1. Lee Yeung v. Strong Machine
First registrant in good faith in the Real Property Registry,
(AGRICOLA BOUGHT RICE MACHINERY BY CREDIT FROM STRONG
MACHINE. IT MORTGAGED THE MACHINERY AND THE BUIILDING
AND WAS REGISTERED IN THE CHATTEL MORTGAGE & IT WAS SOLD
SINCE UNPAID. AGRICOLA ALSO MORTGAGED IT TO LEE YEUNG FOR
THE CONSTRUCTION OF A BUILDING. UNPAID, IT WAS LEVIED
AGAIN. WHO IS THE OWNER? SHOULD BE FIRST REGISTRANT IN
GOOD FAITH IN REAL PROPERTY REGISTRY AT FIRST. THEN, FIRST
POSSESSOR AND THEN OLDEST TITLE. SINCE IT WAS IN CHATTEL
MORTGAGE, THE FIRST POSSESSOR WINS. HENCE, STRONG MAN KY
FIRST POSSESSOR.)
FACTS: The "Compañia Agricola Filipina" bought a considerable
quantity of rice-cleaning machinery company from the defendant
machinery company (SI STRONG), and executed a chattel mortgage
thereon (gi-MORTGAGE ang machinery nga gipalit) 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 (wala sa real property 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
"Compañia 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 "Compañia
Agricola Filipina" executed ANOTHER MORTGAGE to the
plaintiff(LEE YEUNG) 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.
ISSUE: Who is the owner?
RULING: Mga bai, mao ni summary sa Art 1473 sa Civil Code(medyo
taas ang provision) as to double sale (a.k.a sale to two persons) (in
good faith tanan ha)
Personal Property:
1. First possessor
Real property:
1.
NOT CHATTEL REGISTRY
2. First possessor
3. Oldest tite (aka kinsa ang nakaunag palit)
HENCE: The registry here 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.
The building of strong materials in which the rice-cleaning
machinery was installed by the "Compañia 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.
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.
__________________________________________________
2. Punsalan et.al. v. Lacsamana
(PUNSALAN IS OWNER OF A LOT IN TARLAC. FORECLOSED SINCE
LOAN TO PNB. WHILE STILL IN POSSESSION OF THE LOT, PUNSALAN
BUILT A WAREHOUSE AND RENTED IT TO SIBAL. PNB, ON THE OTHER
HAND, SOLD THE LOT AND ALL OF ITS IMPROVEMENTS TO
LACSAMANA. PUNSALAN FILED A CASE FOR ANNULMENT OF SALE IN
QUEZON CITY. PNB FILED A MOTION TO DISMISS DUE TO IMPROPER
VENUE KY REAL PROPERTY SHOULD BE VENUE OF WHERE THE
COURT IS, NOT THE RESIDENCE OF OWNER. PNB WAS RIGHT.
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.)
Facts: 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 in the amount of P10,000, but for failure to pay said amount,
the property was foreclosed on December 16, 1970. Respondent
PNB was the highest bidder in said foreclosure proceedings.
In the meantime, in 1974, while the property was still in the alleged
possession of petitioner and with the alleged acquiescence of
respondent PNB, and upon securing a permit from the Municipal
Mayor, petitioner constructed a warehouse on said property.
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 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.
On Nov. 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 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".
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.
Lower Court granted motion to dismiss by PNB
Issue: WON respondent court erred in granting the motion to
dismiss by PNB on the grounds of improper venue
Held: No. SC affirmed respondent court’s decision. 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.
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. (Section 2 Rule 4)
Sidenote: 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.
_____________________________________________
3. Standard Oil Company of New York v. Joaquin Jaramillo as
register of deeds Manila
(HOUSE OF STRONG MATERIALS IN CHATTEL MORTGAGE WANTED
TO BE REGISTERED BY STANDARD OIL WHICH WAS MORTGAGED BY
DE LA ROSA, DE VERA. JARAMILLO DIDN’T WANT TO REGISTER. CAN
HE DENY KY NOT PERSONALTY? NO. NO! Under Sec. 198 of the
Admin Code (previously found in Sec. 15 of the Chattel Mortgage
Law) – the duty of Jaramillo as a register of deeds is PURELY
MINISTERIAL ONLY. IT IS A QUESTION TO BE DETERMINED BY THE
COURTS ONLY AND HENCE MUST BE REGISTERED.)
