Case Brief: Lopez v. Orosa et al

G.R. Nos. L-10817-18  February 28, 1958

ENRIQUE LOPEZ, petitioner,

vs.

VICENTE OROSA, JR., and PLAZA THEATRE, INC., respondents.

Facts:

After agreeing to make an investment in Orosa’s theatre business and his assurance that he would be personally liable for any account that the said construction might incur, Lopez delivered the lumber which was used for the construction of the Plaza Theatre.  But of the total cost of the materials amounting to P62,255.85, Lopez was paid only P20848.50.

Plaza Theatre was erected on a piece of land formerly owned by Orosa, and was acquired by the corporation.  As Lopez was pressing Orosa for payment of remaining unpaid obligation, the latter promised to obtain a bank loan by mortgaging the properties of Plaza Theatre.  Unknown to Lopez, the corporation already got a loan from a bank with Luzon Surety Company as surety, and the corporation in turn executed a mortgage on the land and building in favor of said company as counter-security.

Persistent demand from Lopez caused Orosa to execute an alleged “deed of assignment” of his 480 shares of stock of Plaza Theatre, at P100 per share; and as the obligation still remain unsettled, Lopez filed a complaint against Orosa and Plaza Theatre Inc, praying that xxx in case defendants fail to pay, the building and land owned by corporation be sold at public auction, or the shares of the capital stock be sold, and the proceeds thereof be applied to said indebtedness.

As a defense, Orosa contended that the shares of stocks were personal properties and cannot be made to cover and satisfy the obligation.  it was thus prayed that he be declared exempted from payment of deficiency in case the proceeds from the sale of properties are not enough.

The surety company, upon discovery that the land was already registered, file a petition to annotate the rights and interests of the surety company over the said properties, which was opposed by Lopez who asserted that he has preferred lien over the properties.

The two cases were heard jointly, and lower court held that Orosa were liable for the unpaid balance of the cost of lumber used in the construction, and Lopez thus acquired materialman’s lien over it.  In making the pronouncement that tyhe lien was merely confined to the building and did not extend to the land where it was built, the trial jduge took into consideration that xxx codal provisions specifying that refection credits are preferred could refer to buildings which are also classified as real properties upon which the refaction was made.  Orosa were thus required to xxx with respect tohe building, said mortgage was subject to materialmen’s lien in favor of Lopez.

Lopez tried to secure a modification of decision in so far as it declared that lien did not extend to the land, but was denied by court.  Hence, the appeal.

Issue:

Whether a materialmen’s lien for the value of materials used in the construction of building attaches to said structure alone, and does not extend to the land on which building is adhered to.

Held:

Yes.  Such lien attaches to structure alone, and does not extend to the land where the building is.

In view of employment of the phrase, “real estate or immovable property”, and in as much as said provision does not contain any specification delimiting the lien to the building, said article must be construed as to embrace both the land and building or the structure adhering thereto.  SC cannot subscribe to this view, for while it is true that real estate connotes land and building constructed thereon, it is obvious that the inclusion of the building, separate and distinct from the land, in the enumeration of what may constitute real properties could mean only one thing – that the building is by itself an immovable property.  Moreover, in view of the absence of any specific provision of law to the contrary, a building is an immovable property, irrespective of whether or not said structure and the land on which it is adhered to belong to the same owner.

A close examination of the provision of the Civil Code reveals that the law gives preference to unregistered refectionary credits only with respect to the real estate upon the refection or work was made.  The conclusion is that it must be that the lien so created attaches merely to the immovable property for the construction or repair of which the obligation was incurred.  Therefore, the lien in favor of appellant for the unpaid value of the lumber used in construction of the building attaches only to said structure and to no other property of the obligors.

Wherefore, and on the strength of the foregoing considerations, the decision appealed from is hereby affirmed, with costs against appellant. It is so ordered.

Case Brief: Tumalad v Simeon

G.R. No. L-30173  September 30, 1971

GAVINO A. TUMALAD and GENEROSA R. TUMALAD, plaintiffs-appellees

vs

ALBERTA VICENCIO and EMILIANO SIMEON, defendants-appellants.

Facts:

On Sep 1, 1955, Vicencio and Simeon executed a chattel mortgage in favor of Tumalad over their house of strong materials located at Quiapo, Manila over Lot Nos 6B and 7B, Block 2554, which were being rented from Madrigal & Company, Inc.  It was also agreed that in default the payment of any amortizations would cause the remaining unpaid balance to become immediately due and payable, the Sheriff of the City of Manila or any of his deputies is empowered and authorized to sell all the mortgagor’s property after the necessary publication in order to settle the financial debts, plus interest and yearly fees.

