Berkenkotter v.

Cu Unjieng
G.R. No. L-41643
Villa-Real, J.:

FACTS:
On April 26, 1926, the Mabalacat Sugar Co., Inc., owner of the sugar central situated in Mabalacat, Pampanga,
obtained from the defendants, Cu Unjieng e Hijos, a loan secured by a first mortgage constituted on two parcels
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."

On October 5, 1926, 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. The estimated cost of said
additional machinery and equipment was approximately P100,000. In order to carry out this plan, B.A. Green,
president of said corporation, proposed to the plaintiff, B.H. Berkenkotter, to advance the necessary amount for
the purchase of said machinery and equipment, promising to reimburse him as soon as he could obtain an
additional loan from the mortgagees, the herein defendants Cu Unjieng e Hijos. Having agreed to said proposition
made in a letter dated October 5, 1926 (Exhibit E), B.H. Berkenkotter, on October 9th of the same year, delivered
the sum of P1,710 to B.A. Green, president of the Mabalacat Sugar Co., Inc., the total amount supplied by him to
said B.A. Green having been P25,750. Furthermore, B.H. Berkenkotter had a credit of P22,000 against said
corporation for unpaid salary. With the loan of P25,750 and said credit of P22,000, the Mabalacat Sugar Co., Inc.,
purchased the additional machinery and equipment now in litigation.

On June 10, 1927, 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, on April 27, 1927,
together with whatever additional equipment acquired with said loan. B.A. Green failed to obtain said loan.

The appellant contends that the installation of the machinery and equipment claimed by him in the sugar central
of the Mabalacat Sugar Company, Inc., was not permanent in character inasmuch as B.A. Green, in proposing to
him to advance the money for the purchase thereof, made it appear in the letter, Exhibit E, 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, said B.A. Green binding himself not to mortgage nor encumber them to anybody
until said plaintiff be fully reimbursed for the corporation's indebtedness to him.

ISSUE:
WON the machinery in question is considered permanent in character for it to be subjected to the mortgage.

RULING:
Yes. 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 necessarily be permanent.
 Caltex v. Central Board of Assessment Appeals
G.R. No. L-50466
Aquino,J.:

FACTS:
Caltex Philippines installed underground tanks, elevated tanks, elevated water tanks, water
tanks, gasoline and computing pumps, car washers, car and tire hoists, air compressors and tireflators in
its gasoline stations located on leased land. They were attached to the pavement covering the entire lot.
The said machines were loaned by Caltex to gas station operators under lease contracts to be returned
to Caltex upon demand. The city assessor of Pasay City treated the said machines as taxable realty and
imposed real tax thereon. The city board of tax appeals ruled that they are personality not subject to
realty tax, but the Central Board of Assessment Appeals reversed the ruling and found that the machines
and equipment were real property within the meaning of Section 3(k) and (m) and 38 of the Real
Property Tax Code, Presidential Decree 464, and that the definitions of real property and personal
property in Articles 415 and 416 of the Civil Code are not applicable to this case.

ISSUE:
WON the machineries in question are real property so as to subject them to real property tax?

RULING:
Yes. We hold that the said equipment and machinery, as appurtenances to the gas station
building or shed owned by Caltex (as to which it is subject to realty tax) and which fixtures are necessary
to the operation of the gas station, for without them the gas station would be useless, and which have
been attached or affixed permanently to the gas station site or embedded therein, are taxable
improvements and machinery within the meaning of the Assessment Law and the Real Property Tax
Code. That ruling is an interpretation of paragraph 5 of Article 415 of the Civil Code regarding machinery
that becomes real property by destination. In the Davao Saw Mills case the question was whether the
machinery mounted on foundations of cement and installed by the lessee on leased land should be
regarded as real property for purposes of execution of a judgment against the lessee. The sheriff treated
the machinery as personal property. This Court sustained the sheriff's action.
 Manila Electric Co. v. Central Board of Assessment Appeals
G.R.No. L-47943
Aquino, J.:

FACTS:
Petitioner installed two storage tanks on a lot it leased from Caltex (Phil.) for storing fuel oil for
its power plants. The tanks are made of steel plates welded and assembled on the spot and pipelines
installed on the sides of each tank. They are not attached to the land but merely sit on concrete
foundations. The Board concludes that while the tanks rest or sit on their foundation, the foundation
itself and the walls, dikes and steps, which are integral parts of the tanks, are affixed to the land while
the pipelines are attached to the tanks. The municipal treasurer of Bauan, Batangas, on the basis of an
assessment made by the provincial assessor, required Meralco to pay realty taxes on the two tanks. For
the five-year period from 1970 to 1974, the tax and penalties amounted to P431,703.96. The Board
required Meralco to pay the tax and penalties as a condition for entertaining its appeal from the adverse
decision of the Batangas board of assessment appeals.|||Payment of the realty taxes was upheld by the
Batangas Board of Assessment Appeals and subsequently by the Central Board of Assessment Appeals. A
motion for reconsideration was filed with the Board but the same was denied Hence, the present
petition. Petitioner claims that said oil storage tanks do not fall within any of the kinds of real property
enumerated in Article 415 of the Civil Code. Meralco contends that the said oil storage tanks do not fall
within any of the kinds of real property enumerated in article 415 of the Civil Code and, therefore, they
cannot be categorized as realty by nature, by incorporation, by destination nor by analogy. Stress is laid
on the fact that the tanks are not attached to the land and that they were placed on leased land, not on
the land owned by Meralco.

ISSUE:
WON the storage tanks in question are real property so as to subject them to real property tax.

RULING:
Yes. The said storage tanks are considered as improvements on the land, enhancing its utility
and rendering it useful to the oil industry, which are taxable under the provisions of the Real Property
Tax Code. It is undeniable that the two tanks have been installed with some degree of permanence as
receptacles for the considerable quantities of oil needed by Meralco for its operations. For purposes of
taxation, the term "real property" may include things which should generally be regarded as personal
property. 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.
 Benguet Corp. v. Central Board of Assessment Appeals
G.R. No. 106041
Cruz, J.:

FACTS:
In 1985, Provincial Assessor of Zambales assessed the said properties in issue as taxable
improvements. The assessment was appealed to the Board of Assessment Appeals of the Province of
Zambales. However, the appeal was dismissed mainly on the ground of the petitioner's failure to pay the
realty taxes that fell due during the pendency of the appeal. The petitioner elevated the matter to the
Central Board of Assessment Appeals, one of the herein respondents. In its decision dated March 22,
1990, the Board reversed the dismissal of the appeal but, agreed that the tailings dam and the lands
submerged thereunder shall be subject to realty tax. For purposes of taxation the dam is considered as
real property as it comes within the object mentioned in Article 415 of the New Civil Code, It is a
construction adhered to the soil which cannot be separated or detached without breaking the material
or causing destruction on the land upon which it is attached. The immovable nature of the dam as an
improvement which determines its character as real property, hence taxable under Section 38 of the
Real Property Tax Code. 

ISSUE:
WON the dam in question is real property so as to subject it to real property tax.

RULING:
Yes. The petitioner does not dispute that the tailings dam may be considered realty within the meaning of
Article 415. It insists, however, that the dam cannot be subjected to realty tax as a separate and independent
property because it does not constitute an "assessable improvement" on the mine although a considerable sum
may have been spent in constructing and maintaining it. 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 of which state:

ART. 415.  The following are immovable property.

(1) Lands, buildings and constructions of all kinds adhered to the soil;
xxx xxx xxx
(3) Everything attached to an immovable in a fixed manner, in such a way that it cannot be separated therefrom
without breaking the material or deterioration of the object.

Even without the tailings dam, the petitioner's mining operation can still be carried out because the
primary function of the dam is merely to receive and retain the wastes and water coming from the mine. There is
no allegation that the water coming from the dam is the sole source of water for the mining operation so as to
make the dam an integral part of the mine. In fact, as a result of the construction of the dam, the petitioner can
now impound and recycle water without having to spend for the building of a water reservoir. And as the
petitioner itself points out, even if the petitioner's mine is shut down or ceases operation, the dam may still be
used for irrigation of the surrounding areas.
The Court is convinced that the subject dam falls within the definition of an "improvement" because it is
permanent in character and it enhances both 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.
 Tumulad vs Vicencio
G.R. No. L-30173
Reyes, J.B.L., J.:

FACTS:
On 1 September 1955 defendants-appellants executed a chattel mortgage in favor of plaintiffs-appellees
over their house of strong materials located at No. 550 Int. 3, Quezon Boulevard, Quiapo, Manila, over Lot No. 6-B
and 7-B, Block No. 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 herein mortgage was executed to guarantee a loan of
P4,800.00 received from plaintiffs-appellees, 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. When defendants-appellants 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, plaintiffs-appellees were issued the corresponding certificate of
sale. Thereafter, on 18 April 1956, plaintiffs-appellant commenced Civil Case No. 43073 in the municipal court of
Manila, praying, among other things, that the house be vacated and its possession surrendered to them, and for
defendants-appellants to pay rent of P200.00 monthly from 27 March 1956 up to the time the possession is
surrendered. The Trial Court ruled in favor of plaintiffs-appellants. 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 Real Estate
Mortgage.

ISSUE:
WON the house, a real property can be the subject matter in a chattel mortgage.

RULING:
Yes. This Court stated that "it is undeniable that the parties to a contract may by agreement treat as
personal property that which by nature would be real property’. It was so expressly stated and intended by the
parties to the chattel mortgage that the house would be the subject matter. Because of this, he doctrine of
estoppel therefore applies to the herein defendants-appellants, having treated the subject house as personalty.

“In the contract now before Us, the house on rented land is not only expressly designated as Chattel Mortgage; it
specifically provides that "the mortgagor ... voluntarily CEDES, SELLS and TRANSFERS by way of Chattel
Mortgage23 the property together with its leasehold rights over the lot on which it is constructed and
participation ..." 24 Although there is no specific statement referring to the subject house as personal property, yet
by ceding, selling or transferring a property by way of chattel mortgage defendants-appellants could only have
meant to convey the house as chattel, or at least, intended to treat the same as such, so that they should not now
be allowed to make an inconsistent stand by claiming otherwise. Moreover, the subject house stood on a rented lot
to which defendats-appellants merely had a temporary right as lessee, and although this cannot in itself alone
determine the status of the property, it does so when combined with other factors to sustain the interpretation that
the parties, particularly the mortgagors, intended to treat the house as personalty. Finally unlike in the Iya cases,
Lopez vs. Orosa, Jr. and Plaza Theatre, Inc. 25 and Leung Yee vs. F. L. Strong Machinery and Williamson, 26 wherein
third persons assailed the validity of the chattel mortgage,27 it is the defendants-appellants themselves, as
debtors-mortgagors, who are attacking the validity of the chattel mortgage in this case. The doctrine of estoppel
therefore applies to the herein defendants-appellants, having treated the subject house as personalty”.
 NOVAI v. Republic
G.R. No. 177168
Brion, J.:

FACTS:
TCT No. T-15387,5 issued in NOVAI's name, covers a 475,009 square-meter parcel of land (the property)6
situated inside the former Fort Andres Bonifacio Military Reservation (FBMR) in Taguig, Metro Manila. The
property previously formed part of a larger 15,812,684 square-meter parcel of land situated at the former Fort
William McKinley, Rizal, which was covered by TCT No. 61524 issued in the name of the Republic of the Philippines.

On July 12, 1957, then President Carlos P. Garcia issued Proclamation No. 4237 "reserving for military
purposes certain parcels of the public domain situated in the municipalities of Pasig, Taguig, Parañaque, province
of Rizal, and Pasay City," which included the 15,812,684 square-meter parcel of land covered by TCT No. 61524.

On September 29, 1965, then Pres. Diosdado Macapagal issued Proclamation No. 4618 which excluded
from Fort McKinley "a certain portion of land embraced therein, situated in the municipalities of Taguig and
Parañaque, Province of Rizal, and Pasay City," with an area of 2,455,310 square meters, and declared the excluded
area as "AFP Officers' Village" to be disposed of under the provisions of Republic Act Nos. 274 9 and 730. The
property is within the 537,520 square-meter parcel of land reserved in VFP's favor.

On November 15, 1991, the property was the subject of a Deed of Sale 12between the Republic of the
Philippines, through former Land Management Bureau (LMB) Director Abelardo G. Palad, Jr., (Dir. Palad) and
petitioner NOVAI. The deed of sale was subsequently registered and from which TCT No. T-15387 was issued in
NOVAI's name
.
The Republic contends that the land covered in the Deed of Sale is part of a military reservation, thus part
of the State’s public domain, and thus cannot be subject of a Deed of Sale and unregisterable. NOVAI, on the other
hand contends that the Deed of Sale is valid and that by virtue of Proclamation No. 461, such was removed from
the public domain.

