LEUNG YEE V. F.L STRONG MACHINERY CO.

AND WILLIAMSON

FACTS:
1. First mortgage: Compania Agricola Filipina bought rice-cleaning machinery from the machinery company and this was secured by a chattel mortgage on the machinery and the building to which it
was installed. Upon failure to pay, the chattel mortgage was foreclosed, the building and machinery sold in public auction and bought by the machinery company.
2. Days after, the Compania Agricola Filipina executed a deed of sale over the land to which the building stood in favor of the machinery company. This was done to cure any defects that may arise in the
machinery company’s ownership of the building.
3. Second mortgage: on or about the date to which the chattel mortgage was excecuted, Compania executed a real estate mortgage over the building in favor of Leung Yee, distinct and
separate from the land. This is to secure payment for its indebtedness for the construction of the building. Upon failure to pay, the mortgage was foreclosed.
4. The machinery company then filed a case, demanding that it be declared the rightful owner of the building. The trial court held that it was the machinery company which was the rightful
owner
as it had its title before the building was registered prior to the date of registry of Leung Yee’s certificate.

HELD:
The building in which the machinery was installed 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 the character as real property.

It follows that neither the original registry in the chattel mortgage registry of the instrument purporting to be a chattel mortgage of the building and the machinery installed therein, nor the annotation in
the registry of the sale of the mortgaged property, had any effect whatever so far as the building is concerned. *LANDMARK CASE

Leung Yee v. Strong Machinery Co.

37 Phil. 644

FACTS:
The "Compania Agricola Filipina" purchased from "Strong Machinery Co." rice-cleaning machines which the former installed in one of its buildings. As security for the purchase price, the buyer executed a
CHATTEL MORTGAGE on the machines and the building on which they had been installed. Upon buyer's failure to pay, the registered mortgage was foreclosed, and the building was purchased by the seller,
the "Strong Machinery Co." This sale was annotated in the Chattel Mortgage Registry. Later, the "Agricola" also sold to "Strong Machinery" the lot on which the building had been constructed. This sale was
not registered in the Registry of Property but the Machinery Co. took possession of the building and the lot.

Previously however, the same building has been purchases at a sheriff's sale by Leung Yee, a creditor of Agricola, although Leung Yee knew all the time of the prior sale in favor of "Strong Machinery." The
sale in favor of Leung Yee was recorded in the Registry. Leung Yee now sues to recover the property from "Strong Machinery."

ISSUE: Who has a better right to the property?

HELD: The building is real property, therefore, its sale as annotated in the Chattel Mortgage Registry cannot be given the legal effect of registration in the Registry of Real Property. The mere fact that the
parties decided to deal with the building as personal property does not change its character as real property. Thus, neither the original registry in the chattel mortgage registry, nor the annotation in said
registry of the sale of the mortgaged property had any effect on the building. However, since the land and the building had first been purchased by "Strong Machinery" (ahead of Leung Yee), and this fact was
known to Leung Yee, it follows that Leung Yee was not a purchaser in good faith, and should therefore not be entitled to the property. "Strong Machinery" thus has a better right to the property.

STANDARD OIL COMPANY V JARAMILLO

The Power of the Registry of Deeds is Ministerial, and The absolute criterion to determine between real and personal property is NOT supplied by the civil code. Parties may agree what to treat as personal
property and what to treat as real property.

FACTS
On November 27, 1922, Gervasia de la Rosa was the lessee of a parcel of land situated in the City of Manila and owner of the house of really tough materials built thereon. She executed that fine day a
document in the form of a chattel mortgage, purporting to convey to Standard Oil Company of New York (by way of mortgage) both the leasehold interest in said lot and the building.
After said document had been duly acknowledged and delivered, Standard Oil presented it to Joaquin Jaramillo, as register of deeds of the City of Manila, for the purpose of having the same recorded in the
book of record of chattel mortgages. Upon examination of the instrument, Jaramillo opined that it was not chattel mortgage, for the reason that the interest therein mortgaged did not appear to be personal
property, within the meaning of the Chattel Mortgage Law, and registration was refused on this ground only.

Later this confusion was brought to the Supreme Court upon demurrer by Joaquin Jaramillo, register of deeds of the City of Manila, to an original petition of the Standard Oil Company of New York, demanding
a mandamus to compel the respondent to record in the proper register a document purporting to be a chattel mortgage executed in the City of Manila by Gervasia de la Rosa, Vda. de Vera, in favor of the
Standard Oil Company of New York.

The Supreme Court overruled the demurrer, and ordered that unless Jaramillo interposes a sufficient answer to the petition for mandamus by Standard Oil within 5 days of notification, the writ would be
issued as prayed, but without costs.

ISSUE:
w/n the Registry of Deeds can determine the nature of property to be registered.
w/n the Registry of Deeds has powers beyond Ministerial discretion.

RESOLUTION:
1.Jaramillo, register of deeds, does not have judicial or quasi-judicial power to determine nature of document registered as chattel mortgage Section 198 of the Administrative Code, originally of Section 15
of the Chattel Mortgage Law (Act 1508 as amended by Act 2496), does not confer upon the register of deeds any authority whatever in respect to the "qualification," as the term is used in Spanish law, of
chattel mortgages. His duties in respect to such instruments are ministerial only. The efficacy of the act of recording a chattel mortgage consists in the fact that it operates as constructive notice of the
existence of the contract, and the legal effects of the contract must be discovered in the instrument itself in relation with the fact of notice.

2.Article 334 and 335 of the Civil Code does not supply absolute criterion on distinction between real and personal property for purpose of the application of the Chattel Mortgage Law Article 334 and 335 of
the Civil Code supply no absolute criterion for discriminating between real property and personal property for purposes of the application of the Chattel Mortgage Law. Those articles state rules which,
considered as a general doctrine, are law in this jurisdiction; but it must not be forgotten that under given conditions property may have character different from that imputed to it in said articles. It is
undeniable that the parties to a contract may be agreement treat as personal property that which by nature would be real property; and it is a familiar phenomenon to see things classed as real property for
purposes of taxation which on general principle might be considered personal property. Other situations are constantly arising, and from time to time are presented to the Supreme Court, in which the proper
classification of one thing or another as real or personal property may be said to be doubtful.

THE STANDARD OIL COMPANY OF NEW YORK, petitioner, vs. JOAQUIN JARAMILLO, as register of deeds of the City of Manila, respondent.
G.R. No. L-20329 March 16, 1923

Facts:
On November 27, 1922, Gervasia de la Rosa, Vda. de Vera, was the lessee of a parcel of land situated in the City of Manila and owner of the house of strong materials built thereon, upon which date she
executed a document in the form of a chattel mortgage to convey to the Standard Oil. Co. by way of mortgage both the leasehold interest in said lot and the building to which it stands After said document
had been duly acknowledged and delivered, it was then presented to Joaquin Jaramillo, Register of Deeds of the City of Manila, for the purpose of having the same recorded. Upon examination of the
instrument, the Jaramillo was of the opinion that it was not chattel mortgage, for the reason that the interest therein mortgaged did not appear to be personal property, within the meaning of the Chattel
Mortgage Law, and registration was refused on this ground only.

Issue:
Whether or not the deed may be registered in the chattel mortgage registry?

Held:
Yes it may be registered. The duties of a register of deeds in respect to the registration of chattel mortgages are purely of a ministerial character, and he is clothed with no judicial or quasi-judicial power to
determine the nature of the property, whether real or personal, which is the subject of the mortgage. Generally speaking, he should accept the qualification of the property adapted by the person who presents
the instrument for registration and should place the instrument on record, upon payment of the proper fee, leaving the effects of registration to be determined by the court if such question should arise for
legal determination.The efficacy of the act of recording a chattel mortgage consists in the fact that registration operates as constructive notice of the existence of the contract, and the legal effects of the
instrument must be discovered in the document itself, in relation with the fact of notice. Registration adds nothing to the instrument, considered as a source of title, and affects nobody’s rights except as a
species of constructive notice.
DAVAO SAW MILL vs. APRONIANO G. CASTILLO and DAVAO LIGHT & POWER CO., INC. G.R. No. L-40411 August 7, 1935

Facts:
Davao Saw Mill Co., Inc., is the holder of a lumber concession from the Government of the Philippine Islands. However, the land upon which the business was conducted belonged to another person. On the
land the sawmill company erected a building which housed the machinery used by it. Some of the implements thus used were clearly personal property, the conflict concerning machines which were placed
and mounted on foundations of cement. In the contract of lease between the sawmill company and the owner of the land there appeared the following provision: That on the expiration of the period agreed
upon, all the improvements and buildings introduced and erected by the party of the second part shall pass to the exclusive ownership of the lessor without any obligation on its part to pay any amount for
said improvements and buildings; which do not include the machineries and accessories in the improvements.

