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1.

Davao Sawmill vs Castillo

61 Phil 709 G.R. No. L-40411

August 7, 1935

plaintiff-appellant:

DAVAO SAW MILL CO., INC


Arsenio Suazo and Jose L. Palma Gil and Pablo Lorenzo and Delfin Joven
defendants-appellees:
APRONIANO G. CASTILLO and DAVAO LIGHT & POWER CO., INC.
J.W. Ferrier for appellees
MALCOLM, J.:

Facts: The Davao Saw Mill Co., Inc., is the holder of a lumber concession from the Government of the
Philippine Islands. It has operated a sawmill in the sitio of Maa, barrio of Tigatu, municipality of Davao,
Province of Davao. However, the land upon which the business was conducted belonged to another
person. On the land the sawmill company erected a building which housed the machinery used by it.
Some of the implements thus used were clearly personal property, the conflict concerning machines
which were placed and mounted on foundations of cement. In the contract of lease between the
sawmill company and the owner of the land there appeared the following provision:
That on the expiration of the period agreed upon, all the improvements and buildings
introduced and erected by the party of the second part shall pass to the exclusive ownership of
the party of the first part without any obligation on its part to pay any amount for said
improvements and buildings; also, in the event the party of the second part should leave or
abandon the land leased before the time herein stipulated, the improvements and buildings
shall likewise pass to the ownership of the party of the first part as though the time agreed
upon had expired: Provided, however, That the machineries and accessories are not included
in the improvements which will pass to the party of the first part on the expiration or
abandonment of the land leased.
In another action, wherein the Davao Light & Power Co., Inc., was the plaintiff and the Davao, Saw,
Mill Co., Inc., was the defendant, a judgment was rendered in favor of the plaintiff in that action
against the defendant in that action; a writ of execution issued thereon, and the properties now in
question were levied upon as personalty by the sheriff. No third party claim was filed for such
properties at the time of the sales thereof as is borne out by the record made by the plaintiff herein.
Indeed the bidder, which was the plaintiff in that action, and the defendant herein having
consummated the sale, proceeded to take possession of the machinery and other properties
described in the corresponding certificates of sale executed in its favor by the sheriff of Davao.
As connecting up with the facts, it should further be explained that the Davao Saw Mill Co., Inc., has
on a number of occasions treated the machinery as personal property by executing chattel mortgages
in favor of third persons. One of such persons is the appellee by assignment from the original
mortgages.

Issue: WON the machineries are considered as personal properties.


Held: As a rule, the machinery should be considered as personal since it was not placed on the land
by the owner of said land. Immobilization by destination or purpose cannot generally be made by a
person whose possession of the property is only TEMPORARY, otherwise we will be forced to presume
that he intended to give the property permanently away in favor of the owner of the premises.
Machinery which is movable in its nature only becomes immobilized when placed in plant by the
owner of the property or plant, but not when so placed by a tenant, a usufructuary, or any person
having only a temporary right (Davao Saw Mill v Castillo)
o Exception (becomes immovable):
1. Such person acted as the agent of the owner, or
2. Lease agreement states that the machines will pass over to the lessor after the expiration of
the lease agreement (US Valdez case)

2:

Berkenketter vs Cu Unjieng

plaintiff-appellant:

61 Phil 663 G.R. No. L-41643

July 31, 1935

B.H. BERKENKOTTER
Briones and Martinez
defendants-appellees:
CU UNJIENG E HIJOS, YEK TONG LIN FIRE AND MARINE INSURANCE
COMPANY, MABALACAT SUGAR COMPANY and THE PROVINCE SHERIFF OF PAMPANGA

Araneta, Zaragoza and Araneta for appellees Cu Unjieng e Hijos.


No appearance for the other appellees.
VILLA-REAL, J.:
Facts:

It is admitted by the parties that on April 26, 1926, the Mabalacat Sugar Co., Inc., owner of the
sugar central situated in Mabalacat, Pampanga, obtained from the defendants, Cu Unjieng e Hijos, a
loan secured by a first mortgage constituted on two parcels and land "with all its buildings,
improvements, sugar-cane mill, steel railway, telephone line, apparatus, utensils and whatever forms
part or is necessary complement of said sugar-cane mill, steel railway, telephone line, now existing or
that may in the future exist is said lots."
On October 5, 1926, shortly after said mortgage had been constituted, the Mabalacat Sugar
Co., Inc., decided to increase the capacity of its sugar central by buying additional machinery and
equipment, so that instead of milling 150 tons daily, it could produce 250. The estimated cost of said
additional machinery and equipment was approximately P100,000. In order to carry out this plan, B.A.
Green, president of said corporation, proposed to the plaintiff, B.H. Berkenkotter, to advance the
necessary amount for the purchase of said machinery and equipment, promising to reimburse him as
soon as he could obtain an additional loan from the mortgagees, the herein defendants Cu Unjieng e
Hijos. Having agreed to said proposition made in a letter dated October 5, 1926 (Exhibit E), B.H.
Berkenkotter, on October 9th of the same year, delivered the sum of P1,710 to B.A. Green, president
of the Mabalacat Sugar Co., Inc., the total amount supplied by him to said B.A. Green having been
P25,750. Furthermore, B.H. Berkenkotter had a credit of P22,000 against said corporation for unpaid
salary. With the loan of P25,750 and said credit of P22,000, the Mabalacat Sugar Co., Inc., purchased
the additional machinery and equipment now in litigation.
On June 10, 1927, B.A. Green, president of the Mabalacat Sugar Co., Inc., applied to Cu Unjieng
e Hijos for an additional loan of P75,000 offering as security the additional machinery and equipment
acquired by said B.A. Green and installed in the sugar central after the execution of the original
mortgage deed, on April 27, 1927, together with whatever additional equipment acquired with said
loan. B.A. Green failed to obtain said loan.
The appellant contends that the installation of the machinery and equipment claimed by him in
the sugar central of the Mabalacat Sugar Company, Inc., was not permanent in character inasmuch as
B.A. Green, in proposing to him to advance the money for the purchase thereof, made it appear in the
letter, Exhibit E, that in case B.A. Green should fail to obtain an additional loan from the defendants
Cu Unjieng e Hijos, said machinery and equipment would become security therefor, said B.A. Green
binding himself not to mortgage nor encumber them to anybody until said plaintiff be fully
reimbursed for the corporation's indebtedness to him.
Issue: Are the additional machines also considered mortgaged?
Held: The mortgage of a parcel of land generally includes all future improvements that may be found
on said parcel. These improvements include real properties, like the additional machines and sugar
mill purchased. Said additional machinery are real properties because they are essential and principal
elements of the sugar central. Without them, the sugar central would be unable to carry out its
industrial purpose.
3:
Lopez vs Orosa
103 Phil 98 G.R. Nos. L-10817-18
February 28, 1958
Petitioner:
ENRIQUE LOPEZ
Nicolas Belmonte and Benjamin T. de Peralta for petitioner.
Respondents:VICENTE OROSA, JR., and PLAZA THEATRE, INC.,
Tolentino & Garcia and D. R. Cruz for respondent Luzon Surety Co., Inc. Jose B.
Macatangay for respondent Plaza Theatre, Inc.
FELIX, J.:
Facts: Enrique Lopez is a resident of Balayan, Batangas, doing business under the trade name of
Lopez-Castelo Sawmill. Sometime in May, 1946, Vicente Orosa, Jr., invited Lopez to make an
investment in the theatre business (Plaza Theatre, Inc.,). Although Lopez expressed his unwillingness
to invest of the same, he agreed to supply the lumber necessary for the construction of the proposed
theatre, and at Orosa's behest and assurance that the latter would be personally liable for any
account that the said construction might incur, Lopez further agreed that payment therefor would be
on demand and not cash on delivery basis. Pursuant to said verbal agreement, Lopez delivered the
lumber which was used for the construction of the Plaza Theatre on May 17, 1946, up to December 4
of the same year. But of the total cost of the materials amounting to P62,255.85, Lopez was paid only
P20,848.50, thus leaving a balance of P41,771.35.
We may state at this juncture that the Plaza Theatre was erected on a piece of land with an
area of 679.17 square meters formerly owned by Vicente Orosa, Jr., and was acquired by the
corporation on September 25, 1946, for P6,000. As Lopez was pressing Orosa for payment of the
remaining unpaid obligation, the latter and Belarmino Rustia, the president of the corporation,
promised to obtain a bank loan by mortgaging the properties of the Plaza Theatre., out of which said
amount of P41,771.35 would be satisfied, to which assurance Lopez had to accede. Unknown to him,
however, as early as November, 1946, the corporation already got a loan for P30,000 from the
Philippine National Bank with the Luzon Surety Company as surety, and the corporation in turn

executed a mortgage on the land and building in favor of said company as counter-security. As the
land at that time was not yet brought under the operation of the Torrens System, the mortgage on the
same was registered on November 16, 1946, under Act No. 3344. Subsequently, when the corporation
applied for the registration of the land under Act 496, such mortgage was not revealed and thus
Original Certificate of Title No. O-391 was correspondingly issued on October 25, 1947, without any
encumbrance appearing thereon.
Persistent demand from Lopez for the payment of the amount due him caused Vicente Orosa,
Jr. to execute on March 17, 1947, an alleged "deed of assignment" of his 420 shares of stock of the
Plaza Theater, Inc., at P100 per share or with a total value of P42,000 in favor of the creditor, and as
the obligation still remained unsettled, Lopez filed on November 12, 1947, a complaint with the Court
of First Instance of Batangas (Civil Case No. 4501 which later became R-57) against Vicente Orosa, Jr.
and Plaza Theater, Inc., praying that defendants be sentenced to pay him jointly and severally the
sum of P41,771.35, with legal interest from the firing of the action; that in case defendants fail to pay
the same, that the building and the land covered by OCT No. O-391 owned by the corporation be sold
at public auction and the proceeds thereof be applied to said indebtedness; or that the 420 shares of
the capital stock of the Plaza Theatre, Inc., assigned by Vicente Orosa, Jr., to said plaintiff be sold at
public auction for the same purpose; and for such other remedies as may be warranted by the
circumstances. Plaintiff also caused the annotation of a notice of lis pendens on said properties with
the Register of Deeds.
Issues:
(1) whether a materialman's lien for the value of the materials used in the construction
of a building attaches to said structure alone and does not extend to the land on which the building is
adhered to;
Held: While it is true that generally, real estate connotes the land and the building constructed
thereon, it is obvious that the inclusion of the building, separate and distinct from the land, in the
enumeration of what may constitute real properties could mean only one thing that a building is by
itself an immovable property, a doctrine already pronounced by this Court in the case of Leung Yee
vs. Strong Machinery Co., 37 Phil., 644. Moreover, and in view of the absence of any specific provision
of law to the contrary, a building is an immovable property, irrespective of whether or not said
structure and the land on which it is adhered to belong to the same owner.
A close examination of the provision of the Civil Code invoked by appellant reveals that the law
gives preference to unregistered refectionary credits only with respect to the real estate upon which
the refection or work was made. This being so, the inevitable conclusion must be that the lien so
created attaches merely to the immovable property for the construction or repair of which the
obligation was incurred. Evidently, therefore, the lien in favor of appellant for the unpaid value of the
lumber used in the construction of the building attaches only to said structure and to no other
property of the obligors.
4: Associated Insurance Vs Iya
103 Phil 972
G.R.
May 30, 1958
Plaintiff:
ASSOCIATED INSURANCE and SURETY COMPANY, INC.,
Defendants: ISABEL IYA, ADRIANO VALINO and LUCIA VALINO

Nos.

