Case Digests Property

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PROPERTY CASE DIGESTS June 27, 2014 Standard Oil Co. of New York vs Jaramillo 44 Phil 630 FACTS: Gervasia dela Rosa executed a document in the form of a Chattel Mortgage purporting to convey to Standard Oil Co. by way of mortgage both the leasehold interest of the land she leases in Manila and the building which stands thereon. The clauses in said document describe the property as personal including the right, title and interest of the mortgagor in and to the contract of lease and also the building of the said premises therein. After said document had been duly acknowledge and delivered, the petitioner presented it to Joaquin Jaramillo, as register of deeds of the City of Manila, for the purpose of having the same recorded. The respondent opined that it was not a chattel mortgage for the interests mortgaged did not appear to be personal property within the meaning of the Chattel Mortgage Law and registration was refused on this ground only. ISSUE: 1. Whether or not said property could be a subject for mortgage. 2. Whether the respondent is clothe with authority to determine such. RULING: The duties of a register of deeds in respect to the registration of chattel mortgages are of purely ministerial character and no provision of law can be cited which confers upon him any judicial or quasijudicial power to determine the nature of any document of which registration is sought as a chattel mortgage. The efficacy of the act of recording a chattel mortgage consists in the fact that it operates as constructive notice of the existence of the contract, and the legal effects of the contract must be discovered in the instrument itself in relation with the fact of notice. Registration adds nothing to the instrument, considered as a source of title, and affects nobody’s rights except as a species of notice. The parties to a contract may by agreement treat, as personal property that which by nature would be real property and it is a familiar phenomenon to see things classed as real property for purposes of taxation, which on general principle might be considered personal property. It is unnecessary to determine whether or not the property described in the document is real or personal. The issue is to be determined by the Court and not by the register of deeds.

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Case digests in property

Transcript of Case Digests Property

Page 1: Case Digests Property

PROPERTY  CASE  DIGESTS  June  27,  2014  

 Standard  Oil  Co.  of  New  York  vs  Jaramillo  44  Phil  630    FACTS:  Gervasia   dela   Rosa   executed   a   document   in   the   form   of   a   Chattel   Mortgage  purporting   to   convey   to   Standard   Oil   Co.   by  way   of  mortgage   both   the   leasehold  interest  of  the  land  she  leases  in  Manila  and  the  building  which  stands  thereon.    The  clauses  in  said  document  describe  the  property  as  personal  including  the  right,  title   and   interest   of   the   mortgagor   in   and   to   the   contract   of   lease   and   also   the  building  of  the  said  premises  therein.    After   said   document   had   been   duly   acknowledge   and   delivered,   the   petitioner  presented   it   to   Joaquin   Jaramillo,  as  register  of  deeds  of   the  City  of  Manila,   for   the  purpose   of   having   the   same   recorded.   The   respondent   opined   that   it   was   not   a  chattel  mortgage  for  the  interests  mortgaged  did  not  appear  to  be  personal  property  within   the  meaning   of   the   Chattel  Mortgage   Law   and   registration  was   refused   on  this  ground  only.    ISSUE:  1.  Whether  or  not  said  property  could  be  a  subject  for  mortgage.  2.  Whether  the  respondent  is  clothe  with  authority  to  determine  such.    RULING:  The  duties  of  a  register  of  deeds  in  respect  to  the  registration  of  chattel  mortgages  are   of   purely   ministerial   character   and   no   provision   of   law   can   be   cited   which  confers  upon  him  any  judicial  or  quasi-­‐judicial  power  to  determine  the  nature  of  any  document  of  which  registration  is  sought  as  a  chattel  mortgage.  The  efficacy  of  the  act   of   recording   a   chattel   mortgage   consists   in   the   fact   that   it   operates   as  constructive   notice   of   the   existence   of   the   contract,   and   the   legal   effects   of   the  contract   must   be   discovered   in   the   instrument   itself   in   relation   with   the   fact   of  notice.  Registration  adds  nothing  to  the  instrument,  considered  as  a  source  of  title,  and  affects  nobody’s  rights  except  as  a  species  of  notice.    The  parties  to  a  contract  may  by  agreement  treat,  as  personal  property  that  which  by   nature   would   be   real   property   and   it   is   a   familiar   phenomenon   to   see   things  classed  as  real  property  for  purposes  of  taxation,  which  on  general  principle  might  be  considered  personal  property.    It   is   unnecessary   to   determine   whether   or   not   the   property   described   in   the  document  is  real  or  personal.  The  issue  is  to  be  determined  by  the  Court  and  not  by  the  register  of  deeds.  

