature, by incorporation, by destination nor by analogy. Stress is laid on the fact that the tanks are not attached to the land and that they were placed on leased land, not on the land owned by Meralco.
This is one of those highly controversial, borderline or penumbral cases on the classification of property where strong divergent opinions are inevitable. The issue raised by Meralco has to be resolved in the light of the provisions of the Assessment Law, Commonwealth Act No. 470, and the Real Property Tax Code, Presidential Decree No. 464 which took effect on June 1, 1974.
Section 2 of the Assessment Law provides that the realty tax is due "on real property, including land, buildings,
machinery, and other improvements" not specifically exempted in section 3 thereof. This provision is reproduced with some modification in the Real Property Tax Code which provides:
Sec. 38. Incidence of Real Property Tax. — They shall be levied, assessed and collected in all provinces, cities and municipalities an annual ad valorem tax on real property, such as land, buildings, machinery and other improvements affixed or attached to real property not hereinafter specifically exempted.
The Code contains the following definition in its section 3:
k) Improvements — is a valuable addition made to property or an amelioration in its condition, amounting to more than mere repairs or replacement of waste, costing labor or capital and intended to enhance its value, beauty or utility or to adapt it for new or further purposes.
We hold that while the two storage tanks are not embedded in the land, they may, nevertheless, be considered as improvements on the land, enhancing its utility and rendering it useful to the oil industry. It is undeniable that the two tanks have been installed with some degree of permanence as receptacles for the considerable quantities of oil needed by Meralco for its operations.
Oil storage tanks were held to be taxable realty in Standard Oil Co. of New Jersey vs. Atlantic City, 15 Atl. 2nd 271.
For purposes of taxation, the term "real property" may include things which should generally be regarded as personal property(84 C.J.S. 171, Note 8). It is a familiar phenomenon to see things classed as real property for
purposes of taxation which on general principle might be considered personal property (Standard Oil Co. of New York vs. Jaramillo, 44 Phil. 630, 633).
The case of Board of Assessment Appeals vs. Manila Electric Company, 119 Phil. 328, wherein Meralco's steel towers were held not to be subject to realty tax, is not in point because in that case the steel towers were regarded as poles and under its franchise Meralco's poles are exempt from taxation. Moreover, the steel towers were not attached to any land or building. They were removable from their metal frames.
Nor is there any parallelism between this case and Mindanao Bus Co. vs. City Assessor, 116 Phil. 501, where the tools and equipment in the repair, carpentry and blacksmith shops of a transportation company were held not subject to realty tax because they were personal property.
WHEREFORE, the petition is dismissed. The Board's questioned decision and resolution are affirmed. No costs.
SO ORDERED.
Barredo (Chairman), Guerrero, De Castro and Escolin, JJ., concur.
Concepcion, Jr., J., is on leave.
Justice Abad Santos, J., took no part.
G.R. No. L-40411 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.
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;
x x x x x x x x x
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 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 Yorkvs. 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 subject-matter 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 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.
x x x x x x x x x
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.
Villa-Real, Imperial, Butte, and Goddard, JJ., concur.
Davao Sawmill Co. vs Castillo61 PHIL 709GR No. L-40411August 7, 1935
A tenant placed machines for use in a sawmill on the landlord's land.
FACTSDavao Sawmill Co., operated a sawmill. The land upon which the business was conducted was leased from another person. On the land, Davao Sawmill erected a building which housed the machinery it used. Some of the
machines were mounted and placed on foundations of cement. In the contract of lease, Davo Sawmill agreed to turn over free of charge all improvements and buildings erected by it on the premises with the exception of machineries, which shall remain with the Davao Sawmill. In an action brought by the Davao Light and Power Co., judgment was rendered against Davao Sawmill. A writ of execution was issued and the machineries placed on the sawmill were levied upon as personalty by the sheriff. Davao Light and Power Co., proceeded to purchase the machinery and other properties auctioned by the sheriff.
ISSUEAre the machineries real or personal property?
HELDArt.415 of the New Civil Code provides that Real Property consists of:
(1) Lands, buildings, roads and constructions of all kinds adhered to the soil;
xxx
(5) Machinery, receptacles, instruments or implements intended by the owner pf the tenement for an industry ot 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;
Appellant should have registered its protest before or at the time of the sale of the property. While not conclusive, the appellant's characterization of the property as chattels is indicative of intention and impresses upon the property the character determined by the parties.
Machinery is naturally movable. However, machinery may be immobilized by destination or purpose under the following conditions:
General Rule: The machinery only becomes immobilized if placed in a plant by the owner of the property or plant.
Immobilization cannot be made by a tenant, a usufructuary, or any person having only a temporary right.
Exception: The tenant, usufructuary, or temporary possessor acted as agent of the owner of the premises; or he intended to permanently give away the property in favor of the owner.
As a rule, therefore, the machinery should be considered as Personal Property, since it was not placed on the land by the owner of the said land.
G.R. No. L-17870 September 29, 1962
MINDANAO BUS COMPANY, petitioner, vs.THE CITY ASSESSOR & TREASURER and the BOARD OF TAX APPEALS of Cagayan de Oro City,respondents.
Binamira, Barria and Irabagon for petitioner.Vicente E. Sabellina for respondents.
LABRADOR, J.:
This is a petition for the review of the decision of the Court of Tax Appeals in C.T.A. Case No. 710 holding that the petitioner Mindanao Bus Company is liable to the payment of the realty tax on its maintenance and repair equipment hereunder referred to.
Respondent City Assessor of Cagayan de Oro City assessed at P4,400 petitioner's above-mentioned equipment. Petitioner appealed the assessment to the respondent Board of Tax Appeals on the ground that the same are not realty. The Board of Tax Appeals of the City sustained the city assessor, so petitioner herein filed with the Court of Tax Appeals a petition for the review of the assessment.
In the Court of Tax Appeals the parties submitted the following stipulation of facts:
Petitioner and respondents, thru their respective counsels agreed to the following stipulation of facts:
1. That petitioner is a public utility solely engaged in transporting passengers and cargoes by motor trucks, over
its authorized lines in the Island of Mindanao, collecting rates approved by the Public Service Commission;
2. That petitioner has its main office and shop at Cagayan de Oro City. It maintains Branch Offices and/or stations at Iligan City, Lanao; Pagadian, Zamboanga del Sur; Davao City and Kibawe, Bukidnon Province;
3. That the machineries sought to be assessed by the respondent as real properties are the following:
(a) Hobart Electric Welder Machine, appearing in the attached photograph, marked Annex "A";
(b) Storm Boring Machine, appearing in the attached photograph, marked Annex "B";
(c) Lathe machine with motor, appearing in the attached photograph, marked Annex "C";
(d) Black and Decker Grinder, appearing in the attached photograph, marked Annex "D";
(e) PEMCO Hydraulic Press, appearing in the attached photograph, marked Annex "E";
(f) Battery charger (Tungar charge machine) appearing in the attached photograph, marked Annex "F"; and
(g) D-Engine Waukesha-M-Fuel, appearing in the attached photograph, marked Annex "G".
4. That these machineries are sitting on cement or wooden platforms as may be seen in the attached photographs which form part of this agreed stipulation of facts;
5. That petitioner is the owner of the land where it maintains and operates a garage for its TPU motor trucks;
a repair shop; blacksmith and carpentry shops, and with these machineries which are placed therein, its TPU trucks are made; body constructed; and same are repaired in a condition to be serviceable in the TPU land transportation business it operates;
6. That these machineries have never been or were never used as industrial equipments to produce finished products for sale, nor to repair machineries, parts and the like offered to the general public indiscriminately for business or commercial purposes for which petitioner has never engaged in, to date.1awphîl.nèt
The Court of Tax Appeals having sustained the respondent city assessor's ruling, and having denied a motion for reconsideration, petitioner brought the case to this Court assigning the following errors:
1. The Honorable Court of Tax Appeals erred in upholding respondents' contention that the questioned assessments are valid; and that said tools, equipments or machineries are immovable taxable real properties.
2. The Tax Court erred in its interpretation of paragraph 5 of Article 415 of the New Civil Code, and holding that pursuant thereto the movable equipments are taxable realties, by reason of their being intended or destined for use in an industry.
3. The Court of Tax Appeals erred in denying petitioner's contention that the respondent City Assessor's power to assess and levy real estate taxes on machineries is further restricted by section 31, paragraph (c) of Republic Act No. 521; and
4. The Tax Court erred in denying petitioner's motion for reconsideration.
Respondents contend that said equipments, tho movable, are immobilized by destination, in accordance with paragraph 5 of Article 415 of the New Civil Code which provides:
Art. 415. — The following are immovable properties:
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. (Emphasis ours.)
Note that the stipulation expressly states that the equipment are placed on wooden or cement platforms. They can be moved around and about in petitioner's repair shop. In the case of B. H. Berkenkotter vs. Cu Unjieng, 61 Phil. 663, the Supreme Court said:
Article 344 (Now Art. 415), paragraph (5) of the Civil Code, gives the character of real property to "machinery, liquid containers, instruments or implements intended by the owner of any building or land for use in connection with any industry or trade being carried on therein and which are expressly adapted to meet the requirements of such trade or industry."
If the installation of the machinery and equipment in question in the central of the Mabalacat Sugar Co., Inc., in lieu of the other of less capacity existing therein, for its sugar and industry, converted them into real property by reason of their purpose, it cannot be said that their incorporation therewith was not permanent in character because, as essential and principle elements of a sugar central, without them the sugar central would be unable
to function or carry on the industrial purpose for which it was established. Inasmuch as the central is permanent in character, the necessary machinery and equipment installed for carrying on the sugar industry for which it has been established must necessarily be permanent. (Emphasis ours.)
So that movable equipments to be immobilized in contemplation of the law must first be "essential and principal elements" of an industry or works without which such industry or works would be "unable to function or carry on the industrial purpose for which it was established." We may here distinguish, therefore, those movable which become immobilized by destination because they are essential and principal elements in the industry for those which may not be so considered immobilized because they are merely incidental, not essential and principal. Thus, cash registers, typewriters, etc., usually found and used in hotels, restaurants, theaters, etc. are merely incidentals and are not and should not be considered immobilized by destination, for these businesses can continue or carry on their functions without these equity comments. Airline companies use forklifts, jeep-wagons, pressure pumps, IBM machines, etc. which are incidentals, not essentials, and thus retain their movable nature. On the other hand, machineries of breweries used in the manufacture of liquor and soft drinks, though movable in nature, are immobilized because they are essential to said industries; but the delivery trucks and adding machines which they usually own and use and are found within their industrial compounds are merely incidental and retain their movable nature.
Similarly, the tools and equipments in question in this instant case are, by their nature, not essential and principle municipal elements of petitioner's business of transporting passengers and cargoes by motor trucks. They are merely incidentals — acquired as movables and used only for expediency to facilitate and/or improve its service. Even without such tools and equipments, its business may be carried on, as petitioner has carried on, without such equipments, before the war. The transportation business could be carried on without the repair or service shop if its rolling equipment is repaired or serviced in another shop belonging to another.
The law that governs the determination of the question at issue is as follows:
Art. 415. The following are immovable property:
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; (Civil Code of the Phil.)
Aside from the element of essentiality the above-quoted provision also requires that the industry or works be carried on in a building or on a piece of land. Thus in the case of Berkenkotter vs. Cu Unjieng, supra, the "machinery, liquid containers, and instruments or implements" are found in a building constructed on the land. A sawmill would also be installed in a building on land more or less permanently, and the sawing is conducted in the land or building.
But in the case at bar the equipments in question are destined only to repair or service the transportation business, which is not carried on in a building or permanently on a piece of land, as demanded by the law. Said equipments may not, therefore, be deemed real property.
Resuming what we have set forth above, we hold that the equipments in question are not absolutely essential to the petitioner's transportation business, and petitioner's business is not carried on in a building, tenement or on a specified land, so said equipment may not be considered real estate within the meaning of Article 415 (c) of the Civil Code.
WHEREFORE, the decision subject of the petition for review is hereby set aside and the equipment in question declared not subject to assessment as real estate for the purposes of the real estate tax. Without costs.
So ordered.
Bengzon, C.J., Padilla, Bautista Angelo, Reyes, J.B.L., Paredes, Dizon and Makalintal, JJ., concur.Regala, Concepcion and Barrera JJ., took no part.
Mindanao Bus Company vs City Assessor
Posted on June 24, 2013
Mindanao Bus Company vs City Assessor116 PHIL 501GR No. L-17870September 29, 1962
FACTSThe City Assessor of Cagayan de Oro City assessed a realty
tax on several equipment and machineries of Mindanao Bus Co. These equipment were placed on wooden or cement platforms and can be moved around in the bus company’s repair shop. The bus company appealed the assessment to the Board of Tax Appeals on the ground that the same are not realty. The Board of Tax Appeals of the City, however, sustained the city assessor. Thus, the bus company appealed to the Court of Tax Appeals, which likewise sustained the city assessor.
HELD
Art. 415 of the NCC classifies the following as immovable property:
xxx
(5) Machinery, receptacles, instruments or implements intended by the owner pf 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;
Note that the stipulation expressly states that the equipment are placed on wooden or cement platforms. They can be moved around and about in petitioner's repair shop.
Before movables may be deemed immobilized in contemplation of Article 415 (5), it is necessary that they must first be “essential” and “principal” elements of an industry or works without which such industry or works would be unable to function or carry on the industrial purpose for which it was established.