L-10837-38

Plaintiff:
ISABEL IYA
Defendants: ADRIANO VALINO, LUCIA VALINO and ASSOCIATED INSURANCE and SURETY
COMPANY. INC.,
Jovita L. de Dios for defendant Isabel Iya.
M. Perez Cardenas and Apolonio Abola for defendant Associated Insurance and Surety Co., Inc.
FELIX, J.:
Facts: Adriano Valino and Lucia A. Valino, husband and wife, were the owners and possessors of a
house of strong materials constructed on Lot No. 3, Block No. 80 of the Grace Park Subdivision in
Caloocan, Rizal, which they purchased on installment basis from the Philippine Realty Corporation. On
November 6, 1951, to enable her to purchase on credit rice from the NARIC, Lucia A. Valino filed a
bond in the sum of P11,000.00 (AISCO Bond No. G-971) subscribed by the Associated Insurance and
Surety Co., Inc., and as counter-guaranty therefor, the spouses Valino executed an alleged chattel
mortgage on the aforementioned house in favor of the surety company, which encumbrance was duly
registered with the Chattel Mortgage Register of Rizal on December 6, 1951. It is admitted that at the
time said undertaking took place, the parcel of land on which the house is erected was still registered
in the name of the Philippine Realty Corporation. Having completed payment on the purchase price of
the lot, the Valinos were able to secure on October 18, 1958, a certificate of title in their name (T.C.T.
No. 27884). Subsequently, however, or on October 24, 1952, the Valinos, to secure payment of an
indebtedness in the amount of P12,000.00, executed a real estate mortgage over the lot and the
house in favor of Isabel Iya, which was duly registered and annotated at the back of the certificate of
title.
On the other hand, as Lucia A. Valino, failed to satisfy her obligation to the NARIC, the surety
company was compelled to pay the same pursuant to the undertaking of the bond. In turn, the surety
company demanded reimbursement from the spouses Valino, and as the latter likewise failed to do
so, the company foreclosed the chattel mortgage over the house. As a result thereof, a public sale
was conducted by the Provincial Sheriff of Rizal on December 26, 1952, wherein the property was

awarded to the surety company for P8,000.00, the highest bid received therefor. The surety company
then caused the said house to be declared in its name for tax purposes (Tax Declaration No. 25128).
Sometime in July, 1953, the surety company learned of the existence of the real estate
mortgage over the lot covered by T.C.T. No. 26884 together with the improvements thereon; thus,
said surety company instituted Civil Case No. 2162 of the Court of First Instance of Manila naming
Adriano and Lucia Valino and Isabel Iya, the mortgagee, as defendants. The complaint prayed for the
exclusion of the residential house from the real estate mortgage in favor of defendant Iya and the
declaration and recognition of plaintiff's right to ownership over the same in virtue of the award given
by the Provincial Sheriff of Rizal during the public auction held on December 26, 1952. Plaintiff
likewise asked the Court to sentence the spouses Valino to pay said surety moral and exemplary
damages, attorney's fees and costs. Defendant Isabel Iya filed her answer to the complaint alleging
among other things, that in virtue of the real estate mortgage executed by her co-defendants, she
acquired a real right over the lot and the house constructed thereon; that the auction sale allegedly
conducted by the Provincial Sheriff of Rizal as a result of the foreclosure of the chattel mortgage on
the house was null and void for non-compliance with the form required by law. She, therefore, prayed
for the dismissal of the complaint and anullment of the sale made by the Provincial Sheriff. She also
demanded the amount of P5,000.00 from plaintiff as counterclaim, the sum of P5,000.00 from her codefendants as crossclaim, for attorney's fees and costs.
The two cases were jointly heard upon agreement of the parties, who submitted the same on a
stipulation of facts, after which the Court rendered judgment dated March 8, 1956, holding that the
chattel mortgage in favor of the Associated Insurance and Surety Co., Inc., was preferred and superior
over the real estate mortgage subsequently executed in favor of Isabel Iya. It was ruled that as the
Valinos were not yet the registered owner of the land on which the building in question was
constructed at the time the first encumbrance was made, the building then was still a personality and
a chattel mortgage over the same was proper. However, as the mortgagors were already the owner of
the land at the time the contract with Isabel Iya was entered into, the building was transformed into a
real property and the real estate mortgage created thereon was likewise adjudged as proper. It is to
be noted in this connection that there is no evidence on record to sustain the allegation of the
spouses Valino that at the time they mortgaged their house and lot to Isabel Iya, the latter was told or
knew that part of the mortgaged property, i.e., the house, had previously been mortgaged to the
surety company.
There is no question as to appellant's right over the land covered by the real estate mortgage;
however, as the building constructed thereon has been the subject of 2 mortgages; controversy arise
as to which of these encumbrances should receive preference over the other. The decisive factor in
resolving the issue presented by this appeal is the determination of the nature of the structure
litigated upon, for where it be considered a personality, the foreclosure of the chattel mortgage and
the subsequent sale thereof at public auction, made in accordance with the Chattel Mortgage Law
would be valid and the right acquired by the surety company therefrom would certainly deserve prior
recognition; otherwise, appellant's claim for preference must be granted. The lower Court, deciding in
favor of the surety company, based its ruling on the premise that as the mortgagors were not the
owners of the land on which the building is erected at the time the first encumbrance was made, said
structure partook of the nature of a personal property and could properly be the subject of a chattel
mortgage.
Issue: WON the residential lot is a real property.
Held: Yes. A building certainly cannot be divested of its character of a realty by the fact that the land
on which it is constructed belongs to another. To hold it the other way, the possibility is not remote
that it would result in confusion, for to cloak the building with an uncertain status made dependent on
the ownership of the land, would create a situation where a permanent fixture changes its nature or
character as the ownership of the land changes hands. In the case at bar, as personal properties
could only be the subject of a chattel mortgage (Section 1, Act 3952) and as obviously the structure
in question is not one, the execution of the chattel mortgage covering said building is clearly invalid
and a nullity. While it is true that said document was correspondingly registered in the Chattel
Mortgage Register of Rizal, this act produced no effect whatsoever for where the interest conveyed is
in the nature of a real property, the registration of the document in the registry of chattels is merely a
futile act. Thus, the registration of the chattel mortgage of a building of strong materials produce no
effect as far as the building is concerned (Leung Yee vs. Strong Machinery Co., 37 Phil., 644). Nor can
we give any consideration to the contention of the surety that it has acquired ownership over the
property in question by reason of the sale conducted by the Provincial Sheriff of Rizal, for as this
Court has aptly pronounced:
A mortgage creditor who purchases real properties at an extrajudicial foreclosure sale thereof
by virtue of a chattel mortgage constituted in his favor, which mortgage has been declared null
and void with respect to said real properties, acquires no right thereto by virtue of said sale
(De la Riva vs. Ah Keo, 60 Phil., 899).
5:
Tumalad vs Vicencio
41 scra 143
G.R. No. L-30173 September 30, 1971
plaintiffs-appellees: GAVINO A. TUMALAD and GENEROSA R. TUMALAD
Castillo & Suck for plaintiffs-appellees.
defendants-appellants: ALBERTA VICENCIO and EMILIANO SIMEON
Jose Q. Calingo for defendants-appellants.

REYES, J.B.L., J.:


Facts: It appears on the records that on 1 September 1955 defendants-appellants executed a chattel
mortgage in favor of plaintiffs-appellees over their house of strong materials located at No. 550 Int. 3,
Quezon Boulevard, Quiapo, Manila, over Lot Nos. 6-B and 7-B, Block No. 2554, which were being
rented from Madrigal & Company, Inc. The mortgage was registered in the Registry of Deeds of
Manila on 2 September 1955. The herein mortgage was executed to guarantee a loan of P4,800.00
received from plaintiffs-appellees, payable within one year at 12% per annum. The mode of payment
was P150.00 monthly, starting September, 1955, up to July 1956, and the lump sum of P3,150 was
payable on or before August, 1956. It was also agreed that default in the payment of any of the
amortizations, would cause the remaining unpaid balance to become immediately due and Payable
and
the Chattel Mortgage will be enforceable in accordance with the provisions of Special
Act No. 3135, and for this purpose, the Sheriff of the City of Manila or any of his
deputies is hereby empowered and authorized to sell all the Mortgagor's property after
the necessary publication in order to settle the financial debts of P4,800.00, plus 12%
yearly interest, and attorney's fees...
When defendants-appellants defaulted in paying, the mortgage was extrajudicially foreclosed,
and on 27 March 1956, the house was sold at public auction pursuant to the said contract. As highest
bidder, plaintiffs-appellees were issued the corresponding certificate of sale. 3 Thereafter, on 18 April
1956, plaintiffs-appellant commenced Civil Case No. 43073 in the municipal court of Manila, praying,
among other things, that the house be vacated and its possession surrendered to them, and for
defendants-appellants to pay rent of P200.00 monthly from 27 March 1956 up to the time the
possession is surrendered. 4 On 21 September 1956, the municipal court rendered its decision
... ordering the defendants to vacate the premises described in the complaint; ordering
further to pay monthly the amount of P200.00 from March 27, 1956, until such (time
that) the premises is (sic) completely vacated; plus attorney's fees of P100.00 and the
costs of the suit. 5
Defendants-appellants, in their answers in both the municipal court and court a quo impugned
the legality of the chattel mortgage, claiming that they are still the owners of the house; but they
waived the right to introduce evidence, oral or documentary. Defendants-appellants predicate their
theory of nullity of the chattel mortgage on two grounds, which are: (a) that, their signatures on the
chattel mortgage were obtained through fraud, deceit, or trickery; and (b) that the subject matter of
the mortgage is a house of strong materials, and, being an immovable, it can only be the subject of a
real estate mortgage and not a chattel mortgage.
On the charge of fraud, deceit or trickery, the Court of First Instance found defendantsappellants' contentions as not supported by evidence and accordingly dismissed the charge, 8
confirming the earlier finding of the municipal court that "the defense of ownership as well as the
allegations of fraud and deceit ... are mere allegations."
Issue: WON the house can be a subject of Chattel Mortgage
Held: Yes.
In the contract now before Us, the house on rented land is not only expressly designated as
Chattel Mortgage; it specifically provides that "the mortgagor ... voluntarily CEDES, SELLS and
TRANSFERS by way of Chattel Mortgage 23 the property together with its leasehold rights over the lot
on which it is constructed and participation ..." 24Although there is no specific statement referring to
the subject house as personal property, yet by ceding, selling or transferring a property by way of
chattel mortgage defendants-appellants could only have meant to convey the house as chattel, or at
least, intended to treat the same as such, so that they should not now be allowed to make an
inconsistent stand by claiming otherwise. Moreover, the subject house stood on a rented lot to which
defendats-appellants merely had a temporary right as lessee, and although this cannot in itself alone
determine the status of the property, it does so when combined with other factors to sustain the
interpretation that the parties, particularly the mortgagors, intended to treat the house as personalty.
Finally unlike in the Iya cases, Lopez vs. Orosa, Jr. and Plaza Theatre, Inc. 25 and Leung Yee
vs. F. L. Strong Machinery and Williamson, 26 wherein third persons assailed the validity of
the chattel mortgage, 27 it is the defendants-appellants themselves, as debtorsmortgagors, who are attacking the validity of the chattel mortgage in this case. The
doctrine of estoppel therefore applies to the herein defendants-appellants, having treated
the subject house as personalty.

6:

Makati Leasing vs Wearever

Petitioner:

122 scra 143

G.R. No. L-58469 May 16, 1983

MAKATI LEASING and FINANCE CORPORATION

Loreto C. Baduan for petitioner. Ramon D. Bagatsing & Assoc. (collaborating counsel).
Respondents:

WEAREVER TEXTILE MILLS, INC., and HONORABLE COURT OF APPEALS


Jose V. Mancella for respondent.
DE CASTRO, J.:
Facts: It appears that in order to obtain financial accommodations from herein petitioner Makati
Leasing and Finance Corporation, the private respondent Wearever Textile Mills, Inc., discounted and
assigned several receivables with the former under a Receivable Purchase Agreement. To secure the
collection of the receivables assigned, private respondent executed a Chattel Mortgage over certain
raw materials inventory as well as a machinery described as an Artos Aero Dryer Stentering Range.
Upon private respondent's default, petitioner filed a petition for extrajudicial foreclosure of the
properties mortgage to it. However, the Deputy Sheriff assigned to implement the foreclosure failed
to gain entry into private respondent's premises and was not able to effect the seizure of the
aforedescribed machinery. Petitioner thereafter filed a complaint for judicial foreclosure with the Court
of First Instance of Rizal, Branch VI, docketed as Civil Case No. 36040, the case before the lower
court.
Acting on petitioner's application for replevin, the lower court issued a writ of seizure, the
enforcement of which was however subsequently restrained upon private respondent's filing of a
motion for reconsideration. After several incidents, the lower court finally issued on February 11,
1981, an order lifting the restraining order for the enforcement of the writ of seizure and an order to
break open the premises of private respondent to enforce said writ. The lower court reaffirmed its
stand upon private respondent's filing of a further motion for reconsideration.
The Court of Appeals, in certiorari and prohibition proceedings subsequently filed by herein
private respondent, set aside the Orders of the lower court and ordered the return of the drive motor
seized by the sheriff pursuant to said Orders, after ruling that the machinery in suit cannot be
the subject of replevin, much less of a chattel mortgage, because it is a real property
pursuant to Article 415 of the new Civil Code, the same being attached to the ground by
means of bolts and the only way to remove it from respondent's plant would be to drill out
or destroy the concrete floor
Issue: WON the machinery is question is a real property
Held: No. The machinery is a personal property. If a house of strong materials, like what was involved
in the Tumalad case, may be considered as personal property for purposes of executing a chattel
mortgage thereon as long as the parties to the contract so agree and no innocent third party will be
prejudiced thereby, there is absolutely no reason why a machinery, which is movable in its nature and
becomes immobilized only by destination or purpose, may not be likewise treated as such. This is
really because one who has so agreed is estopped from denying the existence of the chattel
mortgage.
It must be pointed out that the characterization of the subject machinery as chattel by the
private respondent is indicative of intention and impresses upon the property the character
determined by the parties. As stated inStandard Oil Co. of New York v. Jaramillo, 44 Phil. 630, it is
undeniable that the parties to a contract may by agreement treat as personal property that which by
nature would be real property, as long as no interest of third parties would be prejudiced thereby.
7:
Bd. Of Assessment Appeals vs Meralco
10 SCRA 63 G.R.
No.
L-15334
January 31, 1964
Petitioners: BOARD OF ASSESSMENT APPEALS, CITY ASSESSOR and CITY TREASURER OF
QUEZON CITY
Assistant City Attorney Jaime R. Agloro for petitioners.
Respondent: MANILA ELECTRIC COMPANY
Ross, Selph and Carrascoso for respondent.
PAREDES, J.:
Facts: On October 20, 1902, the Philippine Commission enacted Act No. 484 which authorized the
Municipal Board of Manila to grant a franchise to construct, maintain and operate an electric street
railway and electric light, heat and power system in the City of Manila and its suburbs to the person
or persons making the most favorable bid. Charles M. Swift was awarded the said franchise on March
1903, the terms and conditions of which were embodied in Ordinance No. 44 approved on March 24,
1903. Respondent Manila Electric Co. (Meralco for short), became the transferee and owner of the
franchise.
Meralco's electric power is generated by its hydro-electric plant located at Botocan Falls,
Laguna and is transmitted to the City of Manila by means of electric transmission wires, running from

