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Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No.

129644 September 7, 2001

CHINA BANKING CORPORATION, petitioner, vs. HON. COURT OF APPEALS, PAULINO ROXAS CHUA and KIANG MING CHU CHUA, respondents. RESOLUTION YNARES-SANTIAGO, J.: Private respondents Paulino Roxas Chua and Kiang Ming Chu Chua have filed before this Court a Motion for Reconsideration of the Decision dated March 7, 2000, the dispositive portion of which reads: WHEREFORE, the petition is GRANTED. The decision of the Court of Appeals in CA-G.R. CV No. 46735 isREVERSED and SET ASIDE. The permanent injunction enjoining petitioner, the Sheriff of Manila, the Register of Deeds of San Juan, their officers, representatives, agents and persons acting on their behalf from causing the transfer of possession, ownership and title of the property covered by TCT No. 410603 in favor of petitioner is LIFTED. The Assignment of Rights to Redeem dated November 21, 1988 executed by Alfonso Roxas Chua in favor of Paulino Roxas Chua is ordered RESCINDED. The levy on execution dated February 4, 1991 and the Certificate of Sale dated April 30, 1992 in favor of petitioner are DECLAREDVALID against the one-half portion of the subject property. SO ORDERED. Briefly, the facts are restated as follows: By virtue of the adverse decision of the Regional Trial Court of Manila, Branch 46, in Civil Case No. 82-14134, entitled "Metropolitan Bank and Trust Company v. Pacific Multi Commercial Corporation and Alfonso Roxas Chua,"the residential land covered by Transfer Certificate of Title No. 410603 in the name of spouses Alfonso Roxas Chua and Kiang Ming Chu Chua was levied on execution. Kiang Ming Chu Chua filed an action questioning the levy on the ground that the land was conjugal partnership property. This resulted in a compromise agreement to the effect that the levy shall be valid only to the extent of the share pertaining to Alfonso Roxas Chua. Accordingly, an alias notice of levy was issued affecting the said undivided portion of the property. After the execution sale, a certificate of sale was executed in favor of Metrobank, the judgment creditor, and the same was annotated on TCT No. 410603 on December 22, 1987. Meanwhile, China Banking Corporation filed a complaint for sum of money against Pacific Multi Agro-Industrial Corporation and Alfonso Roxas Chua, docketed as Civil Case No. 85-31257 of the Regional Trial Court of Manila, Branch 29. On November 7, 1985, judgment was rendered ordering defendants to pay Chinabank the aggregate amount of P2,500,000.00 plus interests, penalties and attorneys fees. Defendants appealed to the Court of Appeals but the same was dismissed for failure

to file appellants brief. Thus, notice of levy on execution was issued on February 4, 1991 against the right and interest of Alfonso Roxas Chua in TCT No. 410603. The same was later sold at public auction and a certificate of sale was executed in favor of Chinabank, and inscribed on TCT 410603 on May 4, 1992. Previously, however, on November 21, 1988, Alfonso Roxas Chua executed in favor of his son, Paulino Roxas Chua, an "Assignment of Right to Redeem," pertaining to his right to redeem the undivided portion of the land sold to Metrobank. On January 11, 1989, Paulino redeemed the property from Metrobank. On March 14, 1989, the Assignment of Right to Redeem and the redemption by Paulino Roxas Chua of the property from Metrobank were annotated on TCT No. 410603. Private respondents Paulino Roxas Chua and Kiang Ming Chu Chua filed Civil Case No. 63199 before the Regional Trial Court of Pasig, Branch 163, alleging that Paulino has a prior and better right over Chinabank inasmuch as the assignment to him of the right to redeem and his redemption of Alfonsos share in the property were inscribed on the title on an earlier date than the annotation of the notice of levy and certificate of sale in favor of Chinabank. Both the trial court and the Court of Appeals ruled in favor of private respondents and enjoined Chinabank, the Sheriff of Manila and the Register of Deeds of San Juan from causing the transfer of possession, ownership and certificate of title, or otherwise disposing of the property covered by TCT No. 410603 in favor of Chinabank or any other person. On March 7, 2000, we rendered the now assailed Decision reversing the judgment of the Court of Appeals and rescinding the Assignment of Right to Redeem executed by Alfonso in favor of Paulino Roxas Chua, for having been entered into in fraud of creditors. In their Motion for Reconsideration, private respondents raise the following grounds: 2.1. The Decision, with due respect, failed to consider vital facts showing that the assignment was indubitably: [a] for valuable consideration; and [b] In good faith; which if considered, would result in a complete reversal. 2.2. The dispositive portion of the decision rescinding the assignment of the right to redeem and validating the levy on execution dated April 30, 1992 in favor of petitioner, with due respect, cannot be enforced because: [a] rescission is late; and [b] levy on execution was on the wrong property. 2.3. The Petition was invalid and failed to vest the Honorable Court with the jurisdiction to review the decision by the Court of Appeals.1 Petitioner filed its Comment,2 and private respondents filed their Reply with leave of Court.3

