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Lopez v. Orosa, G.R. Nos. L-10817-18, 103 SCRA 98, 28February 1958

FACTS:

-Petitioner Lopez was engaged in doing business under the tradename Lopez-Castelo Sawmill.

Orosa, a resident of the same province as Lopez, invited the latter tomake an investment in the theatre business. Lopez declined to investbut agreed to supply the lumber necessary for the construction of theproposed theatre. They had an oral agreement that Orosa would bepersonally liable for any account that the said construction mightincur and that payment would be on demand and not cash ondelivery basis.

Lopez delivered the which was used for construction amounting toP62,255.85. He was paid only P20,848.50, leaving a balance ofP41,771.35.

The land on which the building was erected previously owned byOrosa, was later on acquired by the corporation.

. As Lopez was pressing Orosa for payment, the latter and presidentof the corporation promised to obtain a bank loan by mortgaging theproperties of the Plaza Theatre., out of which the unpaid balancewould be satisfied. But unknown to Lopez, the corporation alreadyobtained a loan with Luzon Surety Company as surety, and thecorporation in turn executed a mortgage on the land and building infavor of the said company as counter-security.

Due to the persistent demands of Lopez, Orosa executed a "deed ofassignment" over his shares of stock in the corporation.

As it remained unsettled, Lopez filed a case against Orosa and Plazatheatre praying that they be sentenced to pay him jointly andseverally of the unpaid balance; and in case defendants fail to pay,the land and building owned by the corporation be sold in public

auction with the proceeds be applied to the balance; or the shares ofstock be sold in public auction.

The lower court held that defendants were jointly liable for the unpaidbalance and Lopez thus acquired the material man's lien over the

construction. The lien was merely confined to the building and didnot extend to the on which the construction was made.

Lopez tried to secure a modification of the decision, but was denied.

ISSUES:

Whether the material man's lien for the value of the materials used inthe construction of the building attaches to said structure alone anddoesn't extend to the land on which the building is adhered to.

Whether the lower court and CA erred in not providing that the

material mans liens is superior to the mortgage executed in favor ofsurety company not only on the building but also on the land.

HELD:

-The material man's lien could be charged only to the building forwhich the credit was made or which received the benefit of refection,the lower court was right in, holding at the interest of the mortgageeover the land is superior and cannot be made subject to the materialman's lien.

-Generally, real estate connotes the land and the buildingconstructed thereon, it is obvious that the inclusion of the building inthe enumeration of what may constitute real properties could onlymean one thing-that a building is by itself an immovable property.

-In the absence of any specific provision to the contrary, a building isan immovable property irrespective of whether or not said structureand the land on which it is adhered to belong to the same owner.

-The law gives preference to unregistered refectionary credits onlywith respect to the real estate upon which the refectionary or workwas made.

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- The lien so created attaches merely to the immovable property forthe construction or repair of which the obligation was incurred.Therefore, the lien in favor of appellant for the unpaid value of thelumber used in the construction of the building attaches only to said

structure and to no other property of the obligors.

Associated Insurance and Surety Company v. Iya, 103 SCRA

972

FACTS: Spouses Valino were the owners of a house, payable oninstallments from Philippine Realty Corporation. To be able topurchase on credit rice from NARIC, they filed a surety bondsubscribed by petitioner and therefor, they executed an allegedchattel mortgage on the house in favor of the surety company. Thespouses didn't own yet the land on which the house was constructedon at the time of the undertaking. After being able to purchase the

land, to be able to secure payment for indebtedness, the spousesexecuted a real estate mortgage in favor of Iya.

The spouses were not able to satisfy obligation with NARIC,petitioner was compelled to pay. The spouses weren't able to pay thesurety company despite demands and thus, the company foreclosedthe chattel mortgage. It later learned of the real estate mortgage overthe house and lot securedby the spouses. This prompted the company to file an action againstthe spouses. Also, Iya filed another civil action against the spouses,asserting that she has a better right over the property. The trial courtheard the two cases jointly and it held that the surety company had apreferred right over the building as since when the chattel mortgagewas secured, the land wasn't owned yet by the spouses making thebuilding then a chattel and not a real property.

HELD: A building certainly cannot be divested of its character of arealty by the fact that the land on which it is constructed belongs toanother. To hold it the other way, the possibility is not remote that itwould result in confusion, for to cloak the building with an uncertainstatus made dependent on ownership of the land, would create asituation where apermanent fixture changes its nature or characteras the ownership of the land changes hands. In the case at bar, as

personal properties may be the only subjects of a chattel mortgage,the execution of the chattel mortgage covering said building is nulland void.

Bicerra v. Teneza, L-16218, 6 SCRA 648, 29 November 1962

Facts: appellants were the owners of the house, worth P200.00, builton and owned by them and situated in the said municipalityLagangilang; that sometime in January 1957 appealed forciblydemolished the house, claiming to be the owners thereof; that thematerials of the house, after it was dismantled, were placed in thecustody of the barrio lieutenant of the place; and that as a result ofappellate's refusal to restore the house or to deliver the materialappellants the latter have suffered damages.

Issue: whether the action involves title to real property.

Ruling/ Rationale: A house is classified as immovable property byreason of its adherence to the soil on which it is built (Art. 415, par.1, Civil Code). This classification holds true regardless of the factthat the house may be situated on land belonging to a differentowner. But once the house is demolished, as in this case, it ceasesto exist as such and hence its character as an immovable likewiseceases.

Evangelista v. Alto Surety & Insurance Co., Inc., G.R. No. L-11139, 23 April 1958

Facts:In 1949, Santos Evangelista instituted Civil Case No. 8235 of the CFIManila (Santos Evangelista vs. Ricardo Rivera) for a sum of money.On the same date, he obtained a writ of attachment, which waslevied upon a house, built by Rivera on a land situated in Manila andleased to him, by filing copy of said writ and the corresponding noticeof attachment with the Office of the Register of Deeds of Manila. Indue course, judgment was rendered in favor of Evangelista, whobought the house at public auction held in compliance with the writ ofexecution issued in said case on 8 October 1951. The correspondingdefinite deed of sale was issued to him on 22 October 1952, uponexpiration of the period of redemption. When Evangelista sought to

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take possession of the house, Rivera refused to surrender it, uponthe ground that he had leased the property from the Alto Surety &Insurance Co., Inc. and that the latter is now the true owner of saidproperty. It appears that on 10 May 1952, a definite deed of sale ofthe same house had been issued to Alto Surety, as the highest

bidder at an auction sale held, on 29 September 1950, in compliancewith a writ of execution issued in Civil Case 6268 of the same court(Alto Surety & Insurance vs. Maximo Quiambao, Rosario Guevaraand Ricardo Rivera)" in which judgment for the sum of money, hadbeen rendered in favor of Alto Surety. Hence, on 13 June 1953,Evangelista instituted an action against Alto Surety and RicardoRivera, for the purpose of establishing his title over said house, andsecuring possession thereof, apart from recovering damages. Afterdue trial, the CFI Manila rendered judgment for Evangelista,sentencing Rivera and Alto Surety to deliver the house in question toEvangelista and to pay him, jointly and severally, P40.00 a monthfrom October 1952, until said delivery. The decision was however

reversed by the Court of Appeals, which absolved Alto Surety fromthe complaint on account that although the writ of attachment in favorof Evangelista had been filed with the Register of Deeds of Manilaprior to the sale in favor of Alto Surety, Evangelista did not acquirethereby a preferential lien, the attachment having been levied as ifthe house in question were immovable property.

Issue:Whether or not a house constructed by the lessee of the land onwhich it is built, should be dealt with, for purpose of attachment, asimmovable property?

Held:The court ruled that the house is not personal property, much less adebt, credit or other personal property not capable of manualdelivery, but immovable property. As held in Laddera vs. Hodges (48OG 5374), "a true building is immovable or real property, whether itis erected by the owner of the land or by a usufructuary or lessee."The opinion that the house of Rivera should have been attached, as"personal property capable of manual delivery, by taking and safelykeeping in his custody", for it declared that "Evangelista could nothave validly purchased Ricardo Rivera's house from the sheriff asthe latter was not in possession thereof at the time he sold it at a

public auction" is untenable. Parties to a deed of chattel mortgagemay agree to consider a house as personal property for purposes ofsaid contract. However, this view is good only insofar as thecontracting parties are concerned. It is based, partly, upon theprinciple of estoppel. Neither this principle, nor said view, is

applicable to strangers to said contract. The rules on execution donot allow, and should not be interpreted as to allow, the specialconsideration that parties to a contract may have desired to impart toreal estate as personal property, when they are not ordinarily so.Sales on execution affect the public and third persons. Theregulation governing sales on execution are for public officials tofollow. The form of proceedings prescribed for each kind of propertyis suited to its character, not to the character which the parties havegiven to it or desire to give it. The regulations were never intended tosuit the consideration that parties, may have privately given to theproperty levied upon. The court therefore affirms the decision of theCA with cost against Alto Surety.