In this case, the tools and equipment in question are by their nature, not essential and principal elements of
Mindanao Bus Co.’s business of transporting passengers and cargoes by motor trucks. They are merely incidentals — acquired as movables and used only for expediency to facilitate and/or improve its service. Even without such tools and equipments, its business may be carried on.
Aside from the element of essentiality the Art.415 (5) also requires that the industry or works be carried on in a building or on a piece of land. A sawmill would also be installed in a building on land more or less permanently, and the sawing is conducted in the land/building.
However, in the instant case, the equipments in question are destined only to repair or service the transportation business, which is not carried on in a building or permanently on a piece of land, as demanded by law. The equipments in question are not absolutely essential to the petitioner's transportation business, and petitioner's business is not carried on in a building, tenement or on a specified land.
As such, the equipments in question are not deemed real property because the transportation business is not carried on in a building or permanently on a piece of land, as demanded by law.
The transportation business could be carried on without the repair or service shop, if its rolling equipment is repaired or serviced in another shop belonging to another.
Therefore, the imposition of realty tax on the maintenance and repair equipment was not proper because the properties involved were not real property under Article 415 (5).
INVOLUNTARY INSOLVENCY OF PAUL STROCHECKER, Appellee, v. ILDEFONSO RAMIREZ, creditor-appellant. WILLIAM EDMONDS, assignee.
Lim & Lim for Appellant.
Ross & Lawrence and Antonio T. Carrasco, jr., for the Fidelity & surety Co.
SYLLABUS
1. CHATTEL MORTGAGE; INTEREST IN A BUSINESS. — An interest in a business may be the subject of mortgage, for it is a personal property, being capable of appropriation, and not included among the real properties enumerated in article 335 of the Civil Code.
2. ID., ID., DESCRIPTION; SUFFICIENCY OF. — Where the description of the chattel mortgaged is such as to enable the parties to the mortgage or any other person to identify the same after a reasonable investigation or inquiry, the description is sufficient. Thus if the drug business known as Antigua Botica Ramirez (owned by a certain person therein named and the mortgagor) located at Nos. 123 and 125, Calle Real, District of Intramuros, Manila, P.I., the description meets the requirements of the law.
3. ID.; PREFERENCE; PURCHASE PRICE; POSSESSION. — The vendor of a chattel, who is a creditor for the purchase price, has no preference over a creditor holding a mortgage on that chattel where the vendor is not in possession of the thing mortgaged.
4. ID., ID.; RETROACTIVITY; PERSONAL SECURITY. — A junior mortgage can have no preference over a senior
mortgage by the mere fact that prior to said junior mortgage a personal security had been stipulated between the junior mortgagee and the debtor, because the second mortgage cannot be given effect as of the date the personal security was stipulated.
D E C I S I O N
ROMUALDEZ, J. :
The question at issue in this appeal is, which of the two mortgages here in question must be given preference? Is it the one in favor of the Fidelity & Surety Co., or that in favor of Ildefonso Ramirez. The first was declared by the trial court to be entitled to preference.
In the lower court there were three mortgages each of whom claimed preference. They were the two above mentioned and Concepcion Ayala. The latter’s claim was rejected by the trial court, and that ruling she did not appeal.
There is no question as to the priority in time of the mortgage in favor of the Fidelity & Surety Co. which was executed on March 10, 1919, and registered in due time in the registry of the property, that in favor of the appellant being dated September 22, 1919, and registered also in the registry.
The appellant claims preference on these grounds: (a) That the first mortgage above-mentioned is not valid because the property which is the subject-matter thereof is not capable of being mortgaged, and the description of said
property is not sufficient; and (b) that the amount due the appellant is a purchase price, citing article 1922 of the Civil Code in support thereof, and that his mortgage is but a modification of the security given by the debtor on February 15, 1919, that is, prior to the mortgage executed in favor of the Fidelity & Surety Co.
As the first ground, the thing that was mortgaged to this corporation is described in the document as follows:jgc:chanrobles.com.ph
". . . his half interest in the drug business known as Antigua Botica Ramirez (owned by Srta. Dolores del Rosario and the mortgagor herein referred to as the partnership), located at Calle Real Nos. 123 and 125, District of Intramuros, Manila Philippine Islands."cralaw virtua1aw library
With regard to the nature of the property thus mortgaged which is one-half interest in the business above described, such interest is a personal property capable of appropriation and not included in the enumeration of real properties in articles 335 of the Civil Code, and may be the subject of mortgage. All personal property may be mortgage. (Sec. 7, Act No. 1508.)
The description contained in the document is sufficient. The law (sec. 7, Act No. 1508) requires only a description of the following nature:jgc:chanrobles.com.ph
"The description of the mortgaged property shall be such as to enable the parties to the mortgage, or any other person, after reasonable inquiry and investigation, to identify the same."cralaw virtua1aw library
Turning to the second error assigned, numbers 1, 2, and 3 of the article 1922 of the Civil Code invoked by the appellant are not applicable. Neither the debtor, nor the himself, is in possession of the property mortgaged, which is, and since the registration of the mortgage has been, legally in possession of the Fidelity Surety Co. (Sec. 4, Act. No. 1508; Meyers v. Thein, 15 Phil., 303)
In no way can the mortgage executed in the favor of the appellant on September 22, 1919, be given effect as of February 15, 1919, the date of the sale of the drug store in question. On the 15th of February of that year, there was a stipulation about personal security, but not a mortgage upon property, and much less upon the property in question.
Moreover, the appellant cannot deny the preferential character of the mortgage in favor of the Fidelity & Surety Co. because in his mortgage was second mortgage, subordinate to the one made in favor of the Fidelity Surety Co.
The judgment appealed from is affirmed with costs against the appellant. So ordered
LEON SIBAL , plaintiff-appellant, vs.EMILIANO J. VALDEZ ET AL., defendants. EMILIANO J. VALDEZ, appellee.
J. E. Blanco for appellant.Felix B. Bautista and Santos and Benitez for appellee.
JOHNSON, J.:
The action was commenced in the Court of First Instance of the Province of Tarlac on the 14th day of December 1924. The facts are about as conflicting as it is possible for facts to be, in the trial causes.
As a first cause of action the plaintiff alleged that the defendant Vitaliano Mamawal, deputy sheriff of the Province of Tarlac, by virtue of a writ of execution issued by the Court of First Instance of Pampanga, attached and sold to the defendant Emiliano J. Valdez the sugar cane planted by the plaintiff and his tenants on seven parcels of land described in the complaint in the third paragraph of the first cause of action; that within one year from the date of the attachment and sale the plaintiff offered to redeem said sugar cane and tendered to the defendant Valdez the amount sufficient to cover the price paid by the latter, the interest thereon and any assessments or taxes which he may have paid thereon after the purchase, and the interest corresponding thereto and that Valdez refused to accept the money and to return the sugar cane to the plaintiff.
As a second cause of action, the plaintiff alleged that the defendant Emiliano J. Valdez was attempting to harvest the palay planted in four of the seven parcels mentioned
in the first cause of action; that he had harvested and taken possession of the palay in one of said seven parcels and in another parcel described in the second cause of action, amounting to 300 cavans; and that all of said palay belonged to the plaintiff.
Plaintiff prayed that a writ of preliminary injunction be issued against the defendant Emiliano J. Valdez his attorneys and agents, restraining them (1) from distributing him in the possession of the parcels of land described in the complaint; (2) from taking possession of, or harvesting the sugar cane in question; and (3) from taking possession, or harvesting the palay in said parcels of land. Plaintiff also prayed that a judgment be rendered in his favor and against the defendants ordering them to consent to the redemption of the sugar cane in question, and that the defendant Valdez be condemned to pay to the plaintiff the sum of P1,056 the value of palay harvested by him in the two parcels above-mentioned ,with interest and costs.
On December 27, 1924, the court, after hearing both parties and upon approval of the bond for P6,000 filed by the plaintiff, issued the writ of preliminary injunction prayed for in the complaint.
The defendant Emiliano J. Valdez, in his amended answer, denied generally and specifically each and every allegation of the complaint and step up the following defenses:
(a) That the sugar cane in question had the nature of personal property and was not, therefore, subject to redemption;
(b) That he was the owner of parcels 1, 2 and 7 described in the first cause of action of the complaint;
(c) That he was the owner of the palay in parcels 1, 2 and 7; and
(d) That he never attempted to harvest the palay in parcels 4 and 5.
The defendant Emiliano J. Valdez by way of counterclaim, alleged that by reason of the preliminary injunction he was unable to gather the sugar cane, sugar-cane shoots (puntas de cana dulce) palay in said parcels of land, representing a loss to him of P8,375.20 and that, in addition thereto, he suffered damages amounting to P3,458.56. He prayed, for a judgment (1) absolving him from all liability under the complaint; (2) declaring him to be the absolute owner of the sugar cane in question and of the palay in parcels 1, 2 and 7; and (3) ordering the plaintiff to pay to him the sum of P11,833.76, representing the value of the sugar cane and palay in question, including damages.
Upon the issues thus presented by the pleadings the cause was brought on for trial. After hearing the evidence, and on April 28, 1926, the Honorable Cayetano Lukban, judge, rendered a judgment against the plaintiff and in favor of the defendants —
(1) Holding that the sugar cane in question was personal property and, as such, was not subject to redemption;
(2) Absolving the defendants from all liability under the complaint; and
(3) Condemning the plaintiff and his sureties Cenon de la Cruz, Juan Sangalang and Marcos Sibal to jointly and severally pay to the defendant Emiliano J. Valdez the sum of P9,439.08 as follows:
(a) P6,757.40, the value of the sugar cane;
(b) 1,435.68, the value of the sugar-cane shoots;
(c) 646.00, the value of palay harvested by plaintiff;
(d) 600.00, the value of 150 cavans of palay which the defendant was not able to raise by reason of the injunction, at P4 cavan. 9,439.08 From that judgment the plaintiff appealed and in his assignments of error contends that the lower court erred: (1) In holding that the sugar cane in question was personal property and, therefore, not subject to redemption;
(2) In holding that parcels 1 and 2 of the complaint belonged to Valdez, as well as parcels 7 and 8, and that the palay therein was planted by Valdez;
(3) In holding that Valdez, by reason of the preliminary injunction failed to realized P6,757.40 from the sugar cane and P1,435.68 from sugar-cane shoots (puntas de cana dulce);
(4) In holding that, for failure of plaintiff to gather the sugar cane on time, the defendant was unable to raise palay on the land, which would have netted him the sum of P600; and.
(5) In condemning the plaintiff and his sureties to pay to the defendant the sum of P9,439.08.
It appears from the record:
(1) That on May 11, 1923, the deputy sheriff of the Province of Tarlac, by virtue of writ of execution in civil case No. 20203 of the Court of First Instance of Manila (Macondray & Co., Inc. vs. Leon Sibal),levied an attachment on eight parcels of land belonging to said Leon
Sibal, situated in the Province of Tarlac, designated in the second of attachment as parcels 1, 2, 3, 4, 5, 6, 7 and 8 (Exhibit B, Exhibit 2-A).
(2) That on July 30, 1923, Macondray & Co., Inc., bought said eight parcels of land, at the auction held by the sheriff of the Province of Tarlac, for the sum to P4,273.93, having paid for the said parcels separately as follows (Exhibit C, and 2-A):
(3) That within one year from the sale of said parcel of land, and on the 24th day of September, 1923, the judgment debtor, Leon Sibal, paid P2,000 to Macondray & Co., Inc., for the account of the redemption price of said parcels of land, without specifying the particular parcels to which said amount was to applied. The redemption price said eight parcels was reduced, by virtue of said transaction, to P2,579.97 including interest (Exhibit C and 2).
The record further shows:
(1) That on April 29, 1924, the defendant Vitaliano Mamawal, deputy sheriff of the Province of Tarlac, by virtue of a writ of execution in civil case No. 1301 of the Province of Pampanga (Emiliano J. Valdez vs. Leon Sibal 1.º — the same parties in the present case), attached the personal property of said Leon Sibal located in Tarlac, among which was included the sugar cane now in question in the seven parcels of land described in the complaint (Exhibit A).
(2) That on May 9 and 10, 1924, said deputy sheriff sold at public auction said personal properties of Leon Sibal, including the sugar cane in question to Emilio J. Valdez, who paid therefor the sum of P1,550, of which P600 was for the sugar cane (Exhibit A).
(3) That on April 29,1924, said deputy sheriff, by virtue of said writ of execution, also attached the real property of said Leon Sibal in Tarlac, including all of his rights, interest and participation therein, which real property consisted of eleven parcels of land and a house and camarin situated in one of said parcels (Exhibit A).
(4) That on June 25, 1924, eight of said eleven parcels, including the house and the camarin, were bought by Emilio J. Valdez at the auction held by the sheriff for the sum of P12,200. Said eight parcels were designated in the certificate of sale as parcels 1, 3, 4, 5, 6, 7, 10 and 11. The house and camarin were situated on parcel 7 (Exhibit A).
(5) That the remaining three parcels, indicated in the certificate of the sheriff as parcels 2, 12, and 13, were released from the attachment by virtue of claims presented by Agustin Cuyugan and Domiciano Tizon (Exhibit A).
(6) That on the same date, June 25, 1924, Macondray & Co. sold and conveyed to Emilio J. Valdez for P2,579.97 all of its rights and interest in the eight parcels of land acquired by it at public auction held by the deputy sheriff of Tarlac in connection with civil case No. 20203 of the Court of First Instance of Manila, as stated above. Said amount represented the unpaid balance of the redemption price of said eight parcels, after payment by Leon Sibal of P2,000 on September 24, 1923, fro the account of the redemption price, as stated above. (Exhibit C and 2).
