Cases Property 1

Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-11658 February 15, 1918
LEUNG YEE, plaintiff-appellant,

vs.
FRANK L. STRONG MACHINERY COMPANY and J. G. WILLIAMSON, defendants-appellees.
Booram and Mahoney for appellant.

Williams, Ferrier and SyCip for appellees.
CARSON, J.:
The "Compañia Agricola Filipina" bought a considerable quantity of rice-cleaning machinery company from the defendant machinery
company, and executed a chattel mortgage thereon to secure payment of the purchase price. It included in the mortgage deed the
building of strong materials in which the machinery was installed, without any reference to the land on which it stood. The
indebtedness secured by this instrument not having been paid when it fell due, the mortgaged property was sold by the sheriff, in
pursuance of the terms of the mortgage instrument, and was bought in by the machinery company. The mortgage was registered in
the chattel mortgage registry, and the sale of the property to the machinery company in satisfaction of the mortgage was annotated
in the same registry on December 29, 1913.
A few weeks thereafter, on or about the 14th of January, 1914, the "Compañia Agricola Filipina" executed a deed of sale of the land
upon which the building stood to the machinery company, but this deed of sale, although executed in a public document, was not
registered. This deed makes no reference to the building erected on the land and would appear to have been executed for the
purpose of curing any defects which might be found to exist in the machinery company's title to the building under the sheriff's
certificate of sale. The machinery company went into possession of the building at or about the time when this sale took place, that is
to say, the month of December, 1913, and it has continued in possession ever since.
At or about the time when the chattel mortgage was executed in favor of the machinery company, the mortgagor, the "Compañia
Agricola Filipina" executed another mortgage to the plaintiff upon the building, separate and apart from the land on which it stood, to
secure payment of the balance of its indebtedness to the plaintiff under a contract for the construction of the building. Upon the
failure of the mortgagor to pay the amount of the indebtedness secured by the mortgage, the plaintiff secured judgment for that
amount, levied execution upon the building, bought it in at the sheriff's sale on or about the 18th of December, 1914, and had the
sheriff's certificate of the sale duly registered in the land registry of the Province of Cavite.
At the time when the execution was levied upon the building, the defendant machinery company, which was in possession, filed with
the sheriff a sworn statement setting up its claim of title and demanding the release of the property from the levy. Thereafter, upon
demand of the sheriff, the plaintiff executed an indemnity bond in favor of the sheriff in the sum of P12,000, in reliance upon which
the sheriff sold the property at public auction to the plaintiff, who was the highest bidder at the sheriff's sale.
This action was instituted by the plaintiff to recover possession of the building from the machinery company.
The trial judge, relying upon the terms of article 1473 of the Civil Code, gave judgment in favor of the machinery company, on the
ground that the company had its title to the building registered prior to the date of registry of the plaintiff's certificate.
Article 1473 of the Civil Code is as follows:
If the same thing should have been sold to different vendees, the ownership shall be transfer to the person who may have the first
taken possession thereof in good faith, if it should be personal property.
Should it be real property, it shall belong to the person acquiring it who first recorded it in the registry.
Should there be no entry, the property shall belong to the person who first took possession of it in good faith, and, in the absence
thereof, to the person who presents the oldest title, provided there is good faith.
The registry her referred to is of course the registry of real property, and it must be apparent that 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. By its express terms, the Chattel Mortgage Law contemplates and makes provision for mortgages of personal property; and
the sole purpose and object of the chattel mortgage registry is to provide for the registry of "Chattel mortgages," that is to say,
mortgages of personal property executed in the manner and form prescribed in the statute. The building of strong materials in which
the rice-cleaning machinery was installed by the "Compañia Agricola Filipina" was real property, and the mere fact that the parties
seem to have dealt with it separate and apart from the land on which it stood in no wise changed its character as real property. It
follows that neither the original registry in the chattel mortgage of the building and the machinery installed therein, not the
annotation in that registry of the sale of the mortgaged property, had any effect whatever so far as the building was concerned.
We conclude that the ruling in favor of the machinery company cannot be sustained on the ground assigned by the trial judge. We
are of opinion, however, that the judgment must be sustained on the ground that the agreed statement of facts in the court below
discloses that neither the purchase of the building by the plaintiff nor his inscription of the sheriff's certificate of sale in his favor was
made in good faith, and that the machinery company must be held to be the owner of the property under the third paragraph of the
above cited article of the code, it appearing that the company first took possession of the property; and further, that the building and
the land were sold to the machinery company long prior to the date of the sheriff's sale to the plaintiff.
It has been suggested that since the provisions of article 1473 of the Civil Code require "good faith," in express terms, in relation to
"possession" and "title," but contain no express requirement as to "good faith" in relation to the "inscription" of the property on the
registry, it must be presumed that good faith is not an essential requisite of registration in order that it may have the effect
contemplated in this article. We cannot agree with this contention. It could not have been the intention of the legislator to base the
preferential right secured under this article of the code upon an inscription of title in bad faith. Such an interpretation placed upon
the language of this section would open wide the door to fraud and collusion. The public records cannot be converted into
instruments of fraud and oppression by one who secures an inscription therein in bad faith. The force and effect given by law to an
inscription in a public record presupposes the good faith of him who enters such inscription; and rights created by statute, which are
predicated upon an inscription in a public registry, do not and cannot accrue under an inscription "in bad faith," to the benefit of the
person who thus makes the inscription.
Construing the second paragraph of this article of the code, the supreme court of Spain held in its sentencia of the 13th of May, 1908,
that:
This rule is always to be understood on the basis of the good faith mentioned in the first paragraph; therefore, it having been found
that the second purchasers who record their purchase had knowledge of the previous sale, the question is to be decided in
accordance with the following paragraph. (Note 2, art. 1473, Civ. Code, Medina and Maranon [1911] edition.)
Although article 1473, in its second paragraph, provides that the title of conveyance of ownership of the real property that is first
recorded in the registry shall have preference, this provision must always be understood on the basis of the good faith mentioned in
the first paragraph; the legislator could not have wished to strike it out and to sanction bad faith, just to comply with a mere formality
which, in given cases, does not obtain even in real disputes between third persons. (Note 2, art. 1473, Civ. Code, issued by the
publishers of the La Revista de los Tribunales, 13th edition.)
The agreed statement of facts clearly discloses that the plaintiff, when he bought the building at the sheriff's sale and inscribed his
title in the land registry, was duly notified that the machinery company had bought the building from plaintiff's judgment debtor; that
it had gone into possession long prior to the sheriff's sale; and that it was in possession at the time when the sheriff executed his levy.
The execution of an indemnity bond by the plaintiff in favor of the sheriff, after the machinery company had filed its sworn claim of
ownership, leaves no room for doubt in this regard. Having bought in the building at the sheriff's sale with full knowledge that at
the time of the levy and sale the building had already been sold to the machinery company by the judgment debtor, the plaintiff
cannot be said to have been a purchaser in good faith; and of course, the subsequent inscription of the sheriff's certificate of title
must be held to have been tainted with the same defect.
Perhaps we should make it clear that in holding that the inscription of the sheriff's certificate of sale to the plaintiff was not made in
good faith, we should not be understood as questioning, in any way, the good faith and genuineness of the plaintiff's claim against
the "Compañia Agricola Filipina." The truth is that both the plaintiff and the defendant company appear to have had just and
righteous claims against their common debtor. No criticism can properly be made of the exercise of the utmost diligence by the
plaintiff in asserting and exercising his right to recover the amount of his claim from the estate of the common debtor. We are
strongly inclined to believe that in procuring the levy of execution upon the factory building and in buying it at the sheriff's sale, he
considered that he was doing no more than he had a right to do under all the circumstances, and it is highly possible and even
probable that he thought at that time that he would be able to maintain his position in a contest with the machinery company. There
was no collusion on his part with the common debtor, and no thought of the perpetration of a fraud upon the rights of another, in the
ordinary sense of the word. He may have hoped, and doubtless he did hope, that the title of the machinery company would not stand
the test of an action in a court of law; and if later developments had confirmed his unfounded hopes, no one could question the
legality of the propriety of the course he adopted.
But it appearing that he had full knowledge of the machinery company's claim of ownership when he executed the indemnity bond
and bought in the property at the sheriff's sale, and it appearing further that the machinery company's claim of ownership was well
founded, he cannot be said to have been an innocent purchaser for value. He took the risk and must stand by the consequences; and
it is in this sense that we find that he was not a purchaser in good faith.
One who purchases real estate with knowledge of a defect or lack of title in his vendor cannot claim that he has acquired title
thereto in good faith as against the true owner of the land or of an interest therein; and the same rule must be applied to one who
has knowledge of facts which should have put him upon such inquiry and investigation as might be necessary to acquaint him with
the defects in the title of his vendor. A purchaser cannot close his eyes to facts which should put a reasonable man upon his guard,
and then claim that he acted in good faith under the belief that there was no defect in the title of the vendor. His mere refusal to
believe that such defect exists, or his willful closing of his eyes to the possibility of the existence of a defect in his vendor's title, will
not make him an innocent purchaser for value, if afterwards develops that the title was in fact defective, and it appears that he had
such notice of the defects as would have led to its discovery had he acted with that measure of precaution which may reasonably be
acquired of a prudent man in a like situation. Good faith, or lack of it, is in its analysis a question of intention; but in ascertaining the
intention by which one is actuated on a given occasion, we are necessarily controlled by the evidence as to the conduct and outward
acts by which alone the inward motive may, with safety, be determined. So it is that "the honesty of intention," "the honest lawful
intent," which constitutes good faith implies a "freedom from knowledge and circumstances which ought to put a person on inquiry,"
and so it is that proof of such knowledge overcomes the presumption of good faith in which the courts always indulge in the absence
of proof to the contrary. "Good faith, or the want of it, is not a visible, tangible fact that can be seen or touched, but rather a state or
condition of mind which can only be judged of by actual or fancied tokens or signs." (Wilder vs. Gilman, 55 Vt., 504, 505; Cf. Cardenas
Lumber Co. vs. Shadel, 52 La. Ann., 2094-2098; Pinkerton Bros. Co. vs. Bromley, 119 Mich., 8, 10, 17.)
We conclude that upon the grounds herein set forth the disposing part of the decision and judgment entered in the court below
should be affirmed with costs of this instance against the appellant. So ordered.
Arellano, C.J., Johnson, Araullo, Street and Malcolm, JJ., concur.

Torres, Avanceña and Fisher, JJ., took no part.
CASE DIGEST
In 1913, Compania Agricola Filipina (CAF) was indebted to two personalities: Leung Yee and Frank L. Strong Machinery Co. CAF
purchased some rice cleaning machines from Strong Machinery. CAF installed the machines in a building. As security for the purchase
price, CAF executed a chattel mortgage on the rice cleaning machines including the building where the machines were installed
without any reference to the land on which it stood. CAF failed to pay Strong Machinery, hence the latter foreclosed the mortgage –
the same was registered in the chattel mortgage registry.
CAF also sold the land (where the building was standing) to Strong Machinery but this deed of sale, although executed in a public
document, was not registered. Strong Machinery took possession of the building and the land.
On the other hand, Yee, another creditor of CAF who engaged in the construction of the building, being the highest bidder in an
auction conducted by the sheriff, purchased the same building where the machines were installed. Apparently CAF also executed a
chattel mortgage in favor Yee. Yee registered the sale in the registry of land. Yee was however aware that prior to his buying, the
property has been sold in favor of Strong Machinery – evidence is the chattel mortgage already registered by Strong Machinery
(constructive notice).
ISSUE: Who is the owner of the building?
HELD: The SC ruled that Strong Machinery has a better right to the contested property. Yee cannot be regarded as a buyer in good
faith as he was already aware of the fact that there was a prior sale of the same property to Strong Machinery.
The SC also noted that the Chattel Mortgage Law expressly contemplates provisions for chattel mortgages which only deal with
personal properties. The fact that the parties dealt the building as if it’s a personal property does not change the nature of the thing.
It is still a real property. Its inscription in the Chattel Mortgage registry does not modify its inscription the registry of real property.
The building of strong materials in which the rice-cleaning machinery was installed by the "Compañia Agricola Filipina" was real
property, and the mere fact that the parties seem to have dealt with it separate and apart from the land on which it stood in no wise
changed its character as real property. It follows that neither the original registry in the chattel mortgage of the building and the
machinery installed therein, not the annotation in that registry of the sale of the mortgaged property, had any effect whatever so far
as the building was concerned.

SUPREME COURT
Manila
EN BANC
G.R. No. L-15334 January 31, 1964
BOARD OF ASSESSMENT APPEALS, CITY ASSESSOR and CITY TREASURER OF QUEZON CITY, petitioners,
vs.
MANILA ELECTRIC COMPANY, respondent.
Assistant City Attorney Jaime R. Agloro for petitioners.

