Star Two (SPV-AMC), Inc., vs Paper City Corporation of the Philippines, G.R.
Elevated Concrete Water Tank
No. 169211, March 6, 2013
FACTS:
For review is a Petition for Review on Certiorari filed by Rizal Commercial Banking
Corporation now substituted by Star Two (SPV-AMC), Inc.
 Respondent Paper City is a domestic corporation engaged in the
manufacture of paper products. Paper City applied for and was granted
loans and credit accommodations in peso and dollar denominations by
RCBC secured by 4 Deeds of Continuing Chattel Mortgages on its
machineries and equipments found inside its paper plants.
 However, a unilateral Cancellation of Deed of Continuing Chattel Mortgage
on Inventory of Merchandise/Stocks-in-Trade was executed by RCBC over
the merchandise and stocks-in-trade covered by the continuing chattel
mortgages.
 RCBC, Metrobank and Union Bank (creditor banks with RCBC instituted
as the trustee bank) entered into a Mortgage Trust Indenture (MTI) with
Paper City. In the said MTI, Paper City acquired an additional P170,
000,000.00 from the creditor banks in addition to the previous loan from
RCBC amounting to P110, 000,000.00.
 The old loan of P110,000,000.00 was partly secured by various parcels of
land situated in Valenzuela City. The new loan obligation
of P170,000,000.00 would be secured by the same five (5) Deeds of Real
Estate Mortgage and additional real and personal properties described in an
annex to MTI, Annex "B" which covered the machineries and equipments
of Paper City.
Annex "A"
A. Office Building
Building 1, 2, 3, 4, and 5
Boiler House
Workers’ Quarter/Restroom
Canteen
Guardhouse, Parking Shed, Elevated Guard
Post and other amenities
B. Pollution Tank Nos. 1 and 2.
Reserve Water Tank and Swimming Pool
Waste Water Treatment Tank
And other Improvements listed in Annex "A"
C. Power Plants Nos. 1 and 2
Fabrication Building
Various Fuel, Water Tanks and Pumps
Transformers
Annex "B"
D. D. Material Handling Equipment
Paper Plant No. 3
 The MTI was later amended to increase the contributions of the RCBC and
Union Bank. As a consequence, they executed a Deed of Amendment to
MTI but still included as part of the mortgaged properties by way of a first
mortgage the various machineries and equipments located in and bolted to
and/or forming part of buildings.
 A Second Supplemental Indenture to the MTI was executed to increase the
amount of the loan secured against the existing properties composed of
land, building, machineries and equipments and inventories described in
Annexes "A" and "B."
 Finally, a Third Supplemental Indenture to the MTI was executed to
increase the existing loan obligation with an additional security composed
of a newly constructed two-storey building and other improvements,
machineries and equipments located in the existing plant site.
 Paper City was able to comply with its loan obligations but economic crisis
ensued which made it difficult for Paper City to meet the terms of its
obligations leading to payment defaults. Consequently, RCBC filed a
Petition for Extrajudicial Foreclosure.
 The petition was for the extra-judicial foreclosure of eight parcels of land
including all improvements thereon which were sold in favor of the creditor
banks RCBC, Union Bank and Metrobank as the highest bidders.
This foreclosure sale prompted Paper City to file a Complaint against the creditor
banks alleging that the extra-judicial sale of the properties and plants was null and
void due to lack of prior notice and attendance of gross and evident bad faith on the
part of the creditor banks.
Acting on the said motion, the trial court issued an Order denying the prayer and
ruled that the machineries and equipments were included in the annexes and form
part of the MTI.
Paper City filed its Motion for Reconsideration which was favorably granted by the
trial court with justification that the disputed machineries and equipments are
chattels by agreement of the parties through their inclusion in the four Deeds of
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Chattel Mortgage and the deed of cancellation executed by RCBC was not valid
because it was done unilaterally and without the consent of Paper City.
The CA affirmed the Order.
ISSUE:
Whether the subsequent contracts of the parties such as Mortgage Trust Indenture as
well as the subsequent supplementary amendments included in its coverage of
mortgaged properties the subject machineries and equipment; and
Whether or not the subject machineries and equipment were considered real
properties and should therefore be included in the extra-judicial foreclosure which in
turn were sold to the banks.
RULING:
Petition was granted.
1. Repeatedly, the parties stipulated that the properties mortgaged by Paper City
to RCBC are various parcels of land including the buildings and existing
improvements thereon as well as the machineries and equipments, which as
stated in the granting clause of the original mortgage, are "more particularly
described and listed that is to say, the real and personal properties listed in
Annexes ‘A’ and ‘B’ x x x of which the Paper City is the lawful and registered
owner." Significantly, Annexes "A" and "B" are itemized listings of the
buildings, machineries and equipments typed single spaced in twenty-seven
pages of the document made part of the records. As held in Gateway
Electronics Corp. v. Land Bank of the Philippines,49 the rule in this jurisdiction
is that the contracting parties may establish any agreement, term, and condition
they may deem advisable, provided they are not contrary to law, morals or
public policy. The right to enter into lawful contracts constitutes one of the
liberties guaranteed by the Constitution.
2. Contrary to the finding of the CA, the Extra-Judicial Foreclosure of Mortgage
includes the machineries and equipments of respondent. Considering that the
Indenture which is the instrument of the mortgage that was foreclosed exactly
states through the Deed of Amendment that the machineries and equipments
listed in Annexes "A" and "B" form part of the improvements listed and
located on the parcels of land subject of the mortgage, such machineries and
equipments are surely part of the foreclosure of the "real estate properties,
including all improvements thereon" as prayed for in the petition. The real
estate mortgages which specifically included the machineries and equipments
were subsequent to the chattel mortgages. Without doubt, the real estate
mortgages superseded the earlier chattel mortgages.
The real estate mortgage over the machineries and equipments is even in full
accord with the classification of such properties by the Civil Code of the
Philippines as immovable property. Thus:
Article 415. The following are immovable property:
(1) Land, buildings, roads and constructions of all kinds adhered to the soil;
xxxx
(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;
LAUREL V. ABROGAR
G.R. NO. 155076 (JANUARY 13, 2009)
Personal Property
FACTS:
Philippine Long Distance Telephone Company (PLDT) filed a complaint for theft
under Article 308 of the Revised Penal Code against Baynet Co., Ltd. (Baynet) for
stealing its business. PLDT alleged that Baynet offered phone cards to people in
Japan to call their friends and relatives in the Philippines using PLDT's facilities
and equipment.
ISSUE:
Whether or not the PLDT's business of providing telecommunication services is a
personal property under Article 308 of the Revised Penal Code.
