G.R. No.

L-11658

February 15, 1918

LEUNG YEE, plaintiff-appellant,

vs.
FRANK L. STRONG MACHINERY COMPANY and J. G.
WILLIAMSON, defendants-appellees.
Booram and Mahoney for appellant.
Williams, Ferrier and SyCip for appellees.
CARSON, J.:
The "Compaia Agricola Filipina" bought a considerable quantity of ricecleaning machinery company from the defendant machinery company, and
executed a chattel mortgage thereon to secure payment of the purchase
price. It included in the mortgage deed the building of strong materials in
which the machinery was installed, without any reference to the land on
which it stood. The indebtedness secured by this instrument not having
been paid when it fell due, the mortgaged property was sold by the sheriff,
in pursuance of the terms of the mortgage instrument, and was bought in
by the machinery company. The mortgage was registered in the chattel
mortgage registry, and the sale of the property to the machinery company
in satisfaction of the mortgage was annotated in the same registry on
December 29, 1913.
A few weeks thereafter, on or about the 14th of January, 1914, the
"Compaia Agricola Filipina" executed a deed of sale of the land upon
which the building stood to the machinery company, but this deed of sale,
although executed in a public document, was not registered. This deed
makes no reference to the building erected on the land and would appear
to have been executed for the purpose of curing any defects which might
be found to exist in the machinery company's title to the building under
the sheriff's certificate of sale. The machinery company went into
possession of the building at or about the time when this sale took place,
that is to say, the month of December, 1913, and it has continued in
possession ever since.
At or about the time when the chattel mortgage was executed in favor of
the machinery company, the mortgagor, the "Compaia Agricola Filipina"
executed another mortgage to the plaintiff upon the building, separate and
apart from the land on which it stood, to secure payment of the balance of
its indebtedness to the plaintiff under a contract for the construction of the
building. Upon the failure of the mortgagor to pay the amount of the

indebtedness secured by the mortgage, the plaintiff secured judgment for

that amount, levied execution upon the building, bought it in at the
sheriff's sale on or about the 18th of December, 1914, and had the sheriff's
certificate of the sale duly registered in the land registry of the Province of
Cavite.
At the time when the execution was levied upon the building, the
defendant machinery company, which was in possession, filed with the
sheriff a sworn statement setting up its claim of title and demanding the
release of the property from the levy. Thereafter, upon demand of the
sheriff, the plaintiff executed an indemnity bond in favor of the sheriff in
the sum of P12,000, in reliance upon which the sheriff sold the property at
public auction to the plaintiff, who was the highest bidder at the sheriff's
sale.
This action was instituted by the plaintiff to recover possession of the
building from the machinery company.
The trial judge, relying upon the terms of article 1473 of the Civil Code,
gave judgment in favor of the machinery company, on the ground that the
company had its title to the building registered prior to the date of registry
of the plaintiff's certificate.
Article 1473 of the Civil Code is as follows:
If the same thing should have been sold to different vendees, the
ownership shall be transfer to the person who may have the first
taken possession thereof in good faith, if it should be personal
property.
Should it be real property, it shall belong to the person acquiring it
who first recorded it in the registry.
Should there be no entry, the property shall belong to the person
who first took possession of it in good faith, and, in the absence
thereof, to the person who presents the oldest title, provided there
is good faith.
The registry her referred to is of course the registry of real property, and it
must be apparent that the annotation or inscription of a deed of sale of
real property in a chattel mortgage registry cannot be given the legal
effect of an inscription in the registry of real property. By its express terms,
the Chattel Mortgage Law contemplates and makes provision for

mortgages of personal property; and the sole purpose and object of the
chattel mortgage registry is to provide for the registry of "Chattel
mortgages," that is to say, mortgages of personal property executed in the
manner and form prescribed in the statute. The building of strong
materials in which the rice-cleaning machinery was installed by the
"Compaia Agricola Filipina" was real property, and the mere fact that the
parties seem to have dealt with it separate and apart from the land on
which it stood in no wise changed its character as real property. It follows
that neither the original registry in the chattel mortgage of the building
and the machinery installed therein, not the annotation in that registry of
the sale of the mortgaged property, had any effect whatever so far as the
building was concerned.
We conclude that the ruling in favor of the machinery company cannot be
sustained on the ground assigned by the trial judge. We are of opinion,
however, that the judgment must be sustained on the ground that the
agreed statement of facts in the court below discloses that neither the
purchase of the building by the plaintiff nor his inscription of the sheriff's
certificate of sale in his favor was made in good faith, and that the
machinery company must be held to be the owner of the property under
the third paragraph of the above cited article of the code, it appearing that
the company first took possession of the property; and further, that the
building and the land were sold to the machinery company long prior to
the date of the sheriff's sale to the plaintiff.
It has been suggested that since the provisions of article 1473 of the Civil
Code require "good faith," in express terms, in relation to "possession" and
"title," but contain no express requirement as to "good faith" in relation to
the "inscription" of the property on the registry, it must be presumed that
good faith is not an essential requisite of registration in order that it may
have the effect contemplated in this article. We cannot agree with this
contention. It could not have been the intention of the legislator to base
the preferential right secured under this article of the code upon an
inscription of title in bad faith. Such an interpretation placed upon the
language of this section would open wide the door to fraud and collusion.
The public records cannot be converted into instruments of fraud and
oppression by one who secures an inscription therein in bad faith. The
force and effect given by law to an inscription in a public record
presupposes the good faith of him who enters such inscription; and rights
created by statute, which are predicated upon an inscription in a public
registry, do not and cannot accrue under an inscription "in bad faith," to
the benefit of the person who thus makes the inscription.

