property case no. 03,04

7/31/2019 Property Case No. 03,04

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CASE No. 03

Republic of the Philippines

SUPREME COURT

Manila

EN BANC

G.R. No. L-20329 March 16, 1923

THE STANDARD OIL COMPANY OF NEW YORK, petitioner,

vs.

JOAQUIN JARAMILLO, as register of deeds of the City of Manila, respondent.

Ross, Lawrence and Selph for petitioner.

City Fiscal Revilla and Assistant City Fiscal Rodas for respondent.

STREET, J.:

This cause is before us upon demurrer interposed by the respondent, Joaquin Jaramillo, register of

deeds of the City of Manila, to an original petition of the Standard Oil Company of New York, seeking

a peremptory mandamus to compel the respondent to record in the proper register a document

purporting to be a chattel mortgage executed in the City of Manila by Gervasia de la Rosa, Vda. de

Vera, in favor of the Standard Oil Company of New York.

It appears from the petition that on November 27, 1922, Gervasia de la Rosa, Vda. de Vera, was the

lessee of a parcel of land situated in the City of Manila and owner of the house of strong materials built

thereon, upon which date she executed a document in the form of a chattel mortgage, purporting to

convey to the petitioner by way of mortgage both the leasehold interest in said lot and the building

which stands thereon.



The clauses in said document describing the property intended to be thus mortgage are expressed in the

following words:

Now, therefore, the mortgagor hereby conveys and transfer to the mortgage, by way of mortgage, the

following described personal property, situated in the City of Manila, and now in possession of the

mortgagor, to wit:

(1) All of the right, title, and interest of the mortgagor in and to the contract of lease hereinabove

referred to, and in and to the premises the subject of the said lease;

(2) The building, property of the mortgagor, situated on the aforesaid leased premises.

After said document had been duly acknowledge and delivered, the petitioner caused the same to be

presented to the respondent, Joaquin Jaramillo, as register of deeds of the City of Manila, for the

purpose of having the same recorded in the book of record of chattel mortgages. Upon examination of

the instrument, the respondent was of the opinion that it was not a chattel mortgage, for the reason that

the interest therein mortgaged did not appear to be personal property, within the meaning of the Chattel

Mortgage Law, and registration was refused on this ground only.

We are of the opinion that the position taken by the respondent is untenable; and it is his duty to accept

the proper fee and place the instrument on record. The duties of a register of deeds in respect to the

registration of chattel mortgage are of a purely ministerial character; and no provision of law can be

cited which confers upon him any judicial or quasi-judicial power to determine the nature of any

document of which registration is sought as a chattel mortgage.

The original provisions touching this matter are contained in section 15 of the Chattel Mortgage Law(Act No. 1508), as amended by Act No. 2496; but these have been transferred to section 198 of the

Administrative Code, where they are now found. There is nothing in any of these provisions conferring

upon the register of deeds any authority whatever in respect to the "qualification," as the term is used in

Spanish law, of chattel mortgage. His duties in respect to such instruments are ministerial only. The

efficacy of the act of recording a chattel mortgage consists in the fact that it operates as constructive

notice of the existence of the contract, and the legal effects of the contract must be discovered in the

instrument itself in relation with the fact of notice. Registration adds nothing to the instrument,



considered as a source of title, and affects nobody's rights except as a specifies of notice.

Articles 334 and 335 of the Civil Code supply no absolute criterion for discriminating between real

property and personal property for purpose of the application of the Chattel Mortgage Law. Those

articles state rules which, considered as a general doctrine, are law in this jurisdiction; but it must notbe forgotten that under given conditions property may have character different from that imputed to it

in said articles. It is undeniable that the parties to a contract may by agreement treat as personal

property that which by nature would be real property; and it is a familiar phenomenon to see things

classed as real property for purposes of taxation which on general principle might be considered

personal property. Other situations are constantly arising, and from time to time are presented to this

court, in which the proper classification of one thing or another as real or personal property may be said

to be doubtful.

The point submitted to us in this case was determined on September 8, 1914, in an administrative

ruling promulgated by the Honorable James A. Ostrand, now a Justice of this Court, but acting at that

time in the capacity of Judge of the fourth branch of the Court of First Instance of the Ninth Judicial

District, in the City of Manila; and little of value can be here added to the observations contained in

said ruling. We accordingly quote therefrom as follows:

It is unnecessary here to determine whether or not the property described in the document in question is

real or personal; the discussion may be confined to the point as to whether a register of deeds has

authority to deny the registration of a document purporting to be a chattel mortgage and executed in themanner and form prescribed by the Chattel Mortgage Law.

