G.R. No.

L-50008 August 31, 1987

SOUTH: By No. 2, Ardoin Street

PRUDENTIAL BANK, petitioner,

vs.
HONORABLE DOMINGO D. PANIS, Presiding Judge of Branch III,
Court of First Instance of Zambales and Olongapo City; FERNANDO
MAGCALE & TEODULA BALUYUT-MAGCALE, respondents.

EAST: By 37 Canda Street, and

PARAS, J.:
This is a petition for review on certiorari of the November 13, 1978
Decision * of the then Court of First Instance of Zambales and Olongapo
City in Civil Case No. 2443-0 entitled "Spouses Fernando A. Magcale and
Teodula Baluyut-Magcale vs. Hon. Ramon Y. Pardo and Prudential Bank"
declaring that the deeds of real estate mortgage executed by respondent
spouses in favor of petitioner bank are null and void.
The undisputed facts of this case by stipulation of the parties are as
follows:
... on November 19, 1971, plaintiffs-spouses Fernando A. Magcale and
Teodula Baluyut Magcale secured a loan in the sum of P70,000.00 from the
defendant Prudential Bank. To secure payment of this loan, plaintiffs
executed in favor of defendant on the aforesaid date a deed of Real Estate
Mortgage over the following described properties:
l. A 2-STOREY, SEMI-CONCRETE, residential building with warehouse spaces
containing a total floor area of 263 sq. meters, more or less, generally
constructed of mixed hard wood and concrete materials, under a roofing of
cor. g. i. sheets; declared and assessed in the name of FERNANDO
MAGCALE under Tax Declaration No. 21109, issued by the Assessor of
Olongapo City with an assessed value of P35,290.00. This building is the
only improvement of the lot.
2. THE PROPERTY hereby conveyed by way of MORTGAGE includes the
right of occupancy on the lot where the above property is erected, and
more particularly described and bounded, as follows:
A first class residential land Identffied as Lot No. 720, (Ts-308, Olongapo
Townsite Subdivision) Ardoin Street, East Bajac-Bajac, Olongapo City,
containing an area of 465 sq. m. more or less, declared and assessed in
the name of FERNANDO MAGCALE under Tax Duration No. 19595 issued by
the Assessor of Olongapo City with an assessed value of P1,860.00;
bounded on the
NORTH: By No. 6, Ardoin Street

WEST: By Ardoin Street.

All corners of the lot marked by conc. cylindrical monuments of the Bureau
of Lands as visible limits. ( Exhibit "A, " also Exhibit "1" for defendant).
Apart from the stipulations in the printed portion of the aforestated deed of
mortgage, there appears a rider typed at the bottom of the reverse side of
the document under the lists of the properties mortgaged which reads, as
follows:
AND IT IS FURTHER AGREED that in the event the Sales Patent on the lot
applied for by the Mortgagors as herein stated is released or issued by the
Bureau of Lands, the Mortgagors hereby authorize the Register of Deeds to
hold the Registration of same until this Mortgage is cancelled, or to
annotate this encumbrance on the Title upon authority from the Secretary
of Agriculture and Natural Resources, which title with annotation, shall be
released in favor of the herein Mortgage.
From the aforequoted stipulation, it is obvious that the mortgagee
(defendant Prudential Bank) was at the outset aware of the fact that the
mortgagors (plaintiffs) have already filed a Miscellaneous Sales Application
over the lot, possessory rights over which, were mortgaged to it.
Exhibit "A" (Real Estate Mortgage) was registered under the Provisions of
Act 3344 with the Registry of Deeds of Zambales on November 23, 1971.
On May 2, 1973, plaintiffs secured an additional loan from defendant
Prudential Bank in the sum of P20,000.00. To secure payment of this
additional loan, plaintiffs executed in favor of the said defendant another
deed of Real Estate Mortgage over the same properties previously
mortgaged in Exhibit "A." (Exhibit "B;" also Exhibit "2" for defendant). This
second deed of Real Estate Mortgage was likewise registered with the
Registry of Deeds, this time in Olongapo City, on May 2,1973.
On April 24, 1973, the Secretary of Agriculture issued Miscellaneous Sales
Patent No. 4776 over the parcel of land, possessory rights over which were
mortgaged to defendant Prudential Bank, in favor of plaintiffs. On the basis
of the aforesaid Patent, and upon its transcription in the Registration Book
of the Province of Zambales, Original Certificate of Title No. P-2554 was
issued in the name of Plaintiff Fernando Magcale, by the Ex-Oficio Register
of Deeds of Zambales, on May 15, 1972.
For failure of plaintiffs to pay their obligation to defendant Bank after it
became due, and upon application of said defendant, the deeds of Real
Estate Mortgage (Exhibits "A" and "B") were extrajudicially foreclosed.

Consequent to the foreclosure was the sale of the properties therein

mortgaged to defendant as the highest bidder in a public auction sale
conducted by the defendant City Sheriff on April 12, 1978 (Exhibit "E"). The
auction sale aforesaid was held despite written request from plaintiffs
through counsel dated March 29, 1978, for the defendant City Sheriff to
desist from going with the scheduled public auction sale (Exhibit "D")."
(Decision, Civil Case No. 2443-0, Rollo, pp. 29-31).
Respondent Court, in a Decision dated November 3, 1978 declared the
deeds of Real Estate Mortgage as null and void (Ibid., p. 35).
On December 14, 1978, petitioner filed a Motion for Reconsideration (Ibid.,
pp. 41-53), opposed by private respondents on January 5, 1979 (Ibid., pp.
54-62), and in an Order dated January 10, 1979 (Ibid., p. 63), the Motion for
Reconsideration was denied for lack of merit. Hence, the instant petition
(Ibid., pp. 5-28).
The first Division of this Court, in a Resolution dated March 9, 1979,
resolved to require the respondents to comment (Ibid., p. 65), which order
was complied with the Resolution dated May 18,1979, (Ibid., p. 100),
petitioner filed its Reply on June 2,1979 (Ibid., pp. 101-112).
Thereafter, in the Resolution dated June 13, 1979, the petition was given
due course and the parties were required to submit simultaneously their
respective memoranda. (Ibid., p. 114).
On July 18, 1979, petitioner filed its Memorandum (Ibid., pp. 116-144),
while private respondents filed their Memorandum on August 1, 1979
(Ibid., pp. 146-155).
In a Resolution dated August 10, 1979, this case was considered submitted
for decision (Ibid., P. 158).
In its Memorandum, petitioner raised the following issues:
1. WHETHER OR NOT THE DEEDS OF REAL ESTATE MORTGAGE ARE VALID;
AND
2. WHETHER OR NOT THE SUPERVENING ISSUANCE IN FAVOR OF PRIVATE
RESPONDENTS OF MISCELLANEOUS SALES PATENT NO. 4776 ON APRIL 24,
1972 UNDER ACT NO. 730 AND THE COVERING ORIGINAL CERTIFICATE OF
TITLE NO. P-2554 ON MAY 15,1972 HAVE THE EFFECT OF INVALIDATING THE
DEEDS OF REAL ESTATE MORTGAGE. (Memorandum for Petitioner, Rollo, p.
122).
This petition is impressed with merit.

The pivotal issue in this case is whether or not a valid real estate mortgage
can be constituted on the building erected on the land belonging to
another.
The answer is in the affirmative.
In the enumeration of properties under Article 415 of the Civil Code of the
Philippines, this Court ruled that, "it is obvious that the inclusion of
"building" separate and distinct from the land, in said provision of law can
only mean that a building is by itself an immovable property." (Lopez vs.
Orosa, Jr., et al., L-10817-18, Feb. 28, 1958; Associated Inc. and Surety Co.,
Inc. vs. Iya, et al., L-10837-38, May 30,1958).
Thus, while it is true that a mortgage of land necessarily includes, in the
absence of stipulation of the improvements thereon, buildings, still a
building by itself may be mortgaged apart from the land on which it has
been built. Such a mortgage would be still a real estate mortgage for the
building would still be considered immovable property even if dealt with
separately and apart from the land (Leung Yee vs. Strong Machinery Co.,
37 Phil. 644). In the same manner, this Court has also established that
possessory rights over said properties before title is vested on the grantee,
may be validly transferred or conveyed as in a deed of mortgage (Vda. de
Bautista vs. Marcos, 3 SCRA 438 [1961]).
Coming back to the case at bar, the records show, as aforestated that the
original mortgage deed on the 2-storey semi-concrete residential building
with warehouse and on the right of occupancy on the lot where the
building was erected, was executed on November 19, 1971 and registered
under the provisions of Act 3344 with the Register of Deeds of Zambales
on November 23, 1971. Miscellaneous Sales Patent No. 4776 on the land
was issued on April 24, 1972, on the basis of which OCT No. 2554 was
issued in the name of private respondent Fernando Magcale on May 15,
1972. It is therefore without question that the original mortgage was
executed before the issuance of the final patent and before the
government was divested of its title to the land, an event which takes
effect only on the issuance of the sales patent and its subsequent
registration in the Office of the Register of Deeds (Visayan Realty Inc. vs.
Meer, 96 Phil. 515; Director of Lands vs. De Leon, 110 Phil. 28; Director of
Lands vs. Jurado, L-14702, May 23, 1961; Pena "Law on Natural
Resources", p. 49). Under the foregoing considerations, it is evident that
the mortgage executed by private respondent on his own building which
was erected on the land belonging to the government is to all intents and
purposes a valid mortgage.
As to restrictions expressly mentioned on the face of respondents' OCT No.
P-2554, it will be noted that Sections 121, 122 and 124 of the Public Land
Act, refer to land already acquired under the Public Land Act, or any

improvement thereon and therefore have no application to the assailed

mortgage in the case at bar which was executed before such eventuality.
Likewise, Section 2 of Republic Act No. 730, also a restriction appearing on
the face of private respondent's title has likewise no application in the
instant case, despite its reference to encumbrance or alienation before the
patent is issued because it refers specifically to encumbrance or alienation
on the land itself and does not mention anything regarding the
improvements existing thereon.
But it is a different matter, as regards the second mortgage executed over
the same properties on May 2, 1973 for an additional loan of P20,000.00
which was registered with the Registry of Deeds of Olongapo City on the
same date. Relative thereto, it is evident that such mortgage executed
after the issuance of the sales patent and of the Original Certificate of Title,
falls squarely under the prohibitions stated in Sections 121, 122 and 124 of
the Public Land Act and Section 2 of Republic Act 730, and is therefore null
and void.
Petitioner points out that private respondents, after physically possessing
the title for five years, voluntarily surrendered the same to the bank in
1977 in order that the mortgaged may be annotated, without requiring the
bank to get the prior approval of the Ministry of Natural Resources
beforehand, thereby implicitly authorizing Prudential Bank to cause the
annotation of said mortgage on their title.
However, the Court, in recently ruling on violations of Section 124 which
refers to Sections 118, 120, 122 and 123 of Commonwealth Act 141, has
held:
... Nonetheless, we apply our earlier rulings because we believe that as
in pari delicto may not be invoked to defeat the policy of the State neither
may the doctrine of estoppel give a validating effect to a void contract.
Indeed, it is generally considered that as between parties to a contract,
validity cannot be given to it by estoppel if it is prohibited by law or is
against public policy (19 Am. Jur. 802). It is not within the competence of
any citizen to barter away what public policy by law was to preserve
(Gonzalo Puyat & Sons, Inc. vs. De los Amas and Alino supra). ... (Arsenal
vs. IAC, 143 SCRA 54 [1986]).
This pronouncement covers only the previous transaction already alluded
to and does not pass upon any new contract between the parties (Ibid), as
in the case at bar. It should not preclude new contracts that may be
entered into between petitioner bank and private respondents that are in
accordance with the requirements of the law. After all, private respondents
themselves declare that they are not denying the legitimacy of their debts
and appear to be open to new negotiations under the law (Comment; Rollo,

pp. 95-96). Any new transaction, however, would be subject to whatever

steps the Government may take for the reversion of the land in its favor.
PREMISES CONSIDERED, the decision of the Court of First Instance of
Zambales & Olongapo City is hereby MODIFIED, declaring that the Deed of
Real Estate Mortgage for P70,000.00 is valid but ruling that the Deed of
Real Estate Mortgage for an additional loan of P20,000.00 is null and void,
without prejudice to any appropriate action the Government may take
against private respondents.
SO ORDERED.

G.R. No. L-58469 May 16, 1983

MAKATI LEASING and FINANCE CORPORATION, petitioner,
vs.
WEAREVER TEXTILE MILLS, INC., and HONORABLE COURT OF
APPEALS, respondents.
Loreto C. Baduan for petitioner.
Ramon D. Bagatsing & Assoc. (collaborating counsel) for petitioner.
Jose V. Mancella for respondent.

DE CASTRO, J.:
Petition for review on certiorari of the decision of the Court of Appeals (now
Intermediate Appellate Court) promulgated on August 27, 1981 in CA-G.R.
No. SP-12731, setting aside certain Orders later specified herein, of Judge
Ricardo J. Francisco, as Presiding Judge of the Court of First instance of
Rizal Branch VI, issued in Civil Case No. 36040, as wen as the resolution
dated September 22, 1981 of the said appellate court, denying petitioner's
motion for reconsideration.
It appears that in order to obtain financial accommodations from herein
petitioner Makati Leasing and Finance Corporation, the private respondent
Wearever Textile Mills, Inc., discounted and assigned several receivables
with the former under a Receivable Purchase Agreement. To secure the
collection of the receivables assigned, private respondent executed a
Chattel Mortgage over certain raw materials inventory as well as a
machinery described as an Artos Aero Dryer Stentering Range.
Upon private respondent's default, petitioner filed a petition for
extrajudicial foreclosure of the properties mortgage to it. However, the
Deputy Sheriff assigned to implement the foreclosure failed to gain entry
into private respondent's premises and was not able to effect the seizure of
the aforedescribed machinery. Petitioner thereafter filed a complaint for
judicial foreclosure with the Court of First Instance of Rizal, Branch VI,
docketed as Civil Case No. 36040, the case before the lower court.
Acting on petitioner's application for replevin, the lower court issued a writ
of seizure, the enforcement of which was however subsequently restrained
upon private respondent's filing of a motion for reconsideration. After
several incidents, the lower court finally issued on February 11, 1981, an
order lifting the restraining order for the enforcement of the writ of seizure
and an order to break open the premises of private respondent to enforce
said writ. The lower court reaffirmed its stand upon private respondent's
filing of a further motion for reconsideration.

On July 13, 1981, the sheriff enforcing the seizure order, repaired to the
premises of private respondent and removed the main drive motor of the
subject machinery.
The Court of Appeals, in certiorari and prohibition proceedings
subsequently filed by herein private respondent, set aside the Orders of
the lower court and ordered the return of the drive motor seized by the
sheriff pursuant to said Orders, after ruling that the machinery in suit
cannot be the subject of replevin, much less of a chattel mortgage,
because it is a real property pursuant to Article 415 of the new Civil Code,
the same being attached to the ground by means of bolts and the only way
to remove it from respondent's plant would be to drill out or destroy the
concrete floor, the reason why all that the sheriff could do to enfore the
writ was to take the main drive motor of said machinery. The appellate
court rejected petitioner's argument that private respondent is estopped
from claiming that the machine is real property by constituting a chattel
mortgage thereon.
A motion for reconsideration of this decision of the Court of Appeals having
been denied, petitioner has brought the case to this Court for review by
writ of certiorari. It is contended by private respondent, however, that the
instant petition was rendered moot and academic by petitioner's act of
returning the subject motor drive of respondent's machinery after the
Court of Appeals' decision was promulgated.
The contention of private respondent is without merit. When petitioner
returned the subject motor drive, it made itself unequivocably clear that
said action was without prejudice to a motion for reconsideration of the
Court of Appeals decision, as shown by the receipt duly signed by
respondent's representative. 1 Considering that petitioner has reserved its
right to question the propriety of the Court of Appeals' decision, the
contention of private respondent that this petition has been mooted by
such return may not be sustained.
The next and the more crucial question to be resolved in this Petition is
whether the machinery in suit is real or personal property from the point of
view of the parties, with petitioner arguing that it is a personality, while the
respondent claiming the contrary, and was sustained by the appellate
court, which accordingly held that the chattel mortgage constituted
thereon is null and void, as contended by said respondent.
A similar, if not Identical issue was raised in Tumalad v. Vicencio, 41 SCRA
143 where this Court, speaking through Justice J.B.L. Reyes, ruled:
Although there is no specific statement referring to the subject house as
personal property, yet by ceding, selling or transferring a property by way
of chattel mortgage defendants-appellants could only have meant to
convey the house as chattel, or at least, intended to treat the same as

such, so that they should not now be allowed to make an inconsistent

stand by claiming otherwise. Moreover, the subject house stood on a
rented lot to which defendants-appellants merely had a temporary right as
lessee, and although this can not in itself alone determine the status of the
property, it does so when combined with other factors to sustain the
interpretation that the parties, particularly the mortgagors, intended to
treat the house as personality. Finally, unlike in the Iya cases, Lopez vs.
Orosa, Jr. & Plaza Theatre, Inc. & Leung Yee vs. F.L. Strong Machinery &
Williamson, wherein third persons assailed the validity of the chattel
mortgage, it is the defendants-appellants themselves, as debtorsmortgagors, who are attacking the validity of the chattel mortgage in this
case. The doctrine of estoppel therefore applies to the herein defendantsappellants, having treated the subject house as personality.
Examining the records of the instant case, We find no logical justification to
exclude the rule out, as the appellate court did, the present case from the
application of the abovequoted pronouncement. If a house of strong
materials, like what was involved in the above Tumalad case, may be
considered as personal property for purposes of executing a chattel
mortgage thereon as long as the parties to the contract so agree and no
innocent third party will be prejudiced thereby, there is absolutely no
reason why a machinery, which is movable in its nature and becomes
immobilized only by destination or purpose, may not be likewise treated as
such. This is really because one who has so agreed is estopped from
denying the existence of the chattel mortgage.
In rejecting petitioner's assertion on the applicability of the Tumalad
doctrine, the Court of Appeals lays stress on the fact that the house
involved therein was built on a land that did not belong to the owner of
such house. But the law makes no distinction with respect to the ownership
of the land on which the house is built and We should not lay down
distinctions not contemplated by law.
It must be pointed out that the characterization of the subject machinery
as chattel by the private respondent is indicative of intention and
impresses upon the property the character determined by the parties. As
stated inStandard Oil Co. of New York v. Jaramillo, 44 Phil. 630, it is
undeniable that the parties to a contract may by agreement treat as
personal property that which by nature would be real property, as long as
no interest of third parties would be prejudiced thereby.
Private respondent contends that estoppel cannot apply against it because
it had never represented nor agreed that the machinery in suit be
considered as personal property but was merely required and dictated on
by herein petitioner to sign a printed form of chattel mortgage which was
in a blank form at the time of signing. This contention lacks
persuasiveness. As aptly pointed out by petitioner and not denied by the

respondent, the status of the subject machinery as movable or immovable

was never placed in issue before the lower court and the Court of Appeals
except in a supplemental memorandum in support of the petition filed in
the appellate court. Moreover, even granting that the charge is true, such
fact alone does not render a contract void ab initio, but can only be a
ground for rendering said contract voidable, or annullable pursuant to
Article 1390 of the new Civil Code, by a proper action in court. There is
nothing on record to show that the mortgage has been annulled. Neither is
it disclosed that steps were taken to nullify the same. On the other hand,
as pointed out by petitioner and again not refuted by respondent, the latter
has indubitably benefited from said contract. Equity dictates that one
should not benefit at the expense of another. Private respondent could not
now therefore, be allowed to impugn the efficacy of the chattel mortgage
after it has benefited therefrom,
From what has been said above, the error of the appellate court in ruling
that the questioned machinery is real, not personal property, becomes
very apparent. Moreover, the case of Machinery and Engineering Supplies,
Inc. v. CA, 96 Phil. 70, heavily relied upon by said court is not applicable to
the case at bar, the nature of the machinery and equipment involved
therein as real properties never having been disputed nor in issue, and
they were not the subject of a Chattel Mortgage. Undoubtedly, the Tumalad
case bears more nearly perfect parity with the instant case to be the more
controlling jurisprudential authority.
WHEREFORE, the questioned decision and resolution of the Court of
Appeals are hereby reversed and set aside, and the Orders of the lower
court are hereby reinstated, with costs against the private respondent.
SO ORDERED.