Under their first ground, private respondents argue that there was sufficient evidence to overthrow the presumption that the assignment of the right to redeem was in fraud of creditors. After a reexamination of the evidence, we agree with private respondents. Indeed, Article 1387 of the Civil Code provides that alienations made by a debtor by gratuitous title are presumed fraudulent when the donor did not reserve sufficient property to pay his outstanding debts. Likewise, alienations by onerous title are presumed fraudulent when made by persons against whom some judgment has been rendered or some writ of attachment has been issued. These, however, are mere presumptions which are in no way conclusive. The presumption of fraud can be overthrown by evidence showing that the conveyance was made in good faith and for a sufficient and valuable consideration.4 In the case at bar, private respondents sufficiently established that the conveyance was made in good faith and for valuable consideration. Paulino maintains that he had no knowledge of his father Alfonsos financial problem with petitioner Chinabank until he was about to cause the cancellation of TCT No. 410603.5 Furthermore, he paid the sum of P100,000.00 to Alfonso for the right to redeem,6 and paid the redemption amount of P1,463,375.39 to Metrobank.7 Expectedly, petitioner refutes these, saying that the amounts paid by Paulino were grossly disproportionate to the right to redeem the property, which is a residential house and lot located in North Greenhills, San Juan, Metro Manila. But as correctly pointed out by private respondents, the amount of P100,000.00 paid by Paulino to Alfonso was not for the property itself, but merely for the right to redeem the same. As a matter of fact, Paulino still had to pay Metrobank the redemption price of P1,463,375.39. Whether or not the latter amount was adequate is beyond the scope of this inquiry. Suffice it to state that Metrobank accepted the same and reconveyed the property to Paulino. Moreover, only Alfonsos conjugal share in the property was affected, and the determination of its value was still subject to liquidation of debts and charges against the conjugal partnership. It must be emphasized that the reconsideration of our earlier Decision on this score does not depart from well-settled doctrines and jurisprudence. Rather, it entailed merely a re-evaluation of the evidence on record. Going now to the second ground, private respondent points out that the dispositive portion of our Decision can not be executed without affecting the rights of Metrobank inasmuch as Alfonsos right of redemption, which he assigned to Paulino, only had a lifetime of twelve months from the date of registration of the certificate of sale in favor of Metrobank. The rescission of the assignment of the right to redeem would have had the effect of allowing the twelve-month period of redemption to lapse, and thus confer on Metrobank the right to consolidate ownership over the property and to the execution of the sheriffs final deed of sale. The certificate of sale in favor of Metrobank was registered on December 22, 1987. Under the 1964 Rules of Court which were in effect at that time, the judgment debtor or redemptioner had the right to redeem the property from Metrobank within twelve months8from the date of registration of the certificate of sale.9 Chinabank was a redemptioner, being then a creditor with a lien by judgment on the property sold, subsequent to the judgment under which the property was sold.10 Upon the expiration of the twelve-month period of redemption and no such redemption is made, the purchaser shall be entitled to the final deed of sale over the property sold on execution. Deed and possession to be given at expiration of redemption period. By whom executed or given. --- If no redemption be made within twelve (12) months after the sale, the purchaser, or his assignee, is entitled to a conveyance and possession of the property; or, if so

redeemed, whenever sixty (60) days have elapsed and no other redemption has been made, and notice thereof given, and the time for redemption has expired, the last redemptioner, or his assignee, is entitled to the conveyance and possession; but in all cases the judgment debtor shall have the entire period of twelve (12) months from the date of the sale to redeem the property. The deed shall be executed by the officer making the sale or by his successor in office, and in the latter case shall have the same validity, as though the officer making the sale had continued in office and executed it. Upon the execution and delivery of said deed, the purchaser, or redemptioner, or his assignee, shall be substituted to and acquire all the right, title, interest and claim of the judgment debtor to the property as of the time of the levy, except as against the judgment debtor in possession, in which case the substitution shall be effective as of the date of the deed. The possession of the property shall be given to the purchaser or last redemptioner by the same officer unless a third party is actually holding the property adversely to the judgment debtor.11 Hence, at the time Chinabank levied on Alfonso Roxas Chuas share in TCT No. 410603 on February 4, 1991, the said property was no longer his. The same had already been acquired by Metrobank and, later, redeemed by Paulino Roxas Chua. Even without the assignment of the right to redeem to Paulino, the subject share in the property would pertain to Metrobank. Either way, Chinabank would not stand to acquire the same. It is an established doctrine that a judgment creditor only acquires at an execution sale the identical interest possessed by the judgment debtor in the property which is the subject of the sale. It follows that if, at the time of the execution sale, the judgment debtor had no more right to or interest in the property because he had already sold it to another, then the purchaser acquires nothing.12 Otherwise stated, the rescission of the assignment of the right to redeem would have nullified Paulinos redemption of the property. Thus, Metrobanks inchoate right to the property would have become complete as of December 1988, when the twelve-month redemption period expired without the right of redemption having been exercised. As stated above, Chinabank was a redemptioner that could redeem the property from Metrobank. It was a judgment creditor with a lien on the property sold subsequent to the judgment under which the property was sold. Hence, what Chinabank could have done was to redeem the property ahead of Paulino. In the alternative, it could have moved for the rescission of the assignment to Paulino of the right to redeem, but within the twelve-month period of redemption. Beyond that, there would be no more right of redemption and, thus, no more assignment to rescind. Assuming that there was no valid assignment of the right to redeem, Paulino, as the son and compulsory heir of Alfonso, could still redeem his fathers share in the property from Metrobank. Under Rule 39, Section 29 (a) of the 1964 Rules of Court, the judgment debtor or his successor in interest may redeem real property sold on execution. Paulino is included within the term "successor in interest." The "successor-in-interest" contemplated by the above provisions includes a person to whom the judgment debtor has transferred his right of redemption, or one to whom he has conveyed his interests in the property for purposes of redemption, or one who succeeds to his property by operation of law, or a person with a joint interest in the property, or his spouse or heirs. A compulsory heir to the judgment debtor qualifies as a successor-in-interest who can redeem property sold on execution.13