the province of Laguna to the said City. These electric transmission wires which carry high voltage
current, are fastened to insulators attached on steel towers constructed by respondent at intervals,
from its hydro-electric plant in the province of Laguna to the City of Manila. The respondent Meralco
has constructed 40 of these steel towers within Quezon City, on land belonging to it. A photograph of
one of these steel towers is attached to the petition for review, marked Annex A.
On November 15, 1955, petitioner City Assessor of Quezon City declared the aforesaid steel
towers for real property tax under Tax declaration Nos. 31992 and 15549. After denying respondent's
petition to cancel these declarations, an appeal was taken by respondent to the Board of Assessment
Appeals of Quezon City, which required respondent to pay the amount of P11,651.86 as real property
tax on the said steel towers for the years 1952 to 1956. Respondent paid the amount under protest,
and filed a petition for review in the Court of Tax Appeals (CTA for short) which rendered a decision on
December 29, 1958, ordering the cancellation of the said tax declarations and the petitioner City
Treasurer of Quezon City to refund to the respondent the sum of P11,651.86. The motion for
reconsideration having been denied, on April 22, 1959, the instant petition for review was filed.
In upholding the cause of respondents, the CTA held that: (1) the steel towers come within the
term "poles" which are declared exempt from taxes under part II paragraph 9 of respondent's
franchise; (2) the steel towers are personal properties and are not subject to real property tax; and (3)
the City Treasurer of Quezon City is held responsible for the refund of the amount paid. These are
assigned as errors by the petitioner in the brief.
Issue: WON the steel towers were personal properties
Held: Yes. The steel towers or supports in question, do not come within the objects mentioned in
paragraph 1, because they do not constitute buildings or constructions adhered to the soil. They are
not construction analogous to buildings nor adhering to the soil. As per description, given by the
lower court, they are removable and merely attached to a square metal frame by means of bolts,
which when unscrewed could easily be dismantled and moved from place to place. They can not be
included under paragraph 3, as they are not attached to an immovable in a fixed manner, and they
can be separated without breaking the material or causing deterioration upon the object to which
they are attached. Each of these steel towers or supports consists of steel bars or metal strips, joined
together by means of bolts, which can be disassembled by unscrewing the bolts and reassembled by
screwing the same. These steel towers or supports do not also fall under paragraph 5, for they are not
machineries, receptacles, instruments or implements, and even if they were, they are not intended
for industry or works on the land. Petitioner is not engaged in an industry or works in the land in
which the steel supports or towers are constructed.
*** Granting for the purpose of argument that the steel supports or towers in question are not
embraced within the term poles, the logical question posited is whether they constitute real
properties, so that they can be subject to a real property tax. The tax law does not provide for a
definition of real property; but Article 415 of the Civil Code does, by stating the following are
immovable property:
(1) Land, buildings, roads, and constructions of all kinds adhered to the soil;
(3) Everything attached to an immovable in a fixed manner, in such a way that it cannot be
separated therefrom without breaking the material or deterioration of the object;
(5) Machinery, receptacles, instruments or implements intended by the owner of the tenement
for an industry or works which may be carried in a building or on a piece of land, and which
tends directly to meet the needs of the said industry or works;
8:
Meralco Securities vs Bd Assessment Appeals
114 SCRA 296
G.R. No. L-46245
May 31, 1982
Petitioner:
MERALCO SECURITIES INDUSTRIAL CORPORATION
Respondents:CENTRAL BOARD OF ASSESSMENT APPEALS, BOARD OF ASSESSMENT APPEALS
OF LAGUNA and PROVINCIAL ASSESSOR OF LAGUNA
AQUINO, J.:
Facts: In this special civil action of certiorari, Meralco Securities Industrial Corporation assails the
decision of the Central Board of Assessment Appeals (composed of the Secretary of Finance as
chairman and the Secretaries of Justice and Local Government and Community Development as
members) dated May 6, 1976, holding that Meralco Securities' oil pipeline is subject to realty tax.
The record reveals that pursuant to a pipeline concession issued under the Petroleum Act of
1949, Republic Act No. 387, Meralco Securities installed from Batangas to Manila a pipeline system
consisting of cylindrical steel pipes joined together and buried not less than one meter below the
surface along the shoulder of the public highway. The portion passing through Laguna is about thirty
kilometers long.
The pipes for white oil products measure fourteen inches in diameter by thirty-six feet with a
maximum capacity of 75,000 barrels daily. The pipes for fuel and black oil measure sixteen inches by
forty-eight feet with a maximum capacity of 100,000 barrels daily.
The pipes are embedded in the soil and are firmly and solidly welded together so as to
preclude breakage or damage thereto and prevent leakage or seepage of the oil. The valves are
welded to the pipes so as to make the pipeline system one single piece of property from end to end.

In order to repair, replace, remove or transfer segments of the pipeline, the pipes have to be
cold-cut by means of a rotary hard-metal pipe-cutter after digging or excavating them out of the
ground where they are buried. In points where the pipeline traversed rivers or creeks, the pipes were
laid beneath the bed thereof. Hence, the pipes are permanently attached to the land.
However, Meralco Securities notes that segments of the pipeline can be moved from one place
to another as shown in the permit issued by the Secretary of Public Works and Communications which
permit provides that the government reserves the right to require the removal or transfer of the pipes
by and at the concessionaire's expense should they be affected by any road repair or improvement.
Meralco Securities insists that its pipeline is not subject to realty tax because it is not real property
within the meaning of article 415
Pursuant to the Assessment Law, Commonwealth Act No. 470, the provincial assessor of
Laguna treated the pipeline as real property and issued Tax Declarations Nos. 6535-6537, San Pedro;
7473-7478, Cabuyao; 7967-7971, Sta. Rosa; 9882-9885, Bian and 15806-15810, Calamba,
containing the assessed values of portions of the pipeline.
Issue: WON the questioned pipeline system is subject to realty tax
Held: Article 415[l] and [3] provides that real property may consist of constructions of all kinds
adhered to the soil and everything attached to an immovable in a fixed manner, in such a way that it
cannot be separated therefrom without breaking the material or deterioration of the object.
The pipeline system in question is indubitably a construction adhering to the soil (Exh. B, p. 39,
Rollo). It is attached to the land in such a way that it cannot be separated therefrom without
dismantling the steel pipes which were welded to form the pipeline.
Insofar as the pipeline uses valves, pumps and control devices to maintain the flow of oil, it is
in a sense machinery within the meaning of the Real Property Tax Code.
It should be borne in mind that what are being characterized as real property are not the steel
pipes but the pipeline system as a whole. Meralco Securities has apparently two pipeline systems.
A pipeline for conveying petroleum has been regarded as real property for tax purposes (Miller
County Highway, etc., Dist. vs. Standard Pipe Line Co., 19 Fed. 2nd 3; Board of Directors of Red
*** Pipeline means a line of pipe connected to pumps, valves and control devices for conveying
liquids, gases or finely divided solids. It is a line of pipe running upon or in the earth, carrying with it
the right to the use of the soil in which it is placed (Note 21[10],54 C.J.S. 561).
9:
Caltex vs Bd of Assessment Appeals 114 scra 296
G.R. No. L-50466 May
1982
Petitioner:
CALTEX (PHILIPPINES) INC
Respondents:CENTRAL BOARD OF ASSESSMENT APPEALS and CITY ASSESSOR OF PASAY
AQUINO, J.:

31,

Facts: This case is about the realty tax on machinery and equipment installed by Caltex (Philippines)
Inc. in its gas stations located on leased land.
The machines and equipment consists of underground tanks, elevated tank, elevated water
tanks, water tanks, gasoline pumps, computing pumps, water pumps, car washer, car hoists, truck
hoists, air compressors and tireflators. The city assessor described the said equipment and machinery
in this manner:
A gasoline service station is a piece of lot where a building or shed is erected, a water
tank if there is any is placed in one corner of the lot, car hoists are placed in an adjacent shed,
an air compressor is attached in the wall of the shed or at the concrete wall fence.
The controversial underground tank, depository of gasoline or crude oil, is dug deep
about six feet more or less, a few meters away from the shed. This is done to prevent
conflagration because gasoline and other combustible oil are very inflammable.
This underground tank is connected with a steel pipe to the gasoline pump and the
gasoline pump is commonly placed or constructed under the shed. The footing of the pump is
a cement pad and this cement pad is imbedded in the pavement under the shed, and evidence
that the gasoline underground tank is attached and connected to the shed or building through
the pipe to the pump and the pump is attached and affixed to the cement pad and pavement
covered by the roof of the building or shed.
The building or shed, the elevated water tank, the car hoist under a separate shed, the
air compressor, the underground gasoline tank, neon lights signboard, concrete fence and
pavement and the lot where they are all placed or erected, all of them used in the pursuance
of the gasoline service station business formed the entire gasoline service-station.

As to whether the subject properties are attached and affixed to the tenement, it is
clear they are, for the tenement we consider in this particular case are (is) the pavement
covering the entire lot which was constructed by the owner of the gasoline station and the
improvement which holds all the properties under question, they are attached and affixed to
the pavement and to the improvement.
The pavement covering the entire lot of the gasoline service station, as well as all the
improvements, machines, equipments and apparatus are allowed by Caltex (Philippines) Inc. ...
The underground gasoline tank is attached to the shed by the steel pipe to the pump, so
with the water tank it is connected also by a steel pipe to the pavement, then to the electric
motor which electric motor is placed under the shed. So to say that the gasoline pumps, water
pumps and underground tanks are outside of the service station, and to consider only the
building as the service station is grossly erroneous. (pp. 58-60, Rollo).
The said machines and equipment are loaned by Caltex to gas station operators under an
appropriate lease agreement or receipt. It is stipulated in the lease contract that the operators, upon
demand, shall return to Caltex the machines and equipment in good condition as when received,
ordinary wear and tear excepted.
The lessor of the land, where the gas station is located, does not become the owner of the machines
and equipment installed therein. Caltex retains the ownership thereof during the term of the lease.
The city assessor of Pasay City characterized the said items of gas station equipment and
machinery as taxable realty. The realty tax on said equipment amounts to P4,541.10 annually (p. 52,
Rollo). The city board of tax appeals ruled that they are personalty. The assessor appealed to the
Central Board of Assessment Appeals.
Caltex invokes the rule that machinery which is movable in its nature only becomes
immobilized when placed in a plant by the owner of the property or plant but not when so placed by a
tenant, a usufructuary, or any person having only a temporary right, unless such person acted as the
agent of the owner (Davao Saw Mill Co. vs. Castillo, 61 Phil 709).

Issue:WON the machines are real properties


Held: Yes. We hold that the said equipment and machinery, as appurtenances to the gas station
building or shed owned by Caltex (as to which it is subject to realty tax) and which fixtures are
necessary to the operation of the gas station, for without them the gas station would be useless, and
which have been attached or affixed permanently to the gas station site or embedded therein, are
taxable improvements and machinery within the meaning of the Assessment Law and the Real
Property Tax Code.
Here, the question is whether the gas station equipment and machinery permanently affixed
by Caltex to its gas station and pavement (which are indubitably taxable realty) should be subject to
the realty tax. This question is different from the issue raised in the Davao Saw Mill case

10:

Sibal vs Valdez

plaintiff-appellant:

50 Phil 512 G.R. No. L-26278

LEON SIBAL
J. E. Blanco for appellant.

August 4, 1927

Defendants:

EMILIANO J. VALDEZ ET AL.,

Appellee:

EMILIANO J. VALDEZ
Felix B. Bautista and Santos and Benitez for appellee.

