Republic of the Philippines April 18, 1956, the filing of

SUPREME COURT the complaint, until fully paid,

Manila plus attorney's fees in the
sum of P300.00 and to pay
EN BANC the costs.

It appears on the records that on 1

September 1955 defendants-appellants
G.R. No. L-30173 September 30, 1971 executed a chattel mortgage in favor of
plaintiffs-appellees over their house of
GAVINO A. TUMALAD and GENEROSA strong materials located at No. 550 Int. 3,
R. TUMALAD, plaintiffs-appellees, Quezon Boulevard, Quiapo, Manila, over
vs. Lot Nos. 6-B and 7-B, Block No. 2554,
ALBERTA VICENCIO and EMILIANO which were being rented from Madrigal &
SIMEON, defendants-appellants. Company, Inc. The mortgage was
registered in the Registry of Deeds of
Castillo & Suck for plaintiffs-appellees. Manila on 2 September 1955. The herein
mortgage was executed to guarantee a loan
of P4,800.00 received from plaintiffs-
Jose Q. Calingo for defendants-appellants.
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
REYES, J.B.L., J.: P3,150 was payable on or before August,
1956. It was also agreed that default in the
Case certified to this Court by the Court of payment of any of the amortizations, would
Appeals (CA-G.R. No. 27824-R) for the cause the remaining unpaid balance to
reason that only questions of law are becomeimmediately due and Payable and
involved. —