Leung Yee v. Strong Machinery Co., G.R. No. L-11658, 15

February 1918

FACTSThe Compania Agricola Filipina (CAF) purchased from StrongMachinery Co. rice-cleaning machines which CAF installed in one ofits buildings.

As security for the purchase price, CAF executed a chattel mortgageon the machines and the building on which they had been installed.When CEF failed to pay, the registered mortgage was foreclosedand Strong Machinery Co. purchased the building. This sale wasannotated in the Chattel Mortgage Registry.Later, Strong Machinery Co. also purchased from Agricola the lot onwhich the building was constructed. The sale wasn't registered in theRegistry of Property BUT Strong Machinery Co. took possession ofthe building and the lot.However, the same building had been previously purchased byLeung Yee, a creditor of Agricola, at a sheriff's sale despite hisknowledge of the prior sale in favor of Strong Machinery Co.. Thesale to Leung Yee was registered in the Registry of Property.

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ISSUES1. Was the property's nature changed by its registration in theChattel Mortgage Registry?2. Who has a better right to the property?

HELD1. Where the interest conveyed is of the nature of real property, theplacing of the document on record in the Chattel Mortgage Registryis a futile act.Chattel Mortgage refers to the mortgage of Personal Propertyexecuted in the manner and form prescribed in the statute.Since the building is REAL PROPERTY, its sale as annotated in theChattel Mortgage Registry cannot be given the legal effect ofregistration in the Registry of Real Property.The mere fact that the parties decided to deal with the building aspersonal property does not change its character as real property.Neither the original registry in the chattel mortgage registry, nor the

annotation in said registry of the sale of the mortgaged property hadany effect on the building.Art. 1473 of the New Civil Code provides the following rules ondetermining ownership of property which has been sold to differentvendees:If Personal Property - grant ownership to person who 1st possessedit in good faithIf Real Property - grant ownership to person who 1st recorded it inthe RegistryIf no entry - grant to person who 1st possessed in good faithIf no proof of possession - grant to person who presents oldest titleSince Leung Yee purchased the property despite knowledge of theprevious purchase of the same by Strong Machinery Co., it followsthat Leung Yee was not a purchaser in good faith."One who purchases real estate with knowledge of a defect or lack oftitle in his vendor cannot claim that he has acquired title thereto ingood faith as against the true owner of the land or of an interesttherein. The same rule must be applied to one who has knowledge offacts which should have put him upon such inquiry and investigationas might be necessary to acquaint him with the defects in the title ofhis vendor."Good Faith, or the want of it, is a "state or condition of mind whichcan only be judged of by actual or fancied tokens or signs." (Wilder

vs. Gilman, 55Vt., 504, 505; Cf. Cardenas Lumber Co. vs. Shadel,52 La. Ann., 2094-2098; Pinkerton Bros. Co. vs. Bromley, 119Mich.,8, 10, 17.)Honesty Of Intention is the honest lawful intent constituting goodfaith. It implies a f reedom from knowledge and circumstances which

ought to put a person on inquiry.As such, proof of such knowledge overcomes the presumption ofgood faith.Following the rule on possessory rights provided in Art. 1473, StrongMachinery Co. has a better right to the property since it firstpurchased the same ahead of Leung Yee, the latter not being apurchaser in good faith.

Standard Oil Co. of New York v. Jaramillo, 44 SCRA 630

The Power of the Registry of Deeds is Ministerial, and The absolutecriterion to determine between real and personal property is NOT

supplied by the civil code. Parties may agree what to treat aspersonal property and what to treat as real property.FACTSOn November 27, 1922, Gervasia de la Rosa was the lessee of aparcel of land situated in the City of Manila and owner of the houseof really tough materials built thereon. She executed that fine day adocument in the form of a chattel mortgage, purporting to convey toStandard Oil Company of New York (by way of mortgage) both theleasehold interest in said lot and the building.

After said document had been duly acknowledged and delivered,Standard Oil presented it to Joaquin Jaramillo, as register of deedsof the City of Manila, for the purpose of having the same recorded inthe book of record of chattel mortgages. Upon examination of theinstrument, Jaramillo opined that it was not chattel mortgage, for thereason that the interest therein mortgaged did not appear to bepersonal property, within the meaning of the Chattel Mortgage Law,and registration was refused on this ground only.

Later this confusion was brought to the Supreme Court upondemurrer by Joaquin Jaramillo, register of deeds of the City ofManila, to an original petition of the Standard Oil Company of NewYork, demanding a mandamus to compel the respondent to record in

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the proper register a document purporting to be a chattel mortgageexecuted in the City of Manila by Gervasia de la Rosa, Vda. de Vera,in favor of the Standard Oil Company of New York.

The Supreme Court overruled the demurrer, and ordered that unless

Jaramillo interposes a sufficient answer to the petition for mandamusby Standard Oil within 5 days of notification, the writ would be issuedas prayed, but without costs.

ISSUE:w/n the Registry of Deeds can determine the nature of property to beregistered.w/n the Registry of Deeds has powers beyond Ministerial discretion.

RESOLUTION:1.Jaramillo, register of deeds, does not have judicial or quasi-judicialpower to determine nature of document registered as chattel

mortgage Section 198 of the Administrative Code, originally ofSection 15 of the Chattel Mortgage Law (Act 1508 as amended byAct 2496), does not confer upon the register of deeds any authoritywhatever in respect to the "qualification," as the term is used inSpanish law, of chattel mortgages. His duties in respect to suchinstruments are ministerial only. The efficacy of the act of recording achattel mortgage consists in the fact that it operates as constructivenotice of the existence of the contract, and the legal effects of thecontract must be discovered in the instrument itself in relation withthe fact of notice.

2.Article 334 and 335 of the Civil Code does not supply absolutecriterion on distinction between real and personal property forpurpose of the application of the Chattel Mortgage Law Article 334and 335 of the Civil Code supply no absolute criterion fordiscriminating between real property and personal property forpurposes of the application of the Chattel Mortgage Law. Thosearticles state rules which, considered as a general doctrine, are lawin this jurisdiction; but it must not be forgotten that under givenconditions property may have character different from that imputed toit in said articles. It is undeniable that the parties to a contract maybe agreement treat as personal property that which by nature wouldbe real property; and it is a familiar phenomenon to see things

classed as real property for purposes of taxation which on generalprinciple might be considered personal property. Other situations areconstantly arising, and from time to time are presented to theSupreme Court, in which the proper classification of one thing oranother as real or personal property may be said to be doubtful.]

Sibal v. Valdez, G.R. No. L-27532, 4 August 1927

FACTS: The deputy sheriff of Tarlac attached and sold to Valdez thesugarcane planted by the plaintiff. The plaintiff asked for theredemption of the sugarcane. Valdez said that it cannot be subject toredemption because it is a personal property.

ISSUE: WON the sugarcane in question is a personal or realproperty.

HELD:Sugarcane is under real property as ungathered products. The

Supreme Court of Louisiana provided that standing crops areconsidered as part of the land to which they are attached but theimmovability provided for is only one in abstract. The existence of aright on the growing crop is mobilization by anticipation, a gatheringas it were in advance, rendering the crop movable quoad the rightacquired therein.-A crop raised on leased premises in no sense forms part of theimmovable. It belongs to the lessee and may be sold by him.-Act 1508 (Chattel Mortgage Law) recognize growing crops aspersonal property.- Crops whether growing or ready to be harvested, when producedby annual cultivation, is not part of realty.- Paragraph 2 of Art. 334 of the Civil Code has been modified bySec. 450 of Code of Civil Procedure and Act no. 1508 in the sensethat for purposes of attachment and execution and Chattel MortgageLaw, ungathered products have the nature of personal property.

Tsai v. CA, G.R. No. 120098, 2 October 2001

FACTS:Ever Textile Mills, Inc. (EVERTEX) obtained loan from PhilippineBank of Communications (PBCom), secured by a deed of Real andChattel Mortgage over the lot where its factory stands, and the

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chattels located therein as enumerated in a schedule attached to themortgage contract. PBCom again granted a second loan toEVERTEX which was secured by a Chattel Mortgage over personalproperties enumerated in a list attached thereto. These listedproperties were similar to those listed in the first mortgage deed.