The foregoing statement of facts shows:
(1) The Emilio J. Valdez bought the sugar cane in question, located in the seven parcels of land described in the first
cause of action of the complaint at public auction on May 9 and 10, 1924, for P600.
(2) That on July 30, 1923, Macondray & Co. became the owner of eight parcels of land situated in the Province of Tarlac belonging to Leon Sibal and that on September 24, 1923, Leon Sibal paid to Macondray & Co. P2,000 for the account of the redemption price of said parcels.
(3) That on June 25, 1924, Emilio J. Valdez acquired from Macondray & Co. all of its rights and interest in the said eight parcels of land.
(4) That on June 25, 1924, Emilio J. Valdez also acquired all of the rights and interest which Leon Sibal had or might have had on said eight parcels by virtue of the P2,000 paid by the latter to Macondray.
(5) That Emilio J. Valdez became the absolute owner of said eight parcels of land.
The first question raised by the appeal is, whether the sugar cane in question is personal or real property. It is contended that sugar cane comes under the classification of real property as "ungathered products" in paragraph 2 of article 334 of the Civil Code. Said paragraph 2 of article 334 enumerates as real property the following: Trees, plants, and ungathered products, while they are annexed to the land or form an integral part of any immovable property." That article, however, has received in recent years an interpretation by the Tribunal Supremo de España, which holds that, under certain conditions, growing crops may be considered as personal property. (Decision of March 18, 1904, vol. 97, Civil Jurisprudence of Spain.)
Manresa, the eminent commentator of the Spanish Civil Code, in discussing section 334 of the Civil Code, in view of the recent decisions of the supreme Court of Spain, admits that growing crops are sometimes considered and treated as personal property. He says:
No creemos, sin embargo, que esto excluya la excepcionque muchos autores hacen tocante a la venta de toda cosecha o de parte de ella cuando aun no esta cogida (cosa frecuente con la uvay y la naranja), y a la de lenas, considerando ambas como muebles. El Tribunal Supremo, en sentencia de 18 de marzo de 1904, al entender sobre un contrato de arrendamiento de un predio rustico, resuelve que su terminacion por desahucio no extingue los derechos del arrendario, para recolectar o percibir los frutos correspondientes al año agricola, dentro del que nacieron aquellos derechos, cuando el arrendor ha percibido a su vez el importe de la renta integra correspondiente, aun cuando lo haya sido por precepto legal durante el curso del juicio, fundandose para ello, no solo en que de otra suerte se daria al desahucio un alcance que no tiene, sino en que, y esto es lo interesante a nuestro proposito, la consideracion de inmuebles que el articulo 334 del Codigo Civil atribuge a los frutos pendientes, no les priva del caracter de productos pertenecientes, como tales, a quienes a ellos tenga derecho, Ilegado el momento de su recoleccion.
x x x x x x x x x
Mas actualmente y por virtud de la nueva edicion de la Ley Hipotecaria, publicada en 16 de diciembre de 1909, con las reformas introducidas por la de 21 de abril anterior, la hipoteca, salvo pacto expreso que disponga lo contrario, y cualquiera que sea la naturaleza y forma de la obligacion que garantice, no comprende los frutos cualquiera que sea
la situacion en que se encuentre. (3 Manresa, 5. edicion, pags. 22, 23.)
From the foregoing it appears (1) that, under Spanish authorities, pending fruits and ungathered products may be sold and transferred as personal property; (2) that the Supreme Court of Spain, in a case of ejectment of a lessee of an agricultural land, held that the lessee was entitled to gather the products corresponding to the agricultural year, because said fruits did not go with the land but belonged separately to the lessee; and (3) that under the Spanish Mortgage Law of 1909, as amended, the mortgage of a piece of land does not include the fruits and products existing thereon, unless the contract expressly provides otherwise.
An examination of the decisions of the Supreme Court of Louisiana may give us some light on the question which we are discussing. Article 465 of the Civil Code of Louisiana, which corresponds to paragraph 2 of article 334 of our Civil Code, provides: "Standing crops and the fruits of trees not gathered, and trees before they are cut down, are likewise immovable, and are considered as part of the land to which they are attached."
The Supreme Court of Louisiana having occasion to interpret that provision, held that in some cases "standing crops" may be considered and dealt with as personal property. In the case of Lumber Co. vs. Sheriff and Tax Collector (106 La., 418) the Supreme Court said: "True, by article 465 of the Civil Code it is provided that 'standing crops and the fruits of trees not gathered and trees before they are cut down . . . are considered as part of the land to which they are attached, but the immovability provided for is only one in abstracto and without reference to rights on or to the crop acquired by others than the owners of
the property to which the crop is attached. . . . The existence of a right on the growing crop is a mobilization by anticipation, a gathering as it were in advance, rendering the crop movable quoad the right acquired therein. Our jurisprudence recognizes the possible mobilization of the growing crop." (Citizens' Bank vs. Wiltz, 31 La. Ann., 244; Porche vs. Bodin, 28 La., Ann., 761; Sandel vs. Douglass, 27 La. Ann., 629; Lewis vs. Klotz, 39 La. Ann., 267.)
"It is true," as the Supreme Court of Louisiana said in the case of Porche vs. Bodin (28 La. An., 761) that "article 465 of the Revised Code says that standing crops are considered as immovable and as part of the land to which they are attached, and article 466 declares that the fruits of an immovable gathered or produced while it is under seizure are considered as making part thereof, and incurred to the benefit of the person making the seizure. But the evident meaning of these articles, is where the crops belong to the owner of the plantation they form part of the immovable, and where it is seized, the fruits gathered or produced inure to the benefit of the seizing creditor.
A crop raised on leased premises in no sense forms part of the immovable. It belongs to the lessee, and may be sold by him, whether it be gathered or not, and it may be sold by his judgment creditors. If it necessarily forms part of the leased premises the result would be that it could not be sold under execution separate and apart from the land. If a lessee obtain supplies to make his crop, the factor's lien would not attach to the crop as a separate thing belonging to his debtor, but the land belonging to the lessor would be affected with the recorded privilege. The
law cannot be construed so as to result in such absurd consequences.
In the case of Citizen's Bank vs. Wiltz (31 La. Ann., 244)the court said:
If the crop quoad the pledge thereof under the act of 1874 was an immovable, it would be destructive of the very objects of the act, it would render the pledge of the crop objects of the act, it would render the pledge of the crop impossible, for if the crop was an inseparable part of the realty possession of the latter would be necessary to that of the former; but such is not the case. True, by article 465 C. C. it is provided that "standing crops and the fruits of trees not gathered and trees before they are cut down are likewise immovable and are considered as part of the land to which they are attached;" but the immovability provided for is only one in abstracto and without reference to rights on or to the crop acquired by other than the owners of the property to which the crop was attached. The immovability of a growing crop is in the order of things temporary, for the crop passes from the state of a growing to that of a gathered one, from an immovable to a movable. The existence of a right on the growing crop is a mobilization by anticipation, a gathering as it were in advance, rendering the crop movable quoad the right acquired thereon. The provision of our Code is identical with the Napoleon Code 520, and we may therefore obtain light by an examination of the jurisprudence of France.
The rule above announced, not only by the Tribunal Supremo de España but by the Supreme Court of Louisiana, is followed in practically every state of the Union.
From an examination of the reports and codes of the State of California and other states we find that the settle doctrine followed in said states in connection with the attachment of property and execution of judgment is, that growing crops raised by yearly labor and cultivation are considered personal property. (6 Corpuz Juris, p. 197; 17 Corpus Juris, p. 379; 23 Corpus Juris, p. 329: Raventas vs. Green, 57 Cal., 254; Norris vs. Watson, 55 Am. Dec., 161; Whipple vs. Foot, 3 Am. Dec., 442; 1 Benjamin on Sales, sec. 126; McKenzie vs. Lampley, 31 Ala., 526; Crine vs. Tifts and Co., 65 Ga., 644; Gillitt vs. Truax, 27 Minn., 528; Preston vs. Ryan, 45 Mich., 174; Freeman on Execution, vol. 1, p. 438; Drake on Attachment, sec. 249; Mechem on Sales, sec. 200 and 763.)
Mr. Mechem says that a valid sale may be made of a thing, which though not yet actually in existence, is reasonably certain to come into existence as the natural increment or usual incident of something already in existence, and then belonging to the vendor, and then title will vest in the buyer the moment the thing comes into existence. (Emerson vs. European Railway Co., 67 Me., 387; Cutting vs. Packers Exchange, 21 Am. St. Rep., 63.) Things of this nature are said to have a potential existence. A man may sell property of which he is potentially and not actually possessed. He may make a valid sale of the wine that a vineyard is expected to produce; or the gain a field may grow in a given time; or the milk a cow may yield during the coming year; or the wool that shall thereafter grow upon sheep; or what may be taken at the next cast of a fisherman's net; or fruits to grow; or young animals not yet in existence; or the good will of a trade and the like. The thing sold, however, must be specific and identified. They must be also owned at the time by the vendor. (Hull vs. Hull, 48 Conn., 250 [40 Am. Rep., 165].)
It is contended on the part of the appellee that paragraph 2 of article 334 of the Civil Code has been modified by section 450 of the Code of Civil Procedure as well as by Act No. 1508, the Chattel Mortgage Law. Said section 450 enumerates the property of a judgment debtor which may be subjected to execution. The pertinent portion of said section reads as follows: "All goods, chattels, moneys, and other property, both real and personal, * * * shall be liable to execution. Said section 450 and most of the other sections of the Code of Civil Procedure relating to the execution of judgment were taken from the Code of Civil Procedure of California. The Supreme Court of California, under section 688 of the Code of Civil Procedure of that state (Pomeroy, p. 424) has held, without variation, that growing crops were personal property and subject to execution.
Act No. 1508, the Chattel Mortgage Law, fully recognized that growing crops are personal property. Section 2 of said Act provides: "All personal property shall be subject to mortgage, agreeably to the provisions of this Act, and a mortgage executed in pursuance thereof shall be termed a chattel mortgage." Section 7 in part provides: "If growing crops be mortgaged the mortgage may contain an agreement stipulating that the mortgagor binds himself properly to tend, care for and protect the crop while growing.
It is clear from the foregoing provisions that Act No. 1508 was enacted on the assumption that "growing crops" are personal property. This consideration tends to support the conclusion hereinbefore stated, that paragraph 2 of article 334 of the Civil Code has been modified by section 450 of Act No. 190 and by Act No. 1508 in the sense that "ungathered products" as mentioned in said article of the
Civil Code have the nature of personal property. In other words, the phrase "personal property" should be understood to include "ungathered products."
At common law, and generally in the United States, all annual crops which are raised by yearly manurance and labor, and essentially owe their annual existence to cultivation by man, . may be levied on as personal property." (23 C. J., p. 329.) On this question Freeman, in his treatise on the Law of Executions, says: "Crops, whether growing or standing in the field ready to be harvested, are, when produced by annual cultivation, no part of the realty. They are, therefore, liable to voluntary transfer as chattels. It is equally well settled that they may be seized and sold under execution. (Freeman on Executions, vol. p. 438.)
We may, therefore, conclude that paragraph 2 of article 334 of the Civil Code has been modified by section 450 of the Code of Civil Procedure and by Act No. 1508, in the sense that, for the purpose of attachment and execution, and for the purposes of the Chattel Mortgage Law, "ungathered products" have the nature of personal property. The lower court, therefore, committed no error in holding that the sugar cane in question was personal property and, as such, was not subject to redemption.
All the other assignments of error made by the appellant, as above stated, relate to questions of fact only. Before entering upon a discussion of said assignments of error, we deem it opportune to take special notice of the failure of the plaintiff to appear at the trial during the presentation of evidence by the defendant. His absence from the trial and his failure to cross-examine the defendant have lent considerable weight to the evidence then presented for the defense.
Coming not to the ownership of parcels 1 and 2 described in the first cause of action of the complaint, the plaintiff made a futile attempt to show that said two parcels belonged to Agustin Cuyugan and were the identical parcel 2 which was excluded from the attachment and sale of real property of Sibal to Valdez on June 25, 1924, as stated above. A comparison of the description of parcel 2 in the certificate of sale by the sheriff (Exhibit A) and the description of parcels 1 and 2 of the complaint will readily show that they are not the same.
The description of the parcels in the complaint is as follows:
1. La caña dulce sembrada por los inquilinos del ejecutado Leon Sibal 1.º en una parcela de terreno de la pertenencia del citado ejecutado, situada en Libutad, Culubasa, Bamban, Tarlac, de unas dos hectareas poco mas o menos de superficie.
2. La caña dulce sembrada por el inquilino del ejecutado Leon Sibal 1.º, Ilamado Alejandro Policarpio, en una parcela de terreno de la pertenencia del ejecutado, situada en Dalayap, Culubasa, Bamban, Tarlac de unas dos hectareas de superficie poco mas o menos." The description of parcel 2 given in the certificate of sale (Exhibit A) is as follows:
2a. Terreno palayero situado en Culubasa, Bamban, Tarlac, de 177,090 metros cuadrados de superficie, linda al N. con Canuto Sibal, Esteban Lazatin and Alejandro Dayrit; al E. con Francisco Dizon, Felipe Mañu and others; al S. con Alejandro Dayrit, Isidro Santos and Melecio Mañu; y al O. con Alejandro Dayrit and Paulino Vergara. Tax No. 2854, vador amillarado P4,200 pesos.
