Berkenkotter v.

Cu Unjieng Facts: On 26 April 1926, the Mabalacat Sugar Company obtained from Cu Unjieng e Hijos, a loan secured by a first mortgage constituted on 2 parcels of land "with all its buildings, improvements, sugar-cane mill, steel railway, telephone line, apparatus, utensils and whatever forms part or is a necessary complement of said sugar-cane mill, steel railway, telephone line, now existing or that may in the future exist in said lots. On 5 October 1926, the Mabalacat Sugar Company decided to increase the capacity of its sugar central by buying additional machinery and equipment, so that instead of milling 150 tons daily, it could produce 250. Green proposed to the Berkenkotter, to advance the necessary amount for the purchase of said machinery and equipment, promising to reimburse him as soon as he could obtain an additional loan from the mortgagees, Cu Unjieng e Hijos, and that in case Green should fail to obtain an additional loan from Cu Unjieng e Hijos, said machinery and equipment would become security therefore, said Green binding himself not to mortgage nor encumber them to anybody until Berkenkotter be fully reimbursed for the corporation's indebtedness to him. Having agreed to said proposition made in a letter dated 5 October 1926, Berkenkotter, on 9 October 1926, delivered the sum of P1,710 to Green, the total amount supplied by him to Green having been P25,750. Furthermore, Berkenkotter had a credit of P22,000 against said corporation for unpaid salary. With the loan of P25,750 and said credit of P22,000, the Mabalacat Sugar Co., Inc., purchased the additional machinery and equipment. On 10 June 1927, Green applied to Cu Unjieng e Hijos for an additional loan of P75,000 offering as security the additional machinery and equipment acquired by said Green and installed in the sugar central after the execution of the original mortgage deed, on 27 April 1927, together with whatever additional equipment acquired with said loan. Green failed to obtain said loan. Hence, above mentioned mortgage was in effect. Issue: Are the additional machines also considered mortgaged? Held: Article 1877 of the Civil Code provides that mortgage includes all natural accessions, improvements, growing fruits, and rents not collected when the obligation falls due, and the amount of any indemnities paid or due the owner by the insurers of the mortgaged property or by virtue of the exercise of the power of eminent domain, with the declarations, amplifications, and limitations established by law, whether the state continues in the possession of the person who mortgaged it or whether it passes into the hands of a third person. It is a rule, that in a mortgage of real estate, the improvements on the same are included; therefore, all objects permanently attached to a mortgaged building or land, although they may have been placed there after the mortgage was constituted, are also included.

Article 334, 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. The installation of a machinery and equipment in a mortgaged sugar central, in lieu of another of less capacity, for the purpose of carrying out the industrial functions of the latter and increasing production, constitutes a permanent improvement on said sugar central and subjects said machinery and equipment to the mortgage constituted thereon. BERKENKOTTER V. CU UNJIENGJuly 31, 1935 FACTS: On 26 April 1926, the Mabalacat Sugar Company obtained from Cu Unjieng eHijos, a loan secured by a first mortgage constituted on 2 parcels of land "with all its buildings, improvements, sugar-cane mill, steel railway, telephone line, apparatus,utensils and whatever forms part or isa necessary complement of said sugar-cane mill, steel railway,telephone line, now existing or that may in the future exist in said lots.On 5 October 1926, the Mabalacat Sugar Company decided to increase the capacity of its sugar central by buying additional machinery and equipment, so that instead of milling150 tons daily, it could produce 250. HELD: For the foregoing considerations, we are of the opinion and so hold: (1) That the installation of a machinery and equipment in a mortgaged sugar central, in lieu of another of less capacity, for the purpose of carrying out the industrial functions of the latter and increasing production, constitutes a permanent improvement on said sugar central and subjects said machinery and equipment to the mortgage constituted thereon (article1877, Civil Code); (2) that the fact that the purchaser of the new machinery and equipment has bound himself to the person supplying him the purchase money to hold them as security for the payment of the latter's credit, and to refrain from mortgaging or otherwise encumbering them does not alter the permanent character of the incorporation of said machinery and equipment with the central; and (3)that the sale of the machinery and equipment in question by the purchaser who was supplied the purchase money, as a loan, to the person who supplied the money, after the incorporation thereof with the mortgaged sugar central, does not vest the creditor with ownership of said machinery and equipment but simply with the right of redemption.