Construing the second paragraph of this article of the code, the supreme
court of Spain held in its sentencia of the 13th of May, 1908, that:
This rule is always to be understood on the basis of the good faith
mentioned in the first paragraph; therefore, it having been found
that the second purchasers who record their purchase had
knowledge of the previous sale, the question is to be decided in
accordance with the following paragraph. (Note 2, art. 1473, Civ.
Code, Medina and Maranon [1911] edition.)
Although article 1473, in its second paragraph, provides that the
title of conveyance of ownership of the real property that is first
recorded in the registry shall have preference, this provision must
always be understood on the basis of the good faith mentioned in
the first paragraph; the legislator could not have wished to strike it
out and to sanction bad faith, just to comply with a mere formality
which, in given cases, does not obtain even in real disputes
between third persons. (Note 2, art. 1473, Civ. Code, issued by the
publishers of the La Revista de los Tribunales, 13th edition.)
The agreed statement of facts clearly discloses that the plaintiff, when he
bought the building at the sheriff's sale and inscribed his title in the land
registry, was duly notified that the machinery company had bought the
building from plaintiff's judgment debtor; that it had gone into possession
long prior to the sheriff's sale; and that it was in possession at the time
when the sheriff executed his levy. The execution of an indemnity bond by
the plaintiff in favor of the sheriff, after the machinery company had filed
its sworn claim of ownership, leaves no room for doubt in this regard.
Having bought in the building at the sheriff's sale with full knowledge that
at the time of the levy and sale the building had already been sold to the
machinery company by the judgment debtor, the plaintiff cannot be said to
have been a purchaser in good faith; and of course, the subsequent
inscription of the sheriff's certificate of title must be held to have been
tainted with the same defect.
Perhaps we should make it clear that in holding that the inscription of the
sheriff's certificate of sale to the plaintiff was not made in good faith, we
should not be understood as questioning, in any way, the good faith and
genuineness of the plaintiff's claim against the "Compaia Agricola
Filipina." The truth is that both the plaintiff and the defendant company
appear to have had just and righteous claims against their common debtor.
No criticism can properly be made of the exercise of the utmost diligence
by the plaintiff in asserting and exercising his right to recover the amount
of his claim from the estate of the common debtor. We are strongly inclined

to believe that in procuring the levy of execution upon the factory building
and in buying it at the sheriff's sale, he considered that he was doing no
more than he had a right to do under all the circumstances, and it is highly
possible and even probable that he thought at that time that he would be
able to maintain his position in a contest with the machinery company.
There was no collusion on his part with the common debtor, and no
thought of the perpetration of a fraud upon the rights of another, in the
ordinary sense of the word. He may have hoped, and doubtless he did
hope, that the title of the machinery company would not stand the test of
an action in a court of law; and if later developments had confirmed his
unfounded hopes, no one could question the legality of the propriety of the
course he adopted.

which the courts always indulge in the absence of proof to the contrary.
"Good faith, or the want of it, is not a visible, tangible fact that can be seen
or touched, but rather a state or condition of mind which can only be
judged of by actual or fancied tokens or signs." (Wilder vs. Gilman, 55 Vt.,
504, 505; Cf. Cardenas Lumber Co. vs. Shadel, 52 La. Ann., 2094-2098;
Pinkerton Bros. Co. vs. Bromley, 119 Mich., 8, 10, 17.)

But it appearing that he had full knowledge of the machinery company's

claim of ownership when he executed the indemnity bond and bought in
the property at the sheriff's sale, and it appearing further that the
machinery company's claim of ownership was well founded, he cannot be
said to have been an innocent purchaser for value. He took the risk and
must stand by the consequences; and it is in this sense that we find that
he was not a purchaser in good faith.

G.R. No. L-55729 March 28, 1983

One who purchases real estate with knowledge of a defect or lack of title in
his vendor cannot claim that he has acquired title thereto in good faith as
against the true owner of the land or of an interest therein; and the same
rule must be applied to one who has knowledge of facts which should have
put him upon such inquiry and investigation as might be necessary to
acquaint him with the defects in the title of his vendor. A purchaser cannot
close his eyes to facts which should put a reasonable man upon his guard,
and then claim that he acted in good faith under the belief that there was
no defect in the title of the vendor. His mere refusal to believe that such
defect exists, or his willful closing of his eyes to the possibility of the
existence of a defect in his vendor's title, will not make him an innocent
purchaser for value, if afterwards develops that the title was in fact
defective, and it appears that he had such notice of the defects as would
have led to its discovery had he acted with that measure of precaution
which may reasonably be acquired of a prudent man in a like situation.
Good faith, or lack of it, is in its analysis a question of intention; but in
ascertaining the intention by which one is actuated on a given occasion,
we are necessarily controlled by the evidence as to the conduct and
outward acts by which alone the inward motive may, with safety, be
determined. So it is that "the honesty of intention," "the honest lawful
intent," which constitutes good faith implies a "freedom from knowledge
and circumstances which ought to put a person on inquiry," and so it is
that proof of such knowledge overcomes the presumption of good faith in

We conclude that upon the grounds herein set forth the disposing part of
the decision and judgment entered in the court below should be affirmed
with costs of this instance against the appellant. So ordered.