This case was originally commenced by the Chattel Mortgage will be

defendants-appellants in the municipal court enforceable in accordance
of Manila in Civil Case No. 43073, for with the provisions of Special
ejectment. Having lost therein, defendants- Act No. 3135, and for this
appellants appealed to the court a quo (Civil purpose, the Sheriff of the
Case No. 30993) which also rendered a City of Manila or any of his
decision against them, the dispositive deputies is hereby
portion of which follows: empowered and authorized
to sell all the Mortgagor's
WHEREFORE, the court property after the necessary
hereby renders judgment in publication in order to settle
favor of the plaintiffs and the financial debts of
against the defendants, P4,800.00, plus 12% yearly
ordering the latter to pay interest, and attorney's
jointly and severally the fees... 2
former a monthly rent of
P200.00 on the house, When defendants-appellants defaulted in
subject-matter of this action, paying, the mortgage was extrajudicially
from March 27, 1956, to foreclosed, and on 27 March 1956, the
January 14, 1967, with house was sold at public auction pursuant
interest at the legal rate from
to the said contract. As highest bidder, execution, and it was actually issued on 24
plaintiffs-appellees were issued the January 1957. However, the judgment
corresponding certificate of regarding the surrender of possession to
sale.3 Thereafter, on 18 April 1956, plaintiffs-appellees could not be executed
plaintiffs-appellant commenced Civil Case because the subject house had been
No. 43073 in the municipal court of Manila, already demolished on 14 January 1957
praying, among other things, that the house pursuant to the order of the court in a
be vacated and its possession surrendered separate civil case (No. 25816) for
to them, and for defendants-appellants to ejectment against the present defendants
pay rent of P200.00 monthly from 27 March for non-payment of rentals on the land on
1956 up to the time the possession is which the house was constructed.
surrendered.4 On 21 September 1956, the
municipal court rendered its decision — The motion of plaintiffs for dismissal of the
appeal, execution of the supersedeas bond
... ordering the defendants to and withdrawal of deposited rentals was
vacate the premises denied for the reason that the liability
described in the complaint; therefor was disclaimed and was still being
ordering further to pay litigated, and under Section 8, Rule 72,
monthly the amount of rentals deposited had to be held until final
P200.00 from March 27, disposition of the appeal.7
1956, until such (time that)
the premises is (sic) On 7 October 1957, the appellate court of
completely vacated; plus First Instance rendered its decision, the
attorney's fees of P100.00 dispositive portion of which is quoted earlier.
and the costs of the suit.5 The said decision was appealed by
defendants to the Court of Appeals which, in
Defendants-appellants, in their answers in turn, certified the appeal to this Court.
both the municipal court and court a Plaintiffs-appellees failed to file a brief and
quo impugned the legality of the chattel this appeal was submitted for decision
mortgage, claiming that they are still the without it.
owners of the house; but they waived the
right to introduce evidence, oral or Defendants-appellants submitted numerous
documentary. Instead, they relied on their assignments of error which can be
memoranda in support of their motion to condensed into two questions, namely: .
dismiss, predicated mainly on the grounds
that: (a) the municipal court did not have (a) Whether the municipal
jurisdiction to try and decide the case court from which the case
because (1) the issue involved, is originated had jurisdiction to
ownership, and (2) there was no allegation adjudicate the same;
of prior possession; and (b) failure to prove
prior demand pursuant to Section 2, Rule (b) Whether the defendants
72, of the Rules of Court.6 are, under the law, legally
bound to pay rentals to the
During the pendency of the appeal to the plaintiffs during the period of
Court of First Instance, defendants- one (1) year provided by law
appellants failed to deposit the rent for for the redemption of the
November, 1956 within the first 10 days of extrajudicially foreclosed
December, 1956 as ordered in the decision house.
of the municipal court. As a result, the court
granted plaintiffs-appellees' motion for We will consider these questions seriatim.
(a) Defendants-appellants mortgagors Dalman,12 wherein the defendant was also a
question the jurisdiction of the municipal successful bidder in an auction sale, it was
court from which the case originated, and likewise held by this Court that in detainer
consequently, the appellate jurisdiction of cases the aim of ownership "is a matter of
the Court of First Instance a quo, on the defense and raises an issue of fact which
theory that the chattel mortgage is void ab should be determined from the evidence at
initio; whence it would follow that the the trial." What determines jurisdiction are
extrajudicial foreclosure, and necessarily the allegations or averments in the
the consequent auction sale, are also void. complaint and the relief asked for. 13
Thus, the ownership of the house still
remained with defendants-appellants who Moreover, even granting that the charge is
are entitled to possession and not plaintiffs- true, fraud or deceit does not render a
appellees. Therefore, it is argued by contract void ab initio, and can only be a
defendants-appellants, the issue of ground for rendering the contract voidable
ownership will have to be adjudicated first in or annullable pursuant to Article 1390 of the
order to determine possession. lt is New Civil Code, by a proper action in
contended further that ownership being in court. 14 There is nothing on record to show
issue, it is the Court of First Instance which that the mortgage has been annulled.
has jurisdiction and not the municipal court. Neither is it disclosed that steps were taken
to nullify the same. Hence, defendants-
Defendants-appellants predicate their appellants' claim of ownership on the basis
theory of nullity of the chattel mortgage on of a voidable contract which has not been
two grounds, which are: (a) that, their voided fails.
signatures on the chattel mortgage were
obtained through fraud, deceit, or trickery; It is claimed in the alternative by
and (b) that the subject matter of the defendants-appellants that even if there was
mortgage is a house of strong materials, no fraud, deceit or trickery, the chattel
and, being an immovable, it can only be the mortgage was still null and void ab
subject of a real estate mortgage and not a initio because only personal properties can
chattel mortgage. be subject of a chattel mortgage. The rule
about the status of buildings as immovable
On the charge of fraud, deceit or trickery, property is stated in Lopez vs. Orosa, Jr.
the Court of First Instance found and Plaza Theatre Inc.,15cited in Associated
defendants-appellants' contentions as not Insurance Surety Co., Inc. vs. Iya, et al. 16 to
supported by evidence and accordingly the effect that —
dismissed the charge,8 confirming the
earlier finding of the municipal court that ... it is obvious that the
"the defense of ownership as well as the inclusion of the building,
allegations of fraud and deceit ... are mere separate and distinct from
allegations."9 the land, in the enumeration
of what may constitute real
It has been held in Supia and Batiaco vs. properties (art. 415, New
Quintero and Ayala10 that "the answer is a Civil Code) could only mean
mere statement of the facts which the party one thing — that a building is
filing it expects to prove, but it is not by itself an immovable
evidence;11 and further, that when the property irrespective of
question to be determined is one of title, the whether or not said structure
Court is given the authority to proceed with and the land on which it is
the hearing of the cause until this fact is adhered to belong to the
clearly established. In the case of Sy vs. same owner.
Certain deviations, however, have been same, such as the lessee or
allowed for various reasons. In the case usufructuary, does not
of Manarang and Manarang vs. become immobilized by
Ofilada,17 this Court stated that "it is attachment (Valdez vs.
undeniable that the parties to a contract Central Altagracia, 222 U.S.
may by agreement treat as personal 58, cited in Davao Sawmill
property that which by nature would be real Co., Inc. vs. Castillo, et al.,
property", citing Standard Oil Company of 61 Phil. 709). Hence, if a
New York vs. Jaramillo. 18 In the latter case, house belonging to a person
the mortgagor conveyed and transferred to stands on a rented land
the mortgagee by way of mortgage "the belonging to another person,
following described personal it may be mortgaged as a
property." 19 The "personal property" personal property as so
consisted of leasehold rights and a building. stipulated in the document of
Again, in the case of Luna vs. mortgage. (Evangelista vs.
Encarnacion,20 the subject of the contract Abad, Supra.) It should be
designated as Chattel Mortgage was a noted, however that the
house of mixed materials, and this Court principle is predicated on
hold therein that it was a valid Chattel statements by the owner
mortgage because it was so expressly declaring his house to be a
designated and specifically that the property chattel, a conduct that may
given as security "is a house of mixed conceivably estop him from
materials, which by its very nature is subsequently claiming
considered personal property." In the later otherwise. (Ladera vs. C.N.
case of Navarro vs. Pineda,21 this Court Hodges, [CA] 48 O.G.
stated that — 5374): 22

The view that parties to a In the contract now before Us, the house on
deed of chattel mortgage rented land is not only expressly designated
may agree to consider a as Chattel Mortgage; it specifically provides
house as personal property that "the mortgagor ... voluntarily CEDES,
for the purposes of said SELLS and TRANSFERS by way of Chattel
contract, "is good only insofar Mortgage
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