After the date of the execution of the second mortgage mentionedabove, EVERTEX purchased various machines and equipments.Upon EVERTEX's failure to meetits obligation to PBCom, the latter commenced extrajudicialforeclosure proceedings against EVERTEX under Act 3135 and Act1506 or "The Chattel Mortgage Law". PBCom then consolidated itsownership over the lot and all the properties in it. It leased the entirefactory 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 extrajudicialforeclosure of subject mortgage was not valid, and that PBCom,

without any legal or factual basis, appropriated the contestedproperties which were not included in the Real and Chattel Mortgageof the first mortgage contract nor in the second contract which is aChattel Mortgage, and neither were those properties included in theNotice of Sheriff's Sale.

ISSUES:1) W/N the contested properties are personal or movable properties2) W/N the sale of these properties to a third personhttp://www.blogger.com/blogger.g?blogID=1844282339298005116(Tsai) by the bank through an irregular foreclosure sale is valid.

HELD:1) Nature of the Properties and Intent of the PartiesThe nature of the disputed machineries, i.e., that they were heavy,bolted or cemented on the real property mortgaged does not makethem ipso facto immovable under Article 415 (3) and (5) of the NewCivil Code. While it is true that the properties appear to be immobile,a perusal of the contract of Real and Chattel Mortgage executed bythe parties herein reveal their intent, that is - to treat machinery andequipment as chattels.In the first mortgage contract, reflective of the true intention ofPBCOM and EVERTEX was the typing in capital letters, immediately

following the printed caption of mortgage, of the phrase "real andchattel." So also, the "machineries and equipment" in the printedform of the bank had to be inserted in the blank space of the printedcontract and connected with the word "building" by typewritten slashmarks. Now, then, if the machineries in question were contemplated

to be included in the real estate mortgage, there would have been nonecessity to ink a chattel mortgage specifically mentioning as part IIIof Schedule A a listing of the machineries covered thereby. It wouldhave sufficed to list them as immovables in the Deed of Real EstateMortgage of the land and building involved. As regards the secondcontract, the intention of the parties is clear and beyond question. Itrefers solely to chattels. The inventory list of the mortgagedproperties is an itemization of 63 individually described machinerieswhile the schedule listed only machines and 2,996,880.50 worth offinished 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 tosecure an obligation under the principle of estoppel. As far back asNavarro v. Pineda, an immovable may be considered a personalproperty if there is a stipulation as when it is used as security in thepayment of an obligation where a chattel mortgage is executed overit.

2) Sale of the Properties Not Included in the Subject of ChattelMortgage is Not ValidThe auction sale of the subject properties to PBCom is void.Inasmuch as the subject mortgages were intended by the parties toinvolve chattels, insofar as equipment and machinery wereconcerned, the Chattel Mortgage Law applies. Section 7 providesthereof that: "a chattel mortgage shall be deemed to cover only theproperty described therein and not like or substituted propertythereafter acquired by the mortgagor and placed in the samedepository as the property originally mortgaged, anything in themortgage to the contrary notwithstanding." Since the disputedmachineries were acquired later after the two mortgage contractswere executed, it was consequently an error on the part of the Sheriffto include subject machineries with the properties enumerated insaid chattel mortgages.

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As the lease and sale of said personal properties were irregular andillegal because they were not duly foreclosed nor sold at the auction,no valid title passed in its favor. Consequently, the sale thereoftohttp://www.blogger.com/blogger.g?blogID=1844282339298005116Ruby Tsai is also a nullity under the elementary principle of nemo dat

quod non habet, one cannot give what one does not have. ##

Yap v. Tanada, G.R. No. L-32917, 18 July 1988

Doctrine: Article 415, par. 3 of the Civil Code considers andimmovable property as "everything attached to an immovable in afixed manner, in such a way that it cannot be separated therefromwithout breaking the material or deteriorating the object." The pumpdoes not fit this description. It could be, and was, in fact,separatedfrom Yap's premises without being broken of suffering deterioration.Obviously, the separation or removal of the pump involved nothingmore complicated that the loosening of bolts or dismantling of otherfasteners.

Facts: The case began in the City Court of Cebu with the filing ofGoulds Pumps International (Phil), Inc. of a complaint against Yapand his wife seeking recovery of P1,459.30, representing thebalance of the price and installation cost of a water pump in thelatter's premises. The Court rendered judgment in favor of hereinrespondent after they presented evidence ex-parte due to failure ofpetitioner Yap to appear before the Court. Petitioner then appealedto the CFI, particularly to the sale of Judge Tanada. For again failureto appear for pre-trial, Yap was declared in default. He filed for amotion for reconsideration which was denied by Judge Tanada. OnOctober 15, 1969, Tanada granted Gould's Motion for Issuance ofWrit of Execution. Yap forthwith filed an Urgent Motion forReconsideration of the said Order. In the meantime, the Sherifflevied on the water pump in question and by notice scheduled theexecution 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 whocontinuedwith the auction sale and sold the property to the highest bidder,Goulds. Because of such, petitioner filed a Motion to Set AsideExecution Sale and to Quash Alias Writ of Execution. One of hisarguments was that the sale was made without the notice required

by Sec. 18, Rule 29 of the New Rules of Court, "i.e. notice bypublication in case of execution of sale of real property, the pumpand its accessories being immovable because attached to theground with the character of permanency." Such motion was deniedby the CFI.

Issue: Whether or not the pump and its accessories are immovableproperty

Held: No. The water pump and its accessories are NOT immovableproperties. The argument of Yap that the water pump had becomeimmovable property by its being installed in his residence isuntenable. Article 415, par. 3 of the Civil Code considers andimmovable property as "everything attached to an immovable in afixed manner, in such a way that it cannot be separated therefromwithout breaking the material or deteriorating the object." The pumpdoes not fit this description. It could be, and was, in fact,separatedfrom Yap's premises without being broken of suffering deterioration.Obviously, the separation or removal of the pump involved nothingmore complicated that the loosening of bolts or dismantling of otherfasteners.

Mindanao Bus Co. v. City Assessor and Treasurer, G.R. No. L-17870, 29 September 1962

Doctrine: Movable equipment, to be immobilized in contemplation ofArticle 415 of the Civil Code, must be the essential and principalelements of an industry or works which are carried on in a building oron a piece of land. Thus, where the business is one of transportation,which is carried on without a repair or service shop, and its rollingequipment is repaired or serviced in a shop belonging to another, thetools and equipment in its repair shop which appear movable aremerely incidentals and may not be considered immovables , and,hence, not subject to assessment as real estate for purposes of thereal estate tax.

Facts: Respondent City Assessor of Cagayan de Oro City assessedat P4,400 petitioner's equipment in its repair or service shop.Petitioner appealed the assessment to the respondent Board of Tax

Appeals on the ground that the same are not realty. The Board of

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Tax Appeals of the City sustained the city assessor, so petitionerherein filed with the Court of Tax Appeals a petition for the review ofthe assessment. The Court of Tax Appeals having sustained therespondent city assessor's ruling, and having denied a motion forreconsideration, petitioner brought the case to this Court.

Issue: Whether the Tax Court erred in its interpretation of paragraph5 of Article 415 of the New Civil Code, and holding that pursuantthereto, the movable equipments are taxable realties, by reason oftheir being intended or destined for use in an industry.

Held: Yes. Movable equipments, to be immobilized in contemplationof Article 415 of the Civil Code, must be the essential and principalelements of an industry or works which are carried on in a building oron a piece of land. Thus, where the business is one of transportation,which is carried on without a repair or service shop, and its rollingequipment is repaired or serviced in a shop belonging to another, thetools and equipments in its repair shop which appear movable aremerely incidentals and may not be considered immovables, and,hence, not subject to assessment as real estate for purposes of thereal estate tax.Similarly, the tool and equipment in question in this instant case are,by their nature, not essential and principal elements of petitioner'sbusiness of transporting passengers and cargoes by motor trucks.They are merely incidentals - acquired as movables and used onlyfor expediency to facilitate and/or improve its service. Even withoutsuch tools and equipment, its business may be carried on, aspetitioner has carried on without such equipments, before the war.The transportation business could be carried on without the repair orservice shop if its rolling equipment is repaired or serviced in anothershop belonging to another.

Article 415 of the Civil Code requires that the industry or works becarried on in a building or on a piece of land. But in the case at barthe equipments in question are destined only to repair or service thetransportation business, which is not carried on in a building orpermanently on a piece of land, as demanded by the law. Saidequipment may not, therefore, be deemed as real property.