When Vicencio & Simeon defaulted in paying, the mortgage was extrajudicially foreclosed, and on 27 Mar 1956, the house was sold at public auction pursuant to the sent contract.  As highest bidder, Tumalad were issued corresponding certificate of sale.  Municipal court eventually rendered a decision ordering defendants to vacate the premises described in the complaint.

During the pendency of the appeal to the CFI, Vicencio and Simeon failed to deposit rent for Nov 1956.  As a result, the court granted Tumalad’s motion for execution, and it was issued Jan 1957.  However, the judgement regarding the surrender of possession to Tumalad could not be executed because the subject house had been already demolished on Jan 1957 pursuant to the order of court in a separate civil case for ejectment against the present defendants for non-payment of rentals on the land where the house was constructed.

Vicencio & Simeon predicate their theory of nullity  of the chattel mortgage on two grounds: a) that their signatures on the chattel mortgage were obtained through fraud, deceit, or trickery, and b) that the subject matter of mortgage is a house o strong materials, and being an immovable, it can only be the subject of a real estate mortgage and not a chattel mortgage.

Issue:

Whether the subject of chattel mortgage, which is a house of strong material and being an immovable, is valid.

Held:

Yes.  The subject matter of chattel mortgage is valid.

The house on rented land is not only expressly designated as chattel mortgage.  It specifically provides that the mortgagor voluntarily cedes, sells, and transfers, by way of Chattel Mortgage, the property together with its leasehold rights over the lot on which it is constructed.  Although there is no specific statement referring to the subject house as personal property, yet by ceding, selling, or transferring a property by way of chattel mortgage, Vicencio & Simeon could only have meant to convey the house as chattel, or at least, intended to treat the same as such, so that they should not be allowed to make an inconsistent stand by claiming otherwise.

Moreover, the subject house stood on a rented lot to which Vicencio and Simeon merely had a temporary right as lessee, although this cannot in itself alone determine the status of the property, it does so when combined with other factors to sustain the interpretation that the parties intended to treat the house as personal property.

Finally, it is Vicencio and Simeon themselves who are attacking the validity of the chattel mortgage in this case.  The doctrine therefore applies to the herein defendants, having treated the subject house as personal property.

FOR THE FOREGOING REASONS, the decision appealed from is reversed and another one entered, dismissing the complaint. With costs against plaintiffs-appellees.

Case Brief: Salas, et al v Jarencio, et al

G.R. No. L-29788    August 30, 1972

RAFAEL S. SALAS, in his capacity as Executive Secretary; CONRADO F. ESTRELLA, in his capacity as Governor of the Land Authority; and LORENZO GELLA, in his capacity as Register of Deeds of Manila, petitioners-appellants,

vs.

HON. HILARION U. JARENCIO, as Presiding Judge of Branch XXIII, Court of First Instance of Manila; ANTONIO J. VILLEGAS, in his capacity as Mayor of the City of Manila; and the CITY OF MANILA, respondents-appellees.

Facts:

City of Manila – owner in fee simple of a parcel of land known as Lot 1, Block 557 of Cadastral Survey of City of Manila, containing an area of 9689.80 sqm. On various dates in 1927, City of Manila sold portions of the parcel of land. When the last sale was effected August 1924, Transfer Certificate of Title 22547 covering the residue of the land 7490.10 sam was issued in the name of City of Manila.

On September 1960, Municipal Board of Manila adopted a resolution requesting the President to consider the feasibility of declaring the land under Transfer Certificate of Title 25545-25547 as patrimonial property of Manila for the purpose of selling these lots to the actual occupants thereof. The resolution was then transmitted to the Congress. The bill was then passed by Congress and approved by President, and became Republic Act 4118, converting the land from communal property to disposable and alienable land of State.

To implement RA 4118, Land Authority requested City of Manila to deliver the City’s TCT 22547 in order to obtain title thereto in the name of Land Authority. The request was granted with the knowledge and consent of City mayor, cancelling TCT 22547 and issuing TCT 80876 in the name of Land Authority.

City of Manila, for some reasons, brought an action to restrain, prohibit, and enjoin Land Authority and Register of Deeds from implementing RA 4118, and praying for the declaration of RA 4118 as unconstitutional.

Trial court declared RA 4118 to be unconstitutional and invalid on the ground that it deprived City of its property without due process of law and payment of just compensation.

Land Authority and Register of Deeds argued that the land is a communal land, or a portion of public domain owned by State; that the land has not been used by City of Manila for any public purpose; that it was originally a communal land not because it was needed in connection with its organisation as a municipality but rather for the common use of its inhabitants; that the City mayor merely enjoys the usufruct over said land and its exercise of acts of ownership by selling parts thereof did not necessarily convert the land into a patrimonial property of City of Manila nor divert the State of its paramount title.