On the other hand the evidence for the defendant purported to show that parcels 1 and 2 of the complaint were included among the parcels bought by Valdez from Macondray on June 25, 1924, and corresponded to parcel 4 in the deed of sale (Exhibit B and 2), and were also included among the parcels bought by Valdez at the auction of the real property of Leon Sibal on June 25, 1924, and corresponded to parcel 3 in the certificate of sale made by the sheriff (Exhibit A). The description of parcel 4 (Exhibit 2) and parcel 3 (Exhibit A) is as follows:
Parcels No. 4. — Terreno palayero, ubicado en el barrio de Culubasa,Bamban, Tarlac, I. F. de 145,000 metros cuadrados de superficie, lindante al Norte con Road of the barrio of Culubasa that goes to Concepcion; al Este con Juan Dizon; al Sur con Lucio Maño y Canuto Sibal y al Oeste con Esteban Lazatin, su valor amillarado asciende a la suma de P2,990. Tax No. 2856.
As will be noticed, there is hardly any relation between parcels 1 and 2 of the complaint and parcel 4 (Exhibit 2 and B) and parcel 3 (Exhibit A). But, inasmuch as the plaintiff did not care to appear at the trial when the defendant offered his evidence, we are inclined to give more weight to the evidence adduced by him that to the evidence adduced by the plaintiff, with respect to the ownership of parcels 1 and 2 of the compliant. We, therefore, conclude that parcels 1 and 2 of the complaint belong to the defendant, having acquired the same from Macondray & Co. on June 25, 1924, and from the plaintiff Leon Sibal on the same date.
It appears, however, that the plaintiff planted the palay in said parcels and harvested therefrom 190 cavans. There being no evidence of bad faith on his part, he is therefore entitled to one-half of the crop, or 95 cavans. He should
therefore be condemned to pay to the defendant for 95 cavans only, at P3.40 a cavan, or the sum of P323, and not for the total of 190 cavans as held by the lower court.
As to the ownership of parcel 7 of the complaint, the evidence shows that said parcel corresponds to parcel 1 of the deed of sale of Macondray & Co, to Valdez (Exhibit B and 2), and to parcel 4 in the certificate of sale to Valdez of real property belonging to Sibal, executed by the sheriff as above stated (Exhibit A). Valdez is therefore the absolute owner of said parcel, having acquired the interest of both Macondray and Sibal in said parcel.
With reference to the parcel of land in Pacalcal, Tarlac, described in paragraph 3 of the second cause of action, it appears from the testimony of the plaintiff himself that said parcel corresponds to parcel 8 of the deed of sale of Macondray to Valdez (Exhibit B and 2) and to parcel 10 in the deed of sale executed by the sheriff in favor of Valdez (Exhibit A). Valdez is therefore the absolute owner of said parcel, having acquired the interest of both Macondray and Sibal therein.
In this connection the following facts are worthy of mention:
Execution in favor of Macondray & Co., May 11, 1923. Eight parcels of land were attached under said execution. Said parcels of land were sold to Macondray & Co. on the 30th day of July, 1923. Rice paid P4,273.93. On September 24, 1923, Leon Sibal paid to Macondray & Co. P2,000 on the redemption of said parcels of land. (See Exhibits B and C ).
Attachment, April 29, 1924, in favor of Valdez. Personal property of Sibal was attached, including the sugar cane in
question. (Exhibit A) The said personal property so attached, sold at public auction May 9 and 10, 1924. April 29, 1924, the real property was attached under the execution in favor of Valdez (Exhibit A). June 25, 1924, said real property was sold and purchased by Valdez (Exhibit A).
June 25, 1924, Macondray & Co. sold all of the land which they had purchased at public auction on the 30th day of July, 1923, to Valdez.
As to the loss of the defendant in sugar cane by reason of the injunction, the evidence shows that the sugar cane in question covered an area of 22 hectares and 60 ares (Exhibits 8, 8-b and 8-c); that said area would have yielded an average crop of 1039 picos and 60 cates; that one-half of the quantity, or 519 picos and 80 cates would have corresponded to the defendant, as owner; that during the season the sugar was selling at P13 a pico (Exhibit 5 and 5-A). Therefore, the defendant, as owner, would have netted P 6,757.40 from the sugar cane in question. The evidence also shows that the defendant could have taken from the sugar cane 1,017,000 sugar-cane shoots (puntas de cana) and not 1,170,000 as computed by the lower court. During the season the shoots were selling at P1.20 a thousand (Exhibits 6 and 7). The defendant therefore would have netted P1,220.40 from sugar-cane shoots and not P1,435.68 as allowed by the lower court.
As to the palay harvested by the plaintiff in parcels 1 and 2 of the complaint, amounting to 190 cavans, one-half of said quantity should belong to the plaintiff, as stated above, and the other half to the defendant. The court erred in awarding the whole crop to the defendant. The plaintiff should therefore pay the defendant for 95 cavans
only, at P3.40 a cavan, or P323 instead of P646 as allowed by the lower court.
The evidence also shows that the defendant was prevented by the acts of the plaintiff from cultivating about 10 hectares of the land involved in the litigation. He expected to have raised about 600 cavans of palay, 300 cavans of which would have corresponded to him as owner. The lower court has wisely reduced his share to 150 cavans only. At P4 a cavan, the palay would have netted him P600.
In view of the foregoing, the judgment appealed from is hereby modified. The plaintiff and his sureties Cenon de la Cruz, Juan Sangalang and Marcos Sibal are hereby ordered to pay to the defendant jointly and severally the sum of P8,900.80, instead of P9,439.08 allowed by the lower court, as follows:
P6,757.40 for the sugar cane;
1,220.40 for the sugar cane shoots;
323.00for the palay harvested by plaintiff in parcels 1 and 2;
600.00for the palay which defendant could have raised.
8,900.80============
In all other respects, the judgment appealed from is hereby affirmed, with costs. So ordered.
Street, Malcolm, Villamor, Romualdez and Villa-Real., JJ., concur.
SIBAL v. VALDEZ
FACTS: The deputy sheriff of Tarlac attached and sold to Valdez the sugarcane planted by the plaintiff. The plaintiff asked for the redemption of the sugarcane. Valdez said that it cannot be subject to redemption because it is a personal property.
ISSUE: WON the sugarcane in question is a personal or real property.
HELD:Sugarcane is under real property as ungathered products. The Supreme Court of Louisiana provided that standing crops are considered as part of the land to which they are attached but the immovability provided for is only one in abstract. The existence of a right on the growing crop is mobilization by anticipation, a gathering as it were in advance, rendering the crop movable quoad the right acquired therein.
-A crop raised on leased premises in no sense forms part of the immovable. It belongs to the lessee and may be sold by him.
-Act 1508 (Chattel Mortgage Law) recognize growing crops as personal property.
– Crops whether growing or ready to be harvested, when produced by annual cultivation, is not part of realty.
– Paragraph 2 of Art. 334 of the Civil Code has been modified by Sec. 450 of Code of Civil Procedure and Act no. 1508 in the sense that for purposes of attachment and execution and Chattel Mortgage Law, ungathered products have the nature of personal property.
G.R. No. L-44237 February 28, 1989
VICTORIA ONG DE OCSIO, petitioner, vs.
COURT OF APPEALS and the RELIGIOUS OF THE VIRGIN MARY, represented by M.O. Leoncia Pacquing, R.V.M., respondents.
Elpedio N. Cabasan for petitioner.
Padilla Law Office for private respondent.
NARVASA, J.:
From the adverse judgment of the Court of Appeals, 1 affirming in toto that of the Trial Court, 2 the petitioner has come to this Court on an appeal by certiorari to plead for reversal of (1) the factual determination that she had sold the lot in controversy to private respondent, and (2) the legal conclusion that neither the 1973 nor the 1987 Constitution disqualifies the corporation known as the Religious of the Virgin Mary, from acquiring the land in question and registering it in its name. In light of the time-honored rule that findings of fact of the Court of Appeals are generally final, and the doctrine lately laid down by this Court on the precise legal issue now raised by petitioner, her appeal must fail.
The controversy at bar arose in connection with cadastral proceedings initiated by the Director of Lands, in behalf of the Republic, for the settlement and adjudication of title to a large tract of land measuring 261.5791 hectares, divided into 1,419 lots, situated in the City of Iligan. 3
Victoria Ong de Ocsio (herein petitioner) seasonably presented an answer to the petition. She alleged that she was the owner, by purchase, of two (2) parcels of land with specific boundaries comprehended in the cadastral proceeding: Lot No. 1272, measuring 256 square meters,
and Lot 1273 a road lot, measuring 21 square meters; and that as owner, she had been in possession of both lots for fifteen (15) years, and her predecessors-in-interest, for sixty (60) years. 4 Title to the same parcels of land was however claimed by the Religious of the Virgin Mary.5 In its answer, it averred that it had bought the lots from Victoria Ong de Ocsio and had been in possession as owner thereof for over four years, and its possession and that of its predecessors was immemorial.
Evidence was received on these conflicting assertions after which the Cadastral Court rendered judgment, declaring that the evidence satisfactorily established that Victoria Ong de Ocsio had in truth sold Lot No. 1272 to the Religious of the Virgin Mary in virtue of a deed of sale dated April 12, 1956 (Exhibit 1), and Lot No. 1273 was a road right of way granted to the City of Iligan. The judgment contained the following dispositive portion, viz: 6
WHEREFORE, the court renders judgment adjudicating Cadastral Lot 1272, Iligan Cadastre, to the Religious of the Virgin Mary, a duly registered domestic religious corporation, the members of which are all Filipino citizens, with main office in the City of Manila, but the building existing thereon is hereby declared to be the property of claimant Victoria Ong de Ocsio who is hereby ordered to remove Said building out of the premises within 90 days from date hereof. The claim of Victoria Ong de Ocsio with respect to said cadastral lot is dismiss. No pronouncement is made as to costs.
Let the corresponding decree issue 30 days after this decision shall have become final.
As aforestated, the Court of Appeals affirmed the cadastral court's decision in toto. So, too, will this Court.
Both the cadastral Court and the Court of Appeals came to the conclusion, after analysing and weighing the testimonial and documentary evidence adduced by the parties, that Virginia Ong de Ocsio's version of the facts was not true-that it was another property, not Lot No. 1272, that she had conveyed to the religious corporation but that it was indeed Lot No. 1272 that was subject of the sale and had indeed been transferred to the latter. Now, findings of fact of this sort, contained in a decision of the Court of Appeals are by long and uniformly observed rule conclusive on the parties and on the Supreme Court, as well; 7 subject only to a few specified exceptions, 8 none of which obtains here, said findings may not be reviewed on appeal.
As regards the issue of law raised by her, petitioner fares no better. Citing Manila Electric Co. v. Castro-Bartolome, 114 SCRA 799 (1982) and Republic v. Villanueva, 114 SCRA 875 (1982), in relation to Section 11, Article XIV of the 1973 Constitution, she asserts that as the private respondent is a religious corporation, it is disqualified to obtain judicial confirmation of an imperfect title under Section 48(b) of the Public Land Act which grants that right only to natural persons. The cited rulings no longer control. Current doctrine, first announced by the Court en banc in Director of Lands v. I.A.C. 146 SCRA 509 (1986), is that open, continuous and exclusive possession of alienable public land for at least thirty (30) years in accordance with the Public Land Act ipso jureconverts the land to private property, and a juridical person who thereafter acquires the same may have title thereto confirmed in its name. Virtually the same state of facts
obtained in said case that now obtain here. A private corporation had purchased the land originally of the public domain from parties who had, by themselves and through their predecessors-in-interest, possessed and occupied it since time immemorial. It had thereafter instituted proceedings for confirmation of title under Section 48(b) of the Public Land Act. In upholding its right to do so, the court held that the fact that the proceedings had been instituted by said purchaser in its own name and not in the name of the transferors was "xx simply xx (an) accidental circumstance, productive of a defect hardly more than procedural and in nowise affecting the substance and merits of the right of ownership sought to be confirmed." The ruling was reaffirmed in two later cases, Director of Lands v. Manila Electric Co., 153 SCRA 686 (September 11, 1987), and Republic v. C.A., 156 SCRA 344 (October 30, 1987) where the same question of law was raised. In the latter it was expressly held that the prohibitions in the 1973 and 1987 Constitutions against acquisition or registration of lands by or in behalf of private corporations do not apply to public lands already converted to private ownership by natural persons under the provisions of the Public Land Act. In the present case, Virginia Ong de Ocsio and her predecessors-in-interest having possessed Lot No. 1272 for the period and under the conditions prescribed by law for acquisition of ownership of disposable public land prior to the sale of the property to the Religious of the Virgin Mary, confirmation of title thereto in the latter's name is, under the precedents referred to, entirely in order.
WHEREFORE, the judgment of the Court of Appeals subject of the petition for review on certiorari is AFFIRMEDin toto. Costs against the petitioner.
Cruz, Gancayco, Griño-Aquino and Medialdea, JJ., concur.
THIRD DIVISION
[G.R. No. 153201. January 26, 2005]
JOSE MENCHAVEZ, JUAN MENCHAVEZ JR., SIMEON MENCHAVEZ, RODOLFO MENCHAVEZ, CESAR MENCHAVEZ, REYNALDO, MENCHAVEZ, ALMA MENCHAVEZ, ELMA MENCHAVEZ, CHARITO M. MAGA, FE M. POTOT, THELMA M. REROMA, MYRNA M. YBAEZ, and SARAH M. VILLABER, petitioners, vs. FLORENTINO TEVES JR., respondent.
