GOLDEN SUN FINANCE A.M. No.

P-11-2888
CORPORATION, represented by RACHELLE (formerly A.M. OCA I.P.I. No. 09-3252-P)
L. MARMITO, Present:
Complainant,
CARPIO, J.,
Chairperson,
LEONARDO-DE CASTRO,*
- versus - BRION,
PERALTA,** and
PEREZ, JJ.

RICARDO R. ALBANO, Sheriff III, Metropolitan Promulgated:

Trial Court (MeTC), Branch 62, Makati City,
Respondent. -- - July 27, 2011

x-----------------------------------------------------------------------------------------------------x

DECISION

BRION, J.:

Ricardo R. Albano (respondent), Sheriff III, Metropolitan Trial Court

(MeTC), Branch 62, Makati City, was charged with negligence and grave misconduct by the Golden Sun Finance Corporation
(complainant), represented by Rachelle L. Marmito, the complainants Head Auditor.

THE COMPLAINT

In a verified letter-complaint dated September 1, 2009, the complainant alleged that on January 7, 2009, it filed a complaint for
the recovery of a Honda Civic Sedan with the Regional Trial Court (RTC), Quezon City, Branch 81, against one Lucila S. Reyes,
docketed as Civil Case No. 0964026. The subject motor vehicle, registered in the name of Reyes, was encumbered in its favor, as shown
in the Certificate of Registration issued by the Land Transportation Office.

The RTC decided in favor of the complainant and issued a writ of replevin. However, the complainant found out that the motor
vehicle had already been levied upon by the respondent by virtue of a writ of execution issued on March 27, 2009 by the
MeTC, Makati City, Branch 62, in Criminal Case Nos. 353822-23 for violation of Batas Pambansa Bilang 22 against Reyes. It was sold
at a public auction conducted by the respondent on April 29, 2009, with the Royal Makati Credit Resource as the highest bidder. On the
same day, a Certificate of Sale was issued in favor of the Royal Makati Credit Resource.

The complainant averred that the levy and sale of the motor vehicle by the respondent was illegal. It claimed that the respondent
was negligent when he levied upon the motor vehicle and proceeded with the auction sale without looking into the cars Certificate of
Registration to determine whether it was encumbered or not. The encumbrance on the motor vehicle having been made prior to the suit
filed by the Royal Makati Credit Resource, the complainant posited that its claim should have priority over the formers claims.

Required by the Office of the Court Administrator (OCA) to comment on the charges against him,[1] the respondent contended
that he had no knowledge that the car was encumbered because the Certificate of Registration was never shown to him. He also had no
knowledge that the car was the subject of a writ of replevin in Civil Case No. 0964026.[2] Thus, the respondent asked for the dismissal
of the complaint, stressing that he had acted within the scope of his duty as sheriff when he enforced the writ of execution.

THE OCAS REPORT AND RECOMMENDATION

 In a Memorandum Report dated November 3, 2010,[3] the OCA evaluated the complaint and submitted its findings:

The encumbrance in the instant case has been properly recorded in the Land Transportation Office and, as
attested to by the complainant, in the Register of Deeds of Rizal Province.Such record is constructive notice of its
contents and all interests, legal and equitable, included therein. This presumption cannot be defeated by lack of notice
or knowledge of what the public record contains any more than one may be permitted to show that he was ignorant of
the provisions of law. Hence, the respondent is charged with knowledge of the duly registered encumbrance on the
property he levied.

In the case of Caja vs. Nanquil, the Court has declared that the respondent sheriffs act of levying complainants real
property despite its being mortgaged is tantamount to negligence. As an officer of the court, he knew fully well that
the property cannot be used to satisfy the judgment debt since the mortgagee is the preferred creditor in relation to the
said property.

In the instant administrative complaint, the respondent not only levied the encumbered vehicle, but sold it in an
execution sale, the proceeds of which would not satisfy the judgment debt because of the existing encumbrance. Thus,
the implementation of the writ of execution, although impressively carried out with such celerity and promptness, had
been to naught. It must be pointed out that the recovery of the vehicle itself was the subject of Civil Case No. 0964026
filed by GSFC before the Quezon City Regional Trial Court, Branch 81.

The OCA recommended that - (1) the complaint be redocketed as a regular administrative matter, (2) the respondent be held
administratively liable for simple neglect of duty, and (3) the respondent be suspended without pay for one (1) month and one (1) day,
with a stern warning that the commission of the same or similar offense in the future shall be dealt with more severely.

The Court, as recommended, (a) directed that the complaint be redocketed as a regular administrative matter, and (b) required
the parties to manifest whether they were willing to submit the case for decision based on the pleadings/records already filed and
submitted.[4]

Both the complainant and the respondent complied, manifesting that they were submitting the case for decision based on the
pleadings/records on file.[5]

THE COURTS RULING

We disagree with the OCAs recommendation. We fail to find sufficient basis to declare the respondent administratively
liable for simple neglect of duty.

Section 9(b), Rule 39 of the Rules of Court states the manner by which judgments for money may be satisfied by levy:

SEC. 9. Execution of judgments for money, how enforced.

xxxx

(b) Satisfaction by levy. If the judgment obligor cannot pay all or part of the obligation in cash, certified bank check or
other mode of payment acceptable to the judgment obligee, the officer shall levy upon the properties of the
judgment obligor of every kind and nature whatsoever which may be disposed of for value and not otherwise
exempt from execution giving the latter the option to immediately choose which property or part thereof may be
levied upon, sufficient to satisfy the judgment. If the judgment obligor does not exercise the option, the officer shall
first levy on the personal properties, if any, and then on the real properties if the personal properties are
insufficient to answer for the judgment.