G.R. No. L-30173 September 30, 1971

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

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

Case certified to this Court by the Court of Appeals (CA-G.R. No. 27824-R)
for the reason that only questions of law are involved.
This case was originally commenced by defendants-appellants in the
municipal court of Manila in Civil Case No. 43073, for ejectment. Having
lost therein, defendants-appellants appealed to the court a quo (Civil Case
No. 30993) which also rendered a decision against them, the dispositive
portion of which follows:
WHEREFORE, the court hereby renders judgment in favor of the plaintiffs
and against the defendants, ordering the latter to pay jointly and severally
the former a monthly rent of P200.00 on the house, subject-matter of this
action, from March 27, 1956, to January 14, 1967, with interest at the legal
rate from April 18, 1956, the filing of the complaint, until fully paid, plus
attorney's fees in the sum of P300.00 and to pay the costs.
It appears on the records that on 1 September 1955 defendants-appellants
executed a chattel mortgage in favor of plaintiffs-appellees over their
house of strong materials located at No. 550 Int. 3, Quezon Boulevard,
Quiapo, Manila, over Lot Nos. 6-B and 7-B, Block No. 2554, which were
being rented from Madrigal & Company, Inc. The mortgage was registered
in the Registry of Deeds of Manila on 2 September 1955. The herein
mortgage was executed to guarantee a loan of P4,800.00 received from
plaintiffs-appellees, payable within one year at 12% per annum. The mode
of payment was P150.00 monthly, starting September, 1955, up to July
1956, and the lump sum of P3,150 was payable on or before August, 1956.
It was also agreed that default in the payment of any of the amortizations,
would cause the remaining unpaid balance to becomeimmediately due and
Payable and
the Chattel Mortgage will be enforceable in accordance with the provisions
of Special Act No. 3135, and for this purpose, the Sheriff of the City of
Manila or any of his deputies is hereby empowered and authorized to sell
all the Mortgagor's property after the necessary publication in order to

settle the financial debts of P4,800.00, plus 12% yearly interest, and
attorney's fees... 2
When defendants-appellants defaulted in paying, the mortgage was
extrajudicially foreclosed, and on 27 March 1956, the house was sold at
public auction pursuant to the said contract. As highest bidder, plaintiffsappellees were issued the corresponding certificate of sale. 3 Thereafter, on
18 April 1956, plaintiffs-appellant commenced Civil Case No. 43073 in the
municipal court of Manila, praying, among other things, that the house be
vacated and its possession surrendered to them, and for defendantsappellants to pay rent of P200.00 monthly from 27 March 1956 up to the
time the possession is surrendered. 4 On 21 September 1956, the municipal
court rendered its decision
... ordering the defendants to vacate the premises described in the
complaint; ordering further to pay monthly the amount of P200.00 from
March 27, 1956, until such (time that) the premises is (sic) completely
vacated; plus attorney's fees of P100.00 and the costs of the suit. 5
Defendants-appellants, in their answers in both the municipal court and
court a quo impugned the legality of the chattel mortgage, claiming that
they are still the owners of the house; but they waived the right to
introduce evidence, oral or documentary. Instead, they relied on their
memoranda in support of their motion to dismiss, predicated mainly on the
grounds that: (a) the municipal court did not have jurisdiction to try and
decide the case because (1) the issue involved, is ownership, and (2) there
was no allegation of prior possession; and (b) failure to prove prior demand
pursuant to Section 2, Rule 72, of the Rules of Court. 6
During the pendency of the appeal to the Court of First Instance,
defendants-appellants failed to deposit the rent for November, 1956 within
the first 10 days of December, 1956 as ordered in the decision of the
municipal court. As a result, the court granted plaintiffs-appellees' motion
for execution, and it was actually issued on 24 January 1957. However, the
judgment regarding the surrender of possession to plaintiffs-appellees
could not be executed because the subject house had been already
demolished on 14 January 1957 pursuant to the order of the court in a
separate civil case (No. 25816) for ejectment against the present
defendants for non-payment of rentals on the land on which the house was
constructed.
The motion of plaintiffs for dismissal of the appeal, execution of the
supersedeas bond and withdrawal of deposited rentals was denied for the
reason that the liability therefor was disclaimed and was still being
litigated, and under Section 8, Rule 72, rentals deposited had to be held
until final disposition of the appeal. 7

On 7 October 1957, the appellate court of First Instance rendered its

decision, the dispositive portion of which is quoted earlier. The said
decision was appealed by defendants to the Court of Appeals which, in
turn, certified the appeal to this Court. Plaintiffs-appellees failed to file a
brief and this appeal was submitted for decision without it.
Defendants-appellants submitted numerous assignments of error which
can be condensed into two questions, namely: .
(a) Whether the municipal court from which the case originated had
jurisdiction to adjudicate the same;
(b) Whether the defendants are, under the law, legally bound to pay
rentals to the plaintiffs during the period of one (1) year provided by law
for the redemption of the extrajudicially foreclosed house.
We will consider these questions seriatim.
(a) Defendants-appellants mortgagors question the jurisdiction of the
municipal court from which the case originated, and consequently, the
appellate jurisdiction of the Court of First Instance a quo, on the theory that
the chattel mortgage is void ab initio; whence it would follow that the
extrajudicial foreclosure, and necessarily the consequent auction sale, are
also void. Thus, the ownership of the house still remained with defendantsappellants who are entitled to possession and not plaintiffs-appellees.
Therefore, it is argued by defendants-appellants, the issue of ownership
will have to be adjudicated first in order to determine possession. lt is
contended further that ownership being in issue, it is the Court of First
Instance which has jurisdiction and not the municipal court.
Defendants-appellants predicate their theory of nullity of the chattel
mortgage on two grounds, which are: (a) that, their signatures on the
chattel mortgage were obtained through fraud, deceit, or trickery; and (b)
that the subject matter of the mortgage is a house of strong materials,
and, being an immovable, it can only be the subject of a real estate
mortgage and not a chattel mortgage.
On the charge of fraud, deceit or trickery, the Court of First Instance found
defendants-appellants' contentions as not supported by evidence and
accordingly dismissed the charge, 8 confirming the earlier finding of the
municipal court that "the defense of ownership as well as the allegations of
fraud and deceit ... are mere allegations." 9
It has been held in Supia and Batiaco vs. Quintero and Ayala 10 that "the
answer is a mere statement of the facts which the party filing it expects to
prove, but it is not evidence; 11 and further, that when the question to be
determined is one of title, the Court is given the authority to proceed with
the hearing of the cause until this fact is clearly established. In the case

of Sy vs. Dalman, 12 wherein the defendant was also a successful bidder in

an auction sale, it was likewise held by this Court that in detainer cases the
aim of ownership "is a matter of defense and raises an issue of fact which
should be determined from the evidence at the trial." What determines
jurisdiction are the allegations or averments in the complaint and the relief
asked for. 13
Moreover, even granting that the charge is true, fraud or deceit does not
render a contract void ab initio, and can only be a ground for rendering the
contract voidable or annullable pursuant to Article 1390 of the New Civil
Code, by a proper action in court. 14 There is nothing on record to show
that the mortgage has been annulled. Neither is it disclosed that steps
were taken to nullify the same. Hence, defendants-appellants' claim of
ownership on the basis of a voidable contract which has not been voided
fails.
It is claimed in the alternative by defendants-appellants that even if there
was no fraud, deceit or trickery, the chattel mortgage was still null and
void ab initio because only personal properties can be subject of a chattel
mortgage. The rule about the status of buildings as immovable property is
stated in Lopez vs. Orosa, Jr. and Plaza Theatre Inc., 15 cited in Associated
Insurance Surety Co., Inc. vs. Iya, et al. 16 to the effect that
... it is obvious that the inclusion of the building, separate and distinct from
the land, in the enumeration of what may constitute real properties (art.
415, New Civil Code) could only mean one thing that a building is by
itself an immovable property irrespective of whether or not said structure
and the land on which it is adhered to belong to the same owner.
Certain deviations, however, have been allowed for various reasons. In the
case of Manarang and Manarang vs. Ofilada, 17 this Court stated that "it is
undeniable that the parties to a contract may by agreement treat as
personal property that which by nature would be real property",
citing Standard Oil Company of New York vs. Jaramillo. 18 In the latter case,
the mortgagor conveyed and transferred to the mortgagee by way of
mortgage "the following described personal property."19 The "personal
property" consisted of leasehold rights and a building. Again, in the case
of Luna vs. Encarnacion, 20 the subject of the contract designated as
Chattel Mortgage was a house of mixed materials, and this Court hold
therein that it was a valid Chattel mortgage because it was so expressly
designated and specifically that the property given as security "is a house
of mixed materials, which by its very nature is considered personal
property." In the later case of Navarro vs. Pineda,21 this Court stated that
The view that parties to a deed of chattel mortgage may agree to consider
a house as personal property for the purposes of said contract, "is good
only insofar as the contracting parties are concerned. It is based, partly,

upon the principle of estoppel" (Evangelista vs. Alto Surety, No. L-11139,
23 April 1958). In a case, a mortgaged house built on a rented land was
held to be a personal property, not only because the deed of mortgage
considered it as such, but also because it did not form part of the land
(Evangelists vs. Abad, [CA]; 36 O.G. 2913), for it is now settled that an
object placed on land by one who had only a temporary right to the same,
such as the lessee or usufructuary, does not become immobilized by
attachment (Valdez vs. Central Altagracia, 222 U.S. 58, cited in Davao
Sawmill Co., Inc. vs. Castillo, et al., 61 Phil. 709). Hence, if a house
belonging to a person stands on a rented land belonging to another
person, it may be mortgaged as a personal property as so stipulated in the
document of mortgage. (Evangelista vs. Abad, Supra.) It should be noted,
however that the principle is predicated on statements by the owner
declaring his house to be a chattel, a conduct that may conceivably estop
him from subsequently claiming otherwise. (Ladera vs. C.N. Hodges, [CA]
48 O.G. 5374): 22
In the contract now before Us, the house on rented land is not only
expressly designated as Chattel Mortgage; it specifically provides that "the
mortgagor ... voluntarily CEDES, SELLS and TRANSFERS by way of Chattel
Mortgage 23 the property together with its leasehold rights over the lot on
which it is constructed and participation ..." 24Although there is no specific
statement referring to the subject house as personal property, yet by
ceding, selling or transferring a property by way of chattel
mortgage defendants-appellants could only have meant to convey the
house as chattel, or at least, intended to treat the same as such, so that
they should not now be allowed to make an inconsistent stand by claiming
otherwise. Moreover, the subject house stood on a rented lot to which
defendats-appellants merely had a temporary right as lessee, and although
this can not in itself alone determine the status of the property, it does so
when combined with other factors to sustain the interpretation that the
parties, particularly the mortgagors, intended to treat the house as
personalty. Finally unlike in the Iya cases, Lopez vs. Orosa, Jr. and Plaza
Theatre, Inc. 25 and Leung Yee vs. F. L. Strong Machinery and
Williamson, 26 wherein third persons assailed the validity of the chattel
mortgage, 27 it is the defendants-appellants themselves, as debtorsmortgagors, who are attacking the validity of the chattel mortgage in this
case. The doctrine of estoppel therefore applies to the herein defendantsappellants, having treated the subject house as personalty.
(b) Turning to the question of possession and rentals of the premises in
question. The Court of First Instance noted in its decision that nearly a year
after the foreclosure sale the mortgaged house had been demolished on 14
and 15 January 1957 by virtue of a decision obtained by the lessor of the
land on which the house stood. For this reason, the said court limited itself
to sentencing the erstwhile mortgagors to pay plaintiffs a monthly rent of

P200.00 from 27 March 1956 (when the chattel mortgage was foreclosed
and the house sold) until 14 January 1957 (when it was torn down by the
Sheriff), plus P300.00 attorney's fees.
Appellants mortgagors question this award, claiming that they were
entitled to remain in possession without any obligation to pay rent during
the one year redemption period after the foreclosure sale, i.e., until 27
March 1957. On this issue, We must rule for the appellants.
Chattel mortgages are covered and regulated by the Chattel Mortgage
Law, Act No. 1508. 28 Section 14 of this Act allows the mortgagee to have
the property mortgaged sold at public auction through a public officer in
almost the same manner as that allowed by Act No. 3135, as amended by
Act No. 4118, provided that the requirements of the law relative to notice
and registration are complied with. 29 In the instant case, the parties
specifically stipulated that "the chattel mortgage will be enforceable in
accordance with the provisions of Special Act No. 3135 ... ." 30 (Emphasis
supplied).
Section 6 of the Act referred to 31 provides that the debtor-mortgagor
(defendants-appellants herein) may, at any time within one year from and
after the date of the auction sale, redeem the property sold at the extra
judicial foreclosure sale. Section 7 of the same Act 32 allows the purchaser
of the property to obtain from the court the possession during the period of
redemption: but the same provision expressly requires the filing of a
petition with the proper Court of First Instance and the furnishing of a
bond. It is only upon filing of the proper motion and the approval of the
corresponding bond that the order for a writ of possession issues as a
matter of course. No discretion is left to the court. 33 In the absence of such
a compliance, as in the instant case, the purchaser can not claim
possession during the period of redemption as a matter of right. In such a
case, the governing provision is Section 34, Rule 39, of the Revised Rules
of Court 34 which also applies to properties purchased in extrajudicial
foreclosure proceedings. 35 Construing the said section, this Court stated in
the aforestated case of Reyes vs. Hamada.
In other words, before the expiration of the 1-year period within which the
judgment-debtor or mortgagor may redeem the property, the purchaser
thereof is not entitled, as a matter of right, to possession of the same.
Thus, while it is true that the Rules of Court allow the purchaser to receive
the rentals if the purchased property is occupied by tenants, he is,
nevertheless, accountable to the judgment-debtor or mortgagor as the
case may be, for the amount so received and the same will be duly
credited against the redemption price when the said debtor or mortgagor
effects the redemption.Differently stated, the rentals receivable from
tenants, although they may be collected by the purchaser during the
redemption period, do not belong to the latter but still pertain to the

debtor of mortgagor. The rationale for the Rule, it seems, is to secure for
the benefit of the debtor or mortgagor, the payment of the redemption
amount and the consequent return to him of his properties sold at public
auction. (Emphasis supplied)
The Hamada case reiterates the previous ruling in Chan vs. Espe. 36
Since the defendants-appellants were occupying the house at the time of
the auction sale, they are entitled to remain in possession during the
period of redemption or within one year from and after 27 March 1956, the
date of the auction sale, and to collect the rents or profits during the said
period.
It will be noted further that in the case at bar the period of redemption had
not yet expired when action was instituted in the court of origin, and that
plaintiffs-appellees did not choose to take possession under Section 7, Act
No. 3135, as amended, which is the law selected by the parties to govern
the extrajudicial foreclosure of the chattel mortgage. Neither was there an
allegation to that effect. Since plaintiffs-appellees' right to possess was not
yet born at the filing of the complaint, there could be no violation or breach
thereof. Wherefore, the original complaint stated no cause of action and
was prematurely filed. For this reason, the same should be ordered
dismissed, even if there was no assignment of error to that effect. The
Supreme Court is clothed with ample authority to review palpable errors
not assigned as such if it finds that their consideration is necessary in
arriving at a just decision of the cases. 37
It follows that the court below erred in requiring the mortgagors to pay
rents for the year following the foreclosure sale, as well as attorney's fees.
FOR THE FOREGOING REASONS, the decision appealed from is reversed
and another one entered, dismissing the complaint. With costs against
plaintiffs-appellees.

SERGS PRODUCTS, INC., and SERGIO T.

GOQUIOLAY, petitioners, vs. PCI LEASING AND FINANCE,
INC., respondent.

On March 24, 1998, in implementation of said writ, the sheriff proceeded to

petitioners factory, seized one machinery with [the] word that he [would]
return for the other machineries.

DECISION

On March 25, 1998, petitioners filed a motion for special protective order
(Annex C), invoking the power of the court to control the conduct of its
officers and amend and control its processes, praying for a directive for the
sheriff to defer enforcement of the writ of replevin.

PANGANIBAN, J.:
After agreeing to a contract stipulating that a real or immovable property
be considered as personal or movable, a party is estopped from
subsequently claiming otherwise.Hence, such property is a proper subject
of a writ of replevin obtained by the other contracting party.
The Case
Before us is a Petition for Review on Certiorari assailing the January 6, 1999
Decision[1] of the Court of Appeals (CA)[2] in CA-GR SP No. 47332 and its
February 26, 1999 Resolution[3] denying reconsideration. The decretal
portion of the CA Decision reads as follows:
WHEREFORE, premises considered, the assailed Order dated February 18,
1998 and Resolution dated March 31, 1998 in Civil Case No. Q-98-33500
are hereby AFFIRMED. The writ of preliminary injunction issued on June
15, 1998 is hereby LIFTED.[4]
In its February 18, 1998 Order,[5] the Regional Trial Court (RTC) of Quezon
City (Branch 218)[6] issued a Writ of Seizure.[7] The March 18, 1998
Resolution[8] denied petitioners Motion for Special Protective Order, praying
that the deputy sheriff be enjoined from seizing immobilized or other real
properties in (petitioners) factory in Cainta, Rizal and to return to their
original place whatever immobilized machineries or equipments he may
have removed.[9]
The Facts
The undisputed facts are summarized by the Court of Appeals as follows: [10]
On February 13, 1998, respondent PCI Leasing and Finance, Inc. (PCI
Leasing for short) filed with the RTC-QC a complaint for [a] sum of money
(Annex E), with an application for a writ of replevin docketed as Civil Case
No. Q-98-33500.
On March 6, 1998, upon an ex-parte application of PCI Leasing, respondent
judge issued a writ of replevin (Annex B) directing its sheriff to seize and
deliver the machineries and equipment to PCI Leasing after 5 days and
upon the payment of the necessary expenses.

