CASES IN PROPERTY1. Mindanao Bus Co. vs The City Assessor and the Treasurer L-17870, 29 Sept 19622. Navarro vs. Pineda 9 SCRA 6313. MERALCO vs Board of Assessment Appeals 114 SCRA 2734. Sergs Products Inc. vs PCI Leasing and Finance Inc. 338 SCRA 4995. Leung Yee vs. Strong Machineries 37 Phil. 6446. Board of Assessment Appeals vs. MERALCO 10 SCRA 687. Toledo-Banaga vs. CA 302 SCRA 3318. Davao Saw Mill Co vs. Castillo 51 SCRA 7099. Peoples Bank and Trust Co. vs. Dahican Lumber Co. L-15700 16 May 1967

Mindanao Bus Co. vs The City Assessor and the Treasurer L-17870, 29 Sept 1962Republic of the PhilippinesSUPREME COURTManilaEN BANCG.R. No. L-17870 September 29, 1962MINDANAO BUS COMPANY, petitioner, vs.THE CITY ASSESSOR & TREASURER and the BOARD OF TAX APPEALS of Cagayan de Oro City, respondents.Binamira, Barria and Irabagon for petitioner.Vicente E. Sabellina for respondents.

LABRADOR, J.: This is a petition for the review of the decision of the Court of Tax Appeals in C.T.A. Case No. 710 holding that the petitioner Mindanao Bus Company is liable to the payment of the realty tax on its maintenance and repair equipment hereunder referred to. Respondent City Assessor of Cagayan de Oro City assessed at P4,400 petitioner's above-mentioned equipment. Petitioner appealed the assessment to the respondent Board of Tax Appeals on the ground that the same are not realty. The Board of Tax Appeals of the City sustained the city assessor, so petitioner herein filed with the Court of Tax Appeals a petition for the review of the assessment. In the Court of Tax Appeals the parties submitted the following stipulation of facts: Petitioner and respondents, thru their respective counsels agreed to the following stipulation of facts:1. That petitioner is a public utility solely engaged in transporting passengers and cargoes by motor trucks, over its authorized lines in the Island of Mindanao, collecting rates approved by the Public Service Commission;2. That petitioner has its main office and shop at Cagayan de Oro City. It maintains Branch Offices and/or stations at Iligan City, Lanao; Pagadian, Zamboanga del Sur; Davao City and Kibawe, Bukidnon Province;3. That the machineries sought to be assessed by the respondent as real properties are the following:(a) Hobart Electric Welder Machine, appearing in the attached photograph, marked Annex "A";(b) Storm Boring Machine, appearing in the attached photograph, marked Annex "B";(c) Lathe machine with motor, appearing in the attached photograph, marked Annex "C";(d) Black and Decker Grinder, appearing in the attached photograph, marked Annex "D";(e) PEMCO Hydraulic Press, appearing in the attached photograph, marked Annex "E";(f) Battery charger (Tungar charge machine) appearing in the attached photograph, marked Annex "F"; and(g) D-Engine Waukesha-M-Fuel, appearing in the attached photograph, marked Annex "G".4. That these machineries are sitting on cement or wooden platforms as may be seen in the attached photographs which form part of this agreed stipulation of facts;5. That petitioner is the owner of the land where it maintains and operates a garage for its TPU motor trucks; a repair shop; blacksmith and carpentry shops, and with these machineries which are placed therein, its TPU trucks are made; body constructed; and same are repaired in a condition to be serviceable in the TPU land transportation business it operates;6. That these machineries have never been or were never used as industrial equipments to produce finished products for sale, nor to repair machineries, parts and the like offered to the general public indiscriminately for business or commercial purposes for which petitioner has never engaged in, to date.1awphl.nt The Court of Tax Appeals having sustained the respondent city assessor's ruling, and having denied a motion for reconsideration, petitioner brought the case to this Court assigning the following errors:1. The Honorable Court of Tax Appeals erred in upholding respondents' contention that the questioned assessments are valid; and that said tools, equipments or machineries are immovable taxable real properties.2. The Tax Court erred in its interpretation of paragraph 5 of Article 415 of the New Civil Code, and holding that pursuant thereto the movable equipments are taxable realties, by reason of their being intended or destined for use in an industry.3. The Court of Tax Appeals erred in denying petitioner's contention that the respondent City Assessor's power to assess and levy real estate taxes on machineries is further restricted by section 31, paragraph (c) of Republic Act No. 521; and4. The Tax Court erred in denying petitioner's motion for reconsideration. Respondents contend that said equipments, tho movable, are immobilized by destination, in accordance with paragraph 5 of Article 415 of the New Civil Code which provides: Art. 415. The following are immovable properties:x x x x x x x x x(5) Machinery, receptacles, instruments or implements intended by the owner of the tenement for an industry or works which may be carried on in a building or on a piece of land, and which tend directly to meet the needs of the said industry or works. (Emphasis ours.) Note that the stipulation expressly states that the equipment are placed on wooden or cement platforms. They can be moved around and about in petitioner's repair shop. In the case of B. H. Berkenkotter vs. Cu Unjieng, 61 Phil. 663, the Supreme Court said: Article 344 (Now Art. 415), paragraph (5) of the Civil Code, gives the character of real property to "machinery, liquid containers, instruments or implements intended by the owner of any building or land for use in connection with any industry or trade being carried on therein and which are expressly adapted to meet the requirements of such trade or industry." If the installation of the machinery and equipment in question in the central of the Mabalacat Sugar Co., Inc., in lieu of the other of less capacity existing therein, for its sugar and industry, converted them into real property by reason of their purpose, it cannot be said that their incorporation therewith was not permanent in character because, as essential and principle elements of a sugar central, without them the sugar central would be unable to function or carry on the industrial purpose for which it was established. Inasmuch as the central is permanent in character, the necessary machinery and equipment installed for carrying on the sugar industry for which it has been established must necessarily be permanent. (Emphasis ours.) So that movable equipments to be immobilized in contemplation of the law must first be "essential and principal elements" of an industry or works without which such industry or works would be "unable to function or carry on the industrial purpose for which it was established." We may here distinguish, therefore, those movable which become immobilized by destination because they are essential and principal elements in the industry for those which may not be so considered immobilized because they are merely incidental, not essential and principal. Thus, cash registers, typewriters, etc., usually found and used in hotels, restaurants, theaters, etc. are merely incidentals and are not and should not be considered immobilized by destination, for these businesses can continue or carry on their functions without these equity comments. Airline companies use forklifts, jeep-wagons, pressure pumps, IBM machines, etc. which are incidentals, not essentials, and thus retain their movable nature. On the other hand, machineries of breweries used in the manufacture of liquor and soft drinks, though movable in nature, are immobilized because they are essential to said industries; but the delivery trucks and adding machines which they usually own and use and are found within their industrial compounds are merely incidental and retain their movable nature. Similarly, the tools and equipments in question in this instant case are, by their nature, not essential and principle municipal elements of petitioner's business of transporting passengers and cargoes by motor trucks. They are merely incidentals acquired as movables and used only for expediency to facilitate and/or improve its service. Even without such tools and equipments, its business may be carried on, as petitioner has carried on, without such equipments, before the war. The transportation business could be carried on without the repair or service shop if its rolling equipment is repaired or serviced in another shop belonging to another. The law that governs the determination of the question at issue is as follows: Art. 415. The following are immovable property:x x x x x x x x x(5) Machinery, receptacles, instruments or implements intended by the owner of the tenement for an industry or works which may be carried on in a building or on a piece of land, and which tend directly to meet the needs of the said industry or works; (Civil Code of the Phil.) Aside from the element of essentiality the above-quoted provision also requires that the industry or works be carried on in a building or on a piece of land. Thus in the case of Berkenkotter vs. Cu Unjieng, supra, the "machinery, liquid containers, and instruments or implements" are found in a building constructed on the land. A sawmill would also be installed in a building on land more or less permanently, and the sawing is conducted in the land or building. But in the case at bar the equipments in question are destined only to repair or service the transportation business, which is not carried on in a building or permanently on a piece of land, as demanded by the law. Said equipments may not, therefore, be deemed real property. Resuming what we have set forth above, we hold that the equipments in question are not absolutely essential to the petitioner's transportation business, and petitioner's business is not carried on in a building, tenement or on a specified land, so said equipment may not be considered real estate within the meaning of Article 415 (c) of the Civil Code. WHEREFORE, the decision subject of the petition for review is hereby set aside and the equipment in question declared not subject to assessment as real estate for the purposes of the real estate tax. Without costs. So ordered.

Meralco vs CBAA114 SCRA 273

Facts:Pursuant to a pipeline concession issued under the Petroleum Act of 1949, Republic Act No. 387, Meralco Securities installed from Batangas to Manila a pipeline system consisting of cylindrical steel pipes joined together and buried not less than one meter below the surface along the shoulder of the public highway. The pipes are embedded in the soil while the valves are welded to the pipes so as to make the pipeline system one single piece of property from end to end. Pursuant to the Assessment Law,Commonwealth Act No. 470, the provincial assessor of Laguna treated the pipeline as real property and issued Tax Declarations.