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             Tsai  vs  Court  of  Appeals    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  

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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  ESTOPPEL    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  

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elementary  principle  of  nemo  dat  quod  non  habet,  one  cannot  give  what  one  does  not  have.        Yap  vs.  Tañada  Julian  S.  Yap  vs.  Hon.  Santiago  O.  Tañada  and  Goulds  Pumps  International  (Phil),  Inc.,  G.R.  No.  L-­‐32917,  July  18,  1988    Narvasa,  J.    Doctrine:  Article  415,  par.  3  of  the  Civil  Code  considers  and  immovable  property  as  “everything  attached  to  an  immovable  in  a  fixed  manner,  in  such  a  way  that  it  cannot  be  separated  therefrom  without  breaking  the  material  or  deteriorating  the  object.”  The  pump  does  not  fit  this  description.  It  could  be,  and  was,  in  fact,separated  from  Yap’s   premises   without   being   broken   of   suffering   deterioration.   Obviously,   the  separation   or   removal   of   the   pump   involved   nothing   more   complicated   that   the  loosening  of  bolts  or  dismantling  of  other  fasteners.    Facts:   The   case   began   in   the   City   Court   of   Cebu   with   the   filing   of   Goulds   Pumps  International  (Phil),  Inc.  of  a  complaint  against  Yap  and  his  wife  seeking  recovery  of  P1,459.30,   representing   the   balance   of   the   price   and   installation   cost   of   a   water  pump   in   the   latter’s   premises.   The   Court   rendered   judgment   in   favor   of   herein  respondent  after   they  presented  evidence  ex-­‐parte  due  to   failure  of  petitioner  Yap  to  appear  before  the  Court.  Petitioner  then  appealed  to  the  CFI,  particularly   to  the  sale  of   Judge  Tanada.  For  again  failure  to  appear  for  pre-­‐trial,  Yap  was  declared  in  default.   He   filed   for   a   motion   for   reconsideration   which   was   denied   by   Judge  Tanada.  On  October  15,  1969,  Tanada  granted  Gould’s  Motion  for  Issuance  of  Writ  of  Execution.   Yap   forthwith   filed   an   Urgent   Motion   for   Reconsideration   of   the   said  Order.   In   the  meantime,   the   Sheriff   levied   on   the  water   pump   in   question   and   by  notice   scheduled   the   execution   sale   thereof.   But   in   view  of   the   pendency   of   Yap’s  motion,  suspension  of  sale  was  directed  by  Judge  Tanada.  It  appears,  however,  that  this  was  not  made  known  to  the  Sheriff  whocontinued  with  the  auction  sale  and  sold  the  property  to  the  highest  bidder,  Goulds.  Because  of  such,  petitioner  filed  a  Motion  to   Set   Aside   Execution   Sale   and   to   Quash   Alias   Writ   of   Execution.   One   of   his  arguments  was  that  the  sale  was  made  without  the  notice  required  by  Sec.  18,  Rule  29  of  the  New  Rules  of  Court,  “i.e.  notice  by  publication  in  case  of  execution  of  sale  of  real   property,   the  pump  and   its   accessories  being   immovable  because   attached   to  the  ground  with  the  character  of  permanency.”  Such  motion  was  denied  by  the  CFI.    Issue:  Whether  or  not  the  pump  and  its  accessories  are  immovable  property    Held:  No.  The  water  pump  and  its  accessories  are  NOT  immovable  properties.  The  argument  of  Yap  that  the  water  pump  had  become  immovable  property  by  its  being  installed  in  his  residence  is  untenable.  Article  415,  par.  3  of  the  Civil  Code  considers  

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and   immovable   property   as   “everything   attached   to   an   immovable   in   a   fixed  manner,   in  such  a  way  that  it  cannot  be  separated  therefrom  without  breaking  the  material  or  deteriorating  the  object.”  The  pump  does  not  fit  this  description.  It  could  be,  and  was,  in  fact,separated  from  Yap’s  premises  without  being  broken  of  suffering  deterioration.  Obviously,   the   separation  or   removal   of   the  pump   involved  nothing  more  complicated  that  the  loosening  of  bolts  or  dismantling  of  other  fasteners.      Fels  Energy,  Inc.  vs.  Province  of  Batangas  G.R.  No.  168557.  February  16,  2007.    Callejo  Sr.,  J.    Doctrine:   In   Consolidated   Edison   Company   of   New   York,   Inc.,   et   al.   v.   The   City   of  New   York,   et   al.,   a   power   company   brought   an   action   to   review   property   tax  assessment.  On   the   city’s  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  “docks  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.    Facts:  On  January  18,  1993,  NPC  entered  into  a  lease  contract  with  Polar  Energy,  Inc.  over   3×30   MW   diesel   engine   power   barges   moored   at   Balayan   Bay   in   Calaca,  Batangas.  The  contract,  denominated  as  an  Energy  Conversion  Agreement,  was  for  a  period  of  five  years.  Article  10  states  that  NPC  shall  be  responsible  for  the  payment  of  taxes.  (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.   Polar   Energy  then  assigned  its  rights  under  the  Agreement  to  Fels  despite  NPC’s  initial  opposition.    FELS   received   an   assessment   of   real   property   taxes   on   the   power   barges   from  Provincial  Assessor  Lauro  C.  Andaya  of  Batangas  City.  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.   NPC   filed   a  petition  with   the   LBAA.   The   LBAA   ordered   Fels   to   pay   the   real   estate   taxes.   The  LBAA  ruled  that  the  power  plant  facilities,  while  they  may  be  classified  as  movable  