In another action wherein the Davao Light & Power Co., Inc., was the plaintiff and the Davao, Saw, Mill Co., Inc., was the defendant, a judgment was rendered in favor of the plaintiff in that action against
the defendant; a writ of execution issued thereon, and the properties now in question were levied upon as personalty by the sheriff. No third party claim was filed for such properties at the time of the sales
thereof as is borne out by the record made by the plaintiff herein

It must be noted also that on number of occasion, Davao Sawmill treated the machinery as personal property by executing chattel mortgages in favor of third persons. One of such is the appellee by assignment
from the original mortgages.

The lower court rendered decision in favor of the defendants herein. Hence, this instant appeal.

Issue:
whether or not the machineries and equipments were personal in nature.

Ruling/ Rationale:
Yes. The Supreme Court affirmed the decision of the lower court.
Machinery which is movable in its nature only becomes immobilized when placed in a plant by the owner of the property or plant, but not when so placed by a tenant, a usufructuary, or any person having
only a temporary right, unless such person acted as the agent of the owner.

DAVAO SAW MILL CO. VS. CASTILLO

61 SCRA 709

FACTS:
Petitioner is the holder of a lumber concession. It operated a sawmill on a land, which it doesn’t own. Part of the lease agreement was a stipulation in which after the lease agreement, all buildings and
improvements would pass to the ownership of the lessor, which would not include machineries and accessories. In connection to this, petitioner had in its sawmill machineries and other equipment
wherein some were bolted in foundations of cement.

HELD:
The machinery must be classified as personal property.

The lessee placed the machinery in the building erected on land belonging to another, with the understanding that the machinery was not included in the improvements which would pass to the lessor on the
expiration of the lease agreement. The lessee also treated the machinery as personal
property in executing chattel mortgages in favor of third persons. The machinery was levied upon by the sheriff as personalty pursuant to a writ of execution obtained without any protest being
registered. Furthermore, machinery 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
temporary right, unless such person acted as the agent of the owner.

Furthermore, machinery 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 temporary right,
unless such person acted as the agent of the owner.
B.H. BERKENKOTTER vs. CU UNJIENG E HIJOS

FACTS:
This is an appeal taken by the plaintiff, B. H. Berkenkotter, from the judgment of the Court of First Instance of Manila, dismissing said plaintiff’s complaint against Cu Unjieng e Hijos et al
Mabalacat Sugar Co., Inc., owner of the sugar central situated in Mabalacat, Pampanga, obtained from the defendants, Cu Unjieng e Hijos, a loan secured by a first mortgage constituted on two parcels and
land “with all its buildings, improvements, sugar-cane mill, steel railway, telephone line, apparatus, utensils and whatever forms part or is necessary complement of said sugar-cane mill, steel railway,
telephone line, now existing or that may in the future exist is said lots.” Shortly after said mortgage had been constituted, the Mabalacat Sugar Co., Inc., decided to increase the capacity of its sugar central
by buying additional machinery and equipment, so that instead of milling 150 tons daily, it could produce 250. The estimated cost of said additional machinery and equipment was approximately P100,000.
B.A. Green, president of said corporation, proposed to the plaintiff, B.H. Berkenkotter, to advance the necessary amount for the purchase of said machinery and equipment, promising to reimburse him as
soon as he could obtain an additional loan from the mortgagees, the herein defendants Cu Unjieng e Hijos. Berkenkotter agreed to the said proposition and delivered to him a total sum of P25,750. Berkenkotter
had a credit of P22,000 against said corporation for unpaid salary. With the loan of P25,750 and said credit of P22,000, the Mabalacat Sugar Co., Inc., purchased the additional machinery and equipment now
in litigation. B.A. Green, president of the Mabalacat Sugar Co., Inc., applied to Cu Unjieng e Hijos for an additional loan of P75,000 offering as security the additional machinery and equipment acquired by
said B.A. Green and installed in the sugar central after the execution of the original mortgage deed, together with whatever additional equipment acquired with said loan. B.A. Green failed to obtain said loan.
Appellants contention: the installation of the machinery and equipment claimed by him in the sugar central of the Mabalacat Sugar Company, Inc., was not permanent in character inasmuch as B. A. Green,
in proposing to him to advance the money for the purchase thereof, that in case B. A. Green should fail to obtain an additional loan from the defendants Cu Unjieng e Hijos, said machinery and equipment
would become security therefor.

ISSUE: Whether or not the lower court erred in declaring that the additional machinery and equipment, as improvement incorporated with the central are subject to the mortgage deed executed in favor of
the defendants Cu Unjieng e Hijos.

HELD: No error was committed by trial court. The additional machinery and equipment are included in the first mortgage.

Article 334, paragraph 5, of the Civil Code gives the character of real property to “machinery, liquid containers, instruments or implements intended by the owner of any building or land for use in connection
with any industry or trade being carried on therein and which are expressly adapted to meet the requirements of such trade or industry.”
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 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 principal 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 necessary be permanent.
Furthermore, the fact that B. A. Green bound himself to the plaintiff B. H. Berkenkotter to hold said machinery and equipment as security, as nothing could prevent B. A. Green from giving them as security
at least under a second mortgage.
As to the alleged sale of said machinery and equipment to the plaintiff and appellant after they had been permanently incorporated with the sugar central of the Mabalacat Sugar Co., Inc., and while the
mortgage constituted on said sugar central to Cu Unjieng e Hijos remained in force, only the right of redemption of the vendor Mabalacat Sugar Co., Inc., in he sugar central with which said machinery and
equipment had been incorporated, was transferred thereby, subject to the right of the defendants Cu Unjieng e Hijos under the first mortgage.
For the foregoing considerations, we are of the opinion and so hold: (1) That the installation of a machinery and equipment in a mortgaged sugar central, in lieu of another of less capacity, for the purpose of
carrying out the industrial functions of the latter and increasing production, constitutes a permanent improvement on said sugar central and subjects said machinery and equipment to the mortgage constituted
thereon (article 1877, Civil Code); (2) that the fact that the purchaser of the new machinery and equipment has bound himself to the person supplying him the purchase money to hold them as security for
the payment of the latter’s credit, and to refrain from mortgaging or otherwise encumbering them does not alter the permanent character of the incorporation of said machinery and equipment with the
central; and (3) that the sale of the machinery and equipment in question by the purchaser who was supplied the money, after the incorporation thereof with the mortgaged sugar central, does not vest the
creditor with ownership of said machinery and equipment but simply with the right of redemption.

MANARANG AND MANARANG V. OFILADA AND ESTEBAN

99 SCRA 108

FACTS:
Manarang secured a loan from Esteban guaranteed by a chattel mortgage over a house of mixed materials. Due to failure to pay, the chattel mortgage was foreclosed. Before the sale of the property,
Manarang tried to pay for the property but the sheriff refused to accept tender unless there
is payment for the publication of the notice of sale in the newspapers.

This prompted Manarang to bring this suit to compel the sheriff to accept payment. He averred that the publication was unnecessary as the house should be considered as personal property per agreement
in the chattel mortgage, and the publication for notice of sale is unnecessary.
HELD:
There is no question that a building of mixed materials may be a subject of chattel mortgage, in which case it is considered as between the parties as personal property.

The mere fact that a house was the subject of chattel mortgage and was considered as personal property by the parties doesn’t make the said house personal property for purposes of the notice to be
given for its sale in public auction. It is real property within the purview of Rule 39, Section
16 of the Rules of Court as it has become a permanent fixture on the land, which is real property.