This motion was opposed by PCI Leasing (Annex F), on the ground that the
properties [were] still personal and therefore still subject to seizure and a
writ of replevin.
In their Reply, petitioners asserted that the properties sought to be seized
[were] immovable as defined in Article 415 of the Civil Code, the parties
agreement to the contrary notwithstanding. They argued that to give effect
to the agreement would be prejudicial to innocent third parties. They
further stated that PCI Leasing [was] estopped from treating these
machineries as personal because the contracts in which the alleged
agreement [were] embodied [were] totally sham and farcical.
On April 6, 1998, the sheriff again sought to enforce the writ of seizure and
take possession of the remaining properties. He was able to take two more,
but was prevented by the workers from taking the rest.
On April 7, 1998, they went to [the CA] via an original action for certiorari.
Ruling of the Court of Appeals
Citing the Agreement of the parties, the appellate court held that the
subject machines were personal property, and that they had only been
leased, not owned, by petitioners. It also ruled that the words of the
contract are clear and leave no doubt upon the true intention of the
contracting parties. Observing that Petitioner Goquiolay was an
experienced businessman who was not unfamiliar with the ways of the
trade, it ruled that he should have realized the import of the document he
signed. The CA further held:
Furthermore, to accord merit to this petition would be to preempt the trial
court in ruling upon the case below, since the merits of the whole matter
are laid down before us via a petition whose sole purpose is to inquire upon
the existence of a grave abuse of discretion on the part of the [RTC] in
issuing the assailed Order and Resolution. The issues raised herein are
proper subjects of a full-blown trial, necessitating presentation of evidence
by both parties. The contract is being enforced by one, and [its] validity is
attacked by the other a matter x x x which respondent court is in the best
position to determine.

Hence, this Petition.[11]

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

describing the personal property alleged to be wrongfully detained and

requiring the sheriff forthwith to take such property into his custody.
On the other hand, Article 415 of the Civil Code enumerates immovable or
real property 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;
x x x....................................x x x....................................x x x
In the present case, the machines that were the subjects of the Writ of
Seizure were placed by petitioners in the factory built on their own
land. Indisputably, they were essential and principal elements of their
chocolate-making industry. Hence, although each of them was movable or
personal property on its own, all of them have become immobilized by
destination because they are essential and principal elements in the
industry.[16] In that sense, petitioners are correct in arguing that the said
machines are real, not personal, property pursuant to Article 415 (5) of the
Civil Code.[17]
Be that as it may, we disagree with the submission of the petitioners that
the said machines are not proper subjects of the Writ of Seizure.
The Court has held that contracting parties may validly stipulate that a real
property be considered as personal.[18] After agreeing to such stipulation,
they are consequently estopped from claiming otherwise. Under the
principle of estoppel, a party to a contract is ordinarily precluded from
denying the truth of any material fact found therein.
Hence, in Tumalad v. Vicencio,[19] the Court upheld the intention of the
parties to treat a house as a personal property because it had been made
the subject of a chattel mortgage. The Court ruled:

Rule 60 of the Rules of Court provides that writs of replevin are issued for
the recovery of personal property only. [15] Section 3 thereof reads:

x x x. Although there is no specific statement referring to the subject house

as personal property, yet by ceding, selling or transferring a property by
way of chattel mortgage defendants-appellants could only have meant to
convey the house as chattel, or at least, intended to treat the same as
such, so that they should not now be allowed to make an inconsistent
stand by claiming otherwise.

SEC. 3. Order. -- Upon the filing of such affidavit and approval of the bond,
the court shall issue an order and the corresponding writ of replevin

Applying Tumalad, the Court in Makati Leasing and Finance Corp. v.

Wearever Textile Mills[20] also held that the machinery used in a factory and

essential to the industry, as in the present case, was a proper subject of a

writ of replevin because it was treated as personal property in a
contract. Pertinent portions of the Courts ruling are reproduced hereunder:
x x x. If a house of strong materials, like what was involved in the above
Tumalad case, may be considered as personal property for purposes of
executing a chattel mortgage thereon as long as the parties to the contract
so agree and no innocent third party will be prejudiced thereby, there is
absolutely no reason why a machinery, which is movable in its nature and
becomes immobilized only by destination or purpose, may not be likewise
treated as such. This is really because one who has so agreed is estopped
from denying the existence of the chattel mortgage.
In the present case, the Lease Agreement clearly provides that the
machines in question are to be considered as personal
property. Specifically, Section 12.1 of the Agreement reads as follows:[21]
12.1 The PROPERTY is, and shall at all times be and remain, personal
property notwithstanding that the PROPERTY or any part thereof may now
be, or hereafter become, in any manner affixed or attached to or
embedded in, or permanently resting upon, real property or any building
thereon, or attached in any manner to what is permanent.
Clearly then, petitioners are estopped from denying the characterization of
the subject machines as personal property. Under the circumstances, they
are proper subjects of the Writ of Seizure.
It should be stressed, however, that our holding -- that the machines
should be deemed personal property pursuant to the Lease Agreement is
good only insofar as the contracting parties are concerned. [22] Hence, while
the parties are bound by the Agreement, third persons acting in good faith
are not affected by its stipulation characterizing the subject machinery as
personal.[23] In any event, there is no showing that any specific third party
would be adversely affected.
Validity of the Lease Agreement
In their Memorandum, petitioners contend that the Agreement is a loan
and not a lease.[24] Submitting documents supposedly showing that they
own the subject machines, petitioners also argue in their Petition that the
Agreement suffers from intrinsic ambiguity which places in serious doubt
the intention of the parties and the validity of the lease agreement itself.
[25]
In their Reply to respondents Comment, they further allege that the
Agreement is invalid.[26]
These arguments are unconvincing. The validity and the nature of the
contract are the lis mota of the civil action pending before the RTC. A
resolution of these questions, therefore, is effectively a resolution of the

merits of the case. Hence, they should be threshed out in the trial, not in
the proceedings involving the issuance of the Writ of Seizure.
Indeed, in La Tondea Distillers v. CA,[27] the Court explained that the policy
under Rule 60 was that questions involving title to the subject property
questions which petitioners are now raising -- should be determined in the
trial. In that case, the Court noted that the remedy of defendants under
Rule 60 was either to post a counter-bond or to question the sufficiency of
the plaintiffs bond. They were not allowed, however, to invoke the title to
the subject property. The Court ruled:
In other words, the law does not allow the defendant to file a motion to
dissolve or discharge the writ of seizure (or delivery) on ground of
insufficiency of the complaint or of the grounds relied upon therefor, as in
proceedings on preliminary attachment or injunction, and thereby put at
issue the matter of the title or right of possession over the specific chattel
being replevied, the policy apparently being that said matter should be
ventilated and determined only at the trial on the merits. [28]
Besides, these questions require a determination of facts and a
presentation of evidence, both of which have no place in a petition for
certiorari in the CA under Rule 65 or in a petition for review in this Court
under Rule 45.[29]
Reliance on the Lease Agreement
It should be pointed out that the Court in this case may rely on the Lease
Agreement, for nothing on record shows that it has been nullified or
annulled. In fact, petitioners assailed it first only in the RTC proceedings,
which had ironically been instituted by respondent. Accordingly, it must be
presumed valid and binding as the law between the parties.
Makati Leasing and Finance Corporation[30] is also instructive on this
point. In that case, the Deed of Chattel Mortgage, which characterized the
subject machinery as personal property, was also assailed because
respondent had allegedly been required to sign a printed form of chattel
mortgage which was in a blank form at the time of signing. The Court
rejected the argument and relied on the Deed, ruling as follows:
x x x. Moreover, even granting that the charge is true, such fact alone does
not render a contract void ab initio, but can only be a ground for rendering
said contract voidable, or annullable pursuant to Article 1390 of the new
Civil Code, by a proper action in court. There is nothing on record to show
that the mortgage has been annulled. Neither is it disclosed that steps
were taken to nullify the same. x x x
Alleged Injustice Committed on the Part of Petitioners

Petitioners contend that if the Court allows these machineries to be seized,

then its workers would be out of work and thrown into the streets. [31] They
also allege that the seizure would nullify all efforts to rehabilitate the
corporation.
Petitioners arguments do not preclude the implementation of the Writ. As
earlier discussed, law and jurisprudence support its propriety. Verily, the
above-mentioned consequences, if they come true, should not be blamed
on this Court, but on the petitioners for failing to avail themselves of the
remedy under Section 5 of Rule 60, which allows the filing of a counterbond. The provision states:
SEC. 5. Return of property. -- If the adverse party objects to the sufficiency
of the applicants bond, or of the surety or sureties thereon, he cannot
immediately require the return of the property, but if he does not so object,
he may, at any time before the delivery of the property to the applicant,
require the return thereof, by filing with the court where the action is
pending a bond executed to the applicant, in double the value of the
property as stated in the applicants affidavit for the delivery thereof to the
applicant, if such delivery be adjudged, and for the payment of such sum
to him as may be recovered against the adverse party, and by serving a
copy bond on the applicant.
WHEREFORE, the Petition is DENIED and the assailed Decision of the
Court of Appeals AFFIRMED. Costs against petitioners.
SO ORDERED.

G.R. No. L-32917 July 18, 1988

JULIAN S. YAP, petitioner,
vs.
HON. SANTIAGO O. TAADA, etc., and GOULDS PUMPS
INTERNATIONAL (PHIL.), INC., respondents.
Paterno P. Natinga for private respondent.

NARVASA, J.:
The petition for review on certiorari at bar involves two (2) Orders of
respondent Judge Taada 1 in Civil Case No. 10984. The first, dated
September 16, 1970, denied petitioner Yap's motion to set aside execution
sale and to quash alias writ of execution. The second, dated November 21,
1970, denied Yap's motion for reconsideration. The issues concerned the
propriety of execution of a judgment claimed to be "incomplete, vague and
non-final," and the denial of petitioner's application to prove and recover
damages resulting from alleged irregularities in the process of execution.
The antecedents will take some time in the telling. The case began in the
City Court of Cebu with the filing by Goulds Pumps International (Phil.), Inc.
of a complaint 2 against Yap and his wife 3 seeking recovery of P1,459.30
representing the balance of the price and installation cost of a water pump
in the latter's premises. 4 The case resulted in a judgment by the City Court
on November 25, 1968, reading as follows:
When this case was called for trial today, Atty. Paterno Natinga appeared
for the plaintiff Goulds and informed the court that he is ready for trial.
However, none of the defendants appeared despite notices having been
served upon them.
Upon petition Atty. Natinga, the plaintiff is hereby allowed to present its
evidence ex-parte.
After considering the evidence of the plaintiff, the court hereby renders
judgment in favor of the plaintiff and against the defendant (Yap), ordering
the latter to pay to the former the sum of Pl,459.30 with interest at the
rate of 12% per annum until fully paid, computed from August 12, 1968,
date of the filing of the complaint; to pay the sum of P364.80 as
reasonable attorney's fees, which is equivalent " to 25% of the unpaid
principal obligation; and to pay the costs, if any.
Yap appealed to the Court of First Instance. The appeal was assigned to
the sala of respondent Judge Taada. For failure to appear for pre-trial on
August 28, 1968, this setting being intransferable since the pre-trial had

already been once postponed at his instance, 5 Yap was declared in default
by Order of Judge Taada dated August 28, 1969, 6 reading as follows:
When this case was called for pre-trial this morning, the plaintiff and
counsel appeared, but neither the defendants nor his counsel appeared
despite the fact that they were duly notified of the pre-trial set this
morning. Instead he filed an Ex-Parte Motion for Postponement which this
Court received only this morning, and on petition of counsel for the plaintiff
that the Ex-Parte Motion for Postponement was not filed in accordance with
the Rules of Court he asked that the same be denied and the defendants
be declared in default; .. the motion for the plaintiff being well- grounded,
the defendants are hereby declared in default and the Branch Clerk of
Court ..is hereby authorized to receive evidence for the plaintiff and ..
submit his report within ten (10) days after reception of evidence.
Goulds presented evidence ex parte and judgment by default was rendered
the following day by Judge Taada requiring Yap to pay to Goulds (1)
Pl,459.30 representing the unpaid balance of the pump purchased by him;
(2) interest of 12% per annum thereon until fully paid; and (3) a sum
equivalent to 25% of the amount due as attorney's fees and costs and
other expenses in prosecuting the action. Notice of the judgment was
served on Yap on September 1, 1969. 7
On September 16, 1969 Yap filed a motion for reconsideration. 8 In it he
insisted that his motion for postponement should have been granted since
it expressed his desire to explore the possibility of an amicable settlement;
that the court should give the parties time to arrive at an amicable
settlement failing which, he should be allowed to present evidence in
support of his defenses (discrepancy as to the price and breach of
warranty). The motion was not verified or accompanied by any separate
affidavit. Goulds opposed the motion. Its opposition 9 drew attention to the
eleventh-hour motion for postponement of Yap which had resulted in the
cancellation of the prior hearing of June 30, 1969 despite Goulds'
vehement objection, and the re-setting thereof on August 28, 1969 with
intransferable character; it averred that Yap had again sought
postponement of this last hearing by another eleventh-hour motion on the
plea that an amicable settlement would be explored, yet he had never up
to that time ever broached the matter, 10 and that this pattern of seeking
to obtain last-minute postponements was discernible also in the
proceedings before the City Court. In its opposition, Goulds also adverted
to the examination made by it of the pump, on instructions of the City
Court, with a view to remedying the defects claimed to exist by Yap; but
the examination had disclosed the pump's perfect condition. Yap's motion
for reconsideration was denied by Order dated October 10, 1969, notice of
which was received by Yap on October 4, 1969. 11

On October 15, 1969 Judge Taada issued an Order granting Goulds'

Motion for Issuance of Writ of Execution dated October 14, 1969, declaring
the reasons therein alleged to be meritorious. 12 Yap forthwith filed an
"Urgent Motion for Reconsideration of Order" dated October 17,
1969, 13 contending that the judgment had not yet become final, since
contrary to Goulds' view, his motion for reconsideration was not pro
forma for lack of an affidavit of merit, this not being required under Section
1 (a) of Rule 37 of the Rules of Court upon which his motion was grounded.
Goulds presented an opposition dated October 22, 1969. 14 It pointed out
that in his motion for reconsideration Yap had claimed to have a valid
defense to the action, i.e., ".. discrepancy as to price and breach of seller's
warranty," in effect, that there was fraud on Goulds' paint; Yap's motion for
reconsideration should therefore have been supported by an affidavit of
merit respecting said defenses; the absence thereof rendered the motion
for reconsideration fatally defective with the result that its filing did not
interrupt the running of the period of appeal. The opposition also drew
attention to the failure of the motion for reconsideration to specify the
findings or conclusions in the judgment claimed to be contrary to law or
not supported by the evidence, making it a pro forma motion also
incapable of stopping the running of the appeal period. On October 23,
1969, Judge Taada denied Yap's motion for reconsideration and authorized
execution of the judgment. 15 Yap sought reconsideration of this order, by
another motion dated October 29, 1969. 16 This motion was denied by
Order dated January 26, 1970. 17 Again Yap moved for reconsideration, and
again was rebuffed, by Order dated April 28, 1970. 18
In the meantime the Sheriff levied on the water pump in question, 19 and
by notice dated November 4, 1969, scheduled the execution sale thereof
on November 14, 1969. 20 But in view of the pendency of Yap's motion for
reconsideration of October 29, 1969, suspension of the sale was directed
by Judge Taada in an order dated November 6, 1969. 21
Counsel for the plaintiff is hereby given 10 days time to answer the Motion,
dated October 29, 1969, from receipt of this Order and in the meantime,
the Order of October 23, 1969, insofar as it orders the sheriff to enforce the
writ of execution is hereby suspended.
It appears however that a copy of this Order was not transmitted to the
Sheriff "through oversight, inadvertence and pressure of work" of the
Branch Clerk of Court. 22 So the Deputy Provincial Sheriff went ahead with
the scheduled auction sale and sold the property levied on to Goulds as the
highest bidder. 23 He later submitted the requisite report to the Court dated
November 17, 1969, 24 as well as the "Sheriffs Return of Service" dated
February 13, 1970, 25 in both of which it was stated that execution had
been "partially satisfied." It should be observed that up to this time,
February, 1970, Yap had not bestirred himself to take an appeal from the
judgment of August 29, 1969.

