First cases

STAR TWO (SPV-AMC), INC., V PAPER CITY CORPORATION OF THE PHILIPPINES

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"
1. Office Building
Building 1, 2, 3, 4, and 5
Boiler House
Workers’ Quarter/Restroom
Canteen
Guardhouse, Parking Shed, Elevated Guard
Post and other amenities

2. Pollution Tank Nos. 1 and 2.

Reserve Water Tank and Swimming Pool
Waste Water Treatment Tank
Elevated Concrete Water Tank
And other Improvements listed in Annex "A"

3. Power Plants Nos. 1 and 2

Fabrication Building
Various Fuel, Water Tanks and Pumps
Transformers
Annex "B"
1. 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 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 subject machineries and equipments were included in the mortgage, extrajudicial foreclosure and in the
consequent sale.

RULING
Yes. By contracts, all uncontested in this case, machineries and equipments are included in the mortgage in favor of
RCBC, in the foreclosure of the mortgage and in the consequent sale on foreclosure also in favor of petitioner.

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’.”

The plain language and literal interpretation of the MTIs must be applied. The petitioner, other creditor banks and
Paper City intended from the very first execution of the indentures that the machineries and equipments enumerated
in Annexes "A" and "B" are included. Obviously, with the continued increase in the amount of the loan, totaling
hundreds of millions of pesos, Paper City had to offer all valuable properties acceptable to the creditor banks.

The MTIs did not describe the equipments and machineries as personal property. Notably, while "personal"
appeared in the granting clause of the original MTI, the subsequent Deed of Amendment specifically stated that:
x x x The machineries and equipment listed in Annexes "A" and "B" form part of the improvements listed above and
located on the parcels of land subject of the Mortgage Trust Indenture and the Real Estate Mortgage.

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 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;
 CONCLUSION

The petition is GRANTED.

(Laurel v abrogar sep.file)

(BPI VS FRANCO sep.file)

Leung Yee v. Strong Machinery Co. 37 Phil. 644

FACTS: The "Compania Agricola Filipina" purchased from "Strong Machinery Co." rice-cleaning machines which the
former installed in one of its buildings. As security for the purchase price, the buyer executed a CHATTEL
MORTGAGE on the machines and the building on which they had been installed. Upon buyer's failure to pay, the
registered mortgage was foreclosed, and the building was purchased by the seller, the "Strong Machinery Co." This
sale was annotated in the Chattel Mortgage Registry. Later, the "Agricola" also sold to "Strong Machinery" the lot on
which the building had been constructed. This sale was not registered in the Registry of Property but the Machinery
Co. took possession of the building and the lot.

Previously however, the same building has been purchases at a sheriff's sale by Leung Yee, a creditor of Agricola,
although Leung Yee knew all the time of the prior sale in favor of "Strong Machinery." The sale in favor of Leung Yee
was recorded in the Registry. Leung Yee now sues to recover the property from "Strong Machinery."

ISSUE: Who has a better right to the property?

HELD: The building is real property, therefore, its sale as annotated in the Chattel Mortgage Registry cannot be
given the legal effect of registration in the Registry of Real Property. The mere fact that the parties decided to deal
with the building as personal property does not change its character as real property. Thus, neither the original
registry in the chattel mortgage registry, nor the annotation in said registry of the sale of the mortgaged property had
any effect on the building. However, since the land and the building had first been purchased by "Strong Machinery"
(ahead of Leung Yee), and this fact was known to Leung Yee, it follows that Leung Yee was not a purchaser in good
faith, and should therefore not be entitled to the property. "Strong Machinery" thus has a better right to the property.

PRUDENTIAL BANK V. PANIS

153 SCRA 390
FACTS:
Spouses Magcale secured a loan from Prudential Bank. To secure payment, they executed a real estate
mortgage over a residential building. The mortgage included also the right to occupy the lot and the information
about the sales patent applied for by the spouses for the lot to which the building stood. After securing the first loan,
the spouses secured another from the same bank. To secure payment, another real estate mortgage
was executed over the same properties.

The Secretary of Agriculture then issued a Miscellaneous Sales Patent over the land which was later on mortgaged
to the bank.

The spouses then failed to pay for the loan and the REM was extrajudicially foreclosed and sold in public auction
despite opposition from the spouses. The respondent court held that the REM was null and void.

HELD:
A real estate mortgage can be constituted on the building erected on the land belonging to another.

The inclusion of building distinct and separate from the land in the Civil Code can only mean that the
building itself is an immovable property.

While it is true that a mortgage of land necessarily includes in the absence

of stipulation of the improvements thereon, buildings, still a building in itself may be mortgaged by itself
apart from the land on which it is built. Such a mortgage would still be considered as a REM for the building would
still be considered as immovable property even if dealt with separately and apart from the land.

The original mortgage on the building and right to occupancy of the land
was executed before the issuance of the sales patent and before the
government was divested of title to the land. Under the foregoing, it is
evident that the mortgage executed by private respondent on his own
building was a valid mortgage.

As to the second mortgage, it was done after the sales patent was issued and thus prohibits pertinent provisions of
the Public Land Act.

G.R. No. L-10510

LEONCIO ZARATE, applicant-appellant, vs.

THE DIRECTOR OF LANDS, ET AL., objectors-appellees.

Aurelio Cecilio for appellant.

