Case Summary (G.R. No. L-17898)
Petitioner and Respondents
Petitioner bought sawmill machineries and executed a chattel mortgage in favor of Grace Park Engineering, Inc. Respondents include the mortgagee (Grace Park), the trial judge who dictated a judgment on compromise, the provincial sheriff who levied and sold the goods, and the Court of Appeals that earlier ruled on the petition for certiorari and preliminary injunction.
Key Dates
- 1957: Purchase of machineries and execution of chattel mortgage; unpaid balance P32,000.00.
- 1958: Extrajudicial foreclosure instituted by Grace Park.
- January 28, 1959: Trial judge dictated a judgment in open court based on a written compromise.
- August 15, 1959: Court of First Instance issued an order granting execution.
- September 23, 1959: Writ of execution dated.
- September 25, 1959: Counsel for petitioner allegedly received a copy of the judgment.
- December 1, 1959: Petitioner filed certiorari and prohibition with preliminary injunction in Court of Appeals.
- December 4, 1959: Sheriff conducted public auction; Grace Park was sole bidder (P15,000).
- December 8, 1959: Court of Appeals issued writ of preliminary injunction (after sale).
- November 9, 1960: Court of Appeals rendered decision dismissing petition and dissolving injunction.
- October 31, 1962: Supreme Court decision under review.
Applicable Law and Precedents
Applicable constitutional framework: the 1935 Philippine Constitution (decision before 1990). Relevant procedural and substantive provisions quoted or applied in the decision: Rule 35, Section 1 (how judgments are to be rendered — written, personally prepared by judge, signed, and filed with clerk); Rule 27, Section 7 (service of final orders or judgments — personally or by registered mail); Rule 39, Section 16(c) (notice of sale for real property, including posting and publication where assessed value exceeds prescribed amount); Civil Code Article 415(5) (definition of immovable property including machinery intended by owner of tenement for an industry or works in a building); and pertinent precedents cited in the record (De los Reyes v. Ugarte; Berkenkotter v. Cu Unjieng y Hijos).
Factual Background
Pastor Ago purchased sawmill machineries from Grace Park and secured payment with a chattel mortgage. After defaults, Grace Park initiated extrajudicial foreclosure; petitioner filed an action to enjoin foreclosure. The parties executed a written compromise submitted and accepted in court; the trial judge then dictated a decision in open court on January 28, 1959. Petitioner allegedly continued defaulting under the compromise judgment, prompting Grace Park to move for execution; the trial court granted execution and issued a writ. The sheriff levied on and later sold the machineries, which petitioner had assigned to Golden Pacific Sawmill, Inc., and which had been installed in Golden Pacific’s building before the sheriff’s levy and sale.
Procedural History
Petitioner moved for reconsideration alleging lack of formal and valid notice; the trial court denied it. Petitioner then petitioned the Court of Appeals for certiorari and prohibition with a preliminary injunction, alleging (a) lack of valid service of the judgment prior to issuance of execution, (b) illegality of the sheriff’s sale, and (c) that the machineries had become real property of Golden Pacific Sawmill, Inc. The Court of Appeals concluded the open-court dictation constituted sufficient notice and dismissed the petition, dissolving the preliminary injunction; the Court of Appeals’ order was then reviewed by the Supreme Court.
Issues Presented
- Whether the judge’s pronouncement of the compromise judgment in open court constituted rendition of judgment and sufficient notice to petitioner for purposes of issuance of execution.
- Whether the sheriff’s public auction sale was valid, including whether notice and publication requirements were observed.
- Whether the machineries were movable chattels or had become immovable property (real estate) by reason of installation and use.
Supreme Court’s Analysis — Rendition and Notice of Judgment
The Court applied Rule 35, Section 1: judgments deciding the merits must be in writing, personally and directly prepared by the judge, signed by him, and filed with the clerk of court. A mere oral pronouncement in open court with stenographic notes does not constitute rendition. The Court explained that until a signed judgment is filed with the clerk it remains subject to amendment or change by the judge and therefore is not the binding judgment of the court. Concerning notice, Rule 27, Section 7 requires service of final orders or judgments either personally or by registered mail. Thus the mere presence of a party or counsel in court when a judge dictates a decision is not equivalent to service of the signed, filed judgment; such hearing is not effective notice for purposes of starting post-judgment processes. Because the writ of execution issued and the subsequent enforcement steps occurred before the petitioner had been served with the signed, filed judgment in the manner required by the Rules, the issuance of the writ of execution was null and void.