Fels Energy, Inc. v. Province of Batangas, et al., G.R. No.168557, 16 February 2007

Doctrine: In Consolidated Edison Company of New York, Inc., et al.v. The City of New York, et al., a power company brought an actionto review property tax assessment. On the city's motion to dismiss,the Supreme Court of New York held that the barges on which weremounted gas turbine power plants designated to generate electrical

power, the fuel oil barges which supplied fuel oil to the power plantbarges, and the accessory equipment mounted on the barges weresubject to real property taxation.Moreover, Article 415 (9) of the New Civil Code provides that "docksand structures which, though floating, are intended by their natureand object to remain at a fixed place on a river, lake, or coast" areconsidered immovable property. Thus, power barges are categorizedas immovable property by destination, being in the nature ofmachinery and other implements intended by the owner for anindustry or work which may be carried on in a building or on a pieceof land and which tend directly to meet the needs of said industry orwork.

Facts: On January 18, 1993, NPC entered into a lease contract withPolar Energy, Inc. over 330 MW diesel engine power bargesmoored at Balayan Bay in Calaca, Batangas. The contract,denominated as an Energy Conversion Agreement, was for a periodof five years. Article 10 states that NPC shall be responsible for thepayment of taxes. (other than (i) taxes imposed or calculated on thebasis of the net income of POLAR and Personal Income Taxes of itsemployees and (ii) construction permit fees, environmental permitfees and other similar fees and charges. Polar Energy then assignedits rights under the Agreement to Fels despite NPC's initialopposition.FELS received an assessment of real property taxes on the powerbarges from Provincial Assessor Lauro C. Andaya of Batangas City.FELS referred the matter to NPC, reminding it of its obligation underthe Agreement to pay all real estate taxes. It then gave NPC the fullpower and authority to represent it in any conference regarding thereal property assessment of the Provincial Assessor. NPC filed apetition with the LBAA. The LBAA ordered Fels to pay the real estatetaxes. The LBAA ruled that the power plant facilities, while they maybe classified as movable or personal property, are neverthelessconsidered real property for taxation purposes because they areinstalled at a specific location with a character of permanency. The

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LBAA also pointed out that the owner of the barges-FELS, a privatecorporation-is the one being taxed, not NPC. A mere agreementmaking NPC responsible for the payment of all real estate taxes andassessments will not justify the exemption of FELS; such a privilegecan 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 thepower barges belong to NPC; since they are actually, directly andexclusively used by it, the power barges are covered by theexemptions under Section 234(c) of R.A. No. 7160. As to the other

jurisdictional issue, the CBAA ruled that prescription did not precludethe NPC from pursuing its claim for tax exemption in accordance withSection 206 of R.A. No. 7160. Upon MR, the CBAA reversed itself.

Issue: Whether or not the petitioner may be assessed of realproperty taxes.

Held: YES. The CBAA and LBAA power barges are real property andare thus subject to real property tax. This is also the inevitableconclusion, considering that G.R. No. 165113 was dismissed forfailure to sufficiently show any reversible error. Tax assessments bytax examiners are presumed correct and made in good faith, with thetaxpayer having the burden of proving otherwise. Besides, factualfindings of administrative bodies, which have acquired expertise intheir field, are generally binding and conclusive upon the Court; wewill not assume to interfere with the sensible exercise of the

judgment of men especially trained in appraising property. Where thejudicial mind is left in doubt, it is a sound policy to leave theassessment undisturbed. We find no reason to depart from this rulein this case.In Consolidated Edison Company of New York, Inc., et al. v. The Cityof New York, et al., a power company brought an action to reviewproperty tax assessment. On the city's motion to dismiss, theSupreme Court of New York held that the barges on which weremounted gas turbine power plants designated to generate electricalpower, the fuel oil barges which supplied fuel oil to the power plantbarges, and the accessory equipment mounted on the barges weresubject to real property taxation.Moreover, Article 415 (9) of the New Civil Code provides that "docksand structures which, though floating, are intended by their nature

and object to remain at a fixed place on a river, lake, or coast" areconsidered immovable property. Thus, power barges are categorizedas immovable property by destination, being in the nature ofmachinery and other implements intended by the owner for anindustry 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 orwork.Petitioners maintain nevertheless that the power barges are exemptfrom real estate tax under Section 234 (c) of R.A. No. 7160 becausethey are actually, directly and exclusively used by petitioner NPC, agovernment- owned and controlled corporation engaged in thesupply, generation, and transmission of electric power.We affirm the findings of the LBAA and CBAA that the owner of thetaxable properties is petitioner FELS, which in fine, is the entity beingtaxed by the local government. As stipulated under Section 2.11,

Article 2 of the Agreement:"OWNERSHIP OF POWER BARGES. POLAR shall own the PowerBarges and all the fixtures, fittings, machinery and equipment on theSite used in connection with the Power Barges which have beensupplied by it at its own cost. POLAR shall operate, manage andmaintain the Power Barges for the purpose of converting Fuel ofNAPOCOR into electricity."It follows then that FELS cannot escape liability from the payment ofrealty 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 controlledcorporation; nevertheless, petitioner FELS still cannot find solace inthis provision because Section 5.5, Article 5 of the Agreementprovides:"OPERATION. POLAR undertakes that until the end of the LeasePeriod, subject to the supply of the necessary Fuel pursuant to

Article 6 and to the other provisions hereof, it will operate the PowerBarges to convert such Fuel into electricity in accordance with Part Aof Article 7.It is a basic rule that obligations arising from a contract have theforce of law between the parties. Not being contrary to law, morals,good customs, public order or public policy, the parties to thecontract are bound by its terms and conditions.Time and again, the Supreme Court has stated that taxation is therule and exemption is the exception. The law does not look with favor

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on tax exemptions and the entity that would seek to be thusprivileged must justify it by words too plain to be mistaken and toocategorical to be misinterpreted. Thus, applying the rule of strictconstruction of laws granting tax exemptions, and the rule thatdoubts 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 theAgreement, that it shall be responsible for the payment of all realestate taxes and assessments, does not justify the exemption. Theprivilege granted to petitioner NPC cannot be extended to FELS. Thecovenant is between FELS and NPC and does not bind a thirdperson not privy thereto, in this case, the Province of Batangas.It must be pointed out that the protracted and c ircuitous litigation hasseriously resulted in the local government's deprivation of revenues.The power to tax is an incident of sovereignty and is unlimited in itsmagnitude, acknowledging in its very nature no perimeter so thatsecurity against its abuse is to be found only in the responsibility ofthe legislature which imposes the tax on the constituency who are topay for it. The right of local government units to collect taxes duemust always be upheld to avoid severe tax erosion. Thisconsideration is consistent with the State policy to guarantee theautonomy of local governments and the objective of the LocalGovernment Code that they enjoy genuine and meaningful localautonomy to empower them to achieve their fullest development asself-reliant communities and make them effective partners in theattainment of national goals.In conclusion, we reiterate that the power to tax is the most potentinstrument to raise the needed revenues to finance and supportmyriad activities of the local government units for the delivery ofbasic services essential to the promotion of the general welfare andthe enhancement of peace, progress, and prosperity of the people.

Davao Sawmill Co. v. Castillo, G.R. No. 40411, 7 August 1935

FACTSDavao Sawmill Co., operated a sawmill. The land upon which thebusiness was conducted was leased from another person. On theland, Davao Sawmill erected a building which housed the machineryit used. Some of the machines were mounted and placed onfoundations of cement. In the contract of lease, Davo Sawmill agreed

to turn over free of charge all improvements and buildings erected byit on the premises with the exception of machineries, which shallremain with the Davao Sawmill. In an action brought by the DavaoLight and Power Co., judgment was rendered against DavaoSawmill. A writ of execution was issued and the machineries placed

on the sawmill were levied upon as personalty by the sheriff. DavaoLight and Power Co., proceeded to purchase the machinery andother properties auctioned by the sheriff.

ISSUEAre the machineries real or personal property?

HELDArt.415 of the New Civil Code provides that Real Property consistsof:(1) Lands, buildings, roads and constructions of all kinds adhered tothe soil;xxx(5) Machinery, receptacles, instruments or implements intended bythe owner pf the tenement for an industry ot works which may becarried on in a building or on a piece of land, and which tend directlyto meet the needs of the said industry or works;

Appellant should have registered its protest before or at the time ofthe sale of the property. While not conclusive, the appellant'scharacterization of the property as chattels is indicative of intentionand impresses upon the property the character determined by theparties.Machinery is naturally movable. However, machinery may beimmobilized by destination or purpose under the following conditions:General Rule: The machinery only becomes immobilized if placed ina plant by the owner of the property or plant.Immobilization cannot be made by a tenant, a usufructuary, or anyperson having only a temporary right.Exception: The tenant, usufructuary, or temporary possessor actedas agent of the owner of the premises; or he intended to permanentlygive away the property in favor of the owner.