HELD:
No, PLDT's business of providing telecommunication services is not a personal
property under Article 308 of the Revised Penal Code.
Personal property under the Revised Penal Code covers both tangible and intangible
properties but must be considered with the word "take" in the law. There is "taking"
Page 2 of 15
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 statutory definition of "taking"
clearly indicates that 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 subjects of
theft. Movable properties under Article 308 of the Revised Penal Code should be
distinguished from the rights or interest to which they relate to. While the rights or
interests are properties, they are not considered personal properties under Article
308 of the Revised Penal Code.
PLDT's business is intangible and cannot be taken by another and not the proper
subjects of theft because they are without form or substance.
Held: No. Significantly, while Article 559 permits an owner who has lost or has
been unlawfully deprived of a movable to recover the exact same thing from the
current possessor, BPI simply claims ownership of the equivalent amount of money,
i.e., the value thereof, which it had mistakenly debited from FMIC’s account and
credited to Tevesteco’s, and subsequently traced to Franco’s account.
Money bears no earmarks of peculiar ownership, and this characteristic is all the
more manifest in the instant case which involves money in a banking transaction
gone awry. Its primary function is to pass from hand to hand as a medium of
exchange, without other evidence of its title. Money, which had been passed through
various transactions in the general course of banking business, even if of traceable
origin, is no exception.

LEUNG YEE V. F.L STRONG MACHINERY CO. AND WILLIAMSON

37 SCRA 644
BPI vs Court of Appeals
FACTS:
538 SCRA 184, GR No. 123498, November 23, 2007 1. First mortgage: Compania Agricola Filipina bought rice-cleaning machinery
from the machinery company and this was secured by a chattel mortgage on the
Posted by Pius Morados on January 12, 2012 machinery and the building to which it
was installed. Upon failure to pay, the chattel mortgage was foreclosed, the
Facts: Franco opened 3 accounts with BPI with the total amount of P2,000,000.00. building and machinery sold in public auction and bought by the machinery
The said amount used to open these accounts is traceable to a check issued by company.
Tevesteco. The funding for the P2,000,000.00 check was part of the P80,000,000.00
debited by BPI from FMIC’s account (with a deposit of P100,000,000.00) and 2. Days after, the Compania Agricola Filipina executed a deed of sale over the
credited to Tevesteco’s account pursuant to an Authority to Debit which was land to which the building stood in favor of the machinery company. This was done
allegedly forged as claimed by FMIC. to cure any defects that may arise in the
machinery company’s ownership of the building.
Tevesteco effected several withdrawals already from its account amounting to
3. Second mortgage: on or about the date to which the chattel
P37,455,410.54 including the P2,000,000.00 paid to Franco.
mortgage was excecuted, Compania executed a real estate
mortgage over the building in favor of Leung Yee, distinct and
Franco issued two checks which were dishonoured upon presentment for payment
separate from the land. This is to secure payment for its indebtedness for the
due to garnishment of his account filed by BPI.
construction of the building. Upon failure to pay, the mortgage was foreclosed.
BPI claimed that it had a better right to the amounts which consisted of part of the 4. The machinery company then filed a case, demanding that it be
money allegedly fraudulently withdrawn from it by Tevesteco and ending up in declared the rightful owner of the building. The trial court held that it was
Franco’s account. BPI urges us that the legal consequence of FMIC’s forgery claim the machinery company which was the rightful owner
is that the money transferred by BPI to Tevesteco is its own, and considering that it as it had its title before the building was registered prior to the date of
was able to recover possession of the same when the money was redeposited by registry of Leung Yee’s certificate.
Franco, it had the right to set up its ownership thereon and freeze Franco’s accounts.

Issue: WON the bank has a better right to the deposits in Franco’s account.

Page 3 of 15
HELD:
The building in which the machinery was installed 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 the character as real property.
It follows that neither the original registry in the chattel mortgage registry of the
instrument purporting to be a chattel mortgage of the building and
the machinery installed therein, nor the annotation in the registry of the
sale of the mortgaged property, had any effect whatever so far as the building
is concerned.
Prudential Bank v. Panis
G.R. No. 5008 (August 31, 1988)
Article 415 of the Civil Code: Real Property
FACTS:
The spouses Magcale obtained a Php 70, 000 loan from Prudential Bank secured by
a Deed of Real Estate Mortgage over a 2-storey, semi-concrete residential building
including the right of occupancy on the land.
When the spouses Magcale executed this mortgage, the land still belonged to the
government as the Sales Patent over the lot applied for by the spouses Magcale was
not yet issued.
ISSUE:
Whether or not a real estate mortgage over a building erected on the land belonging
to another is valid.
HELD:
Yes, a real estate mortgage over a building erected on the land belonging to another
is valid.
Article 415 of the Civil Code provides the inclusion of "building" separate and
distinct from the land, which can only mean that a building is by itself an immovable
property.
A mortgage of land necessarily includes buildings unless otherwise stipulated. A
building by itself, however, may be mortgaged apart from the land on which it has
been built. Such a mortgage would still be a real estate mortgage for the building
alone would still be considered an immovable property.
Serg's Products, Inc. v. PCI Leasing and Finance, Inc.
G.R. No. 137705 (August 22, 2000) Case Digest
Real Properties
FACTS:
PCI Leasing and Finance, Inc. (PCI) filed a complaint for a sum of money with an
application of writ of replevin. The judge issued a writ of replevin directing its
sheriff to seize and deliver the machinery and equipment to PCI.
Serg filed a motion for special protective order praying for a directive for the sheriff
to defer the enforcement of the writ of replevin contending that the machines were
not proper subjects of the writ because they are in fact real property defined in
Article 415 of the Civil Code.
ART. 415. The following are immovable property:
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
PCI opposed the motion on the ground that Section 12.1 of their Lease Agreement
clearly provided that the machines were to be considered as personal property.
2.1 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.
ISSUE:
Whether the machinery are considered a real or personal property.
HELD:
The machinery are considered personal property.
The Court has held that contracting parties may validly stipulate that a real property
be considered as personal. After agreeing to such stipulation, they are consequently
Page 4 of 15
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, Serg is estopped from denying the characterization of the machinery as
personal property, which are proper subjects of Writ of Seizure.