ANTONIO PUNSALAN, JR., petitioner,

vs.
REMEDIOS VDA. DE LACSAMANA and THE HONORABLE JUDGE
RODOLFO A. ORTIZ, respondents.
Benjamin S. Benito & Associates for petitioner.
Expedito Yummul for private respondent.

MELENCIO-HERRERA, J.:
The sole issue presented by petitioner for resolution is whether or not
respondent Court erred in denying the Motion to Set Case for Pre-trial with
respect to respondent Remedios Vda. de Lacsamana as the case had been
dismissed on the ground of improper venue upon motion of co-respondent
Philippine National Bank (PNB).
It appears that petitioner, Antonio Punsalan, Jr., was the former registered
owner of a parcel of land consisting of 340 square meters situated in
Bamban, Tarlac. 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, the property was foreclosed on December 16, 1970. Respondent
PNB (Tarlac Branch) was the highest bidder in said foreclosure proceedings.
However, the bank secured title thereto only on December 14, 1977.

In the meantime, in 1974, while the properly was still in the alleged
possession of petitioner and with the alleged acquiescence of respondent
PNB (Tarlac Branch), and upon securing a permit from the Municipal Mayor,
petitioner constructed a warehouse on said property. Petitioner declared
said warehouse for tax purposes for which he was issued Tax Declaration
No. 5619. Petitioner then leased the warehouse to one Hermogenes Sibal
for a period of 10 years starting January 1975.
On July 26, 1978, a Deed of Sale was executed between respondent PNB
(Tarlac Branch) and respondent Lacsamana over the property. This contract
was amended on July 31, 1978, particularly to include in the sale, the
building and improvement thereon. 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. 1
On November 22, 1979, petitioner commenced suit for "Annulment of
Deed of Sale with Damages" against herein respondents PNB and
Lacsamana before respondent Court of First Instance of Rizal, Branch XXXI,
Quezon City, essentially impugning the validity of the sale of the building
as embodied in the Amended Deed of Sale. In this connection, petitioner
alleged:
xxx xxx xxx
22. That defendant, Philippine National Bank, through its
Branch Manager ... by virtue of the request of defendant ...
executed a document dated July 31, 1978, entitled
Amendment to Deed of Absolute Sale ... wherein said
defendant bank as Vendor sold to defendant Lacsamana
the building owned by the plaintiff under Tax Declaration
No. 5619, notwithstanding the fact that said building is not
owned by the bank either by virtue of the public auction
sale conducted by the Sheriff and sold to the Philippine
National Bank or by virtue of the Deed of Sale executed by
the bank itself in its favor on September 21, 1977 ...;
23. That said defendant bank fraudulently mentioned ...
that the sale in its favor should likewise have included the
building, notwithstanding no legal basis for the same and
despite full knowledge that the Certificate of Sale executed
by the sheriff in its favor ... only limited the sale to the
land, hence, by selling the building which never became

the property of defendant, they have violated the principle

against 'pactum commisorium'.
Petitioner prayed that the Deed of Sale of the building in favor of
respondent Lacsamana be declared null and void and that damages in the
total sum of P230,000.00, more or less, be awarded to him. 2
In her Answer filed on March 4, 1980,-respondent Lacsamana averred the
affirmative defense of lack of cause of action in that she was a purchaser
for value and invoked the principle in Civil Law that the "accessory follows
the principal". 3
On March 14, 1980, respondent PNB filed a Motion to Dismiss on the
ground that venue was improperly laid considering that the building was
real property under article 415 (1) of the New Civil Code and therefore
section 2(a) of Rule 4 should apply. 4
Opposing said Motion to Dismiss, petitioner contended that the action for
annulment of deed of sale with damages is in the nature of a personal
action, which seeks to recover not the title nor possession of the property
but to compel payment of damages, which is not an action affecting title to
real property.
On April 25, 1980, respondent Court granted respondent PNB's Motion to
Dismiss as follows:
Acting upon the 'Motion to Dismiss' of the defendant
Philippine National Bank dated March 13, 1980, considered
against the plaintiff's opposition thereto dated April 1,
1980, including the reply therewith of said defendant, this
Court resolves to DISMISS the plaintiff's complaint for
improper venue considering that the plaintiff's complaint
which seeks for the declaration as null and void, the
amendment to Deed of Absolute Sale executed by the
defendant Philippine National Bank in favor of the
defendant Remedios T. Vda. de Lacsamana, on July 31,
1978, involves a warehouse allegedly owned and
constructed by the plaintiff on the land of the defendant
Philippine National Bank situated in the Municipality of
Bamban, Province of Tarlac, which warehouse is an
immovable property pursuant to Article 415, No. 1 of the
New Civil Code; and, as such the action of the plaintiff is a
real action affecting title to real property which, under

Section 2, Rule 4 of the New Rules of Court, must be tried

in the province where the property or any part thereof
lies. 5
In his Motion for Reconsideration of the aforestated Order, petitioner
reiterated the argument that the action to annul does not involve
ownership or title to property but is limited to the validity of the deed of
sale and emphasized that the case should proceed with or without
respondent PNB as respondent Lacsamana had already filed her Answer to
the Complaint and no issue on venue had been raised by the latter.
On September 1, 1980,.respondent Court denied reconsideration for lack of
merit.
Petitioner then filed a Motion to Set Case for Pre-trial, in so far as
respondent Lacsamana was concerned, as the issues had already been
joined with the filing of respondent Lacsamana's Answer.

