GR L 17898; (October, 1962) (Digest)
G.R. No. L-17898; October 31, 1962
PASTOR D. AGO, petitioner, vs. THE HON. COURT OF APPEALS, HON. MONTANO A. ORTIZ, Judge of the Court of First Instance of Agusan, THE PROVINCIAL SHERIFF OF SURIGAO and GRACE PARK ENGINEERING, INC., respondents.
FACTS
Petitioner Pastor D. Ago purchased sawmill machinery from respondent Grace Park Engineering, Inc., executing a chattel mortgage to secure the unpaid balance. Upon Ago’s default, the respondent initiated extra-judicial foreclosure. Ago filed a case to enjoin the foreclosure, which culminated in a compromise agreement submitted to and approved by the Court of First Instance of Agusan. The court rendered a judgment based on this compromise in open court on January 28, 1959. Ago again defaulted on the payments stipulated in the compromise judgment. Consequently, the respondent company secured a writ of execution. The Provincial Sheriff levied upon and sold the machinery at public auction on December 4, 1959.
Ago challenged the execution before the Court of Appeals, arguing he received no formal notice of the judgment and that the sheriff’s sale was void. He contended the machinery, having been installed in a sawmill building after its sale to Golden Pacific Sawmill, Inc., had become immovable property, requiring a different mode of execution sale. The Court of Appeals dismissed his petition, ruling that rendition of judgment in open court constituted sufficient notice and upholding the execution.
ISSUE
The primary issue is whether the Court of Appeals erred in upholding the validity of the execution and the subsequent sheriff’s sale of the machinery.
RULING
The Supreme Court reversed the Court of Appeals. On the procedural issue, the Court clarified that while a judgment based on a compromise is immediately executory and the rendition in open court was a valid act, the core substantive issue regarding the nature of the levied property was paramount and merited resolution. The Court held that the machinery in question had been converted into immovable property pursuant to Article 415(5) of the Civil Code. The provision states that machinery intended by the owner for an industry carried on in a building is immovable. By installing the sawmill equipment in a building for the purpose of the sawmill industry, the machinery became a permanent part of the real estate.
Consequently, the sheriff’s levy and sale were governed by the rules for the execution of real property. Rule 39, Section 16(c) of the Rules of Court then in force required that if the assessed value of real property exceeded four hundred pesos, notice of sale must be published in a newspaper. The record showed the machinery was valued at over P15,000 but was sold without the requisite publication. This fatal defect rendered the sheriff’s sale null and void. Therefore, the writ of execution issued against the machinery as personal property and the sale conducted pursuant thereto were declared invalid.