Sibal vs Valdez same were essential and principal elements in the chocolate-making business of
SPI. Subsequently, PCI filed a complaint against SPI for sum of money, with an
Facts: In a case brought by plaintiff against defendant, the latter won. For the
purpose of satisfying the judgment won by the defendant, the sheriff attached the
sugar cane that was then growing on the lots of the plaintiff. Said lots incidentally
had already been previously attached by another judgment creditor of the
plaintiff. Within the one-year period given by law for redemption, the plaintiff
wanted to redeem the lots from one creditor, and the sugar cane from the other
creditor. The lots were redeemed, the redemption of the sugar cane was however
refused by the defendant, who contended that the sugar cane was personal
property, and therefore could not be the subject of the legal redemption sought to
be enforced. The plaintiff upon the other hand claimed that the sugar cane was
real property for same could be considered as “growing fruits” under par. 2 of
Art. 415.
Issue: How should the sugar cane be regarded — as real property or as personal
property?
Held: In a case, the first question raised was whether the sugar cane in question
was personal or real property. If personal it could not be the subject of legal
redemption sought to be enforced. The sugar cane, although considered as
“growing fruits” and therefore ordinarily real property under Par. 2 of Art. 415 of
the Civil Code, must be regarded as PERSONAL PROPERTY for purposes of the
Chattel Mortgage Law, and also for purposes of attachment, because as ruled by
the Louisiana Supreme Court, the right to the growing crops mobilizes (makes
personal, as contradistinguished from immobilization) the crops by
ANTICIPATION. More specifically, it said that 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. (See Lumber Co. v. Sheriff, 106 La. 418).
Serg’s Products vs PCI Leasing
Facts: The doctrine of estoppel was likewise applied by the Supreme Court with
respect to properties which are considered immobilized by reason of its
destination or purpose under paragraph 5 of Article 415. In Serg’s Products, Inc.
v. PCI Leasing and Finance, Inc., the Court held that the machines therein are
proper subjects of a writ of replevin,85 although they are essential and principal
elements of the industry because the parties have treated the same as personal
property. In the Serg’s Products case, Serg’s Products Inc. (SPI) and PCI Leasing
and Finance, Inc. (PCI) entered into a lease agreement providing that the
machines in question were to be considered as personal property, although the
application for a writ of replevin. The sheriff then proceeded to seize the
machines in question. SPI contended that the subject machines used in their
factory were not proper subjects of the writ of replevin because they were in fact
real property having become immobilized by destination. SPI went to the Court
of Appeals vi aan original action for certiorari. The Court of Appeals, however,
sustained the writ and held that the machines were personal property. Thus, SPI
appealed to the Supreme Court.
Held: In holding that the machines are proper subjects of the writ of replevin
even if they are considered immobilized under paragraph 5 of Article 415, the
Court explained that the lease agreement, of which SPI is a party, clearly provides
that the machines in question are personal property, hence, SPI is estopped from
denying the characterization of the subject machines as personal property. The
Court cautioned, however, that its holding — that the machines should be
deemed personal property pursuant to the Lease Agreement — is good only
insofar as the contracting parties are concerned.
Manila Lodge vs Court of Appeals
Facts: Act No. 1360 of the Philippine Commission authorized the City of Manila to
reclaim a portion of Manila Bay to form part of the Luneta Extension. After
obtaining an original certificate, the City of Manila sold the subject property to
Manila Lodge 761 which secured a transfer certificate of title in its favor. Manila
Lodge, in turn, sold the land together with all the improvements to TDC
corporation.
Issue: Is the subject land part of the public park or plaza, i.e.part of the public
domain, and consequently, the sale by the City of Manila was null and void?
Held: Yes. (1) Public grant of property is strictly construed.— “The grant made by
Act No. 1360 of the reclaimed land to the City of Manila is a grant of a public
nature, the same having been made to a local political subdivision. Such grants
have always been strictly construed against the grantee. One compelling reason
given for the strict interpretation of a public grant is that there is in such grant a
gratuitous donation of public money or resources which results in an unfair
advantage to the grantee and for that reason, the grant should be narrowly
restricted in favor of the public.’’
(2) Reclaimed land is of public dominion. — “What kind of property of the City is
the reclaimed land? Is it of public ownership (dominion) or of private ownership?