The sheriff shall sell only a sufficient portion of the personal or real property of the judgment obligor which has been
levied upon.
 When there is more property of the judgment obligor than is sufficient to satisfy the judgment and lawful fees, he must
sell only so much of the personal or real property as is sufficient to satisfy the judgment and lawful fees.

Real property, stocks, shares, debts, credits, and other personal property, or any interest in either real or personal
property, may be levied upon in like manner and with like effect as under a writ of attachment.

In determining properties to be levied upon, the Rules require the sheriff to levy only on those properties of the judgment debtor
which are not otherwise exempt from execution. For purposes of the levy, a property is deemed to belong to the judgment debtor if he
holds a beneficial interest in such property that he can sell or otherwise dispose of for value.[6] In a contract of mortgage, the debtor
retains beneficial interest over the property notwithstanding the encumbrance, since the mortgage only serves to secure the fulfillment
of the principal obligation.[7] Indeed, even if the debtor defaults, this fact does not operate to vest in the creditor the ownership of the
property;[8] the creditor must still resort to foreclosure proceedings. Thus, a mortgaged property may still be levied upon by the sheriff
to satisfy the judgment debtors obligations, as what happened in the present case. After ascertaining the judgment debtors (Reyes)
interest over the car, the respondent properly enforced the levy thereon an act that, to our mind, is in accordance with the Rules of Court.

It was thus irrelevant for the complainant to argue that had the respondent checked the cars certificate of registration, the
respondent would have been aware of the encumbrance. The encumbrance, until foreclosed, will not in any way affect the

GENEROSA ALMEDA LATORRE,

Petitioner, G.R. No. 183926
Present:

VELASCO, JR., J.,

Acting Chairperson,
NACHURA,
- versus - LEONARDO-DE CASTRO,*
PERALTA, and
MENDOZA, JJ.

LUIS ESTEBAN LATORRE, Promulgated:

Respondent.
March 29, 2010

x------------------------------------------------------------------------------------x

RESOLUTION

NACHURA, J.:

Before this Court is a Petition for Review on Certiorari[1] under Rule 45, in relation to Rule 41, of the Rules of Civil Procedure, assailing
the decision[2] of the Regional Trial Court (RTC) of Muntinlupa City, Branch 256, dated April 29, 2008.

The facts of the case are as follows:

In October 2000, petitioner Generosa Almeda Latorre (petitioner) filed before the RTC of Muntinlupa City a Complaint[3] for Collection
and Declaration of Nullity of Deed of Absolute Sale with application for Injunction against her own son, herein respondent Luis Esteban
Latorre (respondent), and one Ifzal Ali (Ifzal).

Petitioner averred that, on September 28, 1999, respondent and Ifzal entered into a Contract of Lease[4] over a 1,244-square meter real
property, situated at No. 1366 Caballero St., Dasmarias Village, Makati City (subject property). Under the said contract, respondent, as
lessor, declared that he was the absolute and registered owner of the subject property. Petitioner alleged that respondent's declaration
therein was erroneous because she and respondent were co-owners of the subject property in equal shares.

Petitioner narrated that, on March 14, 1989, she and respondent executed their respective Deeds of Donation, conveying the subject
property in favor of The Porfirio D. Latorre Memorial & Fr. Luis Esteban Latorre Foundation, Inc. (the Foundation). Thus, Transfer
Certificate of Title (TCT) No. 161963[5] was issued in the name of the Foundation. Subsequently, on September 2, 1994, petitioner and
respondent executed separate Deeds of Revocation of Donation and Reconveyance of the subject property, consented to by the
Foundation, through the issuance of appropriate corporate resolutions. However, the Deeds of Revocation were not registered; hence,
the subject property remained in the name of the Foundation. Petitioner insisted, however, that respondent was fully aware that the
subject property was owned in common by both of them. To protect her rights as co-owner, petitioner formally demanded from Ifzal
the payment of her share of the rentals, which the latter, however, refused to heed.

Moreover, petitioner averred that, on or about August 16, 2000, she discovered that respondent caused the annotation of an adverse
claim on the TCT of the subject property, claiming full ownership over the same by virtue of a Deed of Absolute Sale[6] dated March
21, 2000, allegedly executed by petitioner in favor of respondent. Petitioner claimed that the deed was a falsified document; that her
signature thereon was forged by respondent; and that she never received P21 Million or any other amount as consideration for her share
of the subject property. Thus, petitioner prayed that Ifzal be enjoined from paying the rentals to respondent, and the latter from receiving
said rentals; that both Ifzal and respondent be ordered to pay petitioner her share of the rentals; and that respondent be enjoined from
asserting full ownership over the subject property and from committing any other act in derogation of petitioner's interests therein.
Petitioner also prayed for the payment of moral and exemplary damages, litigation expenses, and costs of the suit.

