LAW ON PROPERTY | LEUNG YEE V. STRONG MACHINERY CO. G.R. NO. L-11658, FEBRUARY 15, 1918
LEUNG YEE V. STRONG
MACHINERY CO.
G.R. NO. L-11658,
FEBRUARY 15, 1918
TOPIC/DOCTRINE
The building
where the rice-cleaning machinery was installed by the “Compañia
Agricola Filipina” was a 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 does not change its character as real property
FACTS
The
"Compañia Agricola Filipina" bought several rice-cleaning machineries
from the defendant machinery company. The Compañia executed a chattel mortgage
to secure payment of the purchase price. It included in the mortgage deed the
building where the machinery was installed, without any reference to the land
on which it stood. Upon failure to pay the debt, the mortgaged property was sold
by the sheriff, and in pursuance of the terms of the mortgage instrument, it
was bought 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.
On the 14th of
January 1914, the "Compañia Agricola Filipina" executed a deed of
sale of the land where the building stood to the machinery company, but this
deed of sale, although executed in a public document, was not registered. The
machinery company went into possession of the land and the building.
Simultaneously, the "Compañia Agricola Filipina"
executed another mortgage to the plaintiff Leung Yee on the building, not
including the land, to secure payment of the balance of its indebtedness to the
plaintiff under a contract for the construction of the building. Upon failure
to pay the amount owed, the plaintiff bought it in at the sheriff's sale on 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.
The machinery company, who was in possession of the levied
building 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.
The plaintiff filed an action 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 the date of registry of the plaintiff's certificate. Hence
the appeal.
ISSUE
Whether or not
the building which was sold separate from the land is a real property?
Who has the
better right to building?
RULING
Yes.
The court ruled that the building
where the rice-cleaning machinery was installed by the “Compañia
Agricola Filipina” was a 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 does not change its character as real property. It follows
that neither the original registry in the chattel mortgage of the building and the machinery
installed therein, not the annotation in that registry of the sale of the mortgaged property, had any
effect whatever as
far as the building was concerned.
Here, the court ruled that the judgment is sustained because under the third paragraph
of the cited article of the code, the company first took possession of the
property; and later the building and the land were sold to the machinery
company long prior to the date of the sheriff's sale to the plaintiff.
Article 1473 of
the Civil Code provides:
“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.”
As
to the second issue, the Machine Company has a better right.
The court ruled that 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.
Here, the court held that the machinery company has the better
right on the building because of good faith. It appears that Yee 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. He took the
risk and must stand by the consequences; and it is in this sense that Yee was
not a purchaser in good faith.