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or   personal   property,   are   nevertheless   considered   real   property   for   taxation  purposes   because   they   are   installed   at   a   specific   location   with   a   character   of  permanency.   The   LBAA   also   pointed   out   that   the   owner   of   the   barges–FELS,   a  private  corporation–is  the  one  being  taxed,  not  NPC.  A  mere  agreement  making  NPC  responsible  for  the  payment  of  all  real  estate  taxes  and  assessments  will  not  justify  the  exemption  of  FELS;  such  a  privilege  can  only  be  granted  to  NPC  and  cannot  be  extended  to  FELS.  Finally,  the  LBAA  also  ruled  that  the  petition  was  filed  out  of  time.    Fels   appealed   to   the   CBAA.   The   CBAA   reversed   and   ruled   that   the   power   barges  belong  to  NPC;  since  they  are  actually,  directly  and  exclusively  used  by  it,  the  power  barges  are  covered  by  the  exemptions  under  Section  234(c)  of  R.A.  No.  7160.  As  to  the  other  jurisdictional  issue,  the  CBAA  ruled  that  prescription  did  not  preclude  the  NPC   from  pursuing   its   claim   for   tax   exemption   in   accordance  with   Section  206  of  R.A.  No.  7160.  Upon  MR,  the  CBAA  reversed  itself.    Issue:  Whether  or  not  the  petitioner  may  be  assessed  of  real  property  taxes.    Held:  YES.  The  CBAA  and  LBAA  power  barges  are  real  property  and  are  thus  subject  to  real  property  tax.  This  is  also  the  inevitable  conclusion,  considering  that  G.R.  No.  165113   was   dismissed   for   failure   to   sufficiently   show   any   reversible   error.   Tax  assessments  by   tax  examiners  are  presumed  correct  and  made   in  good   faith,  with  the   taxpayer   having   the   burden   of   proving   otherwise.   Besides,   factual   findings   of  administrative   bodies,   which   have   acquired   expertise   in   their   field,   are   generally  binding   and   conclusive   upon   the   Court;   we  will   not   assume   to   interfere  with   the  sensible  exercise  of  the  judgment  of  men  especially  trained  in  appraising  property.  Where  the  judicial  mind  is  left  in  doubt,  it  is  a  sound  policy  to  leave  the  assessment  undisturbed.  We  find  no  reason  to  depart  from  this  rule  in  this  case.    In  Consolidated  Edison  Company  of  New  York,  Inc.,  et  al.  v.  The  City  of  New  York,  et  al.,  a  power  company  brought  an  action  to  review  property  tax  assessment.  On  the  city’s  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  “docks  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.    Petitioners   maintain   nevertheless   that   the   power   barges   are   exempt   from   real  estate  tax  under  Section  234  (c)  of  R.A.  No.  7160  because  they  are  actually,  directly  

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and   exclusively   used   by   petitioner   NPC,   a   government-­‐   owned   and   controlled  corporation  engaged  in  the  supply,  generation,  and  transmission  of  electric  power.    We   affirm   the   findings   of   the   LBAA   and   CBAA   that   the   owner   of   the   taxable  properties   is   petitioner   FELS,  which   in   fine,   is   the   entity   being   taxed   by   the   local  government.  As  stipulated  under  Section  2.11,  Article  2  of  the  Agreement:    “OWNERSHIP  OF  POWER  BARGES.  POLAR  shall  own  the  Power  Barges  and  all   the  fixtures,  fittings,  machinery  and  equipment  on  the  Site  used  in  connection  with  the  Power  Barges  which  have  been  supplied  by  it  at  its  own  cost.  POLAR  shall  operate,  manage   and   maintain   the   Power   Barges   for   the   purpose   of   converting   Fuel   of  NAPOCOR  into  electricity.”    It  follows  then  that  FELS  cannot  escape  liability  from  the  payment  of  realty  taxes  by  invoking   its   exemption   in   Section  234   (c)   of  R.A.  No.   7160.   Indeed,   the   law   states  that   the   machinery   must   be   actually,   directly   and   exclusively   used   by   the  government   owned   or   controlled   corporation;   nevertheless,   petitioner   FELS   still  cannot  find  solace  in  this  provision  because  Section  5.5,  Article  5  of  the  Agreement  provides:    “OPERATION.  POLAR  undertakes   that  until   the  end  of   the  Lease  Period,   subject   to  the  supply  of   the  necessary  Fuel  pursuant   to  Article  6  and   to   the  other  provisions  hereof,   it   will   operate   the   Power   Barges   to   convert   such   Fuel   into   electricity   in  accordance  with  Part  A  of  Article  7.    It   is   a   basic   rule   that   obligations   arising   from   a   contract   have   the   force   of   law  between  the  parties.  Not  being  contrary  to  law,  morals,  good  customs,  public  order  or  public  policy,  the  parties  to  the  contract  are  bound  by  its  terms  and  conditions.    Time   and   again,   the   Supreme   Court   has   stated   that   taxation   is   the   rule   and  exemption  is  the  exception.  The  law  does  not  look  with  favor  on  tax  exemptions  and  the  entity  that  would  seek  to  be  thus  privileged  must  justify  it  by  words  too  plain  to  be   mistaken   and   too   categorical   to   be   misinterpreted.   Thus,   applying   the   rule   of  strict  construction  of  laws  granting  tax  exemptions,  and  the  rule  that  doubts  should  be   resolved   in   favor  of  provincial   corporations,  we  hold   that  FELS   is   considered  a  taxable  entity.    The  mere  undertaking  of  petitioner  NPC  under  Section  10.1  of  the  Agreement,  that  it  shall  be  responsible   for  the  payment  of  all  real  estate  taxes  and  assessments,  does  not   justify   the   exemption.   The   privilege   granted   to   petitioner   NPC   cannot   be  extended  to  FELS.  The  covenant  is  between  FELS  and  NPC  and  does  not  bind  a  third  person  not  privy  thereto,  in  this  case,  the  Province  of  Batangas.    It   must   be   pointed   out   that   the   protracted   and   circuitous   litigation   has   seriously  resulted   in  the   local  government’s  deprivation  of  revenues.  The  power  to  tax   is  an  incident  of  sovereignty  and  is  unlimited  in  its  magnitude,  acknowledging  in  its  very  

