Philippine Sugar Estates Development Co. v. Camps
REITERATIONFacts
The Antecedents: The plaintiff-appellee, Philippine Sugar Estates Development Company, Ltd., initiated a mortgage agreement with the defendant-appellant, Armando Camps y Camps, on October 2, 1912, to secure a sum of money. This mortgage explicitly included "the building erected thereon." A second mortgage with substantially the same conditions was executed on June 11, 1913, upon the same property for an additional sum. Procedural History: Due to non-payment, the plaintiff filed an action to foreclose the mortgages on March 11, 1915. The defendant, while admitting the execution of the mortgages, denied the facts in the complaint and alleged the P3,000 for expenses was excessive. On July 23, 1915, the Court of First Instance (CFI) of Manila, presided over by Judge James A. Ostrand, rendered a judgment in favor of the plaintiff, ordering the foreclosure of the mortgages and requiring the defendant to pay the judgment amount. The Petition: As the judgment remained unpaid, an execution was issued on October 5, 1915. During the sheriff's attempt to sell the mortgaged property, the defendant objected, claiming a cinematograph constructed on the property was not included in the mortgage and should not be sold. Despite this objection, the sheriff sold the mortgaged property "together with the buildings erected thereon." Subsequently, the defendant objected to the confirmation of the sale. On November 18, 1915, Judge George R. Harvey confirmed the sale. The defendant appealed this confirmation order.
Issue(s)
Whether a building originally included in a mortgage, which was subsequently reformed and converted into a cinematograph ('Cine Manila'), is included in the foreclosure sale of the mortgaged real property.
Ruling
The Supreme Court affirmed the order of the lower court confirming the sale. The Court held that the buildings erected on the mortgaged property, including the cinematograph which was a reformation of an existing building, were included in the mortgage and thus subject to the execution sale.
Ratio Decidendi
On Issue 1: The Court ruled that the 'Cine Manila' was undeniably included in the mortgage. The reasoning was based on the fact that the mortgage instruments expressly covered the land and 'the buildings erected thereon' without any specific exclusions. The Court emphasized that the cinematograph was not a new structure but was created by simply reforming, changing, and altering a building already located on the land when the mortgage was executed. Applying the established precedent from Bischoff v. Pomar and Compañia General de Tabacos, the Court held that a mortgage on land extends to all its improvements even if they are not specifically mentioned. This legal extension applies by operation of law unless there is an express stipulation between the parties to exclude such improvements. Since no such exclusion existed in the contracts signed by Camps, the modified building remained part of the security. Therefore, the sheriff acted within the law by selling the building together with the land, and the judicial confirmation of said sale was correct.
Main Doctrine
Improvements on mortgaged property, including buildings, are considered included in the mortgage unless expressly excluded by stipulation between the parties, even if not specifically mentioned in the mortgage instrument.