As a rule, therefore, the machinery should be considered asPersonal Property, since it was not placed on the land by the ownerof the said land.

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Makati Leasing and Financial Corporation v. Wearever TextileMills, Inc., G.R. No. L-58469, 16 May 1983

FACTSWearever Textile Mills, Inc. executed a chattel mortgage contract in

favor of Makati Leasing and Finance Corporation covering certainraw materials and machinery. Upon default, Makati Leasing fi led apetition for judicial foreclosure of the properties mortgaged. Acting onMakati Leasing's application for replevin, the lower court issued awrit of seizure. Pursuant thereto, the sheriff enforcing the seizureorder seized the machinery subject matter of the mortgage. In apetition for certiorari and prohibition, the Court of Appeals orderedthe return of the machinery on the ground that the same can-not bethe subject of replevin because it is a real property pursuant to

Article415 of the new Civil Code, the same being attached to theground by means of bolts and the only way to remove it f romWearever textile's plant would be to drill out or destroy the concrete floor. When the motion for reconsideration of Makati Leasing wasdenied by the Court of Appeals, Makati Leasing elevated the matterto the Supreme Court.

ISSUEWhether the machinery in suit is real or personal property from thepoint of view of the parties.

HELDThere is no logical justification to exclude the rule out the presentcase from the application of the pronouncement in Tumalad vVicencio, 41 SCRA 143. If a house of strong materials, like what wasinvolved in the Tumalad case, may be considered as personalproperty for purposes of executing a chattel mortgage thereon aslong as the parties to the contract so agree and no innocent thirdparty will be prejudiced thereby, there is absolutely no reason why amachinery, which is movable in its nature and becomes immobilizedonly by destination or purpose, may not be likewise treated as such.This is really because one who has so agreed is estopped from thedenying the existence of the chattel mortgage.In rejecting petitioner's assertion on the applicability of the Tumaladdoctrine, the CA lays stress on the fact that the house involvedtherein was built on a land that did not belong to the owner of such

house. But the law makes no distinction with respect to theownership of the land on which the house is built and We should notlay down distinctions not contemplated by law.It must be pointed out that the characterization by the privaterespondent is indicative of the 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 isundeniable that the parties to a contract may, by agreement, treat aspersonal property that which by nature would be a real property aslong as no interest of third parties would be prejudiced thereby.The status of the subject matter as movable or immovable propertywas not raised as an issue before the lower court and the CA, exceptin a supplemental memorandum in support of the petition filed in theappellate court. There is no record showing that the mortgage hasbeen annulled, or that steps were taken to nullify the same. On theother hand, respondent has benefited from the said contract.Equity dictates that one should not benefit at the expense of another.

As such, private respondent could no longer be allowed to impugnthe efficacy of the chattel mortgage after it has benefited therefrom.Therefore, the questioned machinery should be considered aspersonal property.

Board of Assessment Appeals v. MERALCO, 10 SCRA 68 (1964)

FACTSOn November 15, 1955, the QC City Assessor declared theMERALCO's steel towers subject to real property tax. After the denialof MERALCO's petition to cancel these declarations, an appeal wastaken to the QC Board of Assessment Appeals, which requiredrespondent to pay P11,651.86 as real property tax on the said steeltowers for the years 1952 to 1956.MERALCO paid the amount under protest, and filed a petition forreview in the Court of Tax Appeals (CTA) which rendered a decisionordering the cancellation of the said tax declarations and therefunding to MERALCO by the QC City Treasurer of P11,651.86.

ISSUEAre the steel towers or poles of the MERALCO considered real orpersonal properties?

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HELDPole - long, comparatively slender, usually cylindrical piece of wood,timber, object of metal or the like; an upright standard to the top ofwhich 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 arecross-arms supporting 5 high-voltage transmission wires, and theirsole function is to support/carry such wires. The exemption grantedto poles as quoted from Part II, Par.9 of respondent's franchise isdetermined by the use to which such poles are dedicated.It is evident that the word "poles", as used in Act No. 484 andincorporated in the petitioner's franchise, should not be given arestrictive and narrow interpretation, as to defeat the very object forwhich the franchise was granted. The poles should be taken andunderstood as part of MERALCO's electric power system for theconveyance 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 tothe soil;xxx(3) Everything attached to an immovable in a fixed manner, in such away that it cannot be separated therefrom without breaking thematerial or deterioration of the object;xxx(5) Machinery, receptacles, instruments or implements intended bythe owner pf the tenement for an industry ot works which may becarried on in a building or on a piece of land, and which tend directlyto meet the needs of the said industry or works;Following these classifications, MERALCO's steel towers should beconsidered personal property. It should be noted that the steeltowers:(a) are neither buildings or constructions adhered to the soil;(b) are not attached to an immovable in a fixed manner - they can beseparated without breaking the material or deterioration of the object; are not machineries, receptacles or instruments, and even if theyare, they are not intended for an industry to be carried on in thepremises.

Machinery & Engineering Supplies, Inc. v. CA, No. L-7057, 29October 1954

Doctrine: The special civil action of replevin is applicable only topersonal property. When the machinery and equipment in question

appeared to be attached to the land, particularly to the concretefoundation of said premises, in a fixed manner, in such a way thatthe former could not be separated from the latter without breakingthe material or deterioration of the object, it had become animmovable property under Art. 415(3).

Facts: Herein petitioner filed a complaint for replevin in the CFI ofManila against Ipo Limestone Co., and Dr. Antonio Villarama, for therecovery of the machineries and equipments sold and delivered tosaid defendants at their factory in Barrio Bigti, Norzagaray, Bulacan.The respondent judge issued an order, commanding ProvincialSheriff of Bulacan to seize and take immediate possession of theproperties specified in the order. Two deputy sheriffs of Bulacan,Ramon S. Roco(president of Machinery), and a crew of technicalmen and laborers proceeded to Bigti, for the purpose of carrying thecourt's order into effect. Leonardo Contreras, Manager of therespondent Company, and Pedro Torres, in charge thereof, met thedeputy sheriffs, and Contreras handed to them a letter addressed to

Atty. Palad (ex-officio Provincial Sheriff of Bulacan), protestingagainst the seizure of the properties in question, on the ground thatthey are not personal properties.Later on, they went to the factory. Roco's attention was called to thefact that the equipments could not possibly be dismantled withoutcausing damages or injuries to the wooden frames attached to them.But Roco insisted in dismantling the equipments on his ownresponsibility, 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 theproperties seized by the deputy sheriffs. On the same day, the trialcourt issued an order, directing the Provincial Sheriff of Bulacan toreturn the machineries to the place where they were installed. Thedeputy sheriffs returned the properties seized, by depositing themalong the road, near the quarry, of the defendant Company, at Bigti,without the benefit of inventory and without re-installing them in their

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former position and replacing the destroyed posts, which renderedtheir use impracticable.The trial court ordered Roco to furnish the Provincial Sheriff with thenecessary funds, technical men, laborers, equipments and materials.Roco raised the issue to the CA; a writ of preliminary injunction wasissued but the CA subsequently dismissed for lack of merit. A motionfor reconsideration was denied.

Issue: Whether or not the machineries and equipments werepersonal properties and, therefore, could be seized by replevin.

Held: No. The special civil action known as replevin, governed by theRules of Court, is applicable only to "personal property." When thesheriff repaired to the premises of respondent company, themachinery and equipment in question appeared to be attached to theland, particularly to the concrete foundation of said premises, in afixed manner, in such a way that the former could not be separatedfrom the latter "without breaking the material or deterioration of theobject." Hence, in order to remove said outfit, it became necessary,not only to unbolt the same, but, also, to cut some of its woodensupports. Moreover, said machinery and equipment were "intendedby the owner of the tenement for an industry" carried on saidimmovable and tended "directly to meet the needs of the saidindustry." For these reasons, they were already immovable propertypursuant to paragraphs 3 and 5 of Article 415 of the Civil Code.Mr. Ramon Roco, insisted "on the dismantling of at his ownresponsibility," stating that, precisely, "that is the reason why plaintiffposted a bond." In this manner, petitioner clearly assumed thecorresponding risks. It is well settled that, when restitution of whathas been ordered, the goods in question shall be returned insubstantially the same condition as when taken. It follows thatpetitioner must also do everything necessary to the reinstallation ofsaid property in conformity with its original condition.