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nature   no   perimeter   so   that   security   against   its   abuse   is   to   be   found   only   in   the  responsibility  of  the  legislature  which  imposes  the  tax  on  the  constituency  who  are  to  pay  for  it.  The  right  of  local  government  units  to  collect  taxes  due  must  always  be  upheld   to  avoid  severe   tax  erosion.  This  consideration   is  consistent  with   the  State  policy   to   guarantee   the   autonomy   of   local   governments   and   the   objective   of   the  Local  Government  Code  that  they  enjoy  genuine  and  meaningful  local  autonomy  to  empower  them  to  achieve  their  fullest  development  as  self-­‐reliant  communities  and  make  them  effective  partners  in  the  attainment  of  national  goals.    In  conclusion,  we  reiterate   that   the  power   to   tax   is   the  most  potent   instrument   to  raise   the   needed   revenues   to   finance   and   support   myriad   activities   of   the   local  government  units  for  the  delivery  of  basic  services  essential  to  the  promotion  of  the  general   welfare   and   the   enhancement   of   peace,   progress,   and   prosperity   of   the  people.      Davao  Sawmill  vs  Castillo    FACTS:  Davao  Sawmill  Co.,   operated  a   sawmill.  The   land  upon  which   the  business  was  conducted  was  leased  from  another  person.  On  the  land,  Davao  Sawmill  erected  a   building   which   housed   the   machinery   it   used.   Some   of   the   machines   were  mounted   and   placed   on   foundations   of   cement.   In   the   contract   of   lease,   Davo  Sawmill  agreed  to  turn  over  free  of  charge  all  improvements  and  buildings  erected  by  it  on  the  premises  with  the  exception  of  machineries,  which  shall  remain  with  the  Davao  Sawmill.   In   an  action  brought  by   the  Davao  Light   and  Power  Co.,   judgment  was   rendered   against   Davao   Sawmill.   A   writ   of   execution   was   issued   and   the  machineries   placed   on   the   sawmill  were   levied   upon   as   personalty   by   the   sheriff.  Davao   Light   and   Power   Co.,   proceeded   to   purchase   the   machinery   and   other  properties  auctioned  by  the  sheriff.    ISSUE:  Are  the  machineries  real  or  personal  property?    HELD  Art.415  of  the  New  Civil  Code  provides  that  Real  Property  consists  of:    (1)  Lands,  buildings,  roads  and  constructions  of  all  kinds  adhered  to  the  soil;    xxx    (5)  Machinery,   receptacles,   instruments   or   implements   intended   by   the   owner   pf  the  tenement  for  an  industry  ot  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;    