Manarang vs. Ofilada Case Digest G.R. No. L-8133 May 18, 1956

Facts:
Lucia Manarang obtained a loan of 200 pesos from Ernesto Esteban. She executed a chattel mortgage over a house of mixed materials to secure its payment. When she failed to pay the loan, Esteban
brought an action for the recovery of the money he loaned to her. Judgment was rendered in favor of the former. Execution was issued against the mortgaged property.

Before the property could be sold in a judicial sale, Manarang offered to pay the amount of 227 pesos representing the amount of judgment, interest, costs, and sheriff fees. The sheriff refused the tender
unless the amount of 260 pesos representing the payment of the publication of the notice of sale is paid also.

Manarang filed a petition to compel the sheriff to accept the amount of 227 pesos and to annul the notice of sale. The contention of Manarang is that the house in question should be considered as personal
property and publication of notice of sale is not necessary. The Court of First Instance held that although sometimes real property may be considered as personal property, the sheriff is duty bound to cause
the publication of notice of sale to make the sale valid and to prevent it from being declared void or voidable; and that the sheriff did not err in causing the publication of the notice. Consequently, the petition
was dismissed.

Issue:
Whether the house made of mixed materials and subject of a chattel mortgage is one of personal or real property.

Held:
The house is a real property.

The general principle of law is that a building permanently fixed to the freehold becomes part of it; that is, a house is a real estate belonging to the owner of the land on which it stands, even though it was
erected against his will or without his consent. (Accessory follows the principal.)
However, where improvement is made with the consent of the landowner, it shall remain as personal property.
In determining whether property remains personal or real, the following must be considered: its annexation to the soil, either actual or constructive and the intention of the parties.
The house was made subject of a contract but it does not give the character of one of personal property to it although it is the intention of the parties when they executed the chattel mortgage.
This is because the rules on execution does not allow special consideration that the parties to a contract may have desired to impart to real estate when they are not ordinarily so. When the rules speak of
personal property, it means a property which is ordinarily considered as such and when it speaks of real property, it means property which is generally known as real property. The rules were never intended
to suit the consideration that parties may have given to the property levied upon.
The mere fact that a house was the subject of a chattel mortgage and was considered as personal property by the parties, it does not make the house a personal property for purposes of the notice to be
given for its sale at public auction. This is to prevent confusion and misunderstanding.

GSIS v. Calson [G.R. No. L-19867. May 29, 1968.]

En Banc, Makalintal (J): 7 concur, 1 on official leave

Facts: On 11 April 1957, Calsons Inc. applied for a loan of P2M to appellee to pay the balance of the purchase price of certain parcels of land situated at the corner of Globo de Oro and Elizondo Streets,
Quiapo, Manila, and to finance the construction of a 2-story textile market building on said land. The application was approved by appellee’s Board of Trustees on 26 August 1957. In connection with said loan
appellants executed on 31 October 1957 a promissory note binding themselves jointly and severally to pay appellee the sum of P2M, with interest at the rate of 7% per annum compounded monthly, in 120
equal monthly installments of P23,221.69 each; the first of such due and payable beginning the month following the last release or the month following the expiration of the period for the construction of the
building (or within 12 months), whichever is earlier. It was also stipulated that the properties should be free from all liens and encumbrances other than the mortgage itself. The first release in the amount of
P819,000.00 was made on 7 November 1957, while the second (and last) release in the amount of P30,000.00 was made on 15 May 1958. The checks covering both releases were drawn in favor of the vendor
of the mortgaged properties. In accordance with the agreement between the parties, the old building standing on the mortgaged properties was insured for P300,000.00 on 1 December 1959. Appellee
advanced the sum of P5,628,00 for the annual premium, but appellants failed to reimburse the same.

Appellee filed a complaint for the foreclosure of the mortgage with the CFI Manila on 11 August 1958, alleging a number of violations of the mortgage contract, to wit: (1) that the mortgaged properties had
not been freed by the mortgagor from certain liens and encumbrances other than the mortgage itself; (2) that without the prior written consent of plaintiff defendants removed and disposed of the complete
band sawmill and filing machine which formed part of the properties mortgaged; (3) that Calsons, Inc., failed to submit to appellee evidence showing the reduction of defendant’s account on the lot to at least
P819,000.00; (4) and that. Calsons, Inc., failed to begin, much less complete, the construction of the supermarket building on the mortgaged properties. On August 11, 1959, plaintiff filed supplemental
complaint, which was admitted without opposition. Two additional grounds for the foreclosure of the mortgage were alleged, namely: (1) that defendants failed, despite demands therefor, to pay the
amortizations due and payable, including accrued interest and surcharges, on the portion of the loan released to them; and (2) that defendants failed to complete the construction of the textile market building
on the mortgaged properties within 12 months from 7 November 1957, the date of the first release of P819,000.00. Judgment was rendered on 3 March 1962 in favor of plaintiff, and defendants brought the
appeal directly to the Court in view of the amount involved.

The Supreme Court affirmed the judgment appealed from, with costs against appellants.

1. Vendor’s lien a legal encumbrance, which is effective even if not recorded

Even if the two certificates of title covering the mortgaged property do not show any lien or encumbrance thereon other than the mortgage itself; the vendor’s lien in favor of the former owners,
representing the unpaid balance of P280,000.00 on the purchase price of the lots mortgaged. The lien is a legal encumbrance and therefore effective although not recorded.

2. Appellee not estopped in invoking right to have properties free from vendor’s lien
One of the reasons why appellant Calsons, Inc., applied for the P2M loan was precisely to use part thereof to pay the balance of the purchase price of 5 parcels of land it mortgaged to appellee. And
to assure itself that no vendor’s lien attached to the said properties, appellee caused the additional conditions to be added to the original terms of the mortgage contract. It turns out in fact that
appellants had failed to reduce their account on the lot to P819,000.00, as stipulated in the mortgage contract, since there was still a balance of P280,000 on the purchase price. With respect to the
second release of P30,000.00, the check was also drawn in favor of the vendor with the understanding that it would be used to pay the real estate taxes due on said properties and thus remove the
corresponding tax lien imposed by law. The steps taken by appellee negate any inference that it agreed to waive its right to have the properties “free from all liens and encumbrances,” as provided
in the mortgage contract.

3. Appellee cannot be estopped by a commitment made by its agent not reflected in the Agreement
Estoppel is invoked by appellants on the basis of a letter dated 28 October 1957, sent by the Manager of appellee’s Real Estate Department to the vendor of the properties, to the effect that the
balance of the purchase price in the amount of P280,000.00 would be released within six (6) months from the date of the said letter. The commitment of said Manager was not recognized by the
Board of Trustees of the appellee as shown by the fact that it was not incorporated in the mortgage contract, which was executed on a later date, 31 October 1957. While the schedule of subsequent
releases was clearly defined in the mortgage contract, no mention was made about the said commitment.

4. Machineries are immovables and are included in mortgage; installed by the owner to meet demands of industry or works
The mortgage was on the lands “together with all the buildings and improvements now existing or which may hereafter be constructed” thereon. And the machineries were permanently attached to
the property, and installed there by the former owner to meet the needs of certain works or industry therein. They were therefore part of immovable pursuant to Article 415 of the Civil Code, and
need not be the subject of a separate chattel mortgage in order to be deemed duly encumbered in favor of appellee.
5. Promissory note provides for due date of installments; Failure to pay amortizations a violation of mortgage contract
The promissory note executed by the parties clearly provides when the first installment, as well as subsequent ones, would become due, i.e. beginning the month following the last release and/or the
month following the expiration of the period for the construction of the textile market building, whichever is earlier and the rest on the 7th day of every month thereafter until the principal of P2M
and the interest shall have been fully paid. The mortgage contract provides that the proposed building should be completed within 12 months from the date of the first release. Said release having
been made on 7 November 1957, the construction period expired on 7 November 1958; hence, the first installment became due one month thereafter or on 7 December 1958, and the rest on the
7th day of every month thereafter. Appellants’ failure to pay the amortizations, interest and surcharges demanded of them by appellee, therefore, constitutes a violation of the mortgage contract and
is sufficient ground for the foreclosure of the mortgage.
Mindanao Bus v. City Assessor [G.R. No. L-17870. September 29, 1962.]
En Banc, Labrador (J): 7 concur, 3 took no part.