Respondent Court, therefore, did not err in dismissing the case on the
ground of improper venue (Section 2, Rule 4) 10, which was timely raised
(Section 1, Rule 16) 11.
Petitioner's other contention that the case should proceed in so far as
respondent Lacsamana is concerned as she had already filed an Answer,
which did not allege improper venue and, therefore, issues had already
been joined, is likewise untenable. Respondent PNB is an indispensable
party as the validity of the Amended Contract of Sale between the former
and respondent Lacsamana is in issue. It would, indeed, be futile to
proceed with the case against respondent Lacsamana alone.
WHEREFORE, the petition is hereby denied without prejudice to the refiling
of the case by petitioner Antonio Punsalan, Jr. in the proper forum.
Costs against petitioner.
SO ORDERED.

In the Order of November 10, 1980 respondent Court denied said Motion to
Set Case for Pre-trial as the case was already dismissed in the previous
Orders of April 25, 1980 and September 1, 1980.
Hence, this Petition for Certiorari, to which we gave due course.
We affirm respondent Court's Order denying the setting for pre-trial.
The warehouse claimed to be owned by petitioner is an immovable or real
property as provided in article 415(l) of the Civil Code. 6 Buildings are
always immovable under the Code. 7 A building treated separately from the
land on which it stood is immovable property and 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. 8
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. It is a real
action. 9

G.R. No. L-20329

March 16, 1923

THE STANDARD OIL COMPANY OF NEW YORK, petitioner,

vs.
JOAQUIN JARAMILLO, as register of deeds of the City of
Manila, respondent.
Ross, Lawrence and Selph for petitioner.
City Fiscal Revilla and Assistant City Fiscal Rodas for respondent.
STREET, J.:
This cause is before us upon demurrer interposed by the respondent,
Joaquin Jaramillo, register of deeds of the City of Manila, to an original
petition of the Standard Oil Company of New York, seeking a
peremptory mandamusto 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.
It appears from the petition that 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,

purporting to convey to the petitioner by way of mortgage both the

leasehold interest in said lot and the building which stands thereon.
The clauses in said document describing the property intended to be thus
mortgage are expressed in the following words:
Now, therefore, the mortgagor hereby conveys and transfer to the
mortgage, by way of mortgage, the following described personal
property, situated in the City of Manila, and now in possession of
the mortgagor, to wit:
(1) All of the right, title, and interest of the mortgagor in and to the
contract of lease hereinabove referred to, and in and to the
premises the subject of the said lease;
(2) The building, property of the mortgagor, situated on the
aforesaid leased premises.
After said document had been duly acknowledge and delivered, the
petitioner caused the same to be presented to the respondent, 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, the respondent was of the opinion that it
was not a 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.
We are of the opinion that the position taken by the respondent is
untenable; and it is his duty to accept the proper fee and place the
instrument on record. The duties of a register of deeds in respect to the
registration of chattel mortgage are of a purely ministerial character; and
no provision of law can be cited which confers upon him any judicial or
quasi-judicial power to determine the nature of any document of which
registration is sought as a chattel mortgage.
The original provisions touching this matter are contained in section 15 of
the Chattel Mortgage Law (Act No. 1508), as amended by Act No. 2496; but
these have been transferred to section 198 of the Administrative Code,
where they are now found. There is nothing in any of these provisions
conferring upon the register of deeds any authority whatever in respect to
the "qualification," as the term is used in Spanish law, of chattel mortgage.
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. Registration adds nothing to the
instrument, considered as a source of title, and affects nobody's rights
except as a specifies of notice.
Articles 334 and 335 of the Civil Code supply no absolute criterion for
discriminating between real property and personal property for purpose 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 by 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 this court, in which the proper classification of one thing or
another as real or personal property may be said to be doubtful.
The point submitted to us in this case was determined on September 8,
1914, in an administrative ruling promulgated by the Honorable James A.
Ostrand, now a Justice of this Court, but acting at that time in the capacity
of Judge of the fourth branch of the Court of First Instance of the Ninth
Judicial District, in the City of Manila; and little of value can be here added
to the observations contained in said ruling. We accordingly quote
therefrom as follows:
It is unnecessary here to determine whether or not the property
described in the document in question is real or personal; the
discussion may be confined to the point as to whether a register of
deeds has authority to deny the registration of a document
purporting to be a chattel mortgage and executed in the manner
and form prescribed by the Chattel Mortgage Law.
Then, after quoting section 5 of the Chattel Mortgage Law (Act No. 1508),
his Honor continued:
Based principally upon the provisions of section quoted the
Attorney-General of the Philippine Islands, in an opinion dated
August 11, 1909, held that a register of deeds has no authority to
pass upon the capacity of the parties to a chattel mortgage which
is presented to him for record. A fortiori a register of deeds can

