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Davao Sawmill Co.

vs Castillo
61 PHIL 709
GR No. L-40411
August 7, 1935
A tenant placed machines for use in a sawmill on the landlord's land.
FACTS
Davao Sawmill Co., operated a sawmill. The land upon which the business was conducted was
leased from another person. On the land, Davao Sawmill erected a building which housed the
machinery it used. Some of the machines were mounted and placed on foundations of cement.
In the contract of lease, Davo Sawmill agreed to turn over free of charge all improvements and
buildings erected by it on the premises with the exception of machineries, which shall remain
with the Davao Sawmill. In an action brought by the Davao Light and Power Co., judgment was
rendered against Davao Sawmill. A writ of execution was issued and the machineries placed on
the sawmill were levied upon as personality by the sheriff. Davao Light and Power Co.,
proceeded to purchase the machinery and other properties auctioned by the sheriff.
ISSUE
Are the machineries real or personal property?
HELD
Art.415 of the New Civil Code provides that Real Property consists of:
(1) Lands, buildings, roads and constructions of all kinds adhered to the soil;
xxx
(5) Machinery, receptacles, instruments or implements intended by the owner pf the
tenement for an industry ot works which may be carried on in a building or on a piece of
land, and which tend directly to meet the needs of the said industry or works;
Appellant should have registered its protest before or at the time of the sale of the property.
While not conclusive, the appellant's characterization of the property as chattels is indicative of
intention and impresses upon the property the character determined by the parties.

Machinery is naturally movable. However, machinery may be immobilized by destination or


purpose under the following conditions:
General Rule: The machinery only becomes immobilized if placed in a plant by the owner of the
property or plant.
Immobilization cannot be made by a tenant, a usufructuary, or any person having only
a temporary right.
Exception: The tenant, usufructuary, or temporary possessor acted as agent of the owner of
the premises; or he intended to permanently give away the property in favor of the owner.
As a rule, therefore, the machinery should be considered as Personal Property, since it was not
placed on the land by the owner of the said land.
Berkenkotter vs. Cu Unijeng
GR No. L41643 | July 31, 1935 | J. Villa-real
FACTS
The Mabalacat Sugar Co., Inc., owner of the sugar central situated in Mabalacat, Pampanga,
obtained from the defendants, Cu Unjieng e Hijos, a loan secured by a first mortgage
constituted on two parcels of land "with all its buildings, improvements, sugarcane mill, steel
railway, telephone line, apparatus, utensils and whatever forms part or is necessary
complement of said sugarcane mill, steel railway, telephone line, now existing or that may in the
future exist is said lots."
Shortly after said mortgage had been constituted, the Mabalacat Sugar Co., Inc., decided to
increase the capacity of its sugar central by buying additional machinery and equipment, so that
instead of milling 150 tons daily, it could produce 250. The estimated cost of said additional
machinery and equipment was approximately P100,000. In order to carry out this plan, B.A.
Green, president of said corporation, proposed to the plaintiff, B.H. Berkenkotter, to advance the
necessary amount for the purchase of said machinery and equipment, promising to reimburse
him as soon as he could obtain an additional loan from the mortgagees, Cu Unjieng e Hijos.
Having agreed to said proposition, B.H. Berkenkotter, on October 9th of the same year,
delivered the sum of P1,710 to B.A. Green, president of the Mabalacat Sugar Co., Inc., the total
amount supplied by him to said B.A. Green having been P25,750. Furthermore, B.H.
Berkenkotter had a credit of P22,000 against said corporation for unpaid salary. With the loan of
P25,750 and said credit of P22,000, the Mabalacat Sugar Co., Inc., purchased the additional
machinery and equipment now in litigation.
B.A. 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 B.A. Green and installed in the sugar
central after the execution of the original mortgage deed, on April 27, 1927, together with
whatever additional equipment acquired with said loan. B.A. Green failed to obtain said loan.

Berkenkotter filed this appeal before the SC because his complaint against Cu Unijeng e Hijos
was dismissed by the CFI. The appellant contends that the installation of the machinery and
equipment claimed by him in the sugar central of the Mabalacat Sugar Company, Inc., was not
permanent in character inasmuch as B.A. Green, in proposing to him to advance the money for
the purchase thereof, made it appear that in case B.A. Green should fail to obtain an additional
loan from Cu Unjieng e Hijos, said machinery and equipment would become security therefor,
said B.A. Green binding himself not to mortgage nor encumber them to anybody until said
plaintiff be fully reimbursed for the corporation's indebtedness to him.
ISSUE
WON the additional machinery and equipment, as improvement incorporated with the central
are subject to the mortgage deed executed in favor of the defendants Cu Unjieng e Hijos
HELD
YES.
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 par. 5 (now Art. 415 par. 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 (Art. 1877)
The fact that B.A. Green bound himself to the plaintiff B.H. Berkenkotter to hold said machinery
and equipment as security for the payment of the latter's credit and to refrain from mortgaging or
otherwise encumbering them until Berkenkotter has been fully reimbursed therefor, is not
incompatible with the permanent character of the incorporation of said machinery and
equipment with the sugar central of the Mabalacat Sugar Co., Inc., as nothing could prevent
B.A. Green from giving them as security at least under a second mortgage.
As to the alleged sale of said machinery and equipment to the plaintiff and appellant after they
had been permanently incorporated with sugar central of the Mabalacat Sugar Co., Inc., and
while the mortgage constituted on said sugar central to Cu Unjieng e Hijos remained in force,
only the right of redemption of the vendor Mabalacat Sugar Co., Inc., in the sugar central with
which said machinery and equipment had been incorporated, was transferred thereby, subject
to the right of the defendants Cu Unjieng e Hijos under the first mortgage.
ENRIQUE LOPEZ vs. VICENTE OROSA, JR. and PLAZA THEATRE, INC.
[G.R. Nos. L-10817-18, February 28, 1958]
FELIX, J.:

FACTS:
Enrique Lopez is a resident of Balayan, Batangas, doing business under the trade name of
Lopez-Castelo Sawmill. Sometime in May, 1946, Vicente Orosa invites the petitioner to make an
investment in the theater business. It was estimated that Orosa, his family and close friends
were organizing a corporation to be known as Plaza Theatre Inc. (PTI). Despite Lopezs
expression of unwillingness, he agreed to supply the lumber necessary for the construction.
Lopez further agreed that payment therefore would be on demand and not cash on delivery
basis. He delivered the supply on May 17, 1946 up to Dec. 4 of the same year. The total cost of
lumber delivered amounted to P62, 255.85. Lopez was paid only P20, 848.50 thus leaving a
balance of P41, 771.35. As Lopez was pressing for the payment, Belarmino Rustia, the
president of the corporation, promised to obtain a bank loan by mortgaging the properties of the
Plaza Theatre, out of which said amount of P41, 771.35 would be satisfied, and to which
assurance Lopez had to accede. Still unable to pay, Vicente Orosa execute a deed of
assignment of his 420 shares of stocks at P100 per share, all due to Lopezs persistent
demand. Since the obligation is still unsettled Lopez filed a complaint with the Court of First
Instance of Batangas which ruled under his favor, making Orosa and PTI, jointly and severally
liable for the remaining amount. Hence this petition.
ISSUE/S:
1 Whether or not the lien for the value of the material attaches to the building alone and
does not extend to the land.
2 Whether or not the Court of First Instance and Court of Appeals erred in providing the
material mans claim superior to the mortgage executed in favor of the surety company
not only on the building but also on the land.
HOLDING & RATIO DECIDENDI:
YES, THE LIEN IN FAVOR OF APPELLANT FOR THE UNPAID VALUE OF THE LUMBER
USED IN THE CONSTRUCTION OF THE BUILDING ATTACHES ONLY TO SAID
STRUCTURE AND TO NO OTHER PROPERTY OF THE OBLIGOR. A close examination of
the provision of the Civil Code particularly Article 1923, invoked by appellant reveals that the law
gives preference to unregistered refectionary credits only with respect to the real estate upon
which the refection or work was made. This being so, the inevitable conclusion must be that the
lien so created attaches merely to the immovable property for the construction or repair of which
the obligation was incurred. A building is an immovable property, irrespective of whether or not
said structure and the land on which it is adhered to belong to the same owner. Considering the
conclusion thus arrived, the material man's lien could be charged only to the building for which
the credit was made or which received the benefit of refection. The lower court did not err in
holding that the interest of the mortgagee over the land is superior and cannot be made
subject to the said material man's lien. Wherefore, and on the strength of the foregoing
considerations, the decision appealed from is hereby affirmed.
ASSOCIATED INSURANCE AND SURETY COMPANY V. IYA, ET. AL
103 SCRA 972
G.R. Nos. L-10837-38 May 30, 1958
FACTS:
Spouses Valino were the owners of a house, payable on installments from Philippine Realty
Corporation. To be able to purchase on credit rice from NARIC, they filed a surety bond
subscribed by petitioner and therefor, they executed an alleged chattel mortgage on the house

in favor of the surety company. The spouses didnt own yet the land on which the house was
constructed on at the time of the undertaking. After being able to purchase the land, to be able
to secure payment for indebtedness, the spouses executed 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 werent able to pay the surety company despite demands and thus, the company
foreclosed the chattel mortgage. It later learned of the real estate mortgage over the house and
lot secured by the spouses. This prompted the company to file an action against the spouses.
Also, Iya filed another civil action against the spouses, asserting that she has a better right over
the property. The trial court heard the two cases jointly and it held that the surety company had
a preferred right over the building as since when the chattel mortgage was secured, the land
wasnt owned yet by the spouses making the building then a chattel and not a real property.
Issue: Whether the house can be the subject of a chattel mortgage.
Held:
The building is subject to the real estate mortgage, in favour of Iya. Iyas right to foreclose not
only the land but also the building erected thereon is recognised.
While it is true that real estate connotes the land and the building constructed thereon, it is
obvious that the inclusion of the building, separate and distinct from the land, in the enumeration
of what may constitute real properties (Article 415), could only mean that a building is by itself
an immovable property. Moreover, in view of the absence of any specific provision to the
contrary, a building is an immovable property irrespective of whether or not said structure and
the land on which it is adhered to belong to the same owner.
A building certainly cannot be divested of its character of a realty by the fact that the land on
which it is constructed belongs to another.
In the case at bar, as personal properties could only be the subject of a chattel mortgage and as
obviously the structure in question is not one, the execution of the chattel mortgage covering
said building is clearly invalid and a nullity. While it is true that said document was
correspondingly registered in Chattel Mortgage Registry of Rizal, this act produced no effect
whatsoever, for where the interest conveyed is in the nature of real property, the registration of
the document in the registry of chattels is merely a futile act. Thus, the registration of the chattel
mortgage of a building of strong materials produced no effect as far as the building is
concerned.
TUMALAD V. VICENCIO
Although a building is an immovable; the parties to a contract may by agreement treat as
personal property that which by nature is a real property however they are estopped
from subsequently claiming otherwise.