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Appellant  should  have  registered  its  protest  before  or  at  the  time  of  the  sale  of  the  property.  While  not   conclusive,   the  appellant's   characterization  of   the  property  as  chattels   is   indicative   of   intention   and   impresses   upon   the   property   the   character  determined  by  the  parties.    Machinery   is   naturally   movable.   However,   machinery   may   be   immobilized   by  destination  or  purpose  under  the  following  conditions:    General  Rule:  The  machinery  only  becomes  immobilized  if  placed  in  a  plant  by  the  owner  of  the  property  or  plant.    Immobilization  cannot  be  made  by  a   tenant,   a  usufructuary,  or  any  person  having  only  a  temporary  right.    Exception:  The   tenant,  usufructuary,  or   temporary  possessor  acted  as  agent  of   the  owner   of   the   premises;   or   he   intended   to   permanently   give   away   the   property   in  favor  of  the  owner.    As  a  rule,  therefore,  the  machinery  should  be  considered  as  Personal  Property,  since  it  was  not  placed  on  the  land  by  the  owner  of  the  said  land.      Makati  Leasing  and  Financial  Corporation  vs.  Wearever  Textile  Mills,  Inc.  G.R.  No.  L-­‐58469.  May  16,  1983.    De  Castro,  J.    Doctrine:   Where   a   chattel   mortgage   is   constituted   on   a   machinery   permanently  attached  to  the  ground,  the  machinery  is  to  be  considered  as  personal  property.    Facts:  Wearever  Textile  Mills,  Inc.  discounted  and  assigned  several  receivables  with  Makati  Leasing  and  Financial  Corp.  under  a  Receivable  Purchase  Agreement  so  that  the   latter  would  lend  money  to  the  former.   In  order  to  secure  the  collection  of  the  receivables   assigned,   Wearever   executed   a   Chattel   Mortgage   over   certain   raw  materials   inventory   as  well   as   a  machinery   (Artos   Aero   Dryer   Stentering   Range).  Upon  default  of  Wearever  in  paying  what  is  due,  Makati  Leasing  filed  a  petition  for  extrajudicial   foreclosure  of   the  properties  mortgaged   to   it.  The  Sheriff   assigned   to  execute   such   foreclosure,   however,   failed   to   enter   the   premises   of   Wearever   to  effect   the   seizure   of   the  machinery.   Afterwhich,   petitioner   filed   a   complaint   for   a  judicial  foreclosure  with  the  RTC  of  Rizal  which  was  granted  even  after  the  motion  for   reconsideration   filed   by   the   private   respondent.   Enforcing   then   the   writ   of  seizure  issued  by  the  lower  court,  the  Sheriff  removed  the  main  drive  motor  of  the  machinery.  Upon  appeal,  CA  reversed  the  ruling  of  the  RTC  and  ordered  the  return  of   the   motor   to   Wearever   since   the   said   machinery   cannot   be   the   subject   of   a  replevin  and  chattel  mortgage  for  it  is  a  real  property  pursuant  to  Art.  415  (3)  of  the  

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NCC.  CA  argued  that  the  machinery  is  attached  to  the  ground  by  means  of  bolts  and  the   only   way   to   remove   it   from   the   respondent’s   plant   would   be   to   drill   out   or  destroy  the  concrete  floor  –  which  is  why  all  that  the  sheriff  could  do  to  enforce  the  writ   was   to   take   the  main   drive  motor   of   the  machinery.   Hence,   this   petition   for  certiorari.    Issue:  Whether  the  machinery  is  a  personal  property.    Held:  Yes.  By  destination,   it   is  a  real  property  but  by  virtue  of   the   intention  of   the  parties  stipulated  in  their  chattel  mortgage  contract,  the  machinery  was  intended  to  be   a   personal   property.   The   Court   made   reference   to   its   ruling   in   Tumalad   v.  Vicencio   and   Standard   Oil   Co.   of   New   York   v.   Jaramillo   where   it   held   that   a   real  property   may   be   considered   as   a   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,  and  once  the  parties  so  agreed,  they  are  already  stopped  from  claiming  otherwise.  Private  respondent  contended  that  its  characterization  of   the  subject  machinery  as  chattel   in   their  agreement  should  not  be  appreciated  against  it  because  it  had  never  represented  nor  agreed  in  such  as  it  was  merely  required  and  dictated  on  by  the  petitioner  to  sign  a  chattel  mortgage  in  blank  form.  The  Court  was  not  persuaded  by  its  contention  as  the  said  issue  was  not  duly  raised  in  the  lower  and  appellate  courts  nor  will  the  said  signing  in  blank  by  the  respondent  make  the  contract  void  but  merely  voidable  by  a  proper  action  in  court.  Furthermore   as   it   was   undeniable   that   it   benefited   from   the   chattel   mortgage,   it  cannot  be  allowed  to  impugn  its  efficacy  for  equity  reasons.      Machinery  &  Engineering  Supplies  vs.  CA  No.  L-­‐7057,  October  29,  1954.    Doctrine:  The  special  civil  action  of  replevin  is  applicable  only  to  personal  property.  When   the   machinery   and   equipment   in   question   appeared   to   be   attached   to   the  land,  particularly  to  the  concrete  foundation  of  said  premises,  in  a  fixed  manner,  in  such  a  way  that  the  former  could  not  be  separated  from  the  latter  without  breaking  the  material   or  deterioration  of   the  object,   it   had  become  an   immovable  property  under  Art.  415(3).    Facts:  Herein  petitioner   filed  a   complaint   for   replevin   in   the  CFI  of  Manila  against  Ipo  Limestone  Co.,   and  Dr.  Antonio  Villarama,   for   the   recovery  of   the  machineries  and   equipments   sold   and   delivered   to   said   defendants   at   their   factory   in   Barrio  Bigti,   Norzagaray,   Bulacan.   The   respondent   judge   issued   an   order,   commanding  Provincial   Sheriff   of   Bulacan   to   seize   and   take   immediate   possession   of   the  properties   specified   in   the   order.   Two   deputy   sheriffs   of   Bulacan,   Ramon   S.  Roco(president  of  Machinery),  and  a  crew  of  technical  men  and  laborers  proceeded  to   Bigti,   for   the   purpose   of   carrying   the   court’s   order   into   effect.   Leonardo  Contreras,   Manager   of   the   respondent   Company,   and   Pedro   Torres,   in   charge  