Ross, Selph and Carrascoso for respondent.
PAREDES, J.:
From the stipulation of facts and evidence adduced during the hearing, the following appear:
On October 20, 1902, 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
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 No. 44 approved on March 24, 1903. Respondent Manila
Electric Co. (Meralco for short), became the transferee and owner of the franchise.
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 hydro-electric 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. A photograph of one of these steel towers is attached to the petition for
review, marked Annex A. Three steel towers were inspected by the lower court and parties and the following were the descriptions
given there of by said court:
The first steel tower is located in South Tatalon, España Extension, Quezon City. The findings were as follows: the ground around one
of the four posts was excavated to a depth of about eight (8) feet, with an opening of about one (1) meter in diameter, decreased to
about a quarter of a meter as it we deeper until it reached the bottom of the post; at the bottom of the post were two parallel steel
bars attached to the leg means of bolts; the tower proper was attached to the leg three bolts; with two cross metals to prevent
mobility; there was no concrete foundation but there was adobe stone underneath; as the bottom of the excavation was covered
with water about three inches high, it could not be determined with certainty to whether said adobe stone was placed purposely or
not, as the place abounds with this kind of stone; and the tower carried five high voltage wires without cover or any insulating
materials.
The second tower inspected was located in Kamuning Road, K-F, Quezon City, on land owned by the petitioner approximate more
than one kilometer from the first tower. As in the first tower, the ground around one of the four legs was excavate from seven to
eight (8) feet deep and one and a half (1-½) meters wide. There being very little water at the bottom, it was seen that there was no
concrete foundation, but there soft adobe beneath. The leg was likewise provided with two parallel steel bars bolted to a square
metal frame also bolted to each corner. Like the first one, the second tower is made up of metal rods joined together by means of
bolts, so that by unscrewing the bolts, the tower could be dismantled and reassembled.
The third tower examined is located along Kamias Road, Quezon City. As in the first two towers given above, the ground around the
two legs of the third tower was excavated to a depth about two or three inches beyond the outside level of the steel bar foundation.
It was found that there was no concrete foundation. Like the two previous ones, the bottom arrangement of the legs thereof were
found to be resting on soft adobe, which, probably due to high humidity, looks like mud or clay. It was also found that the square
metal frame supporting the legs were not attached to any material or foundation.
On November 15, 1955, petitioner City Assessor of Quezon City declared the aforesaid steel towers for real property tax under Tax
declaration Nos. 31992 and 15549. After denying respondent's petition to cancel these declarations, an appeal was taken by
respondent to the Board of Assessment Appeals of Quezon City, which required respondent to pay the amount of P11,651.86 as real
property tax on the said steel towers for the years 1952 to 1956. Respondent paid the amount under protest, and filed a petition for
review in the Court of Tax Appeals (CTA for short) which rendered a decision on December 29, 1958, ordering the cancellation of the
said tax declarations and the petitioner City Treasurer of Quezon City to refund to the respondent the sum of P11,651.86. The motion
for reconsideration having been denied, on April 22, 1959, the instant petition for review was filed.
In upholding the cause of respondents, the CTA held that: (1) the steel towers come within the term "poles" which are declared
exempt from taxes under part II paragraph 9 of respondent's franchise; (2) the steel towers are personal properties and are not
subject to real property tax; and (3) the City Treasurer of Quezon City is held responsible for the refund of the amount paid. These are
assigned as errors by the petitioner in the brief.
The tax exemption privilege of the petitioner is quoted hereunder:
PAR 9. The grantee shall be liable to pay the same taxes upon its real estate, buildings, plant (not including poles, wires, transformers,
and insulators), machinery and personal property as other persons are or may be hereafter required by law to pay ... Said percentage
shall be due and payable at the time stated in paragraph nineteen of Part One hereof, ... and shall be in lieu of all taxes and
assessments of whatsoever nature and by whatsoever authority upon the privileges, earnings, income, franchise, and poles, wires,
transformers, and insulators of the grantee from which taxes and assessments the grantee is hereby expressly exempted. (Par. 9, Part
Two, Act No. 484 Respondent's Franchise; emphasis supplied.)
The word "pole" means "a long, comparatively slender usually cylindrical piece of wood or timber, as typically the stem of a small tree
stripped of its branches; also by extension, a similar typically cylindrical piece or object of metal or the like". The term also refers to
"an upright standard to the top of which something is affixed or by which something is supported; as a dovecote set on a pole;
telegraph poles; a tent pole; sometimes, specifically a vessel's master (Webster's New International Dictionary 2nd Ed., p. 1907.)
Along the streets, in the City of Manila, may be seen cylindrical metal poles, cubical concrete poles, and poles of the PLDT Co. which
are made of two steel bars joined together by an interlacing metal rod. They are called "poles" notwithstanding the fact that they are
no made of wood. It must be noted from paragraph 9, above quoted, that the concept of the "poles" for which exemption is granted,
is not determined by their place or location, nor by the character of the electric current it carries, nor the material or form of which it
is made, but the use to which they are dedicated. In accordance with the definitions, pole is not restricted to a long cylindrical piece
of wood or metal, but includes "upright standards to the top of which something is affixed or by which something is supported. As
heretofore described, respondent's steel supports consists of a framework of four steel bars or strips which are bound by steel cross-
arms atop of which are cross-arms supporting five high voltage transmission wires (See Annex A) and their sole function is to support
or carry such wires.
The conclusion of the CTA that the steel supports in question are embraced in the term "poles" is not a novelty. Several courts of last
resort in the United States have called these steel supports "steel towers", and they denominated these supports or towers, as
electric poles. In their decisions the words "towers" and "poles" were used interchangeably, and it is well understood in that
jurisdiction that a transmission tower or pole means the same thing.
In a proceeding to condemn land for the use of electric power wires, in which the law provided that wires shall be constructed upon
suitable poles, this term was construed to mean either wood or metal poles and in view of the land being subject to overflow, and the
necessary carrying of numerous wires and the distance between poles, the statute was interpreted to include towers or poles.
(Stemmons and Dallas Light Co. (Tex) 212 S.W. 222, 224; 32-A Words and Phrases, p. 365.)
The term "poles" was also used to denominate the steel supports or towers used by an association used to convey its electric power
furnished to subscribers and members, constructed for the purpose of fastening high voltage and dangerous electric wires alongside
public highways. The steel supports or towers were made of iron or other metals consisting of two pieces running from the ground up
some thirty feet high, being wider at the bottom than at the top, the said two metal pieces being connected with criss-cross iron
running from the bottom to the top, constructed like ladders and loaded with high voltage electricity. In form and structure, they are
like the steel towers in question. (Salt River Valley Users' Ass'n v. Compton, 8 P. 2nd, 249-250.)
The term "poles" was used to denote the steel towers of an electric company engaged in the generation of hydro-electric power
generated from its plant to the Tower of Oxford and City of Waterbury. These steel towers are about 15 feet square at the base and
extended to a height of about 35 feet to a point, and are embedded in the cement foundations sunk in the earth, the top of which
extends above the surface of the soil in the tower of Oxford, and to the towers are attached insulators, arms, and other equipment
capable of carrying wires for the transmission of electric power (Connecticut Light and Power Co. v. Oxford, 101 Conn. 383, 126 Atl. p.
1).
In a case, the defendant admitted that the structure on which a certain person met his death was built for the purpose of supporting
a transmission wire used for carrying high-tension electric power, but claimed that the steel towers on which it is carried were so
large that their wire took their structure out of the definition of a pole line. It was held that in defining the word pole, one should not
be governed by the wire or material of the support used, but was considering the danger from any elevated wire carrying electric
current, and that regardless of the size or material wire of its individual members, any continuous series of structures intended and
used solely or primarily for the purpose of supporting wires carrying electric currents is a pole line (Inspiration Consolidation Cooper
Co. v. Bryan 252 P. 1016).
It is evident, therefore, that the word "poles", as used in Act No. 484 and incorporated in the petitioner's franchise, should not be
given a restrictive and narrow interpretation, as to defeat the very object for which the franchise was granted. The poles as
contemplated thereon, should be understood and taken as a part of the electric power system of the respondent Meralco, for the
conveyance of electric current from the source thereof to its consumers. If the respondent would be required to employ "wooden
poles", or "rounded poles" as it used to do fifty years back, then one should admit that the Philippines is one century behind the age
of space. It should also be conceded by now that steel towers, like the ones in question, for obvious reasons, can better effectuate
the purpose for which the respondent's franchise was granted.
Granting for the purpose of argument that the steel supports or towers in question are not embraced within the term poles, the
logical question posited is whether they constitute real properties, so that they can be subject to a real property tax. The tax law does
not provide for a definition of real property; but Article 415 of the Civil Code does, by stating the following are immovable property:
(1) Land, buildings, roads, and constructions of all kinds adhered to the soil;
xxx xxx xxx
(3) Everything attached to an immovable in a fixed manner, in such a way that it cannot be separated therefrom without breaking the
material or deterioration of the object;
xxx xxx xxx
(5) Machinery, receptacles, instruments or implements intended by the owner of the tenement for an industry or works which may
be carried in a building or on a piece of land, and which tends directly to meet the needs of the said industry or works;
xxx xxx xxx
The steel towers or supports in question, 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 construction 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 can not 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, 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 in the land in which the steel supports or towers are constructed.
It is finally contended that the CTA erred in ordering the City Treasurer of Quezon City to refund the sum of P11,651.86, despite the
fact that Quezon City is not a party to the case. It is argued that as the City Treasurer is not the real party in interest, but Quezon City,
which was not a party to the suit, notwithstanding its capacity to sue and be sued, he should not be ordered to effect the refund. This
question has not been raised in the court below, and, therefore, it cannot be properly raised for the first time on appeal. The herein
petitioner is indulging in legal technicalities and niceties which do not help him any; for factually, it was he (City Treasurer) whom had
insisted that respondent herein pay the real estate taxes, which respondent paid under protest. Having acted in his official capacity as
City Treasurer of Quezon City, he would surely know what to do, under the circumstances.
IN VIEW HEREOF, the decision appealed from is hereby affirmed, with costs against the petitioners.
Bengzon, C.J., Padilla, Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L., Barrera and Regala, JJ., concur.
Makalintal, J., concurs in the result.
Dizon, J., took no part.
CASE DIGEST
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. 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. 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 Meralco’s 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 don’t 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.
FIRST DIVISION
G.R. No. 166102, August 05, 2015
MANILA ELECTRIC COMPANY, Petitioner, v. THE CITY ASSESSOR AND CITY TREASURER OF LUCENA CITY, Respondents.
MANILA ELECTRIC COMPANY v. CITY ASSESSOR, GR No. 166102, 2015-08-05
Facts:
On February 20, 1989, MERALCO received from the City Assessor of Lucena a copy of Tax Declaration No. 019-6500... these electric
facilities had a market value of P81,811,000.00 and an assessed value of P65,448,800.00, and were subjected... to real property tax as
of 1985.
MERALCO appealed... that
MERALCO was exempted from payment of real property tax on said substation facilities.
The LBAA rendered a Decision... the Board overrules the claim of the [City Assessor of Lucena] and sustain the claim of [MERALCO].
Six years later, on October 29, 1997, MERALCO received a letter19 dated October 16, 1997 from the City Treasurer of Lucena, which
stated that the company was being assessed real property tax delinquency on its machineries beginning 1990
MERALCO appealed Tax Declaration
MERALCO asked the LBAA to cancel... and nullify the Notice of Assessment dated October 20, 1997 and declare the properties
covered by Tax Declaration Nos. 019-6500 and 019-7394 exempt from real property tax.
MERALCO's appeal be dismissed for lack of merit
Disgruntled, MERALCO sought recourse from the Court of Appeals
The Court of Appeals rendered a Decision on May 13, 2004 rejecting all arguments proffered by MERALCO.
MERALCO similarly failed to persuade the Court of Appeals that the transformers, transmission lines, insulators, and electric meters
mounted on the electric posts of MERALCO were not real properties.
Court of Appeals denied the Motion for Reconsideration of MERALCO
MERALCO is presently before the Court via the instant Petition for Review on Certiorari
Issues:
whether or not the poles, wires, insulators, transformers, and electric meters of MERALCO were real properties
Ruling:
The Court finds that the transformers, electric posts, transmission lines, insulators, and electric meters of MERALCO are no longer
exempted from real property tax and may qualify as "machinery" subject to real property tax under the Local Government Code.
Through the years, the relevant laws have consistently considered "machinery" as real property subject to real property tax.
Granting for the purpose of argument that the steel supports or towers in question are not embraced within the term poles, the
logical question posited is whether they constitute real properties, so that they can be subject to a real property tax. The tax law...
does not provide for a definition of real property; but Article 415 of the Civil Code does, by stating the following are immovable
property:
(1) Land, buildings, roads, and constructions of all kinds adhered to the soil;... x x x x
material or deterioration of the object;... x x x x
be carried in a building or on a piece of land, and which tends directly to meet the needs of the said industry or works;... x x x x
The steel towers or supports in question, do not come within the objects mentioned in paragraph 1, because they do not constitute
buildings or constructions adhered to the soil.
They can not 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.
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.
The aforequoted conclusions of the Court in the 1964 MERALCO case do not hold true anymore under the Local Government Code.
While the Local Government Code still does not provide for a specific definition of "real property," Sections 199(o) and 232 of the said
Code, respectively, gives an extensive definition of what constitutes "machinery" and unequivocally subjects such machinery to real
property... tax
As between the Civil Code, a general law governing property and property relations, and the Local Government Code, a special law
granting local government units the power to impose real property tax, then the latter shall prevail.
in Caltex (Philippines), Inc. v. Central Board of Assessment Appeals,[62] the Court acknowledged that "[i]t is a familiar phenomenon to
see things classed as real property for purposes of taxation which on general principle might be... considered personal property[.]"
Therefore, for determining whether machinery is real property subject to real property tax, the definition and requirements under
the Local Government Code are controlling.
Principles:
under Section 199(o) of the Local Government Code, machinery, to be deemed real property subject to real property tax, need no
longer be annexed to the land or building as these "may or may not be attached, permanently or temporarily to the real... property,"
and in fact, such machinery may even be "mobile."[55] The same provision though requires that to be machinery subject to real
property tax, the physical facilities for production, installations, and appurtenant service facilities, those which are... mobile, self-
powered or self-propelled, or not permanently attached to the real property (a) must be actually, directly, and exclusively used to
meet the needs of the particular industry, business, or activity; and (2) by their very nature and purpose, are designed for, or...
necessary for manufacturing, mining, logging, commercial, industrial, or agricultural purposes.
Article 415 of the Civil Code... the following are immovable property:
(1) Land, buildings, roads, and constructions of all kinds adhered to the soil;... x x x x
material or deterioration of the object;... x x x x
be carried in a building or on a piece of land, and which tends directly to meet the needs of the said industry or works;... x x x x
Furthermore, in Caltex (Philippines), Inc. v. Central Board of Assessment Appeals,[62] the Court acknowledged that "[i]t is a familiar
phenomenon to see things classed as real property for purposes of taxation which on general principle might be... considered
personal property[.]"
SECOND DIVISION
G.R. No. 183416, October 05, 2016
PROVINCIAL ASSESSOR OF AGUSAN DEL SUR, Petitioner, v. FILIPINAS PALM OIL PLANTATION, INC., Respondent.
DECISION
LEONEN, J.:
The exemption from real property taxes given to cooperatives applies regardless of whether or not the land owned is leased. This
exemption benefits the cooperative's lessee. The characterization of machinery as real property is governed by the Local Government
Code and not the Civil Code.
This Petition1 for review assails the Decision2 dated September 26, 2007 and the Resolution3 dated May 26, 2008 of the Court of
Appeals in CA-G.R. SP No. 74060. The Court of Appeals affirmed the Decision of the Central Board of Assessment Appeals (CBAA)
exempting Filipinas Palm Oil Plantation Inc. from payment of real property taxes. 4chanrobleslaw
Filipinas Palm Oil Plantation Inc. (Filipinas) is a private organization engaged in palm oil plantation 5 with a total land area of more than
7,000 hectares of National Development Company (NDC) lands in Agusan del Sur. 6 Harvested fruits from oil palm trees are converted
into oil through Filipinas' milling plant in the middle of the plantation area. 7 Within the plantation, there are also three (3) plantation
roads and a number of residential homes constructed by Filipinas for its employees. 8chanrobleslaw
After the Comprehensive Agrarian Reform Law9 was passed, NDC lands were transferred to Comprehensive Agrarian Reform Law
beneficiaries who formed themselves as the merged NDC-Guthrie Plantations, Inc. - NDC-Guthrie Estates, Inc. (NGPI-NGEI)
Cooperatives.10 Filipinas entered into a lease contract agreement with NGPI-NGEI.11chanrobleslaw
The Provincial-Assessor of Agusan del Sur (Provincial Assessor) is a government agency in charge with the assessment of lands under
the public domain.12 It assessed Filipinas' properties found within the plantation area,13 which Filipinas assailed before the Local
Board of Assessment Appeals (LBAA) on the following grounds:
chanRoblesvirtualLawlibrary
(1.) The [petitioner] Provincial Assessors of Agusan del Sur ERRED in finding that the Market Value of a single fruit bearing oil palm
tree is P207.00 when it should only be P42.00 pesos per tree;
(2.) The [petitioner] ERRED in finding that the total number of standing and fruit bearing oil palm tree is PI 10 [sic] trees per hectare
when it should be only 92 trees;
(3.) The [petitioner] ERRED in finding that the Market Value[s] of the plantation roads are:ChanRoblesVirtualawlibrary
A.) P270,000.00 per kilometer for primary roads
B.) P135,000.00 for secondary roads
C.) P67,567.00 for tertiary roads constructed by the company.
It should only be:ChanRoblesVirtualawlibrary
A.) P105,000.00 for primary roads
B.) P52,300.00 for secondary roads
C.) P26,250.00 for tertiary roads
Likewise, bridges, culverts, canals and pipes should not be assessed separately from plantation roads, the same being components
of the roads thereof;
(4.) The [petitioner] ERRED in imposing real property taxes against the petitioner for roads, bridges, culverts, pipes and canals as
these belonged to the cooperatives;
([5].) The [petitioner] ERRED in finding that the Market Value of NDC service area is P11,000.00 per hectare when it should only be
P6,000.00 per hectare;
([6].) The [petitioner] ERRED in imposing realty taxes on Residential areas built by [respondent] except for three of them;
([7].) The [petitioner] ERRED when it included haulers and other equipments [sic] which are unmovable as taxable real properties.14
In its Decision15 dated June 8, 1999, the LBAA found that the P207.00 market value declared in the assessment by the Provincial
Assessor was unreasonable.16 It found that the market value should not have been more than P85.00 per oil palm tree. 17 The sudden
increase of realty tax assessment level from P42.00 for each oil palm tree in 1993 to P207.00 was confiscatory.18chanrobleslaw
The LBAA adopted Filipinas' claim that the basis for assessment should only be 98 trees. 19 Although one (1) hectare of land can
accommodate 124 oil palm trees, the mountainous terrain of the plantation should be considered.20 Because of the terrain, not every
meter of land can be fully planted with trees.21 The LBAA found that roads of any kind, as well as all their improvements, should not
be taxed since these roads were intermittently used by the public. 22 It resolved that the market valuation should be based on the laws
of the Department of Agrarian Reform since the area is owned by the NDC, a quasi-governmental body of the
Philippines.23chanrobleslaw
The LBAA exempted the low-cost housing units from taxation except those with a market value of more than P150,000.00 under the
Local Government Code.24 Finally, the LBAA considered the road equipment and mini haulers as movables that are vital to Filipinas'
business.
Filipinas appealed before the CBAA on July 16, 1999.26 On November 21, 2001, the CBAA rendered a decision, the dispositive portion
of which reads:
WHEREFORE, this Board has decided to set aside, as it does hereby set aside, the decision rendered by the Local Board of Assessment
Appeals of the Province of Agusan del Sur on June 8, 1999 in an unnumbered case entitled "[F]ilipinas Palm Oil Co., Inc. Petitioner,
versus the Provincial Assessors Office of Agusan del Sur, Respondent" and hereby orders as follows:
chanRoblesvirtualLawlibraryA. The market value for each oil palm tree should be FIFTY- SEVEN & 55/100 PESOS (57.55), effective
January 1, 1991. The assessment for each municipality shall be based on the corresponding number of trees as listed in Petitioner-
Appellee's "Hectarage Statement" discussed hereinabove;
B. Petitioner-Appellee should not be made to pay for the real property taxes due on the roads starting from January 1, 1991;
C. Petitioner-Appellee is not liable to the Government for real property taxes on the lands owned by the Multi-purpose Cooperative;
D. The housing units with a market value of PI75,000.00 or less each shall be subjected to 0% assessment level, starting 1994;
E. Road Equipment and haulers are not real properties and, accordingly, Petitioner-Appellee is not liable for real property tax thereon;
F. Any real property taxes already paid by Petitioner-Appellee which, by virtue "of this decision, were not due, shall be applied to
future taxes rightfully due from Petitioner-Appellee.
SO ORDERED.27 (Emphasis supplied)
The CBAA denied the Motion for Reconsideration filed by the Provincial Assessor. 28 The Provincial Assessor filed a Petition for Review
before the Court of Appeals, which, in turn, sustained the CBAA's Decision. 29chanrobleslaw
The Court of Appeals held that the land owned by NGPI-NGEI, which Filipinas has been leasing, cannot be subjected to real property
tax since these are owned by cooperatives that are tax-exempt.30 Section 133(n) of the Local Government Code provides:
SECTION 133. Common Limitations on the Taxing Powers of Local Government Units. � Unless otherwise provided herein, the
exercise of the taxing powers of provinces, cities, municipalities, and barangays shall not extend to the levy of the following:
....
(n) Taxes, fees, or charges, on Countryside and Barangay Business Enterprises and cooperatives duly registered under R.A. No. 6810
and Republic Act Numbered Sixty-nine hundred thirty-eight (R.A. No. 6938) otherwise known as the "Cooperative Code of the
Philippines." (Emphasis supplied)
Section 234(d) of the Local Government Code exempts duly registered cooperatives, like NGPI-NGEI, from payment of real property
taxes:
SECTION 234. Exemptions from Real Property Tax. � The following are exempted from payment of the real property tax:
....
(d) All real property owned by duly registered cooperatives as provided for under R.A. No. 6938[.] (Emphasis supplied)
The Court of Appeals held that the pertinent provisions "neither distinguishes nor specifies" that the exemption only applies to
real properties used by the cooperatives.31 It ruled that "[t]he clear absence of any restriction or limitation in the provision could
only mean that the exemption applies to wherever the properties are situated and to whoever uses them." 32 Therefore, the
exemption privilege extends to Filipinas as the cooperatives' lessee. 33chanrobleslaw
On the roads constructed by Filipinas, the Court of Appeals held that although it is undisputed that the roads were built primarily
for Filipinas' benefit, the roads should be tax-exempt since these roads were also being used by the cooperatives and the public. 34
It applied, by analogy, Bislig Bay Lumber Company, Inc. v. Provincial Government of Surigao:35chanrobleslaw
We are inclined to uphold the theory of appellee. In the first place, it cannot be disputed that the ownership of the road that was
constructed by appellee belongs to the government by right accession not only because it is inherently incorporated or attached to
the timber land leased to appellee but also because upon the expiration of the concession, said road would ultimately pass to the
national government. In the second place, while the road was constructed by appellee primarily for its use and benefit, the privilege is
not exclusive, for, under the lease contract entered into by the appellee and the government and by public in by the general. Thus,
under said lease contract, appellee cannot prevent the use of portions, of the concession for homesteading purposes. It is also in duty
bound to allow the free use of forest products within the concession for the personal use of individuals residing in or within the
vicinity of the land. . . . In other words, the government has practically reserved the rights to use the road to promote its varied
activities. Since, as above shown, the road in question cannot be considered as an improvement which belongs to appellee, although
in part is for its benefit, it is clear that the same cannot be the subject of assessment within the meaning of section 2 of
Commonwealth Act No. 470.36 (Citations omitted)
Furthermore, the Court of Appeals agreed with the CBAA that the roads constructed by Filipinas had become permanent
improvements on the land owned by NGPI-NGEI.37 Articles 440 and 445 of the Civil Code provide that these improvements redound
to the benefit of the land owner under the right of accession: 38chanrobleslaw
Article 440. The ownership of property gives the right by accession to everything which is produced thereby, or which is incorporated
or attached thereto, either naturally or artificially.
....
Article 445. Whatever is built, planted or sown on the land of another and the improvements or repairs made thereon, belong to the
owner of the land, subject to the provisions of the following articles.
On the road equipment and mini haulers as real properties subject to tax, the Court of Appeals affirmed the CBAA's Decision that
these are only movables.39 Section 199(o) of the Local Government Code provides a definition of machinery subject to real
property taxation:
SECTION 199. Definition of Terms. � When used in this Title, the term:
....
(o) "Machinery" embraces machines, equipment, mechanical contrivances, instruments, appliances or apparatus which may or
may not be attached, permanently or temporarily, to the real property. It includes the physical facilities for production, the
installations and appurtenant service facilities, those which are mobile, self-powered or self-propelled, and those not permanently
attached to the real property which are actually, directly, and exclusively used to meet the needs of the particular industry,
business or activity and which by their very nature and purpose are designed for, or necessary to its manufacturing, mining.
The Court of Appeals held that Section 19^(o) of the Local Government Code should be construed to include machineries covered
by the meaning of real properties provided for under Article 415(5) of the Civil Code:40chanrobleslaw
Article 415. The following are immovable property:

....
(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[.]
The Court of Appeals cited Davao Sawmill Company v. Castillo,41 where it has been held that machinery that is movable by nature
becomes immobilized only when placed by the owner of the tenement, but not so when placed by a tenant or any other person
having a temporary right unless this person acts as an agent of the owner. 42 Thus, the mini haulers and other road equipment
retain their nature as movables.43chanrobleslaw
The Provincial Assessor filed before this Court a Petition for Review raising the following issues:
chanRoblesvirtualLawlibraryFirst, whether the exemption privilege of NGPI-NGEI from payment of real property tax extends to
respondent Filipinas Palm Oil Plantation Inc. as lessee of the parcel of land owned by cooperatives; and cralawlawlibrary
Second, whether respondent's road equipment and mini haulers are movable properties and have not been immobilized by
destination for real property taxation.
Petitioner argues that based on Mactan Cebu International Airport Authority v. Ferdinand J. Marcos,44 cooperatives cannot extend
its exemption from real property tax to taxable persons.45 It argues that Sections 198, 199, 205, and 217 of the Local Government
Code provide that real property taxes are assessed based on actual use. 46 Moreover, the exemption of cooperatives applies only
when it is the cooperative that actually, directly, and exclusively uses and possesses the properties. 47 Sections 198, 199, 205, and
217 of the Local Government Code provide:
SECTION 198. Fundamental Principles. � The appraisal, assessment, levy and collection of real property tax shall be guided by the
following fundamental principles:
....
(b) Real property shall be classified for assessment purposes on the basis of its actual use[.]
....
....
(b) "Actual Use" refers to the purpose for which the property is principally or predominantly utilized by the person in possession
thereof[.]
....
SECTION 205. Listing of Real Property in the Assessment Rolls. �
....
(d) Real property owned by the Republic of the Philippines, its instrumentalities and political subdivisions, the beneficial use of which
has been granted, for consideration or otherwise, to a taxable person, shall be listed, valued and assessed in the name of the
possessor, grantee or of the public entity if such property has been acquired or held for resale or lease.
. . . .��
SECTION 217. Actual Use of Real Property as Basis for Assessment. � Real property shall be classified, valued and assessed on the
basis of its actual use regardless of where located, whoever owns it, and whoever uses it. (Emphasis supplied)
Petitioner claims that Section 199(o) of the Local Government Code specifically covers respondent's road equipment and mini
haulers since these are directly and exclusively used to meet the needs of respondent's industry, business, or activity. 48 Article
415(5) of the Civil Code, which defines real property, should not be made to control the Local Government Code, 49 a subsequent
legislation that specifically defines "machinery" for taxation purposes. 50chanrobleslaw
In the Resolution51 dated October 13, 2008, this Court denied the Petition for Review due to procedural missteps, which included the
failure to attach legible duplicate original or certified true copies of the assailed decision and failure to pay proper fees. On November
25, 2008, petitioner moved for reconsideration,52 praying for the reversal of the Petition's denial due to mere technicalities.
On January 26, 2009, this Court granted Petitioner's Motion for Reconsideration. 53 It directed the reinstatement of the Petition and
required respondent to comment.54chanrobleslaw
On November 20, 2009, respondent filed its Comment.55chanrobleslaw
Respondent reiterates the rulings of the CBAA and the Court of Appeals that the exemption of cooperatives from real property
taxes extends to it as the lessee.56 It asserts that under its lease agreement with NGPI-NGEI, it pays an Annual Fixed Rental, which
includes the payment of taxes.57 It claims that in case NGPI-NGEI is liable to the local government for real property tax on the land,
the tax should be taken from the Annual Fixed Rental.58 To make respondent pay real property taxes on the leased land would be
equivalent to assessing it twice for the same property. 59chanrobleslaw
On the road equipment and mini haulers being subjected to real property taxation, respondent maintains that it should be spared
from real property tax since the equipment and mini haulers are movables. 60chanrobleslaw
The Petition is granted to modify the Court of Appeals Decision, but only with respect to the nature of respondent's road
equipment and mini haulers.
Under Section 133(n) of the Local Government Code, the taxing power of local government units shall not extend to the levy of
taxes, fees, or charges on duly registered cooperatives under the Cooperative Code. 61 Section 234(d) of the Local Government Code
specifically provides for real property tax exemption to cooperatives:
SECTION 234. Exemptions from Real Property Tax. � The following are exempted from payment of the real property tax:
....
(d) All real property owned by duly registered cooperatives as provided for under [Republic Act] No. 6938[.] (Emphasis supplied)
NGPI-NGEI, as the owner of the land being leased by respondent, falls within the purview of the law. Section 234 of the Local
Government Code exempts all real property owned by cooperatives without distinction. Nothing in the law suggests that the real
property tax exemption only applies when the property is used by the cooperative itself. Similarly, the instance that the real property
is leased to either an individual or corporation is not a ground for withdrawal of tax exemption. 62chanrobleslaw
In arguing the first issue, petitioner hinges its claim on a misplaced reliance in Mactan, which refers to the revocation of tax
exemption due to the effectivity of the Local Government Code. However, Mactan does not refer to the tax exemption extended to
cooperatives. The portion that petitioner cited specifically mentions that the exemption granted to cooperatives has not been
withdrawn by the effectivity of the Local Government Code:
[S]ection 232 must be deemed to qualify Section 133.
Thus, reading together Sections 133, 232, and 234 of the L[ocal] G[overnment] C[ode], we conclude that as a general rule, as laid
down in Section 133, the taxing powers of local government units cannot extend to the levy of, inter alia, "taxes, fees and charges of
any kind on the National Government, its agencies and instrumentalities, and local government units"; however, pursuant to Section
232, provinces, cities, and municipalities in the Metropolitan Manila Area may impose the real property tax except on, inter alia, "real
property owned by the Republic of the Philippines or any of its political subdivisions except when the beneficial use thereof has been
granted, for consideration or otherwise, to a taxable person," as provided in item (a) of the first paragraph of Section 234.
As to tax exemptions or incentives granted to or presently enjoyed by natural or juridical persons, including government-owned and
controlled corporations, Section 193 of the L[ocal] G[overnment] C[ode] prescribes the general rule, viz., they are withdrawn upon
the effectivity of the L[ocal] G[overnment] C[ode], except those granted to local water districts, cooperatives duly registered under
R.A. No. 6938, non-stock and non-profit hospitals and educational institutions, and unless otherwise provided in the L[ocal]
Gfovernment] C[ode]. The latter proviso could refer to Section 234 which enumerates the properties exempt from real property tax.
But the last paragraph of Section 234 further qualifies the retention of the exemption insofar as real property taxes are concerned by
limiting the retention only to those enumerated therein; all others not included in the enumeration lost the privilege upon the
effectivity of the L[ocal] G[overnment] C[ode]. Moreover, even as to real property owned by the Republic of the Philippines or any of
its political subdivisions covered by item (a) of the first paragraph of Section 234, the exemption is withdrawn if the beneficial use of
such property has been granted to a taxable person for consideration or otherwise.
Since the last paragraph of Section 234 unequivocally withdrew, upon the effectivity of the L[ocal] G[overnment] C[ode], exemptions
from payment of real property taxes granted to natural or juridical persons, including government-owned or controlled corporations,
except as provided in the said section, and the petitioner is, undoubtedly, a government-owned corporation, it necessarily follows
that its exemption from such tax granted it in Section 14 of its Charter, R.A. No. 6958, has been withdrawn. Any claim to the contrary
can only be justified if the petitioner can seek refuge under any of the exceptions provided in Section 234, but not under Section 133,
as it now asserts, since, as shown above, the said section is qualified by Sections 232 and 234.
In short, the petitioner can no longer invoke the general rule in Section 133 that the taxing powers of the local government units
cannot extend to the levy of:
(o) taxes, fees or charges of any kind on the National Government, its agencies or instrumentalities, and local government units.
It must show that the parcels of land in question, which are real property, are any one of those enumerated in Section 234, either by
virtue of ownership, character, or use of the property.63 (Emphasis supplied)
The roads that respondent constructed within the leased area should not be assessed with real property taxes. Bislig Bay finds
application here. Bislig Bay Lumber Company, Inc. (Bislig Bay) was a timber concessionaire of a portion of public forest in the
provinces of Agusan and Surigao.64 To aid in developing its concession, Bislig Bay built a road at its expense from a barrio leading
towards its area.65 The Provincial Assessor of Surigao assessed Bislig Bay with real property tax on the constructed road, which was
paid by the company under protest.66 It claimed that even if the road was constructed on public land, it should be subjected to real
property tax because it was built by the company for its own benefit. 67 On the other hand, Bislig Bay asserted that the road should be
exempted from real property tax because it belonged to national government by right of accession. 68 Moreover, the road constructed
already became an inseparable part of the land.69 The records also showed that the road was not only built for the benefit of Bislig
Bay, but also of the public.70 This Court ruled for Bislig Bay, thus:
We are inclined to uphold the theory of appellee. In the first place, it cannot be disputed that the ownership of the road that was
constructed by appellee belongs to the government by right accession not only because it is inherently incorporated or attached to
the timber land leased to appellee but also because upon the expiration of the concession, said road would ultimately pass to the
national government. ... In the second place, while the road was constructed by appellee primarily for its use and benefit, the
privilege is not exclusive, for, under the lease contract entered into by the appellee and the government and by public in by the
general. Thus, under said lease contract, appellee cannot prevent the use of portions, of the concession for homesteading purposes.
... It is also in duty bound to allow the free use of forest products within the concession for the personal use of individuals residing in
or within the vicinity of the land. ... In other words, the government has practically reserved the rights to use the road to promote its
varied activities. Since, as above shown, the road in question cannot be considered as an improvement which belongs to appellee,
although in part is for its benefit, it is clear that the same cannot be the subject of assessment within the meaning of section 2 of
Commonwealth Act No. 470.71
This was reiterated in Board of Assessment Appeals ofZamboanga del Sur v. Samar Mining Company, Inc.72 Samar Mining Company,
Inc. (Samar Mining) was a domestic corporation engaged in the mining industry. 73 Since Samar Mining's mining site and mill were in
an inland location entailing long distance from its area to the loading point, Samar Mining was constrained to construct a road for its
convenience.74 Initially, Samar Mining filed miscellaneous lease applications for a road right of way covering lands under the
jurisdiction of the Bureau of Lands and the Bureau of Forestry where the proposed road would pass through. 75 Samar Mining was
given a "temporary permit to occupy and use the lands applied for by it"; 76 hence, it was able to build what was eventually known as
the Samico Road. Samar Mining was assessed by the Provincial Assessor of Zamboanga del Sur with real property taxes on the road,
which prompted it to appeal before the Board of Assessment Appeals. 77 Invoking Bislig Bay, Samar Mining claimed that it should not
be assessed with real property tax since the road was constructed on public land. This Court ruled for Samar Mining, thus:
There is no question that the road constructed by respondent Saimar on the public lands leased to it by the government is an
improvement. But as to whether the same is taxable under the aforequoted provision of the Assessment Law, this question has
already been answered in the negaitive by this Court. In the case of Bislig Bay Lumber Co., Inc. vs. Provincial Government of Surigao,
where a similar issue was raised. . ..
....
. . . What is emphasized in the Bislig case is that the improvement is exempt from taxation because it is an integral part of the public
land on which it is constructed and the improvement is the property of the government by right of accession. Under Section 3(a) of the
Assessment Law, all properties owned by the government, without any distinction, are exempt from taxation.79 (Emphasis supplied,
citations omitted)
The roads that respondent constructed became permanent improvements on the land owned by the NGPI-NGEI by right of accession
under the Civil Code, thus:
Article 440. The ownership of property gives the right by accession to everything which is produced thereby, or which is incorporated
or attached thereto, either naturally or artificially.
....
Article 445. Whatever is built, planted or sown on the land of another and the improvements or repairs made thereon, belong to the
owner of the land[.]
Despite the land being leased by respondent when the roads were constructed, the ownership of the improvement still belongs to
NGPI-NGEI. As provided under Article 440 and 445 of the Civil Code, the land is owned by the cooperatives at the time respondent
built the roads. Hence, whatever is incorporated in the land, either naturally or artificially, belongs to the NGPI-NGEI as the
landowner.
Although the roads were primarily built for respondent's benefit, the roads were also being used by the members of NGPI and the
public.80 Furthermore, the roads inured to the benefit of NGPI-NGEI as owners of the land not only by right of accession but through
the express provision in the lease agreement:
On March 7, 1990 NGPI Multi-Purpose Cooperative, Inc., as Lessor, and NDC-Guthrie Plantations, Inc., as Lessee, entered into a "Lease
Agreement" . . . covering the agricultural lands transferred by NDC to the DAR, which lands the DAR ultimately distributed undivided
to qualified workers-beneficiaries. . . .
....
Clause No. 6.3 of the same lease agreement provides that "All taxes due on the improvements on the Leased Property except those
improvements on the Area that the LESSOR shall have utilized under Clause 1.2 hereof, shall be for the account of the LESSEE."
Clause No. 9.4 of the same lease agreement provides that ". . . All fixed and permanent improvements, such as roads and palm trees
introduced on the Leased Property, shall automatically accrue to the LESSOR upon termination of this Lease Agreement without need
of reimbursement."
All the above-cited stipulations in the lease agreement between NGPI Multi-Purpose Cooperative and NDC-Guthrie Plantations, Inc.
were reconfirmed and reaffirmed in the Addendum to Lease Agreement entered into by and between NGPI Multi-Purpose Cooperative
and Filipinas Palmoil Plantations, Inc. on January 30, 1998. . . . The main subject of the said Addendum was the extension of the term
of the lease agreement up to December 31, 2032, along with economic benefits to the lessor other than rentals.
There is no dispute that the roads are on the land owned by NGPI Multi-Purpose Cooperative which leased the same to Petitioner-
Appellee. These roads belong to the Multi-Purpose Cooperative, not only by right of accession but also by express provisions of the
Contract of Lease[.]81
Respondent claims that under its lease agreement with NGPI-NGEI, it pays an Annual Fixed Rental, which includes the payment of
taxes.82 If NGPI-NGEI were liable to the local government for real property tax on the land, the tax should be taken from the Annual
Fixed Rental:
"2.1. In consideration of this Lease Agreement, the LESSEE shall pay the LESSOR the following annual
rentals:ChanRoblesVirtualawlibrary
"1) An annual fixed rental, in the following amount � "SIX HUNDRED THIRTY FIVE PESOS" (P635.00) PER HECTARE PER ANNUM which
would cover the following:
chanRoblesvirtualLawlibrary"(1) All Taxes on the Land

