PASTOR D. AGO, PETITIONER, VS. THE HON. COURT OP APPEALS, HON. MONTANO A. ORTIZ, JUDGE OF THE COURT OF FIRST INSTANCE OF AGUSAN, THE PROVINCIAL SHERIFF OF SURIGAO AND GRACE PARK…

Appeal by certiorari to review the decision of respondent Court of Appeals in CA-G.R. No. 26723-R entitled “Pastor D. Ago. vs. The Provincial Sheriff of Surigao, et al.” which in part reads:

“In this case for certiorari and prohibition with
preliminary injunction, it appears from the records that the respondent
Judge of the Court of First Instance of Agusan rendered judgment (Annex
‘A’) in open court on January 28, 1959, basing said judgment on a
compromise agreement between the parties.

“On August 15, 1959, upon petition, the Court of First Instance issued a writ of execution.

“Petitioner’s
motion for reconsideration dated October 12, 1959 alleges that he, or
his counsel, did not receive a formal and valid notice of said
decision, which motion for reconsideration was denied by the court
below in the order of November 14, 1959.

“Petitioner now
contends that the respondent Judge exceeded in his jurisdiction in
ordering the execution without valid and formal notice of the decision.

“A compromise agreement is binding between the parties and becomes the law between them. (Gonzales vs. Gonzales, G.R. No. L-1254, May 21, 1948, 81 Phil. 38; Martin vs. Martin, 105 Phil., 750; 57 Off. Gaz. [9] 1589).

“It
is a general rule in this jurisdiction that a judgment based on a
compromise agreement is not appealable and is immediately executory,
unless a motion is filed on the ground of fraud, mistake or duress. (De
los Reyes vs. Ugarte, 75 Phil. 505; Lapena vs. Morfe, 101 Phil., 997; 54 Off. Gaz. [10] 3207)

“Petitioner’s
claim that he was not notified or served notice of the decision is
untenable. The judgment on the compromise agreement rendered by the
court below dated January 28, 1959 was given in open court. This alone
is a substantial compliance as to notice. (De los Reyes vs. Ugarte, supra)

“In
view thereof, we believe that the lower court did not exceed nor abuse
its jurisdiction in ordering the execution of the judgment. The
petition for certiorari is herby dismissed and the writ of preliminary
injunction heretofore dissolved, with costs against the petitioner.

“IT IS SO ORDERED.”

The facts of the case may be briefly stated as follows: In 1957,
petitioner Pastor D. Ago bought sawmill machineries and equipments from
respondent Grace Park Engineering, Inc., executing a chattel mortgage
over said machineries and equipments to secure the payment of a balance
of the price remaining unpaid of P32,000.00, which petitioner agreed to
pay on installment basis.

Petitioner Ago defaulted in his payments and so, in 1958, respondent
Grace Park Engineering, Inc. instituted extrajudicial foreclosure
proceedings of the mortgage. To enjoin said foreclosure, petitioner
herein instituted Special Civil Case No. 53 in the Court of First
Instance of Agusan. The parties to the case arrived at a compromise
agreement and submitted the same in court in writing, signed by Pastor
D. Ago and the Grace Park Engineering, Inc. The Hon. Montano A. Ortiz,
Judge of the Court of First Instance of Agusan, then presiding dictated
a decision in open court on January 28, 1959.

Petitioner continued to default in his payments as provided in the
judgment by compromise, so Grace Park Engineering, Inc. filed with the
lower court a motion for execution, which was granted by the court on
August 15, 1959. A writ of execution, dated September 23, 1959, later
followed.

The herein respondent Provincial Sheriff of Surigao, acting upon the
writ of execution issued by the lower court, levied upon and ordered
the sale of the sawmill machineries and equipments in question. These
machineries and equipments had been taken to and installed in a sawmill
building located in Lianga, Surigao del Sur, and owned by the Golden
Pacific Sawmill, Inc., to whom, petitioner alleges, he had sold them on
February 16, 1959 (a date after the decision of the lower court but
before levy by the sheriff).