TUMALAD vs. VICENCIOFACTS:

On 1 September 1955 Vicencio and Simeon executed a chattel mortgage in favor of the Tumalads over their house of strong materials located at Quiapo, Manila, which were being rented from Madrigal& Company, Inc. The mortgage was registered in the Registry of Deeds of Manila on 2 September 1955. The mortgage was executed to guarantee a loan of P4,800.00 received from the Tumalads,payable within one year at 12% yearly. Monthly payments are to be made starting September 1955 to July 1956, and the lump sum of P3,150 was payable on or before August 1956. It was also agreed that default in the payment of any of the amortizations would cause the remaining unpaid balance to become immediately due and payable, the Chattel Mortgage enforceable, and the Sheriff of Manila authorized the to sell the property in a public auction for payment of debt. When Vicencio and Simeon defaulted in paying, the mortgage was extra judicially foreclosed, and on 27 March 1956, the house was sold at public auction pursuant to the said contract. As highest bidder, the Tumalads were issued the corresponding certificate of sale.On 18 April 1956, the Tumalads commenced civil case in the MTC of Manila, praying that the house be vacated and its possession surrendered to them, and for Vicencio and Simeon to pay rent of P200.00 monthly from 27 March 1956 up to the time the possession is surrendered. On 21 September 1956, the municipal court rendered its decision in favor of the Tumalads. Vicencios appealed to the court a quo which also rendered a decision against them. On appeal, the case was elevated to the Supreme Court by the Court of Appeals for the reason that only questions of law are involved.Tumalads failed to file a brief and this appeal was submitted for decision without it.Nearly a year after the foreclosure sale the mortgaged house had been demolished on January 1957by virtue of a decision obtained by the less or of the land on which the house stood. ISSUE: Whether or not the chattel mortgage was null and void ab initio because only personal properties can be subject of a chattel mortgage? HELD:

The inclusion of the building, separate and distinct from the land, in the enumeration of what may constitute real properties (art. 415, New Civil Code) could only mean one thing that a building is by itself an immovable property irrespective of whether or not said structure and the land on which it is adhered to belong to the same owner. Certain deviations, however, have been allowed for various reasons; if parties to a contract by agreement treat as personal property that which by nature would be real property.In the contract now before Us, the house on rented land is not only expressly designated as Chattel Mortgage; it specifically provides that "the mortgagor ... voluntarily CEDES, SELLS and TRANSFERS by way of Chattel Mortgage the property together with its leasehold rights over the lot on which it is constructed and participation ..."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 Vicencios could only have meant to convey the house as chattel, or at least, intended to treat the same as such, so that they should not now be allowed to make an inconsistent stand by claiming otherwise.Moreover, the subject house stood on a rented lot to which Vicencios merely had a temporary right as lessee, and although this can not in itself alone determine the status of the property, it does so when combined with other factors to sustain the interpretation that the parties, particularly the mortgagors,intended to treat the house as personalty.Finally unlike other jurisprudence wherein third persons assailed the validity of the chattel mortgage, it is the Vicencios themselves, as debtors-mortgagors, who are attacking the validity of the chattel mortgage in this case. The doctrine of estoppel therefore applies to the herein defendants-appellants,having treated the subject house as personalty.