D E C I S I O N
PANGANIBAN, J.:
Avoid contract is deemed legally nonexistent. It produces no legal effect. As a general rule, courts leave parties to such a contract as they are, because they are in pari delicto or equally at fault. Neither party is entitled to legal protection.
The Case
Before us is a Petition for Review[1] under Rule 45 of the Rules of Court, assailing the February 28, 2001 Decision[2] and the April 16, 2002 Resolution[3] of the Court of Appeals (CA) in CA-GR CV No. 51144. The challenged Decision disposed as follows:
WHEREFORE, the assailed decision is hereby MODIFIED, as follows:
1. Ordering [petitioners] to jointly and severally pay the [respondent] the amount of P128,074.40 as actual damages, and P50,000.00 as liquidated damages;
2. Dismissing the third party complaint against the third party defendants;
3. Upholding the counterclaims of the third party defendants against the [petitioners. Petitioners] are
hereby required to pay [the] third party defendants the sum of P30,000.00 as moral damages for the clearly unfounded suit;
4. Requiring the [petitioners] to reimburse the third party defendants the sum of P10,000.00 in the concept of attorneys fees and appearance fees of P300.00 per appearance;
5. Requiring the [petitioners] to reimburse the third party defendants the sum of P10,000.00 as exemplary damages pro bono publico and litigation expenses including costs, in the sum of P5,000.00.[4]
The assailed Resolution denied petitioners Motion for Reconsideration.
The Facts
On February 28, 1986, a Contract of Lease was executed by Jose S. Menchavez, Juan S. Menchavez Sr., Juan S. Menchavez Jr., Rodolfo Menchavez, Simeon Menchavez, Reynaldo Menchavez, Cesar Menchavez, Charito M. Maga, Fe M. Potot, Thelma R. Reroma, Myrna Ybaez, Sonia S. Menchavez, Sarah Villaver, Alma S. Menchavez, and Elma S. Menchavez, as lessors; and Florentino Teves Jr. as lessee. The pertinent portions of the Contract are herein reproduced as follows:
WHEREAS, the LESSORS are the absolute and lawful co-owners of that area covered by FISHPOND APPLICATION No. VI-1076 of Juan Menchavez, Sr., filed on September 20, 1972, at Fisheries Regional Office No. VII, Cebu City covering an area of 10.0 hectares more or less located at Tabuelan, Cebu;
x x x x x x x x x
NOW, THEREFORE, for and in consideration of the mutual covenant and stipulations hereinafter set forth, the LESSORS and the LESSEE have agreed and hereby agree as follows:
1. The TERM of this LEASE is FIVE (5) YEARS, from and after the execution of this Contract of Lease, renewable at the OPTION of the LESSORS;
2. The LESSEE agrees to pay the LESSORS at the residence of JUAN MENCHAVEZ SR., one of the LESSORS herein, the sum of FORTY THOUSAND PESOS (P40,000.00) Philippine Currency, annually x x x;
3. The LESSORS hereby warrant that the above-described parcel of land is fit and good for the intended use as FISHPOND;
4. The LESSORS hereby warrant and assure to maintain the LESSEE in the peaceful and adequate enjoyment of the lease for the entire duration of the contract;
5. The LESSORS hereby further warrant that the LESSEE can and shall enjoy the intended use of the leased premises as FISHPOND FOR THE ENTIRE DURATION OF THE CONTRACT;
6. The LESSORS hereby warrant that the above-premises is free from all liens and encumbrances, and shall protect the LESSEE of his right of lease over the said premises from any and all claims whatsoever;
7. Any violation of the terms and conditions herein provided, more particularly the warranties above-mentioned, the parties of this Contract responsible thereof shall pay liquidated damages in the amount of not less than P50,000.00 to the offended party of this Contract; in
case the LESSORS violated therefor, they bound themselves jointly and severally liable to the LESSEE;
x x x x x x x x x.[5]
On June 2, 1988, Cebu RTC Sheriffs Gumersindo Gimenez and Arturo Cabigon demolished the fishpond dikes constructed by respondent and delivered possession of the subject property to other parties.[6] As a result, he filed a Complaint for damages with application for preliminary attachment against petitioners. In his Complaint, he alleged that the lessors had violated their Contract of Lease, specifically the peaceful and adequate enjoyment of the property for the entire duration of the Contract. He claimed P157,184.40 as consequential damages for the demolition of the fishpond dikes, P395,390.00 as unearned income, and an amount not less than P100,000.00 for rentals paid.[7]
Respondent further asserted that the lessors had withheld from him the findings of the trial court in Civil Case No. 510-T, entitled Eufracia Colongan and Paulino Pamplona v. Juan Menchavez Sr. and Sevillana S. Menchavez. In that case involving the same property, subject of the lease, the Menchavez spouses were ordered to remove the dikes illegally constructed and to pay damages and attorneys fees.[8]
Petitioners filed a Third Party Complaint against Benny and Elizabeth Allego, Albino Laput, Adrinico Che and Charlemagne Arendain Jr., as agents of Eufracia Colongan and Paulino Pamplona. The third-party defendants maintained that the Complaint filed against them was unfounded. As agents of their elderly parents, they could not be sued in their personal capacity. Thus, they asserted their own counterclaims.[9]
After trial on the merits, the RTC ruled thus:
[The court must resolve the issues one by one.] As to the question of whether the contract of lease between Teves and the [petitioners] is valid, we must look into the present law on the matter of fishponds. And this is Pres. Decree No. 704 which provides in Sec. 24:
Lease of fishponds-Public lands available for fishpond development including those earmarked for family-size fishponds and not yet leased prior to November 9, 1972 shall be leased only to qualified persons, associations, cooperatives or corporations, subject to the following conditions.
1. The lease shall be for a period of twenty five years (25), renewable for another twenty five years;
2. Fifty percent of the area leased shall be developed and be producing in commercial scale within three years and the remaining portion shall be developed and be producing in commercial scale within five years; both periods begin from the execution of the lease contract;
3. All areas not fully developed within five years from the date of the execution of the lease contract shall automatically revert to the public domain for disposition of the bureau; provided that a lessee who failed to develop the area or any portion thereof shall not be permitted to reapply for said area or any portion thereof or any public land under this decree; and/or any portion thereof or any public land under this decree;
4. No portion of the leased area shall be subleased.
The Constitution, (Sec. 2 & 3, Art. XII of the 1987 Constitution) states:
Sec. 2 - All lands of the public domain, waters, minerals, coal, petroleum and other mineral oils, all forces of potential energy, fisheries, forests, or timber, wild life, flora and fauna and other natural resources are owned by the state.
Sec. 3 - Lands of the public domain are classified into agricultural, forest or timber, mineral lands and national parks. Agricultural lands of the public domain may be further classified by law according to the uses to which they may be devoted. Alienable lands of the public domain shall be limited to agricultural lands x x x.
As a consequence of these provisions, and the declared public policy of the State under the Regalian Doctrine, the lease contract between Florentino Teves, Jr. and Juan Menchavez Sr. and his family is a patent nullity. Being a patent nullity, [petitioners] could not give any rights to Florentino Teves, Jr. under the principle: NEMO DAT QUOD NON HABET - meaning ONE CANNOT GIVE WHAT HE DOES NOT HAVE, considering that this property in litigation belongs to the State and not to [petitioners]. Therefore, the first issue is resolved in the negative, as the court declares the contract of lease as invalid and void ab-initio.
On the issue of whether [respondent] and [petitioners] are guilty of mutual fraud, the court rules that the [respondent] and [petitioners] are in pari-delicto. As a consequence of this, the court must leave them where they are found. x x x.
x x x x x x x x x
x x x. Why? Because the defendants ought to have known that they cannot lease what does not belong to them for
as a matter of fact, they themselves are still applying for a lease of the same property under litigation from the government.
On the other hand, Florentino Teves, being fully aware that [petitioners were] not yet the owner[s], had assumed the risks and under the principle of VOLENTI NON FIT INJURIA NEQUES DOLUS - He who voluntarily assumes a risk, does not suffer damage[s] thereby. As a consequence, when Teves leased the fishpond area from [petitioners]- who were mere holders or possessors thereof, he took the risk that it may turn out later that his application for lease may not be approved.
Unfortunately however, even granting that the lease of [petitioners] and [their] application in 1972 were to be approved, still [they] could not sublease the same. In view therefore of these, the parties must be left in the same situation in which the court finds them, under the principle IN PARI DELICTO NON ORITOR ACTIO, meaning[:] Where both are at fault, no one can found a claim.
On the third issue of whether the third party defendants are liable for demolishing the dikes pursuant to a writ of execution issued by the lower court[, t]his must be resolved in the negative, that the third party defendants are not liable. First, because the third party defendants are mere agents of Eufracia Colongan and Eufenio Pamplona, who are the ones who should be made liable if at all, and considering that the demolition was pursuant to an order of the court to restore the prevailing party in that Civil Case 510-T, entitled: Eufracia Colongan v. Menchavez.
After the court has ruled that the contract of lease is null and void ab-initio, there is no right of the [respondent] to protect and therefore[,] there is no basis for questioning
the Sheriffs authority to demolish the dikes in order to restore the prevailing party, under the principle VIDETUR NEMO QUISQUAM ID CAPERE QUOD EI NECESSE EST ALII RESTITUERE - He will not be considered as using force who exercise his rights and proceeds by the force of law.
WHEREFORE, in view of all foregoing [evidence] and considerations, this court hereby renders judgment as follows:
1. Dismissing the x x x complaint by the [respondent] against the [petitioners];
2. Dismissing the third party complaint against the third party defendants;
3. Upholding the counterclaims of the third party defendants against the [petitioners. The petitioners] are hereby required to pay third party defendants the sum of P30,000.00 as moral damages for this clearly unfounded suit;
4. Requiring the [petitioners] to reimburse the third party defendants the sum of P10,000.00 in the concept of attorneys fees and appearance fees of P300.00 per appearance;
5. Requiring the [petitioners] to pay to the third party defendants the sum of P10,000.00 as exemplary damages probono publico and litigation expenses including costs, in the sum of P5,000.00.[10](Underscoring in the original)
Respondent elevated the case to the Court of Appeals, where it was docketed as CA-GR CV No. 51144.
Ruling of the Court of Appeals
The CA disagreed with the RTCs finding that petitioners and respondent were in pari delicto. It contended that while there was negligence on the part of respondent for failing to verify the ownership of the subject property, there was no evidence that he had knowledge of petitioners lack of ownership.[11] It held as follows:
x x x. Contrary to the findings of the lower court, it was not duly proven and established that Teves had actual knowledge of the fact that [petitioners] merely usurped the property they leased to him. What Teves admitted was that he did not ask for any additional document other than those shown to him, one of which was the fishpond application. In fact, [Teves] consistently claimed that he did not bother to ask the latter for their title to the property because he relied on their representation that they are the lawful owners of the fishpond they are holding for lease. (TSN, July 11, 1991, pp. 8-11)[12]
The CA ruled that respondent could recover actual damages in the amount of P128,074.40. Citing Article 1356[13] of the Civil Code, it further awarded liquidated damages in the amount of P50,000, notwithstanding the nullity of the Contract.[14]
Hence, this Petition.[15]
The Issues
Petitioners raise the following issues for our consideration:
1. The Court of Appeals disregarded the evidence, the law and jurisprudence when it modified the trial courts decision when it ruled in effect that the trial court erred in holding that the respondent and petitioners are in pari delicto, and the courts must leave them where they are found;
2. The Court of Appeals disregarded the evidence, the law and jurisprudence in modifying the decision of the trial court and ruled in effect that the Regional Trial Court erred in dismissing the respondents Complaint.[16]
The Courts Ruling
The Petition has merit.
Main Issue:
Were the Parties in Pari Delicto?
The Court shall discuss the two issues simultaneously.
In Pari Delicto Rule
on Void Contracts
The parties do not dispute the finding of the trial and the appellate courts that the Contract of Lease was void.[17] Indeed, the RTC correctly held that it was the State, not petitioners, that owned the fishpond. The 1987 Constitution specifically declares that all lands of the public domain, waters, fisheries and other natural resources belong to the State.[18] Included here are fishponds, which may not be alienated but only leased.[19] Possession thereof, no matter how long, cannot ripen into ownership.[20]
Being merely applicants for the lease of the fishponds, petitioners had no transferable right over them. And even if the State were to grant their application, the law expressly disallowed sublease of the fishponds to respondent.[21] Void are all contracts in which the cause, object or purpose is contrary to law, public order or public policy.[22]
A void contract is equivalent to nothing; it produces no civil effect.[23] It does not create, modify or extinguish a juridical relation.[24] Parties to a void agreement cannot expect the aid of the law; the courts leave them as they are, because they are deemed in pari delicto or in equal fault.[25] To this rule, however, there are exceptions that permit the return of that which may have been given under a void contract.[26] One of the exceptions is found in Article 1412 of the Civil Code, which states:
Art. 1412. If the act in which the unlawful or forbidden cause consists does not constitute a criminal offense, the following rules shall be observed:
(1) When the fault is on the part of both contracting parties, neither may recover what he has given by virtue of the contract, or demand the performance of the others undertaking;
(2) When only one of the contracting parties is at fault, he cannot recover what he has given by reason of the contract, or ask for the fulfillment of what has been promised him. The other, who is not at fault, may demand the return of what he has given without any obligation to comply with his promise.