In Director of Lands v. Lagniton,14 we held that "the right of a son, with respect to the property of a father or mother, is an inchoate or contingent interest, because upon the death of the father or the mother or both, he will have a right to inherit said conjugal property. If any holder of an inchoate interest is a successor in interest with right to redeem a property sold on execution, then the son is such a successor in interest, as he has an inchoate right to the property of his father." Thus, Paulinos redemption on January 11, 1989 from Metrobank of the share of Alfonso Roxas Chua in the property covered by TCT No. 410603, with or without the execution of the "Assignment of Right to Redeem", was valid. Necessarily, therefore, the said property no longer belonged to Alfonso Roxas Chua on February 4, 1991, when notice of levy was made against him pursuant to the judgment in Civil Case No. 85-31257 in favor of Chinabank. Petitioner should have levied on other properties of Alfonso Roxas Chua. Finally, it is not disputed that the property covered by TCT No. 410603 is a family home occupied by Kiang Ming Chu Chua and her children. The levy and execution sale in favor of Metrobank affected the undivided share thereof. In the instant petition, Chinabank prays that the assignment to Paulino of Alfonsos right to redeem be declared null and void and that the levy in its favor on the undivided portion of the property be declared valid. Ultimately, petitioner Chinabanks objective is to acquire ownership of the undivided portion of the property. However, the acquisition by Chinabank, or Metrobank for that matter, of the said portion will create an absurd co-ownership between a bank, on the one hand, and a family, on the other hand, of the latters family home. The rigid and technical application of the Rules may be relaxed in order to avoid an absurd result. After all, the Rules of Court mandates that a liberal construction of the Rules be adopted in order to promote their object and to assist the parties in obtaining just, speedy and inexpensive determination of every action and proceeding. This rule of construction is especially useful in the present case where adherence to the letter of the law would result in absurdity and manifest injustice.15 Therefore, we affirm the decision of the Court of Appeals in CA-G.R. CV No. 46735, except the awards of moral and exemplary damages, which are deleted. There is no proof of private respondents physical or mental suffering as a result of petitioners acts. Likewise, petitioner does not appear to have acted in a malevolent or oppressive manner towards private respondents. However, petitioner should be liable for the attorneys fees incurred by private respondents, since its act of resisting private respondents causes of action compelled private respondents to litigate. WHEREFORE, in view of the foregoing, our Decision dated March 7, 2000 is RECONSIDERED AND SET ASIDE. The decision of the Court of Appeals in CA-G.R. CV No. 46735 is AFFIRMED with MODIFICATION. Petitioner is ordered to pay private respondents the sum of P100,000.00 as attorneys fees and to pay the costs. Petitioner China Banking Corporation, the Sheriff of Manila, and the Register of Deeds of San Juan, Metro Manila, their officers, representatives, agents or persons acting on their behalf, are PERMANENTLY ENJOINED from causing the transfer of possession, ownership and title, or from otherwise disposing, of the property covered by Transfer Certificate of Title No. 410603 in favor of petitioner China Banking Corporation or to any other person acting on its behalf. The Register of Deeds of San Juan, Metro Manila is ordered to CANCEL all annotations on TCT No. 410603 in favor of China Banking Corporation pursuant to Civil Case No. 85-31257.
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SO ORDERED. Davide, Jr., C.J., Puno, Kapunan, and Pardo, JJ., concur.

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-20329 March 16, 1923

THE STANDARD OIL COMPANY OF NEW YORK, petitioner, vs. JOAQUIN JARAMILLO, as register of deeds of the City of Manila, respondent. Ross, Lawrence and Selph for petitioner. City Fiscal Revilla and Assistant City Fiscal Rodas for respondent. STREET, J.: This cause is before us upon demurrer interposed by the respondent, Joaquin Jaramillo, register of deeds of the City of Manila, to an original petition of the Standard Oil Company of New York, seeking a peremptory mandamusto compel the respondent to record in the proper register a document purporting to be a chattel mortgage executed in the City of Manila by Gervasia de la Rosa, Vda. de Vera, in favor of the Standard Oil Company of New York. It appears from the petition that on November 27, 1922, Gervasia de la Rosa, Vda. de Vera, was the lessee of a parcel of land situated in the City of Manila and owner of the house of strong materials built thereon, upon which date she executed a document in the form of a chattel mortgage, purporting to convey to the petitioner by way of mortgage both the leasehold interest in said lot and the building which stands thereon. The clauses in said document describing the property intended to be thus mortgage are expressed in the following words: Now, therefore, the mortgagor hereby conveys and transfer to the mortgage, by way of mortgage, the following described personal property, situated in the City of Manila, and now in possession of the mortgagor, to wit: (1) All of the right, title, and interest of the mortgagor in and to the contract of lease hereinabove referred to, and in and to the premises the subject of the said lease; (2) The building, property of the mortgagor, situated on the aforesaid leased premises. After said document had been duly acknowledge and delivered, the petitioner caused the same to be presented to the respondent, Joaquin Jaramillo, as register of deeds of the City of Manila, for the purpose of having the same recorded in the book of record of chattel mortgages. Upon examination of the instrument, the respondent was of the opinion that it was not a chattel mortgage, for the reason that the interest therein mortgaged did not appear to be personal property, within the meaning of the Chattel Mortgage Law, and registration was refused on this ground only. We are of the opinion that the position taken by the respondent is untenable; and it is his duty to accept the proper fee and place the instrument on record. The duties of a register of deeds in respect to the registration of chattel mortgage are of a purely ministerial character; and no provision