Punsalan, Jr. v. Vda. De Lacsamana, 121 SCRA 331

FACTS:Punsalan was the owner of a piece of land, which he mortgaged infavor of PNB. Due to his failure to pay, the mortgage was foreclosed

and the land was sold in a public auction to which PNB was thehighest bidder.

On a relevant date, while Punsalan was still the possessor of theland, it secured a permit for the construction of a warehouse.

A deed of sale was executed between PNB and Punsalan. Thiscontract was amended to include the warehouse and theimprovement thereon. By virtue of these instruments, respondentLacsamana secured title over the property in her name.

Petitioner then sought for the annulment of the deed of sale. Amonghis allegations was that the bank did not own the building and thus, itshould not be included in the said deed.

Petitioner's complaint was dismissed for improper venue. The trialcourt held that the action being filed in actuality by petitioner is a realaction involving his right over a real property.

HELD:Warehouse claimed to be owned by petitioner is an immovable orreal property. Buildings are always immovable under the Code. Abuilding treated separately from the land on which it is stood isimmovable property and the mere fact that the parties to a contractseem to have dealt with itseparate and apart from the land on which it stood in no wisechanged its character as immovable property.

Prudential Bank v. Panis, 153 SCRA 390

FACTS:Spouses Magcale secured a loan from Prudential Bank. To securepayment, they executed a real estate mortgage over a residentialbuilding. The mortgage included also the right to occupy the lot andthe information about the sales patent applied for by the spouses forthe lot to which the building stood. After securing the first loan, thespouses secured another from the same bank. To secure payment,another real estate mortgage was executed over the sameproperties.

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The Secretary of Agriculture then issued a Miscellaneous SalesPatent over the land which was later on mortgaged to the bank.

The spouses then failed to pay for the loan and the REM wasextrajudicially foreclosed and sold in public auction despiteopposition from the spouses. The respondent court held that theREM was null and void.

HELD:A real estate mortgage can be constituted on the building erected onthe land belonging to another.

The inclusion of building distinct and separate from the land in theCivil Code can only mean that the building itself is an immovableproperty.

While it is true that a mortgage of land necessarily includes in theabsence of stipulation of the improvements thereon, buildings, still abuilding in itself may be mortgaged by itself apart from the land onwhich it is built. Such a mortgage would still be considered as a REMfor the building wouldstill be considered as immovable property even if dealt withseparately and apart from the land.

The original mortgage on the building and right to occupancy of theland was executed before the issuance of the sales patent andbefore the government was divested of title to the land. Under theforegoing, it is evident that the mortgage executed by privaterespondent on his ownbuilding was a valid mortgage.

As to the second mortgage, it was done after the sales patent wasissued and thus prohibits pertinent provisions of the Public Land Act.

Tumalad v. Vicencio, 41 SCRA 143

FACTS:Vicencio and Simeon executed a chattel mortgage in favor ofplaintiffs Tumalad over their house, which was being rented by

Madrigal and company. This was executed to guarantee a loan,payable in one year with a 12% per annum interest.

The mortgage was extrajudicially foreclosed upon failure to pay theloan. The house was sold at a public auction and the plaintiffs werethe highest bidder. A corresponding certificate of sale was issued.Thereafter, the plaintiffs filed an action for ejectment against thedefendants, praying that the latter vacate the house as they were theproper owners.

HELD:Certain deviations have been allowed from the general doctrine thatbuildings are immovable property such as when through stipulation,parties may agree to treat as personal property those by their naturewould be real property. This is partly based on the principle ofestoppel wherein theprinciple is predicated on statements by the owner declaring hishouse as chattel, a conduct that may conceivably stop him fromsubsequently claiming otherwise.

In the case at bar, though there be no specific statement referring tothe subject house as personal property, yet by ceding, selling ortransferring a property through chattel mortgage could only havemeant that defendant conveys the house as chattel, or at least,intended to treat the same assuch, so that they should not now be allowed to make aninconsistent stand by claiming otherwise.

Serg's Products and Goquiola v. PCI Leasing and Finance, 338SCRA 499

FACTS:PCI filed a case for collection of a sum of money as well as a writ ofreplevin for the seizure of machineries, subject of a chattel mortgageexecuted by petitioner in favor of PCI.

Machineries of petitioner were seized and petitioner filed a motion forspecial protective order. It asserts that the machineries were realproperty and could not be subject of a chattel mortgage.

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HELD:The machineries in question have become immobilized bydestination because they are essential and principal elements in theindustry, and thus have become immovable in nature.

Nonetheless, they are still proper subjects for a chattel mortgage.

Contracting parties may validly stipulate that a real property beconsidered as personal. After agreement, they are consequentlyestopped from claiming otherwise.

Manarang and Manarang v. Ofilada and Esteban, 99 SCRA 108

FACTS:Manarang secured a loan from Esteban guaranteed by a chattelmortgage over a house of mixed materials. Due to failure to pay, thechattel mortgage was foreclosed. Before the sale of the property,Manarang tried to pay for the property but the sheriff refused toaccept tender unless thereis payment for the publication of the notice of sale in thenewspapers.

This prompted Manarang to bring this suit to compel the sheriff toaccept payment. He averred that the publication was unnecessary asthe house should be considered as personal property per agreementin the chattel mortgage, and the publication for notice of sale isunnecessary.

HELD:

There is no question that a building of mixed materials may be asubject of chattel mortgage, in which case it is considered asbetween the parties as personal property.

The mere fact that a house was the subject of chattel mortgage andwas considered as personal property by the parties doesn't make thesaid house personal property for purposes of the notice to be givenfor its sale in public auction. It is real property within the purview ofRule 39, Section

16 of the Rules of Court as it has become a permanent fixture on theland, which is real property.

Navarro v. Pineda, 9 SCRA 631

FACTS:Pineda and his mother executed real estate and chattel mortgages infavor of Navarro, to secure a loan they got f rom the latter. The REMcovered a parcel of land owned by the mother while the chattelmortgage covered a residential house. Due to the failure to pay theloan, they asked forextensions to pay for the loan. On the second extension, Pinedaexecuted a PROMISE wherein in case of default in payment, hewouldn't ask for any additional extension and there would be noneed for any formal demand. In spite of this, they still failed to pay.Navarro then filed for the foreclosure of the mortgages. The courtdecided in his favor.

HELD:Where a house stands on a rented land belonging to another person,it may be the subject matter of a chattel mortgage as personalproperty if so stipulated in the document of mortgage, and in anaction by the mortgagee for the foreclosure, the validity of the chattelmortgage cannot be assailedby one of the parties to the contract of mortgage.

Furthermore, although in some instances, a house of mixedmaterials has been considered as a chattel between the parties andthat the validity of the contract between them, has been recognized,it has been a constant criterion that with respect to third persons,

who are not parties to thecontract, and specially in execution proceedings, the house isconsidered as immovable property.

Manila Electric Co., v. Central Board of Assessment Appeals,114 SCRA 273

FACTS:Petitioner owns two oil storage tanks, made of steel plates wieldedand assembled on the spot. Their bottoms rest on a foundation

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consisted of compacted earth, sand pad as immediate layer, andasphalt stratum as top layer. The tanks merely sit on its foundation.

The municipal treasurer of Batangas made an assessment for realtytax on the two tanks, based on the report of the Board of Assessors.MERALCO wished to oppose this assessment as they averred thatthe tanks are not real properties.

HELD:While the two storage tanks are not embodied in the land, they maynevertheless be considered as improvements in the land, enhancingits utility and rendering it useful to the oil industry.

For purposes of taxation, the term real property may include things,which should generally be considered as personal property. it isfamiliar phenomenon to see things classified as real property forpurposes of taxation which on general principle may be consideredas personalproperty.

Caltex Philippines v. Central Board of Assessment Appeals, 114SCRA 296

FACTS:The City Assessor characterized the items in gas stations ofpetitioner as taxable realty. These items included underground tanks,elevated tank, elevated water tanks, water tanks, gasoline pumps,computing pumps, etc. These items are not owned by the lessor ofthe land wherein theequipment are installed. Upon expiration of the lease agreement, the

equipment should be returned in good condition.

HELD:The equipment and machinery as appurtenances to the gas stationbuilding or shed owned by Caltex and which fixtures are necessaryto the operation of the gas station, for without them the gas stationwould be useless, and which have been attached and fixedpermanently to the gas station site or embedded therein, are taxableimprovements and machinery within the meaning of the AssessmentLaw and the Real Property Tax Code.