Issue:
Whether the aforementioned land is a private or patrimonial property of the City of Manila.

Held:

The land is public property.

As a general rule, regardless of the source or classification of the land in the possession of municipality, excepting those which it acquired in its own funds in its private or corporate capacity, such property is held for the State for the benefit of its inhabitants, whether it be for governmental or proprietary purposes. The legal situation is the same if the State itself holds the property and puts it to a different use.

When it comes to property of municipality which it did not acquire in its private or corporate capacity with its own funds (the land was originally given to City by Spain), the legislature can transfer its administration and disposition to an agency of the National Government to be disposed of according to its discretion. Here it did so in obedience to the constitutional mandate of promoting social justice to insure the well-being and economic security of the people.

The property was not acquired by the City of Manila with its own funds in its private or proprietary capacity. The land was part of the territory of City of Manila granted by sovereign in its creation. Furthermore, City expressly recognised the paramount title of the State over its land when it requested the President to consider the feasibility of declaring the lot as patrimonial property for selling.

There could be no more blatant recognition of the fact that said land belongs to the State and was simply granted in usufruct to the City of Manila for municipal purposes. But since the City did not actually use said land for any recognized public purpose and allowed it to remain idle and unoccupied for a long time until it was overrun by squatters, no presumption of State grant of ownership in favor of the City of Manila may be acquiesced in to justify the claim that it is its own private or patrimonial property.

WHEREFORE, the appealed decision is hereby reversed, and petitioners shall proceed with the free and untrammeled implementation of Republic Act No. 4118 without any obstacle from the respondents. Without costs.

Case Brief: Meralco Securities v Central Board of Assessment Appeals, et al

G.R. No. L-46245    May 31, 1982

MERALCO SECURITIES INDUSTRIAL CORPORATION, petitioner,

vs.

CENTRAL BOARD OF ASSESSMENT APPEALS, BOARD OF ASSESSMENT APPEALS OF LAGUNA and PROVINCIAL ASSESSOR OF LAGUNA, respondents.

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.

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.

Art. 417, NCC: Shares of stocks are considered personal property

Shares of stocks are personal property, and therefore, can be the subject matter of a chattel mortgage. So are the certificates themselves evidencing the ownership of shares.

The capital stock of stock corporations shall be divided into shares for which certificates signed by the president or the vice-president, counter signed by the secretary or clerk and sealed with the seal of the corporation, shall be issued in accordance with the by-laws. Shares of stock so issued are personal property and may be transferred by delivery of the certificate indorsed by the owner or his attorney in fact or other person legally authorized to make the transfer. No transfer, however, shall be valid, except as between the parties, until the transfer is entered and noted upon the books of the corporation so as to show the names of the parties to the transaction, the date of the transfer the number of the certificate, and the number of shares transferred. (Section 35, Corporation Law)

It is to be noted, however, that section 35 of the Corporation Law (Act No. 1459) enacts that shares of stock “may be transferred by delivery of the certificate endorsed by the owner or his attorney in fact or other person legally authorized to make the transfer.” The use of the verb “may” does not exclude the possibility that a transfer may be made in a different manner, thus leaving the creditor in an insecure position even though he has the certificate in his possession. Moreover, the shares still standing in the name of the debtor on the books of the corporation will be liable to seizure by attachment or levy on execution at the instance of other creditors. (Cf. Uy Piaoco vs. McMicking, 10 Phil., 286, and Uson vs. Diosomito, 61 Phil., 535.) .

Case Brief: The Province of Zamboanga del Norte v City of Zamboanga, et. al.

G.R. No. L-24440             March 28, 1968

THE PROVINCE OF ZAMBOANGA DEL NORTE, plaintiff-appellee,
vs.
CITY OF ZAMBOANGA, SECRETARY OF FINANCE and COMMISSIONER OF INTERNAL REVENUE,defendants-appellants.

Facts:

Prior to its incorporation as a chartered city, the Municipality of Zamboanga used to be the provincial capital of the then Zamboanga Province. On October 12, 1936, Commonwealth Act 39 was approved converting the Municipality of Zamboanga into Zamboanga City. Sec. 50 of the Act also provided that “Buildings and properties which the province shall abandon upon the transfer of the capital to another place will be acquired and paid for by the City of Zamboanga at a price to be fixed by the Auditor General.”

Such properties include lots of capitol site, schools, hospitals, leprosarium, high school playgrounds, burleighs, and hydro-electric sites.