Then, after quoting section 5 of the Chattel Mortgage Law (Act No. 1508), his Honor continued:

Based principally upon the provisions of section quoted the Attorney-General of the Philippine Islands,

in an opinion dated August 11, 1909, held that a register of deeds has no authority to pass upon the

capacity of the parties to a chattel mortgage which is presented to him for record. A fortiori a register of deeds can have no authority to pass upon the character of the property sought to be encumbered by a

chattel mortgage. Of course, if the mortgaged property is real instead of personal the chattel mortgage

would no doubt be held ineffective as against third parties, but this is a question to be determined by

the courts of justice and not by the register of deeds.

In Leung Yee vs. Frank L. Strong Machinery Co. and Williamson (37 Phil., 644), this court held that



where the interest conveyed is of the nature of real, property, the placing of the document on record in

the chattel mortgage register is a futile act; but that decision is not decisive of the question now before

us, which has reference to the function of the register of deeds in placing the document on record.

In the light of what has been said it becomes unnecessary for us to pass upon the point whether theinterests conveyed in the instrument now in question are real or personal; and we declare it to be the

duty of the register of deeds to accept the estimate placed upon the document by the petitioner and to

register it, upon payment of the proper fee.

The demurrer is overruled; and unless within the period of five days from the date of the notification

hereof, the respondent shall interpose a sufficient answer to the petition, the writ of mandamus will be

issued, as prayed, but without costs. So ordered.

Araullo, C.J., Malcolm, Avanceña, Ostrand, Johns, and Romualdez, JJ., concur

.



DIGEST:

FACTS:

On November 27, 1922, Gervasia de la Rosa, executed a document in the form of a chattel

mortgage, purporting to convey to the petitioner (Standard Oil Co.) by way of mortgage both the

leasehold interest in the parcel of land situated in Manila and the building which stands thereon.

The clauses in said document describe the property as personal including the right, title and



CASE No. 04

Republic of the Philippines

SUPREME COURT

Manila

EN BANC

G.R. No. L-11658 February 15, 1918

LEUNG YEE, plaintiff-appellant,

vs.

FRANK L. STRONG MACHINERY COMPANY and J. G. WILLIAMSON, defendants-appellees.

Booram and Mahoney for appellant.

Williams, Ferrier and SyCip for appellees.



CARSON, J.:

The "Compañia Agricola Filipina" bought a considerable quantity of rice-cleaning machinery company

from the defendant machinery company, and executed a chattel mortgage thereon to secure payment of

the purchase price. It included in the mortgage deed the building of strong materials in which themachinery was installed, without any reference to the land on which it stood. The indebtedness secured

by this instrument not having been paid when it fell due, the mortgaged property was sold by the sheriff,

in pursuance of the terms of the mortgage instrument, and was bought in by the machinery company.

The mortgage was registered in the chattel mortgage registry, and the sale of the property to the

machinery company in satisfaction of the mortgage was annotated in the same registry on December 29,

1913.

A few weeks thereafter, on or about the 14th of January, 1914, the "Compañia Agricola Filipina"

executed a deed of sale of the land upon which the building stood to the machinery company, but this

deed of sale, although executed in a public document, was not registered. This deed makes no reference

to the building erected on the land and would appear to have been executed for the purpose of curing

any defects which might be found to exist in the machinery company's title to the building under the

sheriff's certificate of sale. The machinery company went into possession of the building at or about the

time when this sale took place, that is to say, the month of December, 1913, and it has continued in

possession ever since.

At or about the time when the chattel mortgage was executed in favor of the machinery company, themortgagor, the "Compañia Agricola Filipina" executed another mortgage to the plaintiff upon the

building, separate and apart from the land on which it stood, to secure payment of the balance of its

indebtedness to the plaintiff under a contract for the construction of the building. Upon the failure of

the mortgagor to pay the amount of the indebtedness secured by the mortgage, the plaintiff secured

judgment for that amount, levied execution upon the building, bought it in at the sheriff's sale on or

about the 18th of December, 1914, and had the sheriff's certificate of the sale duly registered in the land

registry of the Province of Cavite.