"(2) Administration Charges
"(3) Amortization charges
"It is understood that, if the annual fixed rental of "SIX HUNDRED THIRTY FIVE PESOS" (p 635.00) is insufficient to pay any increase on
the land taxes, the Lessee shall pay the difference, provided such increase does not exceed ten percent (10%) of the immediately
preceding tax imposed on the land; provided further, that any increase beyond these percentage shall be borne equally by the
LESSOR and LESSEE.
"The foregoing notwithstanding, it is understood and agreed that at all times, liability for realty taxes on the Leased Property Primarily
and principally lies with the LESSOR and any reference herein to payment by LESSEE of said taxes is only for purposes of earmarking
the proceeds of the rentals herein agreed upon."
Clause No. 6.3 of the same lease agreement provides that "All taxes due on the improvements on the Leased Property except those
improvements on the Area that the LESSOR shall have utilized under Clause 1.2 hereof, shall be for the account of the LESSEE."83
(Emphasis supplied)
Therefore, NGPI-NGEI, as owner of the roads that permanently became part of the land being leased by respondent, shall be liable for
real property taxes, if any. However, by express provision of the Local Government Code, NGPI-NGEI is exempted from payment of
real property tax.84chanrobleslaw
II
The road equipment and mini haulers shall be considered as real property, subject to real property tax.
Section 199(o) of the Local Government Code defines "machinery" as real property subject to real property tax,85 thus:
....
(o) "Machinery" embraces machines, equipment, mechanical contrivances, instruments, appliances or apparatus which may or may
not be attached, permanently or temporarily, to the real property. It includes the physical facilities for production, the installations
and appurtenant service facilities, those which are mobile, self-powered or self-propelled, and those not permanently attached to the
real property which are actually, directly, and exclusively used to meet the needs of the particular industry, business or activity and
which by their very nature and purpose are designed for, or necessary to its manufacturing, mining, logging, commercial, industrial or
agricultural purposes[.]
Article 415(5) of the New Civil Code defines "machinery" as that which constitutes an immovable property:
....
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
supplied)
Petitioner contends that the second sentence of Section 199(o) includes the road equipment and mini haulers since these are
directly and exclusively used by respondent to meet the needs of its operations. 86 It further claims that Article 415(5) of the New
Civil Code should not control the Local Government Code, a subsequent legislation. 87chanrobleslaw
On the other hand, respondent claims that the road equipment and mini haulers are movables by nature. It asserts that although
there may be a difference between the meaning of "machinery" under the Local Government Code arid that of immovable
property under Article 415(5) of the Civil Code, "the controlling interpretation of Section 199(o) of [the Local Government Code] is
the interpretation of Article 415(5) of the Civil Code."88chanrobleslaw
In Manila Electric Company v. City Assessor,89 a similar issue of which definition of "machinery" prevails to warrant the assessment of
real property tax on it was raised.
Manila Electric Company (MERALCO) insisted on harmonizing the provisions of the Civil Code and the Local Government Code and
asserted that "machinery" contemplated under Section 199(o) of the Local Government must still be within the contemplation of
immovable property under Article 415 of the Civil Code.90 However, this Court ruled that harmonizing such laws "would necessarily
mean imposing additional requirements for classifying machinery as real property for real property tax purposes not provided for, or
even in direct conflict with, the provisions of the Local Government Code."91 Thus:
While the Local Government Code still does not provide for a specific definition of "real property," Sections 199(o) and 232 of the
said Code, respectively, gives an extensive definition of what constitutes "machinery" and unequivocally subjects such machinery
to real property tax. The Court reiterates that the machinery subject to real property tax under the Local Government Code "may or
may not be attached, permanently or temporarily to the real property"; and the physical facilities for production, installations, and
appurtenant service facilities, those which are mobile, self-powered or self-propelled, or are not permanently attached must (a) be
actually, directly, and exclusively used to meet the needs of the particular industry, business, or activity; and (b) by their very nature
and purpose, be designed for, or necessary for manufacturing, mining, logging, commercial, industrial, or agricultural purposes.
....
Article 415, paragraph (5) of the Civil Code considers as immovables or real properties "[m]achinery, 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." The Civil Code, however, does not define
"machinery."
The properties under Article 415, paragraph (5) of the Civil Code are immovables by destination, or "those which are essentially
movables, but by the purpose for which they have been placed in an immovable, partake of the nature of the latter because of the
added utility derived therefrom." These properties, including machinery, become immobilized if the following requisites concur: (a)
they are placed in the tenement by the owner of such tenement; (b) they are destined for use in the industry or work in the
tenement; and (c) they tend to directly meet the needs of said industry or works. The first two requisites are not found anywhere in
the Local Government Code.92 (Emphasis supplied, citations omitted)
Section 199(o) of the Local Government prevails over Article 415(5) of the Civil Code. In Manila Electric Company:
As between the Civil Code, a general law governing property and property relations, and the Local Government Code, a special law
granting local government units the power to impose real property tax, then the latter shall prevail. As the Court pronounced in
Disomangcop v. The Secretary of the Department of Public Works and Highways Simeon A. Datumanong:ChanRoblesVirtualawlibrary
It is a finely-imbedded principle in statutory construction that a special provision or law prevails over a general one. Lex specialis
derogant generali. As this Court expressed in the case of Leveriza v. Intermediate Appellate Court, "another basic principle of
statutory construction mandates that general legislation must give way to special legislation on the same subject, and generally be so
interpreted as to embrace only cases in which the special provisions are not applicable, that specific statute prevails over a general
statute and that where two statutes are of equal theoretical application to a particular case, the one designed therefor specially
should prevail."
The Court also very clearly explicated in Vinzons-Chato v. Fortune Tobacco Corporation that:
A general law and a special law on the same subject are statutes in pari materia and should, accordingly, be read together and
harmonized, if possible, with a view to giving effect to both. The rule is that where there are two acts, one of which is special and
particular and the other general which, if standing alone, would include the same matter and thus conflict with the special act, the
special law must prevail since it evinces the legislative intent more clearly than that of a general statute and must not be taken as
intended to affect the more particular and specific provisions of the earlier act, unless it is absolutely necessary so to construe it in
order to give its words any meaning at all.
The circumstance that the special law is passed before or after the general act does not change the principle. Where the special
law is later, it will be regarded as an exception to, or a qualification of, the prior general act; and where the general act is later, the
special statute will be construed as remaining an exception to its terms, unless repealed expressly or by necessary implication.
Furthermore, in Caltex (Philippines), Inc. v. Central Board of Assessment Appeals, the Court acknowledged that "[i]t is a familiar
phenomenon to see things classed as real property for purposes of taxation which on general principle might be considered personal
property[.]"
Therefore, for determining whether machinery is real property subject to real property tax, the definition and requirements under
the Local Government Code are controlling.93 (Emphasis supplied, citations omitted)
Respondent is engaged in palm oil plantation.94 Thus, it harvests fruits from palm trees for oil conversion through its milling
plant.95 By the nature of respondent's business, transportation is indispensable for its operations.
Under the definition provided in Section 199(o) of the Local Government Code, the road equipment and the mini haulers are
classified as machinery, thus:
SECTION 199. Definition of Terms. � When used in this Title, the terra:
....
(o) "Machinery" . . . includes the physical facilities for production, the installations and appurtenant service facilities, those which
are mobile, self-powered or self-propelled, and those not permanently attached to the real property which are actually, directly,
and exclusively used to meet the needs of the particular industry, business or activity and which by their very nature and purpose
are designed for, or necessary to its manufacturing, mining, logging, commercial, industrial or agricultural purposes [.] (Emphasis
supplied)
Petitioner is correct in claiming that the phrase pertaining to physical facilities for production is comprehensive enough to include
the road equipment and mini haulers as actually, directly, and exclusively used by respondent to meet the needs of its operations
in palm oil production.96 Moreover, "mini-haulers are farm tractors pulling attached trailers used in the hauling of seedlings during
planting season and in transferring fresh palm fruits from the farm [or] field to the processing plant within the plantation area."97
The indispensability of the road equipment and mini haulers in transportation makes it actually, directly, and exclusively used in
the operation of respondent's business.
In its Comment, respondent claims that the equipment is no longer vital to its operation because it is currently employing equipment
outside the company to do the task.98 However, respondent never raised this contention before the lower courts. Hence, this is a
factual issue of which this Court cannot take cognizance. This Court is not a trier of facts. 99 Only questions of law are entertained in a
petition for review assailing a Court of Appeals decision. 100chanrobleslaw
WHEREFORE, the Petition is PARTLY GRANTED. The Decision of the Court of Appeals dated September 26, 2007 and the Resolution
dated May 26, 2008 in CA-G.R. SP No. 74060 are AFFIRMED with MODIFICATION, in that the road equipment and the mini haulers
should be assessed with real property taxes.
SO ORDERED.
Carpio, (Chairperson),� Del Castillo, , and Mendoza, JJ., concur.

Brion, J., on leave.
G.R. No. 168557
FELS ENERGY, INC.,
Petitioner,
-versus-
THE PROVINCE OF BATANGAS and
THE OFFICE OF THE PROVINCIAL
ASSESSOR OF BATANGAS,
Respondents.
x----------------------------------------------------x
NATIONAL POWER CORPORATION, G.R. No. 170628
Petitioner,
FACTS
Two consolidated cases were filed by FELS Energy, Inc. (FELS) and National Power Corporation (NPC), respectively.
NPC entered into a lease contract with Polar Energy, Inc. over diesel engine power barges moored at Batangas. The contract,
denominated as an Energy Conversion Agreement, was for a period of five years wherein, NPC shall be responsible for the payment
of:
(a) all taxes, import duties, fees, charges and other levies imposed by the National Government
(b) all real estate taxes and assessments, rates and other charges in respect of the Power Barges
Subsequently, Polar Energy, Inc. assigned its rights under the Agreement to FELS. Thereafter, FELS received an assessment of real
property taxes on the power barges. The assessed tax, which likewise covered those due for 1994, amounted to P56,184,088.40 per
annum. 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 sought reconsideration of the Provincial Assessor’s decision to assess real property taxes on the power barges. However, the
motion was denied. The Local Board of Assessment Appeals (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.
FELS appealed the LBAA’s ruling to the Central Board of Assessment Appeals (CBAA). The CBAA rendered a Decision finding the power
barges exempt from real property tax.
It was later reversed by the cbaa upon reconsideration and affirmed by the CA
ISSUE
Whether power barges, which are floating and movable, are personal properties and therefore, not subject to real property tax.
RULING
No. Article 415 (9) of the New Civil Code provides that "[d]ocks 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.
The findings of the LBAA and CBAA that the owner of the taxable properties is petitioner FELS is the entity being taxed by the local
government. As stipulated under the Agreement:
OWNERSHIP OF POWER BARGES. POLAR shall own the Power Barges and all the fixtures, fittings, machinery and equipment on the
Site used in connection with the Power Barges which have been supplied by it at its own cost. POLAR shall operate, manage and
maintain the Power Barges for the purpose of converting Fuel of NAPOCOR into electricity.
It follows then that FELS cannot escape liability from the payment of realty taxes by invoking its exemption in Section 234 (c) of R.A.
No. 7160,
…the law states that the machinery must be actually, directly and exclusively used by the government owned or controlled
corporation;
The agreement POLAR undertakes that until the end of the Lease Period, it will operate the Power Barges to convert such Fuel into
electricity. Therefore, FELS shall be liable for the realty taxes and not the NPC who is not actually, directly and exclusively using the
same. It is a basic rule that obligations arising from a contract have the force of law between the parties
CONCLUSION
Petitions are DENIED.
G.R. No. 168557 Case Digest

G.R. No. 168557, February 16, 2007
FELS Energy, Inc.
vs Province of Batangas and the Office of the Provincial Assessor of Batangas
Ponente: Callejo, Sr.
Facts:
January 1993, NPC entered into a lease contract with Polar Energy over MW diesel engine power barges in Batangas for a period of 5
years. Subsequently, Polar assigned its rights under the agreement to FELS. NPC initially opposed.
August 1995, FELS received an assessment of real property taxes on the barges. FELS referred the matter to NPC reminding it of its
obligation under the agreement to pay the real estate taxes. NPC sought for reconsideration of the decision but the motion was
denied.
NPC filed a petition to the Local Board Assessment Appeals. The provincial Assessor averred that the barges were real property for
the purpose of taxation. LBAA still denied the petition filed by NPC and ordered FELS to pay the taxes.
LBAA Ruling: power plant facilities are considered real property because they are installed at a specific location with a character of
permanency. The owner of the barges-FELS is a private corporation-is the one being taxed, not NPC. The agreement will not justify
the exemption of FELS.
FELS then appealed to Central BAA. CBAA rendered s decision finding the power barges exempt from real property tax.
CBAA Ruling: the power barges belong to NPC since they are actually used by it. FELS appealed before the CA but was denied as well.
Held:
YES. The CBAA and LBAA power barges are real property and are thus subject to real property tax. This is also the inevitable
conclusion, considering that G.R. No. 165113 was dismissed for failure to sufficiently show any reversible error. Tax assessments by
tax examiners are presumed correct and made in good faith, with the taxpayer having the burden of proving otherwise. Besides,
factual findings of administrative bodies, which have acquired expertise in their field, are generally binding and conclusive upon the
Court; we will not assume to interfere with the sensible exercise of the judgment of men especially trained in appraising property.
Where the judicial mind is left in doubt, it is a sound policy to leave the assessment undisturbed. We find no reason to depart from
this rule in this case.
Moreover, Article 415 (9) of the New Civil Code provides that “docks and structures which, though floating, are intended by their
nature and object to remain at a fixed place on a river, lake, or coast” are considered immovable property. Thus, power barges are
categorized as immovable property by destination, being in the nature of machinery and other implements intended by the owner for
an industry or work which may be carried on in a building or on a piece of land and which tend directly to meet the needs of said
industry or work.
Petitioners maintain nevertheless that the power barges are exempt from real estate tax under Section 234 (c) of R.A. No. 7160
because they are actually, directly and exclusively used by petitioner NPC, a government- owned and controlled corporation engaged
in the supply, generation, and transmission of electric power.
We affirm the findings of the LBAA and CBAA that the owner of the taxable properties is petitioner FELS, which in fine, is the entity
being taxed by the local government. As stipulated under Section 2.11, Article 2 of the Agreement:
“OWNERSHIP OF POWER BARGES. POLAR shall own the Power Barges and all the fixtures, fittings, machinery and equipment on the
Site used in connection with the Power Barges which have been supplied by it at its own cost. POLAR shall operate, manage and
maintain the Power Barges for the purpose of converting Fuel of NAPOCOR into electricity.”
It follows then that FELS cannot escape liability from the payment of realty taxes by invoking its exemption in Section 234 (c) of R.A.
No. 7160. Indeed, the law states that the machinery must be actually, directly and exclusively used by the government owned or
controlled corporation; nevertheless, petitioner FELS still cannot find solace.