Respondent immediately filed a Motion to Dismiss[7] on the sole ground that the venue of the case was improperly laid. He stressed that
while the complaint was denominated as one for Collection and Declaration of Nullity of Deed of Absolute Sale with application for
Injunction, in truth the case was a real action affecting title to and interest over the subject property. Respondent insisted that all of
petitioner's claims were anchored on her claim of ownership over one-half () portion of the subject property. Since the subject property
is located in Makati City, respondent argued that petitioner should have filed the case before the RTC of Makati City and not
of Muntinlupa City.

Ifzal also filed his motion to dismiss on the ground of want of jurisdiction, asserting that he was immune from suit because he was an
officer of the Asian Development Bank, an international organization.

The RTC issued a Temporary Restraining Order dated November 6, 2000, restraining Ifzal from paying his rentals to respondent and
enjoining the latter from receiving from the former the aforesaid rentals. The RTC also directed both Ifzal and respondent to pay
petitioner her share of the rentals, with the corresponding order against respondent not to commit any act in derogation of petitioner's
interest over the subject property.

In its Order dated January 2, 2001, the RTC denied respondent's motion to dismiss. The RTC ruled that the nature of an action whether
real or personal was determined by the allegations in the complaint, irrespective of whether or not the plaintiff was entitled to recover
upon the claims asserted - a matter resolved only after, and as a result of, a trial. Thus, trial on the merits ensued.

Undaunted, respondent filed an Answer Ad Cautelam[8] dated March 19, 2001, insisting, among others, that the case was a real action
and that the venue was improperly laid.[9]Respondent narrated that he was a former Opus Dei priest but he left the congregation in 1987
after he was maltreated by his Spanish superiors. Respondent alleged that petitioner lived with him and his family from 1988 to 2000,
and that he provided for petitioner's needs. Respondent also alleged that, for almost 20 years, the Opus Dei divested the Latorre family
of several real properties. Thus, in order to spare the subject property from the Opus Dei, both petitioner and respondent agreed to
donate it to the Foundation. In 1994, when respondent got married and sired a son, both petitioner and respondent decided to revoke the
said donation. The Foundation consented to the revocation. However, due to lack of funds, the title was never transferred but remained
in the name of the Foundation.

Respondent asseverated that he and his wife took good care of petitioner and that they provided for her needs, spending a substantial
amount of money for these needs; that because of this, and the fact that the rentals paid for the use of the subject property went to
petitioner, both parties agreed that petitioner would convey her share over the subject property to respondent; and that, on March 21,
2000, petitioner executed a Deed of Absolute Sale in favor of respondent.

Respondent further alleged that sometime in March to May 2000, the relationship of the parties, as mother and son, deteriorated.
Petitioner left respondent's house because he and his wife allegedly ignored, disrespected, and insulted her.[10] Respondent claimed,
however, that petitioner left because she detested his act of firing their driver.[11] It was then that this case was filed against him by
petitioner.

In the meantime, in its Order dated May 15, 2003, the RTC dismissed petitioner's claim against Ifzal because the dispute was clearly
between petitioner and respondent.

On April 29, 2008, the RTC ruled in favor of respondent, disposing of the case in this wise:

While the case herein filed by the plaintiff involves recovery of possession of a real property situated at 1366 Caballero
St., Dasmarias Village, Makati City, the same should have been filed and tried in the Regional Trial Court of Makati
City who, undoubtedly, has jurisdiction to hear the matter as aforementioned the same being clearly a real action.

WHEREFORE, in view of the foregoing, the above-entitled case is hereby DISMISSED for want of jurisdiction, all in
pursuance to the above-cited jurisprudence and Rule 4 of the Rules of Court.

SO ORDERED.[12]

Aggrieved, petitioner filed her Motion for Reconsideration,[13] which the RTC denied in its Order[14] dated July 24, 2008 for lack of
merit.

Hence, this Petition, claiming that the RTC erred in treating the venue as jurisdiction and in treating petitioner's complaint as a real
action.

While the instant case was pending resolution before this Court, petitioner passed away on November 14, 2009. Thus, petitioner's
counsel prayed that, pending the appointment of a representative of petitioner's estate, notices of the proceedings herein be sent to
petitioners other son, Father Roberto A. Latorre.[15]

As early as the filing of the complaint, this case had been marred by numerous procedural infractions committed by petitioner, by
respondent, and even by the RTC, all of which cannot be disregarded by this Court.

First. Petitioner filed her complaint with the RTC of Muntinlupa City instead of the RTC of Makati City, the latter being the proper
venue in this case.

Sections 1 and 2, Rule 4 of the 1997 Rules of Civil Procedure provide an answer to the issue of venue.[16] Actions affecting title to or
possession of real property or an interest therein (real actions) shall be commenced and tried in the proper court that has territorial
jurisdiction over the area where the real property is situated. On the other hand, all other actions (personal actions) shall be commenced
and tried in the proper courts where the plaintiff or any of the principal plaintiffs resides or where the defendant or any of the principal
defendants resides.[17] The action in the RTC, other than for Collection, was for the Declaration of Nullity of the Deed of Absolute Sale
involving the subject property, which is located at No. 1366 Caballero St., Dasmarias Village, Makati City. The venue for such action
is unquestionably the proper court of Makati City, where the real property or part thereof lies, not the RTC of Muntinlupa City.[18]

In this jurisdiction, we adhere to the principle that the nature of an action is determined by the allegations in the Complaint itself, rather
than by its title or heading.[19] It is also a settled rule that what determines the venue of a case is the primary objective for the filing of
the case.[20] In her Complaint, petitioner sought the nullification of the Deed of Absolute Sale on the strength of two basic claims that
(1) she did not execute the deed in favor of respondent; and (2) thus, she still owned one half () of the subject property. Indubitably,
petitioner's complaint is a real action involving the recovery of the subject property on the basis of her co-ownership thereof.
Second. The RTC also committed a procedural blunder when it denied respondent's motion to dismiss on the ground of improper venue.

