Republic of the Philippines

SUPREME COURT
Manila

EN BANC

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

ENRIQUE LOPEZ, petitioner,

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

Nicolas Belmonte and Benjamin T. de Peralta for petitioner.

Tolentino & Garcia and D. R. Cruz for respondent Luzon Surety Co., Inc. Jose B. Macatangay for respondent Plaza Theatre,
Inc.

FELIX, J.:

Enrique Lopez is a resident of Balayan, Batangas, doing business under the trade name of Lopez-Castelo Sawmill. Sometime in
May, 1946, Vicente Orosa, Jr., also a resident of the same province, dropped at Lopez' house and invited him to make an
investment in the theatre business. It was intimated that Orosa, his family and close friends were organizing a corporation to be
known as Plaza Theatre, Inc., that would engage in such venture. Although Lopez expressed his unwillingness to invest of the
same, he agreed to supply the lumber necessary for the construction of the proposed theatre, and at Orosa's behest and assurance
that the latter would be personally liable for any account that the said construction might incur, Lopez further agreed that
payment therefor would be on demand and not cash on delivery basis. Pursuant to said verbal agreement, Lopez delivered the
lumber which was used for the construction of the Plaza Theatre on May 17, 1946, up to December 4 of the same year. But of the
total cost of the materials amounting to P62,255.85, Lopez was paid only P20,848.50, thus leaving a balance of P41,771.35.

We may state at this juncture that the Plaza Theatre was erected on a piece of land with an area of 679.17 square meters formerly
owned by Vicente Orosa, Jr., and was acquired by the corporation on September 25, 1946, for P6,000. As Lopez was pressing
Orosa for payment of the remaining unpaid obligation, the latter and Belarmino Rustia, the president of the corporation,
promised to obtain a bank loan by mortgaging the properties of the Plaza Theatre., out of which said amount of P41,771.35
would be satisfied, to which assurance Lopez had to accede. Unknown to him, however, as early as November, 1946, the
corporation already got a loan for P30,000 from the Philippine National Bank with the 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. As the land at that
time was not yet brought under the operation of the Torrens System, the mortgage on the same was registered on November 16,
1946, under Act No. 3344. Subsequently, when the corporation applied for the registration of the land under Act 496, such
mortgage was not revealed and thus Original Certificate of Title No. O-391 was correspondingly issued on October 25, 1947,
without any encumbrance appearing thereon.

Persistent demand from Lopez for the payment of the amount due him caused Vicente Orosa, Jr. to execute on March 17, 1947,
an alleged "deed of assignment" of his 420 shares of stock of the Plaza Theater, Inc., at P100 per share or with a total value of
P42,000 in favor of the creditor, and as the obligation still remained unsettled, Lopez filed on November 12, 1947, a complaint
with the Court of First Instance of Batangas (Civil Case No. 4501 which later became R-57) against Vicente Orosa, Jr. and Plaza
Theater, Inc., praying that defendants be sentenced to pay him jointly and severally the sum of P41,771.35, with legal interest
from the firing of the action; that in case defendants fail to pay the same, that the building and the land covered by OCT No. O-
391 owned by the corporation be sold at public auction and the proceeds thereof be applied to said indebtedness; or that the 420
shares of the capital stock of the Plaza Theatre, Inc., assigned by Vicente Orosa, Jr., to said plaintiff be sold at public auction for
the same purpose; and for such other remedies as may be warranted by the circumstances. Plaintiff also caused the annotation of
a notice of lis pendens on said properties with the Register of Deeds.

Defendants Vicente Orosa, Jr. and Plaza Theatre, Inc., filed separate answers, the first denying that the materials were delivered
to him as a promoter and later treasurer of the corporation, because he had purchased and received the same on his personal
account; that the land on which the movie house was constructed was not charged with a lien to secure the payment of the
aforementioned unpaid obligation; and that the 420 shares of stock of the Plaza Theatre, Inc., was not assigned to plaintiff as
collaterals but as direct security for the payment of his indebtedness. As special defense, this defendant contended that as the 420
shares of stock assigned and conveyed by the assignor and accepted by Lopez as direct security for the payment of the amount of
P41,771.35 were personal properties, plaintiff was barred from recovering any deficiency if the proceeds of the sale thereof at
public auction would not be sufficient to cover and satisfy the obligation. It was thus prayed that he be declared exempted from
the payment of any deficiency in case the proceeds from the sale of said personal properties would not be enough to cover the
amount sought to be collected.