Phil. Refining Co., Inc. v. Jarque, G.R. No. 41506, 25 March 1953

FACTS:Plaintiff Philippine Refining Co. and defendant Jarque executed threemortgages on the motor vessels Pandan and Zargazo. Thedocuments were recorded as transfer and encumbrances of thevessels for the port of Cebu and each was denominated a chattelmortgage.The first two mortgages did not have an affidavit of good faith. Afourth mortgage was executed by Jarque and Ramon Aboitiz overmotorship Zaragoza and was entered in the Chattel MortgageRegistry on May 12, 1932, within the period of 30 days prior to theforeclosure/institution of the insolvency proceedings.Jose Curaminas filed with the CFI of Cebu a petition praying thatFrancisco Jarque be declared an insolvent debtor. This was grantedand Jarque's properties were then assigned to Curaminas.

A problem arose when Judge Jose Hontiveros declined to order theforeclosure of the mortgages, and instead, ruled that they weredefective because they did not have affidavits of good faith.

ISSUE:Whether or not the mortgages of the vessels are governed by theChattel Mortgage LawWhether or not an affidavit of good faith is needed to enforceachattel mortgage on a vessel

RULING:Yes. "Personal property" includes vessels. They are subject to theprovisions of the Chattel Mortgage Law. The Chattel Mortgage Lawsays that a good chattel mortgage includes an affidavit of good faith.

The absence of such affidavit makes mortgage unenforceableagainst creditors and subsequent encumbrances. The judge wascorrect.

Note: A mortgage on a vessel is generally like other chattelmortgages. The only difference between a chattel mortgage of avessel and a chattel mortgage of other personalty is that the firstmust be noted in the registry of the register of deeds.

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Rubiso v. Rivera, 37 Phil 72 (1917)

FACTS:Rubiso filed a complaint against Rivera for the recovery of a pilotboat. He alleged that he is the rightful owner of a pilot boat, whichwas stranded and recovered by Rivera. The latter refused to returnthe said boat as he alleged too that he was the owner thereof. It wasknown that the originalowners of the boat had secretly sold the pilot boat to Rivera on anearlier date than the sale in a public auction to Rubiso. Nonetheless,material is the fact that the entry into the customs registry of the saleof the boat was later than the recording of the sale to Rubiso.

HELD:The requisite of registration in the registry, of the purchase of thevessel, is necessary and indispensable in order that the purchaser'srights may be maintained against a third person. Such registration isrequired both by the Code of Commerce and Act 1900. It isundeniable, ergo, that Rivera doesn't have a better right than Rubisoover the pilot boat.

Ships and vessels, whether moved by steam or by sail, partake, to acertain extent of the nature and conditions of real property, onaccount of their value and importance in world commerce; and forthis, the provisions of the Code of Commerce are nearly identicalwith Article 1473 of the CC

U.S. v. Carlos, 21 Phil. 553 (1912)

This is an appeal from a judgment of the Court of First Instance ofNueva Ecija, finding the defendants Donato Inductivo, LucasLizarondo, and Francisco Chico guilty of a violation of Act No. 1757,the Gambling Law, and sentencing each of them to three months'imprisonment and to pay a one-third part of the costs.

Appellants rely on four assignments of error. Assignments 1, 3, and4 require but little consideration. Collectors of jueteng can beconvicted of a violation of the Gambling Law if the proof is sufficient.(U. S. vs. De la Cruz, R. G. No.13808.)1 And, in this instance,waiving for the time being any other debatable question, the

defendants have been proved guilty of an infraction of the GamblingLaw.

Assignment of error No. 2, which requires more seriousconsideration, is as follows:II.The admission without objection of a coaccused or of a person thatought to be accused with the defendants to testify as governmentwitness does not free his testimony given at the trial from therequisites set forth in Act No. 2709, and said testimony was notsufficient to convict the appellants Donato Inductivo and FranciscoChico and the court below erred in not so holding.For a proper understanding of the question thus presented, it isnecessary to include a sketch of the incidents pertaining to this case.The criminal complaint filed in the justice of the peace court of San

Antonio, Nueva Ecija, was laid against four persons, MaximoObdulio, Lucas Lizarondo, Donato Inductivo, and Francisco Chico.Subsequently, a motion was made in the justice of the peace courtby the municipal president asking that the complaint against MaximoObdulio be dismissed "para utilizarle como testigo de cargo" (inorder that he might be used as a government witness). This motionwas granted by the justice of the peace. Later, an information wasfiled in the Court of First Instance against three persons, DonatoInductivo, Lucas Lizarondo, and Francisco Chico. The fourth person,Maximo Obdulio, was named as a witness for the prosecution. Thecause came to trial before the Honorable Vicente Nepomuceno,without any motion or demurrer to the complaint having beenpresented. Claro Soriano, the chief of police, was first called as awitness for the prosecution. He testified relative to the arrest of thethree defendants and Maximo Obdulio, and identified them ascollectors of the prohibited game of jueteng. Maximo Obdulio, who

was the second witness for the prosecution, was permitted to beginhis testimony without objection of any sort being raised by counselfor the defense. It was only along in the cross-examination that thefollowing appears:Q. Is it not true that the chief of police promised you your release incase you testify as government witness in this cause? -

A. No, sir.Q. And you are not now accused; how do you explain that? -

A. Because the judge told me I would be a government witness.Q. What judge? -

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A. The justice of the peace of San Antonio.Q. And what else did the justice of the peace tell you, after telling youthat you would be used as a government witness? -

A. Nothing more than that, that they will use me as witness of thechief.Q. And by reason of the fact that you are now a witness, you are nolonger of the accused?FISCAL. Objection for being incompetent and immaterial; it is aconclusion.JUDGE. Objection sustained.YAPCHIONGCO. That is all.Even after it was thus brought to the notice of counsel and of thecourt that Maximo Obdulio had been dismissed as an accused inorder to be used as a government witness, no formal objection wasraised nor was any adverse action taken by the trial court. With thisthe statement of the case and of the facts, judgment was renderedagainst the three defendants Inductivo, Lizarondo, and Chico. It isonly on appeal that counsel for defendants first argue against thecompetency of Maximo Obdulio as a witness because of the fact thatthe provisions of Act No. 2709 were not followed.There are two very apparent reasons which disclose why such acontention cannot prosper at this time. In the first place, it is analmost universal rule which has found favor in numerous cases in thePhilippines that, aside from matters jurisdictional, which can alwaysbe raised for the first time on appeal, and aside from a few otherexceptions which need not be notice, questions not raised in the trialcourt will' not be considered on appeal. an appellate court, strictlyspeaking, has no question of law to review if the trial court has madeno ruling. This incontrovertible proposition would be sufficient todispose of appellants' second assignment of error. There is,

however, another method of approach leading to the same result. Itis this -The motion intended to secure Maximo Obdulio as a governmentwitness was, it will be recalled, filed in the justice of the peace court;it was not filed in the court of first instance where the trial was had.The justice of the peace court was, under these circumstances, not a"competent court" within the meaning of Act No. 2709. Concedingthen that the provisions of this Act were not followed, it is,nevertheless, not fatal, because the clear and convincing testimonyof the chief of police is sufficient to warrant the conviction of the three

defendants, not taking into consideration the testimony of MaximoObdulio at all. Parenthetically, it may be remarked that since this isso, and since the record discloses that Maximo Obdulio was equallyguilty with the other three defendants, he can now be prosecuted forthe same offense. It is a situation somewhat akin to proceedings in acourt having no jurisdiction, which is no bar to subsequentprosecution in a court which has jurisdiction of the offense. (U. S. vs.Jayme [1913], 24 Phil., 90; U. S. vs. Rubin [1914], 28 Phil., 631.)What has been said shows that any further discussion of Act No.2709 would be beside the point.Judgment is affirmed, with a one-third part of the costs of thisinstance against each appellant. The attention of the provincial fiscalof Nueva Ecija is brought to the advisability of instituting criminalproceedings against Maximo Obdulio for a violation of Act No. 1757.So ordered.

Piansay v. David, 12 SCRA 227

As it may be true that the parties who agreed to attach the house in achattel mortgage may be bound thereto under the doctrine ofestoppel, the same does not bind third persons.