FACTS:
Alberta Vicencio and Emiliano Simeon received a loan of P4, 800 from Gavino and Generosa
Tumalad. To guaranty said loan, Vicencio executed a chattel mortgage in favor of Tumalad over
their house of strong materials which stood on a land which was rented from the Madrigal &
Company, Inc. When Vicencio defaulted in paying, the house was extrajudicially foreclosed,
pursuant to their contract. It was sold to Tumalad and they instituted a Civil case in the
Municipal Court of Manila to have Vicencio vacate the house and pay rent.
The MTC decided in favor of Tumalad ordering Vicencio to vacate the house and pay rent until
they have completely vacated the house. Vicencio is questioning the legality of the chattel
mortgage on the ground that 1) the signature on it was obtained thru fraud and 2) the mortgage
is a house of strong materials which is an immovable therefore can only be the subject of a
REM. On appeal, the CFI found in favor of Tumalad, and since the Vicencio failed to deposit the
rent ordered, it issued a writ of execution, however the house was already demolished pursuant
to an order of the court in an ejectment suit against Vicencio for non-payment of rentals. Thus
the case at bar.

ISSUE:
Whether or not the chattel mortgage is void since its subject is an immovable

HELD:
NO.
Although a building is by itself an immovable property, parties to a contract may treat as
personal property that which by nature would be real property and it would be valid and good
only insofar as the contracting parties are concerned. By principle of estoppel, the owner
declaring his house to be a chattel may no longer subsequently claim otherwise.
When Vicencio executed the Chattel Mortgage, it specifically provides that the mortgagor cedes,
sells and transfers by way of Chattel mortgage. They intended to treat it as chattel therefore are
now estopped from claiming otherwise. Also the house stood on rented land which was held in
previous jurisprudence to be personalty since it was placed on the land by one who had only
temporary right over the property thus it does not become immobilized by attachment.
[Vicencio though was not made to pay rent since the action was instituted during the period of
redemption therefore Vicencio still had a right to remain in possession of the property]
MAKATI LEASING AND FINANCE CORP. V. WEAREVER TEXTILE MILLS, INC.

Parties to a contract may by agreement treat as personal property that which by nature is
a real property, as long as no interest of 3rd party would be prejudiced.

FACTS:
To obtain financial accommodations from Makati Leasing, Wearever Textile discounted and
assigned several receivables under a Receivable Purchase Agreement with Makati Leasing. To
secure the collection of receivables, it executed a chattel mortgage over several raw materials
and a machinery Artos Aero Dryer Stentering Range (Dryer).
Wearever defaulted thus the properties mortgaged were extrajudicially foreclosed. The sheriff,
after the restraining order was lifted, was able to enter the premises of Wearever and removed
the drive motor of the Dryer. The CA reversed the order of the CFI, ordering the return of the
drive motor since it cannot be the subject of a replevin suit being an immovable bolted to the
ground. Thus the case at bar.

ISSUE:
Whether the dryer is an immovable property

HELD: NO
The SC relied on its ruling in Tumalad v. Vicencio, that if a house of strong materials can be the
subject of a Chattel Mortgage as long as the parties to the contract agree and no innocent 3rd
party will be prejudiced then moreso that a machinery may treated as a movable since it is
movable by nature and becomes immobilized only by destination. And treating it as a chattel by
way of a Chattel Mortgage, Wearever is estopped from claiming otherwise.

Board of Assessment Appeals v. MERALCO [G.R. No. L-15334. January 31, 1964.]

Jun28
En Banc, Paredes (J): 8 concur, 1 concur in result, 1 took no part.

Facts: On 20 October 1902, the Philippine Commission enacted Act 484 which authorized the
Municipal Board of Manila to grant a franchise to construct, maintain and operate an electric

street railway and electric light, heat and power system in the City of Manila and its suburbs to
the person or persons making the most favorable bid. Charles M. Swift was awarded the said
franchise on March 1903, the terms and conditions of which were embodied in Ordinance 44
approved on 24 March 1903. Meralco became the transferee and owner of the franchise.
Meralcos 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. Meralco
has constructed 40 of these steel towers within Quezon City, on land belonging to it.
On 15 November 1955, City Assessor of Quezon City declared the aforesaid steel towers for
real property tax under Tax Declaration 31992 and 15549. After denying Meralcos petition to
cancel these declarations an appeal was taken by Meralco to the Board of Assessment Appeals
of Quezon City, which required Meralco to pay the amount of P11,651.86 as real property tax on
the said steel towers for the years 1952 to 1956. Meralco paid the amount under protest, and
filed a petition for review in the Court of Tax Appeals which rendered a decision on 29
December 1958, ordering the cancellation of the said tax declarations and the City Treasurer of
Quezon City to refund to Meralco the sum of P11,651.86. The motion for reconsideration having
been denied, on 22 April 1959, the petition for review was filed.
Issue: Whether or not the steel towers of an electric company constitute real property for the
purposes of real property tax.
Held: The steel towers of an electric company dont constitute real property for the purposes of
real property tax.
Steel towers are not immovable property under paragraph 1, 3 and 5 of Article 415.
The steel towers or supports do not come within the objects mentioned in paragraph 1, because
they do not constitute buildings or constructions adhered to the soil. They are not constructions
analogous to buildings nor adhering to the soil. As per description, given by the lower court, they
are removable and merely attached to a square metal frame by means of bolts, which when
unscrewed could easily be dismantled and moved from place to place.
They cannot be included under paragraph 3, as they are not attached to an immovable in a
fixed manner, and they can be separated without breaking the material or causing deterioration
upon the object to which they are attached. Each of these steel towers or supports consists of
steel bars or metal strips, joined together by means of bolts, which can be disassembled by
unscrewing the bolts and reassembled by screwing the same.
These steel towers or supports do not also fall under paragraph 5, for they are not machineries
or receptacles, instruments or implements, and even if they were, they are not intended for
industry or works on the land.