Sergs Products, Inc. vs. PCI Leasing G.R. No. 137705. August 22, 2000 FACTS:

PCI Leasing and Finance filed a complaint for sum of money, with an application for a writ of replevin. Judge issued a writ of replevin 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. The sheriff proceeded to petitioner's factory, seized one machinery, with word that he would return for other machineries. Petitioner (Sergs Products) filed a motion for special protective order to defer enforcement of the writ of replevin. PCI Leasing opposed the motion on the ground that the properties were still personal and therefore can still be subjected to seizure and writ of replevin. Petitioner asserted that properties sought to be seized were immovable as defined in Article 415 of the Civil Code. Sheriff was still able to take possession of two more machineries

In its decision on the original action for certiorari filed by the Petitioner, the appellate court, Citing the Agreement of the parties, held that the subject machines were personal property, and that they had only been leased, not owned, by petitioners; and ruled that the "words of the contract are clear and leave no doubt upon the true intention of the contracting parties." ISSUE: Whether or not the machineries became real property by virtue of immobilization. Ruling: Petitioners 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. Writ of Replevin: Rule 60 of the Rules of Court provides that writs of replevin are issued for the recovery of personal property only. Article 415 (5) of the Civil Code provides that 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 In 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.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. However, contracting parties may validly stipulate that a real property be considered as personal. 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. Section 12.1 of the Agreement between the parties provides 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. The machines are personal property and they are proper subjects of the Writ of Replevin DAVAO SAWMILL V. CASTILLO FACTS: The Davao Saw Mill Co., Inc., is the holder of a lumber concession from the Government of the Philippine Islands.It has operated a sawmill in the sitio of Maa, barrio of Tigatu, municipality of Davao, Province of Davao. However,the land upon which the business was conducted belonged to another person. On the land the sawmill company erected a building which housed the machinery used by it.The owner of the land claims that the machineries should be transferred to their ownership because of the provision in the contract that buildings and improvements will belong to the land owner at the end of the contract. HELD: The law is clear that the machineries are personal properties and not part of the building because they were not placed by the owner.

Davao Sawmill v. Castillo

DAVAO SAW MILL vs. APRONIANO G. CASTILLO and DAVAO LIGHT & POWER CO., INC. G.R. No. L-40411 August 7, 1935 Facts: Davao Saw Mill Co., Inc., is the holder of a lumber concession from the Government of the Philippine Islands. However, the land upon which the business was conducted belonged to another person. On the land the sawmill company erected a building which housed the machinery used by it. Some of the implements thus used were clearly personal property, the

conflict concerning machines which were placed and mounted on foundations of cement. In the contract of lease between the sawmill company and the owner of the land there appeared the following provision: That on the expiration of the period agreed upon, all the improvements and buildings introduced and erected by the party of the second part shall pass to the exclusive ownership of the lessor without any obligation on its part to pay any amount for said improvements and buildings; which do not include the machineries and accessories in the improvements. In another action wherein the Davao Light & Power Co., Inc., was the plaintiff and the Davao, Saw, Mill Co., Inc., was the defendant, a judgment was rendered in favor of the plaintiff in that action against the defendant; a writ of execution issued thereon, and the properties now in question were levied upon as personalty by the sheriff. No third party claim was filed for such properties at the time of the sales thereof as is borne out by the record made by the plaintiff herein It must be noted also that on number of occasion, Davao Sawmill treated the machinery as personal property by executing chattel mortgages in favor of third persons. One of such is the appellee by assignment from the original mortgages. The lower court rendered decision in favor of the defendants herein. Hence, this instant appeal. Issue: whether or not the machineries and equipments were personal in nature. Ruling/ Rationale: Yes. The Supreme Court affirmed the decision of the lower court. Machinery which is movable in its nature only becomes immobilized when placed in a plant by the owner of the property or plant, but not when so placed by a tenant, a usufructuary, or any person having only a temporary right, unless such person acted as the agent of the owner.

Laurel vs Garcia
9 May

G.R. No. 92013. July 25, 1990 G.R. No. 92047, July 25, 1990 OJEDA, petitioner, vs. EXECUTIVE SECRETARY MACARAIG, JR., et al FACTS: These are two petitions for prohibition seeking to enjoin respondents, their representatives and agents from proceeding with the bidding for the sale of the 3,179 square meters of land at 306 Ropponggi, 5-Chome Minato-ku, Tokyo, Japan scheduled on February 21, 1990.