FACTS: On Nov. 27, 1922, Gervasia de la Rosa, Vda. De Vera, leased a
parcel of land in Manila, and she owns the house of strong materials
built thereon. She then executed a chattel mortgage, conveying to
Standard Oil the leasehold interest on the lot as well as the building
(house of strong materials).
Standard Oil then presented to Joaquin Jaramillo – register of deeds
of the City of Manila, for the mortgage to be recorded in the book of
record of chattel mortgages. Nevertheless, Jaramillo refused to
record on the ground that it was not a chattel mortgage because
the property is not a personal property, within the meaning of the
Chattel Mortgage Law.
ISSUE: WON Jaramillo was correct in denying to record the
presented mortgage by Standard Oil.
RULING: (MAO JUD NI ANG MAIN POINT – MINISTERIAL DUTY RA
ANG FUNCTION SA REGISTER OF DEEDS – COURT NAY MU
DETERMINE IF REAL BA JUD OR PERSONAL ANG NAPA.RECORD
ONCE NAAY MU CONTEST SA MORTGAGE)
NO! Under Sec. 198 of the Admin Code (previously found in Sec. 15
of the Chattel Mortgage Law) – the duty of Jaramillo as a register of
deeds is PURELY MINISTERIAL ONLY. He has no authority whatever
in determining whether the mortgage presented qualifies under the
CHL. Basically, wa juy right ang register of deeds pag deny sa
application kay lage ministerial ra iyang duty. Once nakabayad sa
fee, dapat I record na.
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 the case of Leung Yee vs.
Frank L. Strong Machinery Co. and Williamson, it was held that if the
property is real, 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.
(SUPPLEMENTARY NI – NAA PUD NI SA BOOK) 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. 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. Demurrer filed by Jaramillo is denied.
_____________________________________________
4. Davao Saw Mill Co., Inc., v. Castillo and Davao Light and Power,
Inc.
(MACHINERIES MOUNTED ON FOUNDATIONS OF CEMENT OWNED
BY DAVAO SAW MILL ON A LAND BELONGING TO ANOTHER PERSON,
THE LESSOR. THE LEASE AGREEMENT WAS THE IMPROVEMENTS
AND THE BUILDING WILL GO TO LESSOR UPON ABANDONMENT OR
EXPIRATION. LATER, DAVAO SAW MILL DEFAULTED AGAINST DAVAO
LIGHT POWER. SHERIFFS LEVIED UPON THE PERSONALTIES KY
SAWMILL HAS A HISTORY OF USING MACHINERIES AS CHATTEL.
DAVAO SAW MILL: “OI OI, REAL PROPERTY NA”. FALSE!
PERSONALTY. Citing a US Case: 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. )
Facts: The 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 (the conflict here concerns
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 other words: In the contract of lease, Davo Sawmill agreed to
turn over free of charge all improvements and buildings erected by it
on the premises with the exception of machineries, which shall
remain with the Davao Sawmill.
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. 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. (Bali, the properties were described as personalty and ni-
accept ra sad ang parties sa description and proceeded to
consummate the sale)
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.
Issue: WON the machines in question are to be considered personal
properties
Ruling: YES. The properties in question are personal properties.
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.
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.
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.
_____________________________________________
5. Board of Assessment Appeals v. MERALCO
(STEEL TOWERS OF MERALCO: PERSONALTY KY: They are neither
buildings or constructions adhered to the soil; They are not attached
to an immovable in a fixed manner, pwede sila e separate without
breaking the material or deteriorating the object; They are not
machineries, receptacles or instruments, and even if they were, they
are not intended for an industry to be carried on in the premises)
FACTS: On November 15, 1955, the QC City Assessor declared that
the steel towers (mga poste) of MERALCO was subject to real
property tax. Ang MERALCO ni file ug petititon to cancel the
aforementioned declarations, pero gi deny. So ni appeal sila to the
QC Board of Assessment Appeals, which required respondent to pay
P11,651.86 as real property tax on the steel towers (poste giatay) for
the years 1952 until 1956. Ang MERALCO pud tawn ni bayad nalang
kay wala silay choice, pero ni file sila ug petition for review sa Court
of Tax Appeals (CTA) which rendered a decision ordering the
cancellation of the said tax declarations and refunding to MERALCO
ang amount nila nga nabayad. (important to note sad nga naay
franchise ang MERALCO nga gi declare ilang mga “poles” exempt
from taxes. Gi define sad sa case ug unsa nang pole, nya giatay
manang city assessor sa qc kay di dawn a mga “pole” kay mga “steel
tower” daw giatay technical kayo siya)
ISSUE:Are the steel towers or poles of MERALCO considered real or
personal property?