of law can be cited which confers upon him any judicial or quasi-judicial power to determine the nature of any document of which registration is sought as a chattel mortgage. The original provisions touching this matter are contained in section 15 of the Chattel Mortgage Law (Act No. 1508), as amended by Act No. 2496; but these have been transferred to section 198 of the Administrative Code, where they are now found. There is nothing in any of these provisions conferring upon the register of deeds any authority whatever in respect to the "qualification," as the term is used in Spanish law, of chattel mortgage. His duties in respect to such instruments are ministerial only. The efficacy of the act of recording a chattel mortgage consists in the fact that it operates as constructive notice of the existence of the contract, and the legal effects of the contract must be discovered in the instrument itself in relation with the fact of notice. Registration adds nothing to the instrument, considered as a source of title, and affects nobody's rights except as a specifies of notice. Articles 334 and 335 of the Civil Code supply no absolute criterion for discriminating between real property and personal property for purpose of the application of the Chattel Mortgage Law. Those articles state rules which, considered as a general doctrine, are law in this jurisdiction; but it must not be forgotten that under given conditions property may have character different from that imputed to it in said articles. It is undeniable that the parties to a contract may by agreement treat as personal property that which by nature would be real property; and it is a familiar phenomenon to see things classed as real property for purposes of taxation which on general principle might be considered personal property. Other situations are constantly arising, and from time to time are presented to this court, in which the proper classification of one thing or another as real or personal property may be said to be doubtful. The point submitted to us in this case was determined on September 8, 1914, in an administrative ruling promulgated by the Honorable James A. Ostrand, now a Justice of this Court, but acting at that time in the capacity of Judge of the fourth branch of the Court of First Instance of the Ninth Judicial District, in the City of Manila; and little of value can be here added to the observations contained in said ruling. We accordingly quote therefrom as follows: It is unnecessary here to determine whether or not the property described in the document in question is real or personal; the discussion may be confined to the point as to whether a register of deeds has authority to deny the registration of a document purporting to be a chattel mortgage and executed in the manner and form prescribed by the Chattel Mortgage Law. Then, after quoting section 5 of the Chattel Mortgage Law (Act No. 1508), his Honor continued: Based principally upon the provisions of section quoted the Attorney-General of the Philippine Islands, in an opinion dated August 11, 1909, held that a register of deeds has no authority to pass upon the capacity of the parties to a chattel mortgage which is presented to him for record. A fortiori a register of deeds can have no authority to pass upon the character of the property sought to be encumbered by a chattel mortgage. Of course, if the mortgaged property is real instead of personal the chattel mortgage would no doubt be held ineffective as against third parties, but this is a question to be determined by the courts of justice and not by the register of deeds. In Leung Yee vs. Frank L. Strong Machinery Co. and Williamson (37 Phil., 644), this court held that where the interest conveyed is of the nature of real, property, the placing of the document on record in the chattel mortgage register is a futile act; but that decision is not decisive of the question now

before us, which has reference to the function of the register of deeds in placing the document on record. In the light of what has been said it becomes unnecessary for us to pass upon the point whether the interests conveyed in the instrument now in question are real or personal; and we declare it to be the duty of the register of deeds to accept the estimate placed upon the document by the petitioner and to register it, upon payment of the proper fee. The demurrer is overruled; and unless within the period of five days from the date of the notification hereof, the respondent shall interpose a sufficient answer to the petition, the writ of mandamus will be issued, as prayed, but without costs. So ordered. Araullo, C.J., Malcolm, Avancea, Ostrand, Johns, and Romualdez, JJ., concur.

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-11658 February 15, 1918

LEUNG YEE, plaintiff-appellant, vs. FRANK L. STRONG MACHINERY COMPANY and J. G. WILLIAMSON, defendants-appellees. Booram and Mahoney for appellant. Williams, Ferrier and SyCip for appellees. CARSON, J.: The "Compaia Agricola Filipina" bought a considerable quantity of rice-cleaning machinery company from the defendant machinery company, and executed a chattel mortgage thereon to secure payment of the purchase price. It included in the mortgage deed the building of strong materials in which the machinery was installed, without any reference to the land on which it stood. The indebtedness secured by this instrument not having been paid when it fell due, the mortgaged property was sold by the sheriff, in pursuance of the terms of the mortgage instrument, and was bought in by the machinery company. The mortgage was registered in the chattel mortgage registry, and the sale of the property to the machinery company in satisfaction of the mortgage was annotated in the same registry on December 29, 1913. A few weeks thereafter, on or about the 14th of January, 1914, the "Compaia Agricola Filipina" executed a deed of sale of the land upon which the building stood to the machinery company, but this deed of sale, although executed in a public document, was not registered. This deed makes no reference to the building erected on the land and would appear to have been executed for the

