Haystack: Navarro v. Pineda (GR L-18456, 30 November 1963)

Navarro v. Pineda
[G.R. No. L-18456. November 30, 1963.]
En Banc, Paredes (J): 8 concur

Facts: On 14 December 1959, Rufino G. Pineda and his mother Juana Gonzales (married to Gregorio Pineda), borrowed from Conrado P. Navarro, the sum of P2,550.00, payable 6 months after said date or on 14 June 1959. To secure the indebtedness, Rufino executed a document captioned "Deed of Real Estate and Chattel Mortgages ", whereby Juana Gonzales, by way of Real Estate Mortgage hypothecated a parcel of land, belonging to her, registered with, the register of Deeds of Tarlac, under TCT 25776, and Rufino G. Pineda, by way of Chattel Mortgage, mortgaged his 2-story residential house, having a floor area of 912 sq.m., erected on a lot belonging to Atty. Vicente Castro, located at San Roque, Tarlac, Tarlac; and 1 motor truck, registered in his name, under Motor Vehicle Registration Certificate A-171805. Both mortgages were contained in one instrument, which was registered in both the Office of the Register of Deeds and the Motor Vehicles Office of Tarlac. The Pinedas failed to pay the mortgage debt when it became due. They were granted an extension up to 30 June 1960, but they likewise failed to pay on the said day. They were granted another extension up to 30 July 1960, but they likewise failed and refused to pay.

On 10 August 1960, Navarro filed a complaint for foreclosure of the mortgage and for damages, which consisted of liquidated damages in the sum of P500.00 and 12% per annum interest on the principal, effective on the date of maturity, until fully paid. On 24 February 1961, the lower court dismissed the complaint with regards to Gregorio Pineda; ordering Juana Gonzales and spouses Rufino Pineda and Ramona Reyes to pay Conrado Navarro the sum of P2,550 with 12% compounded interest plus P500 as liquidated damages and the cost of the suit from 14 June 1960 within 90 days from receipt of the copy of the decision, else the properties mentioned in the deed of real estate and chattel mortgage be sold to realize said mortgage debt in accordance with the pertinent provisions of Act 3135 and Article 14 of Act 1508; and ordering Rufino Pineda and Ramona Reyes to deliver the personal properties to the Provincial Sheriff of Tarlac immediately after the lapse of 90 days in default of such payment.

The judgment was appealed directly to the Supreme Court, questioning the lower court’s decision in holding the deed of real estate and chattel mortgages appended to the complaint valid, notwithstanding that the house of Rufino Pineda was made subject of the chattel mortgage for the reason that it is erected on a land that belongs to a third person.

The Supreme Court affirmed the decision appealed from, with costs against appellants.

1. Building is immovable property
Article 415 of the New Civil Code, in classifying a house as immovable property, makes no distinctions whether the owner of the land is or is not the owner of the building; the fact that the land belongs to another is immaterial, it is enough that the house adheres to the land; that in case of immovables by incorporation, such as houses, trees, plants, etc; the Code does not require that the attachment or incorporation be made by the owner of the land, the only criterion being the union or incorporation with the soil. A building is an immovable property, irrespective of whether or not said structure and the land on which it is adhered to, belong to the same owner (Lopez vs. Orosa, Leung Yee vs. Strong Machinery Co.).

2. Lower Court’s Decision predicated on the doctrine of estoppel and not only on the ground that the house mortgaged was erected on the land which belonged to a third person
The trial court did not predicate its decision declaring the deed of chattel mortgage valid solely on the ground that the house mortgaged was erected on the land which belonged to a third person, but also and principally on the doctrine of estoppel, in that "the parties have so expressly agreed" in the mortgage to consider the house as a chattel "for its smallness and mixed materials of sawali and wood". In the present case, Rufino Pineda grouped the house with the truck which is inherently a movable property. The house which was not even declared for taxation purposes was small and made of light construction materials: G.I. sheets roofing, sawali and wooden walls and wooden posts; built on land belonging to another. Clearly, the house in question was treated as personal or movable property, by the parties to the contract themselves.

3. Property may have a character different from that imputed to it by parties in a contract, but such property remains in its actual character as regards third persons who are not parties in the contract; Summary of relevant cases
In construing Arts. 334 and 335 of the Spanish Civil Code (corresponding to Arts. 415 and 416, N.C.C.), for purposes of the application of the Chattel Mortgage Law, it was held that under certain conditions, a property may have a character different from that imputed to it in said articles. It is undeniable that the parties to a contract may by agreement, treat as personal property that which by nature would be real property (Standard Oil vs. Jaranillo). "There can not be any question that a building of mixed materials may be the subject of a chattel mortgage, in which case, it is considered as between the parties as personal property. The matter depends on the circumstances and the intention of the parties. Personal property may retain its character as such where it is so agreed by the parties interested even though annexed to the realty". (42 Am. Jur. 209-210, cited in Manarang, et al. vs. Ofilada, et al.). The view that parties to a deed of chattel mortgage may agree to consider a house as personal property for the purposes of said contract, is good only insofar as the contracting parties are concerned. It is based, partly, upon the principles of estoppel (Evangelista vs. Alto Surety). In a case, a mortgaged house built on a rented land, was held to be a personal property not only because the deed of mortgage considered. it as such, but also because it did not form an integral part of the land (Evangelista vs. Abad, [CA]), for it is now well settled that an object placed on land by one who has only a temporary right to the same, such as a lessee or usufructuary, does not become immobilized by attachment (Valdez vs. Central Altagracia, cited in Davao Sawmill vs. Castillo). Hence, if a house belonging to a person stands on a rented land belonging to another person, it may be mortgaged as a personal property if so stipulated in the document of mortgage. It should be noted, however, that the principle is predicated on statements by the owner declaring his house to be a chattel, a conduct that may conceivably estop him from subsequent claiming otherwise (Ladera, et al. vs. C.W. Hodges, et al., [CA]). The doctrine, therefore, gathered from these cases is that although in some instances, a house of mixed materials has been considered as a chattel between the parties and that the validity of the contract between them, has been recognized, it has been a constant criterion nevertheless that, with respect to third persons, who are not parties to the contract, and specially in execution proceedings, the house is considered as an immovable property (Art. 1431, New Civil Code).

4. Cases cited are not applicable
The cases cited by appellants are not applicable to the present case. The Iya cases refer to a building or a house of strong materials, permanently adhered to the land, belonging to the owner of the house himself. In the case of Lopez vs. Orosa, the subject building was a theater, built of materials worth more than P62,000.00 attached permanently to the soil. In these two cases and in the Leung Yee Case, third persons assailed the validity of the deed of chattel mortgages; in the present case, it was one of the parties to the contract of mortgages who assailed its validity.

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