JOHNSON, J.:

Facts: It appears from the record:


(1) That on May 11, 1923, the deputy sheriff of the Province of Tarlac, by virtue of writ of
execution in civil case No. 20203 of the Court of First Instance of Manila (Macondray & Co.,
Inc. vs. Leon Sibal),levied an attachment on eight parcels of land belonging to said Leon Sibal,
situated in the Province of Tarlac, designated in the second of attachment as parcels 1, 2, 3, 4,
5, 6, 7 and 8 (Exhibit B, Exhibit 2-A).
(2) That on July 30, 1923, Macondray & Co., Inc., bought said eight parcels of land, at the
auction held by the sheriff of the Province of Tarlac, for the sum to P4,273.93, having paid for
the said parcels separately as follows (Exhibit C, and 2-A):
(3) That within one year from the sale of said parcel of land, and on the 24th day of
September, 1923, the judgment debtor, Leon Sibal, paid P2,000 to Macondray & Co., Inc., for
the account of the redemption price of said parcels of land, without specifying the particular
parcels to which said amount was to applied. The redemption price said eight parcels was
reduced, by virtue of said transaction, to P2,579.97 including interest (Exhibit C and 2).
The record further shows:
(1) That on April 29, 1924, the defendant Vitaliano Mamawal, deputy sheriff of the Province of
Tarlac, by virtue of a writ of execution in civil case No. 1301 of the Province of Pampanga
(Emiliano J. Valdez vs. Leon Sibal 1. the same parties in the present case), attached the
personal property of said Leon Sibal located in Tarlac, among which was included the sugar
cane now in question in the seven parcels of land described in the complaint (Exhibit A).
(2) That on May 9 and 10, 1924, said deputy sheriff sold at public auction said personal
properties of Leon Sibal, including the sugar cane in question to Emilio J. Valdez, who paid
therefor the sum of P1,550, of which P600 was for the sugar cane (Exhibit A).
(3) That on April 29,1924, said deputy sheriff, by virtue of said writ of execution, also attached
the real property of said Leon Sibal in Tarlac, including all of his rights, interest and
participation therein, which real property consisted of eleven parcels of land and a house and
camarin situated in one of said parcels (Exhibit A).
(4) That on June 25, 1924, eight of said eleven parcels, including the house and the camarin,
were bought by Emilio J. Valdez at the auction held by the sheriff for the sum of P12,200. Said
eight parcels were designated in the certificate of sale as parcels 1, 3, 4, 5, 6, 7, 10 and 11.
The house and camarin were situated on parcel 7 (Exhibit A).
(5) That the remaining three parcels, indicated in the certificate of the sheriff as parcels 2, 12,
and 13, were released from the attachment by virtue of claims presented by Agustin Cuyugan
and Domiciano Tizon (Exhibit A).
(6) That on the same date, June 25, 1924, Macondray & Co. sold and conveyed to Emilio J.
Valdez for P2,579.97 all of its rights and interest in the eight parcels of land acquired by it at
public auction held by the deputy sheriff of Tarlac in connection with civil case No. 20203 of the
Court of First Instance of Manila, as stated above. Said amount represented the unpaid balance
of the redemption price of said eight parcels, after payment by Leon Sibal of P2,000 on
September 24, 1923, fro the account of the redemption price, as stated above. (Exhibit C and
2).
The foregoing statement of facts shows:
(1) The Emilio J. Valdez bought the sugar cane in question, located in the seven parcels of land
described in the first cause of action of the complaint at public auction on May 9 and 10, 1924,
for P600.
(2) That on July 30, 1923, Macondray & Co. became the owner of eight parcels of land situated
in the Province of Tarlac belonging to Leon Sibal and that on September 24, 1923, Leon Sibal
paid to Macondray & Co. P2,000 for the account of the redemption price of said parcels.
(3) That on June 25, 1924, Emilio J. Valdez acquired from Macondray & Co. all of its rights and
interest in the said eight parcels of land.
(4) That on June 25, 1924, Emilio J. Valdez also acquired all of the rights and interest which
Leon Sibal had or might have had on said eight parcels by virtue of the P2,000 paid by the
latter to Macondray.
(5) That Emilio J. Valdez became the absolute owner of said eight parcels of land.
Plaintiff prayed that a writ of preliminary injunction be issued against the defendant Emiliano J.
Valdez his attorneys and agents, restraining them (1) from distributing him in the possession of the
parcels of land described in the complaint; (2) from taking possession of, or harvesting the sugar cane
in question; and (3) from taking possession, or harvesting the palay in said parcels of land. Plaintiff

also prayed that a judgment be rendered in his favor and against the defendants ordering them to
consent to the redemption of the sugar cane in question, and that the defendant Valdez be
condemned to pay to the plaintiff the sum of P1,056 the value of palay harvested by him in the two
parcels above-mentioned ,with interest and costs.
The defendant Emiliano J. Valdez, in his amended answer, denied generally and specifically
each and every allegation of the complaint and step up the following defenses:
(a) That the sugar cane in question had the nature of personal property and was not, therefore,
subject to redemption;
(b) That he was the owner of parcels 1, 2 and 7 described in the first cause of action of the
complaint;
(c) That he was the owner of the palay in parcels 1, 2 and 7; and
(d) That he never attempted to harvest the palay in parcels 4 and 5.
The first question raised by the appeal is, whether the sugar cane in question is personal or
real property. It is contended that sugar cane comes under the classification of real property as
"ungathered products" in paragraph 2 of article 334 of the Civil Code. Said paragraph 2 of article 334
enumerates as real property the following: Trees, plants, and ungathered products, while they are
annexed to the land or form an integral part of any immovable property." That article, however, has
received in recent years an interpretation by the Tribunal Supremo de Espaa, which holds that,
under certain conditions, growing crops may be considered as personal property. (Decision of March
18, 1904, vol. 97, Civil Jurisprudence of Spain.)

Issue: WON the sugar cane in question is considered as real property and shall be classified under
Growing Crops
Held: (Follow yellow pad Held)
No. The lower court, therefore, committed no error in holding that the sugar cane in question
was personal property and, as such, was not subject to redemption.
From an examination of the reports and codes of the State of California and other states we
find that the settle doctrine followed in said states in connection with the attachment of property and
execution of judgment is, that growing crops raised by yearly labor and cultivation are considered
personal property. (6 Corpuz Juris, p. 197; 17 Corpus Juris, p. 379; 23 Corpus Juris, p. 329: Raventas
vs. Green, 57 Cal., 254; Norris vs. Watson, 55 Am. Dec., 161; Whipple vs. Foot, 3 Am. Dec., 442; 1
Benjamin on Sales, sec. 126; McKenzie vs. Lampley, 31 Ala., 526; Crine vs. Tifts and Co., 65 Ga., 644;
Gillitt vs. Truax, 27 Minn., 528; Preston vs. Ryan, 45 Mich., 174; Freeman on Execution, vol. 1, p. 438;
Drake on Attachment, sec. 249; Mechem on Sales, sec. 200 and 763.)
Mr. Mechem says that a valid sale may be made of a thing, which though not yet actually in
existence, is reasonably certain to come into existence as the natural increment or usual incident of
something already in existence, and then belonging to the vendor, and then title will vest in the buyer
the moment the thing comes into existence. (Emerson vs. European Railway Co., 67 Me., 387; Cutting
vs. Packers Exchange, 21 Am. St. Rep., 63.) Things of this nature are said to have a potential
existence. A man may sell property of which he is potentially and not actually possessed. He may
make a valid sale of the wine that a vineyard is expected to produce; or the gain a field may grow in a
given time; or the milk a cow may yield during the coming year; or the wool that shall thereafter grow
upon sheep; or what may be taken at the next cast of a fisherman's net; or fruits to grow; or young
animals not yet in existence; or the good will of a trade and the like. The thing sold, however, must be
specific and identified. They must be also owned at the time by the vendor. (Hull vs. Hull, 48 Conn.,
250 [40 Am. Rep., 165].)
Act No. 1508, the Chattel Mortgage Law, fully recognized that growing crops are personal
property. Section 2 of said Act provides: "All personal property shall be subject to mortgage,
agreeably to the provisions of this Act, and a mortgage executed in pursuance thereof shall be
termed a chattel mortgage." Section 7 in part provides: "If growing crops be mortgaged the mortgage
may contain an agreement stipulating that the mortgagor binds himself properly to tend, care for and
protect the crop while growing.
It is clear from the foregoing provisions that Act No. 1508 was enacted on the assumption that
"growing crops" are personal property. This consideration tends to support the conclusion
hereinbefore stated, that paragraph 2 of article 334 of the Civil Code has been modified by section

450 of Act No. 190 and by Act No. 1508 in the sense that "ungathered products" as mentioned in said
article of the Civil Code have the nature of personal property. In other words, the phrase "personal
property" should be understood to include "ungathered products."

11:

US vs Carlos

plaintiff-appellee:

21 Phil 543 G.R. No. 6295

September 1, 1911

THE UNITED STATES


A. D. Gibbs for appellant.

defendant-appellant:

IGNACIO CARLOS

Acting Attorney-General Harvey for appellee.


PER CURIAM [by decision of a judge, or of a court in unanimous agreement.]:

Facts:
For considerably more than a year previous to the filing of this complaint the accused,
Ignacio Carlos, had been a consumer of electricity furnished by the Manila Electric Railroad and Light
Company for a building containing the residence of the accused and three other residences, and
which was equipped, according to the defendant's testimony, with thirty electric lights. On March 15,
1909, the representatives of the company, believing that more light was being used than their meter
showed, installed an additional meter (Exhibit A) on a pole outside of defendant's house, and both it
and the meter (Exhibit B) which had been previously installed in the house were read on said date.
Exhibit A read 218 kilowatt hours; Exhibit B, 745 kilowatt hours. On March 3, 1910 each was read
again, Exhibit A showing 2,718 kilowatt hours and Exhibit B, 968. It is undisputed that the current
which supplied the house passed through both meters and the city electrician testifies that each
meter was tested on the date of the last reading and was "in good condition." The result of this
registration therefore is that while the outsider meter (Exhibit A) showed a consumption in
defendant's building of 2,500 kilowatt hours of electricity, this inside meter (Exhibit B) showed but
223 kilowatt hours. In other words the actual consumption, according to the outside meter, was more
than ten times as great as that registered by the one inside. Obviously this difference could not be
due to normal causes, for while the electrician called by the defense (Lanusa) testifies to the
possibility of a difference between two such meters, he places the extreme limit of such difference
between them 5 per cent. Here, as we have seen, the difference is more than 900 per cent. Besides,
according to the defendant's electrician, the outside meter should normally run faster, while
according to the test made in this case the inside meter (Exhibit B) ran the faster. The city electrician
also testifies that the electric current could have been deflected from the inside meter by placing
thereon a device known as a "jumper" connecting the two outside wires, and there is other testimony
that there were marks on the insulation of the meter Exhibit B which showed the use of such a
device. There is a further evidence that the consumption of 223 kilowatt hours, registered by the
inside meter would not be a reasonable amount for the number of lights installed in defendant's
building during the period in question, and the accused fails to explain why he should have had thirty
lights installed if he needed but four or five.
On the strength of this showing a search warrant was issued for the examination of
defendant's premises and was duly served by a police officer (Hartpence). He was accompanied at
the time by three employees of the Manila Electric Railroad and Light Company, and he found there
the accused, his wife and son, and perhaps one or two others. There is a sharp conflict between the
several spectators on some points but on one there is no dispute. All agree that the "jumper" (Exhibit
C) was found in a drawer of a small cabinet in the room of defendant's house where the meter was
installed and not more than 20 feet therefrom. In the absence of a satisfactory explanation this
constituted possession on defendant's part, and such possession, under the Code of Civil Procedure,
section 334 (10), raises the presumption that the accused was the owner of a device whose only use
was to deflect the current from the meter.
Is there any other "satisfactory explanation" of the "jumper's" presence? The only one sought
to be offered is the statement by the son of the accused, a boy of twelve years, that he saw the
"jumper" placed there by the witness Porter, an employee of the Light Company. The boy is the only
witness who so testifies and Porter himself squarely denies it. We can not agree with counsel for the
defense that the boy's interest in the outcome of this case is less than that of the witness for the

prosecution. It seems to us that his natural desire to shield his father would far outweight any interest
such an employee like Porter would have and which, at most, would be merely pecuniary.
There is, however, one witness whom so far as appears, has no interest in the matter
whatsoever. This is officer Hartpence, who executed the search warrant. He testifies that after
inspecting other articles and places in the building as he and the other spectators, including the
accused, approached the cabinet in which the "jumper" was found, the officer's attention was called
to the defendant's appearance and the former noticed that the latter was becoming nervous. Where
the only two witnesses who are supposed to know anything of the matter thus contradict each other
this item of testimony by the officer is of more than ordinary significance; for if, as the accused
claims, the "jumper" was placed in the cabinet for the first time by Porter there would be no occasion
for any change of demeanor on the part of the accused. We do not think that the officer's declination
to wait until defendant should secure a notary public shows bias. The presence of such an official was
neither required nor authorized by law and the very efficacy of a search depends upon its swiftness.
We must also agree with the prosecuting attorney that the attending circumstances do not
strengthen the story told by the boy; that the latter would have been likely to call out at the time he
saw the "jumper" being placed in the drawer, or at least directed his father's attention to it
immediately instead of waiting, as he says, until the latter was called by the officer. Finally, to accept
the boy's story we must believe that this company or its representatives deliberately conspired not
merely to lure the defendant into the commission of a crime but to fasten upon him a crime which he
did not commit and thus convict an innocent man by perjured evidence. This is a much more serious
charge than that contained in the complaint and should be supported by very strong corroborating
circumstances which we do not find here. We are, accordingly, unable to consider as satisfactory
defendant's explanation of the "jumper's" presence.
The only alternative is the conclusion that the "jumper" was placed there by the accused or by
some one acting for him and that it was the instrument by which the current was deflected from the
matter Exhibit B and the Light Company deprived of its lawful compensation.
After a careful examination of the entire record we are satisfied beyond peradventure of a
doubt that the proofs presented fully support the facts as set forth in the foregoing finding.
Counsel for the appellant insists that the only corporeal property can be the subject of the
crime of larceny, and in the support of this proposition cites several authorities for the purpose of
showing that the only subjects of larceny are tangible, movable, chattels, something which could be
taken in possession and carried away, and which had some, although trifling, intrinsic value, and also
to show that electricity is an unknown force and cannot be a subject of larceny.