The subject property in this case is one of the four (4) properties in Japan acquired by the Philippine government under the Reparations Agreement entered into with Japan on May 9, 1956, and is part of the indemnification to the Filipino people for their losses in life and property and their suffering during World War II. As intended, the subject property became the site of the Philippine Embassy until the latter was transferred to Nampeidai on July 22, 1976. Due to the failure of our government to provide necessary funds, the Roppongi property has remained undeveloped since that time. A proposal was presented to President Corazon C. Aquino by former Philippine Ambassador to Japan, Carlos J. Valdez, to make the property the subject of a lease agreement with a Japanese firm where, at the end of the lease period, all the three leased buildings shall be occupied and used by the Philippine government. On August 11, 1986, President Aquino created a committee to study the disposition/utilization of Philippine government properties in Tokyo and Kobe. On July 25, 1987, the President issued Executive Order No. 296 entitling non-Filipino citizens or entities to avail of reparations capital goods and services in the event of sale, lease or disposition. The four properties in Japan including the Roppongi were specifically mentioned in the first Whereas clause. Amidst opposition by various sectors, the Executive branch of the government has been pushing, with great vigor, its decision to sell the reparations properties starting with the Roppongi lot. The property has twice been set for bidding at a minimum floor price at $225 million. ISSUES: The petitioner in G.R. No. 92013 raises the following issues: (1) Can the Roppongi property and others of its kind be alienated by the Philippine Government?; and (2) Does the Chief Executive, her officers and agents, have the authority and jurisdiction, to sell the Roppongi property? In G.R. NO. 92047, apart from questioning the authority of the government to alienate the Roppongi property assails the constitutionality of Executive Order No. 296, the petitioner also questions the bidding procedures of the Committee on the Utilization or Disposition of Philippine Government Properties in Japan for being discriminatory against Filipino citizens and Filipino-owned entities by denying them the right to be informed about the bidding requirements. HELD: The petition is granted. As property of public dominion, the Roppongi lot is outside the commerce of man. It cannot be alienated. Its ownership is a special collective ownership for general use and enjoyment, an application to the satisfaction of collective needs, and resides in the social group. The purpose is not to serve the State as a juridical person, but the citizens; it is intended for the common and public welfare and cannot be the object of appropriation. (Taken

from 3 Manresa, 66-69; cited in Tolentino, Commentaries on the Civil Code of the Philippines, 1963 Edition, Vol. II, p. 26). The Roppongi property is correctly classified under paragraph 2 of Article 420 of the Civil Code as property belonging to the State and intended for some public service. The fact that the Roppongi site has not been used for a long time for actual Embassy service does not automatically convert it to patrimonial property. Any such conversion happens only if the property is withdrawn from public use (Cebu Oxygen and Acetylene Co. v. Bercilles, 66 SCRA 481 [1975]). A property continues to be part of the public domain, not available for private appropriation or ownership until there is a formal declaration on the part of the government to withdraw it from being such (Ignacio v. Director of Lands, 108 Phil. 335 [1960]). An abandonment of the intention to use the Roppongi property for public service and to make it patrimonial property under Article 422 of the Civil Code must be definite. Abandonment cannot be inferred from the non-use alone specially if the non-use was attributable not to the governments own deliberate and indubitable will but to a lack of financial support to repair and improve the property (See Heirs of Felino Santiago v. Lazarao, 166 SCRA 368 [1988]). Abandonment must be a certain and positive act based on correct legal premises. A mere transfer of the Philippine Embassy to Nampeidai in 1976 is not relinquishment of the Roppongi propertys original purpose. Executive Order No. 296, though its title declares an authority to sell, does not have a provision in this text expressly authorizing the sale of the four properties procured from Japan for the government sector. It merely intends to make the properties available to foreigners and not to Filipinos alone in case of a sale, lease or other disposition. Rep Act No. 6657, does not authorize the Executive Department to sell the Roppongi property. It merely enumerates possible sources of future funding to augment (as and when needed) the Agrarian Reform Fund created under Executive Order No. 299. Moreover, President Aquinos approval of the recommendation by the investigating committee to sell the Roppongi property was premature or, at the very least, conditioned on a valid change in the public character of the Roppongi property. It does not have the force and effect of law since the President already lost her legislative powers. The Congress had already convened for more than a year. Assuming that the Roppongi property is no longer of public dominion, there is another obstacle to its sale by the respondents. There is no law authorizing its conveyance, and thus, the Court sees no compelling reason to tackle the constitutional issue raised by petitioner Ojeda.