On May 9, 1970 Judge Taada ordered the issuance of an alias writ of

execution on Gould's ex parte motion therefor. 26 Yap received notice of the
Order on June 11. Twelve (1 2) days later, he filed a "Motion to Set Aside
Execution Sale and to Quash Alias Writ of Execution." 27 As regards
the original, partial execution of the judgment, he argued that
1) "the issuance of the writ of execution on October 16, 1969 was contrary
to law, the judgment sought to be executed not being final and executory;"
and
2) "the sale was made without the notice required by Sec. 18, Rule 39, of
the New Rules of Court," i.e., notice by publication in case of execution sale
of real property, the pump and its accessories being immovable because
attached to the ground with character of permanency (Art. 415, Civil
Code).
And with respect to the alias writ, he argued that it should not have issued
because
1) "the judgment sought to be executed is null and void" as "it deprived
the defendant of his day in court" and "of due process;"
2) "said judgment is incomplete and vague" because there is no starting
point for computation of the interest imposed, or a specification of the
"other expenses incurred in prosecuting this case" which Yap had also been
ordered to pay;
3) "said judgment is defective because it contains no statement of facts
but a mere recital of the evidence; and
4) "there has been a change in the situation of the parties which makes
execution unjust and inequitable" because Yap suffered damages by reason
of the illegal execution.
Goulds filed an opposition on July 6, 1970. Yap's motion was thereafter
denied by Order dated September 16, 1970. Judge Taada pointed out that
the motion had "become moot and academic" since the decision of August
29, 1969, "received by the defendant on September 1, 1969 had long
become final when the Order for the Issuance of a Writ of Execution was
promulgated on October 15, 1969." His Honor also stressed that
The defendant's Motion for Reconsideration of the Courts decision was in
reality one for new trial. Regarded as motion for new trial it should allege
the grounds for new trial, provided for in the Rules of Court, to be
supported by affidavit of merits; and this the defendant failed to do. If the
defendant sincerely desired for an opportunity to submit to an amicable
settlement, which he failed to do extra judicially despite the ample time

before him, he should have appeared in the pre- trial to achieve the same
purpose.
Judge Taada thereafter promulgated another Order dated September 21,
1970 granting a motion of Goulds for completion of execution of the
judgment of August 29, 1969 to be undertaken by the City Sheriff of Cebu.
Once more, Yap sought reconsideration. He submitted a "Motion for
Reconsideration of Two Orders" dated October 13, 1970, 28 seeking the
setting aside not only of this Order of September 21, 1970 but also that
dated September 16, 1970, denying his motion to set aside execution
dated June 23, 1970. He contended that the Order of September 21, 1970
(authorizing execution by the City Sheriff) was premature, since the 30-day
period to appeal from the earlier order of September 16, 1970 (denying his
motion to set aside) had not yet expired. He also reiterated his view that
his motion for reconsideration dated September 15, 1969 did not require
that it be accompanied by an affidavit of merits. This last motion was also
denied for "lack of merits," by Order dated November 21, 1970. 29
On December 3, 1970, Yap filed a "Notice of Appeal" manifesting his
intention to appeal to the Supreme Court on certiorari only on questions of
law, "from the Order ... of September 16, 1970 ... and from the Order ... of
November 21, 1970, ... pursuant to sections 2 and 3 of Republic Act No.
5440." He filed his petition for review with this Court on January 5, 1971,
after obtaining an extension therefor. 30
The errors of law he attributes to the Court a quo are the following:

31

1) refusing to invalidate the execution pursuant to its Order of October 16,

1969 although the judgment had not then become final and executory and
despite its being incomplete and vague;
2) ignoring the fact that the execution sale was carried out although it (the
Court) had itself ordered suspension of execution on November 6, 1969;
3) declining to annul the execution sale of the pump and accessories
subject of the action although made without the requisite notice prescribed
for the sale of immovables; and

appear at the pre-trial was pro forma and consequently had not interrupted
the running of the period of appeal. It is Yap's contention that his motion
was notpro forma for lack of an affidavit of merits, such a document not
being required by Section 1 (a) of Rule 37 of the Rules of Court upon which
his motion was based. This is incorrect.
Section 2, Rule 37 precisely requires that when the motion for new trial is
founded on Section 1 (a), it should be accompanied by an affidavit of
merit.
xxx xxx xxx
When the motion is made for the causes mentioned in subdivisions (a) and
(b) of the preceding section, it shall be proved in the manner provided for
proof of motions. Affidavit or affidavits of merits shall also be attached to a
motion for the cause mentioned in subdivision (a) which may be rebutted
by counter-affidavits.
xxx xxx xxx

32

Since Yap himself asserts that his motion for reconsideration is grounded
on Section 1 (a) of Rule 37, 33 i.e., fraud, accident, mistake or excusable
negligence which ordinary prudence could not have guarded against and
by reason of which ... (the) aggrieved party has probably been impaired in
his rights" this being in any event clear from a perusal of the motion
which theorizes that he had "been impaired in his rights" because he was
denied the right to present evidence of his defenses (discrepancy as to
price and breach of warranty) it was a fatal omission to fail to attach to
his motion an affidavit of merits, i.e., an affidavit "showing the facts (not
conclusions) constituting the valid x x defense which the movant may
prove in case a new trial is granted." 34 The requirement of such an
affidavit is essential because obviously "a new trial would be a waste of the
court's time if the complaint turns out to be groundless or the defense
ineffective." 35

4) refusing to allow the petitioner to prove irregularities in the process of

execution which had resulted in damages to him.

In his motion for reconsideration, Yap also contended that since he had
expressed a desire to explore the possibility of an amicable settlement, the
Court should have given him time to do so, instead of declaring him in
default and thereafter rendering judgment by default on Gould's ex
parte evidence.

Notice of the Trial Court's judgment was served on Yap on September 1,

1969. His motion for reconsideration thereof was filed 15 days thereafter,
on September 16, 1969. Notice of the Order denying the motion was
received by him on October 14, 1969. The question is whether or not the
motion for reconsideration which was not verified, or accompanied by an
affidavit of merits (setting forth facts constituting his meritorious defenses
to the suit) or other sworn statement (stating facts excusing his failure to

The bona fides of this desire to compromise is however put in doubt by the
attendant circumstances. It was manifested in an eleventh-hour motion for
postponement of the pre-trial which had been scheduled with
intransferable character since it had already been earlier postponed at
Yap's instance; it had never been mentioned at any prior time since
commencement of the litigation; such a possible compromise (at least in
general or preliminary terms) was certainly most appropriate for

consideration at the pre-trial; in fact Yap was aware that the matter was
indeed a proper subject of a pre-trial agenda, yet he sought to avoid
appearance at said pre-trial which he knew to be intransferable in
character. These considerations and the dilatory tactics thus far
attributable to him-seeking postponements of hearings, or failing to appear
therefor despite notice, not only in the Court of First Instance but also in
the City Court proscribe belief in the sincerity of his avowed desire to
negotiate a compromise. Moreover, the disregard by Yap of the general
requirement that "(n)otice of a motion shall be served by the applicant to
all parties concerned at least three (3) days before the hearing thereof,
together with a copy of the motion, and of any affidavits and other papers
accompanying it," 36 for which no justification whatever has been offered,
also militates against the bona fides of Yap's expressed wish for an
amicable settlement. The relevant circumstances do not therefore justify
condemnation, as a grave abuse of discretion, or a serious mistake, of the
refusal of the Trial Judge to grant postponement upon this proferred
ground.

his right to controvert the plaintiff s proofs and of his right to prove the
averments of his answer, inclusive of the counterclaim therein pleaded.
Moreover, the conclusion in the judgment of the merit of the plaintiff s
cause of action was necessarily and at the same time a determination of
the absence of merit of the defendant's claim of untenability of the
complaint and of malicious prosecution.

The motion for reconsideration did not therefore interrupt the running of
the period of appeal. The time during which it was pending before the
court from September 16, 1969 when it was filed with the respondent
Court until October 14, 1969 when notice of the order denying the motion
was received by the movant could not be deducted from the 30-day
period of appeal. 37 This is the inescapable conclusion from a consideration
of Section 3 of Rule 41 which in part declares that, "The "time during which
a motion to set aside the judgment or order or for a new trial has been
pending shall be deducted, unless such motion fails to satisfy the
requirements of Rule 37. 38

Yap's last claim is that in the process of the removal of the pump from his
house, Goulds' men had trampled on the plants growing there, destroyed
the shed over the pump, plugged the exterior casings with rags and cut
the electrical and conduit pipes; that he had thereby suffered actualdamages in an amount of not less than P 2,000.00, as well as moral
damages in the sum of P 10,000.00 resulting from his deprivation of the
use of his water supply; but the Court had refused to allow him to prove
these acts and recover the damages rightfully due him. Now, as to the loss
of his water supply, since this arose from acts legitimately done, the
seizure on execution of the water pump in enforcement of a final and
executory judgment, Yap most certainly is not entitled to claim moral or
any other form of damages therefor.

Notice of the judgment having been received by Yap on September 1,

1969, and the period of appeal therefrom not having been interrupted by
his motion for reconsideration filed on September 16, 1969, the
reglementary period of appeal expired thirty (30) days after September 1,
1969, or on October 1, 1969, without an appeal being taken by Yap. The
judgment then became final and executory; Yap could no longer take an
appeal therefrom or from any other subsequent orders; and execution of
judgment correctly issued on October 15, 1969, "as a matter of right." 39
The next point discussed by Yap, that the judgment is incomplete and
vague, is not well taken. It is true that the decision does not fix the starting
time of the computation of interest on the judgment debt, but this is
inconsequential since that time is easily determinable from the opinion,
i.e., from the day the buyer (Yap) defaulted in the payment of his
obligation, 40 on May 31, 1968. 41 The absence of any disposition regarding
his counterclaim is also immaterial and does not render the judgment
incomplete. Yap's failure to appear at the pre-trial without justification and
despite notice, which caused the declaration of his default, was a waiver of

Yap's next argument that the water pump had become immovable property
by its being installed in his residence is also untenable. The Civil Code
considers as immovable property, among others, anything "attached to an
immovable in a fixed manner, in such a way that it cannot be separated
therefrom without breaking the material or deterioration of the
object." 42 The pump does not fit this description. It could be, and was in
fact separated from Yap's premises without being broken or suffering
deterioration. Obviously the separation or removal of the pump involved
nothing more complicated than the loosening of bolts or dismantling of
other fasteners.

WHEREFORE, the petition is DENIED and the appeal DISMISSED, and the
Orders of September 16, 1970 and November 21, 1970 subject thereof,
AFFIRMED in toto. Costs against petitioner.
Cruz, Gancayco, Grio-Aquino and Medialdea, JJ., concur.

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, Espaa 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-) 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 crossarms 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;
xxx

xxx

xxx

(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;
xxx

xxx

xxx

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

owner of the tenement for an industry or works which may be carried in a
building or on a piece of land, and which tends directly to meet the needs
of the said industry or works;
xxx

xxx

xxx

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.

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;
xxx

xxx

xxx

5. Machinery, liquid containers, instruments or implements intended by the

owner of any building or land for use in connection with any industry or
trade being carried on therein and which are expressly adapted to meet
the requirements of such trade of industry.
Appellant emphasizes the first paragraph, and appellees the last
mentioned paragraph. We entertain no doubt that the trial judge and
appellees are right in their appreciation of the legal doctrines flowing from
the facts.
In the first place, it must again be pointed out that the appellant should
have registered its protest before or at the time of the sale of this property.
It must further be pointed out that while not conclusive, the
characterization 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.
xxx

xxx

xxx

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

G.R. No. 155076

February 27, 2006

LUIS MARCOS P. LAUREL, Petitioner,

vs.
HON. ZEUS C. ABROGAR, Presiding Judge of the Regional Trial
Court, Makati City, Branch 150, PEOPLE OF THE PHILIPPINES&
PHILIPPINE LONG DISTANCE TELEPHONE COMPANY, Respondents.
DECISION
CALLEJO, SR., J.:
Before us is a Petition for Review on Certiorari of the Decision 1 of the Court
of Appeals (CA) in CA-G.R. SP No. 68841 affirming the Order issued by
Judge Zeus C. Abrogar, Regional Trial Court (RTC), Makati City, Branch 150,
which denied the "Motion to Quash (With Motion to Defer Arraignment)" in
Criminal Case No. 99-2425 for theft.
Philippine Long Distance Telephone Company (PLDT) is the holder of a
legislative franchise to render local and international telecommunication
services under Republic Act No. 7082. 2 Under said law, PLDT is authorized
to establish, operate, manage, lease, maintain and purchase
telecommunication systems, including transmitting, receiving and
switching stations, for both domestic and international calls. For this
purpose, it has installed an estimated 1.7 million telephone lines
nationwide. PLDT also offers other services as authorized by Certificates of
Public Convenience and Necessity (CPCN) duly issued by the National
Telecommunications Commission (NTC), and operates and maintains an
International Gateway Facility (IGF). The PLDT network is thus principally
composed of the Public Switch Telephone Network (PSTN), telephone
handsets and/or telecommunications equipment used by its subscribers,
the wires and cables linking said telephone handsets and/or
telecommunications equipment, antenna, the IGF, and other
telecommunications equipment which provide
interconnections.3 1avvphil.net
PLDT alleges that one of the alternative calling patterns that constitute
network fraud and violate its network integrity is that which is known as
International Simple Resale (ISR). ISR is a method of routing and
completing international long distance calls using International Private
Leased Lines (IPL), cables, antenna or air wave or frequency, which
connect directly to the local or domestic exchange facilities of the
terminating country (the country where the call is destined). The IPL is
linked to switching equipment which is connected to a PLDT telephone
line/number. In the process, the calls bypass the IGF found at the
terminating country, or in some instances, even those from the originating
country.4

One such alternative calling service is that offered by Baynet Co., Ltd.
(Baynet) which sells "Bay Super Orient Card" phone cards to people who
call their friends and relatives in the Philippines. With said card, one is
entitled to a 27-minute call to the Philippines for about 37.03 per minute.
After dialing the ISR access number indicated in the phone card, the ISR
operator requests the subscriber to give the PIN number also indicated in
the phone card. Once the callers identity (as purchaser of the phone card)
is confirmed, the ISR operator will then provide a Philippine local line to the
requesting caller via the IPL. According to PLDT, calls made through the IPL
never pass the toll center of IGF operators in the Philippines. Using the
local line, the Baynet card user is able to place a call to any point in the
Philippines, provided the local line is National Direct Dial (NDD) capable. 5
PLDT asserts that Baynet conducts its ISR activities by utilizing an IPL to
course its incoming international long distance calls from Japan. The IPL is
linked to switching equipment, which is then connected to PLDT telephone
lines/numbers and equipment, with Baynet as subscriber. Through the use
of the telephone lines and other auxiliary equipment, Baynet is able to
connect an international long distance call from Japan to any part of the
Philippines, and make it appear as a call originating from Metro Manila.
Consequently, the operator of an ISR is able to evade payment of access,
termination or bypass charges and accounting rates, as well as compliance
with the regulatory requirements of the NTC. Thus, the ISR operator offers
international telecommunication services at a lower rate, to the damage
and prejudice of legitimate operators like PLDT.6
PLDT pointed out that Baynet utilized the following equipment for its ISR
activities: lines, cables, and antennas or equipment or device capable of
transmitting air waves or frequency, such as an IPL and telephone lines
and equipment; computers or any equipment or device capable of
accepting information applying the prescribed process of the information
and supplying the result of this process; modems or any equipment or
device that enables a data terminal equipment such as computers to
communicate with other data terminal equipment via a telephone line;
multiplexers or any equipment or device that enables two or more signals
from different sources to pass through a common cable or transmission
line; switching equipment, or equipment or device capable of connecting
telephone lines; and software, diskettes, tapes or equipment or device
used for recording and storing information.7
PLDT also discovered that Baynet subscribed to a total of 123 PLDT
telephone lines/numbers.8 Based on the Traffic Study conducted on the
volume of calls passing through Baynets ISR network which bypass the IGF
toll center, PLDT incurred an estimated monthly loss of
P10,185,325.96.9 Records at the Securities and Exchange Commission
(SEC) also revealed that Baynet was not authorized to provide international
or domestic long distance telephone service in the country. The following

are its officers: Yuji Hijioka, a Japanese national (chairman of the board of
directors); Gina C. Mukaida, a Filipina (board member and president); Luis
Marcos P. Laurel, a Filipino (board member and corporate secretary); Ricky
Chan Pe, a Filipino (board member and treasurer); and Yasushi Ueshima,
also a Japanese national (board member).
Upon complaint of PLDT against Baynet for network fraud, and on the
strength of two search warrants10 issued by the RTC of Makati, Branch 147,
National Bureau of Investigation (NBI) agents searched its office at the 7th
Floor, SJG Building, Kalayaan Avenue, Makati City on November 8, 1999.
Atsushi Matsuura, Nobuyoshi Miyake, Edourd D. Lacson and Rolando J.
Villegas were arrested by NBI agents while in the act of manning the
operations of Baynet. Seized in the premises during the search were
numerous equipment and devices used in its ISR activities, such as
multiplexers, modems, computer monitors, CPUs, antenna, assorted
computer peripheral cords and microprocessors, cables/wires, assorted
PLDT statement of accounts, parabolic antennae and voltage regulators.
State Prosecutor Ofelia L. Calo conducted an inquest investigation and
issued a Resolution11 on January 28, 2000, finding probable cause for theft
under Article 308 of the Revised Penal Code and Presidential Decree No.
40112 against the respondents therein, including Laurel.
On February 8, 2000, State Prosecutor Calo filed an Information with the
RTC of Makati City charging Matsuura, Miyake, Lacson and Villegas with
theft under Article 308 of the Revised Penal Code. After conducting the
requisite preliminary investigation, the State Prosecutor filed an Amended
Information impleading Laurel (a partner in the law firm of Ingles, Laurel,
Salinas, and, until November 19, 1999, a member of the board of directors
and corporate secretary of Baynet), and the other members of the board of
directors of said corporation, namely, Yuji Hijioka, Yasushi Ueshima,
Mukaida, Lacson and Villegas, as accused for theft under Article 308 of the
Revised Penal Code. The inculpatory portion of the Amended Information
reads:
On or about September 10-19, 1999, or prior thereto, in Makati City, and
within the jurisdiction of this Honorable Court, the accused, conspiring and
confederating together and all of them mutually helping and aiding one
another, with intent to gain and without the knowledge and consent of the
Philippine Long Distance Telephone (PLDT), did then and there willfully,
unlawfully and feloniously take, steal and use the international long
distance calls belonging to PLDT by conducting International Simple Resale
(ISR), which is a method of routing and completing international long
distance calls using lines, cables, antennae, and/or air wave frequency
which connect directly to the local or domestic exchange facilities of the
country where the call is destined, effectively stealing this business from

PLDT while using its facilities in the estimated amount of P20,370,651.92

to the damage and prejudice of PLDT, in the said amount.
CONTRARY TO LAW.13
Accused Laurel filed a "Motion to Quash (with Motion to Defer
Arraignment)" on the ground that the factual allegations in the Amended
Information do not constitute the felony of theft under Article 308 of the
Revised Penal Code. He averred that the Revised Penal Code, or any other
special penal law for that matter, does not prohibit ISR operations. He
claimed that telephone calls with the use of PLDT telephone lines, whether
domestic or international, belong to the persons making the call, not to
PLDT. He argued that the caller merely uses the facilities of PLDT, and what
the latter owns are the telecommunication infrastructures or facilities
through which the call is made. He also asserted that PLDT is compensated
for the callers use of its facilities by way of rental; for an outgoing
overseas call, PLDT charges the caller per minute, based on the duration of
the call. Thus, no personal property was stolen from PLDT. According to
Laurel, the P20,370,651.92 stated in the Information, if anything,
represents the rental for the use of PLDT facilities, and not the value of
anything owned by it. Finally, he averred that the allegations in the
Amended Information are already subsumed under the Information for
violation of Presidential Decree (P.D.) No. 401 filed and pending in the
Metropolitan Trial Court of Makati City, docketed as Criminal Case No.
276766.
The prosecution, through private complainant PLDT, opposed the
motion,14 contending that the movant unlawfully took personal property
belonging to it, as follows: 1) intangible telephone services that are being
offered by PLDT and other telecommunication companies, i.e., the
connection and interconnection to their telephone lines/facilities; 2) the
use of those facilities over a period of time; and 3) the revenues derived in
connection with the rendition of such services and the use of such
facilities.15
The prosecution asserted that the use of PLDTs intangible telephone
services/facilities allows electronic voice signals to pass through the same,
and ultimately to the called partys number. It averred that such
service/facility is akin to electricity which, although an intangible property,
may, nevertheless, be appropriated and be the subject of theft. Such
service over a period of time for a consideration is the business that PLDT
provides to its customers, which enables the latter to send various
messages to installed recipients. The service rendered by PLDT is akin to
merchandise which has specific value, and therefore, capable of
appropriation by another, as in this case, through the ISR operations
conducted by the movant and his co-accused.