Issues:

Whether or not the Meralco Securities Pipeline System in Laguna is a subject to a realty tax?

Held:The Court ordered that CBAA did not with grave abuse and discretion and acted within its jurisdiction in sustaining the holding of the provincial assessor that Meralco Securities Pipeline System in Laguna is subject to a realty tax for the following reasons that the pipes are machinery or improvements and regarded as realty because they are constructions adhered to the soil. It is attached to the land in such a way that it cannot be separated therefrom without dismantling the steel pipes which are welded to the pipeline. In so far as the pipeline uses valves, pumps and control devices to maintain the flow of the oil, it is in its sense machinery within the meaning of the Real Property Tax Code. Thus, the Court dismissed the petition and the questioned decision and resolution of the lower court is affirmed.

Board of Assessment vs Meralco10 SCRA 68

Facts:The Philippine Commission enacted Act No. 484 which authorized the Municipal Board of Manila to grant a franchise to construct, maintain and operate an electric street railway and electric light, heat and power system in the City of Manila. Meralco's electric power is generated by its hydro-electric plant located at Botocan Falls, Laguna and is transmitted to the City of Manila by means of electric transmission wires, running from the province of Laguna to the said City. These electric transmission wires which carry high voltage current, are fastened to insulators attached on steel towers constructed by respondent at intervals, from its hydroelectric plant in the province of Laguna to the City of Manila. The respondent Meralco has constructed 40 of these steel towers within Quezon City, on land belonging to it. The City Assessor of Quezon City declared the aforesaid steel towers for real property tax under Tax. Respondent paid the amount under protest, and filed a petition for review in the Court of Tax Appeals.

Issue:Whether or not the Meralco poles constitute real properties so as they can be subjected to a real property tax?

Held:The SC ruled that Meralco's steel towers were considered poles within the meaning of paragraph 9 of its franchise which exempts its poles from taxation. The steel towers were considered personalty because they were removable and merely attached to square metal frames by means of bolts and could be moved from place to place when unscrewed and dismantled. Furthermore, they are not attached to an immovable in a fixed manner, and they can be separated without breaking the material or causing deterioration upon the object to which they are attached.

Note:Poles - was used to denote the steel towers of an electric company engaged in the generation of hydro-electric power generated from its plant.

SERGS PRODUCTS, INC., and SERGIO T. GOQUIOLAY, petitioners, vs. PCI LEASING AND FINANCE, INC., respondent.D E C I S I O NPANGANIBAN, J.:After agreeing to a contract stipulating that a real or immovable property be considered as personal or movable, a party is estopped from subsequently claiming otherwise. Hence, such property is a proper subject of a writ of replevin obtained by the other contracting party. The CaseBefore us is a Petition for Review on Certiorari assailing the January 6, 1999 Decision[footnoteRef:2][1] of the Court of Appeals (CA)[footnoteRef:3][2] in CA-GR SP No. 47332 and its February 26, 1999 Resolution[footnoteRef:4][3] denying reconsideration. The decretal portion of the CA Decision reads as follows: [2: ] [3: ] [4: ]

WHEREFORE, premises considered, the assailed Order dated February 18, 1998 and Resolution dated March 31, 1998 in Civil Case No. Q-98-33500 are hereby AFFIRMED. The writ of preliminary injunction issued on June 15, 1998 is hereby LIFTED.[footnoteRef:5][4] [5: ]

In its February 18, 1998 Order,[footnoteRef:6][5] the Regional Trial Court (RTC) of Quezon City (Branch 218)[footnoteRef:7][6] issued a Writ of Seizure.[footnoteRef:8][7] The March 18, 1998 Resolution[footnoteRef:9][8] denied petitioners Motion for Special Protective Order, praying that the deputy sheriff be enjoined from seizing immobilized or other real properties in (petitioners) factory in Cainta, Rizal and to return to their original place whatever immobilized machineries or equipments he may have removed.[footnoteRef:10][9] [6: ] [7: ] [8: ] [9: ] [10: ]

The FactsThe undisputed facts are summarized by the Court of Appeals as follows:[footnoteRef:11][10] [11: ]