Facts:
Mindanao Bus Company is a public utility engaged in transporting passengers and cargoes by motor trucks in Mindanao; having its main offices in Cagayan de Oro. The company is also owner to the
land where it maintains and operates a garafe, a repair shop, blacksmith and carpentry shops; the machineries are place therein on wooden and cement platforms. The City Assessor of Cagayan de
Oro City assessed at P4,400 said maintenance and repair equipment. The company appealed the assessment to the 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 the company filed with the Court of Tax Appeals a petition for the review of the assessment. The Court of Tax Appeal (CTA Case 710) held that
the Company was liable to the payment of the realty tax on its maintenance and repair equipment. Hence, the company filed a petition for review with the Supreme Court.

The Supreme Court set aside the decision subject of the petition for review and the equipment in question declared not subject to assessment as real estate for the purposes of the real estate tax.
Without costs.

1. Machinery made immovable must be essential and principal elements of an industry or works
Paragraph 5 of Article 415 of the New Civil Code (previously Article 344, paragraph 5, of the old Civil Code) which provides 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 are immovable
properties. 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.”

2. Machinery essential to industry in Berkenkotter v. Cu Unjieng; Machinery incidental in present case

It cannot be said that the incorporation of the machinery and equipment in the central of the Mabalacat Sugar Company was not permanent in character because, as essential and principal
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. In contrast, 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.

3. Machinery incidental to industry are not immobilized; examples

Movables which become immobilized by destination because they are essential and principal elements in the industry are distinguished from 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 equipments. Airline companies use forklifts, jeep-wagons,
pressure pumps, IMB 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 incidentals and retain their movable nature.

4. Transportation business not carried on in a building, tenement or specified land; equipment thus are not real estate
Aside from the element of essentiality, Article 415 (5) also requires that the industry or works be carried on in a building or on a piece of land. In the case of Berkenkotter vs. Cu Unjieng, 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. In contrast, Mindanao Bus Company’s transportation 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.

Mindanao Bus Co. v. City Assessor & Treasurer

GR No. L-17870
Property Law: Immovable Property

Facts:
The City Assessor of Cagayan De Oro City assessed a realty tax on several equipment and machineries of Mindanao Bus Co., a public utility solely engaged in transporting passengers and cargoes
by motor trucks.. The machineries sought to be assessed by the respondent as real properties are sitting on cement or wooden platforms.

The petitioner appealed the assessment to the Board of Tax Appeals on the ground that the same are not realty. The Board of Tax Appeals sustained the assessment of the city assessor.
Additional note (for recit purposes):
– The machineries sought to be assessed by the respondent as real properties are the following:
o Hobart Electric Welder Machine;
o Storm Boring machine;
o Lathe machine with motor;
o Black and Decker Grinder;
o PEMCO Hydraulic Press;
o Battery charger (Tungar charge machine); and
o D-Engine Waukesha-M-Fuel.
– These machineries have never been or were never used as industrial equipment 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.”

Issue:
Whether the equipment and machineries in question, are considered immovable properties, and therefore, subject to realty tax.

Held:
No. The equipment and machineries in question, are movable properties, and therefore, not subject to realty tax.

Movable equipment 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.”

The tools and equipment in question in this instant case are, by their nature, not essential and principal 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 equipment, its business may be carried
on, as petitioner has carried on, without such equipment, before the war. The transportation business could be carried on without the repair or service shops if its rolling equipment is repaired
or serviced in another shop belonging to another.

Aside from the element of essentiality, Article 415 (5) of the New Civil Code also requires that the industry or works be carried on in a building or on a piece of land.

But in the case at bar the equipment 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 equipment may not, therefore, be deemed real property.

Ago v. CA [G.R. No. L-17898. October 31, 1962.]

En Banc, Labrador (J): 9 concurring, 1 took no part

Facts:
In 1957, Pastor D. Ago bought sawmill machineries and equipments from Grace Park Engineering, Inc., executing a chattel mortgage over said machineries and equipments to secure the payment
of a balance of the price remaining unpaid of P32,000.00, which Ago agreed to pay on installment basis. Ago defaulted in his payments and so, in 1958, Grace Park Engineering, Inc. instituted
extrajudicial foreclosure proceedings of the mortgage. To enjoin said foreclosure, Ago instituted Special Civil Case 53 in the CFI Agusan. The parties to the case arrived at a compromise agreement
and submitted the same in court in writing, signed by Ago and the Grace Park Engineering. Judge Ortiz of the CFI Agusan dictated a decision in open court on 28 January 1959. Still, Ago continued
to default in his payments as provided in the judgment by compromise, so Grace Park Engineering filed with the lower court a motion for execution, which was granted by the court on 15 August
1959. A writ of execution, dated 23 September 1959, later followed.

The Provincial Sheriff of Surigao, acting upon the writ of execution, levied upon and ordered the sale of the sawmill machineries and equipments in question. These machineries and equipments
had been taken to and installed in a sawmill building located in Lianga, Surigao del Sur, and owned by the Golden Pacific Sawmill to whom he had sold them or assigned them in payment of his
subscription to the shares of stock of said corporation on 16 February 1959 (a date after the decision of the lower court but before levy by the Sheriff). Thereafter the sawmill machineries and
equipments were installed in a building and permanently attached to the ground. Having been advised by the sheriff that the public auction sale was set for 4 December 1959, Ago, on 1 December
1959, filed the petition for certiorari and prohibition with preliminary injunction with the CA.
The Court of Appeals on 8 December 1959, issued a writ of preliminary injunction against the sheriff but it turned out that the latter had already sold at public auction the machineries in question
as scheduled. Grace Park Engineering was the only bidder for P15,000.00, although the certificate of sale was not yet executed. The CA instructed the sheriff to suspend the issuance of a
certificate of sale of the said sawmill machineries and equipment until the final decision of the case. On 9 November 1960, the CA dismissed the petition for certiorari and dissolved the writ of
preliminary injunction, with costs against the petitioner.

The Supreme Court set aside the decision of the Court of Appeals and declared that the issuance of the writ of execution against the sawmill machineries and equipments purchased by Pastor D.
Ago from the Grace Park Engineering, Inc., as well as the sale of the same by the Sheriff of Surigao, are null and void. Costs against Grace Park Engineering, Inc.

1. CA Ruling: Compromise agreement binding between parties

A compromise agreement is binding between the parties and becomes the law between them. (Gonzales vs. Gonzales, GR L-1254 [1948]; Martin vs. Martin, GR L-12439 [1959]).

2. CA Ruling: Judgment based on a compromise agreement is not appealable and is executory

It is a general rule in this jurisdiction that a judgment based on a compromise agreement is not appealable and is immediately executory, unless a motion is filed on the ground of fraud,
mistake or duress.

3. Judgment made in open court not real judgment of the court as it has not yet been rendered
Section 1 of Rule 35 describes the manner in which judgments shall be rendered, providing that “all judgments determining the merits of cases shall be in writing personally and directly
prepared by the judge, and signed by him, stating clearly and distinctly the facts and the law on which it is based, and filed with the clerk of the court.” The court of first instance being a
court of record, in order that a judgment may be considered as rendered it must not only be in writing, signed by the judge, but it must also be filed with the clerk of court. The mere
pronouncement of the judgment in open court with the stenographer taking note thereof does not, therefore, constitute a rendition of the judgment. It is the filing of the signed decision with
the clerk of court that constitutes rendition. While it is to be presumed that the judgment that was dictated in open court will be the judgment of the court, the court may still modify said
order as the same is being put into writing. And even if the order or judgment has already been put into writing and signed, while it has not yet been delivered to the clerk for filing, it is still
subject to amendment or change by the judge. It is only when the judgment signed by the judge is actually filed with the clerk of court that it becomes a valid and binding judgment. Prior
thereto, it could still be subject to amendment and change and may not, therefore, constitute the real judgment of the court.

4. Dictating judgment in open court is not valid notice of said judgment

The mere fact that a party heard the judge dictating the judgment in open court, is not a valid notice of said judgment. If rendition thereof is constituted by the filing with the clerk of court
of a signed copy (of the judgment), it is evident that the fact that a party or an attorney heard the order or judgment being dictated in court cannot be considered as notice of the real
judgment. No judgment can be notified to the parties unless it has previously been rendered. The notice, therefore, that a party has of a judgment that was being dictated is of no effect
because at that time no judgment has as yet been signed by the judge and filed with the clerk.