purpose of curing any defects which might be found to exist in the machinery company's title to the building under the sheriff's certificate of sale. The machinery company went into possession of the building at or about the time when this sale took place, that is to say, the month of December, 1913, and it has continued in possession ever since. At or about the time when the chattel mortgage was executed in favor of the machinery company, the mortgagor, the "Compaia Agricola Filipina" executed another mortgage to the plaintiff upon the building, separate and apart from the land on which it stood, to secure payment of the balance of its indebtedness to the plaintiff under a contract for the construction of the building. Upon the failure of the mortgagor to pay the amount of the indebtedness secured by the mortgage, the plaintiff secured judgment for that amount, levied execution upon the building, bought it in at the sheriff's sale on or about the 18th of December, 1914, and had the sheriff's certificate of the sale duly registered in the land registry of the Province of Cavite. At the time when the execution was levied upon the building, the defendant machinery company, which was in possession, filed with the sheriff a sworn statement setting up its claim of title and demanding the release of the property from the levy. Thereafter, upon demand of the sheriff, the plaintiff executed an indemnity bond in favor of the sheriff in the sum of P12,000, in reliance upon which the sheriff sold the property at public auction to the plaintiff, who was the highest bidder at the sheriff's sale. This action was instituted by the plaintiff to recover possession of the building from the machinery company. The trial judge, relying upon the terms of article 1473 of the Civil Code, gave judgment in favor of the machinery company, on the ground that the company had its title to the building registered prior to the date of registry of the plaintiff's certificate. Article 1473 of the Civil Code is as follows: If the same thing should have been sold to different vendees, the ownership shall be transfer to the person who may have the first taken possession thereof in good faith, if it should be personal property. Should it be real property, it shall belong to the person acquiring it who first recorded it in the registry. Should there be no entry, the property shall belong to the person who first took possession of it in good faith, and, in the absence thereof, to the person who presents the oldest title, provided there is good faith. The registry her referred to is of course the registry of real property, and it must be apparent that the annotation or inscription of a deed of sale of real property in a chattel mortgage registry cannot be given the legal effect of an inscription in the registry of real property. By its express terms, the Chattel Mortgage Law contemplates and makes provision for mortgages of personal property; and the sole purpose and object of the chattel mortgage registry is to provide for the registry of "Chattel mortgages," that is to say, mortgages of personal property executed in the manner and form prescribed in the statute. The building of strong materials in which the rice-cleaning machinery was installed by the "Compaia Agricola Filipina" was real property, and the mere fact that the parties seem to have dealt with it separate and apart from the land on which it stood in no wise changed its character as real property. It follows that neither the original registry in the chattel mortgage of the

building and the machinery installed therein, not the annotation in that registry of the sale of the mortgaged property, had any effect whatever so far as the building was concerned. We conclude that the ruling in favor of the machinery company cannot be sustained on the ground assigned by the trial judge. We are of opinion, however, that the judgment must be sustained on the ground that the agreed statement of facts in the court below discloses that neither the purchase of the building by the plaintiff nor his inscription of the sheriff's certificate of sale in his favor was made in good faith, and that the machinery company must be held to be the owner of the property under the third paragraph of the above cited article of the code, it appearing that the company first took possession of the property; and further, that the building and the land were sold to the machinery company long prior to the date of the sheriff's sale to the plaintiff. It has been suggested that since the provisions of article 1473 of the Civil Code require "good faith," in express terms, in relation to "possession" and "title," but contain no express requirement as to "good faith" in relation to the "inscription" of the property on the registry, it must be presumed that good faith is not an essential requisite of registration in order that it may have the effect contemplated in this article. We cannot agree with this contention. It could not have been the intention of the legislator to base the preferential right secured under this article of the code upon an inscription of title in bad faith. Such an interpretation placed upon the language of this section would open wide the door to fraud and collusion. The public records cannot be converted into instruments of fraud and oppression by one who secures an inscription therein in bad faith. The force and effect given by law to an inscription in a public record presupposes the good faith of him who enters such inscription; and rights created by statute, which are predicated upon an inscription in a public registry, do not and cannot accrue under an inscription "in bad faith," to the benefit of the person who thus makes the inscription. Construing the second paragraph of this article of the code, the supreme court of Spain held in its sentencia of the 13th of May, 1908, that: This rule is always to be understood on the basis of the good faith mentioned in the first paragraph; therefore, it having been found that the second purchasers who record their purchase had knowledge of the previous sale, the question is to be decided in accordance with the following paragraph. (Note 2, art. 1473, Civ. Code, Medina and Maranon [1911] edition.) Although article 1473, in its second paragraph, provides that the title of conveyance of ownership of the real property that is first recorded in the registry shall have preference, this provision must always be understood on the basis of the good faith mentioned in the first paragraph; the legislator could not have wished to strike it out and to sanction bad faith, just to comply with a mere formality which, in given cases, does not obtain even in real disputes between third persons. (Note 2, art. 1473, Civ. Code, issued by the publishers of the La Revista de los Tribunales, 13th edition.) The agreed statement of facts clearly discloses that the plaintiff, when he bought the building at the sheriff's sale and inscribed his title in the land registry, was duly notified that the machinery company had bought the building from plaintiff's judgment debtor; that it had gone into possession long prior to the sheriff's sale; and that it was in possession at the time when the sheriff executed his levy. The execution of an indemnity bond by the plaintiff in favor of the sheriff, after the machinery company had filed its sworn claim of ownership, leaves no room for doubt in this regard. Having bought in the building at the sheriff's sale with full knowledge that at the time of the levy and sale the building had already been sold to the machinery company by the judgment debtor, the plaintiff cannot be said to