HELD: PERSONAL PROPERTY and are not subject to the real
property tax imposed upon them
It is evident that the word “poles” 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 should be taken and understood as part of MERALCO’s electric
power system for the conveyance of electric current to tis
consumers.
ARTICLE 415 of the NCC classifies the following as immovable
property:
1. Lands, buildings, roads and constructions of all kinds
adhered to the soil;
xxx
2. Everything attached to an immovable in a fixed manner, in
such a way that it cannot be separated therefrom without
breaking the material or det. Of the object;
xxx
3. 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
If we follow these classifications, and mga steel tower sa MERALCO
should be considered personal property because:
1) They are neither buildings or constructions adhered to the
soil;
2) They are not attached to an immovable in a fixed manner,
pwede sila e separate without breaking the material or
deteriorating the object;
3) They are not machineries, receptacles or instruments, and
even if they were, they are not intended for an industry to
be carried on in the premises
_____________________________________________
6. Makati Leasing And Finance Corp. v. Wearever Textile Mills, Inc.
(MAKATI LEASING DISCOUNTED AND ASSIGNED AR OF WEAREVER.
HENCE, WEAREVER GAVE CHATTEL MORTGAGE IN AN AGREEMENT
OVER RAW MATERIALS AND MACHINERY (ARTOS AERO STENTERING
RANGE) WHICH IS ATTACHED TO THE GROUND. CITING TUMALAD: If
a house of strong materials, like what was involved in the above
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.)
FACTS: It appears that in order to obtain financial accommodations
from herein 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 a machinery described as
an Artos Aero Dryer Stentering Range
Acting on petitioner's application for replevin, the LOWER COURT
issued a writ of seizure, the enforcement of which was however
subsequently restrained upon private respondent's filing of a motion
for reconsideration. After several incidents, the lower court finally
issued an order lifting the restraining order for the enforcement of
the writ of seizure and an order to break open the premises of
private respondent to enforce said writ. The sheriff enforcing the
seizure order repaired to the premises of private respondent and
removed the main drive motor of the subject machinery.
CA: It 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 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. The appellate court rejected petitioner's argument that
private respondent is estopped from claiming that the machine is
real property by constituting a chattel mortgage thereon. (Kay bali if
ma declare ang property as real, di siya ma subject to a chattel
mortgage and therefore void ang mortgage nya di ma foreclose ang
machine by petitioners)
ISSUE: Is the disputed machinery a real property? Or a personal
property and can be thus subject of the chattel mortgage?
RULING: PERSONAL PROPERTY, CAN BE SUBJECT OF THE CHATTEL
MORTGAGE.
A similar issue was raised in Tumalad v. Vicencio, where this Court,
speaking through Justice J.B.L. Reyes, ruled: 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.
Examining the records of the instant case, We find no logical
justification to exclude the rule out the present case from the
application of the abovequoted pronouncement. If a house of strong
materials, like what was involved in the above 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.
As stated in Standard Oil Co. of New York v. Jaramillo, 44 Phil. 630, it
is undeniable that the parties to a contract may by agreement treat
as personal property that which by nature would be real property,
as long as no interest of third parties would be prejudiced thereby.
As pointed out by petitioner and again not refuted by respondent,
the latter has indubitably benefited from said contract. Equity
dictates that one should not benefit at the expense of another.
Private respondent could not now therefore, be allowed to impugn
the efficacy of the chattel mortgage after it has benefited therefrom.