ISSUE:
WON the land in question is part of the public domain.

RULING:
Yes. While the parties disagree on the character and nature of the property at the time of the questioned
sale, they agree, however, that the property formed part of the FBMR - a military reservation belonging to the
public domain. We note that the FBMR has been the subject of several presidential proclamations and statues
issued subsequent to Proclamation No. 423, which either removed or reserved for specific public or quasi-public
use or purpose certain of its portions. Section 83 of C.A. No. 141 defines public domain lands classified as
reservations for public and quasi-public uses as "any tract or tracts of land of the public domain" which the
President, by proclamation and upon recommendation of the Secretary of Agriculture and Natural Resources, may
designate "as reservations for the use of the Republic of the Philippines or any of its branches, or of the inhabitants
thereof or "for quasi-public uses or purposes when the public interest requires it." 34 Under Section 88 of the same
Act, these "reserved tract or tracts of lands shall be non-alienable and shall not be subject to occupation, entry,
sale, lease or other disposition until again declared alienable under the provisions of [CA No. 141] or by
proclamation of the President.
 MIAA v. Pasay
G.R. No. 163072
Carpio, J.:

FACTS:
Petitioner Manila International Airport Authority (MIAA) operates and administers the Ninoy Aquino
International Airport (NAIA) Complex under Executive Order No. 903 (EO 903), 3 otherwise known as the Revised
Charter of the Manila International Airport Authority. EO 903 was issued on 21 July 1983 by then President
Ferdinand E. Marcos. Under Sections 34 and 225 of EO 903, approximately 600 hectares of land, including the
runways, the airport tower, and other airport buildings, were transferred to MIAA. The NAIA Complex is located
along the border between Pasay City and Parañaque City.

On 28 August 2001, MIAA received Final Notices of Real Property Tax Delinquency from the City of Pasay
for the taxable years 1992 to 2001.

On 24 August 2001, the City of Pasay, through its City Treasurer, issued notices of levy and warrants of
levy for the NAIA Pasay properties. MIAA received the notices and warrants of levy on 28 August 2001. Thereafter,
the City Mayor of Pasay threatened to sell at public auction the NAIA Pasay properties if the delinquent real
property taxes remain unpaid.

On 29 October 2001, MIAA filed with the Court of Appeals a petition for prohibition and injunction with
prayer for preliminary injunction or temporary restraining order. The petition sought to enjoin the City of Pasay
from imposing real property taxes on, levying against, and auctioning for public sale the NAIA Pasay properties.

On 30 October 2002, the Court of Appeals dismissed the petition and upheld the power of the City of
Pasay to impose and collect realty taxes on the NAIA Pasay properties. MIAA filed a motion for reconsideration,
which the Court of Appeals denied.

ISSUE:
WON the NAIA Pasay properties of MIAA are exempt from real property tax.

RULING:
Yes. Under the Local Government Code (Sec. 193 and 234), Real property owned by the Republic of the
Philippines or any of its political subdivisions except when the beneficial use thereof has been granted, for
consideration or otherwise to a taxable person is exempt from real property tax.
It has already been ruled in a previous case (Manila International Airport Authority v. Court of Appeals 6
(2006 MIAA case). To summarize, MIAA is not a government-owned or controlled corporation under Section 2(13)
of the Introductory Provisions of the Administrative Code because it is not organized as a stock or non-stock
corporation. Neither is MIAA a government-owned or controlled corporation under Section 16, Article XII of the
1987 Constitution because MIAA is not required to meet the test of economic viability. MIAA is a government
instrumentality vested with corporate powers and performing essential public services pursuant to Section 2(10) of
the Introductory Provisions of the Administrative Code. As a government instrumentality, MIAA is not subject to
any kind of tax by local governments under Section 133(o) of the Local Government Code. The exception to the
exemption in Section 234(a) does not apply to MIAA because MIAA is not a taxable entity under the Local
Government Code. Such exception applies only if the beneficial use of real property owned by the Republic is given
to a taxable entity.