have been a purchaser in good faith; and of course, the subsequent inscription of the sheriff's certificate of title must be held to have been tainted with the same defect. Perhaps we should make it clear that in holding that the inscription of the sheriff's certificate of sale to the plaintiff was not made in good faith, we should not be understood as questioning, in any way, the good faith and genuineness of the plaintiff's claim against the "Compaia Agricola Filipina." The truth is that both the plaintiff and the defendant company appear to have had just and righteous claims against their common debtor. No criticism can properly be made of the exercise of the utmost diligence by the plaintiff in asserting and exercising his right to recover the amount of his claim from the estate of the common debtor. We are strongly inclined to believe that in procuring the levy of execution upon the factory building and in buying it at the sheriff's sale, he considered that he was doing no more than he had a right to do under all the circumstances, and it is highly possible and even probable that he thought at that time that he would be able to maintain his position in a contest with the machinery company. There was no collusion on his part with the common debtor, and no thought of the perpetration of a fraud upon the rights of another, in the ordinary sense of the word. He may have hoped, and doubtless he did hope, that the title of the machinery company would not stand the test of an action in a court of law; and if later developments had confirmed his unfounded hopes, no one could question the legality of the propriety of the course he adopted. But it appearing that he had full knowledge of the machinery company's claim of ownership when he executed the indemnity bond and bought in the property at the sheriff's sale, and it appearing further that the machinery company's claim of ownership was well founded, he cannot be said to have been an innocent purchaser for value. He took the risk and must stand by the consequences; and it is in this sense that we find that he was not a purchaser in good faith. One who purchases real estate with knowledge of a defect or lack of title in his vendor cannot claim that he has acquired title thereto in good faith as against the true owner of the land or of an interest therein; and the same rule must be applied to one who has knowledge of facts which should have put him upon such inquiry and investigation as might be necessary to acquaint him with the defects in the title of his vendor. A purchaser cannot close his eyes to facts which should put a reasonable man upon his guard, and then claim that he acted in good faith under the belief that there was no defect in the title of the vendor. His mere refusal to believe that such defect exists, or his willful closing of his eyes to the possibility of the existence of a defect in his vendor's title, will not make him an innocent purchaser for value, if afterwards develops that the title was in fact defective, and it appears that he had such notice of the defects as would have led to its discovery had he acted with that measure of precaution which may reasonably be acquired of a prudent man in a like situation. Good faith, or lack of it, is in its analysis a question of intention; but in ascertaining the intention by which one is actuated on a given occasion, we are necessarily controlled by the evidence as to the conduct and outward acts by which alone the inward motive may, with safety, be determined. So it is that "the honesty of intention," "the honest lawful intent," which constitutes good faith implies a "freedom from knowledge and circumstances which ought to put a person on inquiry," and so it is that proof of such knowledge overcomes the presumption of good faith in which the courts always indulge in the absence of proof to the contrary. "Good faith, or the want of it, is not a visible, tangible fact that can be seen or touched, but rather a state or condition of mind which can only be judged of by actual or fancied tokens or signs." (Wilder vs. Gilman, 55 Vt., 504, 505; Cf. Cardenas Lumber Co. vs. Shadel, 52 La. Ann., 2094-2098; Pinkerton Bros. Co. vs. Bromley, 119 Mich., 8, 10, 17.) We conclude that upon the grounds herein set forth the disposing part of the decision and judgment entered in the court below should be affirmed with costs of this instance against the appellant. So ordered.

Arellano, C.J., Johnson, Araullo, Street and Malcolm, JJ., concur. Torres, Avancea and Fisher, JJ., took no part Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No. 137705 August 22, 2000

SERG'S PRODUCTS, INC., and SERGIO T. GOQUIOLAY, petitioners, vs. PCI LEASING AND FINANCE, INC., respondent. DECISION PANGANIBAN, J.: After agreeing to a contract stipulating that a real or immovable property be considered as personal or movable, a party is estopped from subsequently claiming otherwise. Hence, such property is a proper subject of a writ of replevin obtained by the other contracting party. The Case Before us is a Petition for Review on Certiorari assailing the January 6, 1999 Decision1 of the Court of Appeals (CA)2 in CA-GR SP No. 47332 and its February 26, 1999 Resolution3 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 Resolution8 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.

"On March 24, 1998, in implementation of said writ, the sheriff proceeded to petitioners factory, seized one machinery with [the] word that he [would] return for the other machineries. "On March 25, 1998, petitioners filed a motion for special protective order (Annex C), invoking the power of the court to control the conduct of its officers and amend and control its processes, praying for a directive for the sheriff to defer enforcement of the writ of replevin. "This motion was opposed by PCI Leasing (Annex F), on the ground that the properties [were] still personal and therefore still subject to seizure and a writ of replevin. "In their Reply, petitioners asserted that the properties sought to be seized [were] immovable as defined in Article 415 of the Civil Code, the parties agreement to the contrary notwithstanding. They argued that to give effect to the agreement would be prejudicial to innocent third parties. They further stated that PCI Leasing [was] estopped from treating these machineries as personal because the contracts in which the alleged agreement [were] embodied [were] totally sham and farcical. "On April 6, 1998, the sheriff again sought to enforce the writ of seizure and take possession of the remaining properties. He was able to take two more, but was prevented by the workers from taking the rest. "On April 7, 1998, they went to [the CA] via an original action for certiorari." 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 fullblown trial, necessitating presentation of evidence by both parties. The contract is being enforced by one, and [its] validity is attacked by the other a matter x x x which respondent court is in the best position to determine." 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. 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: "SEC. 3. Order. -- Upon the filing of such affidavit and approval of the bond, the court shall issue an order and the corresponding writ of replevin describing the personal property alleged to be wrongfully detained and requiring the sheriff forthwith to take such property into his custody." On the other hand, Article 415 of the Civil Code enumerates immovable or real property as follows: "ART. 415. The following are immovable property: xxx xxx xxx

(5) Machinery, receptacles, instruments or implements intended by the owner of the tenement for an industry or works which may be carried on in a building or on a piece of land, and which tend directly to meet the needs of the said industry or works; xxx xxx 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.18After agreeing to such stipulation, they are consequently estopped from claiming otherwise. Under the principle of estoppel, a party to a contract is ordinarily precluded from denying the truth of any material fact found therein. Hence, in Tumalad v. Vicencio,19 the Court upheld the intention of the parties to treat a house as a personal property because it had been made the subject of a chattel mortgage. The Court ruled: "x x x. Although there is no specific statement referring to the subject house as personal property, yet by ceding, selling or transferring a property by way of chattel mortgage defendants-appellants could only have meant to convey the house as chattel, or at least, intended to treat the same as such, so that they should not now be allowed to make an inconsistent stand by claiming otherwise." Applying Tumalad, the Court in Makati Leasing and Finance Corp. v. Wearever Textile Mills20 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 Corporation30 is also instructive on this point. In that case, the Deed of Chattel Mortgage, which characterized the subject machinery as personal property, was also assailed because respondent had allegedly been required "to sign a printed form of chattel mortgage which was in a blank form at the time of signing." The Court rejected the argument and relied on the Deed, ruling as follows: "x x x. Moreover, even granting that the charge is true, such fact alone does not render a contract void ab initio, but can only be a ground for rendering said contract voidable, or annullable pursuant to Article 1390 of the new Civil Code, by a proper action in court. There is nothing on record to show that the mortgage has been annulled. Neither is it disclosed that steps were taken to nullify the same. x x x" Alleged Injustice Committed on the Part of Petitioners Petitioners contend that "if the Court allows these machineries to be seized, then its workers would be out of work and thrown into the streets."31 They also allege that the seizure would nullify all efforts to rehabilitate the corporation.