The RTC insisted that trial on the merits be conducted even when it was awfully glaring that the venue was improperly laid, as pointed
out by respondent in his motion to dismiss. After trial, the RTC eventually dismissed the case on the ground of lack of jurisdiction, even
as it invoked, as justification, the rules and jurisprudence on venue. Despite the conduct of trial, the RTC failed to adjudicate this case
on the merits.

Third. Respondent also did not do very well, procedurally. When the RTC denied his Motion to Dismiss, respondent could have filed a
petition for certiorari and/or prohibition inasmuch as the denial of the motion was done without jurisdiction or in excess of jurisdiction
or with grave abuse of discretion amounting to lack of jurisdiction.[21] However, despite this lapse, it is clear that respondent did not
waive his objections to the fact of improper venue, contrary to petitioner's assertion. Notably, after his motion to dismiss was denied,
respondent filed a Motion for Reconsideration to contest such denial. Even in his Answer Ad Cautelam, respondent stood his ground
that the case ought to be dismissed on the basis of improper venue.

Finally, petitioner came directly to this Court on a Petition for Review on Certiorari under Rule 45, in relation to Rule 41, of the Rules
of Civil Procedure on alleged pure questions of law. In Murillo v. Consul,[22] we laid down a doctrine that was later adopted by the 1997
Revised Rules of Civil Procedure. In that case, this Court had the occasion to clarify the three (3) modes of appeal from decisions of
the RTC, namely: (1) ordinary appeal or appeal by writ of error, where judgment was rendered in a civil or criminal action by the RTC
in the exercise of its original jurisdiction; (2) petition for review, where judgment was rendered by the RTC in the exercise of its
appellate jurisdiction; and (3) petition for review to the Supreme Court.

The first mode of appeal, governed by Rule 41, is brought to the Court of Appeals (CA) on questions of fact or mixed questions of fact
and law. The second mode of appeal, covered by Rule 42, is brought to the CA on questions of fact, of law, or mixed questions of fact
and law. The third mode of appeal, provided in Rule 45, is filed with the Supreme Court only on questions of law.

A question of law arises when there is doubt as to what the law is on a certain state of facts, while there is a question of fact when the
doubt arises as to the truth or falsity of the alleged facts.[23] Our ruling in Velayo-Fong v. Velayo[24] is instructive:

A question of law arises when there is doubt as to what the law is on a certain state of facts, while there is a question
of fact when the doubt arises as to the truth or falsity of the alleged facts. For a question to be one of law, the same
must not involve an examination of the probative value of the evidence presented by the litigants or any of them. The
resolution of the issue must rest solely on what the law provides on the given set of circumstances. Once it is clear that
the issue invites a review of the evidence presented, the question posed is one of fact. Thus, the test of whether a
question is one of law or of fact is not the appellation given to such question by the party raising the same; rather, it is
whether the appellate court can determine the issue raised without reviewing or evaluating the evidence, in which case,
it is a question of law; otherwise it is a question of fact.[25]
In her Reply to respondents Comment,[26] petitioner prayed that this Court decide the case on the merits. To do so, however, would
require the examination by this Court of the probative value of the evidence presented,
taking into account the fact that the RTC failed to adjudicate this controversy on the merits. This, unfortunately, we cannot do. It thus
becomes exceedingly clear that the filing of the case directly with this Court ran afoul of the doctrine of hierarchy of courts. Pursuant
to this doctrine, direct resort from the lower courts to the Supreme Court will not be entertained unless the appropriate remedy sought
cannot be obtained in the lower tribunals. This Court is a court of last resort, and must so remain if it is to satisfactorily perform the
functions assigned to it by the Constitution and by immemorial tradition.[27]

Accordingly, we find no merit in the instant petition. Neither do we find any reversible error in the trial courts dismissal of the case
ostensibly for want of jurisdiction, although the trial court obviously meant to dismiss the case on the ground of improper venue.

WHEREFORE, the instant Petition is DENIED. No costs.

SO ORDERED.

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.

Castillo & Suck for plaintiffs-appellees.

Jose Q. Calingo for defendants-appellants.

REYES, J.B.L., J.:

Case certified to this Court by the Court of Appeals (CA-G.R. No. 27824-R) for the reason that only questions of law are
involved.

This case was originally commenced by defendants-appellants in the municipal court of Manila in Civil Case No. 43073,
for ejectment. Having lost therein, defendants-appellants appealed to the court a quo (Civil Case No. 30993) which also
rendered a decision against them, the dispositive portion of which follows:

WHEREFORE, the court hereby renders judgment in favor of the plaintiffs and against the defendants,
ordering the latter to pay jointly and severally the former a monthly rent of P200.00 on the house, subject-
matter of this action, from March 27, 1956, to January 14, 1967, with interest at the legal rate from April
18, 1956, the filing of the complaint, until fully paid, plus attorney's fees in the sum of P300.00 and to pay
the costs.