Issue: WON electricity can be a subject of theft


Held: Yes. Electricity, the same as gas, is a valuable article of merchandise, bought and sold like
other personal property and is capable of appropriation by another. So no error was committed by the
trial court in holding that electricity is a subject of larceny.
It is true that electricity is no longer, as formerly, regarded by electricians as a fluid, but its
manifestation and effects, like those of gas, may be seen and felt. The true test of what is a proper
subject of larceny seems to be not whether the subject is corporeal, but whether it is capable of
appropriation by another than the owner.

12: HongKong & Shanghai Bank vs Aldecoa


30 Phil 255 G.R. No. L-8437
March
23, 1915
plaintiff-appellee: THE HONGKONG & SHANGHAI BANKING CORPORATION
Hausermann, Cohn and Fisher for appellee.
defendants-appellants: ALDECOA & CO., in liquidation, JOAQUIN IBAEZ DE ALDECOA Y
PALET, ZOILO IBAEZ DE ALDECOA Y PALET, CECILIA IBAEZ DE ALDECOA Y PALET, and
ISABEL PALET DE GABARRO,

intervener-appellant:
WILLIAM URQUHART
Antonio Sanz and Chicote and Miranda for appellants
TRENT, J.:
Facts
Issues
Held
13: Involuntary Insolvence of Strochecker vs Ramirez 44 Phil 933 G.R. No. 18520
September 26, 1922
Appellee:
INVOLUNTARY INSOLVENCY OF PAUL STROCHECKER,
creditor and appellant:
ILDEFONSO RAMIREZ
assignee:
WILLIAM EDMONDS
Counsels: Lim & Lim for appellant.
Ross & Lawrence and Antonio T. Carrascoso, jr., for the Fidelity & Surety Co.
ROMUALDEZ, J.:

Facts: The question at issue in this appeal is, which of the two mortgages here in question must be
given preference? Is it the one in favor of the Fidelity & Surety Co., or that in favor of Ildefonso
Ramirez. The first was declared by the trial court to be entitled to preference.
In the lower court there were three mortgagees each of whom claimed preference. They were
the two above mentioned and Concepcion Ayala. The latter's claim was rejected by the trial court,
and from that ruling she did not appeal.
There is no question as to the priority in time of the mortgage in favor of the Fidelity & Surety
Co. which was executed on March 10, 1919, and registered in due time in the registry of property,
that in favor of the appellant being dated September 22, 1919, and registered also in the registry.
The appellant claims preference on these grounds: (a) That the first mortgage abovementioned is not valid because the property which is the subject-matter thereof is not capable of
being mortgaged, and the description of said property is not sufficient; and (b) that the amount due
the appellant is a purchase price, citing article 1922 of the Civil Code in support thereof, and that his
mortgage is but a modification of the security given by the debtor on February 15, 1919, that is, prior
to the mortgage executed in favor of the Fidelity & Surety Co.
As to the first ground, the thing that was mortgaged to this corporation is described in the
document as follows:
. . . his half interest in the drug business known as Antigua Botica Ramirez (owned by Srta.
Dolores del Rosario and the mortgagor herein referred to as the partnership), located at Calle
Real Nos. 123 and 125, District of Intramuros, Manila, Philippine Islands.

Issue: WON the subject of interest in business may be subject of mortgage


Held: Yes. With regard to the nature of the property thus mortgaged, which is one-half interest in the
business above described, such interest is a personal property capable of appropriation and not
included in the enumeration of real properties in article 335 of the Civil Code, and may be the subject
of mortgage. All personal property may be mortgaged. (Sec. 2, Act No. 1508.)
The description contained in the document is sufficient. The law (sec. 7, Act No. 1508) requires
only a description of the following nature:
The description of the mortgaged property shall be such as to enable the parties to the
mortgage, or any other person, after reasonable inquiry and investigation, to identify the same.
14:
US vs Tabunting 41 Phil 364 G.R. No. L-16513
plaintiff-appellee:
THE UNITED STATES
Acting Attorney-General Feria for appellee.
defendant-appellant:
MANUEL TAMBUNTING
Manuel Garcia Goyena for appellant.
STREET, J.:

January 18, 1921

Facts: The evidence submitted in behalf of the prosecution shows that in January of the year 1918,
the accused and his wife became occupants of the upper floor of the house situated at No. 443, Calle
Evangelista, in the city of Manila. In this house the Manila Gas Corporation had previously installed
apparatus for the delivery of gas on both the upper and lower floors, consisting of the necessary
piping and a gas meter, which last mentioned apparatus was installed below. When the occupants at
whose request this installation had been made vacated the premises, the gas company disconnected
the gas pipe and removed the meter, thus cutting off the supply of gas from said premises.
Upon June 2, 1919, one of the inspectors of the gas company visited the house in question and
found that gas was being used, without the knowledge and consent of the gas company, for cooking
in the quarters occupied by the defendant and his wife: to effect which a short piece of iron pipe had
been inserted in the gap where the gas meter had formerly been placed, and piece of rubber tubing
had been used to connect the gas pipe of rubber tubing had been used to connect the gas pipe in
kitchen with the gas stove, or plate, used for cooking.
At the time this discovery was made, the accused, Manuel Tambunting, was not at home, but
he presently arrived and admitted to the agent to the gas company that he had made the connection
with the rubber tubing between the gas pipe and the stove, though he denied making the connection
below. He also admitted that he knew he was using gas without the knowledge of the company and
that he had been so using it for probably two or three months.
The clandestine use of gas by the accused in the manner stated is thus established in our
opinion beyond a doubt; and inasmuch as the animo lucrandi is obvious, it only remains to consider,
first, whether gas can be the subject to larceny and, secondly, whether the quantity of gas
appropriated in the two months, during which the accused admitted having used the same, has been
established with sufficient certainty to enable the court to fix an appropriate penalty.
Issue: WON gas can be subject for larceny.
Held: Yes. There is nothing in the nature of gas used for illuminating purposes which renders it
incapable of being feloniously taken and carried away. It is a valuable article of merchandise, bought
and sold like other personal property, susceptible of being severed from a mass or larger quantity and
of being transported from place to place. Likewise water which is confined in pipes and electricity
which is conveyed by wires are subjects of larceny."
15: Rubiso vs Rivera 37 Phil 72 G.R. No. L-11407
October 30, 1917
plaintiff-appellee: FAUSTO RUBISO and BONIFACIO GELITO
Salvador Q. Araullo for appellee.
defendant-appellant: FLORENTINO E. RIVERA,
Francisco Sevilla for appellant.
TORRES, J.:
Facts: So that the pilot boat Valentina was twice sold: first privately by its owner Sy Qui to the
defendant Florentino E. Rivera, on January 4, 1915, and afterwards by the sheriff at public auction in
conformity with the order contained in the judgment rendered by the justice of the peace, court, on
January 23 of the same year, against the Chinaman Sy Qui and in behalf of the plaintiff, Fausto
Rubiso.
It is undeniable that the defendant Rivera acquired by purchase the pilot boat Valentina on a
date prior to that of the purchase and adjudication made at public auction, by and on behalf of the
plaintiff Rubiso; but it is no less true that the sale of the vessel by Sy Qui to Florentino E. Rivera, on
January 4, 1915, was entered in the customs registry only on March 17, 1915, while its sale at public
auction to Fausto Rubiso on the 23d of January of the same year, 1915, was recorded in the office of
the Collector of Customs on the 27th of the same month, and in the commercial registry on the 4th of
March, following; that is, the sale on behalf of the defendant Rivera was prior to that made at public
auction to Rubiso, but the registration of this latter sale was prior by many days to the sale made to
the defendant.
Issue: WON Riveras rights can prevail over Rubisos acquisition of ownership of the pilot boat.
Held: No. The purchaser at public auction, Fausto Rubiso, who was careful to record his acquisition,
opportunely and on a prior date, has, according to the law, a better right than the defendant Rivera
who subsequently recorded his purchase. The latter is a third person, who was directly affected by the
registration which the plaintiff made of his acquisition.
The legal rule set down in the Mercantile Code subsists, inasmuch as the amendment solely
refers to the official who shall make the entry; but, with respect to the rights of the two purchasers,
whichever of them first registered his acquisition of the vessel is the one entitled to enjoy the
protection of the law, which considers him the absolute owner of the purchased boat, and this latter
to be free of all encumbrance and all claims by strangers for, pursuant to article 582 of the said code,
after the bill of the judicial sale at auction has been executed and recorded in the commercial
registry, all the other liabilities of the vessel in favor of the creditors shall be considered canceled.
In view of said legal provisions, it is undeniable that the defendant Florentino E. Rivera's rights
cannot prevail over those acquired by Fausto Rubiso in the ownership of the pilot boat Valentina,
inasmuch as, though the latter's acquisition of the vessel at public auction, on January 23, 1915, was
subsequent to its purchase by the defendant Rivera, nevertheless said sale at public auction was
antecedently recorded in the office of the Collector of Customs, on January 27, and entered in the

commercial registry an unnecessary proceeding on March 4th; while the private and voluntary
purchase made by Rivera on a prior date was not recorded in the office of the Collector of Customs
until many days afterwards, that is, not until March 17, 1915.
*** Because they are personal property, they may be the subject of a chattel mortgage. (McMicking v.
Banco Espaol-Filipino, 13 Phil. 429; Arroyo v. Yu de Sane, 54 Phil. 7). However, a chattel mortgage on
a vessel should be registered not in the Registry of Deeds or Property, but in the record of the
Collector of Customs at the Port of Entry. (Rubiso and Gelito v. Rivera, 37 Phil. 72; Arroyo v. Yu de
Sane, 54 Phil. 7). In all other respects, however, a chattel mortgage on a vessel is generally like other
chattel mortgages as to its requisites and validity. (Phil. Refi ning Co., Inc. v. Jarque, 61 Phil. 229).
NOTE: A chattel mortgage on a car in order to affect third persons should not only be registered in the
Chattel Mortgage Registry but also in the Motor Vehicles Offi ce. (Aleman, et al. v. De Catera, et al., L13693-94, Mar. 25, 1961).
16: Mindanao Bus Company vs City Assessor, et al 6 SCRA 197
Petitioner:
MINDANAO BUS COMPANY,
Binamira, Barria and Irabagon for petitioner.
Respondents: THE CITY ASSESSOR & TREASURER and the BOARD OF TAX APPEALS of Cagayan de Oro
City
Vicente E. Sabellina for respondents.
Ponente:
LABRADOR, J.
Facts: Petitioner and respondents, thru their respective counsels agreed to the following stipulation of facts:
1. That petitioner is a public utility solely engaged in transporting passengers and cargoes by motor trucks, over its
authorized lines in the Island of Mindanao, collecting rates approved by the Public Service Commission;
2. That petitioner has its main office and shop at Cagayan de Oro City. It maintains Branch Offices and/or stations at
Iligan City, Lanao; Pagadian, Zamboanga del Sur; Davao City and Kibawe, Bukidnon Province;
3. That the machineries sought to be assessed by the respondent as real properties are the following:
(a) Hobart Electric Welder Machine, appearing in the attached photograph, marked Annex "A";
(b) Storm Boring Machine, appearing in the attached photograph, marked Annex "B";
(c) Lathe machine with motor, appearing in the attached photograph, marked Annex "C";
(d) Black and Decker Grinder, appearing in the attached photograph, marked Annex "D";
(e) PEMCO Hydraulic Press, appearing in the attached photograph, marked Annex "E";
(f) Battery charger (Tungar charge machine) appearing in the attached photograph, marked Annex "F"; and
(g) D-Engine Waukesha-M-Fuel, appearing in the attached photograph, marked Annex "G".
4. That these machineries are sitting on cement or wooden platforms as may be seen in the attached photographs
which form part of this agreed stipulation of facts;
5. That petitioner is the owner of the land where it maintains and operates a garage for its TPU motor trucks; a
repair shop; blacksmith and carpentry shops, and with these machineries which are placed therein, its TPU trucks
are made; body constructed; and same are repaired in a condition to be serviceable in the TPU land transportation
business it operates;
6. That these machineries have never been or were never used as industrial equipments to produce finished
products for sale, nor to repair machineries, parts and the like offered to the general public indiscriminately for
business or commercial purposes for which petitioner has never engaged in, to date.
1awphl.nt