On February 13, 1998, respondent PCI Leasing and Finance, Inc. (PCI Leasing for short) filed with the RTC-QC a complaint for [a] sum of money (Annex E), with an application for a writ of replevin docketed as Civil Case No. Q-98-33500. On March 6, 1998, upon an ex-parte application of PCI Leasing, respondent judge issued a writ of replevin (Annex B) directing its sheriff to seize and deliver the machineries and equipment to PCI Leasing after 5 days and upon the payment of the necessary expenses. On March 24, 1998, in implementation of said writ, the sheriff proceeded to petitioners factory, seized one machinery with [the] word that he [would] return for the other machineries. On March 25, 1998, petitioners filed a motion for special protective order (Annex C), invoking the power of the court to control the conduct of its officers and amend and control its processes, praying for a directive for the sheriff to defer enforcement of the writ of replevin. This motion was opposed by PCI Leasing (Annex F), on the ground that the properties [were] still personal and therefore still subject to seizure and a writ of replevin. In their Reply, petitioners asserted that the properties sought to be seized [were] immovable as defined in Article 415 of the Civil Code, the parties agreement to the contrary notwithstanding. They argued that to give effect to the agreement would be prejudicial to innocent third parties. They further stated that PCI Leasing [was] estopped from treating these machineries as personal because the contracts in which the alleged agreement [were] embodied [were] totally sham and farcical.On April 6, 1998, the sheriff again sought to enforce the writ of seizure and take possession of the remaining properties. He was able to take two more, but was prevented by the workers from taking the rest. On April 7, 1998, they went to [the CA] via an original action for certiorari.Ruling of the Court of AppealsCiting the Agreement of the parties, the appellate court held that the subject machines were personal property, and that they had only been leased, not owned, by petitioners. It also ruled that the words of the contract are clear and leave no doubt upon the true intention of the contracting parties. Observing that Petitioner Goquiolay was an experienced businessman who was not unfamiliar with the ways of the trade, it ruled that he should have realized the import of the document he signed. The CA further held: Furthermore, to accord merit to this petition would be to preempt the trial court in ruling upon the case below, since the merits of the whole matter are laid down before us via a petition whose sole purpose is to inquire upon the existence of a grave abuse of discretion on the part of the [RTC] in issuing the assailed Order and Resolution. The issues raised herein are proper subjects of a full-blown trial, necessitating presentation of evidence by both parties. The contract is being enforced by one, and [its] validity is attacked by the other a matter x x x which respondent court is in the best position to determine.Hence, this Petition.[footnoteRef:12][11] [12: ]

The IssuesIn their Memorandum, petitioners submit the following issues for our consideration: A. Whether or not the machineries purchased and imported by SERGS became real property by virtue of immobilization.B. Whether or not the contract between the parties is a loan or a lease.[footnoteRef:13][12] [13: ]

In the main, the Court will resolve whether the said machines are personal, not immovable, property which may be a proper subject of a writ of replevin. As a preliminary matter, the Court will also address briefly the procedural points raised by respondent.The Courts RulingThe Petition is not meritorious.Preliminary Matter:Procedural QuestionsRespondent contends that the Petition failed to indicate expressly whether it was being filed under Rule 45 or Rule 65 of the Rules of Court. It further alleges that the Petition erroneously impleaded Judge Hilario Laqui as respondent.There is no question that the present recourse is under Rule 45. This conclusion finds support in the very title of the Petition, which is Petition for Review on Certiorari.[footnoteRef:14][13] [14: ]

While Judge Laqui should not have been impleaded as a respondent,[footnoteRef:15][14] substantial justice requires that such lapse by itself should not warrant the dismissal of the present Petition. In this light, the Court deems it proper to remove, motu proprio, the name of Judge Laqui from the caption of the present case. [15: ]

Main Issue: Nature of the Subject MachineryPetitioners contend that the subject machines used in their factory were not proper subjects of the Writ issued by the RTC, because they were in fact real property. Serious policy considerations, they argue, militate against a contrary characterization. Rule 60 of the Rules of Court provides that writs of replevin are issued for the recovery of personal property only.[footnoteRef:16][15] Section 3 thereof reads: [16: ]

SEC. 3. Order. -- Upon the filing of such affidavit and approval of the bond, the court shall issue an order and the corresponding writ of replevin describing the personal property alleged to be wrongfully detained and requiring the sheriff forthwith to take such property into his custody.On the other hand, Article 415 of the Civil Code enumerates immovable or real property as follows: ART. 415. The following are immovable property:x x x....................................x x x....................................x x x (5) Machinery, receptacles, instruments or implements intended by the owner of the tenement for an industry or works which may be carried on in a building or on a piece of land, and which tend directly to meet the needs of the said industry or works; x x x....................................x x x....................................x x xIn the present case, the machines that were the subjects of the Writ of Seizure were placed by petitioners in the factory built on their own land. Indisputably, they were essential and principal elements of their chocolate-making industry. Hence, although each of them was movable or personal property on its own, all of them have become immobilized by destination because they are essential and principal elements in the industry.[footnoteRef:17][16] In that sense, petitioners are correct in arguing that the said machines are real, not personal, property pursuant to Article 415 (5) of the Civil Code.[footnoteRef:18][17] [17: ] [18: ]