Petitioners arguments do not preclude the implementation of the Writ. As earlier discussed, law and jurisprudence support its propriety. Verily, the above-mentioned consequences, if they come true, should not be blamed on this Court, but on the petitioners for failing to avail themselves of the remedy under Section 5 of Rule 60, which allows the filing of a counter-bond. The provision states:
1wphi1

"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. Melo, (Chairman), Vitug, Purisima, and Gonzaga-Reyes, JJ., concur. Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-18456 November 30, 1963

CONRADO P. NAVARRO, plaintiff-appellee, vs. RUFINO G. PINEDA, RAMONA REYES, ET AL., defendants-appellants. Deogracias Taedo, Jr. for plaintiff-appellee. Renato A. Santos for defendants-appellants. PAREDES, J.: On December 14, 1959, defendants Rufino G. Pineda and his mother Juana Gonzales (married to Gregorio Pineda), borrowed from plaintiff Conrado P. Navarro, the sum of P2,500.00, payable 6 months after said date or on June 14, 1959. To secure the indebtedness, Rufino executed a document captioned "DEED OF REAL ESTATE and CHATTEL MORTGAGES", whereby Juana Gonzales, by way of Real Estate Mortgage hypothecated a parcel of land, belonging to her, registered with the Register of Deeds of Tarlac, under Transfer Certificate of Title No. 25776, and Rufino G. Pineda, by way of Chattel Mortgage, mortgaged his two-story residential house, having a floor area of 912 square meters, erected on a lot belonging to Atty. Vicente Castro, located at Bo. San Roque, Tarlac, Tarlac; and one motor truck, registered in his name, under Motor Vehicle Registration Certificate No. A-171806. Both mortgages were contained in one instrument, which was registered in both the Office of the Register of Deeds and the Motor Vehicles Office of Tarlac. When the mortgage debt became due and payable, the defendants, after demands made on them, failed to pay. They, however, asked and were granted extension up to June 30, 1960, within which to

pay. Came June 30, defendants again failed to pay and, for the second time, asked for another extension, which was given, up to July 30, 1960. In the second extension, defendant Pineda in a document entitled "Promise", categorically stated that in the remote event he should fail to make good the obligation on such date (July 30, 1960), the defendant would no longer ask for further extension and there would be no need for any formal demand, and plaintiff could proceed to take whatever action he might desire to enforce his rights, under the said mortgage contract. In spite of said promise, defendants, failed and refused to pay the obligation. On August 10, 1960, plaintiff filed a complaint for foreclosure of the mortgage and for damages, which consisted of liquidated damages in the sum of P500.00 and 12% per annum interest on the principal, effective on the date of maturity, until fully paid. Defendants, answering the complaint, among others, stated Defendants admit that the loan is overdue but deny that portion of paragraph 4 of the First Cause of Action which states that the defendants unreasonably failed and refuse to pay their obligation to the plaintiff the truth being the defendants are hard up these days and pleaded to the plaintiff to grant them more time within which to pay their obligation and the plaintiff refused; WHEREFORE, in view of the foregoing it is most respectfully prayed that this Honorable Court render judgment granting the defendants until January 31, 1961, within which to pay their obligation to the plaintiff. On September 30, 1960, plaintiff presented a Motion for summary Judgment, claiming that the Answer failed to tender any genuine and material issue. The motion was set for hearing, but the record is not clear what ruling the lower court made on the said motion. On November 11, 1960, however, the parties submitted a Stipulation of Facts, wherein the defendants admitted the indebtedness, the authenticity and due execution of the Real Estate and Chattel Mortgages; that the indebtedness has been due and unpaid since June 14, 1960; that a liability of 12% per annum as interest was agreed, upon failure to pay the principal when due and P500.00 as liquidated damages; that the instrument had been registered in the Registry of Property and Motor Vehicles Office, both of the province of Tarlac; that the only issue in the case is whether or not the residential house, subject of the mortgage therein, can be considered a Chattel and the propriety of the attorney's fees. On February 24, 1961, the lower court held ... WHEREFORE, this Court renders decision in this Case: (a) Dismissing the complaint with regard to defendant Gregorio Pineda; (b) Ordering defendants Juana Gonzales and the spouses Rufino Pineda and Ramon Reyes, to pay jointly and severally and within ninety (90) days from the receipt of the copy of this decision to the plaintiff Conrado P. Navarro the principal sum of P2,550.00 with 12% compounded interest per annum from June 14, 1960, until said principal sum and interests are fully paid, plus P500.00 as liquidated damages and the costs of this suit, with the warning that in default of said payment of the properties mentioned in the deed of real estate mortgage and chattel mortgage (Annex "A" to the complaint) be sold to realize said mortgage debt, interests, liquidated damages and costs, in accordance with the pertinent provisions of Act 3135, as amended by Act 4118, and Art. 14 of the Chattel Mortgage Law, Act 1508; and