On this premise, respondent contends that he can recover from petitioners, because he is an innocent party to the Contract of Lease.[27] Petitioners allegedly induced him to enter into it through serious misrepresentation.[28]
Finding of In Pari Delicto:
A Question of Fact
The issue of whether respondent was at fault or whether the parties were in pari delicto is a question of fact not
normally taken up in a petition for review on certiorari under Rule 45 of the Rules of Court.[29] The present case, however, falls under two recognized exceptions to this rule.[30] This Court is compelled to review the facts, since the CAs factual findings are (1) contrary to those of the trial court;[31] and (2) premised on an absence of evidence, a presumption that is contradicted by the evidence on record.[32]
Unquestionably, petitioners leased out a property that did not belong to them, one that they had no authority to sublease. The trial court correctly observed that petitioners still had a pending lease application with the State at the time they entered into the Contract with respondent.[33]
Respondent, on the other hand, claims that petitioners misled him into executing the Contract.[34] He insists that he relied on their assertions regarding their ownership of the property. His own evidence, however, rebuts his contention that he did not know that they lacked ownership. At the very least, he had notice of their doubtful ownership of the fishpond.
Respondent himself admitted that he was aware that the petitioners lease application for the fishpond had not yet been approved.[35] Thus, he knowingly entered into the Contract with the risk that the application might be disapproved. Noteworthy is the fact that the existence of a fishpond lease application necessarily contradicts a claim of ownership. That respondent did not know of petitioners lack of ownership is therefore incredible.
The evidence of respondent himself shows that he negotiated the lease of the fishpond with both Juan Menchavez Sr. and Juan Menchavez Jr. in the office of his
lawyer, Atty. Jorge Esparagoza.[36] His counsels presence during the negotiations, prior to the parties meeting of minds, further debunks his claim of lack of knowledge. Lawyers are expected to know that fishponds belong to the State and are inalienable. It was reasonably expected of the counsel herein to advise his client regarding the matter of ownership.
Indeed, the evidence presented by respondent demonstrates the contradictory claims of petitioners regarding their alleged ownership of the fishpond. On the one hand, they claimed ownership and, on the other, they assured him that their fishpond lease application would be approved.[37] This circumstance should have been sufficient to place him on notice. It should have compelled him to determine their right over the fishpond, including their right to lease it.
The Contract itself stated that the area was still covered by a fishpond application.[38] Nonetheless, although petitioners declared in the Contract that they co-owned the property, their erroneous declaration should not be used against them. A cursory examination of the Contract suggests that it was drafted to favor the lessee. It can readily be presumed that it was he or his counsel who prepared it -- a matter supported by petitioners evidence.[39] The ambiguity should therefore be resolved against him, being the one who primarily caused it.[40]
The CA erred in finding that petitioners had failed to prove actual knowledge of respondent of the ownership status of the property that had been leased to him. On the contrary, as the party alleging the fact, it was he who had the burden of proving through a preponderance of evidence[41] -- that they misled him regarding the ownership of the fishpond. His evidence fails to support
this contention. Instead, it reveals his fault in entering into a void Contract. As both parties are equally at fault, neither may recover against the other.[42]
Liquidated Damages
Not Proper
The CA erred in awarding liquidated damages, notwithstanding its finding that the Contract of Lease was void. Even if it was assumed that respondent was entitled to reimbursement as provided under paragraph 1 of Article 1412 of the Civil Code, the award of liquidated damages was contrary to established legal principles.
Liquidated damages are those agreed upon by the parties to a contract, to be paid in case of a breach thereof.[43] Liquidated damages are identical to penalty insofar as legal results are concerned.[44] Intended to ensure the performance of the principal obligation, such damages are accessory and subsidiary obligations.[45] In the present case, it was stipulated that the party responsible for the violation of the terms, conditions and warranties of the Contract would pay not less than P50,000 as liquidated damages. Since the principal obligation was void, there was no contract that could have been breached by petitioners; thus, the stipulation on liquidated damages was inexistent. The nullity of the principal obligation carried with it the nullity of the accessory obligation of liquidated damages.[46]
As explained earlier, the applicable law in the present factual milieu is Article 1412 of the Civil Code. This law merely allows innocent parties to recover what they have given without any obligation to comply with their prestation. No damages may be recovered on the basis of
a void contract; being nonexistent, the agreement produces no juridical tie between the parties involved. Since there is no contract, the injured party may only recover through other sources of obligations such as a law or a quasi-contract.[47] A party recovering through these other sources of obligations may not claim liquidated damages, which is an obligation arising from a contract.
WHEREFORE, the Petition is GRANTED and the assailed Decision and Resolution SET ASIDE. The Decision of the trial court is hereby REINSTATED.
No pronouncement as to costs.
SO ORDERED.
Sandoval-Gutierrez, Corona, Carpio-Morales, and Garcia, JJ., concur.
X -------------------------------------------------------------------------------------- X
DECISION
AZCUNA, J.:
Before this Court is a petition for review on certiorari under Rule 45 of the Rules of Court seeking the reversal of the decision[1] dated July 16, 2001, and the resolution[2] dated December 21, 2001, of the Court of Appeals (CA) in CA-G.R. SP No. 62081 entitled Republic of the Philippines (Represented by the Lands Management Bureau) v. Court of First Instance (CFI) of Palawan (now Regional Trial Court), Seventh Judicial District, Branch II presided over by Former District Judge, Jose P. Rodriguez, et al.
The antecedent facts[3] are as follows:
On July 19, 1973, the heirs of Pedro S. Palanca, (petitioners herein), filed an application to bring the pieces of land they allegedly owned under the operation of the Land Registration Act. These are: a two hundred thirty-nine thousand nine hundred eighty (239,980) square meter parcel of land situated in Barrio Panlaitan, Municipality of Busuanga, Province of Palawan, as shown on plan Psu-04-000074, and a one hundred seventy-six thousand five hundred eighty-eight (176,588) square meter land in Barrio of Panlaitan (Island of Capari), Municipality of NewBusuanga, Province of Palawan, as shown on plan Psu-04-000073. They acquired said realties by inheritance from
the late Pedro S. Palanca, who had occupied and possessed said land openly and continuously in the concept of an owner since 1934, or 39 years before the filing of said application, and planted on said lands about 1,200 coconut trees on each land, declared the same for taxation purposes and paid the taxes thereof. The first parcel of land is presently occupied by Lopez, Libarra, an encargado of herein (petitioners), while the second is occupied by (petitioner)Candelaria Punzalan. In Civil Case No. 573 entitled Heirs of Pedro Palanca, Plaintiffs, vs. Alfonso Guillamac, Defendant, for Recovery of Possession of a Parcel of Land the Court of First Instance of Palawan rendered a decision on March 4, 1970, declaring (petitioners), the heirs of Pedro S. Palanca, as the rightful possessors of the land at Talampulan Island, Bario of Panlaitan, Municipality of Busuanga, Province of Palawan, covered by Psu-04-000074, including the two (2) hectare portion occupied and claimed by Alfonso Guillamac.
It also appears that the jurisdictional requirements as to notices, as prescribed by Section 31, Act No. 496, namely publication in the Official Gazette, were complied with.
During the initial hearing of the case, verbal oppositions to the application were made by the Provincial Fiscal of Palawan purportedly for and in behalf of the Bureau of Forest Development, the Bureau of Lands, and the Department of Agrarian Reform, some inhabitants of the subject properties and a businessman by the name of
Alfonso Guillamac. The Provincial Fiscal stated that the lands subject of the application had no clearance from the Bureau of Forestry and that portions thereof may still be part of the timberland block and/or public forest under the administration of the Bureau of Forestry and had not been certified as being alienable and disposable by the Bureau of Lands. He therefore requested that the resolution on the application be stayed pending the examination and issuance of the required clearance by the Bureau of Forest Development.[4] After the lapse of three years from the date of the initial hearing, however, no valid and formal opposition was filed by any of the oppositors in the form and manner required by law.[5] Neither did the Provincial Fiscal present witnesses from the relevant government bureaus and agencies to support his contention that the subject lands had not yet been cleared for public disposition.
On the other hand, petitioners submitted the plan and technical description of the land, a survey certificate approved by the Bureau of Lands and also tax declarations showing that they have consistently paid the realty taxes accruing on the property. Petitioners likewise presented six witnesses in support of their application, namely Constantino Palanca, Ofelia Palanca-Miguel, Lopez Libarra, Alejandro Cabajar, Alfonso Lucero and Augustin Timbancaya.
Both Constantino Palanca and Ofelia Palanca-Miguel testified that: (1) they were heirs of one Pedro S. Palanca; (2) they, together with their other siblings, were applicants for the registration of two parcels of land located in
Barrio Panlaitan, Busuanga, Palawan; (3) their father, Pedro S. Palanca, acquired ownership over the subject properties by continuous, public and notorious possession; (4) their father built a house on each parcel of land and planted coconut trees; (5) since their fathers death, they have continued their possession over the lands in the concept of owners and adverse to all claimants; and (6) the properties have been declared for taxation purposes and the corresponding taxes religiously paid for over forty (40) years.[6]
Lopez Libarra and Alejandro Cabajar testified that they knew the late Pedro S. Palanca and worked for the latter as an overseer and a capataz respectively in the cultivation of the subject properties. Cabajar, in particular, claimed that he helped clear the lands sometime in the mid-1920s, planted upon such lands coconut trees which are now bearing fruit, and continued working with Pedro S. Palanca until the latters death in 1943. He subsequently went to work for the heirs of Pedro S. Palanca whom he confirms now own and manage the properties.[7]
For his part, Libarra testified that he had been the overseer of the two coconut plantations of the late Pedro S. Palanca since 1934. He identified the location of the properties, averring that one plantation is in Talampulan, Panlaitan Island and the other in Talampetan, Capari Island. He further testified that at the time he was employed in 1934, there were already improvements in the form of coconut trees planted in the areas, a number of which were already bearing fruits. His duties included overseeing and cleaning the plantations, making copra and replanting the area when necessary. He also claimed he worked with Pedro S. Palanca until the
latters death in 1943 and continues to work for the latters heirs up to the present.[8]
Also presented were Alfonso Lucero and Augustin Timbancaya, who testified thus:
Alfonso Lucero testified that he is a Forester in the Bureau of Forest Development, formerly the Bureau of Forestry. He was once assigned as the Chief of Land Classification Party No. 55 in Palawan. Presently, he is a member of the Composite Land Classification Team No. 32 in the province with station at Puerto Princessa City. He has been employed with the Bureau of Forest Development for about 30 years, starting as a Forest Guard in 1947. As chief of Land Classification Party No. 55, he covered the territory from Puerto Princesa City northward up toBusuanga, where the land in question is located. His duty was to supervise the team that conducted the limitation, segregation and deviation of agricultural lands within the area. He served in this capacity for twelve (12) years until December 1975. As such, he issued certifications after due classification by his office, of alienable and disposable land for administration by the Bureau of Lands and eventual disposition to interested parties. He had been in Busuanga, Palawan a number of times and is familiar with the lands in question, one of which is in Talampetan, CapariIsland and the other in Talampulan, Panlaitan Island. He is aware that the lands in question are claimed and administered by the heirs of Pedro S. Palanca. The improvements on the land are at least 40 years old in his estimation. He recalls having issued a certification of release of this property for
disposition to private parties, but could not remember the exact date when he did so. He identified Exhibits JJ and KK to be certifications to the effect that Talampulan in Panlaitan Island and Talampetan, a portion of Capari Island, both in Busuanga (formerly Coron), Palawan, are fully cultivated and mainly planted to coconuts before World War II by herein applicants, the heirs of Pedro S. Palanca. He is fully convinced that the lands in question have already been released before the war for agricultural purposes in favor of Pedro S. Palanca, applicants predecessor-in-interest. Releases of agricultural lands which are done in bulk at present was not in vogue before the last war, for releases at that time were made on a case-to-case basis. Under the pre-war system, an application for a piece of land was individually referred to the then Bureau of Forestry which in turn conducted a classification of the area as to its availability, whether it be for sale, homestead, etc. On the basis of the Bureau of Forestry investigation, a certification was then issued as to its availability for the purpose for which the application was made. The certification was made on the basis of such application, and was called the isolated case release or the case-to-case basis. This procedure was followed in the case of herein applicants and there seemed to be no reason to doubt that the area was in fact released to herein applicants. Therefore, the area is no longer under the jurisdiction of the Bureau of Forest Development.
Alfonso Lucero also testified that as Chief of Land Classification Party No. 55, he was the one directly in charge of classification and release of lands of public domain for agricultural purposes. His office is directly
under the bureau chief in Manila, although for administrative purposes he is carried with the district forestry office in Puerto Princesa City. The certifications he issue carry much weight in land classification and releases in the province unless revoked by the Manila Office.
