PUNSALAN vs.

VDA. DE LACSAMANA

G.R. No. 55729
March 28, 1983

FACTS:
1. Petitioner Antonio Punsalan, Jr was the initial registered owner of a parcel of land consisting
of 340 square meters situated in Bamban, Tarlac.

2. In 1963, petitioner mortgaged said land to respondent PNB (Tarlac Branch) in the amount of
P10,000.00 but for failure to pay said amount.

3. On December 16, 1970, the property was foreclosed. Respondent PNB (Tarlac Branch) was
the highest bidder in said foreclosure proceedings.


4. In 1974, while the property was still in the possession of Punsalan and with the
acquiescence of respondent PNB (Tarlac Branch), Punsalan constructed a warehouse on
said property.

5. Starting January 1975, petitioner then leased the warehouse to one Hermogenes Sibal for a
period of 10 years.

6. In 1977, respondent PNB (Tarlac Branch) secured title to the property.

7. On July 26, 1978, a Deed of Sale was executed between respondent PNB (Tarlac Branch)
and respondent Lacsamana over the property.

8. On July 31, 1978, said Deed of Sale was amended particularly to include in the sale the
building and improvements on the property.

9. By virtue of said instruments, respondent Lacsamana secured title over the property in her
name (TCT No. 173744) as well as separate tax declarations for the land and building.

10. On November 22, 1979, petitioner Punsalan commenced suit for "Annulment of Deed of
Sale with Damages" against respondents PNB and Lacsamana before respondent CFI Rizal.

Petitioner prayed that:
a. the Deed of Sale of the building in favor of respondent Lacsamana be declared null
and void; and
b. damages in the total sum of P230,000.00, more or less, be awarded to him.

11. Respondent PNB filed a Motion to Dismiss on the ground that venue was improperly laid.
The building was real property under article 415(1) of the New Civil Code; thus Section 2(a)
of Rule 4 should apply.

Section 2, Rule 4 of the New Rules of Court provide that real action affecting real property
must be tried in the province where the property or any part thereof lies.

12. Opposing said Motion to Dismiss, Petitioner Punsalan contended that the action for
annulment of deed of sale with damages is in the nature of a personal action, the personal
action seeks not to recover neither the title nor possession of the property.

The personal action seeks to compel payment of damages, which is not an action affecting
title to real property.

ISSUES:
1. WON the warehouse is immovable property.

2. WON the action is a real action.

HELD:
1. Yes. The warehouse claimed to be owned by petitioner is an immovable or real property as
provided in article 415(1) of the Civil Code.

2. Yes. It is a real action and not personal action; thus, action is to be instituted in the province
where the property lies.

RATIO:

1. Buildings are always immovable under the Code.

A building treated separately from the land on which it stood is immovable property.

The mere fact that the parties to a contract seem to have dealt with it separate and apart from the
land on which it stood in no wise changed its character as immovable property.

2. While it is true that petitioner does not directly seek the recovery of title or possession of the
property in question, his action for annulment of sale and his claim for damages are closely
intertwined with the issue of ownership of the building which, under the law, is considered
immovable property.

The recovery of which is petitioner's primary objective.

The prevalent doctrine is that an action for the annulment or rescission of a sale of real property
does not operate to efface the fundamental and prime objective and nature of the case, which is
to recover said real property.


















MINDANAO BUS COMPANY vs.
THE CITY ASSESSOR & TREASURER and the
BOARD OF TAX APPEALS of Cagayan de Oro City

G.R. No. L-17870
September 29, 1962

FACTS:

Petitioner is a public utility solely engaged in transporting passengers and cargoes by motor
trucks, over its authorized lines in the Island of Mindanao.

Machineries sought to be assessed by the respondent as real properties are the following:
Hobart Electric Welder Machine
Storm Boring Machine
Lathe machine with motor
Black and Decker Grinder
PEMCO Hydraulic Press
Battery charger (Tungar charge machine); and
D-Engine Waukesha-M-Fuel
These machineries are sitting on cement or wooden platforms.

That petitioner is the owner of the land where it maintains and operates a garage for its TPU
motor trucks; a repair shop; blacksmith and carpentry shops.

The Court of Tax Appeals held that said tools, equipments or machineries are immovable taxable
real properties based on paragraph 5 of Article 415 of the New Civil Code, and holding that
pursuant thereto the movable equipments are taxable realties, by reason of their being intended
or destined for use in an industry.

