Haystack: Tumalad v. Vicencio (GR L-30173, 30 September 1971)

Tumalad v. Vicencio
[G.R. No. L-30173. September 30, 1971.]
En Banc, Reyes JBL (J): 10 concur

Facts: On 1 September 1955 Vicencio and Simeon, defendants-appellants, executed a chattel mortgage in favor of the Tumalads, plaintiff-appellees over their house of strong materials located at 550 Int. 3, Quezon Boulevard, Quiapo, Manila, over Lot 6-B and 7-B, Block 2554, which were being rented from Madrigal & Company, Inc. The mortgage was registered in the Registry of Deeds of Manila on 2 September 1955. The mortgage was executed to guarantee a loan of P4,800.00 received from the Tumalads, payable within one year at 12% per annum. The mode of payment was P150.00 monthly, starting September, 1955, up to July 1956, and the lump sum of P3,150 was payable on or before August, 1956. It was also agreed that default in the payment of any of the amortizations would cause the remaining unpaid balance to become immediately due and payable, the Chattel Mortgage enforceable, and the Sheriff of Manila authorized the Mortgagor’s property after necessary publication. When Vicencio and Simeon defaulted in paying, the mortgage was extrajudicially foreclosed, and on 27 March 1956, the house was sold at public auction pursuant to the said contract. As highest bidder, the Tumalads were issued the corresponding certificate of sale.

On 18 April 1956, the Tumalads commenced Civil Case 43073 in the municipal court of Manila, praying, among other things, that the house be vacated and its possession surrendered to them, and for Vicencio and Simeon to pay rent of P200.00 monthly from 27 March 1956 up to the time the possession is surrendered. On 21 September 1956, the municipal court rendered its decision in favor of the Tumalads. Having lost therein, appealed to the court a quo (Civil Case 30993) which also rendered a decision against them. On appeal, the case was certified to the Supreme Court by the Court of Appeals (CA-G.R. No. 27824-R) for the reason that only questions of law are involved. Plaintiffs-appellees failed to file a brief and this appeal was submitted for decision without it.

Nearly a year after the foreclosure sale the mortgaged house had been demolished on 14 and 15 January 1957 by virtue of a decision obtained by the lessor of the land on which the house stood.

The Supreme Court reversed the decision appealed from and entered another dismissing the complaint, with costs against plaintiffs-appellees.

1. Answer a mere statement and not evidence; Allegations or averments determines jurisdiction
It has been held in Supia and Batiaco vs. Quintero and Ayala that "the answer is a mere statement of the facts which the party filing it expects to prove, but it is not evidence; and further, that when the question to be determined is one of title, the Court is given the authority to proceed with the hearing of the cause until this fact is clearly established. In the case of Sy vs. Dalman, wherein the defendant was also a successful bidder in an auction sale, it was likewise held by the Court that in detainer cases the claim of ownership "is a matter of defense and raises an issue of fact which should be determined from the evidence at the trial." What determines jurisdiction are the allegations or averments in the complaint and the relief asked for.

2. Fraud and deceit renders a contract voidable or annullable, and not void ab initio; Claim of ownership by virtue of voidable contract fails without evidence that steps were made to annul the same
Fraud or deceit does not render a contract void ab initio, and can only be a ground for rendering the contract voidable or annullable pursuant to Article 1390 of the New Civil Code, by a proper action in court. In the present case, the charge of fraud, deceit or trickery, the conterntions are not supported by evidence. Further, there is nothing on record to show that the mortgage has been annulled. Neither is it disclosed that steps were taken to nullify the same. Hence, defendants-appellants' claim of ownership on the basis of a voidable contract which has not been voided fails.

3. Buildings as immovable
The rule about the status of buildings as immovable property is stated in Lopez vs. Orosa, Jr. and Plaza Theatre, Inc., cited in Associated Insurance Surety Co., Inc. vs. Iya, et al. 16 to the effect that the inclusion of the building, separate and distinct from the land, in the enumeration of what may constitute real properties (art. 415, New Civil Code) could only mean one thing that a building is by itself an immovable property irrespective of whether or not said structure and the land on which it is adhered to belong to the same owner.

4. Deviations allowed, parties’ treatment of real property as personal property; cases
Certain deviations, however, have been allowed for various reasons. In the case of Manarang and Manarang vs. Ofilada, it was held that "it is undeniable that the parties to a contract may by agreement treat as personal property that which by ,nature would be real property", citing Standard Oil Company of New York vs. Jaramillo. In the latter case, the mortgagor conveyed and transferred to the mortgagee by way of mortgage "the following described personal property." The "personal property" consisted of leasehold rights and a building. In the case of Luna vs. Encarnacion, the subject of the contract designated as Chattel Mortgage was a house of mixed materials, and the Court held therein that it was a valid Chattel mortgage because it was so expressly designated and specifically that the property given as security "is a house of mixed materials, which by its very nature is considered personal property." In Navarro vs. Pineda, the Court stated that 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 principle 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 part of the land, for it is now settled that an object placed on land by one who had only a temporary right to the same, such as the 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 as 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 subsequently claiming otherwise. (Ladera vs. C.N. Hodges).