Augustin O. Timbancaya testified that he is a licensed geodetic engineer, formerly called a land surveyor. His services were engaged by applicant Ofelia P. Miguel, the representative of the other applicants, to conduct and prepare a land plan for two parcels of land subject of the application. He went personally to the lands in question. He executed Exhibit U, the Plan of Land covered by PSU-04-000073, containing an area of one hundred seventy-six thousand, five hundred eighty-eight (176,588) square meters situated at Talampetan, Capari Island, Busuanga, Palawan, approved by the Director of Lands on June 25, 1973. He also identified Exhibit V, the Plan of Land under PSU-04-000074, containing an area of two hundred thirty-nine thousand, nine hundred eighty (239, 980) square meters located at Talampulan, Panlaitan Island, Busuanga, Palawan, which was also approved by the Director of Lands on June 25, 1973. Both lands are in barrio Panlaitan, Busuanga (formerly Coron), Palawan, and have an aggregate total area of four hundred sixteen thousand five hundred sixty-eight (416,568) square meters. All these surveys were properly monumented. He personally prepared the technical description for both lots. He also prepared the Geodetic Engineers Certificates and had the same notarized by Atty. RemigioRaton, the first on January 24, 1972 and the second on March 14, 1972. He believes that both parcels of land have been released for agricultural purposes because if it were otherwise, the
survey plans he executed would not have been approved by the Director of Lands. In other words, the approval of the Land Plans by the Director of the Bureau of Lands indicates that the lands in question have been previously released for alienation and disposition. Both parcels of land have been fully developed and the coconuts planted thereon are about 50 years old. He has no doubt that these lands were released for agricultural purposes long ago.[9]
After trial, the CFI of Palawan issued a decision on December 15, 1977 declaring petitioners as the owners in fee simple of the two parcels of land in question. Thereafter, Original Certificate of Title (OCT) No. 4295 was issued in the name of petitioners. Subsequently, out of OCT No. 4295, Transfer Certificates of Title Nos. T-7095, T-7096, T-10396, T-10397, T-10398, T-10399, T-10418, and T-10884 were issued.
On December 6, 2000, or after almost twenty-three years, respondent Republic of the Philippines filed with the CA a petition[10] for annulment of judgment, cancellation of the decree of registration and title, and reversion. Respondent sought to annul the December 15, 1977 decision of the CFI, arguing that the decision was null and void because the two lands in question were unclassified public forest land and, as such, were not capable of private appropriation. In support of this proposition, respondent presented Land Classification Map No. 839, Project 2-A dated December 9, 1929 showing that the subject properties were unclassified lands as of that date as well as a certification dated November 24, 2000 issued by the Community Environment and Natural Resources Office stating that the islands of Talampulan and Capar(i) Island located in the municipality ofBusuanga, Palawan are within the unclassified public forest. Respondent likewise drew attention to Executive Proclamation No. 219 issued on July 2, 1967 which classified theProvince of Palawan as a National Game Refuge and Bird Sanctuary and the small islands off Palawan as national reserves closed to exploitation and settlement under the administration of the Parks and Wildlife Office, subject only to existing private rights.[11] In view of the fact that the properties were never classified as alienable and disposable, respondent argued that the CFI did not have jurisdiction to make a disposition of the same.
In addition, respondent asserted that the participants in the proceedings committed perfidious acts amounting to extrinsic fraud which is one of the grounds for the annulment of a judgment. Respondent maintained that a
culture of collusion existed between and among the petitioners, the Provincial Fiscal and the ranking officer of the District Forestry Office, Alfonso Lucero, such that the State was deprived of the opportunity to fairly present its case to the court.
On July 16, 2001, the CA rendered the assailed decision, the dispositive portion of which reads:
WHEREFORE, the instant petition is GRANTED. The decision of the then Court of First Instance of Palawan, Branch II, dated December 15, 1977, in Land Registration Case No. N-21, LRC Record No. N-44308 is hereby declared NULL and VOID. Accordingly, Decree No. N-172081 and the corresponding Original Certificate of Title No. 4295 issued in the name of the Heirs of Pedro S. Palanca, as well as the subsequent Transfer Certificates of Title Nos. T-7095, T-7096, T-10396, T-10397, T-10398, T-10399, T-10410 and T-10884 and all subsequent TCTsissued thereafter are also declared NULL and VOID. Private respondents Heirs of Pedro S. Palanca are DIRECTED to surrender said transfer certificates of title to public respondent Register of Deeds of Palawan; and the latter is also DIRECTED to cause the cancellation thereof.
SO ORDERED.[12]
Petitioners motion for reconsideration was likewise denied by the CA in a resolution[13] dated December 21, 2001. Hence, this petition.
Petitioners contend that the CA disregarded settled jurisprudence and applicable land laws when it ruled that the subject properties covered by their application for registration were forest lands and that, consequently, the land registration court did not have jurisdiction to award the same to them. They opine that it is not necessary for them to prove that the government had expressly given a grant of the subject properties to Pedro S. Palanca, their predecessor-in-interest, separate of the legislative grant given to them purportedly under Commonwealth Act No. 141 (Public Land Act). Petitioners furthermore insist that a particular land need not be formally released by an act of the Executive before it can be deemed open to private ownership, citing the cases of Ramos v. Director of Lands[14] and Ankron v. Government of the Philippine Islands.[15] They likewise argue that the CA erred in relying upon Executive Proclamation No. 219 and upon Land Classification Map No. 839, Project 2-A to nullify petitioners mother title. According to petitioners, the reversal of the CFIs decision violated the principle of res judicata as well as the rule on incontrovertibility of land titles under Act No. 496.
Respondent, on the other hand, denies the allegations of the petition in its comment[16] dated August 6, 2002 and contends that (a) the claim that the subject parcels of land are public agricultural lands by virtue of a legislative grant is unfounded and baseless; (b) the land registration court
of Puerto Princesa, Palawan, was devoid of jurisdictional competence to order titling of a portion of forest land; (c) the CA is correct in declaring that there must be a prior release of the subject lands for agricultural purposes; (d) the rules on res judicata and the incontestability of Torrens titles do not find proper applications in the exercise of the power of reversion by the State; and (e) estoppel and lacheswill not operate against the State. Respondent also reiterates its contention that collusion existed between the parties in the proceedings below which prevented a fair submission of the controversy, to the damage and prejudice of the Republic.
At the outset, it must be emphasized that an action for reversion filed by the State to recover property registered in favor of any party which is part of the public forest or of a forest reservation never prescribes. Verily, non-disposable public lands registered under the Land Registration Act may be recovered by the State at any time[17] and the defense of res judicata would not apply as courts have no jurisdiction to dispose of such lands of the public domain.[18] That being said, it must likewise be kept in mind that in an action to annul a judgment, the burden of proving the judgments nullity rests upon the petitioner. The petitioner has to establish by clear and convincing evidence that the judgment being challenged is fatally defective.[19]
Under the facts and circumstances of this case, the Court finds that respondent met the required burden of proof. Consequently, the CA did not err in granting respondents
petition to annul the decision of the land registration court. This petition for review, therefore, lacks merit.
Section 48(b) of the Public Land Act upon which petitioners anchor their claim states:
Sec. 48. The following-described citizens of the Philippines, occupying lands of the public domain or claiming to own any such lands or an interest therein, but whose titles have not been perfected or completed, may apply to the Court of First Instance of the province where the land is located for confirmation of their claims and the issuance of a certificate of title therefor, under the Land Registration Act, to wit:
x x x
(b) Those who, by themselves or through their predecessors-in-interest, have been in continuous, exclusive, and notorious possession and occupation of agricultural lands of the public domain, under a bona fide claim of acquisition or ownership, for at least thirty years immediately preceding the filing of the application for confirmation of title, except when prevented by war or force majeure. Those shall be conclusively presumed to have performed all the conditions essential to a government grant and shall be entitled to a certificate of title under the provisions of this chapter.
The above provision clearly requires the concurrence of two things: (1) that the land sought to be registered is public agricultural land, and (2) that the applicant seeking registration must have possessed and occupied the same for at least thirty years prior to the filing of the application. That the petitioners, through Pedro S. Palanca, have been in possession of the properties since 1934 is not disputed. What is in doubt is the compliance with the first requisite.
To reiterate, the validity of the CFI decision was impugned on the basis of the courts lack of jurisdiction. If the properties were alienable public lands, then the CFI, acting as a land registration court, had jurisdiction over them and could validly confirm petitioners imperfect title. Otherwise, if the properties were indeed public forests, then the CA was correct in declaring that the land registration court never acquired jurisdiction over the subject matter of the case and, as a result, its decision decreeing the registration of the properties in favor of petitioners would be null and void.
The reason for this is the fact that public forests are inalienable public lands. The possession of public forests on the part of the claimant, however long, cannot convert the same into private property.[20] Possession in such an event, even if spanning decades or centuries, could never ripen into ownership.[21] It bears stressing that unless and until the land classified as forest is released in an official proclamation to that effect so that it may form part of the
disposable lands of the public domain, the rules on confirmation of imperfect title do not apply.[22]
In the present case, Land Classification Map No. 839, Project 2-A[23] indicated that the Talampulan and Capari Islands on which the properties were located were unclassified public lands as of December 9, 1929. It was by virtue of Executive Proclamation No. 219 issued on July 2, 1967 that these islands were subsequently classified as national reserves. Based on these, it becomes evident that the subject properties have never been released for public disposition. Obviously, from the time that petitioners and their predecessor-in-interest were occupying the properties in 1934 until the time that an application for registration was filed in 1973, these properties remained as inalienable public lands.
While it is true that the land classification map does not categorically state that the islands are public forests, the fact that they were unclassified lands leads to the same result. In the absence of the classification as mineral or timber land, the land remains unclassified land until released and rendered open to disposition.[24] When the property is still unclassified, whatever possession applicants may have had, and however long, still cannot ripen into private ownership.[25] This is because, pursuant to Constitutional precepts, all lands of the public domain belong to the State, and the State is the source of any asserted right to ownership in such lands and is charged with the conservation of such patrimony.[26] Thus, the Court has emphasized the need to show in registration
proceedings that the government, through a positive act, has declassified inalienable public land into disposable land for agricultural or other purposes.[27]
Petitioners reliance upon Ramos v. Director of Lands[28] and Ankron v. Government[29] is misplaced. These cases were decided under the Philippine Bill of 1902 and the first Public Land Act No. 926 enacted by the Philippine Commission on October 7, 1926, under which there was no legal provision vesting in the Chief Executive or President of the Philippines the power to classify lands of the public domain into mineral, timber and agricultural so that the courts then were free to make corresponding classifications in justiciable cases, or were vested with implicit power to do so, depending upon the preponderance of the evidence.
As petitioners themselves admit, registration of the properties is sought under Commonwealth Act No. 141. Sections 6 and 7 of the Act provide as follows:
Section 6. The President, upon the recommendation of the Secretary of Agriculture and Commerce, shall from time to time classify the lands of the public domain into
(a) Alienable or disposable,
(b) Timber, and
(c) Mineral lands,
and may at any time and in a like manner transfer such lands from one class to another, for the purposes of their administration and disposition.
Section 7. For the purposes of the administration and disposition of alienable or disposable public lands, the President, upon recommendation by the Secretary of Agriculture and Commerce, shall from time to time declare what lands are open to disposition or concession under this Act.
Based on the foregoing, the classification or reclassification of public lands into alienable or disposable, mineral or forest lands is the exclusive prerogative of the Executive Department of the government. Clearly, the courts no longer have the authority, whether express or implied, to determine the classification of lands of the public domain.[30]
To the Courts mind, petitioners have failed to present incontrovertible proof that the lands they claimed had previously been classified as alienable. The bare allegation of Alfonso Lucero that a certification had been issued releasing the properties for agricultural purposes is not sufficient to prove this fact. The best evidence would be the document itself which, however, was not produced in this case. It was error for the land registration court to
have taken Mr. Luceros testimony at face value, absent any other evidence to conclusively prove that the land had been released for public disposition.
Furthermore, it must be pointed out that petitioners contention that the State has the burden to prove that the land which it avers to be of public domain is really of such nature applies only in instances where the applicant has been in possession of the property since time immemorial. When referring to this type of possession, it means possession of which no person living has seen the beginning and the existence of which such person has learned from the latters elders.[31] Immemorial possession justifies the presumption that the land had never been part of the public domain or that it had been private property even before the Spanish conquest.[32] The possession of petitioners in this case does not fall under the above-named exception as their possession, by their own admission, only commenced sometime in 1934.
To reiterate, where there is a showing that lots sought to be registered are part of the public domain, the applicant for land registration under Section 48 of Commonwealth Act No. 141 must secure a certification from the government that the lands claimed to have been possessed by the applicant as owner for more than 30 years are alienable and disposable.[33] Petitioners failure to do so in this case, when taken with the evidence adduced by respondent showing that the lands in question indeed remain part of the public domain and form part of the national reserves, confirms that the CFI never acquired jurisdiction to order the registration of such lands in favor
of petitioners, and certainly justifies their reversion to the State.
WHEREFORE, the petition is DENIED for lack of merit. No costs.
SO ORDERED.
G.R. No. 193443
Present:
CARPIO,
Chairperson,
BRION,
PEREZ,
SERENO, and
REYES,
Promulgated:
JEAN TAN, ROSELLER C. ANACINTO, CARLO LOILO ESPINEDA and DAISY ALIADO MANAOIS, represented
This is a petition for review under Rule 45 of the Decision[1] dated July 6, 2009 and Resolution[2] dated August 12, 2010 Resolution of the Court of Appeals (CA) in CA-G.R. CV No. 88995. The facts leading to its filing are as follows:
On June 14, 2001, the petitioners filed with the Regional Trial Court (RTC) of Naic, Cavite, an application for land registration covering a parcel of land identified as Lot 9972, Cad-459-D of Indang Cadastre, situated in Barangay Bancod, Indang, Cavite and with an area of 6,920 square meters.[3] The petitioners alleged that they acquired the subject property from Gregonio Gatdula pursuant to a Deed of Absolute Sale dated April 25, 1996; and they and their predecessors-in-interest have been in open, continuous and exclusive possession of the subject property in the concept of an owner for more than 30 years.[4]
After trial and hearing, the RTC issued a Decision on July 29, 2006, granting the petitioners application, thus:
WHEREFORE, in view of the foregoing, this Court confirming its previous Order of general default, decrees and adjudges Lot No. 9972 consisting of 6,920 square meters, Cad. 459-D, Indang Cadastre and its technical description as herein above-described situated in Brgy. Bancod, Indang, Cavite, pursuant to the provisions of Act 496 as amended by P.D. 1529, as it is hereby decreed and adjudged to be confirmed and registered in the names of Jean Tan, of legal age, Filipino, single, with postal address at Room 54 T. Pinpin St., Binondo, Manila; Roseller C. Anaci[n]to, of legal age, Filipino, single, with postal address at Moncario Villag[e], Ampid-1, San Mateo, Rizal; Carlo Loilo Espineda, of legal age, Filipino, with postal address at Cluster F. Cogeo, Antipolo, Rizal and Daisy Aliado Manaois, of legal age, Filipino and resident of Panghulo Road, Malabon, Metro Manila.