have no authority to pass upon the character of the property

sought to be encumbered by a chattel mortgage. Of course, if the
mortgaged property is real instead of personal the chattel
mortgage would no doubt be held ineffective as against third
parties, but this is a question to be determined by the courts of
justice and not by the register of deeds.
In Leung Yee vs. Frank L. Strong Machinery Co. and Williamson (37 Phil.,
644), this court held that where the interest conveyed is of the nature of
real, property, the placing of the document on record in the chattel
mortgage register is a futile act; but that decision is not decisive of the
question now before us, which has reference to the function of the register
of deeds in placing the document on record.
In the light of what has been said it becomes unnecessary for us to pass
upon the point whether the interests conveyed in the instrument now in
question are real or personal; and we declare it to be the duty of the
register of deeds to accept the estimate placed upon the document by the
petitioner and to register it, upon payment of the proper fee.
The demurrer is overruled; and unless within the period of five days from
the date of the notification hereof, the respondent shall interpose a
sufficient answer to the petition, the writ of mandamus will be issued, as
prayed, but without costs. So ordered.
G.R. No. L-40411

August 7, 1935

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

vs.
APRONIANO G. CASTILLO and DAVAO LIGHT & POWER CO.,
INC., defendants-appellees.
Arsenio Suazo and Jose L. Palma Gil and Pablo Lorenzo and Delfin Joven for
appellant.
J.W. Ferrier for appellees.
MALCOLM, J.:
The issue in this case, as announced in the opening sentence of the
decision in the trial court and as set forth by counsel for the parties on
appeal, involves the determination of the nature of the properties
described in the complaint. The trial judge found that those properties

were personal in nature, and as a consequence absolved the defendants

from the complaint, with costs against the plaintiff.
The Davao Saw Mill Co., Inc., is the holder of a lumber concession from the
Government of the Philippine Islands. It has operated a sawmill in
the sitio of Maa, barrio of Tigatu, municipality of Davao, Province of Davao.
However, the land upon which the business was conducted belonged to
another person. On the land the sawmill company erected a building which
housed the machinery used by it. Some of the implements thus used were
clearly personal property, the conflict concerning machines which were
placed and mounted on foundations of cement. In the contract of lease
between the sawmill company and the owner of the land there appeared
the following provision:
That on the expiration of the period agreed upon, all the
improvements and buildings introduced and erected by the party
of the second part shall pass to the exclusive ownership of the
party of the first part without any obligation on its part to pay any
amount for said improvements and buildings; also, in the event the
party of the second part should leave or abandon the land leased
before the time herein stipulated, the improvements and buildings
shall likewise pass to the ownership of the party of the first part as
though the time agreed upon had expired: Provided, however, That
the machineries and accessories are not included in the
improvements which will pass to the party of the first part on the
expiration or abandonment of the land leased.
In another action, wherein the Davao Light & Power Co., Inc., was the
plaintiff and the Davao, Saw, Mill Co., Inc., was the defendant, a judgment
was rendered in favor of the plaintiff in that action against the defendant in
that action; a writ of execution issued thereon, and the properties now in
question were levied upon as personalty by the sheriff. No third party claim
was filed for such properties at the time of the sales thereof as is borne out
by the record made by the plaintiff herein. Indeed the bidder, which was
the plaintiff in that action, and the defendant herein having consummated
the sale, proceeded to take possession of the machinery and other
properties described in the corresponding certificates of sale executed in
its favor by the sheriff of Davao.
As connecting up with the facts, it should further be explained that the
Davao Saw Mill Co., Inc., has on a number of occasions treated the
machinery as personal property by executing chattel mortgages in favor of
third persons. One of such persons is the appellee by assignment from the
original mortgages.

Article 334, paragraphs 1 and 5, of the Civil Code, is in point. According to

the Code, real property consists of
1. Land, buildings, roads and constructions of all kinds adhering to
the soil;
xxx

xxx

xxx

5. Machinery, liquid containers, instruments or implements

intended by the owner of any building or land for use in connection
with any industry or trade being carried on therein and which are
expressly adapted to meet the requirements of such trade of
industry.
Appellant emphasizes the first paragraph, and appellees the last
mentioned paragraph. We entertain no doubt that the trial judge and
appellees are right in their appreciation of the legal doctrines flowing from
the facts.
In the first place, it must again be pointed out that the appellant should
have registered its protest before or at the time of the sale of this property.
It must further be pointed out that while not conclusive, the
characterization of the property as chattels by the appellant is indicative of
intention and impresses upon the property the character determined by
the parties. In this connection the decision of this court in the case of
Standard Oil Co. of New Yorkvs. Jaramillo ( [1923], 44 Phil., 630),
whether obiter dicta or not, furnishes the key to such a situation.
It is, however not necessary to spend overly must time in the resolution of
this appeal on side issues. It is machinery which is involved; moreover,
machinery not intended by the owner of any building or land for use in
connection therewith, but intended by a lessee for use in a building erected
on the land by the latter to be returned to the lessee on the expiration or
abandonment of the lease.
A similar question arose in Puerto Rico, and on appeal being taken to the
United States Supreme Court, it was held that machinery which is movable
in its nature only becomes immobilized when placed in a plant by the
owner of the property or plant, but not when so placed by a tenant, a
usufructuary, or any person having only a temporary right, unless such
person acted as the agent of the owner. In the opinion written by Chief
Justice White, whose knowledge of the Civil Law is well known, it was in
part said:

To determine this question involves fixing the nature and character

of the property from the point of view of the rights of Valdes and its
nature and character from the point of view of Nevers & Callaghan
as a judgment creditor of the Altagracia Company and the rights
derived by them from the execution levied on the machinery
placed by the corporation in the plant. Following the Code
Napoleon, the Porto Rican Code treats as immovable (real)
property, not only land and buildings, but also attributes
immovability in some cases to property of a movable nature, that
is, personal property, because of the destination to which it is
applied. "Things," says section 334 of the Porto Rican Code, "may
be immovable either by their own nature or by their destination or
the object to which they are applicable." Numerous illustrations are
given in the fifth subdivision of section 335, which is as follows:
"Machinery, vessels, instruments or implements intended by the
owner of the tenements for the industrial or works that they may
carry on in any building or upon any land and which tend directly
to meet the needs of the said industry or works." (See also Code
Nap., articles 516, 518 et seq. to and inclusive of article 534,
recapitulating the things which, though in themselves movable,
may be immobilized.) So far as the subject-matter with which we
are dealing machinery placed in the plant it is plain, both
under the provisions of the Porto Rican Law and of the Code
Napoleon, that machinery which is movable in its nature only
becomes immobilized when placed in a plant by the owner of the
property or plant. Such result would not be accomplished,
therefore, by the placing of machinery in a plant by a tenant or a
usufructuary or any person having only a temporary right.
(Demolombe, Tit. 9, No. 203; Aubry et Rau, Tit. 2, p. 12, Section
164; Laurent, Tit. 5, No. 447; and decisions quoted in FuzierHerman ed. Code Napoleon under articles 522 et seq.) The
distinction rests, as pointed out by Demolombe, upon the fact that
one only having a temporary right to the possession or enjoyment
of property is not presumed by the law to have applied movable
property belonging to him so as to deprive him of it by causing it
by an act of immobilization to become the property of another. It
follows that abstractly speaking the machinery put by the
Altagracia Company in the plant belonging to Sanchez did not lose
its character of movable property and become immovable by
destination. But in the concrete immobilization took place because
of the express provisions of the lease under which the Altagracia
held, since the lease in substance required the putting in of
improved machinery, deprived the tenant of any right to charge
against the lessor the cost such machinery, and it was expressly

stipulated that the machinery so put in should become a part of

the plant belonging to the owner without compensation to the
lessee. Under such conditions the tenant in putting in the
machinery was acting but as the agent of the owner in compliance
with the obligations resting upon him, and the immobilization of
the machinery which resulted arose in legal effect from the act of
the owner in giving by contract a permanent destination to the
machinery.
xxx

xxx

xxx

The machinery levied upon by Nevers & Callaghan, that is, that
which was placed in the plant by the Altagracia Company, being,
as regards Nevers & Callaghan, movable property, it follows that
they had the right to levy on it under the execution upon the
judgment in their favor, and the exercise of that right did not in a
legal sense conflict with the claim of Valdes, since as to him the
property was a part of the realty which, as the result of his
obligations under the lease, he could not, for the purpose of
collecting his debt, proceed separately against. (Valdes vs. Central
Altagracia [192], 225 U.S., 58.)
Finding no reversible error in the record, the judgment appealed from will
be affirmed, the costs of this instance to be paid by the appellant.
G.R. No. L-15334

January 31, 1964

BOARD OF ASSESSMENT APPEALS, CITY ASSESSOR and CITY

TREASURER OF QUEZON CITY, petitioners,
vs.
MANILA ELECTRIC COMPANY, respondent.
Assistant City Attorney Jaime R. Agloro for petitioners.
Ross, Selph and Carrascoso for respondent.
PAREDES, J.:
From the stipulation of facts and evidence adduced during the hearing, the
following appear:
On October 20, 1902, the Philippine Commission enacted Act No. 484
which authorized the Municipal Board of Manila to grant a franchise to
construct, maintain and operate an electric street railway and electric light,

heat and power system in the City of Manila and its suburbs to the person
or persons making the most favorable bid. Charles M. Swift was awarded
the said franchise on March 1903, the terms and conditions of which were
embodied in Ordinance No. 44 approved on March 24, 1903. Respondent
Manila Electric Co. (Meralco for short), became the transferee and owner of
the franchise.
Meralco's electric power is generated by its hydro-electric plant located at
Botocan Falls, Laguna and is transmitted to the City of Manila by means of
electric transmission wires, running from the province of Laguna to the said
City. These electric transmission wires which carry high voltage current, are
fastened to insulators attached on steel towers constructed by respondent
at intervals, from its hydro-electric plant in the province of Laguna to the
City of Manila. The respondent Meralco has constructed 40 of these steel
towers within Quezon City, on land belonging to it. A photograph of one of
these steel towers is attached to the petition for review, marked Annex A.
Three steel towers were inspected by the lower court and parties and the
following were the descriptions given there of by said court:
The first steel tower is located in South Tatalon, Espaa Extension,
Quezon City. The findings were as follows: the ground around one
of the four posts was excavated to a depth of about eight (8) feet,
with an opening of about one (1) meter in diameter, decreased to
about a quarter of a meter as it we deeper until it reached the
bottom of the post; at the bottom of the post were two parallel
steel bars attached to the leg means of bolts; the tower proper was
attached to the leg three bolts; with two cross metals to prevent
mobility; there was no concrete foundation but there was adobe
stone underneath; as the bottom of the excavation was covered
with water about three inches high, it could not be determined with
certainty to whether said adobe stone was placed purposely or not,
as the place abounds with this kind of stone; and the tower carried
five high voltage wires without cover or any insulating materials.
The second tower inspected was located in Kamuning Road, K-F,
Quezon City, on land owned by the petitioner approximate more
than one kilometer from the first tower. As in the first tower, the
ground around one of the four legs was excavate from seven to
eight (8) feet deep and one and a half (1-) meters wide. There
being very little water at the bottom, it was seen that there was no
concrete foundation, but there soft adobe beneath. The leg was
likewise provided with two parallel steel bars bolted to a square
metal frame also bolted to each corner. Like the first one, the
second tower is made up of metal rods joined together by means