Evangelista v. Alto Surety
FACTS:
In 1949, Santos Evangelista instituted Civil Case No. 8235 of the CFI Manila
(Santos Evangelista vs. Ricardo Rivera) for a sum of money. On the same date, he
obtained a writ of attachment, which was levied upon a house, built by Rivera on a
land situated in Manila and leased to him, by filing copy of said writ and the
corresponding notice of attachment with the Office of the Register of Deeds of
Manila. In due course, judgment was rendered in favor of Evangelista, who bought
the house at public auction held in compliance with the writ of execution issued in
said case on 8 October 1951. The corresponding definite deed of sale was issued to
him on 22 October 1952, upon expiration of the period of redemption. When
Evangelista sought to take possession of the house, Rivera refused to surrender it,
upon the ground that he had leased the property from the Alto Surety & Insurance
Co., Inc. and that the latter is now the true owner of said property. It appears that on
10 May 1952, a definite deed of sale of the same house had been issued to Alto
Surety, as the highest bidder at an auction sale held, on 29 September 1950, in
compliance with a writ of execution issued in Civil Case 6268 of the same court
(Alto Surety & Insurance vs. Maximo Quiambao, Rosario Guevara and Ricardo
Rivera)" in which judgment for the sum of money, had been rendered in favor of
Alto Surety. Hence, on 13 June 1953, Evangelista instituted an action against Alto
Surety and Ricardo Rivera, for the purpose of establishing his title over said house,
and securing possession thereof, apart from recovering damages. After due trial, the
CFI Manila rendered judgment for Evangelista, sentencing Rivera and Alto Surety
to deliver the house in question to Evangelista and to pay him, jointly and severally,
P40.00 a month from October 1952, until said delivery. The decision was however
reversed by the Court of Appeals, which absolved Alto Surety from the complaint
on account that although the writ of attachment in favor of Evangelista had been
filed with the Register of Deeds of Manila prior to the sale in favor of Alto Surety,
Evangelista did not acquire thereby a preferential lien, the attachment having been
levied as if the house in question were immovable property.
ISSUE:
Whether or not a house constructed by the lessee of the land on which it is built,
should be dealt with, for purpose of attachment, as immovable property?
HELD:
The court ruled that the house is not personal property, much less a debt, credit or
other personal property not capable of manual delivery, but immovable property. As
held in Laddera vs. Hodges (48 OG 5374), "a true building is immovable or real
property, whether it is erected by the owner of the land or by a usufructuary or
lessee.” The opinion that the house of Rivera should have been attached, as
"personal property capable of manual delivery, by taking and safely keeping in his
custody", for it declared that "Evangelista could not have validly purchased Ricardo
Rivera's house from the sheriff as the latter was not in possession thereof at the time
he sold it at a public auction” is untenable. Parties to a deed of chattel mortgage may
agree to consider a house as personal property for purposes of said contract.
However, this view is good only insofar as the contracting parties are concerned. It
is based, partly, upon the principle of estoppel. Neither this principle, nor said view,
is applicable to strangers to said contract. The rules on execution do not allow, and
should not be interpreted as to allow, the special consideration that parties to a
contract may have desired to impart to real estate as personal property, when they
are not ordinarily so. Sales on execution affect the public and third persons. The
regulation governing sales on execution are for public officials to follow. The form
of proceedings prescribed for each kind of property is suited to its character, not to
the character which the parties have given to it or desire to give it. The regulations
were never intended to suit the consideration that parties, may have privately given
to the property levied upon. The court therefore affirms the decision of the CA with
cost against Alto Surety.
Davao Sawmill v. Castillo
DAVAO SAW MILL vs. APRONIANO G. CASTILLO and DAVAO LIGHT &
POWER CO., INC. G.R. No. L-40411 August 7, 1935
FACTS:
Davao Saw Mill Co., Inc., is the holder of a lumber concession from the
Government of the Philippine Islands. 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 lessor without any obligation on its part to pay any
amount for said improvements and buildings; which do not include the machineries
and accessories in the improvements.
Page 5 of 15

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; 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
It must be noted also that on number of occasion, Davao Sawmill treated the
machinery as personal property by executing chattel mortgages in favor of third
persons. One of such is the appellee by assignment from the original mortgages.
The lower court rendered decision in favor of the defendants herein. Hence, this
instant appeal.
ISSUE:
whether or not the machineries and equipments were personal in nature.
RULING/ RATIONALE:
Yes. The Supreme Court affirmed the decision of the lower court.
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.
Tsai v. CA
October 2, 2001
FACTS:
Ever Textile Mills, Inc. (EVERTEX) obtained loan from Philippine Bank of
Communications (PBCom), secured by a deed of Real and Chattel Mortgage over
the lot where its factory stands, and the chattels located therein as enumerated in a
schedule attached to the mortgage contract. PBCom again granted a second loan to
EVERTEX which was secured by a Chattel Mortgage over personal properties
enumerated in a list attached thereto. These listed properties were similar to those
listed in the first mortgage deed. After the date of the execution of the second
mortgage mentioned above, EVERTEX purchased various machines and
equipments. Upon EVERTEX's failure to meet
its obligation to PBCom, the latter commenced extrajudicial foreclosure proceedings
against EVERTEX under Act 3135 and Act 1506 or "The Chattel Mortgage Law".
PBCom then consolidated its ownership over the lot and all the properties in it. It
leased the entire factory premises to Ruby Tsai and sold to the same the factory,
lock, stock and barrel including the contested machineries.
EVERTEX filed a complaint for annulment of sale, reconveyance, and
damages against PBCom, alleging inter alia that the extrajudicial foreclosure of
subject mortgage was not valid, and that PBCom, without any legal or factual basis,
appropriated the contested properties which were not included in the Real and
Chattel Mortgage of the first mortgage contract nor in the second contract which is a
Chattel Mortgage, and neither were those properties included in the Notice of
Sheriff's Sale.
ISSUES:
1) W/N the contested properties are personal or movable properties
2) W/N the sale of these properties to a third person (Tsai) by the bank through an
irregular foreclosure sale is valid.
HELD:
1) Nature of the Properties and Intent of the Parties
The nature of the disputed machineries, i.e., that they were heavy, bolted or
cemented on the real property mortgaged does not make them ipso facto immovable
under Article 415 (3) and (5) of the New Civil Code. While it is true that the
properties appear to be immobile, a perusal of the contract of Real and Chattel
Mortgage executed by the parties herein reveal their intent, that is - to treat
machinery and equipment as chattels.