ISSUE:
WON the machineries in question fall under paragraph 5 of Art. 415 of the NCC

HELD:

No. SC held that the equipments in question are not absolutely essential to the petitioner's
transportation business.

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."

The tools and equipments in question in this instant case are, by their nature, not essential and
principle municipal elements of petitioner's business of transporting passengers and cargoes by
motor trucks. They are merely incidentals acquired as movables and used only for expediency
to facilitate and/or improve its service. Even without such tools and equipments, its business may
be carried on.

Also, the equipments in question are destined only to repair or service the transportation
business, which is not carried on in a building or permanently on a piece of land, as demanded by
the law. Said equipments may not, therefore, be deemed real property.


CONRADO P. NAVARRO
vs.
RUFINO G. PINEDA, RAMONA REYES, ET AL.,

9 SCRA 631 (G.R. No. L-18456)
November 30, 1963

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
wouldnt 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 especially in execution proceedings, the house is considered as immovable
property.


















BERKENKOTTER vs.
CU UNJIENG e HIJOS

61 Phil 663 (No. 41643)
July 31, 1935

FACTS:
The Mabalacat Sugar Co., Inc., owner of the sugar central situated in Mabalacat, Pampanga,
obtained from Cu Unjieng e Hijos, a loan secured by a first mortgage constituted on two
parcels and land "with all its buildings, improvements, sugarcane mill, steel railway, telephone
line, apparatus, utensils and whatever forms part or is necessary complement of said sugarcane
mill, steel railway, telephone line, now existing or that may in the future exist in 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 P100,000.00

In order to carry out this plan, A. Green, president of said corporation, proposed to plaintiff, B.H.,
Berkenkotter, to advance the necessary amount for the purchase of said machinery and
equipment.


ISSUES:
Whether or not, the lower court erred in declaring that the additional machinery and equipment as
improvement can be permanently attached to a mortgage of the sugar central.

HELD:

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.




















DAVAO SAW MILL CO. vs.
CASTILLO

G.R. No. 40411
August 07, 1935

FACTS:

1. The Davao Saw Mill Co. has operated a sawmill in the sitio of Maa, barrio of Tigatu,
municipality of Davao, Province of Davao.

2. The land upon which the sawmill company's business was conducted belonged to another
person.

On the said land the sawmill company erected a building which housed the machinery used by
the sawmill company.

3. 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 (sawmill
company) shall pass to the exclusive ownership of the party of the first part
(landowner) without any obligation on the landowners part to pay any
amount for said improvements and buildings.

"Also, in the event the party of the second part (sawmill company) should
leave or abandon the land leased before the time herein stipulated, the
improvements and buildings shall likewise pass to the ownership of the party
of the first part (landowner) as though the time agreed upon had expired:

Provided, however, That the machineries and accessories are not included
in the improvements which will pass to the party of the first part (landowner)
on the expiration or abandonment of the land leased."

4. Leading to the facts of this case, it should further be noted that the Davao Saw Mill Co. has,
on a number of occasions, treated the machinery as personal property by executing chattel
mortgages in favor of third persons.

5. In separate action, Davao Light & Power Co was the plaintiff and Davao Saw Mill Co. was the
defendant.

6. In that separate action, a judgment was rendered in favor of Davao Light&Power, a writ of
execution was issued and the machinery now in question were levied upon as personal by the
sheriff.

7. Davao Saw Mill contends that the machinery are real property. They cite Article 334 (1) of the
Civil Code, which provides that

"...real property consists of

1. Land, buildings, roads and constructions of all kinds adhering to
the soil

8. Davao Light&Power emphasizes, on the other hand, Article 334 (5) of the Civil Code, which
provides that

"...real property consists of

5. Machinery, liquid containers, instruments or implements intended
by the owner of any building or land for use in connection with any
industry or trade being carried on therein and which are expressly
adapted to meet the requirements of such trade or industry.

ISSUES:
1. WON the machinery used by the sawmill company is personal/movable property.

HELD:
1. Yes. It is personal/movable property. It is not real/immovable property.

RATIO:
1. Machinery which is movable in its nature only becomes immobilized when placed in a plant by
the owner of the property or plant.

Such result would not be accomplished, therefore, by the placing of machinery in a plant by a
tenant or a usufructuary or any person having only a temporary right.