We hold that it is of public dominion, intended for public use. Firstly, if the
reclaimed area was granted to the City of Manila as its patrimonial property, the
City could, by virtue of its ownership, dispose of the whole reclaimed area
without need of authorization to do so from the lawmaking body. x x x
Secondly, the reclaimed area is an extension to the Luneta in the City of Manila. If
the reclaimed area is an extension of the Luneta, then it is of the same nature or
character as the old Luneta.
Thirdly, the reclaimed area was formerly a part of the Manila Bay. A bay is
nothing more than an inlet of the sea. Pursuant to Article 1 of the Law of Waters
of 1866, bays, roadsteads, coast sea, inlets and shores are part of the national
domain open to public use. When the shore or part of the bay is reclaimed, it does
not lose its character of being property for public use. x x x.
Fourthly, Act No. 1360, as amended, authorized the lease or sale of the northern
portion of the reclaimed area as a hotel site. The subject property is not that
northern portion authorized to be leased or sold; the subject property is the
southern portion. x x x
Fifthly, Article 344 of the Civil Code of Spain provides that “property of public
use, in provinces and in towns, comprises the provincial and town roads, the
squares, streets, fountains, and public waters, the promenades, and public works
of general service paid for by such towns or provinces.’’ A park or plaza, such as
the extension to the Luneta, is undoubtedly comprised in said article.’’
(2) Intention to devote property to public use is sufficient to make it of public
domain.— “The petitioners, however, argue that, according to said Article 344, in
order that the character of property for public use may be so attached to a plaza,
the latter must be actually constructed or at least laid out as such, and since the
subject property was not yet constructed as a plaza or at least laid out as a plaza
when it was sold by the City, it could not be property for
public use. It should be noted, however, that properties of provinces and towns
for public use are governed by the same principles as properties of the same
character belonging to the public domain. In order to be property of public
domain, an intention to devote it to public use is sufficient. x x x.
In the case at bar, it has been shown that the intention of the lawmaking body in
giving to the city of Manila the extension of the Luneta was not a grant to it of
patrimonial property but a grant for public use as a plaza.’’
(3) Executive or legislative declaration is necessary to convert property of public
domain into patrimonial. — “We have demonstrated ad satietatem that the
Luneta extension was intended to be property of the City of Manila for public use.
But, could not said property later on be converted, as the petitioners contend, to
patrimonial property? It could be. But this Court has already said, in Ignacio v.
The Director of Lands (108 Phil. 335, 339.), that it is only the executive and
possibly the legislative department that has the authority and the power to make
the declaration that said property is no longer required for public use, and until
such declaration is made, the property must continue to form part of the public
domain. In the case at bar, there has been no such explicit or unequivocal
declaration. It should be noted, furthermore, anent this matter, that courts are
undoubtedly not primarily called upon, and are not in a position, to determine
whether any public land is still needed for the purposes specified in Article 4 of
the Law of Waters. The sale of the subject property executed by the City of Manila
to the Manila Lodge was void and inexistent for lack of subject matter. It suffered
from an incurable defect that could not be ratified either by lapse of time or by
express ratification. x x x The inexistence of said sale can be set up against
anyone who asserts a right arising from it, not only against the first vendee, but
also against all its successors, including the TDC, which are not protected by law.’’
Davao Saw Mill vs Castillo
Plaintiff operated a sawmill. The land upon which the business was
conducted was leased from another person. On the land, the sawmill company
erected a building which housed the machinery used by it. Some of the machines
were mounted and placed on foundations of cement. In the contract of lease,
plaintiff agreed to turn over free of charge all improvements and buildings
erected by it on the premises with the exception of machineries, which shall
remain with the plaintiff. In an action brought by the defendant herein, judgment
was rendered against plaintiff. A writ of execution was issued and the
machineries placed on the sawmill were levied upon as personalty by the sheriff.
The question raised in this case involves the determination of the nature of the
machineries, for plaintiff claimed that they were immobilized and they belonged
to the owner of the land. In holding that the machinery is not immobilized, the
Court explained 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, usufructuary, or any person having only a
temporary right, unless such person acted as the agent of the owner.”
Immobilization by destination or urpose cannot generally be made by a person
whose possession of the property is only TEMPORARY, otherwise we will be
forced to presume that he intended to give the property permanently away in
favor of the owner of the premises.