Petitioner is not engaged in an industry or works on the land in which the steel supports or
towers are constructed.
The Supreme Court affirmed the decision appealed from, with costs against the petitioners.

MERALCO V. BOARD OF ASSESSMENT APPEALS


FACTS:
This case is about the imposition of the realty tax on two oil storage tanks installed in 1969 by
Manila Electric Company on a lot in San Pascual, Batangas which it leased in 1968 from Caltex
(Phil.), Inc. The tanks are within the Caltex refinery compound.
It is not anchored or welded to the concrete circular wall. Its bottom plate is not attached to any
part of the foundation by bolts, screws or similar devices.
The municipal treasurer required Meralco to pay realty taxes on both tanks.
ISSUE:
WON the tanks should be considered as real property.
HELD:
The two storage tanks are not embedded in the land, they may, nevertheless, be considered as
improvements on the land, enhancing its utility and rendering it useful to the oil industry. It is
undeniable that the two tanks have been installed with some degree of permanence as
receptacles for the considerable quantities of oil needed by Meralco for its operations.

Caltex vs Central Board of Assessment Appeals


Posted on June 24, 2013
Caltex vs Central Board of Assessment Appeals & City Assessor of Pasay
GR No. L-50466
May 31, 1982
This case is about the realty tax on machinery and equipment installed by Caltex (Philippines)
Inc., in its gas stations located on leased land.
FACTS
Caltex loaned machines and equipment to gas station operators under an appropriate lease

agreement or receipt. The lease contract stipulated that upon demand, the operators shall
return to Caltex the machines and equipment in good condition as when received, ordinary wear
and tear excepted.
The lessor of the land, where the gas station is located, does not become the owner of the
machines and equipment installed therein. Caltex retains the ownership thereof during the term
of the lease.
The City Assessor of Pasay City characterized the said items of gas station equipment and
machinery as taxable realty. However, the City Board of Tax Appeals ruled that they are
personalty. The Assessor appealed to the Central Board of Assessment Appeals.
The Board held on June 3, 1977 that the said machines are real property within the meaning of
Ses. 3(k) & (m) and 38 of the Real Property Tax Code, PD 464, and that the Civil Code
definitions of real and personal property in Articles 415 and 416 are not applicable in this case.
ISSUE
WON the pieces of gas station equipment and machinery permanently affixed by Caltex to its
gas station and pavement should be subject to realty tax.

HELD:
The Court held that the said equipment and machinery, as appurtenances to the gas station
building or shed owned by Caltex (as to which it is subject to realty tax) and which fixtures are
necessary to the operation of the gas station, for without them the gas station would be useless,
and which have been attached or affixed permanently to the gas station site or embedded
therein, are taxable improvements and machinery within the meaning of the Assessment Law
and the Real Property Tax Code. Under the Real Property Tax Code, improvements are
defined as valuable addition made to property or an amelioration in its condition, amounting to
more than mere repairs or replacement of waste, costing labor or capital and intended to
enhance its value, beauty or utility or to adapt it for new or further purposes. On the other
hand, machinery is embraces machines, mechanical contrivances, instruments, appliances
and apparatus attached to the real estate. Improvements on land are commonly taxed as
realty even though for some purposes they might be considered personalty.
SIBAL V. VALDEZ
August 4, 1927

FACTS:
On 14 December 1924, action was commenced in the CFI of the Province of Tarlac. The plaintiff
alleged that the deputy sheriff of Tarlac Province attached and sold to Valdez the sugar cane
planted by the plaintiff and his tenants on 7 parcels of land, and that within 1 year from the date
of the attachment and sale the plaintiff ordered to redeem said sugar cane and tendered to
Valdez the amount sufficient to cover the price paid by the latter, with taxes and interests, and
that Valdez refused to accept the money and return the sugar cane to the plaintiff. After hearing
and on 28 April 1926, the judge (Lukban) rendered judgment in favor of the defendant holding
that the sugar cane in question was personal property and, as such, was not subject to
redemption; among others.

HELD:
For the purpose of attachment and execution, and for the purposes of the Chattel Mortgage
Law, ungathered products have the nature of personal property. The lower court, therefore,
committed no error in holding that the sugar cane in question was personal property and, as
such, was not subject to redemption.
US vs Carlos
G.R. No. 6295, 21 Phil 543
September 1, 1911

FACTS: Ignacio Carlos has been a consumer of electricity furnished by the Manila Electric
Railroad and Light Company for a building containing the residence of the accused and 3 other
residences. Believing that more light is consumed than what is shown in the meter installed, the
company installed an additional meter on the pole outside Carloss house to compare the actual
consumption. They found out that Carlos used a jumper. Further, a jumper was found in a
drawer of a small cabinet in the room of the defendants house where the meter was installed. In
the absence of any explanation for his possession of said device, the presumption raised was
that Carlos was the owner of the device whose only use was to deflect the flow of electricity,
causing loss to the Meralco of over 2000 kilowatts of current.

Accused of theft, Carloss defense was that electricity was an unknown force, not a fluid, and
being intangible, could not be the object of theft.
ISSUE: Whether the court erred in declaring that electricity can be the object of theft.
HELD:

While electric current is not a fluid, still, its manifestations and effects like those of gas may be
seen and felt. The true test of what may be stolen is not whether it is corporeal or incorporeal,
but whether, being possessed of value, a person other than the owner may appropriate the
same. Electricity, like gas, is a valuable merchandise and may thus be stolen. (See also U.S. v.
Tambunting, 41 Phil. 364).
The court further ruled that electricity, the same as gas, is a valuable article of merchandise,
bought and sold like other personal property and is capable of appropriation by another. It is
also susceptible of being severed from a mass or larger quantity and of being transported from
place to place. Hence, no error was committed by the trial court in holding that electricity is a
subject of larceny.