The prosecution further alleged that "international business calls and

revenues constitute personal property envisaged in Article 308 of the
Revised Penal Code." Moreover, the intangible telephone services/facilities
belong to PLDT and not to the movant and the other accused, because
they have no telephone services and facilities of their own duly authorized
by the NTC; thus, the taking by the movant and his co-accused of PLDT
services was with intent to gain and without the latters consent.

with stealing the business of PLDT. To support its ruling, it cited Strochecker
v. Ramirez,20 where the Court ruled that interest in business is personal
property capable of appropriation. It further declared that, through their
ISR operations, the movant and his co-accused deprived PLDT of fees for
international long distance calls, and that the ISR used by the movant and
his co-accused was no different from the "jumper" used for stealing
electricity.

The prosecution pointed out that the accused, as well as the movant, were
paid in exchange for their illegal appropriation and use of PLDTs telephone
services and facilities; on the other hand, the accused did not pay a single
centavo for their illegal ISR operations. Thus, the acts of the accused were
akin to the use of a "jumper" by a consumer to deflect the current from the
house electric meter, thereby enabling one to steal electricity. The
prosecution emphasized that its position is fortified by the Resolutions of
the Department of Justice in PLDT v. Tiongson, et al. (I.S. No. 97-0925) and
in PAOCTF-PLDT v. Elton John Tuason, et al. (I.S. No. 2000-370) which were
issued on August 14, 2000 finding probable cause for theft against the
respondents therein.

Laurel then filed a Petition for Certiorari with the CA, assailing the Order of
the RTC. He alleged that the respondent judge gravely abused his
discretion in denying his Motion to Quash the Amended Information. 21 As
gleaned from the material averments of the amended information, he was
charged with stealing the international long distance calls belonging to
PLDT, not its business. Moreover, the RTC failed to distinguish between the
business of PLDT (providing services for international long distance calls)
and the revenues derived therefrom. He opined that a "business" or its
revenues cannot be considered as personal property under Article 308 of
the Revised Penal Code, since a "business" is "(1) a commercial or
mercantile activity customarily engaged in as a means of livelihood and
typically involving some independence of judgment and power of decision;
(2) a commercial or industrial enterprise; and (3) refers to transactions,
dealings or intercourse of any nature." On the other hand, the term
"revenue" is defined as "the income that comes back from an investment
(as in real or personal property); the annual or periodical rents, profits,
interests, or issues of any species of real or personal property." 22

On September 14, 2001, the RTC issued an Order16 denying the Motion to
Quash the Amended Information. The court declared that, although there is
no law that expressly prohibits the use of ISR, the facts alleged in the
Amended Information "will show how the alleged crime was committed by
conducting ISR," to the damage and prejudice of PLDT.
Laurel filed a Motion for Reconsideration17 of the Order, alleging that
international long distance calls are not personal property, and are not
capable of appropriation. He maintained that business or revenue is not
considered personal property, and that the prosecution failed to adduce
proof of its existence and the subsequent loss of personal property
belonging to another. Citing the ruling of the Court in United States v. De
Guzman,18 Laurel averred that the case is not one with telephone calls
which originate with a particular caller and terminates with the called
party. He insisted that telephone calls are considered privileged
communications under the Constitution and cannot be considered as "the
property of PLDT." He further argued that there is no kinship between
telephone calls and electricity or gas, as the latter are forms of energy
which are generated and consumable, and may be considered as personal
property because of such characteristic. On the other hand, the movant
argued, the telephone business is not a form of energy but is an activity.
In its Order19 dated December 11, 2001, the RTC denied the movants
Motion for Reconsideration. This time, it ruled that what was stolen from
PLDT was its "business" because, as alleged in the Amended Information,
the international long distance calls made through the facilities of PLDT
formed part of its business. The RTC noted that the movant was charged

Laurel further posited that an electric companys business is the production

and distribution of electricity; a gas companys business is the production
and/or distribution of gas (as fuel); while a water companys business is the
production and distribution of potable water. He argued that the "business"
in all these cases is the commercial activity, while the goods and
merchandise are the products of such activity. Thus, in prosecutions for
theft of certain forms of energy, it is the electricity or gas which is alleged
to be stolen and not the "business" of providing electricity or gas.
However, since a telephone company does not produce any energy, goods
or merchandise and merely renders a service or, in the words of PLDT, "the
connection and interconnection to their telephone lines/facilities," such
service cannot be the subject of theft as defined in Article 308 of the
Revised Penal Code.23
He further declared that to categorize "business" as personal property
under Article 308 of the Revised Penal Code would lead to absurd
consequences; in prosecutions for theft of gas, electricity or water, it would
then be permissible to allege in the Information that it is the gas business,
the electric business or the water business which has been stolen, and no
longer the merchandise produced by such enterprise. 24

Laurel further cited the Resolution of the Secretary of Justice in Piltel v.

Mendoza,25 where it was ruled that the Revised Penal Code, legislated as it
was before present technological advances were even conceived, is not
adequate to address the novel means of "stealing" airwaves or airtime. In
said resolution, it was noted that the inadequacy prompted the filing of
Senate Bill 2379 (sic) entitled "The Anti-Telecommunications Fraud of 1997"
to deter cloning of cellular phones and other forms of communications
fraud. The said bill "aims to protect in number (ESN) (sic) or Capcode,
mobile identification number (MIN), electronic-international mobile
equipment identity (EMEI/IMEI), or subscriber identity module" and "any
attempt to duplicate the data on another cellular phone without the
consent of a public telecommunications entity would be punishable by
law."26 Thus, Laurel concluded, "there is no crime if there is no law
punishing the crime."
On August 30, 2002, the CA rendered judgment dismissing the
petition.27 The appellate court ruled that a petition for certiorari under Rule
65 of the Rules of Court was not the proper remedy of the petitioner. On
the merits of the petition, it held that while business is generally an activity
which is abstract and intangible in form, it is nevertheless considered
"property" under Article 308 of the Revised Penal Code. The CA opined that
PLDTs business of providing international calls is personal property which
may be the object of theft, and cited United States v. Carlos 28 to support
such conclusion. The tribunal also cited Strochecker v. Ramirez, 29 where
this Court ruled that one-half interest in a days business is personal
property under Section 2 of Act No. 3952, otherwise known as the Bulk
Sales Law. The appellate court held that the operations of the ISR are not
subsumed in the charge for violation of P.D. No. 401.
Laurel, now the petitioner, assails the decision of the CA, contending that THE COURT OF APPEALS ERRED IN RULING THAT THE PERSONAL PROPERTY
ALLEGEDLY STOLEN PER THE INFORMATION IS NOT THE "INTERNATIONAL
LONG DISTANCE CALLS" BUT THE "BUSINESS OF PLDT."
THE COURT OF APPEALS ERRED IN RULING THAT THE TERM "BUSINESS" IS
PERSONAL PROPERTY WITHIN THE MEANING OF ART. 308 OF THE REVISED
PENAL CODE.30
Petitioner avers that the petition for a writ of certiorari may be filed to
nullify an interlocutory order of the trial court which was issued with grave
abuse of discretion amounting to excess or lack of jurisdiction. In support
of his petition before the Court, he reiterates the arguments in his
pleadings filed before the CA. He further claims that while the right to carry
on a business or an interest or participation in business is considered
property under the New Civil Code, the term "business," however, is not.
He asserts that the Philippine Legislature, which approved the Revised

Penal Code way back in January 1, 1932, could not have contemplated to
include international long distance calls and "business" as personal
property under Article 308 thereof.
In its comment on the petition, the Office of the Solicitor General (OSG)
maintains that the amended information clearly states all the essential
elements of the crime of theft. Petitioners interpretation as to whether an
"international long distance call" is personal property under the law is
inconsequential, as a reading of the amended information readily reveals
that specific acts and circumstances were alleged charging Baynet,
through its officers, including petitioner, of feloniously taking, stealing and
illegally using international long distance calls belonging to respondent
PLDT by conducting ISR operations, thus, "routing and completing
international long distance calls using lines, cables, antenna and/or
airwave frequency which connect directly to the local or domestic
exchange facilities of the country where the call is destined." The OSG
maintains that the international long distance calls alleged in the amended
information should be construed to mean "business" of PLDT, which, while
abstract and intangible in form, is personal property susceptible of
appropriation.31 The OSG avers that what was stolen by petitioner and his
co-accused is the business of PLDT providing international long distance
calls which, though intangible, is personal property of the PLDT. 32
For its part, respondent PLDT asserts that personal property under Article
308 of the Revised Penal Code comprehends intangible property such as
electricity and gas which are valuable articles for merchandise, brought
and sold like other personal property, and are capable of appropriation. It
insists that the business of international calls and revenues constitute
personal property because the same are valuable articles of merchandise.
The respondent reiterates that international calls involve (a) the intangible
telephone services that are being offered by it, that is, the connection and
interconnection to the telephone network, lines or facilities; (b) the use of
its telephone network, lines or facilities over a period of time; and (c) the
income derived in connection therewith.33
PLDT further posits that business revenues or the income derived in
connection with the rendition of such services and the use of its telephone
network, lines or facilities are personal properties under Article 308 of the
Revised Penal Code; so is the use of said telephone services/telephone
network, lines or facilities which allow electronic voice signals to pass
through the same and ultimately to the called partys number. It is akin to
electricity which, though intangible property, may nevertheless be
appropriated and can be the object of theft. The use of respondent PLDTs
telephone network, lines, or facilities over a period of time for
consideration is the business that it provides to its customers, which
enables the latter to send various messages to intended recipients. Such
use over a period of time is akin to merchandise which has value and,

therefore, can be appropriated by another. According to respondent PLDT,

this is what actually happened when petitioner Laurel and the other
accused below conducted illegal ISR operations.34
The petition is meritorious.
The issues for resolution are as follows: (a) whether or not the petition for
certiorari is the proper remedy of the petitioner in the Court of Appeals; (b)
whether or not international telephone calls using Bay Super Orient Cards
through the telecommunication services provided by PLDT for such calls,
or, in short, PLDTs business of providing said telecommunication services,
are proper subjects of theft under Article 308 of the Revised Penal Code;
and (c) whether or not the trial court committed grave abuse of discretion
amounting to excess or lack of jurisdiction in denying the motion of the
petitioner to quash the amended information.
On the issue of whether or not the petition for certiorari instituted by the
petitioner in the CA is proper, the general rule is that a petition for
certiorari under Rule 65 of the Rules of Court, as amended, to nullify an
order denying a motion to quash the Information is inappropriate because
the aggrieved party has a remedy of appeal in the ordinary course of law.
Appeal and certiorari are mutually exclusive of each other. The remedy of
the aggrieved party is to continue with the case in due course and, when
an unfavorable judgment is rendered, assail the order and the decision on
appeal. However, if the trial court issues the order denying the motion to
quash the Amended Information with grave abuse of discretion amounting
to excess or lack of jurisdiction, or if such order is patently erroneous, or
null and void for being contrary to the Constitution, and the remedy of
appeal would not afford adequate and expeditious relief, the accused may
resort to the extraordinary remedy of certiorari.35 A special civil action for
certiorari is also available where there are special circumstances clearly
demonstrating the inadequacy of an appeal. As this Court held in Bristol
Myers Squibb (Phils.), Inc. v. Viloria:36
Nonetheless, the settled rule is that a writ of certiorari may be granted in
cases where, despite availability of appeal after trial, there is at least a
prima facie showing on the face of the petition and its annexes that: (a)
the trial court issued the order with grave abuse of discretion amounting to
lack of or in excess of jurisdiction; (b) appeal would not prove to be a
speedy and adequate remedy; (c) where the order is a patent nullity; (d)
the decision in the present case will arrest future litigations; and (e) for
certain considerations such as public welfare and public policy. 37
In his petition for certiorari in the CA, petitioner averred that the trial court
committed grave abuse of its discretion amounting to excess or lack of
jurisdiction when it denied his motion to quash the Amended Information
despite his claim that the material allegations in the Amended Information

do not charge theft under Article 308 of the Revised Penal Code, or any
offense for that matter. By so doing, the trial court deprived him of his
constitutional right to be informed of the nature of the charge against him.
He further averred that the order of the trial court is contrary to the
constitution and is, thus, null and void. He insists that he should not be
compelled to undergo the rigors and tribulations of a protracted trial and
incur expenses to defend himself against a non-existent charge.
Petitioner is correct.
An information or complaint must state explicitly and directly every act or
omission constituting an offense38 and must allege facts establishing
conduct that a penal statute makes criminal;39 and describes the property
which is the subject of theft to advise the accused with reasonable
certainty of the accusation he is called upon to meet at the trial and to
enable him to rely on the judgment thereunder of a subsequent
prosecution for the same offense.40It must show, on its face, that if the
alleged facts are true, an offense has been committed. The rule is rooted
on the constitutional right of the accused to be informed of the nature of
the crime or cause of the accusation against him. He cannot be convicted
of an offense even if proven unless it is alleged or necessarily included in
the Information filed against him.
As a general prerequisite, a motion to quash on the ground that the
Information does not constitute the offense charged, or any offense for that
matter, should be resolved on the basis of said allegations whose truth and
veracity are hypothetically committed;41 and on additional facts admitted
or not denied by the prosecution.42 If the facts alleged in the Information do
not constitute an offense, the complaint or information should be quashed
by the court.43
We have reviewed the Amended Information and find that, as mentioned
by the petitioner, it does not contain material allegations charging the
petitioner of theft of personal property under Article 308 of the Revised
Penal Code. It, thus, behooved the trial court to quash the Amended
Information. The Order of the trial court denying the motion of the
petitioner to quash the Amended Information is a patent nullity.
On the second issue, we find and so hold that the international telephone
calls placed by Bay Super Orient Card holders, the telecommunication
services provided by PLDT and its business of providing said services are
not personal properties under Article 308 of the Revised Penal Code. The
construction by the respondents of Article 308 of the said Code to include,
within its coverage, the aforesaid international telephone calls,
telecommunication services and business is contrary to the letter and
intent of the law.

The rule is that, penal laws are to be construed strictly. Such rule is
founded on the tenderness of the law for the rights of individuals and on
the plain principle that the power of punishment is vested in Congress, not
in the judicial department. It is Congress, not the Court, which is to define
a crime, and ordain its punishment.44 Due respect for the prerogative of
Congress in defining crimes/felonies constrains the Court to refrain from a
broad interpretation of penal laws where a "narrow interpretation" is
appropriate. The Court must take heed to language, legislative history and
purpose, in order to strictly determine the wrath and breath of the conduct
the law forbids.45However, when the congressional purpose is unclear, the
court must apply the rule of lenity, that is, ambiguity concerning the ambit
of criminal statutes should be resolved in favor of lenity. 46
Penal statutes may not be enlarged by implication or intent beyond the fair
meaning of the language used; and may not be held to include offenses
other than those which are clearly described, notwithstanding that the
Court may think that Congress should have made them more
comprehensive.47 Words and phrases in a statute are to be construed
according to their common meaning and accepted usage.
As Chief Justice John Marshall declared, "it would be dangerous, indeed, to
carry the principle that a case which is within the reason or
mischief of a statute is within its provision, so far as to punish a crime not
enumerated in the statute because it is of equal atrocity, or of kindred
character with those which are enumerated. 48 When interpreting a criminal
statute that does not explicitly reach the conduct in question, the Court
should not base an expansive reading on inferences from subjective and
variable understanding.49
Article 308 of the Revised Penal Code defines theft as follows:
Art. 308. Who are liable for theft. Theft is committed by any person who,
with intent to gain but without violence, against or intimidation of persons
nor force upon things, shall take personal property of another without the
latters consent.
The provision was taken from Article 530 of the Spanish Penal Code which
reads:
1. Los que con nimo de lucrarse, y sin violencia o intimidacin en las
personas ni fuerza en las cosas, toman las cosas muebles ajenas sin la
voluntad de su dueo.50
For one to be guilty of theft, the accused must have an intent to steal
(animus furandi) personal property, meaning the intent to deprive another
of his ownership/lawful possession of personal property which intent is

apart from and concurrently with the general criminal intent which is an
essential element of a felony of dolo (dolus malus).
An information or complaint for simple theft must allege the following
elements: (a) the taking of personal property; (b) the said property belongs
to another; (c) the taking be done with intent to gain; and (d) the taking be
accomplished without the use of violence or intimidation of person/s or
force upon things.51
One is apt to conclude that "personal property" standing alone, covers
both tangible and intangible properties and are subject of theft under the
Revised Penal Code. But the words "Personal property" under the Revised
Penal Code must be considered in tandem with the word "take" in the law.
The statutory definition of "taking" and movable property indicates that,
clearly, not all personal properties may be the proper subjects of theft. The
general rule is that, only movable properties which have physical or
material existence and susceptible of occupation by another are proper
objects of theft.52 As explained by Cuelo Callon: "Cosa juridicamente es
toda sustancia corporal, material, susceptible de ser aprehendida que
tenga un valor cualquiera."53
According to Cuello Callon, in the context of the Penal Code, only those
movable properties which can be taken and carried from the place they are
found are proper subjects of theft. Intangible properties such as rights and
ideas are not subject of theft because the same cannot be "taken" from the
place it is found and is occupied or appropriated.
Solamente las cosas muebles y corporales pueden ser objeto de hurto. La
sustraccin de cosas inmuebles y la cosas incorporales (v. gr., los
derechos, las ideas) no puede integrar este delito, pues no es posible
asirlas, tomarlas, para conseguir su apropiacin. El Codigo emplea la
expresin "cosas mueble" en el sentido de cosa que es susceptible de ser
llevada del lugar donde se encuentra, como dinero, joyas, ropas, etctera,
asi que su concepto no coincide por completo con el formulado por el
Codigo civil (arts. 335 y 336).54
Thus, movable properties under Article 308 of the Revised Penal Code
should be distinguished from the rights or interests to which they relate. A
naked right existing merely in contemplation of law, although it may be
very valuable to the person who is entitled to exercise it, is not the subject
of theft or larceny.55 Such rights or interests are intangible and cannot be
"taken" by another. Thus, right to produce oil, good will or an interest in
business, or the right to engage in business, credit or franchise are
properties. So is the credit line represented by a credit card. However, they
are not proper subjects of theft or larceny because they are without form or
substance, the mere "breath" of the Congress. On the other hand, goods,
wares and merchandise of businessmen and credit cards issued to them