At the time when the execution was levied upon the building, the defendant machinery company,

which was in possession, filed with the sheriff a sworn statement setting up its claim of title and

demanding the release of the property from the levy. Thereafter, upon demand of the sheriff, the

plaintiff executed an indemnity bond in favor of the sheriff in the sum of P12,000, in reliance upon

which the sheriff sold the property at public auction to the plaintiff, who was the highest bidder at the

sheriff's sale.



This action was instituted by the plaintiff to recover possession of the building from the machinery

company.

The trial judge, relying upon the terms of article 1473 of the Civil Code, gave judgment in favor of the

machinery company, on the ground that the company had its title to the building registered prior to thedate of registry of the plaintiff's certificate.

Article 1473 of the Civil Code is as follows:

If the same thing should have been sold to different vendees, the ownership shall be transfer to the

person who may have the first taken possession thereof in good faith, if it should be personal property.

Should it be real property, it shall belong to the person acquiring it who first recorded it in the registry.

Should there be no entry, the property shall belong to the person who first took possession of it in good

faith, and, in the absence thereof, to the person who presents the oldest title, provided there is good

faith.

The registry her referred to is of course the registry of real property, and it must be apparent that the

annotation or inscription of a deed of sale of real property in a chattel mortgage registry cannot be

given the legal effect of an inscription in the registry of real property. By its express terms, the Chattel

Mortgage Law contemplates and makes provision for mortgages of personal property; and the sole

purpose and object of the chattel mortgage registry is to provide for the registry of "Chattel mortgages,"

that is to say, mortgages of personal property executed in the manner and form prescribed in the statute.

The building of strong materials in which the rice-cleaning machinery was installed by the "Compañia

Agricola Filipina" was real property, and the mere fact that the parties seem to have dealt with it

separate and apart from the land on which it stood in no wise changed its character as real property. It

follows that neither the original registry in the chattel mortgage of the building and the machineryinstalled therein, not the annotation in that registry of the sale of the mortgaged property, had any effect

whatever so far as the building was concerned.

We conclude that the ruling in favor of the machinery company cannot be sustained on the ground

assigned by the trial judge. We are of opinion, however, that the judgment must be sustained on the

ground that the agreed statement of facts in the court below discloses that neither the purchase of the



building by the plaintiff nor his inscription of the sheriff's certificate of sale in his favor was made in

good faith, and that the machinery company must be held to be the owner of the property under the

third paragraph of the above cited article of the code, it appearing that the company first took

possession of the property; and further, that the building and the land were sold to the machinery

company long prior to the date of the sheriff's sale to the plaintiff.

It has been suggested that since the provisions of article 1473 of the Civil Code require "good faith," in

express terms, in relation to "possession" and "title," but contain no express requirement as to "good

faith" in relation to the "inscription" of the property on the registry, it must be presumed that good faith

is not an essential requisite of registration in order that it may have the effect contemplated in this

article. We cannot agree with this contention. It could not have been the intention of the legislator to

base the preferential right secured under this article of the code upon an inscription of title in bad faith.

Such an interpretation placed upon the language of this section would open wide the door to fraud and

collusion. The public records cannot be converted into instruments of fraud and oppression by one who

secures an inscription therein in bad faith. The force and effect given by law to an inscription in apublic record presupposes the good faith of him who enters such inscription; and rights created by

statute, which are predicated upon an inscription in a public registry, do not and cannot accrue under an

inscription "in bad faith," to the benefit of the person who thus makes the inscription.

Construing the second paragraph of this article of the code, the supreme court of Spain held in its

sentencia of the 13th of May, 1908, that:

This rule is always to be understood on the basis of the good faith mentioned in the first paragraph;

therefore, it having been found that the second purchasers who record their purchase had knowledge of

the previous sale, the question is to be decided in accordance with the following paragraph. (Note 2, art.

1473, Civ. Code, Medina and Maranon [1911] edition.)

Although article 1473, in its second paragraph, provides that the title of conveyance of ownership of

the real property that is first recorded in the registry shall have preference, this provision must always

be understood on the basis of the good faith mentioned in the first paragraph; the legislator could not

have wished to strike it out and to sanction bad faith, just to comply with a mere formality which, in

given cases, does not obtain even in real disputes between third persons. (Note 2, art. 1473, Civ. Code,

issued by the publishers of the La Revista de los Tribunales, 13th edition.)