Be that as it may, we disagree with the submission of the petitioners that the said machines are not proper subjects of the Writ of Seizure. The Court has held that contracting parties may validly stipulate that a real property be considered as personal.[footnoteRef:19][18] After agreeing to such stipulation, they are consequently estopped from claiming otherwise. Under the principle of estoppel, a party to a contract is ordinarily precluded from denying the truth of any material fact found therein. [19: ]

Hence, in Tumalad v. Vicencio,[footnoteRef:20][19] the Court upheld the intention of the parties to treat a house as a personal property because it had been made the subject of a chattel mortgage. The Court ruled: [20: ]

x x x. Although there is no specific statement referring to the subject house as personal property, yet by ceding, selling or transferring a property by way of chattel mortgage defendants-appellants could only have meant to convey the house as chattel, or at least, intended to treat the same as such, so that they should not now be allowed to make an inconsistent stand by claiming otherwise.Applying Tumalad, the Court in Makati Leasing and Finance Corp. v. Wearever Textile Mills[footnoteRef:21][20] also held that the machinery used in a factory and essential to the industry, as in the present case, was a proper subject of a writ of replevin because it was treated as personal property in a contract. Pertinent portions of the Courts ruling are reproduced hereunder: [21: ]

x x x. If a house of strong materials, like what was involved in the above Tumalad case, may be considered as personal property for purposes of executing a chattel mortgage thereon as long as the parties to the contract so agree and no innocent third party will be prejudiced thereby, there is absolutely no reason why a machinery, which is movable in its nature and becomes immobilized only by destination or purpose, may not be likewise treated as such. This is really because one who has so agreed is estopped from denying the existence of the chattel mortgage.In the present case, the Lease Agreement clearly provides that the machines in question are to be considered as personal property. Specifically, Section 12.1 of the Agreement reads as follows:[footnoteRef:22][21] [22: ]

12.1 The PROPERTY is, and shall at all times be and remain, personal property notwithstanding that the PROPERTY or any part thereof may now be, or hereafter become, in any manner affixed or attached to or embedded in, or permanently resting upon, real property or any building thereon, or attached in any manner to what is permanent.Clearly then, petitioners are estopped from denying the characterization of the subject machines as personal property. Under the circumstances, they are proper subjects of the Writ of Seizure.It should be stressed, however, that our holding -- that the machines should be deemed personal property pursuant to the Lease Agreement is good only insofar as the contracting parties are concerned.[footnoteRef:23][22] Hence, while the parties are bound by the Agreement, third persons acting in good faith are not affected by its stipulation characterizing the subject machinery as personal.[footnoteRef:24][23] In any event, there is no showing that any specific third party would be adversely affected. [23: ] [24: ]

Validity of the Lease AgreementIn their Memorandum, petitioners contend that the Agreement is a loan and not a lease.[footnoteRef:25][24] Submitting documents supposedly showing that they own the subject machines, petitioners also argue in their Petition that the Agreement suffers from intrinsic ambiguity which places in serious doubt the intention of the parties and the validity of the lease agreement itself.[footnoteRef:26][25] In their Reply to respondents Comment, they further allege that the Agreement is invalid.[footnoteRef:27][26] [25: ] [26: ] [27: ]

These arguments are unconvincing. The validity and the nature of the contract are the lis mota of the civil action pending before the RTC. A resolution of these questions, therefore, is effectively a resolution of the merits of the case. Hence, they should be threshed out in the trial, not in the proceedings involving the issuance of the Writ of Seizure. Indeed, in La Tondea Distillers v. CA,[footnoteRef:28][27] the Court explained that the policy under Rule 60 was that questions involving title to the subject property questions which petitioners are now raising -- should be determined in the trial. In that case, the Court noted that the remedy of defendants under Rule 60 was either to post a counter-bond or to question the sufficiency of the plaintiffs bond. They were not allowed, however, to invoke the title to the subject property. The Court ruled: [28: ]