are movable properties with physical and material existence and may be
taken by another; hence, proper subjects of theft.
There is "taking" of personal property, and theft is consummated when the
offender unlawfully acquires possession of personal property even if for a
short time; or if such property is under the dominion and control of the
thief. The taker, at some particular amount, must have obtained complete
and absolute possession and control of the property adverse to the rights
of the owner or the lawful possessor thereof.56 It is not necessary that the
property be actually carried away out of the physical possession of the
lawful possessor or that he should have made his escape with it. 57 Neither
asportation nor actual manual possession of property is required.
Constructive possession of the thief of the property is enough. 58
The essence of the element is the taking of a thing out of the possession of
the owner without his privity and consent and without animus revertendi. 59
Taking may be by the offenders own hands, by his use of innocent persons
without any felonious intent, as well as any mechanical device, such as an
access device or card, or any agency, animate or inanimate, with intent to
gain. Intent to gain includes the unlawful taking of personal property for
the purpose of deriving utility, satisfaction, enjoyment and pleasure. 60
We agree with the contention of the respondents that intangible properties
such as electrical energy and gas are proper subjects of theft. The reason
for this is that, as explained by this Court in United States v. Carlos 61 and
United States v. Tambunting,62 based on decisions of the Supreme Court of
Spain and of the courts in England and the United States of America, gas or
electricity are capable of appropriation by another other than the owner.
Gas and electrical energy may be taken, carried away and appropriated. In
People v. Menagas,63 the Illinois State Supreme Court declared that
electricity, like gas, may be seen and felt. Electricity, the same as gas, is a
valuable article of merchandise, bought and sold like other personal
property and is capable of appropriation by another. It is a valuable article
of merchandise, bought and sold like other personal property, susceptible
of being severed from a mass or larger quantity and of being transported
from place to place. Electrical energy may, likewise, be taken and carried
away. It is a valuable commodity, bought and sold like other personal
property. It may be transported from place to place. There is nothing in the
nature of gas used for illuminating purposes which renders it incapable of
being feloniously taken and carried away.
In People ex rel Brush Electric Illuminating Co. v. Wemple, the Court of
Appeals of New York held that electric energy is manufactured and sold in
determinate quantities at a fixed price, precisely as are coal, kerosene oil,
and gas. It may be conveyed to the premises of the consumer, stored in
cells of different capacity known as an accumulator; or it may be sent
64

through a wire, just as gas or oil may be transported either in a close tank
or forced through a pipe. Having reached the premises of the consumer, it
may be used in any way he may desire, being, like illuminating gas,
capable of being transformed either into heat, light, or power, at the option
of the purchaser. In Woods v. People,65 the Supreme Court of Illinois
declared that there is nothing in the nature of gas used for illuminating
purposes which renders it incapable of being feloniously taken and carried
away. It is a valuable article of merchandise, bought and sold like other
personal property, susceptible of being severed from a mass or larger
quantity and of being transported from place to place.
Gas and electrical energy should not be equated with business or services
provided by business entrepreneurs to the public. Business does not have
an exact definition. Business is referred as that which occupies the time,
attention and labor of men for the purpose of livelihood or profit. It
embraces everything that which a person can be employed. 66 Business
may also mean employment, occupation or profession. Business is also
defined as a commercial activity for gain benefit or advantage. 67 Business,
like services in business, although are properties, are not proper subjects
of theft under the Revised Penal Code because the same cannot be "taken"
or "occupied." If it were otherwise, as claimed by the respondents, there
would be no juridical difference between the taking of the business of a
person or the services provided by him for gain, vis--vis, the taking of
goods, wares or merchandise, or equipment comprising his business. 68 If it
was its intention to include "business" as personal property under Article
308 of the Revised Penal Code, the Philippine Legislature should have
spoken in language that is clear and definite: that business is personal
property under Article 308 of the Revised Penal Code. 69
We agree with the contention of the petitioner that, as gleaned from the
material averments of the Amended Information, he is charged of "stealing
the international long distance calls belonging to PLDT" and the use
thereof, through the ISR. Contrary to the claims of the OSG and respondent
PLDT, the petitioner is not charged of stealing P20,370,651.95 from said
respondent. Said amount of P20,370,651.95 alleged in the Amended
Information is the aggregate amount of access, transmission or termination
charges which the PLDT expected from the international long distance calls
of the callers with the use of Baynet Super Orient Cards sold by Baynet Co.
Ltd.
In defining theft, under Article 308 of the Revised Penal Code, as the taking
of personal property without the consent of the owner thereof, the
Philippine legislature could not have contemplated the human voice which
is converted into electronic impulses or electrical current which are
transmitted to the party called through the PSTN of respondent PLDT and
the ISR of Baynet Card Ltd. within its coverage. When the Revised Penal
Code was approved, on December 8, 1930, international telephone calls

and the transmission and routing of electronic voice signals or impulses

emanating from said calls, through the PSTN, IPL and ISR, were still nonexistent. Case law is that, where a legislative history fails to evidence
congressional awareness of the scope of the statute claimed by the
respondents, a narrow interpretation of the law is more consistent with the
usual approach to the construction of the statute. Penal responsibility
cannot be extended beyond the fair scope of the statutory mandate. 70
Respondent PLDT does not acquire possession, much less, ownership of the
voices of the telephone callers or of the electronic voice signals or current
emanating from said calls. The human voice and the electronic voice
signals or current caused thereby are intangible and not susceptible of
possession, occupation or appropriation by the respondent PLDT or even
the petitioner, for that matter. PLDT merely transmits the electronic voice
signals through its facilities and equipment. Baynet Card Ltd., through its
operator, merely intercepts, reroutes the calls and passes them to its toll
center. Indeed, the parties called receive the telephone calls from Japan.

include a sale. For instance, the sale of food by restaurants is usually

referred to as "service," although an actual sale is involved. 74 It may also
mean the duty or labor to be rendered by one person to another;
performance of labor for the benefit of another.75 In the case of PLDT, it is
to render local and international telecommunications services and such
other services as authorized by the CPCA issued by the NTC. Even at
common law, neither time nor services may be taken and occupied or
appropriated.76A service is generally not considered property and a theft of
service would not, therefore, constitute theft since there can be no caption
or asportation.77 Neither is the unauthorized use of the equipment and
facilities of PLDT by the petitioner theft under the aforequoted provision of
the Revised Penal Code.78
If it was the intent of the Philippine Legislature, in 1930, to include services
to be the subject of theft, it should have incorporated the same in Article
308 of the Revised Penal Code. The Legislature did not. In fact, the Revised
Penal Code does not even contain a definition of services.

In this modern age of technology, telecommunications systems have

become so tightly merged with computer systems that it is difficult to know
where one starts and the other finishes. The telephone set is highly
computerized and allows computers to communicate across long
distances.71 The instrumentality at issue in this case is not merely a
telephone but a telephone inexplicably linked to a computerized
communications system with the use of Baynet Cards sold by the Baynet
Card Ltd. The corporation uses computers, modems and software, among
others, for its ISR.72

If taking of telecommunication services or the business of a person, is to

be proscribed, it must be by special statute79 or an amendment of the
Revised Penal Code. Several states in the United States, such as New York,
New Jersey, California and Virginia, realized that their criminal statutes did
not contain any provisions penalizing the theft of services and passed laws
defining and penalizing theft of telephone and computer services. The
Pennsylvania Criminal Statute now penalizes theft of services, thus:

The conduct complained of by respondent PLDT is reminiscent of

"phreaking" (a slang term for the action of making a telephone system to
do something that it normally should not allow by "making the phone
company bend over and grab its ankles"). A "phreaker" is one who engages
in the act of manipulating phones and illegally markets telephone
services.73 Unless the phone company replaces all its hardware, phreaking
would be impossible to stop. The phone companies in North America were
impelled to replace all their hardware and adopted full digital switching
system known as the Common Channel Inter Office Signaling. Phreaking
occurred only during the 1960s and 1970s, decades after the Revised
Penal Code took effect.

(1) A person is guilty of theft if he intentionally obtains services for himself

or for another which he knows are available only for compensation, by
deception or threat, by altering or tampering with the public utility meter
or measuring device by which such services are delivered or by causing or
permitting such altering or tampering, by making or maintaining any
unauthorized connection, whether physically, electrically or inductively, to
a distribution or transmission line, by attaching or maintaining the
attachment of any unauthorized device to any cable, wire or other
component of an electric, telephone or cable television system or to a
television receiving set connected to a cable television system, by making
or maintaining any unauthorized modification or alteration to any device
installed by a cable television system, or by false token or other trick or
artifice to avoid payment for the service.

The petitioner is not charged, under the Amended Information, for theft of
telecommunication or telephone services offered by PLDT. Even if he is, the
term "personal property" under Article 308 of the Revised Penal Code
cannot be interpreted beyond its seams so as to include
"telecommunication or telephone services" or computer services for that
matter. The word "service" has a variety of meanings dependent upon the
context, or the sense in which it is used; and, in some instances, it may

(a) Acquisition of services. --

In the State of Illinois in the United States of America, theft of labor or

services or use of property is penalized:
(a) A person commits theft when he obtains the temporary use of property,
labor or services of another which are available only for hire, by means of

threat or deception or knowing that such use is without the consent of the
person providing the property, labor or services.
In 1980, the drafters of the Model Penal Code in the United States of
America arrived at the conclusion that labor and services, including
professional services, have not been included within the traditional scope
of the term "property" in ordinary theft statutes. Hence, they decided to
incorporate in the Code Section 223.7, which defines and penalizes theft of
services, thus:
(1) A person is guilty of theft if he purposely obtains services which he
knows are available only for compensation, by deception or threat, or by
false token or other means to avoid payment for the service. "Services"
include labor, professional service, transportation, telephone or other
public service, accommodation in hotels, restaurants or elsewhere,
admission to exhibitions, use of vehicles or other movable property. Where
compensation for service is ordinarily paid immediately upon the rendering
of such service, as in the case of hotels and restaurants, refusal to pay or
absconding without payment or offer to pay gives rise to a presumption
that the service was obtained by deception as to intention to pay; (2) A
person commits theft if, having control over the disposition of services of
others, to which he is not entitled, he knowingly diverts such services to
his own benefit or to the benefit of another not entitled thereto.

serial number, personal identification number and other

telecommunication services, equipment or instrumentalities-identifier or
other means of account access that can be used to obtain money, goods,
services or any other thing of value or to initiate a transfer of funds other
than a transfer originated solely by paper instrument. Among the
prohibited acts enumerated in Section 9 of the law are the acts of
obtaining money or anything of value through the use of an access device,
with intent to defraud or intent to gain and fleeing thereafter; and of
effecting transactions with one or more access devices issued to another
person or persons to receive payment or any other thing of value. Under
Section 11 of the law, conspiracy to commit access devices fraud is a
crime. However, the petitioner is not charged of violation of R.A. 8484.
Significantly, a prosecution under the law shall be without prejudice to any
liability for violation of any provisions of the Revised Penal Code inclusive
of theft under Rule 308 of the Revised Penal Code and estafa under Article
315 of the Revised Penal Code. Thus, if an individual steals a credit card
and uses the same to obtain services, he is liable of the following: theft of
the credit card under Article 308 of the Revised Penal Code; violation of
Republic Act No. 8484; and estafa under Article 315(2)(a) of the Revised
Penal Code with the service provider as the private complainant. The
petitioner is not charged of estafa before the RTC in the Amended
Information.

Interestingly, after the State Supreme Court of Virginia promulgated its

decision in Lund v. Commonwealth,80declaring that neither time nor
services may be taken and carried away and are not proper subjects of
larceny, the General Assembly of Virginia enacted Code No. 18-2-98 which
reads:

Section 33 of Republic Act No. 8792, Electronic Commerce Act of 2000

provides:

Computer time or services or data processing services or information or

data stored in connection therewith is hereby defined to be property which
may be the subject of larceny under 18.2-95 or 18.2-96, or
embezzlement under 18.2-111, or false pretenses under 18.2-178.

a) Hacking or cracking which refers to unauthorized access into or

interference in a computer system/server or information and
communication system; or any access in order to corrupt, alter, steal, or
destroy using a computer or other similar information and communication
devices, without the knowledge and consent of the owner of the computer
or information and communications system, including the introduction of
computer viruses and the like, resulting on the corruption, destruction,
alteration, theft or loss of electronic data messages or electronic
documents shall be punished by a minimum fine of One hundred thousand
pesos (P100,000.00) and a maximum commensurate to the damage
incurred and a mandatory imprisonment of six (6) months to three (3)
years.

In the State of Alabama, Section 13A-8-10(a)(1) of the Penal Code of

Alabama of 1975 penalizes theft of services:
"A person commits the crime of theft of services if: (a) He intentionally
obtains services known by him to be available only for compensation by
deception, threat, false token or other means to avoid payment for the
services "
In the Philippines, Congress has not amended the Revised Penal Code to
include theft of services or theft of business as felonies. Instead, it
approved a law, Republic Act No. 8484, otherwise known as the Access
Devices Regulation Act of 1998, on February 11, 1998. Under the law, an
access device means any card, plate, code, account number, electronic

Sec. 33. Penalties. The following Acts shall be penalized by fine and/or
imprisonment, as follows:

IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The assailed

Orders of the Regional Trial Court and the Decision of the Court of Appeals
are REVERSED and SET ASIDE. The Regional Trial Court is directed to issue

an order granting the motion of the petitioner to quash the Amended

Information.
SO ORDERED.

G.R. No. L-61311 September 2l, 1987

FELICIDAD VILLANUEVA, FERNANDO CAISIP, ANTONIO LIANG,
FELINA MIRANDA, RICARDO PUNO, FLORENCIO LAXA, and RENE
OCAMPO, petitioners,
vs.
HON. MARIANO CASTAEDA, JR., Presiding Judge of the Court of
First Instance of Pampanga, Branch III, VICENTE A. MACALINO,
Officer-in-Charge, Office of the Mayor, San Fernando,
Pampanga, respondents.

CRUZ, J.:
There is in the vicinity of the public market of San Fernando, Pampanga,
along Mercado Street, a strip of land measuring 12 by 77 meters on which
stands a conglomeration of vendors stalls together forming what is
commonly known as a talipapa. This is the subject of the herein petition.
The petitioners claim they have a right to remain in and conduct business
in this area by virtue of a previous authorization granted to them by the
municipal government. The respondents deny this and justify the
demolition of their stalls as illegal constructions on public property. At the
petitioners' behest, we have issued a temporary restraining order to
preserve the status quobetween the parties pending our decision. 1 Now
we shall rule on the merits.
This dispute goes back to November 7, 1961, when the municipal council
of San Fernando adopted Resolution No. 218 authorizing some 24 members
of the Fernandino United Merchants and Traders Association to construct
permanent stags and sell in the above-mentioned place. 2 The action was
protested on November 10, 1961, in Civil Case No. 2040, where the Court
of First Instance of Pampanga, Branch 2, issued a writ of preliminary
injunction that prevented the defendants from constructing the said stalls
until final resolution of the controversy. 3 On January 18, 1964, while this
case was pending, the municipal council of San Fernando adopted
Resolution G.R. No. 29, which declared the subject area as "the parking
place and as the public plaza of the municipality, 4 thereby impliedly
revoking Resolution No. 218, series of 1961. Four years later, on November
2, 1968, Judge Andres C. Aguilar decided the aforesaid case and held that
the land occupied by the petitioners, being public in nature, was beyond
the commerce of man and therefore could not be the subject of private
occupancy. 5 The writ of preliminary injunction was made permanent. 6
The decision was apparently not enforced, for the petitioners were not
evicted from the place; in fact, according to then they and the 128 other
persons were in 1971 assigned specific areas or space allotments therein
for which they paid daily fees to the municipal government. 7 The problem

appears to have festered for some more years under a presumably uneasy
truce among the protagonists, none of whom made any move, for some
reason that does not appear in the record. Then, on January 12, 1982, the
Association of Concerned Citizens and Consumers of San Fernando filed a
petition for the immediate implementation of Resolution No. 29, to restore
the subject property "to its original and customary use as a public plaza. 8
Acting thereon after an investigation conducted by the municipal
attorney, 9 respondent Vicente A. Macalino, as officer-in-charge of the office
of the mayor of San Fernando, issued on June 14, 1982, a resolution
requiring the municipal treasurer and the municipal engineer to demolish
the stalls in the subject place beginning July 1, 1982. 10 The reaction of
the petitioners was to file a petition for prohibition with the Court of First
Instance of Pampanga, docketed as Civil Case No. 6470, on June 26, 1982.
The respondent judge denied the petition on July 19, 1982, 11 and the
motion for reconsideration on August 5, 1982, 12 prompting the petitioners
to come to this Court on certiorarito challenge his decision. 13
As required, respondent Macalino filed his comment 14 on the petition, and
the petitioners countered with their reply. 15 In compliance with our
resolution of February 2, 1983, the petitioners submitted their
memorandum 16 and respondent Macalino, for his part, asked that his
comment be considered his memorandum. 17 On July 28, 1986, the new
officer-in-charge of the office of the mayor of San Fernando, Paterno S.
Guevarra, was impleaded in lieu of Virgilio Sanchez, who had himself
earlier replaced the original respondent Macalino. 18
After considering the issues and the arguments raised by the parties in
their respective pleadings, we rule for the respondents. The petition must
be dismissed.
There is no question that the place occupied by the petitioners and from
which they are sought to be evicted is a public plaza, as found by the trial
court in Civil Case No. 2040. This finding was made after consideration of
the antecedent facts as especially established by the testimony of former
San Fernando Mayor Rodolfo Hizon, who later became governor of
Pampanga, that the National Planning Commission had reserved the area
for a public plaza as early as 1951. This intention was reiterated in 1964
through the adoption of Resolution No. 29. 19
It does not appear that the decision in this case was appealed or has been
reversed. In Civil Case G.R. No. 6740, which is the subject of this petition,
the respondent judge saw no reason to disturb the finding in Civil Case No.
2040 and indeed used it as a basis for his own decision sustaining the
questioned order. 20
The basic contention of the petitioners is that the disputed area is under
lease to them by virtue of contracts they had entered into with the

municipal government, first in 1961 insofar as the original occupants were

concerned, and later with them and the other petitioners by virtue of the
space allocations made in their favor in 1971 for which they saw they are
paying daily fees. 21 The municipal government has denied making such
agreements. In any case, they argue, since the fees were collected daily,
the leases, assuming their validity, could be terminated at will, or any day,
as the claimed rentals indicated that the period of the leases was from day
to day. 22
The parties belabor this argument needlessly.
A public plaza is beyond the commerce of man and so cannot be the
subject of lease or any other contractual undertaking. This is elementary.
Indeed, this point was settled as early as in Municipality of Cavite vs.
Rojas, 23decided in 1915, where the Court declared as null and void the
lease of a public plaza of the said municipality in favor of a private person.
Justice Torres said in that case:
According to article 344 of the Civil Code: "Property for public use in
provinces and in towns comprises the provincial and town roads, the
squares, streets, fountains, and public waters, the promenades, and public
works of general service supported by said towns or provinces.
The said Plaza Soledad being a promenade for public use, the municipal
council of Cavite could not in 1907 withdraw or exclude from public use a
portion thereof in order to lease it for the sole benefit of the defendant
Hilaria Rojas. In leasing a portion of said plaza or public place to the
defendant for private use the plaintiff municipality exceeded its authority
in the exercise of its powers by executing a contract over a thing of which
it could not dispose, nor is it empowered so to do.
The Civil Code, article 1271, prescribes that everything which is not outside
the commerce of man may be the object of a contract, and plazas and
streets are outside of this commerce, as was decided by the supreme court
of Spain in its decision of February 12, 1895, which says: "communal things
that cannot be sold because they are by their very nature outside of
commerce are those for public use, such as the plazas, streets, common
lands, rivers, fountains, etc."
Therefore, it must be concluded that the contract, Exhibit C, whereby the
municipality of Cavite leased to Hilaria Rojas a portion of the Plaza Soledad
is null and void and of no force or effect, because it is contrary to the law
and the thing leased cannot be the object of a was held that the City of
contract.