Defendant Plaza Theatre, Inc., on the other hand, practically set up the same line of defense by alleging that the building
materials delivered to Orosa were on the latter's personal account; and that there was no understanding that said materials would
be paid jointly and severally by Orosa and the corporation, nor was a lien charged on the properties of the latter to secure
payment of the same obligation. As special defense, defendant corporation averred that while it was true that the materials
purchased by Orosa were sold by the latter to the corporation, such transactions were in good faith and for valuable consideration
thus when plaintiff failed to claim said materials within 30 days from the time of removal thereof from Orosa, lumber became a
different and distinct specie and plaintiff lost whatever rights he might have in the same and consequently had no recourse
against the Plaza Theatre, Inc., that the claim could not have been refectionary credit, for such kind of obligation referred to an
indebtedness incurred in the repair or reconstruction of something already existing and this concept did not include an entirely
new work; and that the Plaza Theatre, Inc., having been incorporated on October 14, 1946, it could not have contracted any
obligation prior to said date. It was, therefore, prayed that the complaint be dismissed; that said defendant be awarded the sum P
5,000 for damages, and such other relief as may be just and proper in the premises.

The surety company, in the meantime, upon discovery that the land was already registered under the Torrens System and that
there was a notice of lis pendens thereon, filed on August 17, 1948, or within the 1-year period after the issuance of the
certificate of title, a petition for review of the decree of the land registration court dated October 18, 1947, which was made the
basis of OCT No. O-319, in order to annotate the rights and interests of the surety company over said properties (Land
Registration Case No. 17 GLRO Rec. No. 296). Opposition thereto was offered by Enrique Lopez, asserting that the amount
demanded by him constituted a preferred lien over the properties of the obligors; that the surety company was guilty of
negligence when it failed to present an opposition to the application for registration of the property; and that if any violation of
the rights and interest of said surety would ever be made, same must be subject to the lien in his favor.

The two cases were heard jointly and in a decision dated October 30, 1952, the lower Court, after making an exhaustive and
detailed analysis of the respective stands of the parties and the evidence adduced at the trial, held that defendants Vicente Orosa,
Jr., and the Plaza Theatre, Inc., were jointly liable for the unpaid balance of the cost of lumber used in the construction of
the building and the plaintiff thus acquired the materialman's lien over the same. In making the pronouncement that the lien was
merely confined to the building and did not extend to the land on which the construction was made, the trial judge took into
consideration the fact that when plaintiff started the delivery of lumber in May, 1946, the land was not yet owned by the
corporation; that the mortgage in favor of Luzon Surety Company was previously registered under Act No. 3344; that the codal
provision (Art. 1923 of the old Spanish Civil Code) specifying that refection credits are preferred could refer only to buildings
which are also classified as real properties, upon which said refection was made. It was, however, declared that plaintiff's lien on
the building was superior to the right of the surety company. And finding that the Plaza Theatre, Inc., had no objection to the
review of the decree issued in its favor by the land registration court and the inclusion in the title of the encumbrance in favor of
the surety company, the court a quo granted the petition filed by the latter company. Defendants Orosa and the Plaza Theatre,
Inc., were thus required to pay jointly the amount of P41,771.35 with legal interest and costs within 90 days from notice of said
decision; that in case of default, the 420 shares of stock assigned by Orosa to plaintiff be sold at public auction and the proceeds
thereof be applied to the payment of the amount due the plaintiff, plus interest and costs; and that the encumbrance in favor of
the surety company be endorsed at the back of OCT No. O-391, with notation I that with respect to the building, said mortgage
was subject to the materialman's lien in favor of Enrique Lopez.

Plaintiff tried to secure a modification of the decision in so far as it declared that the obligation of therein defendants was joint
instead of solidary, and that the lien did not extend to the land, but same was denied by order the court of December 23, 1952.
The matter was thus appealed to the Court of appeals, which affirmed the lower court's ruling, and then to this Tribunal. In this
instance, plaintiff-appellant raises 2 issues: (1) whether a materialman's lien for the value of the materials used in the
construction of a building attaches to said structure alone and does not extend to the land on which the building is adhered to;
and (2) whether the lower court and the Court of Appeals erred in not providing that the material mans liens is superior to the
mortgage executed in favor surety company not only on the building but also on the land.