5. Rules specific on the service of final orders or judgment

Section 7 of Rule 27 expressly require that final orders or judgments be served personally or by registered mail. In accordance with this provision, a party is not considered as having been
served with the judgment merely because he heard the judge dictating the said judgment in open court; it is necessary that he be served with a copy of the signed judgment that has been
filed with the clerk in order that he may legally be considered as having been served with the judgment.

6. Issuance of writ of execution null and void

As the signed judgment not having been served upon the petitioner, said judgment could not be effective upon him who had not received it. It follows as a consequence that the issuance of
the writ of execution was null and void, having been issued before petitioner was served, personally or by registered mail, a copy of the decision.

7. Sawmill machineries and equipment are real properties in accordance with Art. 415 (5)
By reason of installment in a building, the said sawmill machineries and equipments became real estate properties in accordance with the provision of Art. 415(5) of the Civil Code. It is
interpreted similarly to the case of Berkenkotter vs. Cu Unjieng e Hijos, where the Court held that the installation of the machinery and equipment in the central of the Mabalacat Sugar
Company for use in connection with the industry carried by that company, converted the said machinery and equipment into real estate by reason of their purpose. In the present case, the
installation of the sawmill machineries in the building of the Golden Pacific Sawmill, Inc., for use in the sawing of logs carried on in said building, the same became a necessary and permanent
part of the building or real estate on which the same was constructed, converting the said machineries and equipments into real estate within the meaning of Article 415(5) of the Civil Code
of the Philippines.

8. Sale made by sheriff void for lack of publication

 Considering that the machineries and equipments in question valued at more than P15,000.00 appear to have been sold without the necessary advertisement of sale by publication in a
newspaper, as required in Section 16 of Rule 39 of the Rules of Court, which requires publication for properties with value above P400, the sale made by the sheriff must be declared null
and void.

PASTOR AGO V COURT OF APPEALS

GR NO. 17898 (1962)

Facts:
 Pastor Ago bought saw mill machineries and equipment from Grace Park Engineering, executing a chattel mortgage to pay for the unpaid balance
 The parties arrived at a compromise agreement after Ago defaulted in his payment. With both parties in attendance, Judge Montano Ortiz dictated a decision in open court.
 Ago defaulted in his payment anew. Grace Park motioned for execution and was later granted a writ of execution.
 Provincial Sheriff of Siargao acted on the Writ of Execution, levied upon and ordered the sale of machineries and equipment in question
 Machineries and equipment were now owned by Golden Pacific Sawmill after Ago sold it to them, a day after court decision but before levying of property)
Issues:
 WoN the decision made in open court constitutes a notice of final judgment
 WoN the sale of the Provincial Sheriff was valid without prior publication
Ruling:
 Issue #1: No, it does not constitute a notice of final judgment.
o Section 1 of Rule 35 states:
 How judgment rendered. — All judgments determining the merits of cases shall be in writing personally and directly prepared by the judge, and signed by him, stating clearly and
distinctly the facts and the law on which it is based, filed with the clerk of the court.
o Section 7 of Rule 27 states:
 Service of final orders or judgments. — Final orders or judgments shall be served either personally or by registered mail.
 Issue #2: No, it is not valid.
o Requisites of a valid publication as provided by Section 16 of Rule 39 of the Rules of Court:
 Posted for 20 days
 Displayed in 3 public places where property is situated and sold
 If property is > Php 400, publish a copy of the notice once a week, in some newspaper of general circulation in the province.
o Machineries and equipment became necessary parts of the building or real estate.
 Ago assigned the machinery and equipment to Golden Pacific Sawmill after acquiring it from Grace Park
 Golden installed the machinery and equipment on the property they owned
Art. 415 makes machinery and equipment real property because it was installed by the owner of the property and it is essential to the industry.

Serg’s Products v. PCI Leasing [G.R. No. 137705. August 22, 2000.]
Third division, Panganiban (J): 3 concur

Facts:
On 13 February 1998, PCI Leasing and Finance, Inc. filed a complaint for sum of money, with an application for a writ of replevin (Civil Case Q-98-33500). On 6 March 1998, upon an ex-
parte application of PCI Leasing, judge issued a writ of replevin directing its sheriff to seize and deliver the machineries and equipment to PCI Leasing after 5 days and upon the payment of
the necessary expenses. On 24 March 1998, the sheriff proceeded to petitioner’s factory, seized one machinery with word that the return for the other machineries. On 25 March 1998,
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. On 6 April 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 7 April 1998, they went to the CA via an original action for certiorari.

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; and ruled
that the “words of the contract are clear and leave no doubt upon the true intention of the contracting parties.” It thus affirmed the 18 February 1998 Order, and the 31 March 1998 Resolution
of the lower court, and lifted the preliminary injunction issued on 15 June 1998. A subsequent motion for reconsideration was denied on 26 February 1999. Hence, the petition for review on
certiorari.
 The Supreme Court denied the petition and affirmed the decision of the Court of Appeals; with costs against petitioners.

1. Petition for review on certiorari is clearly under Rule 45

The petition need not expressly indicate if it is being filed under Rule 45 or Rule 65 of the Rules of Court, as it is clear that the present recourse is under Rule 45; the conclusion of such
supported by the title of the Petition, which is “Petition for Review on Certiorari.”

2. Error in impleading the Judge as respondent not ground to dismiss the case
While the judge should not have been impleaded as a respondent, substantial justice requires that such lapse by itself should not warrant the dismissal of the present Petition. The Court
may deems it proper to remove, motu proprio, the name of the Judge from the caption of the case.

3. Writ of replevin issued for recovery of personal property

Rule 60 of the Rules of Court provides that writs of replevin are issued for the recovery of personal property only. Section 3 provides that upon the filing of such affidavit and approval of the
bonds 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.

4. Machinery immovable properties by incorporation

The machinery 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.” The machines are thus, real, not personal, property pursuant to Article 415 (5) of the Civil
Code.

5. Parties estopped when parties stipulated properties as personal; property thus subject to writ of seizure
Contracting parties may validly stipulate that a real property be considered as personal. After agreeing to such stipulation, they are consequently estopped from claiming otherwise. Under
the principle of estoppel, a party to a contract is ordinarily precluded from denying the truth of any material fact found therein. Thus, said machines are proper subjects of the Writ of Seizure
(compare Tumalad v. Vicencio).

6. Similar cases
In Trinidad v. Vicencio, the Court upheld the intention of the parties to treat a house of strong materials as a personal property because it had been made the subject of a chattel mortgage.
Applying Tumalad, the Court in Makati Leasing and Finance Corp. v. Wearever Textile Mills also held that the machinery used in a factory and essential to the industry was a proper subject
of a writ of replevin because it was treated as personal property in a contract.

7. Third parties acting in good faith not affected by stipulation to consider real property as personal
The 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 the present case, however, there is no
showing that any specific third party would be adversely affected.

8. Title to property should be determined at trial; Remedies under Rule 60 either to post a counter-bond or to question the sufficiency of the plaintiff’s bond
The validity and the nature of the contract are the lis mota of the civil action pending before the RTC. A resolution of the questions whether the Agreement is a loan and not a lease, or
whether the Agreement is invalid, 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. As held in La Tondeña Distillers v. CA, the Court explained that the policy under Rule 60 was that questions involving title to the subject property 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 plaintiff’s bond. They were not
allowed, however, to invoke the title to the subject property.

9. Title to property should be determined at trial; no place in a petition for certiorari under Rule 65 or in a petition for review under Rule 45.
The questions whether the Agreement is a loan and not a lease, or whether the Agreement is invalid 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 the Court under Rule 45.

10. Agreement presumed to be valid and binding

The Agreement must be presumed to be valid and binding as the law between the parties; as there is nothing on record to show that it has been nullified or annulled. In the present case,
petitioners assailed it first only in the RTC proceedings, which had ironically been instituted by respondent. As in the Makati Leasing and Finance case, even granting that he 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.

11. Consequences cannot be blamed on the Court for the petitioners’ failure to avail of remedies under Section 5, Rule 60 of the Rules of Court
Petitioners’ arguments, that the seizure will lead to the unemployment of their workers and nullify all efforts to rehabilitate the corporation, do not preclude the implementation of the Writ.
Law and jurisprudence support its propriety. Such consequences 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.