5. House treated by parties as chattel; factors to determine
In the contract, 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 and participation;" whcih 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 now be allowed to make an inconsistent stand by claiming otherwise. Moreover, the subject house stood on a rented lot to which defendants-appellants merely had a temporary right as lessee, and although this can not in itself alone determine the status of the property, it does so when combined with other factors to sustain the interpretation that the parties, particularly the mortgagors, intended to treat the house as personality.

6. Estoppel; Party in chattel mortgage cannot question validity of chattel mortgage entered into
Inlike in the Iya cases, Lopez vs. Orosa, Jr. and Plaza Theatreand Leung Yee vs. F. L. Strong Machinery and Williamson, wherein third persons assailed the validity of the chattel mortgage, it is the defendants-appellants themselves, as debtors-mortgagors, who are attacking the validity of the chattel mortgage in this case. The doctrine of estoppel therefore applies to the herein defendants-appellants, having treated the subject house as personalty.

7. Chattel mortgage covered by Act 1508, Chattel Mortgage Law
Chattel mortgages are covered and regulated by the Chattel Mortgage Law, Act 1508. Section 14 of this Act allows the mortgagee to have the property mortgaged sold at public auction through a public officer in almost the same manner as that allowed by Act 3135, as amended by Act 4118, provided that the requirements of the law relative to notice and registration are complied with. In the present case, the parties specifically stipulated that "the chattel mortgage will be enforceable in accordance with the provisions of Special Act 3135.

8. Mortgagors entitled to remain in possession without rent within redemption period
Nearly a year after the foreclosure sale the mortgaged house had been demolished on 14 and 15 January 1957 by virtue of a decision obtained by the lessor of the land on which the house stood. The CFI sentenced the mortgagors to pay a monthly rent of P200.00 from the time the chattel mortgage was foreclosed until when it was torn down by the sheriff. The Court ruled that the mortgagors were entitled to remain in possession without any obligation to pay rent during the one year redemption period after the foreclosure sale. Section 6 of Act 3135 provides that the debtor-mortgagor may, at any time within one year from and after the date of the auction sale, redeem the property sold at the extra judicial foreclosure sale. Section 7 of the same Act allows the purchaser of the property to obtain from the court the possession during the period of redemption: but the same provision expressly requires the filing of a petition with the proper CFI and the furnishing of a bond. It is only upon filing of the proper motion and the approval of the corresponding bond that the order for a writ of possession issues as a matter of course. No discretion is left to the court. In the absence of such a compliance, as in the instant case, the purchaser can not claim possession during the period of redemption as a matter of right. In such a case, the governing provision is Section 34, Rule 39, of the Revised Rules of Court which also applies to properties purchased in extrajudicial foreclosure proceedings.

9. Rentals received during redemption period credited to redemption price
Before the expiration of the 1-year period within which the judgment-debtor or mortgagor may redeem the property, the purchaser thereof is not entitled, as a matter of right, to possession of the same. Thus, while it is true that the Rules of Court allow the purchaser to receive the rentals if the purchased property is occupied by tenants, he is, nevertheless, accountable to the judgment-debtor or mortgagor as the case may be, for the amount so received and the same will be duly credited against the redemption price when the said debtor or mortgagor effects the redemption. Differently stated, the rentals receivable from tenants, although they may be collected by the purchaser during the redemption period, do not belong to the latter but still pertain to the debtor of mortgagor. The rationale for the Rule, it seems, is to secure for the benefit of the debtor or mortgagor, the payment of the redemption amount and the consequent return to him of his properties sold at public auction. (Reyes vs. Hamada, reiterating Chan v. Espe)

10. Case prematurely filed
The period of redemption had not yet expired when action was instituted in the court of origin, and that plaintiffs-appellees did not choose to take possession under Section 7, Act 3135, as amended, which is the law selected by the parties to govern the extrajudicial foreclosure of the chattel mortgage. Neither was there an allegation to that effect. Since plaintiffs-appellees' right to possess was not yet born at the filing of the complaint, there could be no violation or breach thereof. Wherefore, the original complaint stated no cause of action and was prematurely filed.

11. Court’s authority to review errors not assigned
Even if there was no assignment of error to that effect, the Supreme Court is clothed with ample authority to review palpable errors not assigned as such if it finds that their consideration is necessary in arriving at a just decision of the case.

	This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 License.