G.R. NO. 120303. JULY 24, 1996GEMINIANO, ET. AL. VS. COURTOF APPEALS

FACTS:I t a p p e a r s t h a t s u b j e c t l o t w a s o r i g i n a l l y owned by the petitioners' mother, Paulina Amadovda. de Geminiano. On a 12-square-meter portion of that lot stood the petitioners' unfinished bungalow,which the petitioners sold to the private respondents,w i t h a n a l l e g e d p r o m i s e t o s e l l t o t h e l a t t er that p o r t i o n o f t h e l o t o c c u p i e d b y t h e h o u s e . Subsequently, the petitioners' mother executed a contract of lease over a 126 square-meter portion of t h e l o t , i n c l u d i n g t h a t p o r t i o n o n w h i c h t h e h o u s e stood, in favor of the private respondents for P40.00per month for a period of 7 years.The private respondents then introduced additional improvements and registered the house in t h e i r n a m e s . A f t e r t h e e x p i r a t i o n o f t h e l e a s e contract, however, the petitioners' mother refused to accept the monthly rentals.It turned out that the lot in question was the subject of a suit, which resulted in its acquisition by o n e M a r i a L e e i n 1 9 7 2 . L e e s o l d t h e l o t t o L i l y Salcedo, who in turn sold it to the spouses Dionisio.Spouses Dionisio executed a Deed of Quitclaim over the said property in favor of the petitioners.The petitioners sent a letter addressed to private respondent Mary Nicolas demanding that shevacate the premises and pay the rentals in arrears within twenty days from notice.Upon failure of the private respondents to heed the demand, the petitioners filed a complaint for unlawful detainer and damages.ISSUE: WON Art. 448 is applicable to this case.HELD: NO.T h e p r i v a t e r e s p o n d e n t s c l a i m t h e y a r e builders in good faith, hence, Article 448 of the CivilCode should apply. They rely on the lack of title of the petitioners' mother at the time of the execution of t h e c o n t r a c t o f l e a s e , a s w e l l a s t h e a l l e g e d assurance made by the petitioners that the lot o n which the house stood would be sold to them.B u t b ei n g m e r e l e s s e e s , t h e p r i v a t e r e s p o n d e n t s k n ew t h a t t h e i r o c c u p a t i o n o f t h e p r e m i s e s w o u l d continue only for the life of the lease. Plainly, theycannot be considered as possessors nor builders ingood faith.Article 448 of the Civil Code, in relation toA r t i c l e 5 4 6 o f t h e s a m e C o d e , w h i c h a l l o w s f u l l reimbursement of useful improvements and retentionof the premises until reimbursement is made, appliesonly to a possessor in good faith, i.e., one who buildson

land with the belief that he is the owner thereof. Itdoes not apply where one's only interest is that of alessee under a rental contract; otherwise, it wouldalways be in the power of the tenant to "improve" hislandlord out of his property.And even if the petitioners indeed promisedto sell, it would not make the private respondentsp o s s e s s o r s o r b u i l d e r s i n g o o d f a i t h s o a s t o b e covered by the provisions of Article 448 of the CivilCode. The latter cannot raise the mere expectancyof ownership of the aforementioned lot because thea l l e g e d p r o m i s e t o s e l l w a s n o t f u l f i l l e d n o r i t s existence even proven