SUPREME COURT
Manila
EN BANC
G.R. No. L-19527 March 30, 1963
RICARDO PRESBITERO, in his capacity as Executor of the Testate Estate of EPERIDION PRESBITERO, petitioner,
vs.
THE HON. JOSE F. FERNANDEZ, HELEN CARAM NAVA, and the PROVINCIAL SHERIFF OF NEGROS OCCIDENTAL, respondents.
San Juan, Africa and Benedicto and Hilado and Hilado for petitioner.
Paredes, Poblador, Cruz and Nazareno and Manuel Soriano for respondents.
REYES, J.B.L., J.:
Petition for a writ of certiorari against the Court of First Instance of Negros Occidental.
It appears that during the lifetime of Esperidion Presbitero, judgment was rendered against him by the Court of Appeals on October
14, 1959, in CA-G.R. No. 20879,
... to execute in favor of the plaintiff, within 30 days from the time this judgment becomes final, a deed of reconveyance of Lot No.
788 of the cadastral survey of Valladolid, free from all liens and encumbrances, and another deed of reconveyance of a 7-hectare
portion of Lot No. 608 of the same cadastral survey, also free from all liens and encumbrances, or, upon failure to do so, to pay to the
plaintiff the value of each of the said properties, as may be determined by the Court a quo upon evidence to be presented by the
parties before it. The defendant is further adjudged to pay to the plaintiff the value of the products received by him from the 5-
hectare portion equivalent to 20 cavans of palay per hectare every year, or 125 cavans yearly, at the rate of P10.00 per cavan, from
1951 until possession of the said 5-hectare portion is finally delivered to the plaintiff with legal interest thereon from the time the
complaint was filed; and to pay to the plaintiff the sum of P1,000.00 by way of attorney's fees, plus costs.
This judgment, which became final, was a modification of a decision of the Court of First Instance of Negros Occidental, in its Civil
Case No. 3492, entitled "Helen Caram Nava, plaintiff, versus Esperidion Presbitero, defendant."
Thereafter, plaintiff's counsel, in a letter dated December 8, 1959, sought in vain to amicably settle the case through petitioner's son,
Ricardo Presbitero. When no response was forthcoming, said counsel asked for, and the court a quo ordered on June 9, 1960, the
issuance of a partial writ of execution for the sum of P12,250.00. On the following day, June 10, 1960, said counsel, in another
friendly letter, reiterated his previous suggestion for an amicable settlement, but the same produced no fruitful result. Thereupon, on
June 21, 1960, the sheriff levied upon and garnished the sugar quotas allotted to plantation audit Nos. 26-237, 26-238, 26-239, 26-
240 and 26-241 adhered to the Ma-ao Mill District and "registered in the name of Esperidion Presbitero as the original plantation-
owner", furnishing copies of the writ of execution and the notice of garnishment to the manager of the Ma-ao Sugar Central
Company, Bago, Negros Occidental, and the Sugar Quota Administration at Bacolod City, but without presenting for registration
copies thereof to the Register of Deeds.
Plaintiff Helen Caram Nava (herein respondent) then moved the court, on June 22, 1960, to hear evidence on the market value of the
lots; and after some hearings, occasionally protracted by postponements, the trial court, on manifestation of defendant's willingness
to cede the properties in litigation, suspended the proceedings and ordered him to segregate the portion of Lot 608 pertaining to the
plaintiff from the mass of properties belonging to the defendant within a period to expire on August 24, 1960, and to effect the final
conveyance of the said portion of Lot 608 and the whole of Lot 788 free from any lien and encumbrance whatsoever. Because of
Presbitero's failure to comply with this order within the time set forth by the court, the plaintiff again moved on August 25, 1960 to
declare the market value of the lots in question to be P2,500.00 per hectare, based on uncontradicted evidence previously adduced.
But the court, acting on a prayer of defendant Presbitero, in an order dated August 27, 1960, granted him twenty (20) days to finalize
the survey of Lot 608, and ordered him to execute a reconveyance of Lot 788 not later than August 31, 1960. Defendant again
defaulted; and so plaintiff, on September 21, 1960, moved the court for payment by the defendant of the sum of P35,000.00 for the
14 hectares of land at P2,500.00 to the hectare, and the court, in its order dated September 24, 1960, gave the defendant until
October 15, 1960 either to pay the value of the 14 hectares at the rate given or to deliver the clean titles of the lots. On October 15,
1960, the defendant finally delivered Certificate of Title No. T-28046 covering Lot 788, but not the title covering Lot 608 because of an
existing encumbrance in favor of the Philippine National Bank. In view thereof, Helen Caram Nava moved for, and secured on October
19, 1960, a writ of execution for P17,500.00, and on the day following wrote the sheriff to proceed with the auction sale of the sugar
quotas previously scheduled for November 5, 1960. The sheriff issued the notice of auction sale on October 20, 1960.
On October 22, 1960, death overtook the defendant Esperidion Presbitero.
Proceedings for the settlement of his estate were commenced in Special Proceedings No. 2936 of the Court of First Instance of
Negros Occidental; and on November 4, 1960, the special administrator, Ricardo Presbitero, filed an urgent motion, in Case No. 3492,
to set aside the writs of execution, and to order the sheriff to desist from holding the auction sale on the grounds that the levy on the
sugar quotas was invalid because the notice thereof was not registered with the Register of Deeds, as for real property, and that the
writs, being for sums of money, are unenforceable since Esperidion Presbitero died on October 22, 1960, and, therefore, could only
be enforced as a money claim against his estate.
This urgent motion was heard on November 5, 1960, but the auction sale proceeded on the same date, ending in the plaintiff's
putting up the highest bid for P34,970.11; thus, the sheriff sold 21,640 piculs of sugar quota to her.
On November 10, 1960, plaintiff Nava filed her opposition to Presbitero's urgent motion of November 4, 1960; the latter filed on May
4, 1961 a supplement to his urgent motion; and on May 8 and 23, 1961, the court continued hearings on the motion, and ultimately
denied it on November 18, 1961.
On January 11, 1962, plaintiff Nava also filed an urgent motion to order the Ma-ao Sugar Central to register the sugar quotas in her
name and to deliver the rentals of these quotas corresponding to the crop year 1960-61 and succeeding years to her. The court
granted this motion in its order dated February 3, 1962. A motion for reconsideration by Presbitero was denied in a subsequent order
under date of March 5, 1962. Wherefore, Presbitero instituted the present proceedings for certiorari.
A preliminary restraining writ was thereafter issued by the court against the respondents from implementing the aforesaid orders of
the respondent Judge, dated February 3, 1960 and March 5, 1962, respectively. The petition further seeks the setting aside of the
sheriff's certificate of sale of the sugar quotas made out in favor of Helen Caram Nava, and that she be directed to file the judgment
credit in her favor in Civil Case No. 3492 as a money claim in the proceedings to settle the Estate of Esperidion Presbitero.
The petitioner denies having been personally served with notice of the garnishment of the sugar quotas, but this disclaimer cannot be
seriously considered since it appears that he was sent a copy of the notice through the chief of police of Valladolid on June 21, 1960,
as certified to by the sheriff, and that he had actual knowledge of the garnishment, as shown by his motion of November 4, 1960 to
set aside the writs of execution and to order the sheriff to desist from holding the auction sale.
Squarely at issue in this case is whether sugar quotas are real (immovable) or personal properties. If they be realty, then the levy
upon them by the sheriff is null and void for lack of compliance with the procedure prescribed in Section 14, Rule 39, in relation with
Section 7, Rule 59, of the Rules of Court requiring "the filing with the register of deeds a copy of the orders together with a
description of the property . . . ."
In contending that sugar quotas are personal property, the respondent, Helen Caram Nava, invoked the test formulated by Manresa
(3 Manresa, 6th Ed. 43), and opined that sugar quotas can be carried from place to place without injury to the land to which they are
attached, and are not one of those included in Article 415 of the Civil Code; and not being thus included, they fall under the category
of personal properties:
ART. 416. The following are deemed to be personal property:
xxx xxx xxx
4. In general, all things which can be transported from place to place without impairment of the real property to which they are fixed.
Wherefore, the parties respectfully pray that the foregoing stipulation of facts be admitted and approved by this Honorable Court,
without prejudice to the parties adducing other evidence to prove their case not covered by this stipulation of facts. 1äwphï1.ñët
Respondent likewise points to evidence she submitted that sugar quotas are, in fact, transferred apart from the plantations to which
they are attached, without impairing, destroying, or diminishing the potentiality of either quota or plantation. She was sustained by
the lower court when it stated that "it is a matter of public knowledge and it is universal practice in this province, whose principal
industry is sugar, to transfer by sale, lease, or otherwise, sugar quota allocations from one plantation to any other" and that it is
"specious to insist that quotas are improvements attaching to one plantation when in truth and in fact they are no longer attached
thereto for having been sold or leased away to be used in another plantation". Respondent would add weight to her argument by
invoking the role that sugar quotas play in our modern social and economic life, and cites that the Sugar Office does not require any
registration with the Register of Deeds for the validity of the sale of these quotas; and, in fact, those here in question were not noted
down in the certificate of title of the land to which they pertain; and that Ricardo Presbitero had leased sugar quotas independently
of the land. The respondent cites further that the U.S.-Philippine Trade Relations Act, approved by the United States Congress in
1946, limiting the production of unrefined sugar in the Philippines did not allocate the quotas for said unrefined sugar among lands
planted to sugarcane but among "the sugar producing mills and plantation OWNERS", and for this reason Section 3 of Executive Order
No. 873, issued by Governor General Murphy, authorizes the lifting of sugar allotments from one land to another by means only of
notarized deeds.
While respondent's arguments are thought-provoking, they cannot stand against the positive mandate of the pertinent statute. The
Sugar Limitation Law (Act 4166, as amended) provides —
SEC. 9. The allotment corresponding to each piece of land under the provisions of this Act shall be deemed to be an improvement
attaching to the land entitled thereto ....
and Republic Act No. 1825 similarly provides —
SEC. 4. The production allowance or quotas corresponding to each piece of land under the provisions of this Act shall be deemed to
be an improvement attaching to the land entitled thereto ....
And Executive Order No. 873 defines "plantation" as follows:
(a) The term 'plantation' means any specific area of land under sole or undivided ownership to which is attached an allotment of
centrifugal sugar.
Thus, under express provisions of law, the sugar quota allocations are accessories to land, and can not have independent existence
away from a plantation, although the latter may vary. Indeed, this Court held in the case of Abelarde vs. Lopez, 74 Phil. 344, that even
if a contract of sale of haciendas omitted "the right, title, interest, participation, action (and) rent" which the grantors had or might
have in relation to the parcels of land sold, the sale would include the quotas, it being provided in Section 9, Act 4166, that the
allotment is deemed an improvement attached to the land, and that at the time the contract of sale was signed the land devoted to
sugar were practically of no use without the sugar allotment.
As an improvement attached to land, by express provision of law, though not physically so united, the sugar quotas are inseparable
therefrom, just like servitudes and other real rights over an immovable. Article 415 of the Civil Code, in enumerating what are
immovable properties, names —
10. Contracts for public works, and servitudes and other real rights over immovable property. (Emphasis supplied)
It is by law, therefore, that these properties are immovable or real, Article 416 of the Civil Code being made to apply only when the
thing (res) sought to be classified is not included in Article 415.
The fact that the Philippine Trade Act of 1946 (U.S. Public Law 371-79th Congress) allows transfers of sugar quotas does not militate
against their immovability. Neither does the fact that the Sugar Quota Office does not require registration of sales of quotas with the
Register of Deeds for their validity, nor the fact that allocation of unrefined sugar quotas is not made among lands planted to
sugarcane but among "the sugar producing mills and plantation OWNERS", since the lease or sale of quotas are voluntary
transactions, the regime of which, is not necessarily identical to involuntary transfers or levies; and there cannot be a sugar plantation
owner without land to which the quota is attached; and there can exist no quota without there being first a corresponding plantation.
Since the levy is invalid for non-compliance with law, it is impertinent to discuss the survival or non-survival of claims after the death
of the judgment debtor, gauged from the moment of actual levy. Suffice it to state that, as the case presently stands, the writs of
execution are not in question, but the levy on the quotas, and, because of its invalidity, the levy amount to no levy at all. Neither is it
necessary, or desirable, to pass upon the conscionableness or unconscionableness of the amount produced in the auction sale as
compared with the actual value of the quotas inasmuch as the sale must necessarily be also illegal.
As to the remedial issue that the respondents have presented: that certiorari does not lie in this case because the petitioner had a
remedy in the lower court to "suspend" the auction sale, but did not avail thereof, it may be stated that the latter's urgent motion of
November 4, 1960, a day before the scheduled sale (though unresolved by the court on time), did ask for desistance from holding the
sale.
WHEREFORE, the preliminary injunction heretofore granted is hereby made permanent, and the sheriff's certificate of sale of the
sugar quotas in question declared null and void. Costs against respondent Nava.
Bengzon, C.J., Padilla, Labrador, Barrera, Paredes, Dizon and Regala, JJ., concur.
Makalintal, J., took no part.
CASE DIGEST
Facts:1) ESPERIDION Presbitero failed to furnish Nava the value of the properties under litigation.2) Presbitero was ordered by the
lower court to pay Nava to settle his debts.3) Nava's counsel still tried to settle this case with Presbitero, out of court. But to no
avail.4) Thereafter, the sheriff levied upon and garnished the sugar quotas allotted to the plantationand adhered to the Ma-ao Mill
District and registered in the name of Presbitero as the originalplantation owner.5) The sheriff was not able to present for registration
thererof to the Registry of Deeds.6) The court then ordered Presbitero to segregate the portion of Lot 608 pertaining to Nava fromthe
mass of properties belonging to the defendant within a period to expire on August 1960.7) Bottomline, Presbitero did not meet his
obligations, and the auction sale was scheduled.8) Presbitero died after.9) RICARDO Presbitero, the estate administrator, then
petitioned that the sheriff desist in holdingthe auction sale on the ground that the levy on the sugar quotas was invalid because the
noticethereof was not registered with the Registry of Deeds.Issue: W/N the sugar quotas are real (immovable) or personal
properties.Held:1) They are real properties.2) Legal bases:a) The Sugar Limitation Lawxxx attaching to the land xxx (p 631)b) RA
1825xxx to be an improvement attaching to the land xxx (p 631)c) EO # 873"plantation" xxx to which is attached an allotment of
centrifugal sugar.3) Under the express provisions of law, the sugar quota allocations are accessories to the land,and cannot have
independent existence away from a plantation.4) Since the levy is invalid for non-compliance with law, xxx the levy amount to no levy
at all.
LUIS MARCOS P. LAUREL, G.R. No. 155076
Petitioner,
Present:
Puno, C.J.,
Quisumbing,
Ynares-Santiago,
Carpio,
- versus - Austria-Martinez,
Corona,
Carpio Morales,
Azcuna,
Tinga,
Chico-Nazario,
Velasco, Jr.,
Nachura,
Leonardo-De Castro, and
Brion, JJ.
HON. ZEUS C. ABROGAR,
Presiding Judge of the Regional
Trial Court, Makati City, Branch 150,
PEOPLE OF THE PHILIPPINES Promulgated:
& PHILIPPINE LONG DISTANCE
TELEPHONE COMPANY,
Respondents. January 13, 2009
x ---------------------------------------------------------------------------------------- x
RESOLUTION
YNARES-SANTIAGO, J.:
On February 27, 2006, this Courts First Division rendered judgment in this case as follows:
IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The assailed Orders of the Regional Trial Court and the Decision
of the Court of Appeals are REVERSED and SET ASIDE. The Regional Trial Court is directed to issue an order granting the
motion of the petitioner to quash the Amended Information.
SO ORDERED.1[1]
By way of brief background, petitioner is one of the accused in Criminal Case No. 99-2425, filed with the Regional Trial Court of
Makati City, Branch 150. The Amended Information charged the accused with theft under Article 308 of the Revised Penal Code,
committed as follows:
On or about September 10-19, 1999, or prior thereto in Makati City, and within the jurisdiction of this Honorable
Court, the accused, conspiring and confederating together and all of them mutually helping and aiding one another, with
intent to gain and without the knowledge and consent of the Philippine Long Distance Telephone (PLDT), did then and
there willfully, unlawfully and feloniously take, steal and use the international long distance calls belonging to PLDT by
conducting International Simple Resale (ISR), which is a method of routing and completing international long distance
calls using lines, cables, antenae, and/or air wave frequency which connect directly to the local or domestic exchange
facilities of the country where the call is destined, effectively stealing this business from PLDT while using its facilities in
the estimated amount of P20,370,651.92 to the damage and prejudice of PLDT, in the said amount.
CONTRARY TO LAW.2[2]
Petitioner filed a Motion to Quash (with Motion to Defer Arraignment), on the ground that the factual allegations in the Amended
Information do not constitute the felony of theft. The trial court denied the Motion to Quash the Amended Information, as well
petitioners subsequent Motion for Reconsideration.
Petitioners special civil action for certiorari was dismissed by the Court of Appeals. Thus, petitioner filed the instant petition for
review with this Court.
In the above-quoted Decision, this Court held that the Amended Information does not contain material allegations charging
petitioner with theft of personal property since international long distance calls and the business of providing telecommunication
or telephone services are not personal properties under Article 308 of the Revised Penal Code.
Respondent Philippine Long Distance Telephone Company (PLDT) filed a Motion for Reconsideration with Motion to Refer the Case to
the Supreme Court En Banc. It maintains that the Amended Information charging petitioner with theft is valid and sufficient; that it
states the names of all the accused who were specifically charged with the crime of theft of PLDTs international calls and business
of providing telecommunication or telephone service on or about September 10 to 19, 1999 in Makati City by conducting ISR or
International Simple Resale; that it identifies the international calls and business of providing telecommunication or telephone
service of PLDT as the personal properties which were unlawfully taken by the accused; and that it satisfies the test of sufficiency
as it enabled a person of common understanding to know the charge against him and the court to render judgment properly.
PLDT further insists that the Revised Penal Code should be interpreted in the context of the Civil Codes definition of real and
personal property. The enumeration of real properties in Article 415 of the Civil Code is exclusive such that all those not included
therein are personal properties. Since Article 308 of the Revised Penal Code used the words personal property without
qualification, it follows that all personal properties as understood in the context of the Civil Code, may be the subject of theft
under Article 308 of the Revised Penal Code. PLDT alleges that the international calls and business of providing telecommunication
or telephone service are personal properties capable of appropriation and can be objects of theft.
PLDT also argues that taking in relation to theft under the Revised Penal Code does not require asportation, the sole requisite
being that the object should be capable of appropriation. The element of taking referred to in Article 308 of the Revised Penal
Code means the act of depriving another of the possession and dominion of a movable coupled with the intention, at the time of
the taking, of withholding it with the character of permanency. There must be intent to appropriate, which means to deprive the
lawful owner of the thing. Thus, the term personal properties under Article 308 of the Revised Penal Code is not limited to only
personal properties which are susceptible of being severed from a mass or larger quantity and of being transported from place to
place.
PLDT likewise alleges that as early as the 1930s, international telephone calls were in existence; hence, there is no basis for this
Courts finding that the Legislature could not have contemplated the theft of international telephone calls and the unlawful
transmission and routing of electronic voice signals or impulses emanating from such calls by unlawfully tampering with the
telephone device as within the coverage of the Revised Penal Code.
According to respondent, the international phone calls which are electric currents or sets of electric impulses transmitted through
a medium, and carry a pattern representing the human voice to a receiver, are personal properties which may be subject of theft.
Article 416(3) of the Civil Code deems forces of nature (which includes electricity) which are brought under the control by science,
are personal property.
In his Comment to PLDTs motion for reconsideration, petitioner Laurel claims that a telephone call is a conversation on the phone
or a communication carried out using the telephone. It is not synonymous to electric current or impulses. Hence, it may not be
considered as personal property susceptible of appropriation. Petitioner claims that the analogy between generated electricity and
telephone calls is misplaced. PLDT does not produce or generate telephone calls. It only provides the facilities or services for the
transmission and switching of the calls. He also insists that business is not personal property. It is not the business that is protected
but the right to carry on a business. This right is what is considered as property. Since the services of PLDT cannot be considered as
property, the same may not be subject of theft.
The Office of the Solicitor General (OSG) agrees with respondent PLDT that international phone calls and the business or service of
providing international phone calls are subsumed in the enumeration and definition of personal property under the Civil Code
hence, may be proper subjects of theft. It noted that the cases of United States v. Genato,3[3] United States v. Carlos4[4] and
United States v. Tambunting,5[5] which recognized intangible properties like gas and electricity as personal properties, are
deemed incorporated in our penal laws. Moreover, the theft provision in the Revised Penal Code was deliberately couched in
broad terms precisely to be all-encompassing and embracing even such scenario that could not have been easily anticipated.
According to the OSG, prosecution under Republic Act (RA) No. 8484 or the Access Device Regulations Act of 1998 and RA 8792 or the
Electronic Commerce Act of 2000 does not preclude prosecution under the Revised Penal Code for the crime of theft. The latter
embraces unauthorized appropriation or use of PLDTs international calls, service and business, for personal profit or gain, to the
prejudice of PLDT as owner thereof. On the other hand, the special laws punish the surreptitious and advanced technical means
employed to illegally obtain the subject service and business. Even assuming that the correct indictment should have been under RA
8484, the quashal of the information would still not be proper. The charge of theft as alleged in the Information should be taken in
relation to RA 8484 because it is the elements, and not the designation of the crime, that control.
Considering the gravity and complexity of the novel questions of law involved in this case, the Special First Division resolved
to refer the same to the Banc.
We resolve to grant the Motion for Reconsideration but remand the case to the trial court for proper clarification of the Amended
Information.
Article 308 of the Revised Penal Code provides:
Art. 308. Who are liable for theft. Theft is committed by any person who, with intent to gain but without violence
against, or intimidation of persons nor force upon things, shall take personal property of another without the latters
consent.
The elements of theft under Article 308 of the Revised Penal Code are as follows: (1) that there be taking of personal property; (2)
that said property belongs to another; (3) that the taking be done with intent to gain; (4) that the taking be done without the consent
of the owner; and (5) that the taking be accomplished without the use of violence against or intimidation of persons or force upon
things.
Prior to the passage of the Revised Penal Code on December 8, 1930, the definition of the term personal property in the
penal code provision on theft had been established in Philippine jurisprudence. This Court, in United States v. Genato, United States v.
Carlos, and United States v. Tambunting, consistently ruled that any personal property, tangible or intangible, corporeal or
incorporeal, capable of appropriation can be the object of theft.
Moreover, since the passage of the Revised Penal Code on December 8, 1930, the term personal property has had a
generally accepted definition in civil law. In Article 335 of the Civil Code of Spain, personal property is defined as anything susceptible
of appropriation and not included in the foregoing chapter (not real property). Thus, the term personal property in the Revised Penal
Code should be interpreted in the context of the Civil Code provisions in accordance with the rule on statutory construction that
where words have been long used in a technical sense and have been judicially construed to have a certain meaning, and have been
adopted by the legislature as having a certain meaning prior to a particular statute, in which they are used, the words used in such
statute should be construed according to the sense in which they have been previously used.6[6] In fact, this Court used the Civil
Code definition of personal property in interpreting the theft provision of the penal code in United States v. Carlos.
Cognizant of the definition given by jurisprudence and the Civil Code of Spain to the term personal property at the time the
old Penal Code was being revised, still the legislature did not limit or qualify the definition of personal property in the Revised Penal
Code. Neither did it provide a restrictive definition or an exclusive enumeration of personal property in the Revised Penal Code,
thereby showing its intent to retain for the term an extensive and unqualified interpretation. Consequently, any property which is not
included in the enumeration of real properties under the Civil Code and capable of appropriation can be the subject of theft under
the Revised Penal Code.
The only requirement for a personal property to be the object of theft under the penal code is that it be capable of
appropriation. It need not be capable of asportation, which is defined as carrying away.7[7] Jurisprudence is settled that to take
under the theft provision of the penal code does not require asportation or carrying away.8[8]
To appropriate means to deprive the lawful owner of the thing.9[9] The word take in the Revised Penal Code includes any
act intended to transfer possession which, as held in the assailed Decision, may be committed through the use of the offenders
own hands, as well as any mechanical device, such as an access device or card as in the instant case. This includes controlling the
destination of the property stolen to deprive the owner of the property, such as the use of a meter tampering, as held in Natividad
v. Court of Appeals,10[10] use of a device to fraudulently obtain gas, as held in United States v. Tambunting, and the use of a
jumper to divert electricity, as held in the cases of United States v. Genato, United States v. Carlos, and United States v.
Menagas.11[11]
As illustrated in the above cases, appropriation of forces of nature which are brought under control by science such as
electrical energy can be achieved by tampering with any apparatus used for generating or measuring such forces of nature,
wrongfully redirecting such forces of nature from such apparatus, or using any device to fraudulently obtain such forces of nature.
In the instant case, petitioner was charged with engaging in International Simple Resale (ISR) or the unauthorized routing and
completing of international long distance calls using lines, cables, antennae, and/or air wave frequency and connecting these calls
directly to the local or domestic exchange facilities of the country where destined.
As early as 1910, the Court declared in Genato that ownership over electricity (which an international long distance call
consists of), as well as telephone service, is protected by the provisions on theft of the Penal Code. The pertinent provision of the
Revised Ordinance of the City of Manila, which was involved in the said case, reads as follows:
Injury to electric apparatus; Tapping current; Evidence. No person shall destroy, mutilate, deface, or otherwise
injure or tamper with any wire, meter, or other apparatus installed or used for generating, containing, conducting, or
measuring electricity, telegraph or telephone service, nor tap or otherwise wrongfully deflect or take any electric current
from such wire, meter, or other apparatus.
No person shall, for any purpose whatsoever, use or enjoy the benefits of any device by means of which he may fraudulently
obtain any current of electricity or any telegraph or telephone service; and the existence in any building premises of any such
device shall, in the absence of satisfactory explanation, be deemed sufficient evidence of such use by the persons benefiting
thereby.
It was further ruled that even without the above ordinance the acts of subtraction punished therein are covered by the
provisions on theft of the Penal Code then in force, thus:
Even without them (ordinance), the right of the ownership of electric current is secured by articles 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 supreme court of Spain of January 20, 1887,
and April 1, 1897, construing and enforcing the provisions of articles 530 and 531 of the Penal Code of that country, articles
517 and 518 of the code in force in these islands.
The acts of subtraction include: (a) tampering with any wire, meter, or other apparatus installed or used for generating,
containing, conducting, or measuring electricity, telegraph or telephone service; (b) tapping or otherwise wrongfully deflecting or
taking any electric current from such wire, meter, or other apparatus; and (c) using or enjoying the benefits of any device by means
of which one may fraudulently obtain any current of electricity or any telegraph or telephone service.
In the instant case, the act of conducting ISR operations by illegally connecting various equipment or apparatus to private
respondent PLDTs telephone system, through which petitioner is able to resell or re-route international long distance calls using
respondent PLDTs facilities constitutes all three acts of subtraction mentioned above.
The business of providing telecommunication or telephone service is likewise personal property which can be the object of
theft under Article 308 of the Revised Penal Code. Business may be appropriated under Section 2 of Act No. 3952 (Bulk Sales Law),
hence, could be object of theft:
Section 2. Any sale, transfer, mortgage, or assignment of a stock of goods, wares, merchandise, provisions, or materials
otherwise than in the ordinary course of trade and the regular prosecution of the business of the vendor, mortgagor,
transferor, or assignor, or any sale, transfer, mortgage, or assignment of all, or substantially all, of the business or trade
theretofore conducted by the vendor, mortgagor, transferor or assignor, or all, or substantially all, of the fixtures and
equipment used in and about the business of the vendor, mortgagor, transferor, or assignor, shall be deemed to be a sale
and transfer in bulk, in contemplation of the Act. x x x.
In Strochecker v. Ramirez,12[12] this Court stated:
With regard to the nature of the property thus mortgaged which is one-half interest in the business above described, such
interest is a personal property capable of appropriation and not included in the enumeration of real properties in article 335
of the Civil Code, and may be the subject of mortgage.
Interest in business was not specifically enumerated as personal property in the Civil Code in force at the time the above
decision was rendered. Yet, interest in business was declared to be personal property since it is capable of appropriation and not
included in the enumeration of real properties. Article 414 of the Civil Code provides that all things which are or may be the object of
appropriation are considered either real property or personal property. Business is likewise not enumerated as personal property
under the Civil Code. Just like interest in business, however, it may be appropriated. Following the ruling in Strochecker v. Ramirez,
business should also be classified as personal property. Since it is not included in the exclusive enumeration of real properties under
Article 415, it is therefore personal property.13[13]
As can be clearly gleaned from the above disquisitions, petitioners acts constitute theft of respondent PLDTs business and service,
committed by means of the unlawful use of the latters facilities. In this regard, the Amended Information inaccurately describes
the offense by making it appear that what petitioner took were the international long distance telephone calls, rather than
respondent PLDTs business.
A perusal of the records of this case readily reveals that petitioner and respondent PLDT extensively discussed the issue of
ownership of telephone calls. The prosecution has taken the position that said telephone calls belong to respondent PLDT. This is
evident from its Comment where it defined the issue of this case as whether or not the unauthorized use or appropriation of PLDT
international telephone calls, service and facilities, for the purpose of generating personal profit or gain that should have
otherwise belonged to PLDT, constitutes theft.14[14]
In discussing the issue of ownership, petitioner and respondent PLDT gave their respective explanations on how a telephone
call is generated.15[15] For its part, respondent PLDT explains the process of generating a telephone call as follows:
38. The role of telecommunication companies is not limited to merely providing the medium (i.e. the electric current)
through which the human voice/voice signal of the caller is transmitted. Before the human voice/voice signal can be so
transmitted, a telecommunication company, using its facilities, must first break down or decode the human voice/voice
signal into electronic impulses and subject the same to further augmentation and enhancements. Only after such process of
conversion will the resulting electronic impulses be transmitted by a telecommunication company, again, through the use of
its facilities. Upon reaching the destination of the call, the telecommunication company will again break down or decode the
electronic impulses back to human voice/voice signal before the called party receives the same. In other words, a
telecommunication company both converts/reconverts the human voice/voice signal and provides the medium for
transmitting the same.
39. Moreover, in the case of an international telephone call, once the electronic impulses originating from a foreign
telecommunication company country (i.e. Japan) reaches the Philippines through a local telecommunication company (i.e.
private respondent PLDT), it is the latter which decodes, augments and enhances the electronic impulses back to the human
voice/voice signal and provides the medium (i.e. electric current) to enable the called party to receive the call. Thus, it is not
true that the foreign telecommunication company provides (1) the electric current which transmits the human voice/voice
signal of the caller and (2) the electric current for the called party to receive said human voice/voice signal.
40. Thus, contrary to petitioner Laurels assertion, once the electronic impulses or electric current originating from a
foreign telecommunication company (i.e. Japan) reaches private respondent PLDTs network, it is private respondent PLDT
which decodes, augments and enhances the electronic impulses back to the human voice/voice signal and provides the
medium (i.e. electric current) to enable the called party to receive the call. Without private respondent PLDTs network, the
human voice/voice signal of the calling party will never reach the called party.16[16]
In the assailed Decision, it was conceded that in making the international phone calls, the human voice is converted into
electrical impulses or electric current which are transmitted to the party called. A telephone call, therefore, is electrical energy. It
was also held in the assailed Decision that intangible property such as electrical energy is capable of appropriation because it may
be taken and carried away. Electricity is personal property under Article 416 (3) of the Civil Code, which enumerates forces of
nature which are brought under control by science.17[17]
Indeed, while it may be conceded that international long distance calls, the matter alleged to be stolen in the instant case,
take the form of electrical energy, it cannot be said that such international long distance calls were personal properties belonging
to PLDT since the latter could not have acquired ownership over such calls. PLDT merely encodes, augments, enhances, decodes
and transmits said calls using its complex communications infrastructure and facilities. PLDT not being the owner of said telephone
calls, then it could not validly claim that such telephone calls were taken without its consent. It is the use of these communications
facilities without the consent of PLDT that constitutes the crime of theft, which is the unlawful taking of the telephone services and
business.
Therefore, the business of providing telecommunication and the telephone service are personal property under Article 308 of the
Revised Penal Code, and the act of engaging in ISR is an act of subtraction penalized under said article. However, the Amended
Information describes the thing taken as, international long distance calls, and only later mentions stealing the business from PLDT
as the manner by which the gain was derived by the accused. In order to correct this inaccuracy of description, this case must be
remanded to the trial court and the prosecution directed to amend the Amended Information, to clearly state that the proper ty
subject of the theft are the services and business of respondent PLDT. Parenthetically, this amendment is not necessitated by a
mistake in charging the proper offense, which would have called for the dismissal of the information under Rule 110, Section 14
and Rule 119, Section 19 of the Revised Rules on Criminal Procedure. To be sure, the crime is properly designated as one of theft.
The purpose of the amendment is simply to ensure that the accused is fully and sufficiently apprised of the nature and cause of the
charge against him, and thus guaranteed of his rights under the Constitution.
ACCORDINGLY, the motion for reconsideration is GRANTED. The assailed Decision dated February 27, 2006 is RECONSIDERED and
SET ASIDE. The Decision of the Court of Appeals in CA-G.R. SP No. 68841 affirming the Order issued by Judge Zeus C. Abrogar of the
Regional Trial Court of Makati City, Branch 150, which denied the Motion to Quash (With Motion to Defer Arraignment) in Criminal
Case No. 99-2425 for theft, is AFFIRMED. The case is remanded to the trial court and the Public Prosecutor of Makati City is hereby
DIRECTED to amend the Amended Information to show that the property subject of the theft were services and business of the
private offended party.
SO ORDERED.
SIBAL v. VALDEZ
For the purpose of attachment and execution, and for the purposes of the Chattel Mortgage Law, "ungathered products" have the
nature of personal property.
FACTS:
(this case has a lot of confusing facts, just read the original if this digest fails to compress everything) The Deputy Sheriff of the
Province of Tarlac, by virtue of a writ of execution issued by the Court of First Instance of Pampanga, attached and sold to the
defendant Emiliano J. Valdez the sugar cane planted by the plaintiff and his tenants on seven parcels of land. Included also in those
attached were real properties wherein 8mout of the 11 parcels of land, house and camarin which was first acquired by Macondray &
Co and then later on bought by Valdez in an auction. First Cause for petitioner: That Within one year from the date of the attachment
and sale the plaintiff offered to redeem said sugar cane and tendered to the defendant Valdez the amount sufficient to cover the
price paid by the latter, the interest thereon and any assessments or taxes which he may have paid thereon after the purchase, and
the interest corresponding thereto and that Valdez refused to accept the money and to return the sugar cane to the plaintiff. Second
Cause for petitioner: That Valdez was trying to harvest palay from four out of seven parcels of land. Petitioner filed for preliminary
injunction to stop defendant from 1) distributing the lands 2) harvesting and selling the sugar canes, and 3) harvesting and selling the
palay. The writ was issued which prevented defendant from planting and harvesting the lands. Defendant later appealed claiming
that he was the owner of many of the alleged land thus he also owns the crops of it. The court awarded the defendant 9,439.08
because the petitioner unduly denied the defendant to plant in his land thus preventing him to profit thereto.
ISSUE:
Whether the sugar cane is personal o real property? (The relevance of the issue is with regards to the sugar cane of the Petitioner
which came from the land that now belongs to the defendant)
RULING:
It is contended that sugar cane comes under the classification of real property as "ungathered products" in paragraph 2 of article 334
of the Civil Code. Said paragraph 2 of article 334 enumerates as real property the following: Trees, plants, and ungathered products,
while they are annexed to the land or form an integral part of any immovable property." That article, however, has received in recent
years an interpretation by the Tribunal Supremo de España, which holds that, under certain conditions, growing crops may be
considered as personal property.
In some cases "standing crops" may be considered and dealt with as personal property. In the case of Lumber Co. vs. Sheriff and Tax
Collector (106 La., 418) the Supreme Court said: "True, by article 465 of the Civil Code it is provided that 'standing crops and the fruits
of trees not gathered and trees before they are cut down . . . are considered as part of the land to which they are attached, but the
immovability provided for is only one in abstracto and without reference to rights on or to the crop acquired by others than the
owners of the property to which the crop is attached. . . . The existence of a right on the growing crop is a mobilization by
anticipation, a gathering as it were in advance, rendering the crop movable quoad the right acquired therein. Our jurisprudence
recognizes the possible mobilization of the growing crop."
nature of personal property. SC lowered the award for damages to the defendant to 8,900.80 by acknowledging the fact that some of
the sugar canes were owned by the petitioner and by reducing the calculated expected yield or profit that defendant would have
made if petitioner did not judicially prevent him from planting and harvesting his lands.
G.R. No. L-26278 Case Digest