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thereof,  met  the  deputy  sheriffs,  and  Contreras  handed  to  them  a  letter  addressed  to  Atty.  Palad  (ex-­‐officio  Provincial  Sheriff  of  Bulacan),  protesting  against  the  seizure  of  the  properties  in  question,  on  the  ground  that  they  are  not  personal  properties.    Later  on,   they  went   to   the   factory.  Roco’s   attention  was   called   to   the   fact   that   the  equipments  could  not  possibly  be  dismantled  without  causing  damages  or   injuries  to   the   wooden   frames   attached   to   them.   But   Roco   insisted   in   dismantling   the  equipments  on  his   own   responsibility,   alleging   that   the  bond  was  posted   for   such  eventuality,  the  deputy  sheriffs  directed  that  some  of  the  supports  thereof  be  cut.    The   defendant   Company   filed   an   urgent   motion   for   the   return   of   the   properties  seized   by   the   deputy   sheriffs.   On   the   same   day,   the   trial   court   issued   an   order,  directing   the   Provincial   Sheriff   of   Bulacan   to   return   the  machineries   to   the   place  where   they  were   installed.   The  deputy   sheriffs   returned   the   properties   seized,   by  depositing  them  along  the  road,  near  the  quarry,  of  the  defendant  Company,  at  Bigti,  without   the   benefit   of   inventory   and   without   re-­‐installing   them   in   their   former  position  and  replacing  the  destroyed  posts,  which  rendered  their  use  impracticable.    The   trial   court   ordered   Roco   to   furnish   the   Provincial   Sheriff   with   the   necessary  funds,   technical  men,   laborers,  equipments  and  materials.  Roco  raised   the   issue   to  the   CA;   a   writ   of   preliminary   injunction   was   issued   but   the   CA   subsequently  dismissed  for  lack  of  merit.  A  motion  for  reconsideration  was  denied.    Issue:  Whether   or   not   the  machineries   and   equipments  were   personal   properties  and,  therefore,  could  be  seized  by  replevin.    Held:  No.  The  special  civil  action  known  as  replevin,  governed  by  the  Rules  of  Court,  is  applicable  only  to  “personal  property.”  When  the  sheriff  repaired  to  the  premises  of  respondent  company,   the  machinery  and  equipment   in  question  appeared  to  be  attached   to   the   land,  particularly   to   the  concrete   foundation  of   said  premises,   in  a  fixed  manner,  in  such  a  way  that  the  former  could  not  be  separated  from  the  latter  “without   breaking   the  material   or   deterioration   of   the   object.”   Hence,   in   order   to  remove  said  outfit,  it  became  necessary,  not  only  to  unbolt  the  same,  but,  also,  to  cut  some   of   its   wooden   supports.   Moreover,   said   machinery   and   equipment   were  “intended  by  the  owner  of  the  tenement  for  an  industry”  carried  on  said  immovable  and  tended  “directly  to  meet  the  needs  of  the  said  industry.”  For  these  reasons,  they  were  already  immovable  property  pursuant  to  paragraphs  3  and  5  of  Article  415  of  the  Civil  Code.    Mr.  Ramon  Roco,   insisted  “on  the  dismantling  of  at  his  own  responsibility,”  stating  that,   precisely,   “that   is   the   reason   why   plaintiff   posted   a   bond.”   In   this   manner,  petitioner   clearly   assumed   the   corresponding   risks.   It   is   well   settled   that,   when  restitution   of   what   has   been   ordered,   the   goods   in   question   shall   be   returned   in  substantially  the  same  condition  as  when  taken.  It  follows  that  petitioner  must  also  do  everything  necessary  to  the  reinstallation  of  said  property  in  conformity  with  its  original  condition.  