On June 6, 1952, Republic Act 711 was approved dividing the province of Zamboanga into two (2): Zamboanga del Norte and Zamboanga del Sur. As to how the assets and obligations of the old province were to be divided between the two new ones, Sec. 6 of that law provided “Upon the approval of this Act, the funds, assets and other properties and the obligations of the province of Zamboanga shall be divided equitably between the Province of Zamboanga del Norte and the Province of Zamboanga del Sur by the President of the Philippines, upon the recommendation of the Auditor General.”

However, on June 17, 1961, Republic Act 3039 was approved amending Sec. 50 of Commonwealth Act 39 by providing that, “All buildings, properties and assets belonging to the former province of Zamboanga and located within the City of Zamboanga are hereby transferred, free of charge, in favor of the said City of Zamboanga.”

This constrained Zamboanga del Norte to file on March 5, 1962, a complaint against defendants-appellants Zamboanga City; that, among others, Republic Act 3039 be declared unconstitutional for depriving Zamboanga del Norte of property without due process and just compensation.

Lower court declared RA 3039 unconstitutional as it deprives Zamboanga del Norte of its private properties.

Hence the appeal.

Issue:

Whether RA 3039 is unconstitutional on the grounds that it deprives Zamboanga del Norte of its private properties.

Held:

No. RA 3039 is valid. The properties petitioned by Zamboanga del Norte is a public property.

The validity of the law ultimately depends on the nature of the 50 lots and buildings thereon in question. For, the matter involved here is the extent of legislative control over the properties of a municipal corporation, of which a province is one. The principle itself is simple: If the property is owned by the municipality (meaning municipal corporation) in its public and governmental capacity, the property is public and Congress has absolute control over it. But if the property is owned in its private or proprietary capacity, then it is patrimonial and Congress has no absolute control. The municipality cannot be deprived of it without due process and payment of just compensation.

The capacity in which the property is held is, however, dependent on the use to which it is intended and devoted. Now, which of two norms, i.e., that of the Civil Code or that obtaining under the law of Municipal Corporations, must be used in classifying the properties in question?

Civil Code

The Civil provide: ART. 423. The property of provinces, cities, and municipalities is divided into property for public use and patrimonial property; ART. 424. Property for public use, in the provinces, cities, and municipalities, consists of the provincial roads, city streets, municipal streets, the squares, fountains, public waters, promenades, and public works for public service paid for by said provinces, cities, or municipalities. All other property possessed by any of them is patrimonial and shall be governed by this Code, without prejudice to the provisions of special laws.

Applying the above cited norm, all the properties in question, except the two (2) lots used as High School playgrounds, could be considered as patrimonial properties of the former Zamboanga province. Even the capital site, the hospital and leprosarium sites, and the school sites will be considered patrimonial for they are not for public use. They would fall under the phrase “public works for public service” for it has been held that under the ejusdem generis rule, such public works must be for free and indiscriminate use by anyone, just like the preceding enumerated properties in the first paragraph of Art 424. The playgrounds, however, would fit into this category.

Law of Municipal Corporations

On the other hand, applying the norm obtaining under the principles constituting the law of Municipal Corporations, all those of the 50 properties in question which are devoted to public service are deemed public; the rest remain patrimonial. Under this norm, to be considered public, it is enough that the property be held and, devoted for governmental purposes like local administration, public education, public health, etc.

 Final Ruling

The controversy here is more along the domains of the Law of Municipal Corporations — State vs. Province — than along that of Civil Law. If municipal property held and devoted to public service is in the same category as ordinary private property, then that would mean they can be levied upon and attached; they can even be acquired thru adverse possession — all these to the detriment of the local community. It is wrong to consider those properties as ordinary private property.

Lastly, the classification of properties other than those for public use in the municipalities as patrimonial under Art. 424 of the Civil Code — is “… without prejudice to the provisions of special laws.” For purpose of this article, the principles, obtaining under the Law of Municipal Corporations can be considered as “special laws”. Hence, the classification of municipal property devoted for distinctly governmental purposes as public should prevail over the Civil Code classification in this particular case.

WHEREFORE, the decision appealed from is hereby set aside and another judgment is hereby entered as follows:.

(1) Defendant Zamboanga City is hereby ordered to return to plaintiff Zamboanga del Norte in lump sum the amount of P43,030.11 which the former took back from the latter out of the sum of P57,373.46 previously paid to the latter; and

(2) Defendants are hereby ordered to effect payments in favor of plaintiff of whatever balance remains of plaintiff’s 54.39% share in the 26 patrimonial properties, after deducting therefrom the sum of P57,373.46, on the basis of Resolution No. 7 dated March 26, 1949 of the Appraisal Committee formed by the Auditor General, by way of quarterly payments from the allotments of defendant City, in the manner originally adopted by the Secretary of Finance and the Commissioner of Internal Revenue. No costs. So ordered.