INVOLUNTARY INSOLVENCY OF STROCHECKER V. RAMIREZ

FACTS: Three mortgages were seeking preference in the lower court. The one of Fidelity and
Surety Co. alleged that it should be given preference as the mortgage in favor of Ramirez was
not valid as the subject of the mortgage cannot be a proper subject thereof. The subject
involved in the 1st mortgage is an interest in business of a drug store.
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 the nature of the property
mortgaged which is one-half interest in the business, such interest is a personal property
capable of appropriation and not included in the enumeration of real properties in 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 description contained in the document is


sufficient. The law (sec. 7, Act 1508) requires only a description of the mortgaged property shall
be such as to enable the parties to the mortgage, or any other person, after reasonable inquiry
and investigation, to identify the same. In the case at bar, his half interest in the drug business
known as Antigua Botica Ramirez, located at Calle Real Nos. 123 and 125, District of
Intramuros, Manila Philippine Islands" is sufficient.
3. Article 1922 (1-3) of the Civil Code applicable only to mortgage property in possession
Numbers 1, 2, and 3 of the article 1922 of the Civil Code are not applicable as neither the

debtor, nor himself, is in possession of the property mortgaged, which is, and since the
registration of the mortgage has been, legally in possession of the surety company
4. Stipulation about personal property not a mortgage upon property - In no way can the
mortgage executed be given effect as of the date of the sale of the store in question; as there
was a mere stipulation about personal security during said date, but not a mortgage upon
property, and much less upon the property in question.

U.S. v. Tambunting
41 Phil 364
DOCTRINE: There is nothing in the nature of gas used for illuminating purposes which renders
it incapable of being feloniously taken and carried away. It is a valuable article of merchandise,
bought and sold like other personal property, susceptible of being severed from a mass or larger
quantity and of being transported from place to place. Likewise water which is confined in pipes
and electricity which is conveyed by wires are subjects of larceny.
FACTS:
This appeal was instituted for the purpose of reversing a judgment of the CFI, finding the
accused, Manuel Tambunting, guilty of stealing a quantity of gas belonging to the Manila Gas
Corporation, and sentencing him to undergo imprisonment with the accessories prescribed by
law; to indemnify the said corporation, with subsidiary imprisonment in case of insolvency; and
to pay the costs.
The evidence submitted in behalf of the prosecution shows that in January of the year 1918, the
accused and his wife became occupants of the upper floor of the house situated at No. 443,
Calle Evangelista, Manila. In this house the Manila Gas Corporation had previously installed
apparatus for the delivery of gas on both the upper and lower floors, consisting of the necessary
piping and a gas meter, which last mentioned apparatus was installed below. When the
occupants at whose request this installation had been made vacated the premises, the gas
company disconnected the gas pipe and removed the meter, thus cutting off the supply of gas
from said premises.
Upon June 2, 1919, one of the inspectors of the gas company visited the house in question and
found that gas was being used, without the knowledge and consent of the gas company, for
cooking in the quarters occupied by the defendant and his wife: to effect which a short piece of
iron pipe had been inserted in the gap where the gas meter had formerly been placed, and
piece of rubber tubing had been used to connect the gas pipe of rubber tubing had been used to
connect the gas pipe in kitchen with the gas stove, or plate, used for cooking.
At the time this discovery was made, accused Tambunting was not at home. However, he
presently arrived and admitted to the agent to the gas company that he had made the
connection with the rubber tubing between the gas pipe and the stove, though he denied
making the connection below. He also admitted that he knew he was using gas without the
knowledge of the company and that he had been so using it for probably two or three months.
The clandestine use of gas by the accused in the manner stated is thus established in our

opinion beyond a doubt; and inasmuch as the animo lucrandi is obvious.


ISSUE:
Whether gas can be the subject to larceny. -- YES
HELD:.
The right of the ownership of electric current is secured by article 517 and 518 of the Penal
Code; the application of these articles in cases of subtraction of gas, a fluid used for lighting,
and in some respects resembling electricity, is confirmed by the rule laid down in the decisions
of the SC of Spain, construing and enforcing the provisions of articles 530 and 531 of the Penal
Code of that country, articles identical with articles 517 and 518 of the code in force in these
Islands. These expressions were used in a case which involved the subtraction and
appropriation of electrical energy and the court held, in accordance with the analogy of the case
involving the theft of gas, that electrical energy could also be the subject of theft.
In this connection it will suffice to quote the following from the topic "Larceny," at page 34, Vol.
17, of Ruling Case Law: There is nothing in the nature of gas used for illuminating purposes
which renders it incapable of being feloniously taken and carried away. It is a valuable article of
merchandise, bought and sold like other personal property, susceptible of being severed from a
mass or larger quantity and of being transported from place to place. Likewise water which is
confined in pipes and electricity which is conveyed by wires are subjects of larceny.
Rubiso v. Rivera
37 Phil 72
DOCTRINE: The requisite of registration in the registry, of the purchase of the vessel, is
necessary and indispensable in order that the purchasers rights may be maintained
against a third person.
FACTS:
Rubiso filed a complaint against Rivera for the recovery of a pilot boat. He alleged that he is
the rightful owner of a pilot boat, which was stranded and recovered by Rivera. The latter
refused to return the said boat as he alleged too that he was the owner thereof.
It was known that the original owners of the boat had secretly sold the pilot boat to Rivera on an
earlier date than the sale in a public auction to Rubiso. Nonetheless, material is the fact that the
entry into the customs registry of the sale of the boat was later than the recording of the sale to
Rubiso.
ISSUE:
WON it is Rubiso or Rivera who has a better right to the boat? -- Rubiso has a better right
HELD:
The requisite of registration in the registry, of the purchase of the vessel, is necessary and
indispensable in order that the purchasers rights may be maintained against a third
person.
Such registration is required both by the Code of Commerce and Act 1900. It
is undeniable, ergo, that Rivera doesnt have a better right than Rubiso over the pilot boat.
Ships and vessels, whether moved by steam or by sail, partake, to a certain extent of
the nature and conditions of real property, on account of their value and importance in world

