G.R. No. L-43059 - Sampaguita Pictures, Inc. vs. Jalwindor Manufacturers, Inc.

Sampaguita Pictures, Inc. is the owner of the Sampaguita Pictures Building located at the corner of General Araneta and General Roxas Streets, Cubao, Quezon City.
The building’s roofdeck and all existing improvements thereon were leased to Capitol "300" Inc. (hereinafter “Capitol”) for a monthly rental of P650.00.
Jalwindor Manufacturers, Inc. (hereinafter “Jalwindor”) sold glass and wooden jalousies on credit to Capitol, which were delivered and installed in the leased premises.

The lease contract stipulated that the premises was to be used exclusively for social purposes by Capitol’s members and guests.
All permanent improvements made by the lessee (Capitol) on the leased premises were agreed to belong to the lessor (Sampaguita), without any reimbursement obligation.
The improvements made by Capitol were considered part of the monthly rental consideration.
Any remodelling, alterations, or additions to the leased premises would be at Capitol’s expense and would become the property of Sampaguita.

Capitol purchased the glass and wooden jalousies from Jalwindor on credit, with a contract value of P9,531.09.
Capitol’s failure to settle its payment led Jalwindor to initiate a collection action through a Compromise Agreement, where Capitol acknowledged the indebtedness payable in monthly installments of at least P300.00, starting December 15, 1964.
Under the agreement, the purchased items served as security pending the liquidation of the debt.

Capitol failed to pay rentals to Sampaguita from March 1, 1964 to April 30, 1965, as well as water, electric, and telephone service charges amounting to P10,772.90.
Sampaguita pursued an ejectment and collection case against Capitol, which resulted in a judgment on June 8, 1965, ordering Capitol to vacate the premises and to settle the outstanding payments.
Concurrently, due to Capitol’s non-compliance with its obligation under the Compromise Agreement, the Sheriff of Quezon City levied the jalousies on July 31, 1965.
After the levy, the items were auctioned on August 30, 1965, wherein Jalwindor, securing the highest bid, paid P6,000.00 for the jalousies.

Sampaguita filed a third-party claim asserting ownership of the jalousies, contending that as per the lease agreement, all permanent improvements were to become its property.
Although Jalwindor had filed an indemnity bond in favor of the Sheriff, the issuance of the bond and the subsequent auction sale contested Sampaguita’s right to the items.
The Court of First Instance of Rizal (Branch IV, Quezon City), relying on the stipulation of facts agreed by the parties, dismissed Sampaguita’s complaint and ordered it to pay Jalwindor P500.00 as attorney’s fees.
Sampaguita’s subsequent motion for reconsideration was denied, prompting the appeal with several assignments of error concerning the transfer and ownership of the jalousies.

The lower court erred in holding that Capitol "300" Inc. could not legally transfer or assign the jalousies to Sampaguita.
The lower court erred in failing to recognize Sampaguita as the rightful owner of the jalousies when they were sold by the Sheriff at public auction.
The lower court erred in not declaring null and void the levy on execution and the subsequent Sheriff’s sale.
The lower court erred in determining that Jalwindor became the rightful owner of the disputed items.

Whether delivery (actual or constructive) of the jalousies, even when purchased on credit, effectuates the transfer of ownership from Jalwindor to Capitol.

The issue addresses if ownership passes by the mere delivery of the items, irrespective of payment.

Whether, under the lease agreement, the permanent improvements (jalousies installed at the leased premises) automatically transfer ownership to Sampaguita Pictures, Inc.

This involves the contractual provision that improvements made by the lessee form part of the rental consideration and become the lessor’s property.

Whether the levy and subsequent auction sale executed by the Sheriff are valid if the property (jalousies) has already been transferred out of the judgment debtor’s (Capitol’s) control.

The issue explores whether executing a levy on property not owned by the judgment debtor can affect the rights of a third party.

Whether Sampaguita is the lawful and rightful owner of the disputed jalousies.

This triggers the question regarding the protection of third-party claims and the proper adjudication of ownership in mixed proceedings involving lease improvements and debt execution.

Whether the remedial action to nullify the Sheriff’s sale is justified on the basis that the property involved did not belong to Capitol at the time of the sale.