Davao Saw Mill vs Castillo

Facts: MERALCO is a private corporation organized and existing under Philippine
laws to operate as a public utility engaged in electric distribution. MERALCO
received from the City Assessor of Lucena a copy of Tax Declaration. MERALCO
appealed the tax declaration. MERALCO claimed that its capital investment
consisted only of its substation facilities, the true and correct value of which was
only P9,454,400.00; and that MERALCO was exempted from payment of real
property tax on said substation facilities.
The LBAA rendered a Decision 14 in LBAA-89-2 on July 5, 1989, finding
that under its franchise, MERALCO was required to pay the City Government of
Lucena a tax equal to 5% of its gross earnings. As regards the issue of whether or
not the poles, wires, insulators, transformers, and electric meters of MERALCO
were real properties, the LBAA cited the 1964 case of Board of Assessment
Appeals v. Manila Electric Company 16 (1964 MERALCO case) in which the Court
held that: (1) the steel towers fell within the term "poles" expressly exempted
from taxes under the franchise of MERALCO; and (2) the steel towers were
personal properties under the provisions of the Civil Code and, hence, not subject
to real property tax. The Board overrules the claim of the [City Assessor of
Lucena] and sustains the claim of [MERALCO].
The City Assessor of Lucena filed an appeal with the CBAA, which was
docketed as CBAA Case No. 248.In its Decision18 dated April 10, 1991, the CBAA
affirmed the assailed LBAA judgment. Apparently, the City Assessor of Lucena no
longer appealed said CBAA Decision and it became final and executory.
Six years later, 1997, MERALCO received a letter 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.
Failure to pay will incur liabilities. 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.
The LBAA refused to apply as res judicata its earlier judgment in LBAA-
89-2, as affirmed by the CBAA, because it involved collection of taxes from 1985
to 1989, while the present case concerned the collection of taxes from 1989 to
1997; and LBAA is only an administrative body, not a court or quasi-judicial body.
WHEREFORE, in view of the foregoing, it is hereby ordered that:
1) MERALCO's appeal be dismissed for lack of merit
2) MERALCO be required to pay the realty tax on the questioned
properties, because they are not exempt by law, same to be based on the 1991
level of assessment, less depreciation cost allowed by law.
MERALCO went before the CBAA on appeal, which was docketed as CBAA
Case No. L-20-98. The CBAA, in its Decision dated May 3, 2001, agreed with the
LBAA that MERALCO could no longer claim exemption from real property tax on
its machineries with the enactment of Republic Act No. 7160, otherwise known
as the Local Government Code of 1991. Thus:
The new law has treated these in an unequivocal manner as machineries
in the sense that they are instruments, mechanical contrivances or apparatus
though not attached permanently to the real properties of [MERALCO] are
actually, directly and exclusively used to meet their business of distributing
electricity.
The CBAA denied the Motion for Reconsideration of MERALCO in a
Resolution29 dated August 16, 2001. MERALCO Sought recourse from the Court of
Appeals which was then rejected. Thus:
It was not disputed that [MERALCO] failed to provide the [City Assessor
and City Treasurer of Lucena] with a sworn statement declaring the true
value of each of the subject transformer and electric post, transmission line,
insulator and electric meter which should have been made the basis of the
fair and current market value of the aforesaid property and which would
enable the assessor to identify the same for assessment purposes. [MERALCO]
merely claims that the assessment made by the [City Assessor and City
Treasurer of Lucena] was incorrect but did not even mention in their
pleading the true and correct assessment of the said properties. Absent any
sworn statement given by [MERALCO], [the City Assessor and City Treasurer
of Lucena] were constrained to make an assessment based on the materials
within [their reach].30
The Court of Appeals further ruled that there was no more basis for the
real property tax exemption of MERALCO under the Local Government Code and
that the withdrawal of said exemption did not violate the non-impairment clause
of the Constitution, thus:
Although it could not be denied that [MERALCO] was previously
granted a Certificate of Franchise by the National Electrification
Commission on October 28, 1993 x x x, such conferment does not
automatically include an exemption from the payment of realty tax, nor
does it impliedly give the franchisee the right to continue the privileges
granted under its previous franchise considering that Sec. 534(f) of the
Local Government Code of 1991 expressly repealed those provisions which
are inconsistent with the Code.