In other words, the law does not allow the defendant to file a motion to dissolve or discharge the writ of seizure (or delivery) on ground of insufficiency of the complaint or of the grounds relied upon therefor, as in proceedings on preliminary attachment or injunction, and thereby put at issue the matter of the title or right of possession over the specific chattel being replevied, the policy apparently being that said matter should be ventilated and determined only at the trial on the merits.[footnoteRef:29][28] [29: ]

Besides, these questions require a determination of facts and a presentation of evidence, both of which have no place in a petition for certiorari in the CA under Rule 65 or in a petition for review in this Court under Rule 45.[footnoteRef:30][29] [30: ]

Reliance on the Lease AgreementIt should be pointed out that the Court in this case may rely on the Lease Agreement, for nothing on record shows that it has been nullified or annulled. In fact, petitioners assailed it first only in the RTC proceedings, which had ironically been instituted by respondent. Accordingly, it must be presumed valid and binding as the law between the parties.Makati Leasing and Finance Corporation[footnoteRef:31][30] is also instructive on this point. In that case, the Deed of Chattel Mortgage, which characterized the subject machinery as personal property, was also assailed because respondent had allegedly been required to sign a printed form of chattel mortgage which was in a blank form at the time of signing. The Court rejected the argument and relied on the Deed, ruling as follows: [31: ]

x x x. Moreover, even granting that the charge is true, such fact alone does not render a contract void ab initio, but can only be a ground for rendering said contract voidable, or annullable pursuant to Article 1390 of the new Civil Code, by a proper action in court. There is nothing on record to show that the mortgage has been annulled. Neither is it disclosed that steps were taken to nullify the same. x x xAlleged Injustice Committed on the Part of PetitionersPetitioners contend that if the Court allows these machineries to be seized, then its workers would be out of work and thrown into the streets.[footnoteRef:32][31] They also allege that the seizure would nullify all efforts to rehabilitate the corporation. [32: ]

Petitioners arguments do not preclude the implementation of the Writ. As earlier discussed, law and jurisprudence support its propriety. Verily, the above-mentioned consequences, if they come true, should not be blamed on this Court, but on the petitioners for failing to avail themselves of the remedy under Section 5 of Rule 60, which allows the filing of a counter-bond. The provision states: SEC. 5. Return of property. -- If the adverse party objects to the sufficiency of the applicants bond, or of the surety or sureties thereon, he cannot immediately require the return of the property, but if he does not so object, he may, at any time before the delivery of the property to the applicant, require the return thereof, by filing with the court where the action is pending a bond executed to the applicant, in double the value of the property as stated in the applicants affidavit for the delivery thereof to the applicant, if such delivery be adjudged, and for the payment of such sum to him as may be recovered against the adverse party, and by serving a copy bond on the applicant. WHEREFORE, the Petition is DENIED and the assailed Decision of the Court of Appeals AFFIRMED. Costs against petitioners.SO ORDERED.PEOPLE'S BANK AND TRUST CO. vs. DAHICAN LUMBER COMPANY G.R. No. L-17500 May 16, 1967 PEOPLE'S BANK AND TRUST CO. vs. DAHICAN LUMBER COMPANYG.R. No. L-17500 May 16, 1967

Facts:

On September 8, 1948, Atlantic Gulf & Pacific Company of Manila, a West Virginia corporation licensed to do business in the Philippines sold and assigned all its rights in the Dahican Lumber concession to Dahican Lumber Company - hereinafter referred to as DALCO - for the total sum of $500,000.00, of which only the amount of $50,000.00 was paid. Thereafter, to develop the concession, DALCO obtained various loans from the People's Bank & Trust Company amounting, as of July 13, 1950, to P200,000.00. In addition, DALCO obtained, through the BANK, a loan of $250,000.00 from the Export-Import Bank of Washington D.C., evidenced by five promissory notes of $50,000.00 each, maturing on different dates, executed by both DALCO and the Dahican America Lumber Corporation, a foreign corporation and a stockholder of DALCO,

As security for the payment of the abovementioned loans, on July 13, 1950 DALCO executed in favor of the BANK a deed of mortgage covering five parcels of land situated in the province of Camarines Norte together with all the buildings and other improvements existing thereon and all the personal properties of the mortgagor located in its place of business in the municipalities of Mambulao and Capalonga, Camarines Norte. On the same date, DALCO executed a second mortgage on the same properties in favor of ATLANTIC to secure payment of the unpaid balance of the sale price of the lumber concession amounting to the sum of $450,000.00. Both deeds contained a provision extending the mortgage lien to properties to be subsequently acquired by the mortgagor.Both mortgages were registered in the Office of the Register of Deeds of Camarines Norte. In addition thereto DALCO and DAMCO pledged to the BANK 7,296 shares of stock of DALCO and 9,286 shares of DAMCO to secure the same obligation.