Once this decision becomes final, let the corresponding decree of registration be issued by the Administrator, Land Registration Authority.
SO ORDERED.[5]
The CA gave due course to the appeal filed by the Republic of the Philippines. By way of the assailed Decision, the CA ruled that the petitioners failed to prove that they and their predecessors-in-interest have been in possession of the subject property for the requisite period of 30 years. The CA posit:
We now determine if appellees have the right to register their title on such land despite the fact that their possession commenced only after 12 June 1945. Records show that the appellees possession over the subject property can be reckoned only from 21 June 1983, the date when according to evidence, the subject property became alienable and disposable. From said date up to the filing of the application for registration of title over the subject property on 14 June 2001, only eighteen (18) years had lapsed. Thus, appellees possession of the subject property fell short of the requirement of open, continuous and exclusive possession of at least 30 years.
Moreover, there was no adequate evidence which would show that appellees and their predecessors-in-interest exercised acts of dominion over the subject land as to indicate possession in the concept of owner. The testimonies of appellees witnesses regarding actual possession are belied by the absence of evidence on actual use of or improvements on the subject property. Appellees presented only various tax declarations to prove possession. However, except for the Certification, showing payment of tax due on tax declaration for the year 2003, there are no other evidence showing that all the taxes due corresponding to the rest of the tax declarations were in fact paid by appellees or their predecessors-in-interest.
In sum, appellees were unable to prove that they or their predecessors-in-interest have been in possession of the subject property for more than 30 years, which possession is characterized as open, continuous, exclusive, and notorious, in the concept of an owner. Appellees failed to discharge their duty of substantiating possession and title to the subject land.
WHEREFORE, the appeal is hereby GRANTED and the Decision dated 29 July 2006 of the Regional Trial Court (RTC) of Naic, Cavite, Branch 15 is REVERSED and SET ASIDE.
SO ORDERED.[6] (citation omitted)
The petitioners moved for reconsideration but this was denied by the CA in its August 12, 2010 Resolution.[7]
The petitioners question the conclusion arrived at by the CA, alleging that the evidence they presented prove that they and their predecessors-in-interest have been in possession and occupation of the subject property for more than 30 years. The petitioners claim that the following sufficed to demonstrate that they acquired title over the subject property by prescription:
a. the testimony of their attorney-in-fact, Ma. Wilhelmina Tobias, stating that:
i. the petitioners have been in actual, notorious and open possession of the subject property since the time they purchased the same in 1996;
ii. the petitioners have regularly paid the taxes due on the subject property;
iii. the petitioners predecessors-in-interest, Victorio Garcia, Felipe Gatdula and Gregonio Gatdula, had been in possession of the subject property for more than 30 years and had religiously paid the taxes due thereon; and
iv. the subject property is agricultural, alienable and disposable;
b. the testimony of the caretaker of the subject property, Margarito Pena, stating that:
i. he resides near the subject property;
ii. he witnessed the execution of the deed of sale that petitioners entered into with Gregonio Gatdula; and
iii. the petitioners and predecessors-in-interest have been in possession of the subject property for more than 30 years;
c. the testimony of Ferdinand Encarnacion, a clerk in the Docket Division of the Land Registration Authority (LRA), stating that:
i. no opposition to the petitioners application was filed before the LRA;
ii. an examiner of the LRA found nothing wrong with the petitioners application; and
iii. no title covering the subject property was previously issued;
d. Tax Declaration Nos. 2935, 2405 and 1823 for the years 1961, 1967 and 1974 in the name of Victorio Garcia;[8]
e. Tax Declaration Nos. 1534 and 3850 for the years 1980 and 1985 in the name of Felipe Gatdula;[9]
f. Tax Declaration Nos. 22453-A and 2925 for the years 1991 and 1994 in the name of Gregonio Gatdula;[10]
g. Tax Declaration Nos. 21956-A, 22096-A, 22097-A and 97-05078 in the name of the petitioners;[11]
h. Resolution No. 69, Series of 1998, of the Sangguniang Bayan of Indang, Cavite, which approved the reclassification of several lots, including the subject property, from agricultural to residential/commercial;[12]
i. DARCO Conversion Order No. 040210005-(340)-99, Series of 2000, issued by the Department of Agrarian Reform on July 13, 2000, which converted several parcels of land, including the subject property, from agricultural to residential/commercial;[13]
j. Certification issued by the Department of Environment and Natural Resources (DENR) CALABARZON dated October 29, 2002, stating that the subject area falls within the Alienable and Disposable Land Project No. 13-A of Indang, Cavite per LC Map 3091 certified on June 21, 1983.[14]
Issue
This Court is faced with the lone issue of whether the petitioners have proven themselves qualified to the benefits under the relevant laws on the confirmation of imperfect or incomplete titles.
Our Ruling
Commonwealth Act No. 141, otherwise known as the Public Land Act governs the classification and disposition of lands forming part of the public domain. Section 11 thereof provides that one of the modes of disposing public lands suitable for agricultural purposes is by confirmation of imperfect or incomplete titles. Section 48 thereof enumerates those who are considered to have acquired an imperfect or incomplete title over an alienable and disposable public land.
Presidential Decree No. 1529 (P.D. No. 1529), otherwise known as the Property Registration Decree, is a codification of all the laws relative to the registration of property and Section 14 thereof specifies those who are qualified to register their incomplete title over an alienable and disposable public land under the Torrens system. Particularly:
Section 14. Who may apply. The following persons may file in the proper Court of First Instance an application for registration of title to land, whether personally or through their authorized representatives:
(1) Those who by themselves or through their predecessors-in-interest have been in open, continuous, exclusive and notorious possession and occupation of alienable and disposable lands of the public domain under a bona fide claim of ownership since June 12, 1945, or earlier.
(2) Those who have acquired ownership of private lands by prescription under the provision of existing laws.
(3) Those who have acquired ownership of private lands or abandoned river beds by right of accession or accretion under the existing laws.
(4) Those who have acquired ownership of land in any other manner provided for by law.
As this Court clarified in Heirs of Malabanan v. Republic of the Philippines,[15] and Republic of the Philippines v. East Silverlane Realty Development Corporation,[16] Section 14(1) covers alienable and disposable lands while Section 14(2) covers private property. Thus, for ones possession and occupation of an alienable and disposable public land
to give rise to an imperfect title, the same should have commenced on June 12, 1945 or earlier. On the other, for one to claim that his possession and occupation of private property has ripened to imperfect title, the same should have been for the prescriptive period provided under the Civil Code. Without need for an extensive extrapolation, the private property contemplated in Section 14(2) is patrimonial property as defined in Article 421 in relation to Articles 420 and 422 of the Civil Code.
Going further, it was explained in Heirs of Malabanan and East Silverlane, that possession and occupation of an alienable and disposable public land for the periods provided under the Civil Code will not convert it to patrimonial or private property. There must be an express declaration that the property is no longer intended for public service or the development of national wealth. In the absence thereof, the property remains to be alienable and disposable and may not be acquired by prescription under Section 14(2) of P.D. No. 1529. Thus:
In Heirs of Malabanan, this Court ruled that possession and occupation of an alienable and disposable public land for the periods provided under the Civil Code do not automatically convert said property into private property or release it from the public domain. There must be an express declaration that the property is no longer intended for public service or development of national wealth. Without such express declaration, the property, even if classified as alienable or disposable, remains property of the State, and thus, may not be acquired by prescription.
Nonetheless, Article 422 of the Civil Code states that [p]roperty of public dominion, when no longer intended for public use or for public service, shall form part of the patrimonial property of the State. It is this provision that controls how public dominion property may be converted into patrimonial property susceptible to acquisition by prescription. After all, Article 420 (2) makes clear that those property 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 are public dominion property. For as long as the property belongs to the State, although already classified as alienable or disposable, it remains property of the public dominion if when it is intended for some public service or for the development of the national wealth. (emphasis supplied)
Accordingly, there must be an express declaration by the State that the public dominion property is no longer intended for public service or the development of the national wealth or that the property has been converted into patrimonial. Without such express declaration, the property, even if classified as alienable or disposable, remains property of the public dominion, pursuant to Article 420(2), and thus incapable of acquisition by prescription. It is only when such alienable and disposable lands are expressly declared by the State to be no longer intended for public service or for the development of the national wealth that the period of acquisitive prescription can begin to run. Such declaration shall be in the form of a law duly enacted by Congress or a Presidential Proclamation in cases where the President is duly authorized by law.
In other words, for one to invoke the provisions of Section 14(2) and set up acquisitive prescription against the State, it is primordial that the status of the property as patrimonial be first established. Furthermore, the period of possession preceding the classification of the property as patrimonial cannot be considered in determining the completion of the prescriptive period.[17]
The petitioners application is obviously anchored on Section 14(2) of P.D. No. 1529 as they do not claim to have possessed, by themselves or their predecessors-in-interest, the subject property since June 12, 1945 or earlier. That it was thru prescription that they had acquired an imperfect title over the subject property is the foundation upon which the petitioners rest their application.
Unfortunately, this Court finds the evidence presented by the petitioners to be wanting. The petitioners failed to demonstrate that they and their predecessors-in-interest possessed the property in the requisite manner, which this Court explained as follows:
It is concerned with lapse of time in the manner and under conditions laid down by law, namely, that the possession should be in the concept of an owner, public, peaceful, uninterrupted and adverse. Possession is open when it is
patent, visible, apparent, notorious and not clandestine. It is continuous when uninterrupted, unbroken and not intermittent or occasional; exclusive when the adverse possessor can show exclusive dominion over the land and an appropriation of it to his own use and benefit; and notorious when it is so conspicuous that it is generally known and talked of by the public or the people in the neighborhood. The party who asserts ownership by adverse possession must prove the presence of the essential elements of acquisitive prescription.[18]
Tax declarations per se do not qualify as competent evidence of actual possession for purposes of prescription. More so, if the payment of the taxes due on the property is episodic, irregular and random such as in this case. Indeed, how can the petitioners claim of possession for the entire prescriptive period be ascribed any ounce of credibility when taxes were paid only on eleven (11) occasions within the 40-year period from 1961 to 2001? In Wee v. Republic of the Philippines,[19] this Court stated that:
It bears stressing that petitioner presented only five tax declarations (for the years 1957, 1961, 1967, 1980 and 1985) for a claimed possession and occupation of more than 45 years (1945-1993). This type of intermittent and sporadic assertion of alleged ownership does not prove open, continuous, exclusive and notorious possession and occupation. In any event, in the absence of other competent evidence, tax declarations do not conclusively
establish either possession or declarants right to registration of title.[20] (emphasis supplied and citation omitted)
In East Silverlane, it was emphasized that adverse, continuous, open, public possession in the concept of an owner is a conclusion of law and the burden to prove it by clear, positive and convincing evidence is on the applicant. A claim of ownership will not proper on the basis of tax declarations if unaccompanied by proof of actual possession.[21]
While there was an attempt to supplement the tax declaration by testimonial evidence, the same is futile and frivolous. The testimonies of Margarito Pena and Ma. Wilhelmina Tobias do not merit consideration and do not make up for the inherent inadequacy of the eleven (11) tax declarations submitted by the petitioners. Such witnesses did not state what specific acts of ownership or dominion were performed by the petitioners and predecessors-in-interest and simply made that general assertion that the latter possessed and occupied the subject property for more than thirty (30) years, which, by all means, is a mere conclusion of law. The RTC should have tackled evidence of such nature with a disposition to incredulity, if not with an outright rejection.
Furthermore, the petitioners application was filed after only (1) year from the time the subject property may be
considered patrimonial. DARCO Conversion Order No. 040210005-(340)-99, Series of 2000, was issued by the DAR only on July 13, 2000, which means that the counting of the thirty (30)-year prescriptive period for purposes of acquiring ownership of a public land under Section 14(2) can only start from such date. Before the property was declared patrimonial by virtue of such conversion order, it cannot be acquired by prescription. This is clear from the pronouncements of this Court in Heirs of Malabanan quoted above and in Republic of the Philippines v. Rizalvo,[22] which states:
On this basis, respondent would have been eligible for application for registration because his claim of ownership and possession over the subject property even exceeds thirty (30) years. However, it is jurisprudentially clear that the thirty (30)-year period of prescription for purposes of acquiring ownership and registration of public land under Section 14 (2) of P.D. No. 1529 only begins from the moment the State expressly declares that the public dominion property is no longer intended for public service or the development of the national wealth or that the property has been converted into patrimonial.[23]
WHEREFORE, premises considered, the instant petition is DENIED for lack of merit. The July 6, 2009 Decision and August 12, 2010 Resolution of the Court of Appeals areAFFIRMED.