Supreme Court’s Analysis — Nature of Machineries (Movable vs. Immovable)
Applying Article 415(5) of the Civil Code and the Court’s prior decision in Berkenkotter v. Cu Unjieng y Hijos, the Court held that machinery intended by the owner of the tenement for an industry or works carried on in a building and which tends directly to meet the needs of that industry becomes immovable by reason of its purpose and installation. Here, the sawmill machineries had been installed in Golden Pacific Sawmill, Inc.’s building for use in the sawing of logs and thus became a nece
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Case Caption and Citation
- Reported at 116 Phil. 839, G.R. No. L-17898, decision promulgated October 31, 1962.
- Parties: Pastor D. Ago (petitioner) v. The Hon. Court of Appeals; Hon. Montano A. Ortiz, Judge of the Court of First Instance of Agusan; The Provincial Sheriff of Surigao; Grace Park Engineering, Inc. (respondents).
- Decision authored by Justice Labrador; Bench concurrence listed (Bengzon, C.J., Bautista, Angelo, Conception, Reyes, J. B. L., Barrera, Paredez, Dizon, Regala and Makalintal, JJ., concur).
Procedural Posture and Relief Sought
- Appeal by certiorari to the Supreme Court to review the Court of Appeals’ decision in CA-G.R. No. 26723-R (titled Pastor D. Ago vs. The Provincial Sheriff of Surigao, et al.).
- Original relief sought in the Court of Appeals: certiorari and prohibition with preliminary injunction to restrain sheriff’s sale and to annul writ of execution and orders of the Court of First Instance.
- The Court of Appeals issued a writ of preliminary injunction on December 8, 1959, but the sheriff had already conducted the sale on December 4, 1959.
- The Supreme Court grant sought: review and reversal of the Court of Appeals’ decision which had dismissed the petition for certiorari and dissolved the writ of preliminary injunction (as quoted in the record).
Facts — Contract, Default and Proceedings Below
- In 1957, Pastor D. Ago purchased sawmill machineries and equipment from Grace Park Engineering, Inc.
- A chattel mortgage was executed by petitioner over the machineries and equipment to secure unpaid balance of P32,000, payable in installments.
- Petitioner defaulted on installment payments.
- In 1958, Grace Park Engineering, Inc. initiated extrajudicial foreclosure of the chattel mortgage.
- Petitioner filed Special Civil Case No. 53 in the Court of First Instance of Agusan to enjoin foreclosure; parties submitted a written compromise agreement signed by both Pastor D. Ago and Grace Park Engineering, Inc.
- The presiding judge, Hon. Montano A. Ortiz, dictated a decision in open court on January 28, 1959, based on the compromise agreement.
- Petitioner continued to default under the terms of the judgment by compromise; Grace Park moved for execution which the court granted on August 15, 1959.
- A writ of execution dated September 23, 1959, was issued; the Provincial Sheriff of Surigao levied upon the machineries and equipment and scheduled public auction for December 4, 1959.
- Petitioner alleges that a copy of the judgment was served upon his counsel only on September 25, 1959 (after the court had issued the order and writ of execution).
- Petitioner claims he had sold the machineries and equipment to Golden Pacific Sawmill, Inc. on February 16, 1959, after the trial court’s oral pronouncement but before the sheriff’s levy.
- The machineries and equipment were installed in a sawmill building owned by Golden Pacific Sawmill, Inc., located in Lianga, Surigao del Sur, and allegedly became real property by virtue of such installation.
- At the December 4, 1959 auction the respondent Grace Park Engineering, Inc. was the only bidder at P15,000.00; a certificate of sale had not yet been executed when the Court of Appeals intervened and instructed the sheriff to suspend issuance of the certificate until final determination.
Court of Appeals’ Ruling (as quoted)
- The Court of Appeals held that a judgment based on a compromise is binding between parties and, as a general rule, not appealable and immediately executory unless attacked for fraud, mistake, or duress.
- The Court of Appeals held the January 28, 1959 oral pronouncement in open court constituted substantial compliance with notice requirements; therefore, the lower court did not exceed its jurisdiction in ordering execution.
- The Court of Appeals dismissed the petition for certiorari, dissolved the writ of preliminary injunction, and imposed costs against the petitioner (language excerpted in the record as the CA’s decision).
Issues Presented to the Supreme Court
- Primary questions presented in the appeal:
- Whether the rendition of the judgment on compromise in open court on January 28, 1959 (or January 29, 1959 as alternatively mentioned) constituted sufficient notice such that issuance of the writ of execution before formal service was valid.
- Whether the proceedings of the sheriff in selling the machineries and equipment at public auction were legal, particularly whether the sale required prior publication of notice of sale in a newspaper when the properties had become real property.
- Whether the machineries and equipment were movables or immovables (i.e., whether installation in the sawmill building converted them into real property under Article 415(5) of the Civil Code).