Serg's v. PCI Leasing

Serg’s Products, Inc. vs. PCI Leasing G.R. No. 137705. August 22, 2000

FACTS:
 PCI Leasing and Finance filed a complaint for sum of money, with an application for a writ of replevin.
 Judge issued a writ of replevin directing its sheriff to seize and deliver the machineries and equipment to PCI Leasing after 5 days and upon the payment of the necessary expenses.
 The sheriff proceeded to petitioner's factory, seized one machinery, with word that he would return for other machineries.
 Petitioner (Serg’s Products) filed a motion for special protective order to defer enforcement of the writ of replevin.
 PCI Leasing opposed the motion on the ground that the properties were still personal and therefore can still be subjected to seizure and writ of replevin.
 Petitioner asserted that properties sought to be seized were immovable as defined in Article 415 of the Civil Code.
 Sheriff was still able to take possession of two more machineries

In its decision on the original action for certiorari filed by the Petitioner, the appellate court, Citing the Agreement of the parties, held that the subject machines were personal property,
and that they had only been leased, not owned, by petitioners; and ruled that the "words of the contract are clear and leave no doubt upon the true intention of the contracting parties."

ISSUE: Whether or not the machineries became real property by virtue of immobilization.

Ruling:
Petitioners contend that the subject machines used in their factory were not proper subjects of the Writ issued by the RTC, because they were in fact real property.
Writ of Replevin: Rule 60 of the Rules of Court provides that writs of replevin are issued for the recovery of personal property only.

Article 415 (5) of the Civil Code provides that machinery, receptacles, instruments or implements intended by the owner of the tenement for an industry or works which may be carried on
in a building or on a piece of land, and which tend directly to meet the needs of the said industry or works

In the present case, the machines that were the subjects of the Writ of Seizure were placed by petitioners in the factory built on their own land.They were essential and principal elements
of their chocolate-making industry.Hence, although each of them was movable or personal property on its own, all of them have become “immobilized by destination because they are
essential and principal elements in the industry.”

However, contracting parties may validly stipulate that a real property be considered as personal. After agreeing to such stipulation, they are consequently estopped from claiming
otherwise.Under the principle of estoppel, a party to a contract is ordinarily precluded from denying the truth of any material fact found therein.

Section 12.1 of the Agreement between the parties provides “The PROPERTY is, and shall at all times be and remain, personal property notwithstanding that the PROPERTY or any part
thereof may now be, or hereafter become, in any manner affixed or attached to or embedded in, or permanently resting upon, real property or any building thereon, or attached in any
manner to what is permanent.”

The machines are personal property and they are proper subjects of the Writ of Replevin
Tumalad v. Vicencio
[G.R. No. L-30173. September 30, 1971.] En Banc, Reyes JBL (J): 10 concur

Facts:
On 1 September 1955 Vicencio and Simeon, defendants-appellants, executed a chattel mortgage in favor of the Tumalads, plaintiff-appellees over their house of strong materials located at
550 Int. 3, Quezon Boulevard, Quiapo, Manila, over Lot 6-B and 7-B, Block 2554, which were being rented from Madrigal & Company, Inc. The mortgage was registered in the Registry of
Deeds of Manila on 2 September 1955. The mortgage was executed to guarantee a loan of P4,800.00 received from the Tumalads, payable within one year at 12% per annum. The mode of
payment was P150.00 monthly, starting September, 1955, up to July 1956, and the lump sum of P3,150 was payable on or before August, 1956. It was also agreed that default in the
payment of any of the amortizations would cause the remaining unpaid balance to become immediately due and payable, the Chattel Mortgage enforceable, and the Sheriff of Manila
authorized the Mortgagor’s property after necessary publication. When Vicencio and Simeon defaulted in paying, the mortgage was extrajudicially foreclosed, and on 27 March 1956, the
house was sold at public auction pursuant to the said contract. As highest bidder, the Tumalads were issued the corresponding certificate of sale. On 18 April 1956, the Tumalads commenced
Civil Case 43073 in the municipal court of Manila, praying, among other things, that the house be vacated and its possession surrendered to them, and for Vicencio and Simeon to pay rent
of P200.00 monthly from 27 March 1956 up to the time the possession is surrendered. On 21 September 1956, the municipal court rendered its decision in favor of the Tumalads. Having
lost therein, appealed to the court a quo (Civil Case 30993) which also rendered a decision against them. On appeal, the case was certified to the Supreme Court by the Court of Appeals
(CA-G.R. No. 27824-R) for the reason that only questions of law are involved. Plaintiffs-appellees failed to file a brief and this appeal was submitted for decision without it. Nearly a year after
the foreclosure sale the mortgaged house had been demolished on 14 and 15 January 1957 by virtue of a decision obtained by the lessor of the land on which the house stood.

TUMALAD V. VICENCIO

Although a building is an immovable; the parties to a contract may by agreement treat as personal property that which by nature is a real property however they are estopped from
subsequently claiming otherwise.

FACTS:
Alberta Vicencio and Emiliano Simeon received a loan of P4, 800 from Gavino and Generosa Tumalad. To guaranty said loan, Vicencio executed a chattel mortgage in favor of Tumalad over
their house of strong materials which stood on a land which was rented from the Madrigal & Company, Inc. When Vicencio defaulted in paying, the house was extrajudicially foreclosed,
pursuant to their contract. It was sold to Tumalad and they instituted a Civil case in the Municipal Court of Manila to have Vicencio vacate the house and pay rent.

The MTC decided in favor of Tumalad ordering Vicencio to vacate the house and pay rent until they have completely vacated the house. Vicencio is questioning the legality of the chattel
mortgage on the ground that 1) the signature on it was obtained thru fraud and 2) the mortgage is a house of strong materials which is an immovable therefore can only be the subject of a
REM. On appeal, the CFI found in favor of Tumalad, and since the Vicencio failed to deposit the rent ordered, it issued a writ of execution, however the house was already demolished pursuant
to an order of the court in an ejectment suit against Vicencio for non-payment of rentals. Thus the case at bar.

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

HELD:
NO.
Although a building is by itself an immovable property, parties to a contract may treat as personal property that which by nature would be real property and it would be valid and good only
insofar as the contracting parties are concerned. By principle of estoppel, the owner declaring his house to be a chattel may no longer subsequently claim otherwise.

When Vicencio executed the Chattel Mortgage, it specifically provides that the mortgagor cedes, sells and transfers by way of Chattel mortgage. They intended to treat it as chattel therefore
are now estopped from claiming otherwise. Also the house stood on rented land which was held in previous jurisprudence to be personalty since it was placed on the land by one who had
only temporary right over the property thus it does not become immobilized by attachment.

[Vicencio though was not made to pay rent since the action was instituted during the period of redemption therefore Vicencio still had a right to remain in possession of the property]
Navarro v. Pineda [G.R. No. L-18456. November 30, 1963.]
En Banc, Paredes (J): 8 concur

Facts:
On 14 December 1959, Rufino G. Pineda and his mother Juana Gonzales (married to Gregorio Pineda), borrowed from Conrado P. Navarro, the sum of P2,550.00, payable 6 months after
said date or on 14 June 1959. To secure the indebtedness, Rufino executed a document captioned “Deed of Real Estate and Chattel Mortgages “, whereby Juana Gonzales, by way of Real
Estate Mortgage hypothecated a parcel of land, belonging to her, registered with, the register of Deeds of Tarlac, under TCT 25776, and Rufino G. Pineda, by way of Chattel Mortgage,
mortgaged his 2-story residential house, having a floor area of 912 sq.m., erected on a lot belonging to Atty. Vicente Castro, located at San Roque, Tarlac, Tarlac; and 1 motor truck,
registered in his name, under Motor Vehicle Registration Certificate A-171805. Both mortgages were contained in one instrument, which was registered in both the Office of the Register of
Deeds and the Motor Vehicles Office of Tarlac. The Pinedas failed to pay the mortgage debt when it became due. They were granted an extension up to 30 June 1960, but they likewise failed
to pay on the said day. They were granted another extension up to 30 July 1960, but they likewise failed and refused to pay.