It is to be noted in this appeal that Enrique Lopez has not raised any question against the part of the decision sentencing
defendants Orosa and Plaza Theatre, Inc., to pay jointly the sum of P41,771.35, so We will not take up or consider anything on
that point. Appellant, however, contends that the lien created in favor of the furnisher of the materials used for the construction,
repair or refection of a building, is also extended to the land which the construction was made, and in support thereof he relies on
Article 1923 of the Spanish Civil Code, pertinent law on the matter, which reads as follows:

ART. 1923. With respect to determinate real property and real rights of the debtor, the following are preferred:

xxx xxx xxx

5. Credits for refection, not entered or recorded, with respect to the estate upon which the refection was made, and only
with respect to other credits different from those mentioned in four preceding paragraphs.

It is argued that in view of the employment of the phrase real estate, or immovable property, and inasmuch 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
the building or structure adhering thereto. We cannot subscribe to this view, for while it is true that generally, real estate connotes
the land and the 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 1 could mean only one thing — that a building is by itself an
immovable property, a doctrine already pronounced by this Court in the case of Leung Yee vs. Strong Machinery Co., 37 Phil.,
644. Moreover, and 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 invoked by appellant reveals that the law gives preference to unregistered
refectionary credits only with respect to the real estate upon which the refection or work was made. This being so, the inevitable
conclusion must be that the lien so created attaches merely to the immovable property for the construction or repair of which the
obligation was incurred. Evidently, therefore, the lien in favor of appellant for the unpaid value of the lumber used in the
construction of the building attaches only to said structure and to no other property of the obligors.

Considering the conclusion thus arrived at, i.e., that the materialman's lien could be charged only to the building for which the
credit was made or which received the benefit of refection, the lower court was right in, holding at the interest of the mortgagee
over the land is superior and cannot be made subject to the said materialman's lien.

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

Paras, C.J., Bengzon, Padilla, Montemayor, Reyes, A., Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L. and Endencia,
JJ., concur.

Footnotes

1 Article 415 of the new Civil Code (Art. 334 of the old) enumerates what are considered immovable property, among
which are land, buildings, roads and constructions of all kinds adhered to the soil.