(c) Ordering the defendants Rufino Pineda and Ramona Reyes, to deliver immediately to the Provincial Sheriff of Tarlac the personal properties mentioned in said Annex "A", immediately after the lapse of the ninety (90) days above-mentioned, in default of such payment. The above judgment was directly appealed to this Court, the defendants therein assigning only a single error, allegedly committed by the lower court, to wit In holding that the deed of real estate and chattel mortgages appended to the complaint is valid, notwithstanding the fact that the house of the defendant Rufino G. Pineda was made the subject of the chattel mortgage, for the reason that it is erected on a land that belongs to a third person. Appellants contend that article 415 of the New Civil Code, in classifying a house as immovable property, makes no distinction whether the owner of the land is or not the owner of the building; the fact that the land belongs to another is immaterial, it is enough that the house adheres to the land; that in case of immovables by incorporation, such as houses, trees, plants, etc; the Code does not require that the attachment or incorporation be made by the owner of the land, the only criterion being the union or incorporation with the soil. In other words, it is claimed that "a building is an immovable property, irrespective of whether or not said structure and the land on which it is adhered to, belong to the same owner" (Lopez v. Orosa, G.R. Nos. L-10817-8, Feb. 28, 1958). (See also the case of Leung Yee v. Strong Machinery Co., 37 Phil. 644). Appellants argue that since only movables can be the subject of a chattel mortgage (sec. 1, Act No. 3952) then the mortgage in question which is the basis of the present action, cannot give rise to an action for foreclosure, because it is nullity. (Citing Associated Ins. Co., et al. v. Isabel Iya v. Adriano Valino, et al., L-10838, May 30, 1958.) The trial court did not predicate its decision declaring the deed of chattel mortgage valid solely on the ground that the house mortgaged was erected on the land which belonged to a third person, but also and principally on the doctrine of estoppel, in that "the parties have so expressly agreed" in the mortgage to consider the house as chattel "for its smallness and mixed materials of sawali and wood". In construing arts. 334 and 335 of the Spanish Civil Code (corresponding to arts. 415 and 416, N.C.C.), for purposes of the application of the Chattel Mortgage Law, it was held that under certain conditions, "a property may have a character different from that imputed to it in said articles. It is undeniable that the parties to a contract may by agreement, treat as personal property that whichby nature would be real property" (Standard Oil Co. of N.Y. v. Jaranillo, 44 Phil. 632633)."There can not be any question that a building of mixed materials may be the subject of a chattel mortgage, in which case, it is considered as between the parties as personal property. ... The matter depends on the circumstances and the intention of the parties". "Personal property may retain its character as such where it is so agreed by the parties interested even though annexed to the realty ...". (42 Am. Jur. 209-210, cited in Manarang, et al. v. Ofilada, et al., G.R. No. L-8133, May 18, 1956; 52 O.G. No. 8, p. 3954.) The view that parties to a deed of chattel mortgagee may agree to consider a house as personal property for the purposes of said contract, "is good only insofar as the contracting parties are concerned. It is based partly, upon the principles of estoppel ..." (Evangelista v. Alto Surety, No. L-11139, Apr. 23, 1958). In a case, a mortgage house built on a rented land, was held to be a personal property, not only because the deed of mortgage considered it as such, but also because it did not form part of the land (Evangelista v. Abad [CA];36 O.G. 2913), for it is now well settled that an object placed on land by one who has only a temporary right to the same, such as a lessee or usufructuary, does not become immobilized by attachment (Valdez v. Central Altagracia, 222 U.S. 58, cited in Davao Sawmill Co., Inc. v. Castillo, et al., 61 Phil. 709). Hence, if a house belonging to a person stands on a rented land belonging to another person, it may be mortgaged as a personal property is so stipulated in the document of mortgage. (Evangelista v. Abad, supra.) It should be noted, however, that the principle is predicated on statements by the owner declaring his house to be a chattel, a conduct that may conceivably estop him from

subsequently claiming otherwise (Ladera, et al.. v. C. N. Hodges, et al., [CA]; 48 O.G. 5374). The doctrine, therefore, gathered from these cases is that although in some instances, a house of mixed materials has been considered as a chattel between them, has been recognized, it has been a constant criterion nevertheless that, with respect to third persons, who are not parties to the contract, and specially in execution proceedings, the house is considered as an immovable property (Art. 1431, New Civil Code). In the case at bar, the house in question was treated as personal or movable property, by the parties to the contract themselves. In the deed of chattel mortgage, appellant Rufino G. Pineda conveyed by way of "Chattel Mortgage" "my personal properties", a residential house and a truck. The mortgagor himself grouped the house with the truck, which is, inherently a movable property. The house which was not even declared for taxation purposes was small and made of light construction materials: G.I. sheets roofing, sawali and wooden walls and wooden posts; built on land belonging to another. The cases cited by appellants are not applicable to the present case. The Iya cases (L-1083738, supra), refer to a building or a house of strong materials, permanently adhered to the land, belonging to the owner of the house himself. In the case of Lopez v. Orosa, (L-10817-18), the subject building was a theatre, built of materials worth more than P62,000, attached permanently to the soil. In these cases and in the Leung Yee case, supra, third persons assailed the validity of the deed of chattel mortgages; in the present case, it was one of the parties to the contract of mortgages who assailed its validity. CONFORMABLY WITH ALL THE FOREGOING, the decision appealed from, should be, as it is hereby affirmed, with costs against appellants. Bengzon, C.J., Padilla, Bautista Angelo, Labrador, Barrera, Dizon, Regala, and Makalintal, JJ., concur