On 10 August 1960, Navarro filed a complaint for foreclosure of the mortgage and for damages, which consisted of liquidated damages in the sum of P500.00 and 12% per annum interest
on the principal, effective on the date of maturity, until fully paid. On 24 February 1961, the lower court dismissed the complaint with regards to Gregorio Pineda; ordering Juana Gonzales
and spouses Rufino Pineda and Ramona Reyes to pay Conrado Navarro the sum of P2,550 with 12% compounded interest plus P500 as liquidated damages and the cost of the suit from 14
June 1960 within 90 days from receipt of the copy of the decision, else the properties mentioned in the deed of real estate and chattel mortgage be sold to realize said mortgage debt in
accordance with the pertinent provisions of Act 3135 and Article 14 of Act 1508; and ordering Rufino Pineda and Ramona Reyes to deliver the personal properties to the Provincial Sheriff of
Tarlac immediately after the lapse of 90 days in default of such payment.

The judgment was appealed directly to the Supreme Court, questioning the lower court’s decision in holding the deed of real estate and chattel mortgages appended to the complaint valid,
notwithstanding that the house of Rufino Pineda was made subject of the chattel mortgage for the reason that it is erected on a land that belongs to a third person.

NAVARRO V. PINEDA
9 SCRA 631

FACTS:
Pineda and his mother executed real estate and chattel mortgages in favor of Navarro, to secure a loan they got from the latter. The REM covered a parcel of land owned by the mother
while the chattel mortgage covered a residential house. Due to the failure to pay the loan, they asked for
extensions to pay for the loan. On the second extension, Pineda executed a PROMISE wherein in case of default in payment, he wouldn’t ask for any additional extension and there would
be no need for any formal demand. In spite of this, they still failed to pay.

Navarro then filed for the foreclosure of the mortgages. The court decided in his favor.

HELD:
Where a house stands on a rented land belonging to another person, it may be the subject matter of a chattel mortgage as personal property if so stipulated in the document of
mortgage, and in an action by the mortgagee for the foreclosure, the validity of the chattel mortgage cannot be assailed
by one of the parties to the contract of mortgage.

Furthermore, although in some instances, a house of mixed materials has been considered as a chattel between the parties and that the validity of the contract between them, has been
recognized, it has been a constant criterion that with respect to third persons, who are not parties to the
contract, and specially in execution proceedings, the house is considered as immovable property.
Navarro v. Pineda
GR No. L-18456
Property Law: Immovable Property

Facts:
Rufino Pineda and his mother, Juana Gonzales, borrowed from plaintiff Conrado Navarro, the sum of P2550.00, and payable 6 months after date. Pineda executed “Deed of Real Estate and
Chattel Mortgages,” whereby his mother, by way of Real Estate Mortgage hypothecated a parcel of land, belonging to her. Both mortgages were contained in one instrument, which was
registered in both the Office of the Register of Deeds and the Motor Vehicles Office of Tarlac.

The defendants failed to pay when the mortgage became due and payable. The plaintiff gave two extensions. They still failed to pay.

When the plaintiff filed a complaint for foreclosure of the mortgage, defendant questioned the validity of the chattel mortgage over his house on the ground that the house, being an
immovable property, could not be the subject of a chattel mortgage. Defendant cited cases to prove their point (Lopez v. Ororsa; Associated Ins. & Surety Co. v. Iya; and Leung Yee v.
Strong Machinery Co.)

Additional note (for recit purposes):

– In the second extension, the defendants promised that should they fail to pay the obligation on such date, they would no longer ask for further extension and there would be no need for
any formal demand, and plaintiff could proceed to take whatever action he might desire to enforce his rights, under the said mortgage contract.

Issue:
Whether or not the Deed of Real Estate and Chattel Mortgages is valid, particularly on the questions of whether or not the residential house, subject of the mortgage therein, can be considered
a chattel and the propriety of the attorney’s fees.

Held:
Yes. The Deed of Real Estate and Chattel Mortgage is valid. The parties to the contract treated the house in question as personal or movable property. In the deed of chattel mortgage,
appellant Rufino G. Pineda conveyed by way of “Chattel Mortgage” “my personal properties,” a residential house and a truck. The mortgagor himself grouped the house with the truck, which
is, inherently a movable property. The house which was not even declared for taxation purposes was small and made of light construction materials: G.I. sheets roofing, sawali and wooden
walls and wooden posts; built on land belonging to another.

The cases cited by appellants are not applicable to the present case. The Iya cases refer to a building or a house of strong materials, permanently adhered to the land, belonging to the owner
of the house himself. In the case of Lopez vs. Orosa the subject building was a theater, built of materials worth more than P62,000.00 attached permanently to the soil. In these two cases
and in the Leung Yee Case, supra, third persons assailed the validity of the deed of chattel mortgages; in the present case, it was one of the parties to the contract of mortgages who assailed
its validity.

Makati Leasing v. Wearever Textiles [G.R. No. L-58469. May 16, 1983.]
Second Division, de Castro (J): 5 concur, 1 concur in result

Facts:
To obtain financial accommodations from Makati Leasing and Finance Corporation, Wearever Textile Mills, discounted and assigned several receivables with the former under a Receivable
Purchase Agreement. To secure the collection of the receivables assigned, Wearever Textile executed a Chattel Mortgage over certain raw materials inventory as well as a machinery described
as an Artos Aero Dryer Stentering Range. Upon Wearever’s default, Makati Leasing filed a petition for extrajudicial foreclosure of the properties mortgage to it. However, the Deputy Sheriff
assigned to implement the foreclosure failed to gain entry into Wearever’s premises and was not able to effect the seizure of the machinery. Makati Leasing thereafter filed a complaint for
judicial foreclosure with the CFI Rizal (Branch VI, Civil Case 36040).

Acting on petitioner’s application for replevin, the lower court issued a writ of seizure, the enforcement of which was restrained upon Wearever’s filing of a motion for reconsideration. The
lower court finally issued on 11 February 1981, an order lifting the restraining order for the enforcement of the writ of seizure and an order to break open the premises of Wearever to enforce
said writ. The lower court reaffirmed its stand upon Wearever’s filing of a further motion for reconsideration. On 13 July 1981, the sheriff enforcing the seizure order, repaired to the premises
of Wearever and removed the main drive motor of the subject machinery.
On 27 August 1981, the Court of Appeals, in certiorari and prohibition proceedings filed by Wearever, set aside the Orders of the lower court and ordered the return of the drive motor seized
by the sheriff pursuant to said Orders, after ruling that the machinery in suit cannot be the subject of replevin, much less of a chattel mortgage, because it is a real property pursuant to
Article 415 of the new Civil Code. The appellate court also rejected the argument that Wearever is estopped from claiming that the machine is real property by constituting a chattel mortgage
thereon. A motion for reconsideration was filed by Makati Leasing, which was later denied. Makati Leasing brought the case to the Supreme Court by review by writ of certiorari.

MAKATI LEASING AND FINANCE CORP. V. WEAREVER TEXTILE MILLS, INC.

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

FACTS:
To obtain financial accommodations from Makati Leasing, Wearever Textile discounted and assigned several receivables under a Receivable Purchase Agreement with Makati Leasing. To
secure the collection of receivables, it executed a chattel mortgage over several raw materials and a machinery – Artos Aero Dryer Stentering Range (Dryer).

Wearever defaulted thus the properties mortgaged were extrajudicially foreclosed. The sheriff, after the restraining order was lifted, was able to enter the premises of Wearever and removed
the drive motor of the Dryer. The CA reversed the order of the CFI, ordering the return of the drive motor since it cannot be the subject of a replevin suit being an immovable bolted to the
ground. Thus the case at bar.

ISSUE:
Whether the dryer is an immovable property

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

Makati Leasing and Finance Corp. v. Wearever Textile Mills, Inc.

GR No. L-58469
Property Law: Immovable Property

Facts:
In order to obtain financial accommodations from petitioner Makati Leasing and Finance Corporation, the private respondent Wearever Textile Mills, Inc., discounted and assigned several
receivables with the former under a Receivable Purchase Agreement. To secure the collection of the receivables assigned, private respondent executed a Chattel Mortgage over certain raw
materials inventory as well as machinery described as an Artos Aero Dryer Stentering Range.