Having been advised by the sheriff that the public auction sale was
set for December 4, 1959, petitioner, on December 1, 1959, filed the
petition for certiorari and prohibition with preliminary injunction
with respondent Court of Appeals, alleging that a copy of the
aforementioned judgment given in open court on January 28, 1959 was
served upon counsel of petitioner only on September 25, 1959 (writ of
execution is dated September 23, 1959); that the orderr and writ of
execution having been issued by the lower court before counsel for
petitioner received a copy of the judgment, its resultant last order
that the “sheriff may now proceed With the sale of the properties
levied,” constituted a grave abuse of discretion and was in excess of
its jurisdiction; and that the respondent Provincial Sheriff of Surigao
was acting illegally upon the allegedly void writ of execution by
levying the same upon the sawmill machineries and equipments which have
become real properties of the Golden Pacific Sawmill, Inc., and is
about to proceed in selling the same without prior publication of the
notice of sale thereof in some newspaper of general circulation as
required by the Rules of Court.

The Court of Appeals on December 8, 1959, issued a writ of
preliminary injunction against the sheriff but it turned out that the
latter had already sold at public auction the machineries in question,
on December 4, 1959, as scheduled. The respondent Grace Park
Engineering, Inc. was the only bidder for P15,000.00, although the
certificate of sale was not yet executed. The Court of Appeals
instructed the sheriff to suspend the issuance of a certificate of sale
of the said sawmill machineries and equipments sold by him on December
4, 1959 until the final decision of the case. On November 9,1960 the
Court of Appeals rendered the afore-quoted decision.

Before this Court, petitioner alleges that the Court of Appeals
erred (1) in holding that the rendition of the judgment on compromise
in open court on January 29, 1959 was a sufficient notice; and (2) in
not resolving the other issues raised before it, namely, (a) the
legality of the public auction sale made by the sheriff, and (b) the
nature of the machineries in question, whether they are movables or
immovables.

The Court of Appeals held that as a judgment was entered by the
court below in open court upon the submission of the compromise
agreement, the parties may be considered as having been notified of
said judgment and this fact constitutes due notice of said judgment.
This raises the following legal question: Is the order dictated in open
court the judgment of the court, and is the fact that the petitioner
herein was present in open court when the judgment was dictated,
sufficient notice thereof? The provisions of the Rules of Court decree
otherwise. Section 1 of Rule 35 describes the manner in which judgments
shall be rendered, thus:

“SECTION 1. How judgment rendered.—All
judgments determiningthe merits of cases shall be in writing personally
and directly prepared by the judge, and signed by him, stating clearly
and distinctly the facts and the law on which it is based, and filed
with the clerk of the court.”

The court of first instance being a court of record, in order that a
judgment may be considered as rendered it must not only be in writing,
signed by the judge, but it must also be filed with the clerk of court.
The mere pronouncement of the judgment in open court with the
stenoggrapher taking note thereof does not, therefore, constitute a
rendition of the judgment. It is the filing of the signed decision with the clerk of court that constitutes rendition. While
it is to be presumed that the judgment that was dictated in open court
will be the judgment of the court, the court may still modify said
order as the same is being put into writing. And even if the order or
judgment has already been put into writing and signed, while it has not
yet been delivered to the clerk for filing, it is still subject to
amendment or change by the judge. It is only when the judgment signed
by the judge is actually filed with the clerk of court that it becomes
a valid and binding judgment. Prior thereto, it could still be subject
to amendment and change and may not, therefore, constitute the real
judgment of the court.

Regarding the notice of judgment, the mere fact that a party heard
the judge dictating the judgment in open court, is not a valid notice
of said judgment. If rendition thereof is constituted by the filing
with the clerk of court of a signed copy (of the judgment), It is
evident that the fact that a party or an attorney heard the order or
judgment being dictated in court cannot be considered as notice of the
real judgment. No judgment can be notified to the parties unless it has
previously been rendered. The notice, therefore, that a party has of a
judgment that was being dictated is of no effect because at that time
no judgment has as yet been signed by the judge and filed with the
clerk.