The Lawphil Project - Arellano Law Foundation

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.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. Nos. L-10837-38 May 30, 1958
ASSOCIATED INSURANCE and SURETY COMPANY, INC., plaintiff,
vs.
ISABEL IYA, ADRIANO VALINO and LUCIA VALINO, defendants.
ISABEL IYA, plaintiff,
vs.
ADRIANO VALINO, LUCIA VALINO and ASSOCIATED INSURANCE and SURETY COMPANY.
INC., defendants.
Jovita L. de Dios for defendant Isabel Iya.
M. Perez Cardenas and Apolonio Abola for defendant Associated Insurance and Surety Co., Inc.
FELIX, J.:
Adriano Valino and Lucia A. Valino, husband and wife, were the owners and possessors of a house of strong materials
constructed on Lot No. 3, Block No. 80 of the Grace Park Subdivision in Caloocan, Rizal, which they purchased on
installment basis from the Philippine Realty Corporation. On November 6, 1951, to enable her to purchase on credit
rice from the NARIC, Lucia A. Valino filed a bond in the sum of P11,000.00 (AISCO Bond No. G-971) subscribed by
the Associated Insurance and Surety Co., Inc., and as counter-guaranty therefor, the spouses Valino executed an
alleged chattel mortgage on the aforementioned house in favor of the surety company, which encumbrance was duly
registered with the Chattel Mortgage Register of Rizal on December 6, 1951. It is admitted that at the time said
undertaking took place, the parcel of land on which the house is erected was still registered in the name of the
Philippine Realty Corporation. Having completed payment on the purchase price of the lot, the Valinos were able to
secure on October 18, 1958, a certificate of title in their name (T.C.T. No. 27884). Subsequently, however, or on
October 24, 1952, the Valinos, to secure payment of an indebtedness in the amount of P12,000.00, executed a real
estate mortgage over the lot and the house in favor of Isabel Iya, which was duly registered and annotated at the back
of the certificate of title.
On the other hand, as Lucia A. Valino, failed to satisfy her obligation to the NARIC, the surety company was
compelled to pay the same pursuant to the undertaking of the bond. In turn, the surety company demanded
reimbursement from the spouses Valino, and as the latter likewise failed to do so, the company foreclosed the chattel
mortgage over the house. As a result thereof, a public sale was conducted by the Provincial Sheriff of Rizal
on December 26, 1952, wherein the property was awarded to the surety company for P8,000.00, the highest bid
received therefor. The surety company then caused the said house to be declared in its name for tax purposes (Tax
Declaration No. 25128).
Sometime in July, 1953, the surety company learned of the existence of the real estate mortgage over the lot covered
by T.C.T. No. 26884 together with the improvements thereon; thus, said surety company instituted Civil Case No.
2162 of the Court of First Instance of Manila naming Adriano and Lucia Valino and Isabel Iya, the mortgagee, as
defendants. The complaint prayed for the exclusion of the residential house from the real estate mortgage in favor of
defendant Iya and the declaration and recognition of plaintiff's right to ownership over the same in virtue of the award
given by the Provincial Sheriff of Rizal during the public auction held on December 26, 1952. Plaintiff likewise asked
the Court to sentence the spouses Valino to pay said surety moral and exemplary damages, attorney's fees and costs.
Defendant Isabel Iya filed her answer to the complaint alleging among other things, that in virtue of the real estate
mortgage executed by her co-defendants, she acquired a real right over the lot and the house constructed thereon; that
the auction sale allegedly conducted by the Provincial Sheriff of Rizal as a result of the foreclosure of
the chattel mortgage on the house was null and void for non-compliance with the form required by law. She, therefore,
prayed for the dismissal of the complaint and anullment of the sale made by the Provincial Sheriff. She also demanded
the amount of P5,000.00 from plaintiff as counterclaim, the sum of P5,000.00 from her co-defendants as crossclaim,
for attorney's fees and costs.
Defendants spouses in their answer admitted some of the averments of the complaint and denied the others. They,
however, prayed for the dismissal of the action for lack of cause of action, it being alleged that plaintiff was already
the owner of the house in question, and as said defendants admitted this fact, the claim of the former was already
satisfied.
On October 29, 1953, Isabel Iya filed another civil action against the Valinos and the surety company (Civil Case No.
2504 of the Court of First Instance of Manila) stating that pursuant to the contract of mortgage executed by the
spouses Valino on October 24, 1952, the latter undertook to pay a loan of P12,000.00 with interest at 12% per annum
or P120.00 a month, which indebtedness was payable in 4 years, extendible for only one year; that to secure payment
thereof, said defendants mortgaged the house and lot covered by T.C.T. No. 27884 located at No. 67 Baltazar St.,
Grace Park Subdivision, Caloocan, Rizal; that the Associated Insurance and Surety Co., Inc., was included as a party
defendant because it claimed to have an interest on the residential house also covered by said mortgage; that it was
stipulated in the aforesaid real estate mortgage that default in the payment of the interest agreed upon would entitle the
mortgagee to foreclose the same even before the lapse of the 4-year period; and as defendant spouses had allegedly
failed to pay the interest for more than 6 months, plaintiff prayed the Court to order said defendants to pay the sum of
P12,000.00 with interest thereon at 12% per annum from March 25, 1953, until fully paid; for an additional sum
equivalent to 20% of the total obligation as damages, and for costs. As an alternative in case such demand may not be
met and satisfied plaintiff prayed for a decree of foreclosure of the land, building and other improvements thereon to
be sold at public auction and the proceeds thereof applied to satisfy the demands of plaintiff; that the Valinos, the
surety company and any other person claiming interest on the mortgaged properties be barred and foreclosed of all
rights, claims or equity of redemption in said properties; and for deficiency judgment in case the proceeds of the sale
of the mortgaged property would be insufficient to satisfy the claim of plaintiff.
Defendant surety company, in answer to this complaint insisted on its right over the building, arguing that as the lot on
which the house was constructed did not belong to the spouses at the time the chattel mortgage was executed, the
house might be considered only as a personal property and that the encumbrance thereof and the subsequent