FACTS:Conrado S. David received a loan of P3,000 with interest at 12% perannum from Claudia B. Vda. de Uy Kim, one of the plaintiffs, and tosecure the payment of the same, Conrado S. David executed achattel mortgage on a house situated at 1259 Sande Street, Tondo,Manila. The mortgage was foreclosed and was sold to Kim to satisfythe debt. 2 years later after the foreclosure, the house was sold byKim to Marcos Magubat. The latter then filed to collect the loan from

David and to declare the sale issued by Kim in favour of Piansay nulland void. (It appears that Kim sold the house to two people, namelyPiansay and Magubat) The trial court approved of the collection ofthe loan from David but dismissed the complaint regarding thequestioned sale between Kim and Piansay, declaring the latter asrightful owner of the house and awarding damages to him. CAreversed the decision making David the rightful owner and ing himand his co-defendant, Mangubat, to levy the house. Now Petitionersare trying to release the said property from the aforementioned levyby claiming that Piansay is the rightful owner of the house.

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ISSUE:Whether or not the sale between Kim and Piansay was valid?

RULING:Since it is a rule in our law that buildings and constructions areregarded as mere accesories to the land (following the Romanmaxim omne quod solo inaedificatur solo credit) it is logical that saidaccessories should partaked of the nature of the principal thing,which is the land forming, as they do, but a single object (res) with itin contemplation of law. A mortgage creditor who purchases realproperties at an extra-judicial foreclosure sale thereof by virtue of achattel mortgage constituted in his favor, which mortgage has beendeclared null and void with respect to said real properties acquiresno right thereto by virtue of said sale Thus, Mrs. Uy Kim had no rightto foreclose the alleged chattel mortgage constituted in her favor,because it was in reality a mere contract of an unsecured loan. Itfollows that the Sheriff was not authorized to sell the house as aresult of the foreclosure of such chattel mortgage. And as Mrs. UyKim could not have acquired the house when the Sheriff sold it atpublic auction, she could not, in the same token, it validly to SalvadorPiansay. Conceding that the contract of sale between Mrs. Uy Kimand Salvador Piansay was of no effect, we cannot nevertheless set itaside upon instance of Mangubat because, as the court belowopined, he is not a party thereto nor has he any interest in thesubject matter therein, as it was never sold or mortgaged to him Atany rate, regardless of the validity of a contract constituting a chattelmortgage on a house, as between the parties to said contract, thesame cannot and does not bind third persons, who are not parties tothe aforementioned contract or their privies. As a consequence, thesale of the house in question in the proceedings for the extrajudicial

foreclosure of said chattel mortgage, is null and void insofar asdefendant Mangubat is concerned, and did not confer upon Mrs. UyKim, as buyer in said sale, any dominical right in and to said house,so that she could not have transmitted to her assignee, plaintiffPiansay any such right as against defendant Mangubat. In shortplaintiffs have no cause of action against the defendants herein

U.S. v. Tambunting, 41 Phil 364

FACTS:The Manila Gas Company installed equipment for the transmissionof gas in a house at Evangelista. After the original subscriber left, theapparatus was sealed and the services discontinued.Later Mr Tambunting moved in. He was a cheapskate and splicedthe tubing to leech free gas for household use. Alas, the crime wasdiscovered by the gas company. The prosecutor filed charges andhailed Mr. Tambunting to court

ISSUE:Whether or not gas can be the subject of larceny.

HELD:Yes. Gas is a substance which lends itself to felonious appropriation.It is a valuable merchandise that can be bought and sold like otherpersonal property, susceptible of being siphoned from a larger massand transported from place to place. Articles 517 and 518 setsparameters for the theft of gas and it is a valid ordinance

Involuntary Insolvency of Strochecker v. Ramirez 44 Phil. 933

FACTS:The half-interest in the business (Antigua Botica Ramirez) wasmortgaged with Fidelity & Surety Co. on 10 March 1919, andregistered in due time in the registry of property, while anothermortgage was made with Ildefonso Ramirez on 22 September 1919and registered also in the registry. Raised in the lower court, the trialcourt declared the mortgage of Fidelity & Surety Co. entitled to

preference over that of Ildefonso Ramirez and another mortgage byConcepcion Ayala. Ayala did not appeal, but Ramirez did.

ISSUE:Whether or not half-interest over a business is a movable property

RULING: Yes.1. Interest in business may be subject of mortgage With regard to thenature of the property mortgaged which is one-half interest in thebusiness, such interest is a personal property capable of

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appropriation and not included in the enumeration of real propertiesin articles 335 of the Civil Code, and may be the subject of mortgage.

All personal property may be mortgaged. (Sec. 7, Act 1508.)

2. Description of mortgage property sufficient The descriptioncontained in the document is sufficient. The law (sec. 7, Act 1508)requires only a description of the mortgaged property shall be suchas to enable the parties to the mortgage, or any other person, afterreasonable inquiry and investigation, to identify the same. In thecase at bar, "his half interest in the drug business known as AntiguaBotica Ramirez, located at Calle Real Nos. 123 and 125, District ofIntramuros, Manila Philippine Islands" is sufficient.3. Article 1922 (1-3) of the Civil Code applicable only to mortgageproperty in possession Numbers 1, 2, and 3 of the article 1922 of theCivil Code are not applicable as neither the debtor, nor himself, is inpossession of the property mortgaged, which is, and since theregistration of the mortgage has been, legally in possession of thesurety company4. Stipulation about personal property not a mortgage upon property- In no way can the mortgage executed be given effect as of the dateof the sale of the store in question; as there was a mere stipulationabout personal security during said date, but not a mortgage uponproperty, and much less upon the property in question.

Laurel v. Abrogar, GR 155076, Jan. 13, 2009

FACTSLaurel was charged with Theft under Art. 308 of the RPC forallegedly taking, stealing, and using PLDT's international longdistance calls by conducting International Simple Resale (ISR) - "a

method of outing and completing international long-distance callsusing lines, cables, antennae, and/or air wave frequency whichconnect directly to the local/domestic exchange facilities of thecountry where the call is destined". PLDT alleged that this servicewas stolen from them using their own equipment and causeddamage to them amounting to P20,370,651.92.PLDT alleges that the international calls and business of providingtelecommunication or telephone service are personal propertiescapable of appropriation and can be objects of theft.

ISSUEWON Laurel's act constitutes Theft

HELDArt.308, RPC: Theft is committed by any person who, with intent togain but without violence against, or intimidation of persons nor forceupon things, shall take personal property of another without thelatter's consent.Elements of Theft under Art.308, RPC:There be taking of Personal Property;Said Personal Property belongs to another;Taking be done with Intent to Gain;Taking be done without the owner's consent;No violence against, or intimidation of, persons or force upon thingsPersonal Property - anything susceptible of appropriation and notincluded in Real PropertyThus, the term "personal property" as used in Art.308, RPC shouldbe interpreted in the context of the Civil Code's definition of real andpersonal property. Consequently, any personal property, tangible orintangible, corporeal or incorporeal, capable of appropriation may bethe subject of theft (*US v Carlos; US v Tambunting; US v Genato*),so long as the same is not included in the enumeration of RealProperties under the Civil Code.The only requirement for personal property to capable of theft, is thatit be subject to appropriation.

Art. 416 (3) of the Civil Code deems "Forces of Nature" which arebrought under the control of science, as Personal Property.The appropriation of forces of nature which are brought under controlby science can be achieved by tampering with any apparatus usedfor generating or measuring such forces of nature, wrongfully

redirecting such forces of nature from such apparatus, or using anydevice to fraudulently obtain such forces of nature.In the instant case, the act of conducting ISR operations by illegallyconnecting various equipment or apparatus to PLDT's telephonesystem, through which petitioner is able to resell or re-routeinternational long distance calls using PLDT's facilities constituteSubtraction.Moreover, interest in business should be classified as personalproperty since it is capable of appropriation, and not included in theenumeration of real properties.

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Therefore, the business of providing telecommunication or telephoneservice are personal property which can be the object of theft under

Art. 308 of the RPC. The act of engaging in ISR is an act of"subtraction" penalized under the said article.While international long-distance calls take the form of electricalenergy and may be considered as personal property, the said long-distance calls do not belong to PLDT since it could not have acquiredownership over such calls. PLDT merely encodes, augments,enhances, decodes and transmits said calls using its complexcommunications infrastructure and facilities.Since PLDT does not own the said telephone calls, then it could notvalidly claim that such telephone calls were taken without itsconsent.What constitutes Theft is the use of the PLDT's communicationsfacilities without PLDT's consent. The theft lies in the unlawful takingof the telephone services & businesses.The Amended Information should be amended to show that theproperty subject of the theft were services and business of the

offended party.