Respondents contend that said equipments, tho movable, are immobilized by destination, in accordance with
paragraph 5 of Article 415 of the New Civil Code which provides:
Art. 415. The following are immovable properties:
(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. (Emphasis ours.)
Issue: WON the equipments are real properties
Held: No. The law that governs the determination of the question at issue is as follows:
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; (Civil Code of the Phil.)
Aside from the element of essentiality the above-quoted provision also requires that the industry or works be
carried on in a building or on a piece of land. Thus in the case of Berkenkotter vs. Cu Unjieng, supra, the
"machinery, liquid containers, and instruments or implements" are found in a building constructed on the land. A
sawmill would also be installed in a building on land more or less permanently, and the sawing is conducted in the
land or building.
But in the case at bar the equipments in question are destined only to repair or service the transportation
business, which is not carried on in a building or permanently on a piece of land, as demanded by the law. Said
equipments may not, therefore, be deemed real property.
Resuming what we have set forth above, we hold that the equipments in question are not absolutely
essential to the petitioner's transportation business, and petitioner's business is not carried on in a building,
tenement or on a specified land, so said equipment may not be considered real estate within the meaning of Article
415 (c) of the Civil Code.

17:
Tsai vs CA 336 SCRA 324 G.R. No. 120098
October 2, 2001
RUBY L. TSAI, petitioner,
HON. COURT OF APPEALS, EVER TEXTILE MILLS, INC. and MAMERTO R VILLALUZ, respondents.
[G.R. No. 120109. October 2, 2001.]
PHILIPPINE BANK OF COMMUNICATIONS, petitioner,
vs.
HON. COURT OF APPEALS, EVER TEXTILE MILLS and MAMERTO R VILLALUZ, respondents.
Ponente: QUISUMBING, J.:
Facts: Ever Textile Mills, Inc. (EVERTEX) obtained loan from Philippine Bank of Communications (PBCom),
secured by a deed of Real and Chattel Mortgage over the lot where its factory stands, and the chattels located
therein as enumerated in a schedule attached to the mortgage contract. PBCom again granted a second loan to
EVERTEX which was secured by a Chattel Mortgage over personal properties enumerated in a list attached
thereto. These listed properties were similar to those listed in the first mortgage deed. After the date of the
execution of the second mortgage mentioned above, EVERTEX purchased various machines and equipments.
Upon EVERTEX's failure to meet
its obligation to PBCom, the latter commenced extrajudicial foreclosure proceedings against EVERTEX under Act
3135 and Act 1506 or "The Chattel Mortgage Law". PBCom then consolidated its ownership over the lot and all the
properties in it. It leased the entire factory premises to Ruby Tsai and sold to the same the factory, lock, stock and
barrel including the contested machineries.
EVERTEX filed a complaint for annulment of sale, reconveyance, and damages against PBCom,
alleging inter alia that the extrajudicial foreclosure of subject mortgage was not valid, and that PBCom, without any
legal or factual basis, appropriated the contested properties which were not included in the Real and Chattel
Mortgage of the first mortgage contract nor in the second contract which is a Chattel Mortgage, and neither were
those properties included in the Notice of Sheriff's Sale.
Issues: 1) W/N the contested properties are personal or movable properties
2) W/N the sale of these properties to a third person (Tsai) by the bank through an irregular foreclosure sale is valid.
Held: 1) Nature of the Properties and Intent of the Parties
The nature of the disputed machineries, i.e., that they were heavy, bolted or cemented on the real property
mortgaged does not make them ipso facto immovable under Article 415 (3) and (5) of the New Civil Code. While it
is true that the properties appear to be immobile, a perusal of the contract of Real and Chattel Mortgage executed
by the parties herein reveal their intent, that is - to treat machinery and equipment as chattels.
In the first mortgage contract, reflective of the true intention of PBCOM and EVERTEX was the typing in
capital letters, immediately following the printed caption of mortgage, of the phrase "real and chattel." So also, the
"machineries and equipment" in the printed form of the bank had to be inserted in the blank space of the printed
contract and connected with the word "building" by typewritten slash marks. Now, then, if the machineries in
question were contemplated to be included in the real estate mortgage, there would have been no necessity to ink a
chattel mortgage specifically mentioning as part III of Schedule A a listing of the machineries covered thereby. It
would have sufficed to list them as immovables in the Deed of Real Estate Mortgage of the land and building
involved. As regards the second contract, the intention of the parties is clear and beyond question. It refers solely
to chattels. The inventory list of the mortgaged properties is an itemization of 63 individually described machineries
while the schedule listed only machines and 2,996,880.50 worth of finished cotton fabrics and natural cotton fabrics.
UNDER PRINCIPLE OF STOPPEL
Assuming arguendo that the properties in question are immovable by nature, nothing detracts the parties
from treating it as chattels to secure an obligation under the principle of estoppel. As far back as Navarro v.
Pineda, an immovable may be considered a personal property if there is a stipulation as when it is used as security
in the payment of an obligation where a chattel mortgage is executed over it.
2) Sale of the Properties Not Included in the Subject of Chattel Mortgage is Not Valid
The auction sale of the subject properties to PBCom is void. Inasmuch as the subject mortgages were
intended by the parties to involve chattels, insofar as equipment and machinery were concerned, the Chattel
Mortgage Law applies. Section 7 provides thereof that: "a chattel mortgage shall be deemed to cover only the
property described therein and not like or substituted property thereafter acquired by the mortgagor and placed in
the same depository as the property originally mortgaged, anything in the mortgage to the contrary
notwithstanding." Since the disputed machineries were acquired later after the two mortgage contracts were
executed, it was consequently an error on the part of the Sheriff to include subject machineries with the properties
enumerated in said chattel mortgages.
As the lease and sale of said personal properties were irregular and illegal because they were not duly
foreclosed nor sold at the auction, no valid title passed in its favor. Consequently, the sale thereof to Ruby Tsai is
also a nullity under the elementary principle of nemo dat quod non habet, one cannot give what one does not have.
18: Navarro vs Pineda 9 SCRA 324 G.R. No. L-18456

November 30, 1963

CONRADO P. NAVARRO, plaintiff-appellee,


RUFINO G. PINEDA, RAMONA REYES, ET AL., defendants-appellants.
Deogracias Taedo, Jr. for plaintiff-appellee.
Renato A. Santos for defendants-appellants.
PAREDES, J.:

Facts: On December 14, 1959, defendants Rufino G. Pineda and his mother Juana Gonzales (married to Gregorio
Pineda), borrowed from plaintiff Conrado P. Navarro, the sum of P2,500.00, payable 6 months after said date or on
June 14, 1959. To secure the indebtedness, Rufino executed a document captioned "DEED OF REAL ESTATE and
CHATTEL MORTGAGES", whereby Juana Gonzales, by way of Real Estate Mortgage hypothecated a parcel of
land, belonging to her, registered with the Register of Deeds of Tarlac, under Transfer Certificate of Title No. 25776,
and Rufino G. Pineda, by way of Chattel Mortgage, mortgaged his two-story residential house, having a floor area of
912 square meters, erected on a lot belonging to Atty. Vicente Castro, located at Bo. San Roque, Tarlac, Tarlac; and
one motor truck, registered in his name, under Motor Vehicle Registration Certificate No. A-171806. Both mortgages
were contained in one instrument, which was registered in both the Office of the Register of Deeds and the Motor
Vehicles Office of Tarlac.
When the mortgage debt became due and payable, the defendants, after demands made on them, failed to
pay. They, however, asked and were granted extension up to June 30, 1960, within which to pay. Came June 30,
defendants again failed to pay and, for the second time, asked for another extension, which was given, up to July
30, 1960. In the second extension, defendant Pineda in a document entitled "Promise", categorically stated that in
the remote event he should fail to make good the obligation on such date (July 30, 1960), the defendant would no
longer ask for further extension and there would be no need for any formal demand, and plaintiff could proceed to
take whatever action he might desire to enforce his rights, under the said mortgage contract. In spite of said
promise, defendants, failed and refused to pay the obligation.
On August 10, 1960, plaintiff filed a complaint for foreclosure of the mortgage and for damages, which consisted of
liquidated damages in the sum of P500.00 and 12% per annum interest on the principal, effective on the date of
maturity, until fully paid.
Defendants, answering the complaint, among others, stated
Defendants admit that the loan is overdue but deny that portion of paragraph 4 of the First
Cause of Action which states that the defendants unreasonably failed and refuse to pay their
obligation to the plaintiff the truth being the defendants are hard up these days and pleaded to the
plaintiff to grant them more time within which to pay their obligation and the plaintiff refused;
WHEREFORE, in view of the foregoing it is most respectfully prayed that this Honorable
Court render judgment granting the defendants until January 31, 1961, within which to pay their
obligation to the plaintiff.
On September 30, 1960, plaintiff presented a Motion for summary Judgment, claiming that the Answer failed
to tender any genuine and material issue. The motion was set for hearing, but the record is not clear what ruling the
lower court made on the said motion. On November 11, 1960, however, the parties submitted a Stipulation of Facts,
wherein the defendants admitted the indebtedness, the authenticity and due execution of the Real Estate and
Chattel Mortgages; that the indebtedness has been due and unpaid since June 14, 1960; that a liability of 12% per
annum as interest was agreed, upon failure to pay the principal when due and P500.00 as liquidated damages; that
the instrument had been registered in the Registry of Property and Motor Vehicles Office, both of the province of
Tarlac; that the only issue in the case is whether or not the residential house, subject of the mortgage therein, can
be considered a Chattel and the propriety of the attorney's fees.
On February 24, 1961, the lower court held
... WHEREFORE, this Court renders decision in this Case:
(a) Dismissing the complaint with regard to defendant Gregorio Pineda;
(b) Ordering defendants Juana Gonzales and the spouses Rufino Pineda and Ramon Reyes, to pay
jointly and severally and within ninety (90) days from the receipt of the copy of this decision to the
plaintiff Conrado P. Navarro the principal sum of P2,550.00 with 12% compounded interest per
annum from June 14, 1960, until said principal sum and interests are fully paid, plus P500.00 as
liquidated damages and the costs of this suit, with the warning that in default of said payment of the
properties mentioned in the deed of real estate mortgage and chattel mortgage (Annex "A" to the
complaint) be sold to realize said mortgage debt, interests, liquidated damages and costs, in
accordance with the pertinent provisions of Act 3135, as amended by Act 4118, and Art. 14 of the
Chattel Mortgage Law, Act 1508; and
(c) Ordering the defendants Rufino Pineda and Ramona Reyes, to deliver immediately to the
Provincial Sheriff of Tarlac the personal properties mentioned in said Annex "A", immediately after
the lapse of the ninety (90) days above-mentioned, in default of such payment.
The above judgment was directly appealed to this Court, the defendants therein assigning only a single
error, allegedly committed by the lower court, to wit