In Muyot vs. de la Fuente, 24 it was held that the City of Manila could not
lease a portion of a public sidewalk on Plaza Sta. Cruz, being likewise
beyond the commerce of man.
Echoing Rojas, the decision said:
Appellants claim that they had obtained permit from the present of the City
of Manila, to connect booths Nos. 1 and 2, along the premises in question,
and for the use of spaces where the booths were constructed, they had
paid and continued paying the corresponding rentals. Granting this claim
to be true, one should not entertain any doubt that such permit was not
legal, because the City of Manila does not have any power or authority at
all to lease a portion of a public sidewalk. The sidewalk in question, forming
part of the public plaza of Sta. Cruz, could not be a proper subject matter
of the contract, as it was not within the commerce of man (Article 1347,
new Civil Code, and article 1271, old Civil Code). Any contract entered into
by the City of Manila in connection with the sidewalk, is ipso facto null
and ultra vires. (Municipality of Cavite vs. Roxas, et a1, 30 Phil. 603.) The
sidewalk in question was intended for and was used by the public, in going
from one place to another. "The streets and public places of the city shall
be kept free and clear for the use of the public, and the sidewalks and
crossings for the pedestrians, and the same shall only be used or occupied
for other purpose as provided by ordinance or regulation; ..." (Sec. 1119,
Revised Ordinances of the City of Manila.) The booths in question served as
fruit stands for their owners and often, if not always, blocked the fire
passage of pedestrians who had to take the plaza itself which used to be
clogged with vehicular traffic.
Exactly in point is Espiritu vs. Municipal Council of Pozorrubio,
Supreme Court declared:

25

where the

There is absolutely no question that the town plaza cannot be used for the
construction of market stalls, specially of residences, and that such
structures constitute a nuisance subject to abatement according to law.
Town plazas are properties of public dominion, to be devoted to public use
and to be made available to the public in general They are outside the
common of man and cannot be disposed of or even leased by the
municipality to private parties.
Applying this well-settled doctrine, we rule that the petitioners had no right
in the first place to occupy the disputed premises and cannot insist in
remaining there now on the strength of their alleged lease contracts. They
should have realized and accepted this earlier, considering that even
before Civil Case No. 2040 was decided, the municipalcouncil of San
Fernando had already adopted Resolution No. 29, series of 1964, declaring
the area as the parking place and public plaza of the municipality.

It is the decision in Civil Case No. 2040 and the said resolution of the
municipal council of San Fernando that respondent Macalino was seeking
to enforce when he ordered the demolition of the stags constructed in the
disputed area. As officer-in-charge of the office of the mayor, he had the
duty to clear the area and restore it to its intended use as a parking place
and public plaza of the municipality of San Fernando, conformably to the
aforementioned orders from the court and the council. It is, therefore, not
correct to say that he had acted without authority or taken the law into his
hands in issuing his order.
Neither can it be said that he acted whimsically in exercising his authority
for it has been established that he directed the demolition of the stalls only
after, upon his instructions, the municipal attorney had conducted an
investigation, to look into the complaint filed by the Association of
Concerned Citizens and Consumers of San Fernando. 26 There is evidence
that the petitioners were notified of this hearing, 27which they chose to
disregard. Photographs of the disputed area, 28 which does look congested
and ugly, show that the complaint was valid and that the area really
needed to be cleared, as recommended by the municipal attorney.
The Court observes that even without such investigation and
recommendation, the respondent mayor was justified in ordering the area
cleared on the strength alone of its status as a public plaza as declared by
the judicial and legislative authorities. In calling first for the investigation
(which the petitioner saw fit to boycott), he was just scrupulously paying
deference to the requirements of due process, to remove an taint of
arbitrariness in the action he was caged upon to take.
Since the occupation of the place in question in 1961 by the original 24
stallholders (whose number later ballooned to almost 200), it has
deteriorated increasingly to the great prejudice of the community in
general. The proliferation of stags therein, most of them makeshift and of
flammable materials, has converted it into a veritable fire trap, which,
added to the fact that it obstructs access to and from the public market
itself, has seriously endangered public safety. The filthy condition of
the talipapa, where fish and other wet items are sold, has aggravated
health and sanitation problems, besides pervading the place with a foul
odor that has spread into the surrounding areas. The entire place is
unsightly, to the dismay and embarrassment of the inhabitants, who want
it converted into a showcase of the town of which they can all be proud.
The vendors in the talipapa have also spilled into the street and obstruct
the flow of traffic, thereby impairing the convenience of motorists and
pedestrians alike. The regular stallholders in the public market, who pay
substantial rentals to the municipality, are deprived of a sizable volume of
business from prospective customers who are intercepted by
the talipapa vendors before they can reach the market proper. On top of all
these, the people are denied the proper use of the place as a public plaza,

where they may spend their leisure in a relaxed and even beautiful
environment and civic and other communal activities of the town can be
held.
The problems caused by the usurpation of the place by the petitioners are
covered by the police power as delegated to the municipality under the
general welfare clause. 29 This authorizes the municipal council "to enact
such ordinances and make such regulations, not repugnant to law, as may
be necessary to carry into effect and discharge the powers and duties
conferred upon it by law and such as shall seem necessary and proper to
provide for the health and safety, promote the prosperity, improve the
morals, peace, good order, comfort, and convenience of the municipality
and the inhabitants thereof, and for the protection of property therein."
This authority was validly exercised in this casethrough the adoption of
Resolution No. 29, series of 1964, by the municipal council of San
Fernando.
Even assuming a valid lease of the property in dispute, the resolution could
have effectively terminated the agreement for it is settled that the police
power cannot be surrendered or bargained away through the medium of a
contract. 30 In fact, every contract affecting the public interest suffers a
congenital infirmity in that it contains an implied reservation of the police
power as a postulate of the existing legal order. 31 This power can be
activated at any time to change the provisions of the contract, or even
abrogate it entirely, for the promotion or protection of the general welfare.
Such an act will not militate against the impairment clause, which is
subject to and limited by the paramount police power. 32
We hold that the respondent judge did not commit grave abuse of
discretion in denying the petition for prohibition. On the contrary, he acted
correctly in sustaining the right and responsibility of the mayor to evict the
petitioners from the disputed area and clear it of an the structures illegally
constructed therein.
The Court feels that it would have been far more amiable if the petitioners
themselves, recognizing their own civic duty, had at the outset desisted
from their original stance and withdrawn in good grace from the disputed
area to permit its peaceful restoration as a public plaza and parking place
for the benefit of the whole municipality. They owned this little sacrifice to
the community in general which has suffered all these many years because
of their intransigence. Regrettably, they have refused to recognize that in
the truly democratic society, the interests of the few should yield to those
of the greater number in deference to the principles that the welfare of the
people is the supreme law and overriding purpose. We do not see any
altruism here. The traditional ties of sharing are absent here. What we find,
sad to say, is a cynical disdaining of the spirit of "bayanihan," a selfish

rejection of the cordial virtues of "pakikisama " and "pagbibigayan" which

are the hallmarks of our people.
WHEREFORE, the petition is DISMISSED. The decision dated July 19, 1982,
and the order-dated August 5, 1982, are AFFIRMED. The temporary
restraining order dated August 9, 1982, is LIFTED. This decision is
immediately executory. Costs against the petitioners.
SO ORDERED.

G.R. No. L-66575 September 30, 1986

ADRIANO MANECLANG, JULIETA, RAMONA, VICTOR, ANTONINA,
LOURDES, TEODORO and MYRNA, all surnamed
MANECLANG, petitioners,
vs.
THE INTERMEDIATE APPELLATE COURT and ALFREDO MAZA,
CORLETO CASTRO, SALOME RODRIGUEZ, EDUCARDO CUISON,
FERNANDO ZARCILLA, MARIANO GABRIEL, NICOMEDES CORDERO,
CLETO PEDROZO, FELIX SALARY and JOSE PANLILIO, respondents.
Loreto Novisteros for petitioners.
Corleto R. Castro for respondents.

FERNAN, J.:
Petitioners Adriano Maneclang, et. al. filed before the then Court of First
Instance of Pangasinan, Branch XI a complaint for quieting of title over a
certain fishpond located within the four [41 parcels of land belonging to
them situated in Barrio Salomague, Bugallon, Pangasinan, and the
annulment of Resolutions Nos. 38 and 95 of the Municipal Council of
Bugallon Pangasinan. The trial court dismissed the complaint in a decision
dated August 15, 1975 upon a finding that the body of water traversing the
titled properties of petitioners is a creek constituting a tributary of the
Agno River; therefore public in nature and not subject to private
appropriation. The lower court likewise held that Resolution No. 38,
ordering an ocular inspection of the Cayangan Creek situated between
Barrios Salomague Sur and Salomague Norte, and Resolution No. 95
authorizing public bidding for the lease of all municipal ferries and
fisheries, including the fishpond under consideration, were passed by
respondents herein as members of the Municipal Council of Bugallon,
Pangasinan in the exercise of their legislative powers.
Petitioners appealed said decision to the Intermediate Appellate Court,
which affirmed the same on April 29, 1983. Hence, this petition for review
on certiorari.
Acting on the petition, the Court required the respondents to comment
thereon. However, before respondents could do so, petitioners manifested
that for lack of interest on the part of respondent Alfredo Maza, the
awardee in the public bidding of the fishpond, the parties desire to
amicably settle the case by submitting to the Court a Compromise
Agreement praying that judgment be rendered recognizing the ownership
of petitioners over the land the body of water found within their titled
properties, stating therein, among other things, that "to pursue the case,

the same will not amount to any benefit of the parties, on the other hand it
is to the advantage and benefit of the municipality if the ownership of the
land and the water found therein belonging to petitioners be recognized in
their favor as it is now clear that after the National Irrigation Administration
[NIA] had built the dike around the land, no water gets in or out of the
land. 1
The stipulations contained in the Compromise Agreement partake of the
nature of an adjudication of ownership in favor of herein petitioners of the
fishpond in dispute, which, as clearly found by the lower and appellate
courts, was originally a creek forming a tributary of the Agno River.
Considering that as held in the case of Mercado vs. Municipal President of
Macabebe, 59 Phil. 592 [1934], a creek, defined as a recess or arm
extending from a river and participating in the ebb and flow of the sea, is a
property belonging to the public domain which is not susceptible to private
appropriation and acquisitive prescription, and as a public water, it cannot
be registered under the Torrens System in the name of any individual
[Diego v. Court of Appeals, 102 Phil. 494; Mangaldan v. Manaoag, 38 Phil.
4551; and considering further that neither the mere construction of
irrigation dikes by the National Irrigation Administration which prevented
the water from flowing in and out of the subject fishpond, nor its
conversion into a fishpond, alter or change the nature of the creek as a
property of the public domain, the Court finds the Compromise
Agreement null and void and of no legal effect, the same being contrary to
law and public policy.
The finding that the subject body of water is a creek belonging to the
public domain is a factual determination binding upon this Court. The
Municipality of Bugallon, acting thru its duly-constituted municipal council
is clothed with authority to pass, as it did the two resolutions dealing with
its municipal waters, and it cannot be said that petitioners were deprived
of their right to due process as mere publication of the notice of the public
bidding suffices as a constructive notice to the whole world.
IN VIEW OF THE FOREGOING, the Court Resolved to set aside the
Compromise Agreement and declare the same null and void for being
contrary to law and public policy. The Court further resolved to DISMISS the
instant petition for lack of merit.
SO ORDERED

NIMFA USERO, petitioner, vs. COURT OF APPEALS and SPS.

HERMINIGILDO & CECILIA POLINAR, respondents.
[G.R. No. 155055. January 26, 2005]
LUTGARDA R. SAMELA, petitioner, vs. COURT OF APPEALS and
SPS. HERMINIGILDO & CECILIA POLINAR, respondents.

On November 9, 1998, petitioners filed separate complaints for forcible

entry against the Polinars at the Metropolitan Trial Court of Las Pias City.
The case filed by petitioner Samela was docketed as Civil Case No. 5242,
while that of petitioner Usero was docketed as Civil Case No. 5243.

CORONA, J.:

In Civil Case No. 5242, petitioner Samela adduced in evidence a copy of

her Transfer Certificate of Title, plan of consolidation, subdivision survey,
the tax declaration in her name, and affidavits of petitioner Usero and a
certain Justino Gamela whose property was located beside the perimeter
wall of Pilar Village.

Before this Court are two consolidated petitions for review

on certiorari under Rule 45 of the Rules of Court. The first petition,
docketed as G.R. No. 152115, filed by Nimfa Usero, assails the September
19, 2001 decision[1] of the Court of Appeals in CA-GR SP No. 64718. The
second petition, docketed as G.R. No. 155055, filed by Lutgarda R. Samela,
assails the January 11, 2002 decision[2] of the Court of Appeals in CA-GR SP
NO. 64181.

The spouses Polinar, on the other hand, presented in evidence their own
TCT; a barangay certification as to the existence of the creek; a
certification from the district engineer that the western portion of Pilar
Village is bound by a tributary of Talon Creek throughout its entire length;
boundary and index map of Pilar Village showing that the village is
surrounded by a creek and that the Polinar property is situated at the edge
of said creek; and pictures of the subject strip of land filled with water lilies.

The undisputed facts follow.

On March 22, 1999, the trial court rendered a decision in favor of petitioner
Samela:

DECISION

Petitioners Lutgarda R. Samela and Nimfa Usero are the owners

respectively of lots 1 and 2, Block 5, Golden Acres Subdivision, Barrio
Almanza, Las Pias City.
Private respondent spouses Polinar are the registered owners of a parcel of
land at no. 18 Anahaw St., Pilar Village, Las Pias City, behind the lots of
petitioners Samela and Usero.

WHEREFORE, the Court hereby renders judgment ordering the defendants

to vacate and remove at their expense the improvements made on the
subject lot; ordering the defendants to pay the plaintiffP1,000.00 a month
as reasonable compensation for the use of the portion encroached from
the filing of the complaint until the same is finally vacated; and to pay
plaintiff P10,000.00 as reasonable attorneys fees plus costs of suit. [3]

Situated between the lots of the parties is a low-level strip of land, with a
stagnant body of water filled with floating water lilies; abutting and
perpendicular to the lot of petitioner Samela, the lot of the Polinars and the
low-level strip of land is the perimeter wall of Pilar Village Subdivision.

In a parallel development, the Metropolitan Trial Court, in Civil Case No.

5243, issued an order on February 29, 2000, directing petitioner Usero and
the Polinar spouses to commission a professional geodetic engineer to
conduct a relocation survey and to submit the report to the trial court.

Apparently, every time a storm or heavy rains occur, the water in said strip
of land rises and the strong current passing through it causes considerable
damage to the house of respondent Polinars. Frustrated by their
predicament, private respondent spouses, on July 30, 1998, erected a
concrete wall on the bank of the low-level strip of land about three meters
from their house and rip-rapped the soil on that portion of the strip of land.

On April 24, 2000, Mariano Flotilde, a licensed geodetic engineer,

conducted a relocation survey of Useros property covered by TCT No. T29545. The result of the said relocation survey, as stated in his affidavit,
was as follows:

Claiming ownership of the subject strip of land, petitioners Samela and

Usero demanded that the spouses Apolinar stop their construction but the
spouses paid no heed, believing the strip to be part of a creek.
Nevertheless, for the sake of peace, the Polinars offered to pay for the land
being claimed by petitioners Samela and Usero. However, the parties failed
to settle their differences.

1. That I executed a relocation survey of Lot 2, Block 5, (LRC) PCS-4463

covered by TCT No. T-29545 registered in the name of Nimfa O. Usero;
2. That according to my survey, I found out that there is no existing creek
on the boundary of the said lot;
3. That based on the relocation plan surveyed by the undersigned,
attached herewith, appearing is the encroachment on the above-

mentioned lot by Spouses Herminigildo and Cecilia Polinar with an area of

FORTY THREE (43) SQUARE METERS;
4. That this affidavit was made in compliance with Court Order dated
February 23, 2000 of Metropolitan Trial Court, Las Pias City, Branch LXXIX. [4]

WHEREFORE, premises considered, the Decision rendered by Branch 79 of

the Metropolitan Trial Court, Las Pias is REVERSED. Accordingly, the instant
complaint is DISMISSED.
SO ORDERED.[6]

On August 25, 2000, the Metropolitan Trial Court decided in favor of

petitioner Usero:

On March 16, 2001, the Regional Trial Court, in Civil Case No. 5243, also
reversed the finding of the Municipal Trial Court:

WHEREFORE, judgment is hereby rendered in favor of the plaintiff and

against the defendants ordering them:
a) To vacate and remove at their expense the improvement made on the
subject lot;

From the foregoing, defendants-appellants may maintain the

improvements introduced on the subject portion of the lot subject to
existing laws, rules and regulations and/or ordinances pertaining thereto.
Consequently, no compensation may be awarded in favor of the plaintiffappellee.

b) To pay the plaintiff P1,000.00 a month as reasonable compensation for

the portion encroached from the time of the filing of the complaint until the
same is finally vacated;

WHEREFORE, premises considered, the above-mentioned Decision

rendered by Branch 79 of the Las Pias City Metropolitan Trial Court is
REVERSED. Accordingly, the instant complaint is DISMISSED.

c) To pay plaintiff P10,000.00 as reasonable attorneys fees plus costs of

suit.

From the adverse decisions of the Regional Trial Court, petitioners filed
their respective petitions for review on certiorari to the Court of Appeals.
Petitioner Samelas case was docketed as CA-G.R. SP 64181 while that of
petitioner Usero was docketed as CA-G.R. SP 64718.

SO ORDERED.[5]
The Polinar spouses appealed the decisions of the two Municipal Trial
Courts to the Regional Trial Court of Las Pias, Branch 253 which heard the
appeals separately.
On December 20, 2000, the Regional Trial Court, deciding Civil Case No.
5242, reversed the decision of the trial court and ordered the dismissal of
the complaint. It confirmed the existence of the creek between the
northwestern portion of the lot of petitioner Samela and the southwestern
portion of the lot of the spouses Polinar:
Finding the existence of a creek between the respective properties of the
parties, plaintiff-appellee cannot therefore lay claim of lawful ownership of
that portion because the same forms part of public dominion.
Consequently, she cannot legally stop the defendants-appellants from riprapping the bank of the creek to protect the latters property from soil
erosion thereby avoiding danger to their lives and damage to property.
Absent a lawful claim by the plaintiff-appellee over the subject portion of
that lot, defendants-appellants are not duty bound to pay the former
compensation for the use of the same. As a result, they may maintain the
said improvements introduced thereon subject to existing laws, rules and
regulations and/or ordinances appurtenant thereto.