In the first mortgage contract, reflective of the true intention of PBCOM and
EVERTEX was the typing in capital letters, immediately following the printed
caption of mortgage, of the phrase "real and chattel." So also, the "machineries and
equipment" in the printed form of the bank had to be inserted in the blank space of
the printed contract and connected with the word "building" by typewritten slash
marks. Now, then, if the machineries in question were contemplated to be included
in the real estate mortgage, there would have been no necessity to ink a chattel
mortgage specifically mentioning as part III of Schedule A a listing of the
machineries covered thereby. It would have sufficed to list them as immovables in
the Deed of Real Estate Mortgage of the land and building involved. As regards the
second contract, the intention of the parties is clear and beyond question. It refers
solely to chattels. The inventory list of the mortgaged properties is an itemization of
Page 6 of 15
63 individually described machineries while the schedule listed only machines and
2,996,880.50 worth of finished cotton fabrics and natural cotton fabrics.
UNDER PRINCIPLE OF STOPPEL
Assuming arguendo that the properties in question are immovable by nature, nothing
detracts the parties from treating it as chattels to secure an obligation under the
principle of estoppel. As far back as Navarro v. Pineda, an immovable may be
considered a personal property if there is a stipulation as when it is used as security
in the payment of an obligation where a chattel mortgage is executed over it.
2) Sale of the Properties Not Included in the Subject of Chattel Mortgage is Not
Valid
The auction sale of the subject properties to PBCom is void. Inasmuch as the
subject mortgages were intended by the parties to involve chattels, insofar as
equipment and machinery were concerned, the Chattel Mortgage Law applies.
Section 7 provides thereof that: "a chattel mortgage shall be deemed to cover only
the property described therein and not like or substituted property thereafter
acquired by the mortgagor and placed in the same depository as the property
originally mortgaged, anything in the mortgage to the contrary notwithstanding."
Since the disputed machineries were acquired later after the two mortgage contracts
were executed, it was consequently an error on the part of the Sheriff to include
subject machineries with the properties enumerated in said chattel mortgages.
As the lease and sale of said personal properties were irregular and illegal because
they were not duly foreclosed nor sold at the auction, no valid title passed in its
favor. Consequently, the sale thereof to Ruby Tsai is also a nullity under the
elementary principle of nemo dat quod non habet, one cannot give what one does
not have. ##
Mindanao Bus Co. v. City Assessor Digest
G.R. No. L-17870 29 September 1962
FACTS:
Petitioner is a public utility company engaged in the transport of passengers and
cargo by motor vehicles in Mindanao with main offices in Cagayan de Oro (CDO).
Petitioner likewise owned a land where it maintains a garage, a repair shop and
blacksmith or carpentry shops. The machineries are placed thereon in wooden and
cement platforms. The City Assessor of CDO then assessed a P4,400 realty tax on
said machineries and repair equipment. Petitioner appealed to the Board of Tax
Appeals but it sustained the City Assessor's decision, while the Court of Tax
Appeals (CTA) sustained the same.
Note: This is merely a case digest to aid in remembering the important points of a
case. It is still advisable for any student of law to read the full text of assigned cases.
ISSUE:
Whether or not the machineries and equipments are considered immobilized and
thus subject to a realty tax
HELD:
The Supreme Court decided otherwise and held that said machineries and
equipments are not subject to the assessment of real estate tax.
Said equipments are not considered immobilized as they are merely incidental, not
esential and principal to the business of the petitioner. The transportation business
could be carried on without repair or service shops of its rolling equipment as they
can be repaired or services in another shop belonging to another
MERALCO SECURITIES INDUSTRIAL CORPORATION, petitioner, vs.
CENTRAL BOARD OF ASSESSMENT APPEALS, BOARD OF
ASSESSMENT APPEALS OF LAGUNA and PROVINCIAL ASSESSOR OF
LAGUNA, respondents.
G.R. No. L-46245 May 31, 1982
FACTS:
Pursuant to a pipeline concession issued under the Petroleum Act of 1949, Republic
Act No. 387, Meralco Securities installed from Batangas to Manila a pipeline system
consisting of cylindrical steel pipes joined together and buried not less than one
meter below the surface along the shoulder of the public highway. The pipes are
embedded in the soil and are firmly and solidly welded together so as to preclude
breakage or damage thereto and prevent leakage or seepage of the oil. The valves
are welded to the pipes so as to make the pipeline system one single piece of
property from end to end.
In order to repair, replace, remove or transfer segments of the pipeline, the pipes
have to be cold-cut by means of a rotary hard-metal pipe-cutter after digging or
excavating them out of the ground where they are buried. In points where the
pipeline traversed rivers or creeks, the pipes were laid beneath the bed thereof.
Hence, the pipes are permanently attached to the land.
Pursuant to the Assessment Law, Commonwealth Act No. 470, the provincial
assessor of Laguna treated the pipeline as real property and issued tax declarations,
containing the assessed values of portions of the pipeline.
Page 7 of 15
Meralco appealed the assessments to the defendants, but the latter ruled that pipeline
is subject to realty tax. The defendants argued that the pipeline is subject to realty
tax because they are contemplated in Assessment Law and Real Property Tax Code;
that they do not fall within the category of property exempt from realty tax under
those laws; that Articles 415 & 416 of the Civil Code, defining real and personal
property have no applications to this case because these pipes are constructions
adhered to soil and things attached to the land in a fixed manner, and that Meralco
Securities is not exempt from realty tax under petroleum law.
Meralco insists that its pipeline is not subject to realty tax because it is not real
property within the meaning of Art. 415.
ISSUE:
Whether the aforementioned pipelines are subject to realty tax.
HELD:
Yes, the pipelines are subject to realty tax.
Section 2 of the Assessment Law provides that the realty tax is due “on real
property, including land, buildings, machinery, and other improvements.” This
provision is reproduced with some modification in Section 38, Real Property Tax
Code, which provides that “there shall be levied, assessed, and collected xxx annual
ad valorem tax on real property such as land, buildings, machinery, and other
improvements affixed or attached to real property xxx.”
It is incontestable that the pipeline of Meralco Securities does not fall within any of
the classes of exempt real property enumerated in section 3 of the Assessment Law
and section 40 of the Real Property Tax Code.
Pipeline means a line of pipe connected to pumps, valves and control devices for
conveying liquids, gases or finely divided solids. It is a line of pipe running upon or
in the earth, carrying with it the right to the use of the soil in which it is placed.
Article 415[l] and [3] provides that real property may consist of constructions of all
kinds adhered to the soil and 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.
The pipeline system in question is indubitably a construction adhering to the soil. It
is attached to the land in such a way that it cannot be separated therefrom without
dismantling the steel pipes which were welded to form the pipeline.
WHEREFORE, the questioned decision and resolution are affirmed. The petition is
dismissed. No costs.
LO V. KJS ECO-FRAMEWORK SYSTEM PHIL INC G.R. NO 149420 (2003)
FACTS:
Respondent KJS Eco-Framework System is a corporation engaged in the sale of
steel scaffoldings, while petitioner Sonny Lo, doing business under the name of
San’s Enterprises, is a building contractor.