_____________________________________________
7. Mindanao Bus Company v. City Assessor & Treasurer
((MINDANAO BUS COMPANY IS A PUBLIC UTILITY TRANSPORTING
PASSENGERS AND CARGOES. THE FOLLOWING ARE ITS MACHINES IN
ITS AREA: Hobart Electric Welder Machine, Storm Boring Machine,
Lathe machine with motor, Black and Decker grinder, PEMCO
hydraulic press, Battery charger, D-Engine Fuel. IT WAS ASSESSED BY
THE CITY ASSESSOR WITH REALTY TAX. IS IT REAL PROPERTY? NO.
Before movables may be deemed immobilized in contemplation of
Article 415 (5), it is necessary that they 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. In this case, the tools
and equipment in question are by their nature, not essential and
principal elements of MBC’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. 2ND IT WAS NOT CARRIED ON ON THE LAND/BUILDING.))
Facts: Petitioner Mindanao Bus Company (MBC) is a public utility
solely engaged in transporting passengers and cargoes by motor
trucks. Kani si MBC, naa siyay mga machineries (Hobart Electric
Welder Machine, Storm Boring Machine, Lathe machine with motor,
Black and Decker grinder, PEMCO hydraulic press, Battery charger,
D-Engine Fuel), unya si respondent City Assessor, gi-assessan niya ug
tax ni nga mga equipment at 4,400 pesos. In turn, petitioner MBC
appealed the assessment to the Board of Tax Appeals, saying that
these equipment are not realty. The Board of Tax Appeals however
sustained the assessment made by the City Assessor. Court of Tax
Appeals still sustained the assessment made by the City Assessor
and denied the motion for reconsideration. So mao nani nga naa na
sa SC.
Issues: (Connected raning duha ka issues)
1. WON the Court of Tax Appeals erred in upholding
respondents' contention that the questioned assessments
are valid; and that said equipment or machineries are
immovable taxable properties
2. WON the Court of Tax Appeals erred in its interpretation
of par. 5 of Art. 415 of the NCC, and holding that pursuant
thereto the movable equipment are taxable realties, by
reason of their being intended or destined for use in an
industry.
Held: Art. 415 of the NCC classifies the following as immovable
property: (5) 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
Nya kay diay tu, these machineries sat and are put on cement or
wooden platforms. Mao nah it is in this sense that the machineries
can be moved around and about in petitioner's repair shop.
Before movables may be deemed immobilized in contemplation of
Article 415 (5), it is necessary that they 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. In this case, the tools
and equipment in question are by their nature, not essential and
principal elements of MBC’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. Bisan pa ug wala ni nga mga tools, equipment and
machineries, the business may be carried on.
Furthermore, Art.415 (5) also requires that the industry or works be
carried on in a building or on a piece of land. A sawmill would also
be installed in a building on land more or less permanently, and the
sawing is conducted in the land/building (Berkenkotter v. Cu
Unjieng). However, in the instant case, 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 law. The equipment in question are not
absolutely essential to the petitioner's transportation business, and
petitioner's business is not carried on in a building, tenement or on a
specified land. In sum, the equipment in question are not deemed
real property because the transportation business is not carried on
in a building or permanently on a piece of land, as demanded by
law.
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. Therefore, the imposition of
realty tax on the maintenance and repair equipment was not proper
because the properties involved were not real property under
Article 415 (5).
_____________________________________________
8. Caltex v. Central Board of Assessment Appeals
(CALTEX IS A LESSEE IN A LEASED LAND. IT HAS MACHINES
(underground tanks, elevated tank, elevated water tanks, water
tanks, gasoline pumps, computing pumps, water pumps, car washer,
car hoists, truck hoists, air compressors and tireflators)THERE AND IT
WAS CHARGED WITH REALTY TAX. YES PWEDE, REALTY, ky these are
fixtures are necessary to the operation of the gas station. WHY,
BECAUSE SPECIAL PREVAILS OVER GENERAL LAW.)
FACTS: This case is about the realty tax on machinery and
equipment installed by Caltex (Philippines) Inc. in its gas stations
located on leased land. The said machines and equipment are
loaned by Caltex to gas station operators under an appropriate lease
agreement or receipt. It is stipulated in the lease contract that the
operators, upon demand, shall return to Caltex the machines and
equipment in good condition as when received, ordinary wear and
tear excepted.