Attorney-General Avanceña in behalf of Director of Lands.

Moreland, J.:

FACTS:

This is a proceeding to register the title to lands described in the petition. The Government of the Philippine Islands
interposed an objection to the registration of title on the ground "that said parcel of land was part of the public
domain and is occupied by Apolonio Gamido and Bibiana Olivite by virtue of applications made by them for
homesteads Nos. 2061 and 5626, respectively. Registration of title to that portion of the land found to be occupied
by the persons and highway named was denied; and from that judgment the applicant appealed.

the lands in question belong to the applicant who has shown by a strong preponderance of the evidence that he is
the owner thereof. The land in question not being public and, the Government of the Philippine Islands had no
authority to declare it open for homesteads; and as a necessary

consequence, whatever concessions the Government has made with respect to such land are without force and
effect, except as to the homestead of Apolonio Gamido who, prior to the commencement of this proceeding,
appears to have received his homestead patent from the Government. Under Act No. 926 a patent issued under the
Homestead Law has all the force and effect of a Torrens title acquired under Act No. 496; and that being the case,
and no question having been raised here or in the court below as to the validity of that Act in connection with the
proceedings for homesteads mentioned in this case, we must respect the title so secured, provided it be a fact that a
patent has been secured in any of said homestead proceedings.

IT clearly appears that the applicant and his predecessors in interest were the owners of and had a good title thereto.
In our judgment the evidence falls far short of showing abandonment, the record discloses no acts of the owners on
which abandonment can be cased. Nor is there any claim of title by adverse possession.
ISSUE: WHETHER OR NOT THE APPLICANT HAS THE RIGHT TO REGISTER THE TITLE DESCRIBED IN THE
APPLICATION?

HELD: it is declared that the applicant has the right to register title to all of the lands described in the application,
with the exception of that portion claimed as a homestead by Apolonio Gamido, which homestead shall be excluded
from registration by the applicant provided the Court of Land Registration shall find that said Apolonio Gamido has
obtained a patent for said land; but if the Court of Land Registration finds that said Gamido has not yet obtained a
patent therefor, then the court shall register title in favor of the applicant to all the lands described in the application.

REPUBLIC VS. GUZMAN- ESSENTIAL ELEMENTS OF A DONATION

Category: Property, Ownership and Its Modifications
Three essential elements of a donation:
1. Reduction in the patrimony of the donor
2. Increase in the patrimony of the donee
3. Intent to do an act of liberality or animus donandi

It is also required that the donation be made in a public document and that its acceptance be made in the same deed
of donation or in a separate public document, which has to be recorded as well.

FACTS:
David Rey Guzman, a natural-born American citizen, is the son of the spouses Simeon Guzman (naturalized
American) and Helen Meyers Guzman (American citizen). In 1968, Simeon died leaving to his heirs, Helen and
David, an estate consisting of several parcels of land in Bulacan.

In 1970, Helen and David executed a Deed of Extrajudicial Settlement of the Estate, dividing and adjudicating to
themselves all of the property, and registered it to the RD a year after.

In 1981, Helen executed a Deed of Quitclaim, assigning, transferring and conveying her ½ share of the properties to
David. But since it was not registered, she executed another Deed of Quitclaim to confirm the first.

In 1994, Atty. Batongbacal wrote the OSG andfurnished it with documents showing that David’s ownership of ½ of
the estate was defective. He argued that Art. XII of the Constitution only allows Filipinos to acquire private lands in
the country. The only instances when a foreigner may acquire private property are by hereditary succession and if he
was formerly a natural-born citizen who lost his Filipino citizenship. Moreover, it contends that the Deeds of
Quitclaim executed by Helen were really donations inter vivos.

Republic filed with RTC a Petition for Escheat praying that ½ of David’s interest be forfeited in its favor. RTC
dismissed. CA affirmed.

ISSUE: Whether or not there was a donation inter vivos

HELD: NO.
Not all the elements of a donation are present. The transfer of the properties by virtue of a Deed of Quitclaim resulted
in the (1) reduction of her patrimony as donor and the (2) consequent increase in the patrimony of David as donee.
However, Helen’s (3) intention to perform an act of liberality in favor of David was not sufficiently established. The 2
Quitclaims reveal that Helen intended to convey to her son certain parcels of land and to re-affirm it, she executed a
waiver and renunciation of her rights over these properties. It is clear that Helen merely contemplated a waiver of her
rights, title, interest over the lands in favor of David, not a donation. She was also aware that donation was not
possible.
Moreover, the essential element of acceptance in the proper form and registration to make the donation valid is
lacking. The SPA executed by David in favor of Atty. Abela was not his acceptance, but an acknowledgment that
David owns the property referred to and that he authorizes Atty. Abela to sell the same in his name. Further, there
was nothing in the SPA to show that he indeed accept the donation.

However, the inexistence of a donation does not make the repudiation of Helen in favor David valid. There is NO
valid repudiation of inheritance as Helen had already accepted her share of the inheritance when she, together with
David, executed a Deed of Extrajudicial Settlement of the Estate, dividing and adjudicating between them all the
properties. By virtue of that settlement, the properties were registered in their names and for 11 years, they
possessed the land in the concept of owner. Thus, the 2 Quitclaims have no legal force and effect. Helen still owns ½
of the property.