commerce; and for this, the provisions of the Code of Commerce are nearly identical with Article
1473 of the Civil Code
Mindanao Bus Co. v. City Assessor and Treasurer
G.R. No. L-17870
DOCTRINE: Movable equipment, to be immobilized in contemplation of Article 415 of the Civil
Code, must be the essential and principal elements of an industry or works which are carried on
in a building or on a piece of land. Thus, where the business is one of transportation, which is
carried on without a repair or service shop, and its rolling equipment is repaired or serviced in a
shop belonging to another, the tools and equipment in its repair shop which appear movable are
merely incidentals and may not be considered immovables, and, hence, not subject to
assessment as real estate for purposes of the real estate tax.
FACTS:
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.
The 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.
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,
The City Assessor of CDO then assessed a P4,400 realty tax on said machineries and repair
equipment. This was then appealed to the Court of Tax Appeals (CTA) who sustained the
respondent city assessor's ruling.
ISSUE:
Whether or not the machineries and the equipments are considered immobilized and thus
subject to a realty tax. -- NO
HELD:
The Supreme Court held a decision for the petition for review to be set aside and the
equipments in question declared not subject to assessment as real estate for the purposes of
the real estate tax.
The law that governs the determination of the question at issue is as follows:
Art. 415. The following are immovable property:
xxx

xxx

xxx

(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.
Said equipments are not considered immobilized as they are merely incidental, not essential
and principal to the business of the petitioner. The transportation business could be carried on
without repair or service shops of its rolling equipment as they can be repaired or services in
another shop belonging to another
Tsai v. CA
G.R. No. 120098
DOCTRINE: Even if the properties are immovable by nature, nothing detracts the parties from
treating them as chattels to secure an obligation under the principle of estoppel.
FACTS:
EVERTEX secured a loan from PBC, guaranteed by real estate and chattel
mortgage over a parcel of land where the factory stands, and the chattels located therein, as
included in a schedule attached to the mortgage contract. another loan was obtained
secured by a chattel mortgage over properties with similar descriptions listed in the first
schedule.
During the date of execution of the second mortgage. EVERTEX purchased
machineries and equipment.
Due to business reverses, EVERTEX filed for insolvency proceedings. It failed to
pay its obligation and thus, PBC initiated extrajudicial foreclosure of the mortgages.
PBC was the highest bidder in the public auctions, making it the owner of the
properties. It then leased the factory premises to Tsai.
Afterwards, EVERTEX sought the annulment of the sale and conveyance of the
properties to PBC as it was allegedly a violation of the insolvency law.
The RTC held that the lease and sale were irregular as it involved properties not
included in the schedule of the mortgage contract.
ISSUE:
Whether or not the (immovable) properties in question can be entered into a chattel mortgage. -YES
HELD:

An immovable may be considered a personal property if there is a stipulation as when it is used


as security in the payment of an obligation where a chattel mortgage is executed over it, as in
the case at bar. While it is true that the controverted properties appear to be immobile, a perusal
of the contract of real estate mortgage and chattel mortgage by the parties gives a contrary
indication. Both the trial and appellate courts show that the intention was to treat the
machineries as movables or personal property.
Assuming that the properties were considered immovables, nothing detracts the parties from
treating it as chattels to secure an obligation under the principle of estoppel.
Navarro v. Pineda
9 SCRA 631
DOCTRINE: Estoppel, in that "the parties have so expressly agreed" in the mortgage to
consider the house as chattel "for its smallness and mixed materials of sawali and wood".
FACTS:
December 14, 1959, Rufino G. Pineda and his mother Juana Gonzales (married to Gregorio
Pineda), borrowed from plaintiff Conrado P. Navarro, the sum of P2,500.00, payable 6 months
after said date or on June 14, 1959. To secure the indebtedness, Rufino executed a document
captioned "DEED OF REAL ESTATE and CHATTEL MORTGAGES", whereby Juana Gonzales,
by way of Real Estate Mortgage hypothecated a parcel of land, belonging to her, registered with
the Register of Deeds of Tarlac, under Transfer Certificate of Title No. 25776, and Rufino G.
Pineda, by way of Chattel Mortgage, mortgaged his two-story residential house, having a floor
area of 912 square meters, erected on a lot belonging to Atty. Vicente Castro, located at Bo.
San Roque, Tarlac, Tarlac; and one motor truck, registered in his name, under Motor Vehicle
Registration Certificate No. A-171806. Both mortgages were contained in one instrument, which
was registered in both the Office of the Register of Deeds and the Motor Vehicles Office of
Tarlac.
After failing to settle amount due, respondent was then granted an extension on June 30,1960
and consequently July 30th of the same year for still being unable to comply. Rufino Pineda
then issued a document entitled "Promise," stating that defendant would no longer ask for
further extension and there would be no need for any formal demand, and plaintiff could
proceed to take whatever action he might desire to enforce his rights, under the said mortgage
contract.
On August 10, 1960, plaintiff filed a complaint for foreclosure of the mortgage and for damages,
which consisted of liquidated damages in the sum of P500.00 and 12% per annum interest on
the principal, effective on the date of maturity, until fully paid. Defendants admit that the loan is
overdue but deny that portion of paragraph 4 of the First Cause of Action which states that the
defendants unreasonably failed and refuse to pay their obligation to the plaintiff the truth being
the defendants are hard up these days and pleaded to the plaintiff to grant them more time
within which to pay their obligation and the plaintiff refused;
WHEREFORE, in view of the foregoing it is most respectfully prayed that this Honorable Court
render judgment granting the defendants until January 31, 1961, within which to pay their
obligation to the plaintiff.
November 11, 1960, however, the parties submitted a Stipulation of Facts, wherein the