In holding that the deed of real estate and chattel mortgages appended to the complaint is valid,
notwithstanding the fact that the house of the defendant Rufino G. Pineda was made the subject of
the chattel mortgage, for the reason that it is erected on a land that belongs to a third person.
Appellants contend that article 415 of the New Civil Code, in classifying a house as immovable property,
makes no distinction whether the owner of the land is or not the owner of the building; the fact that the land belongs
to another is immaterial, it is enough that the house adheres to the land; that in case of immovables by
incorporation, such as houses, trees, plants, etc; the Code does not require that the attachment or incorporation be
made by the owner of the land, the only criterion being the union or incorporation with the soil. In other words, it is
claimed that "a building is an immovable property, irrespective of whether or not said structure and the land on
which it is adhered to, belong to the same owner" (Lopez v. Orosa, G.R. Nos. L-10817-8, Feb. 28, 1958). (See also
the case of Leung Yee v. Strong Machinery Co., 37 Phil. 644). Appellants argue that since only movables can be the
subject of a chattel mortgage (sec. 1, Act No. 3952) then the mortgage in question which is the basis of the present
action, cannot give rise to an action for foreclosure, because it is nullity. (Citing Associated Ins. Co., et al. v. Isabel
Iya v. Adriano Valino, et al., L-10838, May 30, 1958.)
Issues: WON the subject residential house considered chattel.
Held: The trial court did not predicate its decision declaring the deed of chattel mortgage valid solely on the ground
that the house mortgaged was erected on the land which belonged to a third person, but also and principally on the
doctrine of estoppel, in that "the parties have so expressly agreed" in the mortgage to consider the house as chattel
"for its smallness and mixed materials of sawali and wood". In construing arts. 334 and 335 of the Spanish Civil
Code (corresponding to arts. 415 and 416, N.C.C.), for purposes of the application of the Chattel Mortgage Law, it
was held that under certain conditions, "a property may have a character different from that imputed to it in said
articles. It is undeniable that the parties to a contract may by agreement, treat as personal property that which by
nature would be real property" (Standard Oil Co. of N.Y. v. Jaranillo, 44 Phil. 632-633)."There can not be any
question that a building of mixed materials may be the subject of a chattel mortgage, in which case, it is considered
as between the parties as personal property. ... The matter depends on the circumstances and the intention of the
parties". "Personal property may retain its character as such where it is so agreed by the parties interested even
though annexed to the realty ...". (42 Am. Jur. 209-210, cited in Manarang, et al. v. Ofilada, et al., G.R. No. L-8133,
May 18, 1956; 52 O.G. No. 8, p. 3954.) The view that parties to a deed of chattel mortgagee may agree to consider
a house as personal property for the purposes of said contract, "is good only insofar as the contracting parties are
concerned. It is based partly, upon the principles of estoppel ..." (Evangelista v. Alto Surety, No. L-11139, Apr. 23,
1958). In a case, a mortgage house built on a rented land, was held to be a personal property, not only because the
deed of mortgage considered it as such, but also because it did not form part of the land (Evangelista v. Abad
[CA];36 O.G. 2913), for it is now well settled that an object placed on land by one who has only a temporary right to
the same, such as a lessee or usufructuary, does not become immobilized by attachment (Valdez v. Central
Altagracia, 222 U.S. 58, cited in Davao Sawmill Co., Inc. v. Castillo, et al., 61 Phil. 709). Hence, if a house belonging
to a person stands on a rented land belonging to another person, it may be mortgaged as a personal property is so
stipulated in the document of mortgage. (Evangelista v. Abad, supra.) It should be noted, however, that the principle
is predicated on statements by the owner declaring his house to be a chattel, a conduct that may conceivably estop
him from subsequently claiming otherwise (Ladera, et al.. v. C. N. Hodges, et al., [CA]; 48 O.G. 5374). The doctrine,
therefore, gathered from these cases is that although in some instances, a house of mixed materials has been
considered as a chattel between them, has been recognized, it has been a constant criterion nevertheless that, with
respect to third persons, who are not parties to the contract, and specially in execution proceedings, the house is
considered as an immovable property (Art. 1431, New Civil Code).
In the case at bar, the house in question was treated as personal or movable property, by the parties to the
contract themselves. In the deed of chattel mortgage, appellant Rufino G. Pineda conveyed by way of "Chattel
Mortgage" "my personal properties", a residential house and a truck. The mortgagor himself grouped the house with
the truck, which is, inherently a movable property. The house which was not even declared for taxation purposes
was small and made of light construction materials: G.I. sheets roofing, sawali and wooden walls and wooden posts;
built on land belonging to another.
The cases cited by appellants are not applicable to the present case. The Iya cases (L-10837-38, supra),
refer to a building or a house of strong materials, permanently adhered to the land, belonging to the owner of the
house himself. In the case of Lopez v. Orosa, (L-10817-18), the subject building was a theatre, built of materials
worth more than P62,000, attached permanently to the soil. In these cases and in the Leung Yee case, supra, third
persons assailed the validity of the deed of chattel mortgages; in the present case, it was one of the parties to the
contract of mortgages who assailed its validity.

19: Prudential Bank vs Panis 153 scra 390 G.R. No. L-50008 August 31, 1987
PRUDENTIAL BANK, petitioner,
HONORABLE DOMINGO D. PANIS, Presiding Judge of Branch III, Court of First Instance of Zambales and
Olongapo City; FERNANDO MAGCALE & TEODULA BALUYUT-MAGCALE, respondents.

PARAS, J.:

Facts: ... on November 19, 1971, plaintiffs-spouses Fernando A. Magcale and Teodula Baluyut Magcale secured a
loan in the sum of P70,000.00 from the defendant Prudential Bank. To secure payment of this loan, plaintiffs
executed in favor of defendant on the aforesaid date a deed of Real Estate Mortgage over the following described
properties:
l. A 2-STOREY, SEMI-CONCRETE, residential building with warehouse spaces containing a total
floor area of 263 sq. meters, more or less, generally constructed of mixed hard wood and concrete
materials, under a roofing of cor. g. i. sheets; declared and assessed in the name of FERNANDO
MAGCALE under Tax Declaration No. 21109, issued by the Assessor of Olongapo City with an
assessed value of P35,290.00. This building is the only improvement of the lot.

2. THE PROPERTY hereby conveyed by way of MORTGAGE includes the right of occupancy on the
lot where the above property is erected, and more particularly described and bounded, as follows:
A first class residential land Identffied as Lot No. 720, (Ts-308, Olongapo Townsite Subdivision)
Ardoin Street, East Bajac-Bajac, Olongapo City, containing an area of 465 sq. m. more or less,
declared and assessed in the name of FERNANDO MAGCALE under Tax Duration No. 19595
issued by the Assessor of Olongapo City with an assessed value of P1,860.00; bounded on the
NORTH: By No. 6, Ardoin Street
SOUTH: By No. 2, Ardoin Street
EAST: By 37 Canda Street, and
WEST: By Ardoin Street.
All corners of the lot marked by conc. cylindrical monuments of the Bureau of Lands
as visible limits. ( Exhibit "A, " also Exhibit "1" for defendant).
Apart from the stipulations in the printed portion of the aforestated deed of mortgage, there
appears a rider typed at the bottom of the reverse side of the document under the lists of the
properties mortgaged which reads, as follows:
AND IT IS FURTHER AGREED that in the event the Sales Patent on the lot applied
for by the Mortgagors as herein stated is released or issued by the Bureau of Lands,
the Mortgagors hereby authorize the Register of Deeds to hold the Registration of
same until this Mortgage is cancelled, or to annotate this encumbrance on the Title
upon authority from the Secretary of Agriculture and Natural Resources, which title
with annotation, shall be released in favor of the herein Mortgage.
From the aforequoted stipulation, it is obvious that the mortgagee (defendant Prudential
Bank) was at the outset aware of the fact that the mortgagors (plaintiffs) have already filed a
Miscellaneous Sales Application over the lot, possessory rights over which, were mortgaged to it.
Exhibit "A" (Real Estate Mortgage) was registered under the Provisions of Act 3344 with the
Registry of Deeds of Zambales on November 23, 1971.
On May 2, 1973, plaintiffs secured an additional loan from defendant Prudential Bank in the
sum of P20,000.00. To secure payment of this additional loan, plaintiffs executed in favor of the said
defendant another deed of Real Estate Mortgage over the same properties previously mortgaged in
Exhibit "A." (Exhibit "B;" also Exhibit "2" for defendant). This second deed of Real Estate Mortgage
was likewise registered with the Registry of Deeds, this time in Olongapo City, on May 2,1973.
On April 24, 1973, the Secretary of Agriculture issued Miscellaneous Sales Patent No. 4776 over the parcel
of land, possessory rights over which were mortgaged to defendant Prudential Bank, in favor of plaintiffs. On the

basis of the aforesaid Patent, and upon its transcription in the Registration Book of the Province of Zambales,
Original Certificate of Title No. P-2554 was issued in the name of Plaintiff Fernando Magcale, by the Ex-Oficio
Register of Deeds of Zambales, on May 15, 1972.
For failure of plaintiffs to pay their obligation to defendant Bank after it became due, and upon application of
said defendant, the deeds of Real Estate Mortgage (Exhibits "A" and "B") were extrajudicially foreclosed.
Consequent to the foreclosure was the sale of the properties therein mortgaged to defendant as the highest bidder
in a public auction sale conducted by the defendant City Sheriff on April 12, 1978 (Exhibit "E"). The auction sale
aforesaid was held despite written request from plaintiffs through counsel dated March 29, 1978, for the defendant
City Sheriff to desist from going with the scheduled public auction sale (Exhibit "D")." (Decision, Civil Case No. 24430, Rollo, pp. 29-31).
Respondent Court, in a Decision dated November 3, 1978 declared the deeds of Real Estate Mortgage as
null and void (Ibid., p. 35).

Issue: Whether or not a valid real estate mortgage can be constituted on the building erected on the land belonging
to another.
Held:

The answer is in the affirmative.

In the enumeration of properties under Article 415 of the Civil Code of the Philippines, this Court ruled that,
"it is obvious that the inclusion of "building" separate and distinct from the land, in said provision of law can only
mean that a building is by itself an immovable property." (Lopez vs. Orosa, Jr., et al., L-10817-18, Feb. 28, 1958;
Associated Inc. and Surety Co., Inc. vs. Iya, et al., L-10837-38, May 30,1958).
Thus, while it is true that a mortgage of land necessarily includes, in the absence of stipulation of the
improvements thereon, buildings, still a building by itself may be mortgaged apart from the land on which it has been
built. Such a mortgage would be still a real estate mortgage for the building would still be considered immovable
property even if dealt with separately and apart from the land (Leung Yee vs. Strong Machinery Co., 37 Phil. 644). In
the same manner, this Court has also established that possessory rights over said properties before title is vested
on the grantee, may be validly transferred or conveyed as in a deed of mortgage (Vda. de Bautista vs. Marcos, 3
SCRA 438 [1961]).

20: Punzalan Jr. v Vda De Lacsamana 121 SCRA 331 G.R. No. L-55729 March 28, 1983
ANTONIO PUNSALAN, JR., petitioner, vs.
REMEDIOS VDA. DE LACSAMANA and THE HONORABLE JUDGE RODOLFO A.
ORTIZ, respondents.
Benjamin S. Benito & Associates for petitioner.
Expedito Yummul for private respondent.
MELENCIO-HERRERA, J.:
Facts: It appears that petitioner, Antonio Punsalan, Jr., was the former registered owner of a
parcel of land consisting of 340 square meters situated in Bamban, Tarlac. In 1963, petitioner
mortgaged said land to respondent PNB (Tarlac Branch) in the amount of P10,000.00, but for
failure to pay said amount, the property was foreclosed on December 16, 1970. Respondent PNB
(Tarlac Branch) was the highest bidder in said foreclosure proceedings. However, the bank
secured title thereto only on December 14, 1977.
In the meantime, in 1974, while the properly was still in the alleged possession of
petitioner and with the alleged acquiescence of respondent PNB (Tarlac Branch), and upon
securing a permit from the Municipal Mayor, petitioner constructed a warehouse on said property.
Petitioner declared said warehouse for tax purposes for which he was issued Tax Declaration No.
5619. Petitioner then leased the warehouse to one Hermogenes Sibal for a period of 10 years
starting January 1975.
On July 26, 1978, a Deed of Sale was executed between respondent PNB (Tarlac Branch)
and respondent Lacsamana over the property. This contract was amended on July 31, 1978,
particularly to include in the sale, the building and improvement thereon. By virtue of said
instruments, respondent - Lacsamana secured title over the property in her name (TCT No.
173744) as well as separate tax declarations for the land and building. 1
On November 22, 1979, petitioner commenced suit for "Annulment of Deed of Sale with
Damages" against herein respondents PNB and Lacsamana before respondent Court of First