1. In February 1990, petitioner ordered scaffolding equipments from the
respondent amounting to P540, 425.80. He paid a down payment of P150,000 and
the balance was to be paid in 10 monthly installments
2. However, Lo was only able to pay the first 2 monthly installments due to
financial difficulties despite demands from the respondent
3. In October 1990, petitioner and respondent executed a deed of assignment
whereby petitioner assigned to respondent his receivables of P335,462.14 from
Jomero Realty Corp
4. But when respondent tried to collect the said credit from Jomero Realty Corp,
the latter refused to honor the deed of assignment because it claimed that the
petitioner was also indebted to it. As such, KJS sent Lo a demand letter but the latter
refused to pay, claiming that his obligation had been extinguished when they
executed the deed of assignment
5. Subsequently, respondent filed an action for recovery of sum of money against
petitioner.
6. Petitioner argued that his obligation was extinguished with the execution of the
deed of assignment of credit. Respondent alleged that Jomero Realty Corp refused to
honor the deed of assignment because it claimed that the petitioner had outstanding
indebtedness to it
7. The trial court dismissed the complaint on the ground that the assignment of
credit extinguished the bligation
8. Upon appeal, CA reversed the trial court decision and held in favor of KJS. CA
held that
a. Petitioner failed to comply with his warranty under the deed
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b. The object of the deed did not exist at the time of the transaction, rendering it
void under Art 1409 NCC
c. Petitioner violated the terms of the deed of assignment when he failed to execute
and do all acts necessary to effectually enable the respondent to recover the
collectibles
ISSUE:
WON the deed of assignment extinguished the petitioner’s obligation
HELD:
No, the petitioner’s obligation was not extinguished with the execution of the deed
of assignment.
An assignment of credit is an agreement by virtue of which the owner of a credit,
known as the assignor, by a legal cause, such as sale, dacion en pago, exchange or
donation, and without the consent of the debtor, transfers his credit and accessory
rights to another, known as the assignee, who acquires the power to enforce it to the
same extent as the assignor could enforce it against the debtor.
In dacion en pago, as a special mode of payment, the debtor offers another thing to
the creditor who accepts it as equivalent of payment of an outstanding debt. In order
that there be a valid dation in payment, the following are the requisites: (1) There
must be the performance of the prestation in lieu of payment (animo solvendi) which
may consist in the delivery of a corporeal thing or a real right or a credit against the
third person; (2) There must be some difference between the prestation due and that
which is given in substitution (aliud pro alio); (3) There must be an agreement
between the creditor and debtor that the obligation is immediately extinguished by
reason of the performance of a prestation different from that due. The undertaking
really partakes in one sense of the nature of sale, that is, the creditor is really buying
the thing or property of the debtor, payment for which is to be charged against the
debtor’s debt. As such, the vendor in good faith shall be responsible, for the
existence and legality of the credit at the time of the sale but not for the solvency of
the debtor, in specified circumstances.
Hence, it may well be that the assignment of credit, which is in the nature of a sale
of personal property, produced the effects of a dation in payment which may
extinguish the obligation. However, as in any other contract of sale, the vendor or
assignor is bound by certain warranties. More specifically, the first paragraph of
Article 1628 of the Civil Code provides:
The vendor in good faith shall be responsible for the existence and legality of the
credit at the time of the sale, unless it should have been sold as doubtful; but not for
the solvency of the debtor, unless it has been so expressly stipulated or unless the
insolvency was prior to the sale and of common knowledge.
From the above provision, petitioner, as vendor or assignor, is bound to warrant the
existence and legality of the credit at the time of the sale or assignment. When
Jomero claimed that it was no longer indebted to petitioner since the latter also had
an unpaid obligation to it, it essentially meant that its obligation to petitioner has
been extinguished by compensation. In other words, respondent alleged the non-
existence of the credit and asserted its claim to petitioner’s warranty under the
assignment. Therefore, it necessary for the petitioner to make good its warranty and
pay the obligation.
Furthermore, the petitioner breached his obligation under the Deed of Assignment,
to execute and do all such further acts and deeds as shall be reasonably necessary to
effectually enable said ASSIGNEE to recover whatever collectibles said
ASSIGNOR has in accordance with the true intent and meaning of these presents.
Indeed, by warranting the existence of the credit, petitioner should be deemed to
have ensured the performance thereof in case the same is later found to be
inexistent. He should be held liable to pay to respondent the amount of his
indebtedness.
WOODRIDGE V ARB
WOODRIDGE SCHOOL, INC., and MIGUELA JIMENEZ-JAVIER,
Petitioners, v. ARB CONSTRUCTION CO., INC., Respondent.
G.R. No. 157285, 2007 February 16, Corona, R.C.J., (First Division)
The use of the subdivision roads by the general public does not strip it of its private
character. The road is not converted into public property by mere tolerance of the
subdivision owner of the public's passage through it.
Petitioner Woodridge School is the usufructuary of a parcel of land in the
name of spouses Ernesto T. Matugas and Filomena U. Matugas. Its co-petitioner,
Miguela Jimenez–Javier, is the registered owner of the adjacent lot to that of
Woodridge.
Respondent ARB Construction is the owner and developer of Soldiers
Hills Subdivision in Bacoor, Cavite, which is composed of four phases. Phase 1 of
the subdivision was already accessible from the Marcos Alvarez Avenue. To provide
the same accessibility to the residents of Phase II of the subdivision, ARB
constructed the disputed road to link the two phases.
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 Petitioners’ properties sit right in the middle of several estates: Phase 1 of
Soldiers Hills Subdivision in the north, a creek in the east and Green Valley
Subdivision in the farther east, a road within Soldiers Hills Subdivision IV which
leads to the Marcos Alvarez Avenue in the west, and Phase III of Soldiers Hills
Subdivision in the south.
Petitioners offered to pay ARB P50,000 as indemnity for the use of the
road. ARB refused the offer and fenced the perimeter of the road fronting the
properties of petitioners, thus, cutting off petitioners’ access to and from the public
highway.
After failing to settle the matter amicably, petitioners jointly filed a
complaint in the RTC to enjoin ARB from depriving them of the use of the disputed
subdivision road and to seek a compulsory right of way after payment of proper
indemnity. The RTC rendered its decision in favor of petitioners relying on the
ruling of the Supreme Court in White Plains Association, Inc. vs. Legaspi (193
SCRA 765) stating that the government automatically becomes the owner of the
subdivisions’ roads the moment the subdivision plan is approved, and thus is open to
public use without any need for compensation.