It appears on the records that on 1 September 1955 defendants-appellants executed a chattel mortgage in favor of
plaintiffs-appellees over their house of strong materials located at No. 550 Int. 3, Quezon Boulevard, Quiapo, Manila, over
Lot Nos. 6-B and 7-B, Block No. 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 herein mortgage was executed to guarantee a
loan of P4,800.00 received from plaintiffs-appellees, 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 becomeimmediately due and Payable and —

the Chattel Mortgage will be enforceable in accordance with the provisions of Special Act No. 3135, and
for this purpose, the Sheriff of the City of Manila or any of his deputies is hereby empowered and
authorized to sell all the Mortgagor's property after the necessary publication in order to settle the financial
debts of P4,800.00, plus 12% yearly interest, and attorney's fees... 2
When defendants-appellants 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, plaintiffs-appellees were issued the
corresponding certificate of sale.3 Thereafter, on 18 April 1956, plaintiffs-appellant commenced Civil Case No. 43073 in
the municipal court of Manila, praying, among other things, that the house be vacated and its possession surrendered to
them, and for defendants-appellants to pay rent of P200.00 monthly from 27 March 1956 up to the time the possession is
surrendered.4 On 21 September 1956, the municipal court rendered its decision —

... ordering the defendants to vacate the premises described in the complaint; ordering further to pay
monthly the amount of P200.00 from March 27, 1956, until such (time that) the premises is (sic)
completely vacated; plus attorney's fees of P100.00 and the costs of the suit.5

Defendants-appellants, in their answers in both the municipal court and court a quo impugned the legality of the chattel
mortgage, claiming that they are still the owners of the house; but they waived the right to introduce evidence, oral or
documentary. Instead, they relied on their memoranda in support of their motion to dismiss, predicated mainly on the
grounds that: (a) the municipal court did not have jurisdiction to try and decide the case because (1) the issue involved, is
ownership, and (2) there was no allegation of prior possession; and (b) failure to prove prior demand pursuant to Section
2, Rule 72, of the Rules of Court.6

During the pendency of the appeal to the Court of First Instance, defendants-appellants failed to deposit the rent for
November, 1956 within the first 10 days of December, 1956 as ordered in the decision of the municipal court. As a result,
the court granted plaintiffs-appellees' motion for execution, and it was actually issued on 24 January 1957. However, the
judgment regarding the surrender of possession to plaintiffs-appellees could not be executed because the subject house
had been already demolished on 14 January 1957 pursuant to the order of the court in a separate civil case (No. 25816)
for ejectment against the present defendants for non-payment of rentals on the land on which the house was constructed.

The motion of plaintiffs for dismissal of the appeal, execution of the supersedeas bond and withdrawal of deposited
rentals was denied for the reason that the liability therefor was disclaimed and was still being litigated, and under Section
8, Rule 72, rentals deposited had to be held until final disposition of the appeal.7

On 7 October 1957, the appellate court of First Instance rendered its decision, the dispositive portion of which is quoted
earlier. The said decision was appealed by defendants to the Court of Appeals which, in turn, certified the appeal to this
Court. Plaintiffs-appellees failed to file a brief and this appeal was submitted for decision without it.

Defendants-appellants submitted numerous assignments of error which can be condensed into two questions, namely: .

(a) Whether the municipal court from which the case originated had jurisdiction to adjudicate the same;

(b) Whether the defendants are, under the law, legally bound to pay rentals to the plaintiffs during the
period of one (1) year provided by law for the redemption of the extrajudicially foreclosed house.

We will consider these questions seriatim.

(a) Defendants-appellants mortgagors question the jurisdiction of the municipal court from which the case originated, and
consequently, the appellate jurisdiction of the Court of First Instance a quo, on the theory that the chattel mortgage is
void ab initio; whence it would follow that the extrajudicial foreclosure, and necessarily the consequent auction sale, are
also void. Thus, the ownership of the house still remained with defendants-appellants who are entitled to possession and
not plaintiffs-appellees. Therefore, it is argued by defendants-appellants, the issue of ownership will have to be
adjudicated first in order to determine possession. lt is contended further that ownership being in issue, it is the Court of
First Instance which has jurisdiction and not the municipal court.

Defendants-appellants predicate their theory of nullity of the chattel mortgage on two grounds, which are: (a) that, their
signatures on the chattel mortgage were obtained through fraud, deceit, or trickery; and (b) that the subject matter of the
mortgage is a house of strong materials, and, being an immovable, it can only be the subject of a real estate mortgage
and not a chattel mortgage.

On the charge of fraud, deceit or trickery, the Court of First Instance found defendants-appellants' contentions as not
supported by evidence and accordingly dismissed the charge,8 confirming the earlier finding of the municipal court that
"the defense of ownership as well as the allegations of fraud and deceit ... are mere allegations."9

It has been held in Supia and Batiaco vs. Quintero and Ayala10 that "the answer is a mere statement of the facts which the
party filing it expects to prove, but it is not evidence;11 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,12 wherein the defendant was also a successful bidder in an auction sale, it was likewise held by this
Court that in detainer cases the aim 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. 13

Moreover, even granting that the charge is true, 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. 14 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.

It is claimed in the alternative by defendants-appellants that even if there was no fraud, deceit or trickery, the chattel
mortgage was still null and void ab initio because only personal properties can be subject of a chattel mortgage. The rule
about the status of buildings as immovable property is stated in Lopez vs. Orosa, Jr. and Plaza Theatre Inc.,15cited
in Associated Insurance Surety Co., Inc. vs. Iya, et al. 16 to the effect that —

... 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 irrespective of whether or not said structure and the land on which it is
adhered to belong to the same owner.