defendants admitted the indebtedness, the authenticity and due execution of the Real Estate
and Chattel Mortgages; that the indebtedness has been due and unpaid since June 14, 1960;
that a liability of 12% per annum as interest was agreed, upon failure to pay the principal when
due and P500.00 as liquidated damages; that the instrument had been registered in the
Registry of Property and Motor Vehicles Office, both of the province of Tarlac.
ISSUE:
W/N the residential house, subject of the mortgage therein, can be considered a Chattel and the
propriety of the attorney's fees.
HELD:
The court ruled "a property may have a character different from that imputed to it in said articles.
It is undeniable that the parties to a contract may by agreement, treat as personal property that
which by nature would be real property" (Standard Oil Co. of N.Y. v. Jaranillo, 44 Phil. 632633)."There can not be any question that a building of mixed materials may be the subject of a
chattel mortgage, in which case, it is considered as between the parties as personal property. ...
The matter depends on the circumstances and the intention of the parties". "Personal property
may retain its character as such where it is so agreed by the parties interested even though
annexed to the realty ...". (42 Am. Jur. 209-210, cited in Manarang, et al. v. Ofilada, et al., G.R.
No. L-8133, May 18, 1956; 52 O.G. No. 8, p. 3954.) Moreover, the court continues and makes
plain that it "is good only insofar as the contracting parties are concerned. It is based partly,
upon the principles of estoppel ..." (Evangelista v. Alto Surety, No. L-11139, Apr. 23, 1958).
WHEREBY, previous judgment is hereby AFFIRMED costs against appelant.
Prudential Bank v. Panis
153 SCRA 390
FACTS:
Plaintiff-spouses Magcale secured two loans over a 2-storey residential building.
For failure of the plaintiffs to pay their obligation to defendant Bank after it became due, the
deed of the Real Estate Mortgage were extrajudicially foreclosed.
ISSUE: WON a valid real estate mortgage can be constituted on the building. -- YES
HELD:
Inclusion of building separate and distinct from land, in the provision of law can only mean that a
building is by itself an immovable property. A building by itself may be mortgaged apart from the
land on which it has been built.
Punsalan, Jr. v. Vda. De Lacsamana
121 SCRA 331
DOCTRINE: Buildings are always immovable under the Civil Code. Separate treatment by the
parties of building from the land in which it stood does not change the immovable character of
the building.
FACTS:
Punsalan was the owner of a piece of land, which he mortgaged in favor 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 the highest bidder.
On a relevant date, while Punsalan was still the possessor of the land, it secured a permit for
the construction of a warehouse.
A deed of sale was executed between PNB and Punsalan. This contract was amended to
include the warehouse and the improvement thereon. By virtue of these instruments,
respondent Lacsamana secured title over the property in her name.
Petitioner then sought for the annulment of the deed of sale. Among his allegations was that the
bank did not own the building and thus, it should not be included in the said deed.
Petitioners complaint was dismissed for improper venue. The trial court held that the action
being filed in actuality by petitioner is a real action involving his right over a real property.
ISSUE:
Whether or not the warehouse is an immovable and must be tried in the province where the
property lies.
HELD:
Warehouse claimed to be owned by petitioner is an immovable or real property. Buildings
are always immovable under the Civil Code. A building treated separately from the land on
which it is stood is immovable property and the mere fact that the parties to a contract seem to
have dealt with it separate and apart from the land on which it stood did not change its character
as immovable property.
Leung Yee v. Strong Machinery Co.
G.R. No. L-11658
DOCTRINE: The mere fact that the parties decided to deal with the building as personal
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 had any effect on the building.
FACTS:
Compaia Agricola Filipina bought several rice-cleaning machinery from a machinery company,
Frank L. Strong Machinery Company and executed a chattel mortgage to secure payment of the
purchase price. The deed of mortgage includes the building where the machinery was installed
without any reference to the land on which it stood. Since Compaia Agricola Filipina failed to
pay when due, the mortgaged property was sold by the sheriff and was bought by the
machinery company.
Few weeks later, Compaia Agricola Filipina executed a deed of sale of the land where the
building stood to the machinery company. In effect, the machinery company possessed the
building when the sale took place and continued its possession ever since.
When the chattel mortgage was executed, Compaia Agricola Filipina executed another
mortgage in favor of Yee over the building to pay its debt to the machinery company. Since
Compaia Agricola Filipina failed to pay when due, Yee secured a judgment to levy execution
upon the building and bought the building at the sheriffs sale; Yee secured the sheriffs
certificate of sale and registered it in the land registry.