of bolts, so that by unscrewing the bolts, the tower could be

dismantled and reassembled.
The third tower examined is located along Kamias Road, Quezon
City. As in the first two towers given above, the ground around the
two legs of the third tower was excavated to a depth about two or
three inches beyond the outside level of the steel bar foundation. It
was found that there was no concrete foundation. Like the two
previous ones, the bottom arrangement of the legs thereof were
found to be resting on soft adobe, which, probably due to high
humidity, looks like mud or clay. It was also found that the square
metal frame supporting the legs were not attached to any material
or foundation.
On November 15, 1955, petitioner City Assessor of Quezon City declared
the aforesaid steel towers for real property tax under Tax declaration Nos.
31992 and 15549. After denying respondent's petition to cancel these
declarations, an appeal was taken by respondent to the Board of
Assessment Appeals of Quezon City, which required respondent to pay the
amount of P11,651.86 as real property tax on the said steel towers for the
years 1952 to 1956. Respondent paid the amount under protest, and filed
a petition for review in the Court of Tax Appeals (CTA for short) which
rendered a decision on December 29, 1958, ordering the cancellation of
the said tax declarations and the petitioner City Treasurer of Quezon City to
refund to the respondent the sum of P11,651.86. The motion for
reconsideration having been denied, on April 22, 1959, the instant petition
for review was filed.
In upholding the cause of respondents, the CTA held that: (1) the steel
towers come within the term "poles" which are declared exempt from taxes
under part II paragraph 9 of respondent's franchise; (2) the steel towers
are personal properties and are not subject to real property tax; and (3) the
City Treasurer of Quezon City is held responsible for the refund of the
amount paid. These are assigned as errors by the petitioner in the brief.
The tax exemption privilege of the petitioner is quoted hereunder:
PAR 9. The grantee shall be liable to pay the same taxes upon its
real estate, buildings, plant (not including poles, wires,
transformers, and insulators), machinery and personal property as
other persons are or may be hereafter required by law to pay ...
Said percentage shall be due and payable at the time stated in
paragraph nineteen of Part One hereof, ... and shall be in lieu of all
taxes and assessments of whatsoever nature and by whatsoever

authority upon the privileges, earnings, income, franchise, and

poles, wires, transformers, and insulators of the grantee from
which taxes and assessments the grantee is hereby expressly
exempted. (Par. 9, Part Two, Act No. 484 Respondent's Franchise;
emphasis supplied.)
The word "pole" means "a long, comparatively slender usually cylindrical
piece of wood or timber, as typically the stem of a small tree stripped of its
branches; also by extension, a similar typically cylindrical piece or object of
metal or the like". The term also refers to "an upright standard to the top
of which something is affixed or by which something is supported; as a
dovecote set on a pole; telegraph poles; a tent pole; sometimes,
specifically a vessel's master (Webster's New International Dictionary 2nd
Ed., p. 1907.) Along the streets, in the City of Manila, may be seen
cylindrical metal poles, cubical concrete poles, and poles of the PLDT Co.
which are made of two steel bars joined together by an interlacing metal
rod. They are called "poles" notwithstanding the fact that they are no made
of wood. It must be noted from paragraph 9, above quoted, that the
concept of the "poles" for which exemption is granted, is not determined
by their place or location, nor by the character of the electric current it
carries, nor the material or form of which it is made, but the use to which
they are dedicated. In accordance with the definitions, pole is not
restricted to a long cylindrical piece of wood or metal, but includes "upright
standards to the top of which something is affixed or by which something is
supported. As heretofore described, respondent's steel supports consists of
a framework of four steel bars or strips which are bound by steel crossarms atop of which are cross-arms supporting five high voltage
transmission wires (See Annex A) and their sole function is to support or
carry such wires.
The conclusion of the CTA that the steel supports in question are embraced
in the term "poles" is not a novelty. Several courts of last resort in the
United States have called these steel supports "steel towers", and they
denominated these supports or towers, as electric poles. In their decisions
the words "towers" and "poles" were used interchangeably, and it is well
understood in that jurisdiction that a transmission tower or pole means the
same thing.