G.R. No. L-26278, August 4, 1927
Leon Sibal
vs Emiliano Valdez et al.
Ponente: Johnson
Facts:
Sibal alleged that Mamawal, deputy sheriff of Tarlac attached and sold to Valdez the sugar cane planted by Sibal on several parcels of
land. Valdez refused to returned the cane and money to Sibal. As 2nd cause of action, Sibal alleged that Valdez was attempting to
harvest the palay planted in four of the seven parcels of land mentioned. The court after hearing both parties, issued the writ of
preliminary injunction prayed for in the complaint.
The defendant Emiliano J. Valdez, in his amended answer, denied generally and specifically each and every
allegation of the complaint and step up the following defenses:
(a) That the sugar cane in question had the nature of personal property and was not, therefore, subject to redemption;
(b) That he was the owner of parcels 1, 2 and 7 described in the first cause of action of the complaint;
(c) That he was the owner of the palay in parcels 1, 2 and 7; and
(d) That he never attempted to harvest the palay in parcels 4 and 5. After hearing the evidence, Judge Lukban rendered in favor of the
defendants.
Issue:
(1) Whether the sugar cane is personal or real property?
Held:
It is contended that sugar cane comes under the classification of real property as "ungathered products" in paragraph 2 of article 334
of the Civil Code. Said paragraph 2 of article 334 enumerates as real property the following: Trees, plants, and ungathered products,
while they are annexed to the land or form an integral part of any immovable property." That article, however, has received in recent
years an interpretation by the Tribunal Supremo de España, which holds that, under certain conditions, growing crops may be
considered as personal property.
In some cases "standing crops" may be considered and dealt with as personal property. In the case of Lumber Co. vs. Sheriff and Tax
Collector (106 La., 418) the Supreme Court said: "True, by article 465 of the Civil Code it is provided that 'standing crops and the fruits
of trees not gathered and trees before they are cut down . . . are considered as part of the land to which they are attached, but the
immovability provided for is only one in abstracto and without reference to rights on or to the crop acquired by others than the
owners of the property to which the crop is attached. . . . The existence of a right on the growing crop is a mobilization by
anticipation, a gathering as it were in advance, rendering the crop movable quoad the right acquired therein. Our jurisprudence
recognizes the possible mobilization of the growing crop."
nature of personal property. SC lowered the award for damages to the defendant to 8,900.80 by acknowledging the fact that some of
the sugar canes were owned by the petitioner and by reducing the calculated expected yield or profit that defendant would have
made if petitioner did not judicially prevent him from planting and harvesting his lands.
Facts: Plaintiff alleged that the defendant Vitaliano Mamawal, deputy sheriff of the Province of Tarlac, , attached and sold to the
defendant Emiliano J. Valdez the sugar cane planted by the plaintiff and his tenants on parcels of land.
Within one year from the date of the attachment and sale the plaintiff offered to redeem said sugar cane and tendered to the
defendant Valdez the amount sufficient to cover the price paid by the latter, the interest thereon and any assessments or taxes which
he may have paid thereon after the purchase, and the interest corresponding thereto and that Valdez refused to accept the money
and to return the sugar cane to the plaintiff.
Plaintiff alleged that the defendant Emiliano J. Valdez was attempting to harvest the palay planted in four of the seven parcels of land
and that he had harvested and taken possession of the palay in one of said seven parcels and in another parcel and that all of said
palay belonged to the plaintiff.
Plaintiff prayed that a writ of preliminary injunction be issued against the defendant Emiliano J. Valdez his attorneys and agents,
restraining them (1) from distributing him in the possession of the parcels of land described in the complaint; (2) from taking
possession of, or harvesting the sugar cane in question; and (3) from taking possession, or harvesting the palay in said parcels of land.
Plaintiff also prayed that a judgment be rendered in his favor and against the defendants ordering them to consent to the redemption
of the sugar cane in question, and that the defendant Valdez be condemned to pay to the plaintiff the sum of P1,056 the value of
palay harvested by him in the two parcels of land, with interest and costs.
The trial court rendered a judgment against the plaintiff and in favor of the defendants. It appeared that the eight parcels of land
belonging to Sibal were attached and Macondray Co., Inc. bought the eight parcels of land. Within 1 year from the sale, Sibal paid
Macondray Co., Inc. for the account of the redemption price.
The deputy sheriff attached the personal property of Sibal, which included the sugar cane now in question in the seven parcels of
land. Said personal properties were sold to Valdez in a public auction. Real property of Sibal was also attached, consisting of 11
parcels of land, 8 of which were bought by Valdez in an auction held by the sheriff. The remaining 3 parcels were released by virtue of
claims of Cuyugan and Tizon.
On that same date, Macondray sold all of its rights to Valdez in the eight parcels of land acquired, for the unpaid balance of the
redemption price of said eight parcels of land. Valdez became the absolute owner of the land.
SIBAL VS. VALDEZ, 50 PHIL 512 FACTS:

As a first cause of action the plaintiff alleged that the defendant Vitaliano Mamawal, deputy sheriff of the Province of Tarlac, by virtue of a writ of execution issued
by the Court of First Instance of Pampanga, attached and sold to the defendant Emiliano J. Valdez the sugar cane planted by the plaintiff and his tenants on seven
parcels of land. Within one year from the date of the attachment and sale the plaintiff offered to redeem said sugar cane and tendered to the defendant Valdez the
amount sufficient to cover the price paid by the latter, the interest thereon and any assessments or taxes which he may have paid thereon after the purchase, and
the interest corresponding thereto. But Valdez refused to accept the money and to return the sugar cane to the plaintiff. As a second cause of action, the
plaintiff alleged that the defendant Emiliano J. Valdez was attempting to harvest the palay planted in four of the seven parcels and that he had
harvested and taken possession of the palay in one of said seven parcels and in another parcel, amounting to 300 cavans; and that all of said palay belonged 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. Hence, the appeal
ISSUE:
Whether the sugar cane in question is personal or real property
HELD:
Manresa, the eminent commentator of the Spanish Civil Code, in discussing section 334 of the Civil Code, in view of the recent decisions of the supreme Court of
Spain, admits that growing crops are sometimes considered and treated as personal property. Moreover, from an examination of the reports and codes of the
State of California and other states we find that the settle doctrine followed in said states in connection with the attachment of property and execution of judgment
is, that growing crops raised by yearly labor and cultivation are considered personal property. On the other hand, Act No. 1508, the Chattel Mortgage Law, fully
recognized that growing crops are personal property. Section 2 of said Act provides: "All personal property shall be subject to mortgage, agreeably to the provisions
of this Act, and a mortgage executed in pursuance thereof shall be termed a chattel mortgage." Section 7 in part provides: "If growing crops be mortgaged the
mortgage may contain an agreement stipulating that the mortgagor binds himself properly to tend, care for and protect the crop while growing. It is clear from the
foregoing provisions that Act No. 1508 was enacted on the assumption that "growing crops" are personal property. This consideration tends to support the
conclusion hereinbefore stated, that paragraph 2 of article 334 of the Civil Code has been modified by section 450 of Act No. 190 and by Act No. 1508 in the sense
that "ungathered products" as mentioned in said article of the Civil Code have the nature of personal property. In other words, the phrase "personal property"
should be understood to include "ungathered products."
We may, therefore, conclude that paragraph 2 of article 334 of the Civil Code has been modified by section 450 of the Code of Civil Procedure and by Act No. 1508,
in the sense that, for the purpose of attachment and execution, and for the purposes of the Chattel Mortgage Law, "ungathered products" have the nature of
personal property.

SUPREME COURT
Manila
EN BANC
G.R. No. 18520 September 26, 1922
INVOLUNTARY INSOLVENCY OF PAUL STROCHECKER, appellee,

vs.
ILDEFONSO RAMIREZ, creditor and appellant.
WILLIAM EDMONDS, assignee.
Lim & Lim for appellant.

Ross & Lawrence and Antonio T. Carrascoso, jr., for the Fidelity & Surety Co.
ROMUALDEZ, J.:
The question at issue in this appeal is, which of the two mortgages here in question must be given preference? Is it the one in favor of
the Fidelity & Surety Co., or that in favor of Ildefonso Ramirez. The first was declared by the trial court to be entitled to preference.
In the lower court there were three mortgagees each of whom claimed preference. They were the two above mentioned and
Concepcion Ayala. The latter's claim was rejected by the trial court, and from that ruling she did not appeal.
There is no question as to the priority in time of the mortgage in favor of the Fidelity & Surety Co. which was executed on March 10,
1919, and registered in due time in the registry of property, that in favor of the appellant being dated September 22, 1919, and
registered also in the registry.
The appellant claims preference on these grounds: (a) That the first mortgage above-mentioned is not valid because the property
which is the subject-matter thereof is not capable of being mortgaged, and the description of said property is not sufficient; and (b)
that the amount due the appellant is a purchase price, citing article 1922 of the Civil Code in support thereof, and that his mortgage is
but a modification of the security given by the debtor on February 15, 1919, that is, prior to the mortgage executed in favor of the
Fidelity & Surety Co.
As to the first ground, the thing that was mortgaged to this corporation is described in the document as follows:
. . . his half interest in the drug business known as Antigua Botica Ramirez (owned by Srta. Dolores del Rosario and the
mortgagor herein referred to as the partnership), located at Calle Real Nos. 123 and 125, District of Intramuros, Manila,
Philippine Islands.
With regard to the nature of the property thus mortgaged, which is one-half interest in the business above described, such interest is
a personal property capable of appropriation and not included in the enumeration of real properties in article 335 of the Civil Code,
and may be the subject of mortgage. All personal property may be mortgaged. (Sec. 2, Act No. 1508.)
The description contained in the document is sufficient. The law (sec. 7, Act No. 1508) requires only a description of the following
nature:
The 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.
Turning to the second error assigned, numbers 1, 2, and 3 of article 1922 of the Civil Code invoked by the appellant are not
applicable. Neither he, as debtor, nor the debtor himself, is in possession of the property mortgaged, which is, and since the
registration of the mortgage has been, legally in possession of the Fidelity & Surety Co. (Sec. 4, Act No. 1508; Meyers vs. Thein, 15
Phil., 303.)
In no way can the mortgage executed in favor of the appellant on September 22, 1919, be given effect as of February 15, 1919, the
date of the sale of the drug store in question. On the 15th of February of that year, there was a stipulation about a persons security,
but not a mortgage upon any property, and much less upon the property in question.
Moreover, the appellant cannot deny the preferential character of the mortgage in favor of the Fidelity & Surety Co. because in the
very document executed in his favor it was stated that his mortgage was a second mortgage, subordinate to the one made in favor of
the Fidelity & Surety Co.
The judgment appealed from is affirmed with costs against the appellant. So ordered.
Araullo, C.J., Street, Malcolm, Avanceña, Villamor, Ostrand and Johns, JJ., concur.
CASE DIGEST
The half-interest in the business (Antigua Botica Ramirez) was mortgaged with Fidelity & Surety Co. on March 10, 1919, and registered in due time in the registry of
property, while another mortgage was made with Ildefonso Ramirez on 22 September 1919 and registered also in the registry. Raised in the lower court, the trial
court declared the mortgage of Fidelity & Surety Co. entitled to preference over that of Ildefonso Ramirez and another mortgage by Concepcion Ayala. Ayala did
not appeal, but Ramirez did.
ISSUE:
Whether or not half-interest over a business is a movable property. RULING: Yes. 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
movable properties in Article 414 of the Civil Code, and may be the subject of mortgage.