Respondent ARB elevated the case to the Court of Appeals. The appellate
court reversed the Trial Court’s decision and stating that the ruling of the Supreme
Court in the 1991 case of White Plains Subdivision is not applicable as it was not
similarly situated as in the present case. However the appellate court went on to rule
that a compulsory right of way exists in favor of petitioners as there is no other
existing adequate outlet to and from petitioners’ properties to the Marcos Alvarez
Avenue other than the subject existing road lot belonging to ARB. In addition, it
awarded P500,000 to ARB as compensation for the wear and tear that petitioners’
use of the road would contribute to.
Unsatisfied with the ruling of the appellate court, petitioners elevated the
matter to the Supreme Court arguing that ARB is not entitled to be paid any
indemnity since the contested road lot is a property of public dominion pursuant to
Article 420 of the Civil Code because the disputed road falls under the category of
“others of similar character” which is the last clause of Article 420 (1). Hence, it is a
property of public dominion which can be used by the general public without need
for compensation.
Petitioners also assert that their initial offer of P50,000 should be
sufficient compensation for the right of way. Further, they should not be held
accountable for the increase in the value of the property since the delay was
attributable to the stubborn refusal of ARB to accept their offer.
ISSUES:
1. Whether the disputed road is a property of public dominion pursuant to the
last clause of Article 420 (1), and, as such, is not a valid subject for legal
easement.
2. Whether the offer of petitioners amounting to P50,000 is a sufficient
compensation for their use of the road.
DECISION:
With regard to the first issue, The Supreme Court says, no. The Court held that the
road lots in a private subdivision are private property, hence, the local government
should first acquire them by donation, purchase, or expropriation, if they are to be
utilized as a public road (Abellana, Sr. v. Court of Appeals). Otherwise, they remain
to be private properties of the owner developer.
The use of the subdivision roads by the general public does not strip it of its private
character. The road is not converted into public property by mere tolerance of the
subdivision owner of the public's passage through it. The local government should
first acquire them by donation, purchase, or expropriation, if they are to be utilized
as a public road. In the present case, since no donation has been made in favor of any
local government and the title to the road lot is still registered in the name of ARB,
the disputed property remains private.
With regard to the second issue, the Supreme Court again says, no. In order to be
entitled to a legal easement of right of way, the following requisites must concur: (1)
the dominant estate is surrounded by other immovables and has no adequate outlet
to a public highway; (2) payment of proper indemnity; (3) The isolation was not due
to acts of the proprietor of the dominant estate and; (4) the right of way claimed is at
the point least prejudicial to the servient estate. In the present case, all of the
requisites are present except for number two.
The appellate and trial courts found that the properties of petitioners are enclosed by
other estates without any adequate access to a public highway except the subject
road lot which leads to Marcos Alvarez Avenue. Although it was shown that the
shortest distance from the properties to the highway is toward the east across a creek,
this alternative route does not provide an adequate outlet for the students of the
proposed school.
Page 10 of 15

The Civil Code categorically provides for the measure by which the proper
indemnity may be computed. Under Article 649, paragraph 2, it is stated:
“Should this easement be established in such a
manner that its use may be continuous for all the needs of the
dominant estate, establishing a permanent passage, the
indemnity shall consist of the value of the land occupied and
the amount of the damage caused to the servient estate.”
Having settled the legal issues, the Supreme Court ordered the remand of the case to
the trial court for the reception of evidence and determination of the limits of the
property to be covered by the easement, the proper indemnity to be paid and the
respective contributions of petitioners.
The petition was PARTIALLY GRANTED.
ZARATE v. DIRECTOR OF LANDS
FACTS:
Petittioner Francisco Zarate applied for registration of title of 3 parcels of land in
Tangalan, Aklan. He claims that he bought the land from Josefino Tirol, who
inherited the same from Ignacio Tirol. There were different oppositors to his
application
ISSUE:
WON subject parcels of land are registrable under petitioner’s name. Petitioner:
Geodetic Engineer’s testimony and certification show that the subject propertyis
alienable and disposable.Respondent Preciosa Tirol Davila: She is the daughter of
Ignacio Tirol. She opposed saying that the land was not donated by his father to
Josefino.
Respondent DBP:
The lots are owned by spouses Molo and was mortgaged to them. When the
mortgage was foreclosed, the land became the bank’s property
Respondents Toriaga:
They owned the land. Oppositor Republic of the Philippines: Subject land was
timberland or unclassified forest.
RULING OF THE TRIAL COURT:Application for registration of title by Zarate
and the claims of private oppositors is dismissed.
RULING OF THE COURT OF APPEALS:CA affirmed the ruling of the Trial
Court.
RULING OF THE SUPREME COURT:
The petition is DENIED. Ruling of the CA and Trial Court is affirmed. Subject
lands were released as alienable and disposable only in 1973. The application for
registration was filed in 1976. Thus, the applicant and/or private oppositors
possessed the land for only 3 years prior to the filing of application and the 30-year
requirement imposed by CA 141 (Public Land Act) was not met. The applicant (and
oppositors) failed to show evidence that they have complied with the requisites
provided by law – 1) the land applied for was alienable and disposable. 2) the
applicant and his predecessors-in-interest had occupied and possessed the land
openly, continuously, exclusively, and adversely for 30 years immediately preceding
the filing of application. More than 1/2 of the total area applied for are not in the
possession of the applicant and thus, he cannot claim exclusive and notorious
possession under the claim of ownership, nor can he support his claim of title
through acquisitive prescription. A positive act of government is needed to convert
forest land into alienable or disposable land. Possession of forest lands, which are
incapable of private appropriation, no matter how long cannot ripen into private
ownership.
SECRETARY OF DENR VS YAP
Natural Resources and Environmental Laws: Regalian Doctrine
GR No. 167707; Oct 8, 2008
FACTS:
This petition is for a review on certiorari of the decision of the Court of Appeals
(CA) affirming that of the Regional Trial Court (RTC) in Kalibo Aklan, which
granted the petition for declaratory relief filed by respondents-claimants Mayor Jose
Yap et al, and ordered the survey of Boracay for titling purposes.
On Nov. 10, 1978, President Marcos issued Proclamation No. 1801 declaring
Boracay Island as a tourist zone and marine reserve. Claiming that Proc. No. 1801
precluded them from filing an application for a judicial confirmation of imperfect
title or survey of land for titling purposes, respondents-claimants filed a petition for
declaratory relief with the RTC in Kalibo, Aklan.