Certain deviations, however, have been allowed for various reasons. In the case of Manarang and Manarang vs.
Ofilada,17 this Court stated 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. 18 In the latter case,
the mortgagor conveyed and transferred to the mortgagee by way of mortgage "the following described personal
property." 19 The "personal property" consisted of leasehold rights and a building. Again, in the case of Luna vs.
Encarnacion,20 the subject of the contract designated as Chattel Mortgage was a house of mixed materials, and this Court
hold 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 the later
case of Navarro vs. Pineda,21 this 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, No. L-11139, 23 April 1958). 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 (Evangelists
vs. Abad, [CA]; 36 O.G. 2913), 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, 222 U.S. 58, cited in Davao Sawmill Co., Inc. vs. Castillo, et al.,
61 Phil. 709). 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.
(Evangelista vs. Abad, Supra.) 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, [CA] 48 O.G. 5374): 22

In the contract now before Us, 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
Mortgage23 the property together with its leasehold rights over the lot on which it is constructed and participation
..." 24 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 defendants-appellants 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 defendats-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 personalty. Finally unlike in the Iya cases, Lopez vs. Orosa, Jr. and Plaza Theatre, Inc. 25 and Leung Yee vs. F.
L. Strong Machinery and Williamson, 26 wherein third persons assailed the validity of the chattel mortgage,27 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.

(b) Turning to the question of possession and rentals of the premises in question. The Court of First Instance noted in its
decision that 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. For this reason, the said court
limited itself to sentencing the erstwhile mortgagors to pay plaintiffs a monthly rent of P200.00 from 27 March 1956 (when
the chattel mortgage was foreclosed and the house sold) until 14 January 1957 (when it was torn down by the Sheriff),
plus P300.00 attorney's fees.
Appellants mortgagors question this award, claiming that they were entitled to remain in possession without any obligation
to pay rent during the one year redemption period after the foreclosure sale, i.e., until 27 March 1957. On this issue, We
must rule for the appellants.

Chattel mortgages are covered and regulated by the Chattel Mortgage Law, Act No. 1508.28 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 No. 3135, as amended by Act No. 4118, provided that the requirements of the law relative to notice
and registration are complied with. 29 In the instant case, the parties specifically stipulated that "the chattel mortgage will
be enforceable in accordance with the provisions of Special Act No. 3135 ... ." 30(Emphasis supplied).

Section 6 of the Act referred to 31 provides that the debtor-mortgagor (defendants-appellants herein) 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 32 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 Court of First Instance 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. 33 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 34 which also applies to
properties purchased in extrajudicial foreclosure proceedings.35 Construing the said section, this Court stated in the
aforestated case of Reyes vs. Hamada.

In other words, 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. (Emphasis supplied)

The Hamada case reiterates the previous ruling in Chan vs. Espe.36

Since the defendants-appellants were occupying the house at the time of the auction sale, they are entitled to remain in
possession during the period of redemption or within one year from and after 27 March 1956, the date of the auction sale,
and to collect the rents or profits during the said period.

It will be noted further that in the case at bar 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 No. 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. For this reason, the same should be ordered dismissed, 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 cases. 37

It follows that the court below erred in requiring the mortgagors to pay rents for the year following the foreclosure sale, as
well as attorney's fees.

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

Concepcion, C.J., Dizon, Makalintal, Zaldivar, Castro, Fernando, Teehankee, Barredo, Villamor and Makasiar, JJ.,
concur.
G.R. No. L-50008 August 31, 1987

PRUDENTIAL BANK, petitioner,

vs.
HONORABLE DOMINGO D. PANIS, Presiding Judge of Branch III, Court of First Instance of Zambales and
Olongapo City; FERNANDO MAGCALE & TEODULA BALUYUT-MAGCALE, respondents.

PARAS, J.:

This is a petition for review on certiorari of the November 13, 1978 Decision * of the then Court of First Instance of
Zambales and Olongapo City in Civil Case No. 2443-0 entitled "Spouses Fernando A. Magcale and Teodula Baluyut-
Magcale vs. Hon. Ramon Y. Pardo and Prudential Bank" declaring that the deeds of real estate mortgage executed by
respondent spouses in favor of petitioner bank are null and void.

The undisputed facts of this case by stipulation of the parties are as follows:

... on November 19, 1971, plaintiffs-spouses Fernando A. Magcale and Teodula Baluyut Magcale secured
a loan in the sum of P70,000.00 from the defendant Prudential Bank. To secure payment of this loan,
plaintiffs executed in favor of defendant on the aforesaid date a deed of Real Estate Mortgage over the
following described properties:

l. A 2-STOREY, SEMI-CONCRETE, residential building with warehouse spaces containing a total floor
area of 263 sq. meters, more or less, generally constructed of mixed hard wood and concrete materials,
under a roofing of cor. g. i. sheets; declared and assessed in the name of FERNANDO MAGCALE under
Tax Declaration No. 21109, issued by the Assessor of Olongapo City with an assessed value of
P35,290.00. This building is the only improvement of the lot.