foreclosure proceedings made pursuant to the provisions of the Chattel Mortgage Law were proper and legal.
Defendant therefore prayed that said building be excluded from the real estate mortgage and its right over the same be
declared superior to that of plaintiff, for damages, attorney's fees and costs.
Taking side with the surety company, defendant spouses admitted the due execution of the mortgage upon the land but
assailed the allegation that the building was included thereon, it being contended that it was already encumbered in
favor of the surety company before the real estate mortgage was executed, a fact made known to plaintiff during the
preparation of said contract and to which the latter offered no objection. As a special defense, it was asserted that the
action was premature because the contract was for a period of 4 years, which had not yet elapsed.
The two cases were jointly heard upon agreement of the parties, who submitted the same on a stipulation of facts, after
which the Court rendered judgment dated March 8, 1956, holding that the chattel mortgage in favor of the Associated
Insurance and Surety Co., Inc., was preferred and superior over the real estate mortgage subsequently executed in
favor of Isabel Iya. It was ruled that as the Valinos were not yet the registered owner of the land on which the building
in question was constructed at the time the first encumbrance was made, the building then was still a personality and a
chattel mortgage over the same was proper. However, as the mortgagors were already the owner of the land at the time
the contract with Isabel Iya was entered into, the building was transformed into a real property and the real estate
mortgage created thereon was likewise adjudged as proper. It is to be noted in this connection that there is no evidence
on record to sustain the allegation of the spouses Valino that at the time they mortgaged their house and lot to Isabel
Iya, the latter was told or knew that part of the mortgaged property, i.e., the house, had previously been mortgaged to
the surety company.
The residential building was, therefore, ordered excluded from the foreclosure prayed for by Isabel Iya, although the
latter could exercise the right of a junior encumbrance. So the spouses Valino were ordered to pay the amount
demanded by said mortgagee or in their default to have the parcel of land subject of the mortgage sold at public
auction for the satisfaction of Iya's claim.
There is no question as to appellant's right over the land covered by the real estate mortgage; however, as the building
constructed thereon has been the subject of 2 mortgages; controversy arise as to which of these encumbrances should
receive preference over the other. The decisive factor in resolving the issue presented by this appeal is the
determination of the nature of the structure litigated upon, for where it be considered a personality, the foreclosure of
the chattel mortgage and the subsequent sale thereof at public auction, made in accordance with the Chattel Mortgage
Law would be valid and the right acquired by the surety company therefrom would certainly deserve prior
recognition; otherwise, appellant's claim for preference must be granted. The lower Court, deciding in favor of the
surety company, based its ruling on the premise that as the mortgagors were not the owners of the land on which the
building is erected at the time the first encumbrance was made, said structure partook of the nature of a personal
property and could properly be the subject of a chattel mortgage. We find reason to hold otherwise, for as this Court,
defining the nature or character of a building, has said:
. . . while it is true that generally, real estate connotes the land and the 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 (Art. 415, new Civil Code) could only mean one thing — that a building is by itself
an immovable property . . . Moreover, and in view of the absence of any specific provision 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. (Lopez vs. Orosa, G.R. Nos. supra, p. 98).
A building certainly cannot be divested of its character of a realty by the fact that the land on which it is constructed
belongs to another. To hold it the other way, the possibility is not remote that it would result in confusion, for to cloak
the building with an uncertain status made dependent on the ownership of the land, would create a situation where a
permanent fixture changes its nature or character as the ownership of the land changes hands. In the case at bar, as
personal properties could only be the subject of a chattel mortgage (Section 1, Act 3952) and as obviously the
structure in question is not one, the execution of the chattel mortgage covering said building is clearly invalid and a
nullity. While it is true that said document was correspondingly registered in the Chattel Mortgage Register of Rizal,
this act produced no effect whatsoever for where the interest conveyed is in the nature of a real property, the
registration of the document in the registry of chattels is merely a futile act. Thus, the registration of the chattel
mortgage of a building of strong materials produce no effect as far as the building is concerned (Leung Yee vs. Strong
Machinery Co., 37 Phil., 644). Nor can we give any consideration to the contention of the surety that it has acquired
ownership over the property in question by reason of the sale conducted by the Provincial Sheriff of Rizal, for as this
Court has aptly pronounced:
A mortgage creditor who purchases real properties at an extrajudicial foreclosure sale thereof by virtue of a
chattel mortgage constituted in his favor, which mortgage has been declared null and void with respect to said
real properties, acquires no right thereto by virtue of said sale (De la Riva vs. Ah Keo, 60 Phil., 899).
Wherefore the portion of the decision of the lower Court in these two cases appealed from holding the rights of the
surety company, over the building superior to that of Isabel Iya and excluding the building from the foreclosure
prayed for by the latter is reversed and appellant Isabel Iya's right to foreclose not only the land but also the building
erected thereon is hereby recognized, and the proceeds of the sale thereof at public auction (if the land has not yet
been sold), shall be applied to the unsatisfied judgment in favor of Isabel Iya. This decision however is without
prejudice to any right that the Associated Insurance and Surety Co., Inc., may have against the spouses Adriano and
Lucia Valino on account of the mortgage of said building they executed in favor of said surety company. Without
pronouncement as to costs. It is so ordered.
Paras, C.J., Bengzon, Montemayor, Reyes, A., Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L., and Endencia,
JJ., concur.
G.R. Nos. L-10837-38 May 30, 1958
ASSOCIATED INSURANCE and SURETY COMPANY, INC., plaintiff,