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The Republic, through the Office of the Solicitor General (OSG) opposed the
petition countering that Boracay Island was an unclassified land of the public
domain. It formed part of the mass of lands classified as “public forest,” which was
not available for disposition pursuant to section 3(a) of PD No. 705 or the Revised
Forestry Code.
ISSUE:
Whether unclassified lands of the public domain are automatically deemed
agricultural land, therefore making these lands alienable.
HELD:
No. To prove that the land subject of an application for registration is alienable, the
applicant must establish the existence of a positive act of the government such as a
presidential proclamation or an executive order, an administrative action,
investigative reports of the Bureau of Lands investigators, and a legislative act or
statute.
A positive act declaring land as alienable and disposable is required. In keeping with
the presumption of state ownership, the Court has time and again emphasized that
there must be a positive act of the government, such as an official proclamation,
declassifying inalienable public land into disposable land for agricultural or other
purposes.
The Regalian Doctrine dictates that all lands of the public domain belong to the
State, that the State is the source of any asserted right to ownership of land and
charged with the conservation of such patrimony.
All lands not otherwise appearing to be clearly within private ownership are
presumed to belong to the State. Thus, all lands that have not been acquired from the
government, either by purchase or by grant, belong to the State as part of the
inalienable public domain.
REPUBLIC v. CITY OF PARAÑAQUE, GR No. 191109, 2012-07-18
FACTS:
The Public Estates Authority (PEA) is a government corporation created by virtue of
Presidential Decree (P.D.) No. 1084 (Creating the Public Estates Authority,
Defining its Powers and Functions, Providing Funds Therefor and For Other
Purposes) which took... effect on February 4, 1977 to provide a coordinated,
economical and efficient reclamation of lands, and the administration and operation
of lands belonging to, managed and/or operated by, the government with the object
of maximizing their utilization and hastening their... development consistent with
public interest.
On February 14, 1979, by virtue of Executive Order (E.O.) No. 525 issued by then
President Ferdinand Marcos, PEA was designated as the agency primarily
responsible for integrating, directing and coordinating all reclamation projects for
and on behalf of the National
Government.
On October 26, 2004, then President Gloria Macapagal-Arroyo issued E.O. No. 380
transforming PEA into PRA, which shall perform all the powers and functions of the
PEA relating to reclamation activities.
By virtue of its mandate, PRA reclaimed several portions of the foreshore and
offshore areas of Manila Bay, including those located in Parañaque City, and was
issued Original Certificates of Title (OCT Nos. 180, 202, 206, 207, 289, 557, and
559) and Transfer Certificates of
Title (TCT Nos. 104628, 7312, 7309, 7311, 9685, and 9686) over the reclaimed
lands.
On February 19, 2003, then Parañaque City Treasurer Liberato M. Carabeo
(Carabeo) issued Warrants of Levy on PRA's reclaimed properties (Central Business
Park and Barangay San Dionisio) located in Parañaque City based on the assessment
for delinquent real property... taxes made by then Parañaque City Assessor Soledad
Medina Cue for tax years 2001 and 2002.
On January 8, 2010, the RTC rendered its decision dismissing PRA's petition. In
ruling that PRA was not exempt from payment of real property taxes, the RTC
reasoned out that it was a GOCC under Section 3 of P.D. No. 1084. It was organized
as a stock corporation because it had an... authorized capital stock divided into no
par value shares. In fact, PRA admitted its corporate personality and that said
properties were registered in its name as shown by the certificates of title. Therefore,
as a GOCC, local tax exemption is withdrawn by virtue of Section 193... of Republic
Act (R.A.) No. 7160 [Local Government Code (LGC)] which was the prevailing law
in 2001 and 2002 with respect to real property taxation. The RTC also ruled that the
tax exemption claimed by PRA under E.O. No. 654 had already been expressly
repealed by R.A. No.
7160 and that PRA failed to comply with the procedural requirements in Section 206
thereof.
PRA asserts that it is not a GOCC under Section 2(13) of the Introductory
Provisions of the Administrative Code. Neither is it a GOCC under Section 16,
Article XII of the 1987 Constitution because it is not required to meet the test of
economic viability. Instead, PRA is a... government instrumentality vested with
Page 12 of 15
corporate powers and performing an essential public service pursuant to Section
2(10) of the Introductory Provisions of the Administrative Code. Although it has a
capital stock divided into shares, it is not authorized to distribute... dividends and
allotment of surplus and profits to its stockholders. Therefore, it may not be
classified as a stock corporation because it lacks the second requisite of a stock
corporation which is the distribution of dividends and allotment of surplus and
profits to the... stockholders.
It insists that it may not be classified as a non-stock corporation because it has no
members and it is not organized for charitable, religious, educational, professional,
cultural, recreational, fraternal, literary, scientific, social, civil service, or similar
purposes, like... trade, industry, agriculture and like chambers as provided in Section
88 of the Corporation Code.
Moreover, PRA points out that it was not created to compete in the market place as
there was no competing reclamation company operated by the private sector. Also,
while PRA is vested with corporate powers under P.D. No. 1084, such circumstance
does not make it a corporation but... merely an incorporated instrumentality and that
the mere fact that an incorporated instrumentality of the National Government holds
title to real property does not make said instrumentality a GOCC. Section 48,
Chapter 12, Book I of the Administrative Code of 1987 recognizes a... scenario
where a piece of land owned by the Republic is titled in the name of a department,
agency or instrumentality.
Thus, PRA insists that, as an incorporated instrumentality of the National
Government, it is exempt from payment of real property tax except when the
beneficial use of the real property is granted to a taxable person. PRA claims that
based on Section 133(o) of the LGC, local... governments cannot tax the national
government which delegate to local governments the power to tax.
It explains that reclaimed lands are part of the public domain, owned by the State,
thus, exempt from the payment of real estate taxes. Reclaimed lands retain their
inherent potential as areas for public use or public service. While the subject
reclaimed lands are still in its... hands, these lands remain public lands and form part
of the public domain. Hence, the assessment of real property taxes made on said
lands, as well as the levy thereon, and the public sale thereof on April 7, 2003,
including the issuance of the certificates of sale in favor of... the respondent
Parañaque City, are invalid and of no force and effect.
ISSUES:
Whether the Trial Court erred when it failed to consider that reclaimed lands are part
of the public domain.
THE TRIAL COURT GRAVELY ERRED IN FAILING TO CONSIDER THAT
RECLAIMED LANDS ARE PART OF THE PUBLIC DOMAIN AND, HENCE,
EXEMPT FROM REAL PROPERTY TAX.
RULING:
The Court finds merit in the petition.