2. THE PROPERTY hereby conveyed by way of MORTGAGE includes the right of occupancy on the lot
where the above property is erected, and more particularly described and bounded, as follows:

A first class residential land Identffied as Lot No. 720, (Ts-308, Olongapo Townsite
Subdivision) Ardoin Street, East Bajac-Bajac, Olongapo City, containing an area of 465 sq.
m. more or less, declared and assessed in the name of FERNANDO MAGCALE under Tax
Duration No. 19595 issued by the Assessor of Olongapo City with an assessed value of
P1,860.00; bounded on the

NORTH: By No. 6, Ardoin Street

SOUTH: By No. 2, Ardoin Street

EAST: By 37 Canda Street, and

WEST: By Ardoin Street.

All corners of the lot marked by conc. cylindrical monuments of the Bureau
of Lands as visible limits. ( Exhibit "A, " also Exhibit "1" for defendant).

Apart from the stipulations in the printed portion of the aforestated deed of mortgage, there
appears a rider typed at the bottom of the reverse side of the document under the lists of
the properties mortgaged which reads, as follows:

AND IT IS FURTHER AGREED that in the event the Sales Patent on the
lot applied for by the Mortgagors as herein stated is released or issued by
the Bureau of Lands, the Mortgagors hereby authorize the Register of
Deeds to hold the Registration of same until this Mortgage is cancelled, or
to annotate this encumbrance on the Title upon authority from the
Secretary of Agriculture and Natural Resources, which title with annotation,
shall be released in favor of the herein Mortgage.

From the aforequoted stipulation, it is obvious that the mortgagee (defendant Prudential
Bank) was at the outset aware of the fact that the mortgagors (plaintiffs) have already filed
 a Miscellaneous Sales Application over the lot, possessory rights over which, were
mortgaged to it.

Exhibit "A" (Real Estate Mortgage) was registered under the Provisions of Act 3344 with
the Registry of Deeds of Zambales on November 23, 1971.

On May 2, 1973, plaintiffs secured an additional loan from defendant Prudential Bank in
the sum of P20,000.00. To secure payment of this additional loan, plaintiffs executed in
favor of the said defendant another deed of Real Estate Mortgage over the same
properties previously mortgaged in Exhibit "A." (Exhibit "B;" also Exhibit "2" for defendant).
This second deed of Real Estate Mortgage was likewise registered with the Registry of
Deeds, this time in Olongapo City, on May 2,1973.

On April 24, 1973, the Secretary of Agriculture issued Miscellaneous Sales Patent No. 4776 over the
parcel of land, possessory rights over which were mortgaged to defendant Prudential Bank, in favor of
plaintiffs. On the basis of the aforesaid Patent, and upon its transcription in the Registration Book of the
Province of Zambales, Original Certificate of Title No. P-2554 was issued in the name of Plaintiff Fernando
Magcale, by the Ex-Oficio Register of Deeds of Zambales, on May 15, 1972.

For failure of plaintiffs to pay their obligation to defendant Bank after it became due, and upon application
of said defendant, the deeds of Real Estate Mortgage (Exhibits "A" and "B") were extrajudicially
foreclosed. Consequent to the foreclosure was the sale of the properties therein mortgaged to defendant
as the highest bidder in a public auction sale conducted by the defendant City Sheriff on April 12, 1978
(Exhibit "E"). The auction sale aforesaid was held despite written request from plaintiffs through counsel
dated March 29, 1978, for the defendant City Sheriff to desist from going with the scheduled public auction
sale (Exhibit "D")." (Decision, Civil Case No. 2443-0, Rollo, pp. 29-31).

Respondent Court, in a Decision dated November 3, 1978 declared the deeds of Real Estate Mortgage as null and void
(Ibid., p. 35).

On December 14, 1978, petitioner filed a Motion for Reconsideration (Ibid., pp. 41-53), opposed by private respondents
on January 5, 1979 (Ibid., pp. 54-62), and in an Order dated January 10, 1979 (Ibid., p. 63), the Motion for
Reconsideration was denied for lack of merit. Hence, the instant petition (Ibid., pp. 5-28).

The first Division of this Court, in a Resolution dated March 9, 1979, resolved to require the respondents to comment
(Ibid., p. 65), which order was complied with the Resolution dated May 18,1979, (Ibid., p. 100), petitioner filed its Reply on
June 2,1979 (Ibid., pp. 101-112).

Thereafter, in the Resolution dated June 13, 1979, the petition was given due course and the parties were required to
submit simultaneously their respective memoranda. (Ibid., p. 114).

On July 18, 1979, petitioner filed its Memorandum (Ibid., pp. 116-144), while private respondents filed their Memorandum
on August 1, 1979 (Ibid., pp. 146-155).

In a Resolution dated August 10, 1979, this case was considered submitted for decision (Ibid., P. 158).

In its Memorandum, petitioner raised the following issues:

1. WHETHER OR NOT THE DEEDS OF REAL ESTATE MORTGAGE ARE VALID; AND

2. WHETHER OR NOT THE SUPERVENING ISSUANCE IN FAVOR OF PRIVATE RESPONDENTS OF

MISCELLANEOUS SALES PATENT NO. 4776 ON APRIL 24, 1972 UNDER ACT NO. 730 AND THE COVERING
ORIGINAL CERTIFICATE OF TITLE NO. P-2554 ON MAY 15,1972 HAVE THE EFFECT OF INVALIDATING THE
DEEDS OF REAL ESTATE MORTGAGE. (Memorandum for Petitioner, Rollo, p. 122).