The agreed statement of facts clearly discloses that the plaintiff, when he bought the building at the

sheriff's sale and inscribed his title in the land registry, was duly notified that the machinery company



had bought the building from plaintiff's judgment debtor; that it had gone into possession long prior to

the sheriff's sale; and that it was in possession at the time when the sheriff executed his levy. The

execution of an indemnity bond by the plaintiff in favor of the sheriff, after the machinery company

had filed its sworn claim of ownership, leaves no room for doubt in this regard. Having bought in the

building at the sheriff's sale with full knowledge that at the time of the levy and sale the building had

already been sold to the machinery company by the judgment debtor, the plaintiff cannot be said to

have been a purchaser in good faith; and of course, the subsequent inscription of the sheriff's certificate

of title must be held to have been tainted with the same defect.

Perhaps we should make it clear that in holding that the inscription of the sheriff's certificate of sale to

the plaintiff was not made in good faith, we should not be understood as questioning, in any way, the

good faith and genuineness of the plaintiff's claim against the "Compañia Agricola Filipina." The truth

is that both the plaintiff and the defendant company appear to have had just and righteous claims

against their common debtor. No criticism can properly be made of the exercise of the utmost diligence

by the plaintiff in asserting and exercising his right to recover the amount of his claim from the estateof the common debtor. We are strongly inclined to believe that in procuring the levy of execution upon

the factory building and in buying it at the sheriff's sale, he considered that he was doing no more than

he had a right to do under all the circumstances, and it is highly possible and even probable that he

thought at that time that he would be able to maintain his position in a contest with the machinery

company. There was no collusion on his part with the common debtor, and no thought of the

perpetration of a fraud upon the rights of another, in the ordinary sense of the word. He may have

hoped, and doubtless he did hope, that the title of the machinery company would not stand the test of

an action in a court of law; and if later developments had confirmed his unfounded hopes, no one could

question the legality of the propriety of the course he adopted.

But it appearing that he had full knowledge of the machinery company's claim of ownership when he

executed the indemnity bond and bought in the property at the sheriff's sale, and it appearing further

that the machinery company's claim of ownership was well founded, he cannot be said to have been an

innocent purchaser for value. He took the risk and must stand by the consequences; and it is in this

sense that we find that he was not a purchaser in good faith.

One who purchases real estate with knowledge of a defect or lack of title in his vendor cannot claim

that he has acquired title thereto in good faith as against the true owner of the land or of an interest

therein; and the same rule must be applied to one who has knowledge of facts which should have put

him upon such inquiry and investigation as might be necessary to acquaint him with the defects in the

title of his vendor. A purchaser cannot close his eyes to facts which should put a reasonable man upon

his guard, and then claim that he acted in good faith under the belief that there was no defect in the title

of the vendor. His mere refusal to believe that such defect exists, or his willful closing of his eyes to the

possibility of the existence of a defect in his vendor's title, will not make him an innocent purchaser for



value, if afterwards develops that the title was in fact defective, and it appears that he had such notice

of the defects as would have led to its discovery had he acted with that measure of precaution which

may reasonably be acquired of a prudent man in a like situation. Good faith, or lack of it, is in its

analysis a question of intention; but in ascertaining the intention by which one is actuated on a given

occasion, we are necessarily controlled by the evidence as to the conduct and outward acts by which

alone the inward motive may, with safety, be determined. So it is that "the honesty of intention," "the

honest lawful intent," which constitutes good faith implies a "freedom from knowledge and

circumstances which ought to put a person on inquiry," and so it is that proof of such knowledge

overcomes the presumption of good faith in which the courts always indulge in the absence of proof to

the contrary. "Good faith, or the want of it, is not a visible, tangible fact that can be seen or touched,

but rather a state or condition of mind which can only be judged of by actual or fancied tokens or

signs." (Wilder vs. Gilman, 55 Vt., 504, 505; Cf. Cardenas Lumber Co. vs. Shadel, 52 La. Ann., 2094-

2098; Pinkerton Bros. Co. vs. Bromley, 119 Mich., 8, 10, 17.)

We conclude that upon the grounds herein set forth the disposing part of the decision and judgmententered in the court below should be affirmed with costs of this instance against the appellant. So

ordered.

Arellano, C.J., Johnson, Araullo, Street and Malcolm, JJ., concur.

Torres, Avanceña and Fisher, JJ., took no part.



mortgages which only deal with personal properties. The fact that the parties dealt the building as if it's

a personal property does not change the nature of the thing. It is still a real property. Its inscription in

the Chattel Mortgage registry does not modify its inscription the registry of real property.

property case no. 03,04

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