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   Board  of  Assessment  Appeals,  Q.C.  vs  Meralco    FACTS:  On  November  15,  1955,  the  QC  City  Assessor  declared  the  MERALCO's  steel  towers  subject  to  real  property  tax.  After  the  denial  of  MERALCO's  petition  to  cancel  these   declarations,   an   appeal   was   taken   to   the   QC   Board   of   Assessment   Appeals,  which  required  respondent  to  pay  P11,651.86  as  real  property  tax  on  the  said  steel  towers  for  the  years  1952  to  1956.      MERALCO   paid   the   amount   under   protest,   and   filed   a   petition   for   review   in   the  Court  of  Tax  Appeals  (CTA)  which  rendered  a  decision  ordering  the  cancellation  of  the  said  tax  declarations  and  the  refunding  to  MERALCO  by  the  QC  City  Treasurer  of  P11,651.86.    ISSUE:  Are   the   steel   towers  or  poles  of   the  MERALCO  considered   real  or  personal  properties?    HELD:  Pole  –  long,  comparatively  slender,  usually  cylindrical  piece  of  wood,  timber,  object   of  metal   or   the   like;   an   upright   standard   to   the   top   of  which   something   is  affixed  or  by  which  something  is  supported.    MERALCO's  steel  supports  consists  of  a  framework  of  4  steel  bars/strips  which  are  bound  by  steel  cross-­‐arms  atop  of  which  are  cross-­‐arms  supporting  5  high-­‐voltage  transmission   wires,   and   their   sole   function   is   to   support/carry   such   wires.   The  exemption  granted  to  poles  as  quoted  from  Part  II,  Par.9  of  respondent's  franchise  is  determined  by  the  use  to  which  such  poles  are  dedicated.    It   is  evident   that   the  word  “poles”,  as  used   in  Act  No.  484  and   incorporated   in   the  petitioner's   franchise,   should  not  be  given  a  restrictive  and  narrow   interpretation,  as  to  defeat  the  very  object  for  which  the  franchise  was  granted.  The  poles  should  be  taken   and   understood   as   part   of   MERALCO's   electric   power   system   for   the  conveyance  of  electric  current  to  its  consumers.    Art.  415  of  the  NCC  classifies  the  following  as  immovable  property:    (1)  Lands,  buildings,  roads  and  constructions  of  all  kinds  adhered  to  the  soil;    xxx    (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;    xxx  

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 (5)  Machinery,   receptacles,   instruments   or   implements   intended   by   the   owner   pf  the  tenement  for  an  industry  ot  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;    Following   these   classifications,   MERALCO's   steel   towers   should   be   considered  personal  property.  It  should  be  noted  that  the  steel  towers:    (a)  are  neither  buildings  or  constructions  adhered  to  the  soil;    (b)   are   not   attached   to   an   immovable   in   a   fixed  manner   –   they   can   be   separated  without  breaking  the  material  or  deterioration  of  the  object;    ©  are  not  machineries,  receptacles  or  instruments,  and  even  if  they  are,  they  are  not  intended  for  an  industry  to  be  carried  on  in  the  premises.      Laurel  vs  Garcia    FACTS:    These   are   two   petitions   for   prohibition   seeking   to   enjoin   respondents,   their  representatives   and   agents   from   proceeding   with   the   bidding   for   the   sale   of   the  3,179   square  meters   of   land   at   306  Ropponggi,   5-­‐Chome  Minato-­‐ku,   Tokyo,   Japan  scheduled  on  February  21,  1990.    The  subject  property  in  this  case  is  one  of  the  four  (4)  properties  in  Japan  acquired  by  the  Philippine  government  under  the  Reparations  Agreement  entered  into  with  Japan  on  May  9,  1956,  and   is  part  of   the   indemnification  to  the  Filipino  people   for  their  losses  in  life  and  property  and  their  suffering  during  World  War  II.    As   intended,   the   subject  property  became   the   site  of   the  Philippine  Embassy  until  the  latter  was  transferred  to  Nampeidai  on  July  22,  1976.  Due  to  the  failure  of  our  government   to   provide   necessary   funds,   the   Roppongi   property   has   remained  undeveloped  since  that  time.    A   proposal   was   presented   to   President   Corazon   C.   Aquino   by   former   Philippine  Ambassador   to   Japan,  Carlos   J.  Valdez,   to  make   the  property   the  subject  of  a   lease  agreement  with  a  Japanese  firm  where,  at  the  end  of  the  lease  period,  all  the  three  leased   buildings   shall   be   occupied   and   used   by   the   Philippine   government.   On  August   11,   1986,   President   Aquino   created   a   committee   to   study   the  disposition/utilization  of  Philippine  government  properties  in  Tokyo  and  Kobe.    