In a proceeding to condemn land for the use of electric power wires, in

which the law provided that wires shall be constructed upon suitable poles,
this term was construed to mean either wood or metal poles and in view of
the land being subject to overflow, and the necessary carrying of
numerous wires and the distance between poles, the statute was
interpreted to include towers or poles. (Stemmons and Dallas Light Co.
(Tex) 212 S.W. 222, 224; 32-A Words and Phrases, p. 365.)
The term "poles" was also used to denominate the steel supports or towers
used by an association used to convey its electric power furnished to
subscribers and members, constructed for the purpose of fastening high
voltage and dangerous electric wires alongside public highways. The steel
supports or towers were made of iron or other metals consisting of two
pieces running from the ground up some thirty feet high, being wider at
the bottom than at the top, the said two metal pieces being connected
with criss-cross iron running from the bottom to the top, constructed like
ladders and loaded with high voltage electricity. In form and structure, they
are like the steel towers in question. (Salt River Valley Users' Ass'n v.
Compton, 8 P. 2nd, 249-250.)
The term "poles" was used to denote the steel towers of an electric
company engaged in the generation of hydro-electric power generated
from its plant to the Tower of Oxford and City of Waterbury. These steel
towers are about 15 feet square at the base and extended to a height of
about 35 feet to a point, and are embedded in the cement foundations
sunk in the earth, the top of which extends above the surface of the soil in
the tower of Oxford, and to the towers are attached insulators, arms, and
other equipment capable of carrying wires for the transmission of electric
power (Connecticut Light and Power Co. v. Oxford, 101 Conn. 383, 126 Atl.
p. 1).
In a case, the defendant admitted that the structure on which a certain
person met his death was built for the purpose of supporting a
transmission wire used for carrying high-tension electric power, but
claimed that the steel towers on which it is carried were so large that their
wire took their structure out of the definition of a pole line. It was held that
in defining the word pole, one should not be governed by the wire or
material of the support used, but was considering the danger from any
elevated wire carrying electric current, and that regardless of the size or
material wire of its individual members, any continuous series of structures
intended and used solely or primarily for the purpose of supporting wires
carrying electric currents is a pole line (Inspiration Consolidation Cooper
Co. v. Bryan 252 P. 1016).

It is evident, therefore, that the word "poles", as used in Act No. 484 and
incorporated in the petitioner's franchise, should not be given a restrictive
and narrow interpretation, as to defeat the very object for which the
franchise was granted. The poles as contemplated thereon, should be
understood and taken as a part of the electric power system of the
respondent Meralco, for the conveyance of electric current from the source
thereof to its consumers. If the respondent would be required to employ
"wooden poles", or "rounded poles" as it used to do fifty years back, then
one should admit that the Philippines is one century behind the age of
space. It should also be conceded by now that steel towers, like the ones in
question, for obvious reasons, can better effectuate the purpose for which
the respondent's franchise was granted.
Granting for the purpose of argument that the steel supports or towers in
question are not embraced within the term poles, the logical question
posited is whether they constitute real properties, so that they can be
subject to a real property tax. The tax law does not provide for a definition
of real property; but Article 415 of the Civil Code does, by stating the
following are immovable property:
(1) Land, buildings, roads, and constructions of all kinds adhered to
the soil;
xxx

xxx

xxx

(3) Everything attached to an immovable in a fixed manner, in

such a way that it cannot be separated therefrom without breaking
the material or deterioration of the object;
xxx

xxx

xxx

(5) Machinery, receptacles, instruments or implements intended by

the owner of the tenement for an industry or works which may be
carried in a building or on a piece of land, and which tends directly
to meet the needs of the said industry or works;
xxx

xxx

xxx

The steel towers or supports in question, do not come within the objects
mentioned in paragraph 1, because they do not constitute buildings or
constructions adhered to the soil. They are not construction analogous to
buildings nor adhering to the soil. As per description, given by the lower
court, they are removable and merely attached to a square metal frame by

means of bolts, which when unscrewed could easily be dismantled and

moved from place to place. They can not be included under paragraph 3,
as they are not attached to an immovable in a fixed manner, and they can
be separated without breaking the material or causing deterioration upon
the object to which they are attached. Each of these steel towers or
supports consists of steel bars or metal strips, joined together by means of
bolts, which can be disassembled by unscrewing the bolts and
reassembled by screwing the same. These steel towers or supports do not
also fall under paragraph 5, for they are not machineries, receptacles,
instruments or implements, and even if they were, they are not intended
for industry or works on the land. Petitioner is not engaged in an industry
or works in the land in which the steel supports or towers are constructed.
It is finally contended that the CTA erred in ordering the City Treasurer of
Quezon City to refund the sum of P11,651.86, despite the fact that Quezon
City is not a party to the case. It is argued that as the City Treasurer is not

the real party in interest, but Quezon City, which was not a party to the
suit, notwithstanding its capacity to sue and be sued, he should not be
ordered to effect the refund. This question has not been raised in the court
below, and, therefore, it cannot be properly raised for the first time on
appeal. The herein petitioner is indulging in legal technicalities and niceties
which do not help him any; for factually, it was he (City Treasurer) whom
had insisted that respondent herein pay the real estate taxes, which
respondent paid under protest. Having acted in his official capacity as City
Treasurer of Quezon City, he would surely know what to do, under the
circumstances.
IN VIEW HEREOF, the decision appealed from is hereby affirmed, with costs
against the petitioners.