The lessor of the land, where the gas station is located, does not
become the owner of the machines and equipment installed therein.
Caltex retains the ownership thereof during the term of the lease.
CITY ASSESSOR OF PASAY CITY: The city board of tax appeals ruled
that they are personalty..
CENTRAL BOARD OF ASSESSMENT APPEALS: held in its decision of
June 3, 1977 that the said machines and equipment are real
property within the meaning of sections 3(k) & (m) and 38 of the
Real Property Tax Code, Presidential Decree No. 464, which took
effect on June 1, 1974, 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.
CALTEX CONTENTION: Caltex invokes the rule 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 (Davao
Saw Mill Co. vs. Castillo, 61 Phil 709).
ISSUE: Are the equipment and machinery subject to realty tax?
Real Property Tax Code which provides:
“SEC. 38. Incidence of Real Property Tax.— There shall be levied,
assessed and collected in all provinces, cities and municipalities an
annual ad valorem tax on real property, such as land, buildings,
machinery and other improvements affixed or attached to real
property not hereinafter specifically exempted.
m) Machinery — shall embrace machines, mechanical contrivances,
instruments, appliances and apparatus attached to the real estate. It
includes the physical facilities available for production, as well as the
installations and appurtenant service facilities, together with all
other equipment designed for or ESSENTIAL to its manufacturing,
industrial or agricultural purposes. (See sec. 3[f], Assessment Law).”
RULING: YES, REALTY, ky these are 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 (REFERRING TO DAVAO SAW MILL CASE) 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.
Here, the question is whether the gas station equipment and
machinery permanently affixed by Caltex to its gas station and
pavement (which are indubitably taxable realty) should be subject to
the realty tax. This question is different from the issue raised in
the Davao Saw Mill case.
Improvements on land are commonly taxed as realty even though
for some purposes they might be considered personalty.
_____________________________________________
9. Serg’s Products v. PCI Leasing
(SERG’S PRODUCTS: CHOCOLATE MAKING FACTORY. COMPLAINT
FOR SUM OF MONEY WITH REPLEVIN [FOR PERSONAL PROPERTIES
RA NAG REPLEVIN UNDER RULE 60, HA?]. THE SHERIFF SEIZED ONE
MACHINERY AND SAID HE WOULD RETURN FOR THE OTHERS. SERG
WANTED TO DEFER THE ENFORCEMENT BUT PCI OPPOSED SINCE
PERSONAL PROP. RULING: PERSONAL. KY THOUGH IMMOVABLE BY
DESTINATION KY USED IN THE INDUSTRY, IT IS PERSONAL AS TO THE
CONTRACTING PARTIES. Lease Agreement clearly provides that the
machines in question are to be considered as personal property.)
Facts: On February 13, 1998, respondent PCI Leasing and Finance,
Inc. (PCI Leasing for short) filed with the RTC-QC a complaint for sum
of money (Annex E), with an application for a writ of replevin
docketed as Civil Case No. Q-98-33500.
On March 24, 1998, in implementation of said writ, the sheriff
proceeded to petitioners factory, seized one machinery with [the]
word that he [would] return for the other machineries.
On March 25, 1998, petitioners filed a motion for special protective
order (Annex C), 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. This motion was opposed by PCI Leasing (Annex F), on the
ground that the properties [were] still personal and therefore still
subject to seizure and a writ of replevin.
In their Reply, petitioners asserted that the properties sought to be
seized [were] immovable as defined in Article 415 of the Civil Code,
the parties agreement to the contrary notwithstanding. They argued
that to give effect to the agreement would be prejudicial to innocent
third parties. They further stated that PCI Leasing [was] estopped
from treating these machineries as personal because the contracts
in which the alleged agreement [were] embodied [were] totally
sham and farcical.
On April 6 1998, the sherriff again sought to enforce the writ of
seizure and was able to take two more before being stopped by the
workers from taking the rest.