In the case at bench, PRA is not a GOCC because it is neither a stock nor a non-
stock corporation. It cannot be considered as a stock corporation because although it
has a capital stock divided into no par value shares as provided in Section 7... of
P.D.
No. 1084, it is not authorized to distribute dividends, surplus allotments or profits to
stockholders. There is no provision whatsoever in P.D. No. 1084 or in any of the
subsequent executive issuances pertaining to PRA, particularly, E.O. No. 525,...
E.O.
No. 654... and EO No. 798... that authorizes PRA to distribute dividends, surplus
allotments or profits to its stockholders.
PRA cannot be considered a non-stock corporation either because it does not have
members. A non-stock corporation must have members.
Moreover, it was not organized for any of the purposes mentioned in Section 88 of
the Corporation Code. Specifically, it... was created to manage all government
reclamation projects.
Likewise, it is worthy to mention Section 14, Chapter 4, Title I, Book III of the
Administrative Code of 1987, thus:
SEC 14. Power to Reserve Lands of the Public and Private Dominion of the
Government.-
(1) The President shall have the power to reserve for settlement or public use, and
for specific public purposes, any of the lands of the public domain, the use of which
is not otherwise directed by law. The reserved land shall thereafter remain subject to
the specific public... purpose indicated until otherwise provided by law or
proclamation.
Reclaimed lands such as the subject lands in issue are reserved lands for public use.
They are properties of public dominion. The ownership of such lands remains with
the State unless they are withdrawn by law or presidential proclamation from public
use.
Under Section 2, Article XII of the 1987 Constitution, the foreshore and submerged
areas of Manila Bay are part of the "lands of the public domain, waters x x x and
Page 13 of 15
other natural resources" and consequently "owned by the State." As such, foreshore
and submerged areas
"shall not be alienated," unless they are classified as "agricultural lands" of the
public domain. The mere reclamation of these areas by PEA does not convert these
inalienable natural resources of the State into alienable or disposable lands of the
public domain. There must be... a law or presidential proclamation officially
classifying these reclaimed lands as alienable or disposable and open to disposition
or concession. Moreover, these reclaimed lands cannot be classified as alienable or
disposable if the law has reserved them for some public or... quasi-public use.
As the Court has repeatedly ruled, properties of public dominion are not subject to
execution or foreclosure sale.
Thus, the assessment, levy and foreclosure made on the subject reclaimed lands by
respondent, as well as the issuances of certificates of... title in favor of respondent,
are without basis.
PRINCIPLES:
Two requisites must concur before one may be classified as a stock corporation,
namely: (1) that it has capital stock divided into shares; and (2) that it is authorized
to distribute dividends and allotments of surplus and profits to its stockholders. If
only one... requisite is present, it cannot be properly classified as a stock
corporation. As for non-stock corporations, they must have members and must not
distribute any part of their income to said members.
HEIRS OF MALABANAN VS. REPUBLIC
August 6, 2017Light G.R. No. 179987
FACTS:
1. On February 20, 1998, Mario Malabanan filed an application for original
registration of title covering a parcel of land in Silang, Cavite which he
purchased from Eduardo Velazco and that he and his predecessors in
interest had been in open, notorious, exclusive and continuous possession
of the said land for more than 30 years.
2. Velazco, the vendor, alleges that this land was originally owned by his
great-grandfather which passed down to his four sons. By 1966, one of the
sons became the administrator of the properties which the son of the latter
succeeded his parents. One of the properties therein was the one sold by
the Velazco.
1. They also presented an evidence on the classification of land to be
alienable and disposable by the DENR on March 15, 1982.
3. The RTC ruled in favor with them, but the CA reversed citing the case of
Republic v Hebierto.
ISSUE:
Whether or not the registration of the property should be allowed
HELD:
No. Given the length discussions of questions of law, we would need to dissect
them. The case settles down the correct interpretation of Sec. 14 (1) and (2) of PD
1529 along with CA 141
1. It should be noted here first that CA 141, particularly Section 48 (b) vests
the right to ownership to those who satisfy its prerequisites, while PD
1529 Sec 14 (1) recognizes such rights. One did not repeal the other.
2. It is also recognized that the change of the term “alienable and disposable”
from “agricultural” by PD 1073 did limit the lands to be registered, as we
may take a look at Sec. 9 of CA 141.
The Court holds that the correct interpretation for Section 14 (1) is Naguit, not
Herbierto, the latter being only an orbiter dicta to a case where the MTC did not
acquire jurisdiction to settle the original registration. Thus:
1. The requirement of bona fide ownership since June 12, 1945 is satisfied
when at the time of the application, the land is already classified as
alienable and disposable. Ad proximum antecedents fiat relation nisi
impediatur sentencia.
2. A contrary ruling with result to absurdity rendering the presumption of the
right nugatory and the provision inoperative, aggravated by the fact that at
the time the Philippine is still not an independent state.
3. The correct interpretation then is that if the State, at the time the
application is made, has not yet deemed it proper to release the property
for alienation or disposition, the presumption is that the government is still
reserving the right to utilize the property; hence, the need to preserve its
ownership in the State irrespective of the length of adverse possession
even if in good faith. If the reverse is true, then there is already an
intention on the part of the State to abdicate its exclusive prerogative over
the property.
The Court rules that the interpretation for Sec 14 (2) requires a mix of interpretation
of Art. 1113, Art. 1137, and Art. 420-422 of the New Civil Code.
1. It is well settled, per Art. 1113, that only objects within the commerce of
men and the patrimonial property of the State can be subject to acquisitive
or extraordinary acquisitive prescription.
2. It is also clear that in Arts. 420-422, the property of public dominion when
no longer in use, is converted into patrimonial property, if and only if, as
held in Ignacio vs. Director of Lands or Laurel vs. Garcia, there is a
positive act of the executive or legislative declaring lands to be such.
3. Hence, combining both rulings, it is clear that only when there is a
positive act, regardless if the land was classified as alienable and
disposable, that the land sought to be registered, can be acquired through
prescription.
Applying to the case at bar:
1. Sec. 14 (1) is unsatisfied as the earliest tax declarations presented was
1948. No other substantive evidence was presented.
Page 14 of 15
 2. Sec. 14 (2) is also unsatisfied as the subject property was declared as
alienable or disposable in 1982, there is no competent evidence that is no
longer intended for public use service or for the development of the
national evidence, conformably with Article 422 of the Civil Code. The
classification of the subject property as alienable and disposable land of
the public domain does not change its status as property of the public
dominion under Article 420(2) of the Civil Code. Thus, it is insusceptible
to acquisition by prescription.
Petition Denied.

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