When the execution was levied upon the building, the machinery company filed with the sheriff a
sworn statement setting up its claim of title and demanding the release of property from the levy.
On the other hand, Yee filed an action to recover possession of the building from the machinery
company. Trial court ruled in favor of the machinery company on the basis of Article 1473 of the
Civil Code; it ruled that the machinery company registered the title to the building prior to the
registration date of Yees certificate.
ISSUE:
Whether or not the nature of property is changed by its registration in the Chattel Mortgage
Registry. -- NO
HELD:
The registry under Article 1473 of the Civil Code refers to registry of real property and the
annotation or inscription of a deed of sale of real property in a chattel mortgage registry cannot
be given the legal effect of an inscription in the registry of real property.
The Chattel Mortgage Law contemplates mortgages of personal property. The sole purpose and
object of the chattel mortgage registry is the registration of personal property mortgages
executed in the manner and form prescribed in the statute.
In this case, the building where the rice-cleaning machinery was installed was real property. The
mere fact that the parties dealt with it as separate and apart from the land on which it stood
does not change its character as real property. Neither the original registry of the building in the
chattel mortgage nor the annotation of sale of the mortgaged property in the registry had any
effect on the buildings nature as immovable property.
Bicerra v. Teneza
G.R. No. L-16218, 6 SCRA 648
DOCTRINE: A house is classified as immovable property by reason of its adherence to the soil
on which it is built (Article 415, paragraph 1, Civil Code). This classification holds true
regardless of the fact that the house may be situated on land belonging to a different owner. But
once the house is demolished it ceases to exist, hence its character as an immovable likewise
ceases.
FACTS:
The Bicerras are supposedly the owners of the house (PhP 20,000) built on a lot owned by
them in Lagangilang, Abra which the Tenezas forcibly demolished in January 1957, claiming to
be the owners thereof. The materials of the house were placed in the custody of the barrio
lieutenant. The Bicerras filed a complaint claiming actual damages of P200, moral and
consequential damages amounting to P600, and the costs. The CFI Abra dismissed the
complaint claiming that the action was within the exclusive (original) jurisdiction of the Justice of
the Peace Court of Lagangilang, Abra.
The Supreme Court affirmed the order appealed. Having been admitted in forma pauperis, no
costs were adjudged.
ISSUE:
WON the house is immovable property even if it is on the land of another

HELD:
House is immovable property even if situated on land belonging to a different owner; Exception,
when demolished.
Fels Energy, Inc. v. Province of Batangas, et al.
G.R. No. 168557
DOCTRINE: Article 415 (9) of the New Civil Code provides that docks and structures which,
though floating, are intended by their nature and object to remain at a fixed place on a river,
lake, or coast are considered immovable property. Thus, power barges are categorized as
immovable property by destination, being in the nature of machinery and other implements
intended by the owner for an industry or work which may be carried on in a building or on a
piece of land and which tend directly to meet the needs of said industry or work.
FACTS:
On January 18, 1993, National Power Corporation (NPC) entered into a lease contract with
Polar Energy, Inc. over 330 MW diesel engine power barges moored at Balayan Bay in
Calaca, Batangas. The contract, denominated as an Energy Conversion Agreement, was for a
period of five years. Article 10 states that NPC shall be responsible for the payment of taxes.
(other than (i) taxes imposed or calculated on the basis of the net income of POLAR and
Personal Income Taxes of its employees and (ii) construction permit fees, environmental permit
fees and other similar fees and charges. Polar Energy then assigned its rights under the
Agreement to Fels despite NPCs initial opposition.
FELS received an assessment of real property taxes on the power barges from Provincial
Assessor Lauro C. Andaya of Batangas City. FELS referred the matter to NPC, reminding it of
its obligation under the Agreement to pay all real estate taxes. It then gave NPC the full power
and authority to represent it in any conference regarding the real property assessment of the
Provincial Assessor. NPC filed a petition with the Local Board Assessment Appeals (LBAA). The
LBAA ordered Fels to pay the real estate taxes. The LBAA ruled that the power plant facilities,
while they may be classified as movable or personal property, are nevertheless considered real
property for taxation purposes because they are installed at a specific location with a character
of permanency. The LBAA also pointed out that the owner of the bargesFELS, a private
corporationis the one being taxed, not NPC. A mere agreement making NPC responsible for
the payment of all real estate taxes and assessments will not justify the exemption of FELS;
such a privilege can only be granted to NPC and cannot be extended to FELS. Finally, the LBAA
also ruled that the petition was filed out of time.
Fels appealed to the Central Board Assessment Appeals (CBAA). The CBAA reversed and ruled
that the power barges belong to NPC; since they are actually, directly and exclusively used by it,
the power barges are covered by the exemptions under Section 234(c) of R.A. No. 7160. As to
the other jurisdictional issue, the CBAA ruled that prescription did not preclude the NPC from
pursuing its claim for tax exemption in accordance with Section 206 of R.A. No. 7160. Upon MR,
the CBAA reversed itself.
ISSUE: Whether or not barges are considered as real property, thus can be subject to real
property tax -- YES
HELD:
The CBAA and LBAA power barges are real property and are thus subject to real property tax.
In Consolidated Edison Company of New York, Inc., et al. v. The City of New York, et al., a

power company brought an action to review property tax assessment. On the citys motion to
dismiss, the Supreme Court of New York held that the barges on which were mounted gas
turbine power plants designated to generate electrical power, the fuel oil barges which supplied
fuel oil to the power plant barges, and the accessory equipment mounted on the barges were
subject to real property taxation.
Moreover, Article 415 (9) of the New Civil Code provides that docks and structures which,
though floating, are intended by their nature and object to remain at a fixed place on a river,
lake, or coast are considered immovable property. Thus, power barges are categorized as
immovable property by destination, being in the nature of machinery and other implements
intended by the owner for an industry or work which may be carried on in a building or on a
piece of land and which tend directly to meet the needs of said industry or work.