SUPREME COURT
Manila
EN BANC
G.R. No. L-40411 August 7, 1935
DAVAO SAW MILL CO., INC., plaintiff-appellant,

vs.
APRONIANO G. CASTILLO and DAVAO LIGHT & POWER CO., INC., defendants-appellees.
Arsenio Suazo and Jose L. Palma Gil and Pablo Lorenzo and Delfin Joven for appellant.
J.W. Ferrier for appellees.
MALCOLM, J.:
The issue in this case, as announced in the opening sentence of the decision in the trial court and as set forth by counsel for the
parties on appeal, involves the determination of the nature of the properties described in the complaint. The trial judge found that
those properties were personal in nature, and as a consequence absolved the defendants from the complaint, with costs against the
plaintiff.
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. 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 party of the first part without any obligation on its part to pay any amount for
said improvements and buildings; also, in the event the party of the second part should leave or abandon the land leased before the
time herein stipulated, the improvements and buildings shall likewise pass to the ownership of the party of the first part as though
the time agreed upon had expired: Provided, however, That the machineries and accessories are not included in the improvements
which will pass to the party of the first part on the expiration or abandonment of the land leased.
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 in that action; 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. Indeed the bidder, which was the plaintiff in
that action, and the defendant herein having consummated the sale, proceeded to take possession of the machinery and other
properties described in the corresponding certificates of sale executed in its favor by the sheriff of Davao.
As connecting up with the facts, it should further be explained that the Davao Saw Mill Co., Inc., has on a number of occasions treated
the machinery as personal property by executing chattel mortgages in favor of third persons. One of such persons is the appellee by
assignment from the original mortgages.
Article 334, paragraphs 1 and 5, of the Civil Code, is in point. According to the Code, real property consists of —
1. Land, buildings, roads and constructions of all kinds adhering to the soil;
xxx xxx xxx
5. 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 of industry.
Appellant emphasizes the first paragraph, and appellees the last mentioned paragraph. We entertain no doubt that the trial judge
and appellees are right in their appreciation of the legal doctrines flowing from the facts.
In the first place, it must again be pointed out that the appellant should have registered its protest before or at the time of the sale of
this property. It must further be pointed out that while not conclusive, the characterization of the property as chattels by the
appellant is indicative of intention and impresses upon the property the character determined by the parties. In this connection the
decision of this court in the case of Standard Oil Co. of New York vs. Jaramillo ( [1923], 44 Phil., 630), whether obiter dicta or not,
furnishes the key to such a situation.
It is, however not necessary to spend overly must time in the resolution of this appeal on side issues. It is machinery which is
involved; moreover, machinery not intended by the owner of any building or land for use in connection therewith, but intended by a
lessee for use in a building erected on the land by the latter to be returned to the lessee on the expiration or abandonment of the
lease.
A similar question arose in Puerto Rico, and on appeal being taken to the United States Supreme Court, it was held that 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. In the opinion written by Chief Justice White, whose knowledge of the Civil Law is well known, it was in part said:
To determine this question involves fixing the nature and character of the property from the point of view of the rights of Valdes and
its nature and character from the point of view of Nevers & Callaghan as a judgment creditor of the Altagracia Company and the
rights derived by them from the execution levied on the machinery placed by the corporation in the plant. Following the Code
Napoleon, the Porto Rican Code treats as immovable (real) property, not only land and buildings, but also attributes immovability in
some cases to property of a movable nature, that is, personal property, because of the destination to which it is applied. "Things,"
says section 334 of the Porto Rican Code, "may be immovable either by their own nature or by their destination or the object to
which they are applicable." Numerous illustrations are given in the fifth subdivision of section 335, which is as follows: "Machinery,
vessels, instruments or implements intended by the owner of the tenements for the industrial or works that they may carry on in any
building or upon any land and which tend directly to meet the needs of the said industry or works." (See also Code Nap., articles 516,
518 et seq. to and inclusive of article 534, recapitulating the things which, though in themselves movable, may be immobilized.) So far
as the subject-matter with which we are dealing — machinery placed in the plant — it is plain, both under the provisions of the Porto
Rican Law and of the Code Napoleon, that machinery which is movable in its nature only becomes immobilized when placed in a plant
by the owner of the property or plant. Such result would not be accomplished, therefore, by the placing of machinery in a plant by a
tenant or a usufructuary or any person having only a temporary right. (Demolombe, Tit. 9, No. 203; Aubry et Rau, Tit. 2, p. 12, Section
164; Laurent, Tit. 5, No. 447; and decisions quoted in Fuzier-Herman ed. Code Napoleon under articles 522 et seq.) The distinction
rests, as pointed out by Demolombe, upon the fact that one only having a temporary right to the possession or enjoyment of
property is not presumed by the law to have applied movable property belonging to him so as to deprive him of it by causing it by an
act of immobilization to become the property of another. It follows that abstractly speaking the machinery put by the Altagracia
Company in the plant belonging to Sanchez did not lose its character of movable property and become immovable by destination. But
in the concrete immobilization took place because of the express provisions of the lease under which the Altagracia held, since the
lease in substance required the putting in of improved machinery, deprived the tenant of any right to charge against the lessor the
cost such machinery, and it was expressly stipulated that the machinery so put in should become a part of the plant belonging to the
owner without compensation to the lessee. Under such conditions the tenant in putting in the machinery was acting but as the agent
of the owner in compliance with the obligations resting upon him, and the immobilization of the machinery which resulted arose in
legal effect from the act of the owner in giving by contract a permanent destination to the machinery.
xxx xxx xxx
The machinery levied upon by Nevers & Callaghan, that is, that which was placed in the plant by the Altagracia Company, being, as
regards Nevers & Callaghan, movable property, it follows that they had the right to levy on it under the execution upon the judgment
in their favor, and the exercise of that right did not in a legal sense conflict with the claim of Valdes, since as to him the property was
a part of the realty which, as the result of his obligations under the lease, he could not, for the purpose of collecting his debt, proceed
separately against. (Valdes vs. Central Altagracia [192], 225 U.S., 58.)
Finding no reversible error in the record, the judgment appealed from will be affirmed, the costs of this instance to be paid by the
appellant.
Villa-Real, Imperial, Butte, and Goddard, JJ., concur.
CASE DIGEST
Davao Sawmill Co. v. Castillo, 61 Phil. 709Facts:

Davao Saw Mill Co., Inc., a holder of a lumber concession, has operated sawmill in a land which it does not own. The company erected
a building therein which housed the machinery used by it. In the lease contract between the sawmill company and the owner of the
land, it has been agreed that after the lease period or in case the company should leave or abandon the land leased before the said
period, ownership of all the improvements and buildings except machineries and accessories, made by the company shall pass to the
owner of the land without any obligation on its part to pay any amount for said improvements and buildings. In another
action, A writ of execution was issued against the c o m p a n y a n d t h e p r o p e r t i e s i n q u e s t i o n w e r e l e v i e d
u p o n . T h e c o m p a n y a s s a i l e d t h e s a i d w r i t contending that the machineries and accessories were personal in nature,
hence, not subject to writ of execution. The trial judge ruled in favour of the company.
Issue: Whether or not the subject properties are personal in nature.
Held: The subject properties are personal in nature. Article 334, paragraph 5, of the [Old] Civil Code provides that real property
consists of (5) 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 c a r r i e d o n t h e r e i n a n d w h i c h a r e e x p r e s s l y a d a p t e d t o
m e e t t h e r e q u i r e m e n t s o f s u c h t r a d e o f industry. Machinery which is movable in nature only becomes immovable
when placed in a land by the o w n e r o f t h e p r o p e r t y o r l a n d b u t n o t w h e n s o p l a c e d b y a t e n a n t o r a n y
p e r s o n h a v i n g o n l y a temporary right, unless such person acted as the agent of the owner. In the case at bar, the machinery is
intended not by the owner of the land but by the saw mill company for use in c onnection with its trade. In this
sense, the machinery is not a real property.

SUPREME COURT
Manila
EN BANC
G.R. No. L-17870 September 29, 1962
MINDANAO 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.1awphîl.nèt
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; and
4. 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:
xxx xxx xxx
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:
xxx xxx xxx
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.
Bengzon, C.J., Padilla, Bautista Angelo, Reyes, J.B.L., Paredes, Dizon and Makalintal, JJ., concur.
Regala, Concepcion and Barrera JJ., took no part.
CASE DIGEST
Facts: Petitioner is a public utility company engaged in the transport of passengers and cargo by motor vehicles in Mindanao with
main offices in Cagayan de Oro (CDO). Petitioner likewise owned a land where it maintains a garage, a repair shop and blacksmith or
carpentry shops. The machineries are placed thereon in wooden and cement platforms. The City Assessor of CDO then assessed a
P4,400 realty tax on said machineries and repair equipment. Petitioner appealed to the Board of Tax Appeals but it sustained the City
Assessor's decision, while the Court of Tax Appeals (CTA) sustained the same.
ISSUE: WON it is a real property.
HELD: Movable equipments to be immobilized must first be essential and principal elements of industry and work without which such
industry or works would b unable to function or carry out its business. In this case, the tools and equipments are not essential and
principal elements of petitioner’s business of transporting passengers and cargoes. They are merely incidental. Aside from
essentiality, the industry or work must be carried on in a building or on a piece of land. In this case, the equipment are destined only
to repair and service the transportation business, not carried on in a building or permanently on a piece of land.
THIRD DIVISION
[G.R. No. 137705. August 22, 2000]
SERGS PRODUCTS, INC., and SERGIO T. GOQUIOLAY, petitioners, vs. PCI LEASING AND FINANCE, INC., respondent.
DECISION
PANGANIBAN, 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 Case
Before us is a Petition for Review on Certiorari assailing the January 6, 1999 Decision18[1] of the Court of Appeals (CA)19[2] in CA-GR
SP No. 47332 and its February 26, 1999 Resolution20[3] denying reconsideration. The decretal portion of the CA Decision reads as
follows:
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.21[4]
In its February 18, 1998 Order,22[5] the Regional Trial Court (RTC) of Quezon City (Branch 218)23[6] issued a Writ of Seizure.24[7] The
March 18, 1998 Resolution25[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.26[9]
The Facts
The undisputed facts are summarized by the Court of Appeals as follows:27[10]
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 Appeals
Citing 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.28[11]
The Issues
In 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.29[12]
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 Ruling
The Petition is not meritorious.
Preliminary Matter:Procedural Questions
Respondent 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.30[13]
While Judge Laqui should not have been impleaded as a respondent,31[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.
Main Issue: Nature of the Subject Machinery
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. 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.32[15] Section 3
thereof reads:
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
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 x
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. 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.33[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.34[17]
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.35[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.
Hence, in Tumalad v. Vicencio,36[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:
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 Mills37[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:
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:38[21]
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.39[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.40[23] In any event, there is no showing that any specific third party would be adversely affected.
Validity of the Lease Agreement
In their Memorandum, petitioners contend that the Agreement is a loan and not a lease.41[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.42[25] In their Reply
to respondents Comment, they further allege that the Agreement is invalid.43[26]
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,44[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:
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.45[28]
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 45.46[29]
Reliance on the Lease Agreement
It 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 Corporation47[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:
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 x
Alleged Injustice Committed on the Part of Petitioners
Petitioners contend that if the Court allows these machineries to be seized, then its workers would be out of work and thrown into
the streets.48[31] They also allege that the seizure would nullify all efforts to rehabilitate the corporation.
CASE DIGEST
Facts:
Respondent PCI Leasing and Finance, Inc, filed with the RTC-QC a complaint for a sum of money with an application for a writ of replevin.
Respondent Judge issued a writ of replevin directing its sheriff to seize and deliver the machineries and equipment to PCI after 5 days and upon the
payment of the necessary expenses.
In the implementation of the said writ, the sheriff proceeded to petitioner’s factory, seized one machinery with word that he would return for the other.
Petitioners filed a motion for special protective order, 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.
The motion was opposed by PCI Leasing, on the ground that the properties were still personal and therefore still subject to seizure and a writ of
replevin.
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.
Issue:
1. Whether or not the machineries purchased and imported by Serg’s became real property by virtue of immobilization.
2. Whether or not the contract between the parties is valid.
Ruling:
The petition is not meritorious.
1. No.
The machines that were 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. In that sense petitioners are correct in
arguing that the said machines are real property pursuant to Article 415 (5) of the Civil Code.
But the Court disagrees with the submission of the petitioners that the said machines are not proper subject of the Writ of Seizure.
The Court has held that contracting parties may validly stipulate that a real property be considered as personal. After agreeing to such stipulation, they
are consequently stopped from claiming otherwise. Under the principle of estoppels, a party to a contract is ordinarily precluded from denying the
truth of any material fact found therein.
Clearly then, petitioners are stopped from denying the characterization of the subject machines as personal property. Under circumstances, they are
proper subjects of the Writ of Seizure.
It should be stressed, however, that the Court’s holding-that the machines should be deemed personal property pursuant to the Lease Agreement-is
good only insofar as the contracting parties are concerned. 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. In any event, there is no showing that any specific third party would be
adversely affected.
2. Yes.
It should be pointed out that the Court may rely on the Lease Agreement, for nothing on the 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.
Petition denied. Judgment affirmed.
Note:
(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.
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.

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Republic of the Philippines

G.R. No. L-11658 February 15, 1918

LEUNG YEE, plaintiff-appellant,

Booram and Mahoney for appellant.

Article 1473 of the Civil Code is as follows:

Arellano, C.J., Johnson, Araullo, Street and Malcolm, JJ., concur.

ISSUE: Who is the owner of the building?

Republic of the Philippines

G.R. No. L-15334 January 31, 1964

Assistant City Attorney Jaime R. Agloro for petitioners.

The tax exemption privilege of the petitioner is quoted hereunder:

xxx xxx xxx

xxx xxx xxx

xxx xxx xxx

G.R. No. 166102, August 05, 2015

MANILA ELECTRIC COMPANY v. CITY ASSESSOR, GR No. 166102, 2015-08-05

MERALCO appealed... that

MERALCO appealed Tax Declaration

MERALCO's appeal be dismissed for lack of merit

Disgruntled, MERALCO sought recourse from the Court of Appeals

Court of Appeals denied the Motion for Reconsideration of MERALCO

G.R. No. 183416, October 05, 2016

Article 415. The following are immovable property:

On November 20, 2009, respondent filed its Comment.55chanrobleslaw

chanRoblesvirtualLawlibrary"(1) All Taxes on the Land

Carpio, (Chairperson),� Del Castillo, , and Mendoza, JJ., concur.

FELS ENERGY, INC.,

THE PROVINCE OF BATANGAS and

THE OFFICE OF THE PROVINCIAL

NATIONAL POWER CORPORATION, G.R. No. 170628

G.R. No. 168557 Case Digest

FELS Energy, Inc.

vs Province of Batangas and the Office of the Provincial Assessor of Batangas

Ponente: Callejo, Sr.

Republic of the Philippines

G.R. No. L-19527 March 30, 1963

REYES, J.B.L., J.:

On October 22, 1960, death overtook the defendant Esperidion Presbitero.

ART. 416. The following are deemed to be personal property:

xxx xxx xxx

and Republic Act No. 1825 similarly provides —

And Executive Order No. 873 defines "plantation" as follows:

LUIS MARCOS P. LAUREL, G.R. No. 155076

Leonardo-De Castro, and

HON. ZEUS C. ABROGAR,

Presiding Judge of the Regional

Trial Court, Makati City, Branch 150,

PEOPLE OF THE PHILIPPINES Promulgated:

& PHILIPPINE LONG DISTANCE

Respondents. January 13, 2009

Article 308 of the Revised Penal Code provides:

In Strochecker v. Ramirez,12[12] this Court stated:

G.R. No. L-26278 Case Digest

vs Emiliano Valdez et al.

allegation of the complaint and step up the following defenses:

(1) Whether the sugar cane is personal or real property?

SIBAL VS. VALDEZ, 50 PHIL 512 FACTS:

Republic of the Philippines

G.R. No. 18520 September 26, 1922

INVOLUNTARY INSOLVENCY OF PAUL STROCHECKER, appellee,

Lim & Lim for appellant.

Republic of the Philippines

G.R. No. L-40411 August 7, 1935

DAVAO SAW MILL CO., INC., plaintiff-appellant,