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On   July   25,   1987,   the   President   issued   Executive   Order   No.   296   entitling   non-­‐Filipino  citizens  or  entities  to  avail  of  reparations’  capital  goods  and  services  in  the  event   of   sale,   lease   or   disposition.   The   four   properties   in   Japan   including   the  Roppongi  were  specifically  mentioned  in  the  first  “Whereas”  clause.    Amidst  opposition  by  various  sectors,   the  Executive  branch  of  the  government  has  been   pushing,   with   great   vigor,   its   decision   to   sell   the   reparations   properties  starting   with   the   Roppongi   lot.   The   property   has   twice   been   set   for   bidding   at   a  minimum  floor  price  at  $225  million.    ISSUES:  The  petitioner  in  G.R.  No.  92013  raises  the  following  issues:    (1)  Can  the  Roppongi  property  and  others  of  its  kind  be  alienated  by  the  Philippine  Government?;  and    (2)   Does   the   Chief   Executive,   her   officers   and   agents,   have   the   authority   and  jurisdiction,  to  sell  the  Roppongi  property?    In   G.R.   NO.   92047,   apart   from   questioning   the   authority   of   the   government   to  alienate  the  Roppongi  property  assails  the  constitutionality  of  Executive  Order  No.  296,  the  petitioner  also  questions  the  bidding  procedures  of  the  Committee  on  the  Utilization   or   Disposition   of   Philippine   Government   Properties   in   Japan   for   being  discriminatory  against  Filipino  citizens  and  Filipino-­‐owned  entities  by  denying  them  the  right  to  be  informed  about  the  bidding  requirements.    HELD:  The  petition  is  granted.  As  property  of  public  dominion,  the  Roppongi   lot   is  outside   the   commerce   of   man.   It   cannot   be   alienated.   Its   ownership   is   a   special  collective   ownership   for   general   use   and   enjoyment,   an   application   to   the  satisfaction  of  collective  needs,  and  resides  in  the  social  group.  The  purpose  is  not  to  serve  the  State  as  a  juridical  person,  but  the  citizens;  it  is  intended  for  the  common  and   public   welfare   and   cannot   be   the   object   of   appropriation.   (Taken   from   3  Manresa,   66-­‐69;   cited   in   Tolentino,   Commentaries   on   the   Civil   Code   of   the  Philippines,  1963  Edition,  Vol.  II,  p.  26).    The  Roppongi  property   is   correctly   classified  under  paragraph  2  of  Article  420  of  the   Civil   Code   as   property   belonging   to   the   State   and   intended   for   some   public  service.    The  fact  that  the  Roppongi  site  has  not  been  used  for  a  long  time  for  actual  Embassy  service   does   not   automatically   convert   it   to   patrimonial   property.   Any   such  conversion  happens  only  if  the  property  is  withdrawn  from  public  use  (Cebu  Oxygen  and  Acetylene  Co.  v.  Bercilles,  66  SCRA  481  [1975]).  A  property  continues  to  be  part  of   the   public   domain,   not   available   for   private   appropriation   or   ownership   “until  there   is   a   formal   declaration   on   the   part   of   the   government   to   withdraw   it   from  being  such  (Ignacio  v.  Director  of  Lands,  108  Phil.  335  [1960]).  

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 An   abandonment  of   the   intention   to  use   the  Roppongi  property   for  public   service  and   to  make   it   patrimonial   property   under   Article   422   of   the   Civil   Code  must   be  definite.   Abandonment   cannot   be   inferred   from   the   non-­‐use   alone   specially   if   the  non-­‐use  was   attributable  not   to   the   government’s   own  deliberate   and   indubitable  will  but  to  a  lack  of  financial  support  to  repair  and  improve  the  property  (See  Heirs  of   Felino   Santiago   v.   Lazarao,   166   SCRA   368   [1988]).   Abandonment   must   be   a  certain  and  positive  act  based  on  correct  legal  premises.    A   mere   transfer   of   the   Philippine   Embassy   to   Nampeidai   in   1976   is   not  relinquishment  of  the  Roppongi  property’s  original  purpose.    Executive   Order   No.   296,   though   its   title   declares   an   “authority   to   sell”,   does   not  have   a   provision   in   this   text   expressly   authorizing   the   sale   of   the   four   properties  procured   from   Japan   for   the   government   sector.   It   merely   intends   to   make   the  properties  available  to  foreigners  and  not  to  Filipinos  alone  in  case  of  a  sale,  lease  or  other  disposition.    Rep  Act  No.  6657,  does  not  authorize  the  Executive  Department  to  sell  the  Roppongi  property.   It  merely  enumerates  possible   sources  of   future   funding   to  augment   (as  and  when   needed)   the   Agrarian   Reform   Fund   created   under   Executive   Order   No.  299.    Moreover,  President  Aquino’s  approval  of  the  recommendation  by  the  investigating  committee   to   sell   the   Roppongi   property   was   premature   or,   at   the   very   least,  conditioned  on  a  valid  change   in   the  public  character  of   the  Roppongi  property.   It  does   not   have   the   force   and   effect   of   law   since   the   President   already   lost   her  legislative   powers.   The   Congress   had   already   convened   for   more   than   a   year.  Assuming   that   the   Roppongi   property   is   no   longer   of   public   dominion,   there   is  another   obstacle   to   its   sale   by   the   respondents.   There   is   no   law   authorizing   its  conveyance,   and   thus,   the   Court   sees   no   compelling   reason   to   tackle   the  constitutional  issue  raised  by  petitioner  Ojeda.