Both petitions failed in the CA. Thus the instant consolidated petitions.
The pivotal issue in the case at bar is whether or not the disputed strip of
land, allegedly encroached upon by the spouses Polinar, is the private
property of petitioners or part of the creek and therefore part of the public
domain. Clearly this an issue which calls for a review of facts already
determined by the Court of Appeals.
The jurisdiction of the Court in petitions for review on certiorari under Rule
45 of the Rules of Court is limited to reviewing only errors of law, not of
fact, unless the factual findings complained of are devoid of support by the
evidence on record or the assailed judgment is based on a
misapprehension of facts.[7] This is obviously not the case here.
A careful scrutiny of the records reveals that the assailed decisions are
founded on sufficient evidence. That the subject strip of land is a creek is
evidenced by: (1) a barangay certification that a creek exists in the
disputed strip of land; (2) a certification from the Second Manila
Engineering District, NCR-DPWH, that the western portion of Pilar Village
where the subject strip of land is located is bounded by a tributary of Talon
Creek and (3) photographs showing the abundance of water lilies in the
subject strip of land. The Court of Appeals was correct: the fact that water
lilies thrive in that strip of land can only mean that there is a permanent
stream of water or creek there.

In contrast, petitioners failed to present proof sufficient to support their

claim. Petitioners presented the TCTs of their respective lots to prove that
there is no creek between their properties and that of the Polinars.
However, an examination of said TCTs reveals that the descriptions thereon
are incomplete. In petitioner Samelas TCT No. T-30088, there is no
boundary description relative to the northwest portion of the property
pertaining to the site of the creek. Likewise in TCT No. T-22329-A of the
spouses Polinar, the southeast portion which pertains to the site of the
creek has no described boundary. Moreover the tax declaration presented
by petitioner is devoid of any entry on the west boundary vis-a-vis the
location of the creek. All the pieces of evidence taken together, we can
only conclude that the adjoining portion of these boundaries is in fact a
creek and belongs to no one but the state.
Property is either of public dominion or of private ownership.
[8]
Concomitantly, Article 420 of the Civil Code provides:
ART. 420. The following things are property of public dominion:
(1) Those intended for public use, such as roads, canals, rivers, torrents,
ports and bridges constructed by the State, banks, shores, roadsteads, and
others of similar character;
The phrase others of similar character includes a creek which is a recess or
an arm of a river. It is property belonging to the public domain which is not
susceptible to private ownership.[9] Being public water, a creek cannot be
registered under the Torrens System in the name of any individual [10].
Accordingly, the Polinar spouses may utilize the rip-rapped portion of the
creek to prevent the erosion of their property.
WHEREFORE, the consolidated petitions are hereby denied. The assailed
decisions of the Court of Appeals in CA-G.R. SP 64181 and CA-G.R. SP
64718 are affirmed in toto.
SO ORDERED.

[G.R. No. 127316. October 12, 2000]

LIGHT RAIL TRANSIT AUTHORITY, petitioner, vs. CENTRAL BOARD
OF ASSESSMENT APPEALS, BOARD OF ASSESSMENT APPEALS OF
MANILA and the CITY ASSESSOR OF MANILA, respondents.
DECISION
PANGANIBAN, J.:
The Light Rail Transit Authority and the Metro Transit Organization function
as service-oriented business entities, which provide valuable transportation
facilities to the paying public. In the absence, however, of any express
grant of exemption in their favor, they are subject to the payment of real
property taxes.
The Case

In the Petition for Review before us, the Light Rail Transit Authority (LRTA)
challenges the November 15, 1996 Decision [1] of the Court of Appeals (CA)
in CA-GR SP No. 38137, which disposed as follows:
"WHEREFORE, premises considered, the appealed decision (dated October
15, 1994) of the Central Board of Assessment Appeals is hereby AFFIRMED,
with costs against the petitioner."[2]
The affirmed ruling of the Central Board of Assessment Appeals (CBAA)
upheld the June 26, 1992 Resolution of the Board of Assessment Appeals of
Manila, which had declared petitioner's carriageways and passenger
terminals as improvements subject to real property taxes.

Organization (METRO) in which the latter undertook to manage, operate

and maintain the Light Rail Transit System owned by the LRTA subject to
the specific stipulations contained in said agreement, including payments
of a management fee and real property taxes (Add'l Exhibit "I", Records)
"4. That it commenced its operations in 1984, and that sometime that
year, Respondent-Appellee City Assessor of Manila assessed the real
properties of [petitioner], consisting of lands, buildings, carriageways and
passenger terminal stations, machinery and equipment which he
considered real propert[y] under the Real Property Tax Code, to commence
with the year 1985;
"5. That [petitioner] paid its real property taxes on all its real property
holdings, except the carriageways and passenger terminal stations
including the land where it is constructed on the ground that the same are
not real properties under the Real Property Tax Code, and if the same are
real propert[y], these x x x are for public use/purpose, therefore, exempt
from realty taxation, which claim was denied by the Respondent-Appellee
City Assessor of Manila; and
"6. x x x [Petitioner], aggrieved by the action of the Respondent-Appellee
City Assessor, filed an appeal with the Local Board of Assessment Appeals
of Manila x x x. Appellee, herein, after due hearing, in its resolution dated
June 26, 1992, denied [petitioner's] appeal, and declared that carriageways
and passenger terminal stations are improvements, therefore, are real
propert[y] under the Code, and not exempt from the payment of real
property tax.
"A motion for reconsideration filed by [petitioner] was likewise denied."

The Facts

The CA Ruling

The undisputed facts are quoted by the Court of Appeals (CA) from the
CBAA ruling, as follows:[3]

The Court of Appeals held that petitioner's carriageways and passenger

terminal stations constituted real property or improvements thereon and,
as such, were taxable under the Real Property Tax Code. The appellate
court emphasized that such pieces of property did not fall under any of the
exemptions listed in Section 40 of the aforementioned law. The reason was
that they were not owned by the government or any government-owned
corporation which, as such, was exempt from the payment of real property
taxes. True, the government owned the real property upon which the
carriageways and terminal stations were built. However, they were still
taxable, because beneficial use had been transferred to petitioner, a
taxable entity.

"1. The LRTA is a government-owned and controlled corporation created

and organized under Executive Order No. 603, dated July 12, 1980 'x x x
primarily responsible for the construction, operation, maintenance and/or
lease of light rail transit system in the Philippines, giving due regard to the
[reasonable requirements] of the public transportation of the country'
(LRTA vs. The Hon. Commission on Audit, GR No. No. 88365);
"2. x x x [B]y reason of x x x Executive Order 603, LRTA acquired real
properties x x x constructed structural improvements, such as buildings,
carriageways, passenger terminal stations, and installed various kinds of
machinery and equipment and facilities for the purpose of its operations;
"3. x x x [F]or x x x an effective maintenance, operation and management,
it entered into a Contract of Management with the Meralco Transit

The CA debunked the argument of petitioner that carriageways and

terminals were intended for public use. The former agreed, instead, with
the CBAA. The CBAA had concluded that since petitioner was not engaged
in purely governmental or public service, the latter's endeavors were

proprietary. Indeed, petitioner was deemed as a profit-oriented endeavor,

serving as it did, only the paying public.

The Petition has no merit.

Hence, this Petition.

May Real Property Taxes be Assessed and Collected?

[4]

The Issues

In its Memorandum,[5] petitioner urges the Court to resolve the following

matters:
"I
The Honorable Court of Appeals erred in not holding that the carriageways
and terminal stations of petitioner are not improvements for purposes of
the Real Property Tax Code.
"II
The Honorable Court of Appeals erred in not holding that being attached to
national roads owned by the national government, subject carriageways
and terminal stations should be considered property of the national
government.
"III
The Honorable Court of Appeals erred in not holding that payment of
charges or fares in the operation of the light rail transit system does not
alter the nature of the subject carriageways and terminal stations as
devoted for public use.
"IV
The Honorable Court of Appeals erred in failing to consider the view
advanced by the Department of Finance, which takes charge of the overall
collection of taxes, that subject carriageways and terminal stations are not
subject to realty taxes.
"V
The Honorable Court of Appeals erred in failing to consider that payment of
the realty taxes assessed is not warranted and should the legality of the
questioned assessment be upheld, the amount of the realty taxes assessed
would far exceed the annual earnings of petitioner, a government
corporation."
The foregoing all point to one main issue: whether petitioner's
carriageways and passenger terminal stations are subject to real property
taxes.
The Court's Ruling

Main Issue:

The Real Property Tax Code,[6] the law in force at the time of the assailed
assessment in 1984, mandated that "there shall be levied, assessed and
collected in all provinces, cities and municipalities an annual ad valorem
tax on real property such as lands, buildings, machinery and other
improvements affixed or attached to real property not hereinafter
specifically exempted."[7]
Petitioner does not dispute that its subject carriageways and stations may
be considered real property under Article 415 of the Civil Code. However, it
resolutely argues that the same are improvements, not of its properties,
but of the government-owned national roads to which they are immovably
attached. They are thus not taxable as improvements under the Real
Property Tax Code. In essence, it contends that to impose a tax on the
carriageways and terminal stations would be to impose taxes on public
roads.
The argument does not persuade. We quote with approval the solicitor
general's astute comment on this matter:
"There is no point in clarifying the concept of industrial accession to
determine the nature of the property when what is fundamentally
important for purposes of tax classification is to determine the character of
the property subject [to] tax. The character of tax as a property tax must
be determined by its incidents, and form the natural and legal effect
thereof. It is irrelevant to associate the carriageways and/or the passenger
terminals as accessory improvements when the view of taxability is
focused on the character of the property. The latter situation is not a novel
issue as it has already been resolved by this Honorable Court in the case of
City of Manila vs. IAC (GR No. 71159, November 15, 1989) wherein it was
held:
'The New Civil Code divides the properties into property for public and
patrimonial property (Art. 423), and further enumerates the property for
public use as provincial road, city streets, municipal streets, squares,
fountains, public waters, public works for public service paid for by said
[provinces], cities or municipalities; all other property is
patrimonial without prejudice to provisions of special laws. (Art. 424,
Province of Zamboanga v. City of Zamboanga, 22 SCRA 1334 [1968])
xxx
'...while the following are corporate or proprietary property in character,
viz: 'municipal water works, slaughter houses, markets, stables, bathing

establishments, wharves, ferries and fisheries.' Maintenance of parks, golf

courses, cemeteries and airports, among others, are also recognized as
municipal or city activities of a proprietary character (Dept. of Treasury v.
City of Evansville; 60 NE 2nd 952)'

Under the Real Property Tax Code, real property is classified for assessment
purposes on the basis of actual use,[10] which is defined as "the purpose for
which the property is principally or predominantly utilized by the person in
possession of the property."[11]

"The foregoing enumeration in law does not specify or include carriageway

or passenger terminals as inclusive of properties strictly for public use to
exempt petitioner's properties from taxes. Precisely, the properties of
petitioner are not exclusively considered as public roads being
improvements placed upon the public road, and this separability nature of
the structure in itself physically distinguishes it from a public road.
Considering further that carriageways or passenger terminals are elevated
structures which are not freely accessible to the public, viz-a-viz roads
which are public improvements openly utilized by the public, the former
are entirely different from the latter.

Petitioner argues that it merely operates and maintains the LRT system,
and that the actual users of the carriageways and terminal stations are the
commuting public. It adds that the public-use character of the LRT is not
negated by the fact that revenue is obtained from the latter's operations.

"The character of petitioner's property, be it an improvements as otherwise

distinguished by petitioner, needs no further classification when the law
already classified it as patrimonial property that can be subject to tax. This
is in line with the old ruling that if the public works is not for such free
public service, it is not within the purview of the first paragraph of Art. 424
if the New Civil Code."[8]
Though the creation of the LRTA was impelled by public service -- to
provide mass transportation to alleviate the traffic and transportation
situation in Metro Manila -- its operation undeniably partakes of ordinary
business. Petitioner is clothed with corporate status and corporate powers
in the furtherance of its proprietary objectives.[9] Indeed, it operates much
like any private corporation engaged in the mass transport industry. Given
that it is engaged in a service-oriented commercial endeavor, its
carriageways and terminal stations are patrimonial property subject to tax,
notwithstanding its claim of being a government-owned or controlled
corporation.
True, petitioner's carriageways and terminal stations are anchored, at
certain points, on public roads. However, it must be emphasized that these
structures do not form part of such roads, since the former have been
constructed over the latter in such a way that the flow of vehicular traffic
would not be impeded. These carriageways and terminal stations serve a
function different from that of the public roads. The former are part and
parcel of the light rail transit (LRT) system which, unlike the latter, are not
open to use by the general public. The carriageways are accessible only to
the LRT trains, while the terminal stations have been built for the
convenience of LRTA itself and its customers who pay the required fare.
Basis of Assessment Is Actual Use of Real Property

We do not agree. Unlike public roads which are open for use by everyone,
the LRT is accessible only to those who pay the required fare. It is thus
apparent that petitioner does not exist solely for public service, and that
the LRT carriageways and terminal stations are not exclusively for public
use. Although petitioner is a public utility, it is nonetheless profit-earning. It
actually uses those carriageways and terminal stations in its public utility
business and earns money therefrom.
Petitioner Not Exempt from Payment of Real Property Taxes

In any event, there is another legal justification for upholding the assailed
CA Decision. Under the Real Property Tax Code, real property "owned by
the Republic of the Philippines or any of its political subdivisions and any
government-owned or controlled corporation so exempt by its charter,
provided, however, that this exemption shall not apply to real property of
the abovenamed entities the beneficial use of which has been granted, for
consideration or otherwise, to a taxable person."[12]
Executive Order No. 603, the charter of petitioner, does not provide for any
real estate tax exemption in its favor. Its exemption is limited to direct and
indirect taxes, duties or fees in connection with the importation of
equipment not locally available, as the following provision shows:
"ARTICLE 4
TAX AND DUTY EXEMPTIONS
Sec. 8. Equipment, Machineries, Spare Parts and Other Accessories and
Materials. - The importation of equipment, machineries, spare parts,
accessories and other materials, including supplies and services, used
directly in the operations of the Light Rails Transit System, not obtainable
locally on favorable terms, out of any funds of the authority including, as
stated in Section 7 above, proceeds from foreign loans credits or
indebtedness, shall likewise be exempted from all direct and indirect taxes,
customs duties, fees, imposts, tariff duties, compensating taxes, wharfage
fees and other charges and restrictions, the provisions of existing laws to
the contrary notwithstanding."

Even granting that the national government indeed owns the carriageways
and terminal stations, the exemption would not apply because their
beneficial use has been granted to petitioner, a taxable entity.
Taxation is the rule and exemption is the exception. Any claim for tax
exemption is strictly construed against the claimant.[13] LRTA has not shown
its eligibility for exemption; hence, it is subject to the tax.
WHEREFORE, the Petition is hereby DENIED and the assailed Decision of
the Court of Appeals AFFIRMED. Costs against the petitioner.
SO ORDERED.

G.R. No. L-57461 September 11, 1987

THE DIRECTOR OF LANDS, petitioner,
vs.
MANILA ELECTRIC COMPANY and HON. RIZALINA BONIFACIO VERA,
as Presiding Judge, Court of First Instance of Rizal, Pasig, Branch
XXIII, respondents.

CORTES, J.:
This is an appeal by certiorari of a decision of the respondent Judge in Land
Registration Case No. N-10317 LRC Record No. N-54803 entitled "In Re:
Application for Registration of Title, Manila Electric Company, applicant,"
dated May 29, 1981.
The facts are not disputed. Manila Electric Company filed an amended
application for registration of a parcel of land located in Taguig, Metro
Manila on December 4, 1979. On August 17, 1976, applicant acquired the
land applied for registration by purchase from Ricardo Natividad (Exhibit E)
who in turn acquired the same from his father Gregorio Natividad as
evidenced by a Deed of Original Absolute Sale executed on December 28,
1970 (Exhibit E). Applicant's predecessors-in-interest have possessed the
property under the concept of an owner for more than 30 years. The
property was declared for taxation purposes under the name of the
applicant (Exhibit 1) and the taxes due thereon have been paid (Exhibits J
and J-1).
On May 29, 1981 respondent Judge rendered a decision ordering the
registration of the property in the name of the private respondent. The
Director of Lands interposed this petition raising the issue of whether or
not a corporation may apply for registration of title to land. After comments
were filed by the respondents, the Court gave the petition due course. The
legal issue raised by the petitioner Director of Lands has been squarely
dealt with in two recent cases (The Director of Lands v. Intermediate
Appellate Court and Acme Plywood & Veneer Co., Inc., etc., No. L-73002
(December 29, 1986), 146 SCRA 509. The Director of Lands v. Hon.
Bengzon and Dynamarine Corporation, etc., No. 54045 (July 28, 1987)],
and resolved in the affirmative. There can be no different answer in the
case at bar.
In the Acme decision, this Court upheld the doctrine that open, exclusive
and undisputed possession of alienable public land for the period

prescribed by law creates the legal fiction whereby the land, upon
completion of the requisite period ipso jure and without the need of judicial
or other sanction, ceases to be public land and becomes private property.
As the Court said in that case:
Nothing can more clearly demonstrate the logical inevitability of
considering possession of public land which is of the character and
duration prescribed by statute as the equivalent of an express grant from
the State than the dictum of the statute itself that the possessor(s) "...
shall be conclusively presumed to have performed all the conditions
essential to a Government grant and shall be entitled to a certificate of
title .... " No proof being admissible to overcome a conclusive presumption,
confirmation proceedings would in truth be little more than a formality, at
the most limited to ascertaining whether the possession claimed is of the
required character and length of time; and registration thereunder would
not confer title, but simply recognize a title already vested. The
proceedings would not originally convert the land from public to private
land, but only confirm such a conversion already affected (sic) from the
moment the required period of possession became complete.
Coming to the case at bar, if the land was already private at the time
Meralco bought it from Natividad, then the prohibition in the 1973
Constitution against corporations holding alienable lands of the public
domain except by lease (1973 Const., Art. XIV, See. 11) does not apply.
Petitioner, however, contends that a corporation is not among those that
may apply for confirmation of title under Section 48 of Commonwealth Act
No. 141, the Public Land Act.
As ruled in the Acme case, the fact that the confirmation proceedings were
instituted by a corporation is simply another 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 in said proceedings." Considering that it is not disputed that the
Natividads could have had their title confirmed, only a rigid subservience
to the letter of the law would deny private respondent the right to register
its property which was validly acquired.
WHEREFORE, the petition is DENIED. The questioned decision of the
respondent Judge is AFFIRMED.
SO ORDERED.