Haystack: Serg’s Products v. PCI Leasing (GR 137705, 22 August 2000)

Serg’s Products v. PCI Leasing
[G.R. No. 137705. August 22, 2000.]
Third division, Panganiban (J): 3 concur

Facts: On 13 February 1998, PCI Leasing and Finance, Inc. filed a complaint for sum of money, with an application for a writ of replevin (Civil Case Q-98-33500). On 6 March 1998, upon an ex-parte application of PCI Leasing, judge issued a writ of replevin directing its sheriff to seize and deliver the machineries and equipment to PCI Leasing after 5 days and upon the payment of the necessary expenses. On 24 March 1998, the sheriff proceeded to petitioner's factory, seized one machinery with word that the return for the other machineries. On 25 March 1998, petitioners filed a motion for special protective order, invoking the power of the court to control the conduct of its officers and amend and control its processes, praying for a directive for the sheriff to defer enforcement of the writ of replevin. On 6 April 1998, the sheriff again sought to enforce the writ of seizure and take possession of the remaining properties. He was able to take two more, but was prevented by the workers from taking the rest. On 7 April 1998, they went to the CA via an original action for certiorari.

Citing the Agreement of the parties, the appellate court held that the subject machines were personal property, and that they had only been leased, not owned, by petitioners; and ruled that the "words of the contract are clear and leave no doubt upon the true intention of the contracting parties." It thus affirmed the 18 February 1998 Order, and the 31 March 1998 Resolution of the lower court, and lifted the preliminary injunction issued on 15 June 1998. A subsequent motion for reconsideration was denied on 26 February 1999. Hence, the petition for review on certiorari.

The Supreme Court denied the petition and affirmed the decision of the Court of Appeals; with costs against petitioners.

1. Petition for review on certiorari is clearly under Rule 45
The petition need not expressly indicate if it is being filed under Rule 45 or Rule 65 of the Rules of Court, as it is clear that the present recourse is under Rule 45; the conclusion of such supported by the title of the Petition, which is "Petition for Review on Certiorari."

2. Error in impleading the Judge as respondent not ground to dismiss the case
While the judge should not have been impleaded as a respondent, substantial justice requires that such lapse by itself should not warrant the dismissal of the present Petition. The Court may deems it proper to remove, motu proprio, the name of the Judge from the caption of the case.

3. Writ of replevin issued for recovery of personal property
Rule 60 of the Rules of Court provides that writs of replevin are issued for the recovery of personal property only. Section 3 provides that upon the filing of such affidavit and approval of the bonds the court shall issue an order and the corresponding writ of replevin describing the personal property alleged to be wrongfully detained and requiring the sheriff forthwith to take such property into his custody.

4. Machinery immovable properties by incorporation
The machinery were essential and principal elements of their chocolate-making industry. Hence, although each of them was movable or personal property on its own, all of them have become "immobilized by destination because they are essential and principal elements in the industry." The machines are thus, real, not personal, property pursuant to Article 415 (5) of the Civil Code.

5. Parties estopped when parties stipulated properties as personal; property thus subject to writ of seizure
Contracting parties may validly stipulate that a real property be considered as personal. After agreeing to such stipulation, they are consequently estopped from claiming otherwise. Under the principle of estoppel, a party to a contract is ordinarily precluded from denying the truth of any material fact found therein. Thus, said machines are proper subjects of the Writ of Seizure (compare Tumalad v. Vicencio).

6. Similar cases
In Trinidad v. Vicencio, the Court upheld the intention of the parties to treat a house of strong materials as a personal property because it had been made the subject of a chattel mortgage. Applying Tumalad, the Court in Makati Leasing and Finance Corp. v. Wearever Textile Mills also held that the machinery used in a factory and essential to the industry was a proper subject of a writ of replevin because it was treated as personal property in a contract.

7. Third parties acting in good faith not affected by stipulation to consider real property as personal
The holding that the machines should be deemed personal property pursuant to the Lease Agreement is good only insofar as the contracting parties are concerned. Hence, while the parties are bound by the Agreement, third persons acting in good faith are not affected by its stipulation characterizing the subject machinery as personal. In the present case, however, there is no showing that any specific third party would be adversely affected.

8. Title to property should be determined at trial; Remedies under Rule 60 either to post a counter-bond or to question the sufficiency of the plaintiff’s bond
The validity and the nature of the contract are the lis mota of the civil action pending before the RTC. A resolution of the questions whether the Agreement is a loan and not a lease, or whether the Agreement is invalid, therefore, is effectively a resolution of the merits of the case. Hence, they should be threshed out in the trial, not in the proceedings involving the issuance of the Writ of Seizure. As held in La Tondeña Distillers v. CA, the Court explained that the policy under Rule 60 was that questions involving title to the subject property should be determined in the trial. In that case, the Court noted that the remedy of defendants under Rule 60 was either to post a counter-bond or to question the sufficiency of the plaintiff's bond. They were not allowed, however, to invoke the title to the subject property.

9. Title to property should be determined at trial; no place in a petition for certiorari under Rule 65 or in a petition for review under Rule 45.
The questions whether the Agreement is a loan and not a lease, or whether the Agreement is invalid require a determination of facts and a presentation of evidence, both of which have no place in a petition for certiorari in the CA under Rule 65 or in a petition for review in the Court under Rule 45.

10. Agreement presumed to be valid and binding
The Agreement must be presumed to be valid and binding as the law between the parties; as there is nothing on record to show that it has been nullified or annulled. In the present case, petitioners assailed it first only in the RTC proceedings, which had ironically been instituted by respondent. As in the Makati Leasing and Finance case, even granting that he charge is true, such fact alone does not render a contract void ab initio, but can only be a ground for rendering said contract voidable, or annullable pursuant to Article 1390 of the new Civil Code, by a proper action in court.

11. Consequences cannot be blamed on the Court for the petitioners’ failure to avail of remedies under Section 5, Rule 60 of the Rules of Court
Petitioners' arguments, that the seizure will lead to the unemployment of their workers and nullify all efforts to rehabilitate the corporation, do not preclude the implementation of the Writ. Law and jurisprudence support its propriety. Such consequences should not be blamed on this Court, but on the petitioners for failing to avail themselves of the remedy under Section 5 of Rule 60, which allows the filing of a counter-bond.

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