Upon DALCO's and DAMCO's failure to pay the fifth promissory note upon its maturity, the BANK paid the same to the Export-Import Bank of Washington D.C., and the latter assigned to the former its credit and the first mortgage securing it. Subsequently, the BANK gave DALCO and DAMCO up to April 1, 1953 to pay the overdue promissory note.c

After July 13, 1950 - the date of execution of the mortgages mentioned above - DALCO purchased various machineries, equipment, spare parts and supplies in addition to, or in replacement of some of those already owned and used by it on the date aforesaid. Pursuant to the provision of the mortgage deeds quoted theretofore regarding "after acquired properties," the BANK requested DALCO to submit complete lists of said properties but the latter failed to do so. In connection with these purchases, there appeared in the books of DALCO as due to Connell Bros. Company (Philippines) - a domestic corporation who was acting as the general purchasing agent of DALCO -the sum of P452,860.55 and to DAMCO, the sum of P2,151,678.34.chan

On December 16, 1952, the Board of Directors of DALCO, in a special meeting called for the purpose, passed a resolution agreeing to rescind the alleged sales of equipment, spare parts and supplies by CONNELL and DAMCO to it.

On January 13, 1953, the BANK, in its own behalf and that of ATLANTIC, demanded that said agreements be cancelled but CONNELL and DAMCO refused to do so. As a result, on February 12, 1953; ATLANTIC and the BANK, commenced foreclosure proceedings in the Court of First Instance of Camarines Norte against DALCO and DAMCO.

Upon motion of the parties the Court, on September 30, 1953, issued an order transferring the venue of the action to the Court of First Instance of Manila.

On August 30, 1958, upon motion of all the parties, the Court ordered the sale of all the machineries, equipment and supplies of DALCO, and the same were subsequently sold for a total consideration of P175,000.00 which was deposited in court pending final determination of the action. By a similar agreement one-half (P87,500.00) of this amount was considered as representing the proceeds obtained from the sale of the "undebated properties" (those not claimed by DAMCO and CONNELL), and the other half as representing those obtained from the sale of the "after acquired properties".

ISSUE:

WON the "after acquired properties" were subject to the deeds of mortgage mentioned heretofore. Assuming that they are subject thereto,WON the mortgages are valid and binding on the properties aforesaid inspite of the fact that they were not registered in accordance with the provisions of the Chattel Mortgage Law.

HELD:

Under the fourth paragraph of both deeds of mortgage, it is crystal clear that all property of every nature and description taken in exchange or replacement, as well as all buildings, machineries, fixtures, tools, equipments, and other property that the mortgagor may acquire, construct, install, attach; or use in, to upon, or in connection with the premises - that is, its lumber concession - "shall immediately be and become subject to the lien" of both mortgages in the same manner and to the same extent as if already included therein at the time of their execution. Such stipulation is neither unlawful nor immoral, its obvious purpose being to maintain, to the extent allowed by circumstances, the original value of the properties given as security.

Article 415 does not define real property but enumerates what are considered as such, among them being machinery, receptacles, instruments or replacements intended by owner of the tenement for an industry or works which may be carried on in a building or on a piece of land, and shall tend directly to meet the needs of the said industry or works. On the strength of the above-quoted legal provisions, the lower court held that inasmuch as "the chattels were placed in the real properties mortgaged to plaintiffs, they came within the operation of Art. 415, paragraph 5 and Art. 2127 of the New Civil Code". In the present case, the characterization of the "after acquired properties" as real property was made not only by one but by both interested parties. There is, therefore, more reason to hold that such consensus impresses upon the properties the character determined by the parties who must now be held in estoppel to question it.CASES IN LABOR STANDARDS1. Calalang vs. Williams GR. 478002. Samson vs. NLRC 253 SCRA 1123. L.T. Datu and Co. vs. NLRC 253 SCRA 4404. North Davao Mining Corp. vs. NLRC 254 SCRA 721 985. Flores vs. NLRC 256 SCRA 7356. JMM Promotions and Management Inc. vs. CA 260 SCRA 3197. Raycor Air Control Systems vs. NLRC 260 SCRA 5898. City Fair Corporation vs. NLRC 243 SCRA 5729. People vs. Honrada 243 SCRA 64010. People vs. Comia GR No. 109761 1 Sept 1994

