8. SIBAL V.
VALDEZ 50 PHIL 512
FACTS:
The Deputy Sheriff, through a writ of execution, attached the personal properties of Sibal,
including the sugar cane in question in the 7 parcels of land described in a complaint. The personal
properties were then sold in public auction, including the sugar canes. Included also in those
attached were real properties wherein 8 out of the 11 parcels of land, house and camarin
were bought by Valdez through the public auction. He also bought the sugar cane in question.
HELD:
Generally, sugar cane comes under the classification of “ungathered products” under real
properties in the CC. However, under certain conditions, it may be considered as personal
property. For purposes of attachment and execution, as well as for the purposes of the
Chattel Mortgage Law, ungathered products have the nature of personal property.
Doctrine:
• A crop raised on leased premises belongs to the lessee and in no sense forms part of the immovable.
• “Ungathered products” have the nature of personal property. In other words, the phrase “personal property” should be understood to include
“ungathered products.” Crops, whether growing or standing in the field ready to be harvested, are, when produced by annual cultivation, no part
of the realty.
• A valid sale may be made of a thing, which though not yet actually in existence, is reasonably certain to come into existence. A man may sell
property of which he is potentially and not actually possessed.
Facts:
Plaintiff alleged that the defendant Vitaliano Mamawal, deputy sheriff of the Province of Tarlac, by virtue of a writ of execution issued by the
Court of First Instance of Pampanga, attached and sold to the defendant Emiliano J. Valdez the sugar cane planted by the plaintiff and his
tenants on seven parcels of land. Plaintiff offered to redeem said sugar cane and tendered to the defendant Valdez the amount sufficient to
cover the price paid by the latter, the interest thereon and any assessments or taxes which he may have paid thereon after the purchase, and
the interest corresponding thereto. However, Valdez refused to accept the money and to return the sugar cane to the plaintiff.
Meanwhile, defendant argued that the sugar cane was personal property hence not subject to redemption.
Issue:
1. Whether or not the sugar cane is to be classified as personal property
2. Whether or not future crops to be harvested can be considered a valid object of sale
Held:
1. No. A crop raised on leased premises in no sense forms part of the immovable. It belongs to the lessee, and may be sold by him, whether it
be gathered or not, and it may be sold by his judgment creditors.
“Ungathered products” have the nature of personal property. In other words, the phrase “personal property” should be understood to include
“ungathered products.” Crops, whether growing or standing in the field ready to be harvested, are, when produced by annual cultivation, no part
of the realty.
2. Yes. A valid sale may be made of a thing, which though not yet actually in existence, is reasonably certain to come into existence as the
natural increment or usual incident of something already in existence, and then belonging to the vendor, and then title will vest in the buyer the
moment the thing comes into existence (Emerson vs. European Railway Co., 67 Me., 387; Cutting vs. Packers Exchange, 21 Am. St. Rep.,
63.).
A man may sell property of which he is potentially and not actually possessed.
9. TSAI V. COURT OF APPEALS 336 SCRA 324
FACTS:
EVERTEX secured a loan from PBC, guaranteed by a real estate and chattel mortgage over a parcel of land where the factory stands,
and the chattels located therein, as included in a schedule attached to the mortgage contract. Another loan was obtained
secured by a chattel mortgage over
properties with similar descriptions listed in the first schedule. During the date of execution of the second mortgage,
EVERTEX purchased machineries and equipment.
Due to business reverses, EVERTEX filed for insolvency proceedings. It failed to pay its obligation and thus, PBC initiated
extrajudicial foreclosure of the mortgages. PBC was the highest bidder in the public auctions, making it the owner of the
properties. It then leased the factory premises
to Tsai. Afterwards, EVERTEX sought the annulment of the sale and conveyance of the properties to PBC as it was allegedly a
violation of the INSOLVENCY LAW.
The RTC held that the lease and sale were irregular as it involved properties not included in the schedule of the mortgage
contract.
HELD:
While it is true that the controverted properties appear to be immobile, a perusal of the contract of REM and CM executed by the
parties gives a contrary indication. In the case at bar, both the trial and appellate courts show that the intention was to treat the
machineries as movables or
personal property.
Assuming that the properties were considered immovables, nothing detracts the parties from treating it as chattels to secure
an obligation under the principle of estoppel.
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 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. ##
10. DAVAO SAW MILL CO. VS. CASTILLO 61 SCRA 709
FACTS:
Petitioner is the holder of a lumber concession. It operated a sawmill on a land, which it doesn’t own. Part of the lease
agreement was a stipulation in which after the lease agreement, all buildings and improvements would pass to the
ownership of the lessor, which would not include machineries and accessories. In connection to this, petitioner had
in its sawmill machineries and other equipment wherein some were bolted in foundations of cement.
HELD:
The machinery must be classified as personal property.
The lessee placed the machinery in the building erected on land belonging to another, with the understanding that the
machinery was not included in the improvements which would pass to the lessor on the expiration of the lease
agreement. The lessee also treated the machinery as personal
property in executing chattel mortgages in favor of third persons. The machinery was levied upon by the sheriff as
personalty pursuant to a writ of execution obtained without any protest being registered.
Furthermore, machinery only becomes immobilized when placed in a plant by the owner of the property or plant, but not
when so placed by a tenant, usufructuary, or any person having temporary right, unless such person acted as the
agent of the owner.
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.
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.