Instance of Rizal, Branch XXXI, Quezon City, essentially impugning the validity of the sale of the
building as embodied in the Amended Deed of Sale. In this connection, petitioner alleged:
22. That defendant, Philippine National Bank, through its Branch Manager ... by
virtue of the request of defendant ... executed a document dated July 31, 1978,
entitled Amendment to Deed of Absolute Sale ... wherein said defendant bank as
Vendor sold to defendant Lacsamana the building owned by the plaintiff under Tax
Declaration No. 5619, notwithstanding the fact that said building is not owned by
the bank either by virtue of the public auction sale conducted by the Sheriff and
sold to the Philippine National Bank or by virtue of the Deed of Sale executed by the
bank itself in its favor on September 21, 1977 ...;
23. That said defendant bank fraudulently mentioned ... that the sale in its favor
should likewise have included the building, notwithstanding no legal basis for the
same and despite full knowledge that the Certificate of Sale executed by the sheriff
in its favor ... only limited the sale to the land, hence, by selling the building which
never became the property of defendant, they have violated the principle against
'pactum commisorium'.
Petitioner prayed that the Deed of Sale of the building in favor of respondent Lacsamana
be declared null and void and that damages in the total sum of P230,000.00, more or less, be
awarded to him. 2
In her Answer filed on March 4, 1980,-respondent Lacsamana averred the affirmative
defense of lack of cause of action in that she was a purchaser for value and invoked the principle
in Civil Law that the "accessory follows the principal". 3
On March 14, 1980, respondent PNB filed a Motion to Dismiss on the ground that venue
was improperly laid considering that the building was real property under article 415 (1) of the
New Civil Code and therefore section 2(a) of Rule 4 should apply. 4
Opposing said Motion to Dismiss, petitioner contended that the action for annulment of deed of
sale with damages is in the nature of a personal action, which seeks to recover not the title nor
possession of the property but to compel payment of damages, which is not an action affecting
title to real property.
Issue: WON the warehouse is an immovable property
WON the action for annulment is a real action.
Held: (1) Yes. The warehouse claimed to be owned by petitioner is an immovable or real
property as provided in article 415(l) of the Civil Code. 6 Buildings are always immovable under
the Code. 7 A building treated separately from the land on which it stood is immovable property
and the mere fact that the parties to a contract seem to have dealt with it separate and apart
from the land on which it stood in no wise changed its character as immovable property. 8
(2) Yes. While it is true that petitioner does not directly seek the recovery of title or
possession of the property in question, his action for annulment of sale and his claim for
damages are closely intertwined with the issue of ownership of the building which, under the law,
is considered immovable property, the recovery of which is petitioner's primary objective. The
prevalent doctrine is that an action for the annulment or rescission of a sale of real property does
not operate to efface the fundamental and prime objective and nature of the case, which is to
recover said real property. It is a real action. 9
Respondent Court, therefore, did not err in dismissing the case on the ground of improper
venue (Section 2, Rule 4) 10, which was timely raised (Section 1, Rule 16) 11.
21: Leung Yee vs PL Strong Machinery Co. 37 SCRA 644 G.R. No. L-11658
February 15, 1918
LEUNG YEE, plaintiff-appellant, vs.
FRANK L. STRONG MACHINERY COMPANY and J. G. WILLIAMSON, defendants-appellees.
Booram and Mahoney for appellant.
Williams, Ferrier and SyCip for appellees.
CARSON, J.:
Facts: The "Compaia Agricola Filipina" bought a considerable quantity of rice-cleaning
machinery company from the defendant machinery company, and executed a chattel mortgage
thereon to secure payment of the purchase price. It included in the mortgage deed the building
of strong materials in which the machinery was installed, without any reference to the land on
which it stood. The indebtedness secured by this instrument not having been paid when it fell
due, the mortgaged property was sold by the sheriff, in pursuance of the terms of the mortgage
instrument, and was bought in by the machinery company. The mortgage was registered in the
chattel mortgage registry, and the sale of the property to the machinery company in satisfaction
of the mortgage was annotated in the same registry on December 29, 1913.
A few weeks thereafter, on or about the 14th of January, 1914, the "Compaia Agricola
Filipina" executed a deed of sale of the land upon which the building stood to the machinery
company, but this deed of sale, although executed in a public document, was not registered. This

deed makes no reference to the building erected on the land and would appear to have been
executed for the purpose of curing any defects which might be found to exist in the machinery
company's title to the building under the sheriff's certificate of sale. The machinery company
went into possession of the building at or about the time when this sale took place, that is to say,
the month of December, 1913, and it has continued in possession ever since.
At or about the time when the chattel mortgage was executed in favor of the machinery
company, the mortgagor, the "Compaia Agricola Filipina" executed another mortgage to the
plaintiff upon the building, separate and apart from the land on which it stood, to secure
payment of the balance of its indebtedness to the plaintiff under a contract for the construction
of the building. Upon the failure of the mortgagor to pay the amount of the indebtedness secured
by the mortgage, the plaintiff secured judgment for that amount, levied execution upon the
building, bought it in at the sheriff's sale on or about the 18th of December, 1914, and had the
sheriff's certificate of the sale duly registered in the land registry of the Province of Cavite.
At the time when the execution was levied upon the building, the defendant machinery
company, which was in possession, filed with the sheriff a sworn statement setting up its claim of
title and demanding the release of the property from the levy. Thereafter, upon demand of the
sheriff, the plaintiff executed an indemnity bond in favor of the sheriff in the sum of P12,000, in
reliance upon which the sheriff sold the property at public auction to the plaintiff, who was the
highest bidder at the sheriff's sale.
This action was instituted by the plaintiff to recover possession of the building from the
machinery company.
The trial judge, relying upon the terms of article 1473 of the Civil Code, gave judgment in
favor of the machinery company, on the ground that the company had its title to the building
registered prior to the date of registry of the plaintiff's certificate.
Article 1473 of the Civil Code is as follows:
If the same thing should have been sold to different vendees, the ownership shall be
transfer to the person who may have the first taken possession thereof in good faith, if it
should be personal property.
Should it be real property, it shall belong to the person acquiring it who first
recorded it in the registry.
Should there be no entry, the property shall belong to the person who first took
possession of it in good faith, and, in the absence thereof, to the person who presents the
oldest title, provided there is good faith.
Issue: WON the building be regarded still, as its nature, as real property.
WON Leung Yee has a better right than Strong Machinery Company
Held: (1)
It remains as a real property and Art 1473 still applies
The registry her referred to is of course the registry of real property, and it
must be apparent that the annotation or inscription of a deed of sale of real property
in a chattel mortgage registry cannot be given the legal effect of an inscription in the
registry of real property. By its express terms, the Chattel Mortgage Law contemplates and
makes provision for mortgages of personal property; and the sole purpose and object of the
chattel mortgage registry is to provide for the registry of "Chattel mortgages," that is to say,
mortgages of personal property executed in the manner and form prescribed in the statute. The
building of strong materials in which the rice-cleaning machinery was installed by the
"Compaia Agricola Filipina" was real property, and the mere fact that the parties
seem to have dealt with it separate and apart from the land on which it stood in no
wise changed its character as real property. It follows that neither the original
registry in the chattel mortgage of the building and the machinery installed therein,
not the annotation in that registry of the sale of the mortgaged property, had any
effect whatever so far as the building was concerned.
(2)
No, since Leung Yee is in bad faith. It appears that he had full knowledge of the
machinery company's claim of ownership when he executed the indemnity bond and bought in
the property at the sheriff's sale, and it appearing further that the machinery company's claim of
ownership was well founded, he cannot be said to have been an innocent purchaser for value. He
took the risk and must stand by the consequences; and it is in this sense that we find that he
was not a purchaser in good faith

22: Bicerra vs Tenezza 6 SCRA 648G.R. No. L-16218


November 29, 1962
ANTONIA BICERRA, DOMINGO BICERRA, BERNARDO BICERRA, CAYETANO BICERRA,
LINDA BICERRA, PIO BICERRA and EUFRICINA BICERRA, plaintiffs-appellants, vs.
TOMASA TENEZA and BENJAMIN BARBOSA, defendants-appellees.
Agripino Brillantes and Alberto B. Bravo for plaintiffs-appellants.
Ernesto Parol for defendants-appellees.

MAKALINTAL, J.:
Facts: This case is before us on appeal from the order of the Court of First Instance of Abra
dismissing the complaint filed by appellants, upon motion of defendants-appellate on the ground
that the action was within the exclude (original) jurisdiction of the Justice of the Peace Court of
Lagangilang, of the same province.
The complaint alleges in substance that appellants were the owners of the house, worth
P200.00, built on and owned by them and situated in the said municipality Lagangilang; that
sometime in January 1957 appealed forcibly demolished the house, claiming to be the owners
thereof; that the materials of the house, after it was dismantled, were placed in the custody of
the barrio lieutenant of the place; and that as a result of appellate's refusal to restore the house
or to deliver the material appellants the latter have suffered actual damages the amount of
P200.00, plus moral and consequential damages in the amount of P600.00. The relief prayed for
is that "the plaintiffs be declared the owners of the house in question and/or the materials that
resulted in (sic) its dismantling; (and) that the defendants be orders pay the sum of P200.00,
plus P600.00 as damages, the costs."
Issue: Whether the action involves title to real property, as appellants contend, and therefore is
cognizable by the Court of First Instance (Sec. 44, par. [b], R.A. 296, as amended), whether it
pertains to the jurisdiction of the Justice of the Peace Court, as stated in the order appealed from,
since there is no real property litigated, the house having ceased to exist, and the amount of the
demand does exceed P2,000.00
Held: It is a personal property.
A house is classified as immovable property by reason of its adherence to the soil on which
it is built (Art. 415, par. 1, Civil Code). This classification holds true regardless of the fact that the
house may be situated on land belonging to a different owner. But once the house is demolished,
as in this case, it ceases to exist as such and hence its character as an immovable likewise
ceases. It should be noted that the complaint here is for recovery of damages. This is the only
positive relief prayed for by appellants. To be sure, they also asked that they be declared owners
of the dismantled house and/or of the materials. However, such declaration in no wise
constitutes the relief itself which if granted by final judgment could be enforceable by execution,
but is only incidental to the real cause of action to recover damages.
The order appealed from is affirmed. The appeal having been admitted in forma pauperis,
no costs are adjudged.

23: Fels Energy Inc vs Province of Batangas et al, G.R. No. 168557
February 16, 2007
G.R. No. 168557
February 16, 2007
FELS ENERGY, INC., Petitioner, vs.
THE PROVINCE OF BATANGAS and THE OFFICE OF THE PROVINCIAL ASSESSOR OF
BATANGAS, Respondents.
x----------------------------------------------------x
G.R. No. 170628
February 16, 2007
NATIONAL POWER CORPORATION, Petitioner, vs.
LOCAL BOARD OF ASSESSMENT APPEALS OF BATANGAS, LAURO C. ANDAYA, in his capacity as
the Assessor of the Province of Batangas, and the PROVINCE OF BATANGAS represented by its
Provincial Assessor, Respondents.
CALLEJO, SR., J.:
Facts: On January 18, 1993, NPC entered into a lease contract with Polar Energy, Inc. over 3x30 MW diesel
engine power barges moored at Balayan Bay in Calaca, Batangas. The contract, denominated as an Energy
Conversion Agreement5 (Agreement), was for a period of five years. Article 10 reads:
10.1 RESPONSIBILITY. NAPOCOR shall be responsible for the payment of (a) all taxes, import
duties, fees, charges and other levies imposed by the National Government of the Republic of the
Philippines or any agency or instrumentality thereof to which POLAR may be or become subject to
or in relation to the performance of their obligations under this agreement (other than (i) taxes
imposed or calculated on the basis of the net income of POLAR and Personal Income Taxes of its
employees and (ii) construction permit fees, environmental permit fees and other similar fees and
charges) and (b) all real estate taxes and assessments, rates and other charges in respect of the
Power Barges.6
Subsequently, Polar Energy, Inc. assigned its rights under the Agreement to FELS. The NPC initially
opposed the assignment of rights, citing paragraph 17.2 of Article 17 of the Agreement.
On August 7, 1995, FELS received an assessment of real property taxes on the power barges from
Provincial Assessor Lauro C. Andaya of Batangas City. The assessed tax, which likewise covered those due
for 1994, amounted to P56,184,088.40 per annum. FELS referred the matter to NPC, reminding it of its
obligation under the Agreement to pay all real estate taxes. It then gave NPC the full power and authority
to represent it in any conference regarding the real property assessment of the Provincial Assessor.

In a letter7 dated September 7, 1995, NPC sought reconsideration of the Provincial Assessors
decision to assess real property taxes on the power barges. However, the motion was denied on
September 22, 1995, and the Provincial Assessor advised NPC to pay the assessment. 8 This prompted NPC
to file a petition with the Local Board of Assessment Appeals (LBAA) for the setting aside of the
assessment and the declaration of the barges as non-taxable items; it also prayed that should LBAA find
the barges to be taxable, the Provincial Assessor be directed to make the necessary corrections. 9
In its Answer to the petition, the Provincial Assessor averred that the barges were real property for
purposes of taxation under Section 199(c) of Republic Act (R.A.) No. 7160.
Before the case was decided by the LBAA, NPC filed a Manifestation, informing the LBAA that the
Department of Finance (DOF) had rendered an opinion10 dated May 20, 1996, where it is clearly stated that
power barges are not real property subject to real property assessment.
Issue: WON the power barges were real property.
Held: In Consolidated Edison Company of New York, Inc., et al. v. The City of New York, et al., 50 a power
company brought an action to review property tax assessment. On the citys motion to dismiss, the
Supreme Court of New York held that the barges on which were mounted gas turbine power plants
designated to generate electrical power, the fuel oil barges which supplied fuel oil to the power plant
barges, and the accessory equipment mounted on the barges were subject to real property taxation.
Moreover, Article 415 (9) of the New Civil Code provides that "[d]ocks and structures which, though
floating, are intended by their nature and object to remain at a fixed place on a river, lake, or coast" are
considered immovable property. Thus, power barges are categorized as immovable property by
destination, being in the nature of machinery and other implements intended by the owner for an industry
or work which may be carried on in a building or on a piece of land and which tend directly to meet the
needs of said industry or work.51

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