Besides, the Rules expressly require that final orders or judgments
be served personally or by registered mail. Section 7 of Rule 27
provides as follows:

“SEC. 7. Service of final orders or judgments.—Final orders or judgments shall be served either personally or by registered mail.”

In accordance with this provision, a party is not considered as
having been served with the judgment merely because he heard the judge
dictating the said judgment in open court; it is necessary that he be
served with a copy of the signed judgment that has been filed with the
clerk in order that he may legally be considered as having been served
with the judgment.

For all the foregoing, the fact that the petitioner herein heard the
trial judge dictating the judgment in open court, is not sufficient to
constitute the service of judgment as required by the above-qouted
section 7 of Rule 27; the signed judgment not having been served upon
the petitioner, said judgment could not be effective upon him
(petitioner) who had not received it. It follows as a consequence that
the issuance of the writ of execution was null and void, having been
issued before petitioner herein was served, personally or by registered
mail, a copy of the decision.

The second question raised in this appeal, which has not been passed
upon by the Court of Appeals, concerns the validity of the proceedings
of the sheriff in selling the sawmill machineries and equipments at
public auction without a notice of the sale having been previously
published.

The record shows that after petitioner herein Pastor D. Ago had
purchased the sawmill machineries and equipments, he assigned the same
to the Golden Pacific Sawmill, Inc. in payment of his subscription to
the shares of stock of said corporation. Thereafter the sawmill
machineries and equipments were installed in a building and permanently
attached to the ground. By reason of such installment in a building,
the said sawmill machineries and equipments became real estate
properties in accordance with the provision of Art. 415(5) of the Civil
Code, thus:

“ART. 415. The following are immovable property:

* * * * * * *

“(5) Machinery, receptacles, instruments or
implements intended by the owner of the tenement for an industry or
works which may be carried on in a building or on a piece of land, and
which tend directly to meet the needs of the said industry or works;”

This Court in interpreting a similar question raised before it in the case of Berkenkotter vs.
Cu Unjieng e Hijos, 61 Phil. 683, held that the installation of the
machinery and equipment in the central of the Mabalacat Sugar Co., Inc.
for use in connection with the industry carried by that company,
converted the said machinery and equipment into real estate by reason
of their purpose. Paraphrasing the language of said decision we hold
that by the installation of the sawmill machineries in the building of
the Golden Pacific Sawmill, Inc., for use in the sawing of logs carried
on in said building, the same became a necessary and permanent part of
the building or real estate on which the same was constructed,
converting the said machineries and equipments into real estate within
the meaning of Article 415(5) above-quoted of the Civil Code of the
Philippines.

Considering that the machineries and equipments in question valued
at more than P15,000.00 appear to have been sold without the necessary
advertisement of sale by publication in a newspaper, as required in
Sec. 16 of Rule 39 of the Rules of Court, which is as follows:

“SEC. 16. Notice of sale of property on execution.— Before the sale of property or execution, notice thereof must given as follows:

* * * * * * *

“(c) In case of real property, by posting a similar
notice particularly describing the property for twenty days in three
public places in the municipality or city where the property is
situated, and also where the property is to be sold, and, if the
assessed value of the property exceeds four hundred pesos, by
publishing a copy of the notice once a week, for the same period, in
some newspaper published or having general circulation in the province,
if there be one. If there are newspapers published in the province in
both the English and Spanish languages, then a like publication for a
like period shall be made in one newspaper published in the English
language, and in one published in the Spanish language.”

the sale made by the sheriff must be declared null and void.

Wherefore, the decision of the Court of Appeals sought to be
reviewed is hereby set aside and We declare that the issuance of the
writ of execution in this case against the sawmill machineries and
equipments purchased by petitioner Pastor D. Ago from the Qrace Park
Engineering, Inc., as well as the sale of the same by the Sheriff of
Surigao, are null and void. Costs shall be against the respondent Grace
Park Engineering, Inc.

Bengzon, C. J., Bautista Angelo, Conception, Reyes, J. B. L., Barrera, Paredez, Dizon, Regala and Makalintal, JJ., concur.