This petition is impressed with merit.

The pivotal issue in this case is whether or not a valid real estate mortgage can be constituted on the building erected on
the land belonging to another.

The answer is in the affirmative.

In the enumeration of properties under Article 415 of the Civil Code of the Philippines, this Court ruled that, "it is obvious
that the inclusion of "building" separate and distinct from the land, in said provision of law can only mean that a building is
by itself an immovable property." (Lopez vs. Orosa, Jr., et al., L-10817-18, Feb. 28, 1958; Associated Inc. and Surety Co.,
Inc. vs. Iya, et al., L-10837-38, May 30,1958).

Thus, while it is true that a mortgage of land necessarily includes, in the absence of stipulation of the improvements
thereon, buildings, still a building by itself may be mortgaged apart from the land on which it has been built. Such a
mortgage would be still a real estate mortgage for the building would still be considered immovable property even if dealt
with separately and apart from the land (Leung Yee vs. Strong Machinery Co., 37 Phil. 644). In the same manner, this
Court has also established that possessory rights over said properties before title is vested on the grantee, may be validly
transferred or conveyed as in a deed of mortgage (Vda. de Bautista vs. Marcos, 3 SCRA 438 [1961]).

Coming back to the case at bar, the records show, as aforestated that the original mortgage deed on the 2-storey semi-
concrete residential building with warehouse and on the right of occupancy on the lot where the building was erected, was
executed on November 19, 1971 and registered under the provisions of Act 3344 with the Register of Deeds of Zambales
on November 23, 1971. Miscellaneous Sales Patent No. 4776 on the land was issued on April 24, 1972, on the basis of
which OCT No. 2554 was issued in the name of private respondent Fernando Magcale on May 15, 1972. It is therefore
without question that the original mortgage was executed before the issuance of the final patent and before the
government was divested of its title to the land, an event which takes effect only on the issuance of the sales patent and
its subsequent registration in the Office of the Register of Deeds (Visayan Realty Inc. vs. Meer, 96 Phil. 515; Director of
Lands vs. De Leon, 110 Phil. 28; Director of Lands vs. Jurado, L-14702, May 23, 1961; Pena "Law on Natural
Resources", p. 49). Under the foregoing considerations, it is evident that the mortgage executed by private respondent on
his own building which was erected on the land belonging to the government is to all intents and purposes a valid
mortgage.

As to restrictions expressly mentioned on the face of respondents' OCT No. P-2554, it will be noted that Sections 121,
122 and 124 of the Public Land Act, refer to land already acquired under the Public Land Act, or any improvement thereon
and therefore have no application to the assailed mortgage in the case at bar which was executed before such
eventuality. Likewise, Section 2 of Republic Act No. 730, also a restriction appearing on the face of private respondent's
title has likewise no application in the instant case, despite its reference to encumbrance or alienation before the patent is
issued because it refers specifically to encumbrance or alienation on the land itself and does not mention anything
regarding the improvements existing thereon.

But it is a different matter, as regards the second mortgage executed over the same properties on May 2, 1973 for an
additional loan of P20,000.00 which was registered with the Registry of Deeds of Olongapo City on the same date.
Relative thereto, it is evident that such mortgage executed after the issuance of the sales patent and of the Original
Certificate of Title, falls squarely under the prohibitions stated in Sections 121, 122 and 124 of the Public Land Act and
Section 2 of Republic Act 730, and is therefore null and void.

Petitioner points out that private respondents, after physically possessing the title for five years, voluntarily surrendered
the same to the bank in 1977 in order that the mortgaged may be annotated, without requiring the bank to get the prior
approval of the Ministry of Natural Resources beforehand, thereby implicitly authorizing Prudential Bank to cause the
annotation of said mortgage on their title.

However, the Court, in recently ruling on violations of Section 124 which refers to Sections 118, 120, 122 and 123 of
Commonwealth Act 141, has held:

... Nonetheless, we apply our earlier rulings because we believe that as in pari delicto may not be invoked
to defeat the policy of the State neither may the doctrine of estoppel give a validating effect to a void
contract. Indeed, it is generally considered that as between parties to a contract, validity cannot be given
to it by estoppel if it is prohibited by law or is against public policy (19 Am. Jur. 802). It is not within the
competence of any citizen to barter away what public policy by law was to preserve (Gonzalo Puyat &
Sons, Inc. vs. De los Amas and Alino supra). ... (Arsenal vs. IAC, 143 SCRA 54 [1986]).

This pronouncement covers only the previous transaction already alluded to and does not pass upon any new contract
between the parties (Ibid), as in the case at bar. It should not preclude new contracts that may be entered into between
petitioner bank and private respondents that are in accordance with the requirements of the law. After all, private
respondents themselves declare that they are not denying the legitimacy of their debts and appear to be open to new
negotiations under the law (Comment; Rollo, pp. 95-96). Any new transaction, however, would be subject to whatever
steps the Government may take for the reversion of the land in its favor.

PREMISES CONSIDERED, the decision of the Court of First Instance of Zambales & Olongapo City is hereby
MODIFIED, declaring that the Deed of Real Estate Mortgage for P70,000.00 is valid but ruling that the Deed of Real
Estate Mortgage for an additional loan of P20,000.00 is null and void, without prejudice to any appropriate action the
Government may take against private respondents.