vs.

ISABEL IYA, ADRIANO VALINO and LUCIA VALINO, defendants.

Facts:

Valino & Valino were the owners and possessors of a house of strong materials in

Rizal, which they purchased on installment basis. To enable her to purchase on credit

rice from NARIC, Valino filed a bond (P11,000) subscribed by Associated Insurance

and Surety Co Inc, and as a counter-guaranty, Valino executed an alleged chattel

mortgage on the aforementioned house in favour of the surety company. At the

same time, the parcel of land which the house was erected was registered in the

name of Philippine Realty Corporation.

Valino, to secure payment of an indebtedness (P12,000) executed a real estate

mortgage over the lot and the house in favour of Iya.

Valino failed to satisfy her obligation to NARIC, so the surety company was

compelled to pay the same pursuant to the undertaking of the bond. In turn, surety

company demanded reimbursement from Valino, and as they failed to do so, the

company foreclosed the chattel mortgage over the house. As a result, public sale

was conducted and the property was awarded to the surety company.

The surety company then learned of the existence of the real estate mortgage over

the lot and the improvements thereon; thus, they prayed for the exclusion of the

residential house from the real estate mortgage and the declaration of its ownership

in virtue of the award given during bidding.

Iya alleged that she acquired a real right over the lot and the house
constructed thereon, and that the auction sale resulting from the
foreclosure of chattel mortgage was null and void.
Surety company argued that as the lot on which the house was
constructed did not belong to the spouses at the time the chattel
mortgage was executed, the house might be considered as personal
property, and they prayed that the said building be excluded from the
real estate mortgage.
Issue:

There is no question over Iya’s right over the land by real estate mortgage; however,

as the building instructed thereon has been the subject of two mortgages,

controversy arise as to which of these encumbrances should receive preference over

the other.
Held:

The building is subject to the real estate mortgage, in favour of Iya. Iya’s right to

foreclose not only the land but also the building erected thereon is recognised.

While it is true that real estate connotes the land and the 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 (Article 415),

could only mean that a building is by itself an immovable property. Moreover, in view

of the absence of any specific provision 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 building certainly cannot be divested of its character of a realty by the fact that

the land on which it is constructed belongs to another.

In the case at bar, as personal properties could only be the subject of a chattel

mortgage and as obviously the structure in question is not one, the execution of the

chattel mortgage covering said building is clearly invalid and a nullity. While it is true

that said document was correspondingly registered in Chattel Mortgage Registry of

Rizal, this act produced no effect whatsoever, for where the interest conveyed is in

the nature of real property, the registration of the document in the registry of

chattels is merely a futile act. Thus, the registration of the chattel mortgage of a

building of strong materials produced no effect as far as the building is concerned.

Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-16218 November 29, 1962
ANTONIA BICERRA, DOMINGO BICERRA, BERNARDO BICERRA, CAYETANO BICERRA, LINDA
BICERRA, PIO BICERRA and EUFRICINA BICERRA, plaintiffs-appellants,
vs.
TOMASA TENEZA and BENJAMIN BARBOSA, defendants-appellees.
Agripino Brillantes and Alberto B. Bravo for plaintiffs-appellants.
Ernesto Parol for defendants-appellees.
MAKALINTAL, J.:
This case is before us on appeal from the order of the Court of First Instance of Abra dismissing the complaint filed by
appellants, upon motion of defendants-appellate on the ground that the action was within the exclude (original)
jurisdiction of the Justice of the Peace Court of Lagangilang, of the same province.
The complaint alleges in substance that appellants were the owners of the house, worth P200.00, built on and owned
by them and situated in the said municipality Lagangilang; that sometime in January 1957 appealed forcibly
demolished the house, claiming to be the owners thereof; that the materials of the house, after it was dismantled, were
placed in the custody of the barrio lieutenant of the place; and that as a result of appellate's refusal to restore the house
or to deliver the material appellants the latter have suffered actual damages the amount of P200.00, plus moral and
consequential damages in the amount of P600.00. The relief prayed for is that "the plaintiffs be declared the owners of
the house in question and/or the materials that resulted in (sic) its dismantling; (and) that the defendants be orders pay
the sum of P200.00, plus P600.00 as damages, the costs."
The issue posed by the parties in this appeal is whether the action involves title to real property, as appellants contend,
and therefore is cognizable by the Court of First Instance (Sec. 44, par. [b], R.A. 296, as amended), whether it pertains
to the jurisdiction of the Justice of the Peace Court, as stated in the order appealed from, since there is no real property
litigated, the house having ceased to exist, and the amount of the demand does exceed P2,000.00 (Sec. 88, id.)1
The dismissal of the complaint was proper. A house is classified as immovable property by reason of its adherence to
the soil on which it is built (Art. 415, par. 1, Civil Code). This classification holds true regardless of the fact that the
house may be situated on land belonging to a different owner. But once the house is demolished, as in this case, it
ceases to exist as such and hence its character as an immovable likewise ceases. It should be noted that the complaint
here is for recovery of damages. This is the only positive relief prayed for by appellants. To be sure, they also asked
that they be declared owners of the dismantled house and/or of the materials. However, such declaration in no wise
constitutes the relief itself which if granted by final judgment could be enforceable by execution, but is only incidental
to the real cause of action to recover damages.
The order appealed from is affirmed. The appeal having been admitted in forma pauperis, no costs are adjudged.
Bengzon, C.J., Padilla, Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L., Barrera, Paredes, Dizon and Regala,
JJ., concur.

Footnotes
1 This amount, cognizable by the Justice of the Peace Court, has been increased to P5,000 in R.A. 2613,
enacted August 1, 1959.
Bicerra v. Teneza [G.R. No. L-16218. November 29, 1962.]
Bicerra v. Teneza
[G.R. No. L-16218. November 29, 1962.]
En Banc, Makalintal (J): 10 concur.

FACTS: The Bicerras are supposedly the owners of the house worth P200, built on a lot owned by them in
Lagangilang, Abra; which the Tenezas forcibly demolished in January 1957, claiming to be the owners thereof.
The materials of the house were placed in the custody of the barrio lieutenant. The Bicerras filed a complaint
claiming actual damages of P200, moral and consequential damages amounting to P600, and the costs. The
CFI Abra dismissed the complaint claiming that the action was within the exclusive (original) jurisdiction of the
Justice of the Peace Court of Lagangilang, Abra.

ISSUE:
W/N the action involves title to real propety.
W/N the dismissal of the complaint was proper.

HELD:
The Supreme Court affirmed the order appealed. Having been admitted in forma pauperis, no costs were
adjudged.

1. House is immovable property even if situated on land belonging to a different owner; Exception, when
demolished
A house is classified as immovable property by reason of its adherence to the soil on which it is built (Article 415,
paragraph 1, Civil Code). This classification holds true regardless of the fact that the house may be situated on
land belonging to a different owner. But once the house is demolished, as in this case, it ceases to exist as such
and hence its character as an immovable likewise ceases.

2. Recovery of damages not exceeding P2,000 and involving no real property belong to the Justice of the Peace
Court
The complaint is for recovery of damages, the only positive relief prayed for. Further, a declaration of being the
owners of the dismantled house and/or of the materials in no wise constitutes the relief itself which if granted by
final judgment could be enforceable by execution, but is only incidental to the real cause of action to recover
damages. As this is a case for recovery of damages where the demand does not exceed PhP 2,000 and that
there is no real property litigated as the house has ceased to exist, the case is within the jurisdiction of the
Justice of the Peace Court (as per Section 88, RA 296 as amended) and not the CFI (Section 44, id.)