Summary: Calalang vs. Williams (GR 47800,2 December 1940)Calalang vs. Williams[GR 47800, 2 December 1940]First Division, Laurel (J): 4 concurFacts:The National Traffic Commission, in its resolution of 17 July 1940, resolved to recommend to the Director ofPublic Works and to the Secretary of Public Works and Communications that animal-drawn vehicles be prohibitedfrom passing along Rosario Street extending from Plaza Calderon de la Barca to Dasmarias Street, from 7:30a.m. to 12:30 p.m. and from 1:30 p.m. to 5:30 p.m.; and along Rizal Avenue extending from the railroad crossing atAntipolo Street to Echague Street, from 7 a.m. to 11 p.m., from a period of one year from the date of the opening ofthe Colgante Bridge to traffic. The Chairman of the National Traffic Commission, on 18 July 1940, recommended tothe Director of Public Works the adoption of the measure proposed in the resolution, in pursuance of the provisionsof Commonwealth Act 548, which authorizes said Director of Public Works, with the approval of the Secretary ofPublic Works and Communications, to promulgate rules and regulations to regulate and control the use of andtraffic on national roads. On 2 August 1940, the Director of Public Works, in his first indorsement to the Secretary ofPublic Works and Communications, recommended to the latter the approval of the recommendation made by theChairman of the National Traffic Commission, with the modification that the closing of Rizal Avenue to traffic toanimal-drawn vehicles be limited to the portion thereof extending from the railroad crossing at Antipolo Street toAzcarraga Street. On 10 August 1940, the Secretary of Public Works and Communications, in his secondindorsement addressed to the Director of Public Works, approved the recommendation of the latter that RosarioStreet and Rizal Avenue be closed to traffic of animal-drawn vehicles, between the points and during the hours asindicated, for a period of 1 year from the date of the opening of the Colgante Bridge to traffic. The Mayor of Manilaand the Acting Chief of Police of Manila have enforced and caused to be enforced the rules and regulations thusadopted. Maximo Calalang, in his capacity as a private citizen and as a taxpayer of Manila, brought before theSupreme court the petition for a writ of prohibition against A. D. Williams, as Chairman of the National TrafficCommission; Vicente Fragante, as Director of Public Works; Sergio Bayan, as Acting Secretary of Public Worksand Communications; Eulogio Rodriguez, as Mayor of the City of Manila; and Juan Dominguez, as Acting Chief ofPolice of Manila.Issue:Whether the rules and regulations promulgated by the Director of Public Works infringe upon theconstitutional precept regarding the promotion of social justice to insure the well-being and economic security of allthe people.Held:The promotion of social justice is to be achieved not through a mistaken sympathy towards any given group.Social justice is "neither communism, nor despotism, nor atomism, nor anarchy," but the humanization of laws andthe equalization of social and economic forces by the State so that justice in its rational and objectively secularconception may at least be approximated. Social justice means the promotion of the welfare of all the people, theadoption by the Government of measures calculated to insure economic stability of all the competent elements ofsociety, through the maintenance of a proper economic and social equilibrium in the interrelations of the membersof the community, constitutionally, through the adoption of measures legally justifiable, or extra-constitutionally,through the exercise of powers underlying the existence of all governments on the time-honored principle of saluspopuli est suprema lex. Social justice, therefore, must be founded on the recognition of the necessity ofinterdependence among divers and diverse units of a society and of the protection that should be equally andevenly extended to all groups as a combined force in our social and economic life, consistent with the fundamentaland paramount objective of the state of promoting the health, comfort, and quiet of all persons, and of bringingabout "the greatest good to the greatest number."Calalang vs. WilliamsThe classic case ofCalalang vs. Williams,70 Phil. 726 (1940), tackled the issue of police power for public welfare,but is remembered because it contains a definition of social justice.FactsA traffic regulation in Manila bannedcalesasfrom some streets in Manila during certain afternoon hours. A citizenchallenged this regulation.IssueWas the regulation valid?

RulingYes. The Supreme Court upheld the regulation as a valid exercise of police power in the interest of public welfare.This case is known primarily for the words of Justice Jose P. Laurel defining social justice: :Social justice is neither communism, nor despotism, nor atomism, nor anarchy, but the humanization of lawsand the equalization of social and economic forces by theState so that justice in its rational and objectivelysecular conception may at least be approximated.Social justice means the promotion of the welfare of all thepeople, the adoption by the Government of measures calculated to ensure economic stability of all thecomponent elements of society, through the maintenance of a proper economic and social equilibrium in theinterrelations of the members of the community, constitutionally, through the adoption of measures legallyjustifiable, or extra-constitutionally, through the exercise of powers underlying the existence of all governmentson the time-honored principle of salus populi est supremo lex.