Upon default, petitioner filed a petition for extrajudicial foreclosure of the properties mortgage to it. Acting on petitioner’s application for replevin, the lower court issued a writ of seizure.
Then after, the sheriff enforcing the seizure order repaired to the premises of private respondent and removed the main drive motor of the subject machinery.

The Court of Appeals, in certiorari and prohibition proceedings ordered the return of the seized drive motor, after ruling that the machinery in suit cannot be the subject of replevin, much
less of a chattel mortgage, because it is a real property pursuant to Article 415 of the New Civil Code, the same being attached to the ground by means of bolts and the only way to remove
it from respondent’s plant would be to drill out or destroy the concrete floor, the reason why all that the sheriff could do to enforce the writ was to take the main drive motor of said machinery.

Issue:
Whether the seized drive motor cannot be a subject of chattel mortgage, because it is a real property pursuant to Article 415 of the new Civil Code

Held:
No. The seized drive motor can be a subject of chattel mortgage.

Examining the records of the instance case, the Supreme Court found no logical justification to exclude and rule out, as the appellate court did, the present case from the application of the
pronouncement in the TUMALAD v. VICENCIO CASE (41 SCRA 143) where a similar, if not identical issue was raised. If a house of strong materials, like what was involved in the 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 rejecting petitioner’s assertion on the applicability of the Tumalad doctrine, the Court of Appeals lays stress on the fact that the house involved therein was built on a land that did not
belong to the owner of such house. But the law makes no distinction with respect to the ownership of the land on which the house is built and we should not lay down distinctions not
contemplated by law.

Private respondent contends that estoppel cannot apply against it because it had never represented nor agreed that the machinery in suit be considered as personal property but was merely
required and dictated on by herein petitioner to sign a printed form of chattel mortgage which was in a blank form at the time of signing. This contention lacks persuasiveness. As aptly
pointed out by petitioner and not denied by the respondent, the status of the subject machinery as movable or immovable was never placed in issue before the lower court and the Court of
Appeals except in a supplemental memorandum in support of the petition filed in the appellate court.

BENGUET CORPORATION VS. CENTRAL BOARD OF ASSESSMENT APPEALS (CBAA)

GR NO. 106041 January 29, 1993

FACTS:

The realty tax assessment involved in this case amounts to Php 11, 319,304.00. It has been imposed on the petitioner's tailings dam and the land thereunder over its protest.
The controversy arose in 1985 when the Provincial Assessor of Zambales assessed the said properties as taxable improvements. The assessment was appealed to the Board of Assessments
Appeals of the Province of Zambales. The appeal was dismissed.
The petitioner seasonably elevated the matter to the CBAA which reversed the dismissal of the appeal but, on the merits, agreed that "The tailings dam and the lands submerged thereunder
were subject to realty tax.

ISSUE: Whether the tailings dam is subject to realty tax because it is an improvement upon the land.

RULING:

Yes. The Real Property Tax Code does not carry a definition of "real property" and simply says that the realty tax is imposed on "real property, such as lands, buildings, machinery and other
improvements affixed or attached to real property." In the absence of such a definition, we apply Article 415 of the Civil Code, the pertinent portions: Par (1) and (3).

Sec. 2 of C.A. No. 470, otherwise known as the Assessment Law, provides that the realty tax is due "on the real property, including land, buidings, machinery and other improvements" not
specifically exempted in Sec. 3 thereof. A reading of that section shows that the tailings dam of the petitioner does not fall under any of the classes exempt real properties therein enumerated.

Is the tailings dam an improvement on the mine?

Under Section 3 of the Real Property Tax Code:

Improvement - is a valuable addition made to property or an amelioration in its condition, amounting to more than mere repairs or replacement of waste, costing labor or capital and intended
to enhance its value, beauty or utility or to adopt it for new or future purposes.
The term has also been interpreted as "artificial alterations of the physical condition of the ground that are reasonably permanent in character.
A structure constitutes an improvement so as to partake of the status of realty would depend upon the degree of permanence intended in its construction and use. The expression "permanent"
as applied to an improvement does not imply that the improvement must be used perpetually but only until the purpose to which the principal realty is devoted has been accomplished. It is
sufficient that the improvement is intended to remain as long as the land to which it is annexed is still used for the said purpose.

The court is convinced that the subject dam falls within the definition of an "improvement" because it is permanent in character and it enhances the value and utility of petitioner's mine.
Moreover, the immovable nature of the dam defines its character as real property under Article 415 of the Civil Code and thus makes it taxable under Section 38 of the Real Property Tax
Code.
Meralco Securities v Central Board of Assessment Appeals, et al

Facts:
Pursuant to a pipeline concession issued under the Petroleum Act of 1949, Republic Act No. 387, Meralco Securities installed from Batangas to Manila a pipeline system consisting of cylindrical
steel pipes joined together and buried not less than one meter below the surface along the shoulder of the public highway. The pipes are embedded in the soil and are firmly and solidly
welded together so as to preclude breakage or damage thereto and prevent leakage or seepage of the oil. The valves are welded to the pipes so as to make the pipeline system one single
piece of property from end to end.

In order to repair, replace, remove or transfer segments of the pipeline, the pipes have to be cold-cut by means of a rotary hard-metal pipe-cutter after digging or excavating them out of
the ground where they are buried. In points where the pipeline traversed rivers or creeks, the pipes were laid beneath the bed thereof. Hence, the pipes are permanently attached to the
land.

Pursuant to the Assessment Law, Commonwealth Act No. 470, the provincial assessor of Laguna treated the pipeline as real property and issued tax declarations, containing the assessed
values of portions of the pipeline.

Meralco appealed the assessments to the defendants, but the latter ruled that pipeline is subject to realty tax. The defendants argued that the pipeline is subject to realty tax because they
are contemplated in Assessment Law and Real Property Tax Code; that they do not fall within the category of property exempt from realty tax under those laws; that Articles 415 & 416 of
the Civil Code, defining real and personal property have no applications to this case because these pipes are constructions adhered to soil and things attached to the land in a fixed manner,
and that Meralco Securities is not exempt from realty tax under petroleum law.

Meralco insists that its pipeline is not subject to realty tax because it is not real property within the meaning of Art. 415.

Issue:
Whether the aforementioned pipelines are subject to realty tax.

Held:
Yes, the pipelines are subject to realty tax.

Section 2 of the Assessment Law provides that the realty tax is due “on real property, including land, buildings, machinery, and other improvements.” This provision is reproduced with some
modification in Section 38, Real Property Tax Code, which provides that “there shall be levied, assessed, and collected xxx annual ad valorem tax on real property such as land, buildings,
machinery, and other improvements affixed or attached to real property xxx.”

It is incontestable that the pipeline of Meralco Securities does not fall within any of the classes of exempt real property enumerated in section 3 of the Assessment Law and section 40 of the
Real Property Tax Code.

Pipeline means a line of pipe connected to pumps, valves and control devices for conveying liquids, gases or finely divided solids. It is a line of pipe running upon or in the earth, carrying
with it the right to the use of the soil in which it is placed.

Article 415[l] and [3] provides that real property may consist of constructions of all kinds adhered to the soil and 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.

The pipeline system in question is indubitably a construction adhering to the soil. It is attached to the land in such a way that it cannot be separated therefrom without dismantling the steel
pipes which were welded to form the pipeline.

WHEREFORE, the questioned decision and resolution are affirmed. The petition is dismissed. No costs.
MANILA ELECTRIC CO. V. CENTRAL BOARD OF ASSESSMENT APPEALS
114 SCRA 273

FACTS:
Petitioner owns two oil storage tanks, made of steel plates wielded and assembled on the spot. Their bottoms rest on a foundation consisted of compacted earth, sand pad
as immediate layer, and asphalt stratum as top layer. The tanks merely sit on its foundation.

The municipal treasurer of Batangas made an assessment for realty tax on the two tanks, based on the report of the Board of Assessors. MERALCO wished to oppose this assessment as
they averred that the tanks are not real properties.

HELD:
While the two storage tanks are not embodied in the land, they may nevertheless be considered as improvements in the land, enhancing its utility and rendering it useful to
the oil industry.

For purposes of taxation, the term real property may include things, which should generally be considered as personal property. it is familiar phenomenon to see things classified
as real property for purposes of taxation which on general principle may be considered as personal
property.