CA Ruled that that the subject machines were personal property,
and that they had only been leased, not owned, by petitioners. It
also ruled that the words of the contract are clear and leave no
doubt upon the true intention of the contracting parties. Observing
that Petitioner Goquiolay was an experienced businessman who was
not unfamiliar with the ways of the trade, it ruled that he should
have realized the import of the document he signed.
Issue: WON the machineries could be subject of a writ of replevin
(Note: sa writ of replevin, Rule 60, ang mga personal properties ra
ang mga seize and not the immovables)
Held: Yes, the machineries could be subject to the writ of seizure
because of the contract. 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. 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. Indisputably, 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.[16] In that sense, petitioners are correct in
arguing that the said machines are real, not personal, property
pursuant to Article 415 (5) of the Civil Code.
However, The Court has held that contracting parties may validly
stipulate that a real property be considered as personal.[18] 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.
In the present case, the Lease Agreement clearly provides that the
machines in question are to be considered as personal property.
Specifically, Section 12.1 of the Agreement reads as follows:[21]
12.1 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.
Clearly then, petitioners are estopped from denying the
characterization of the subject machines as personal property.
Under the circumstances, they are proper subjects of the Writ of
Seizure.
It should be stressed, however, that our holding -- that the machines
should be deemed personal property pursuant to the Lease
Agreement is good only insofar as the contracting parties are
concerned.[22] 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.[23] In
any event, there is no showing that any specific third party would be
adversely affected.
_____________________________________________
10. Tumalad v. Vicencio
(V&S HAVE A HOUSE OF STRONG MATERIALS. CHATTEL
MORTGAGED IT AND THEY DEFAULTED. HENCE, EJECTMENT CASE.
V&S ARE CONTENDING THAT MTC HAS NO JURISDICTION SINCE THE
QUESTION INVOLVES OWNERSHIP OF THE HOUSE. FALSE! ang pde
ma subject sa chattel mortgage. The view that parties to a deed of
chattel mortgage may agree to consider a house as personal
property for the purposes of said contract, "is good only insofar as
the contracting parties are concerned. It is based, partly, upon the
principle of estoppel”. It should be noted, however that the principle
is predicated on statements by the owner declaring his house to be
a chattel, a conduct that may conceivably estop him from
subsequently claiming otherwise.)
FACTS: This case originated from the ejectment case filed by the
Tumulads (Ts) against Vivencio and Simeon (V&S). Prior the case, on
Sept.1 1955, V&S executed a chattel in favor of Ts over their house
of strong materials in Quiapo Manila, which they rented from
Madrigal & Company Inc. It was then registered in the Registry of
Deeds of Manila in Sept. 2, 1955. It contained a loan, payable
monthly, then in case of default, remaining balance will be due
immediately. Then V&S defaulted payment, leading to the
foreclosure of the mortgage. Then sold at a public auction, with Ts
as the highest bidder. Then, Ts commenced the ejectment case
against V&S on April 1956. Then the court ordered V&S to vacate
premises with payment.
As an answer, V&S impugned the legality of the chattel mortgage,
and allege that the municipal court (nagpapahawa nila) did not have
jurisdiction coz the issue involved is ownership, no allegation of prior
possession, and no prior demand. During pendency of appeal by
V&S, they failed to pay the ordered rental by the MC, hence the
motion for execution was granted. However, the house could not be
surrendered coz it was already demolished, pursuant to another
motion filed by the Ts. The appeal was denied and the CFI ordered
V&S to pay the Ts jointly and severally the monthly payment with
interest. V&s appealed to the CA, which in turn certified the appeal
to the SC.
ISSUES:
1. WON the MC had jurisdiction to adjudicate the case.
2. WON V&S are legally bound to pay rentals to the plaintiffs
during the period of 1 year provided by law for the
redemption of the extrajudicially foreclosed house. (was a
nako apila kay lisud sabton and di paman xd topic)
RULING:
Ang gist jud sa argument ni V&S ngano walay jurisdication ang MC is
because ang question sa case is ang ownership sa property, dili ang
mortgage kay lage daw ang gi execute nga Chattel Mortgage is void
ab initio daw kay, (first) ilang signature is obtained by trickery, fraud,
or deceit, (second) ang subject matter daw sa chattel is a house of
strong materials nga immovable daw so real property so di dapat I
register as chattel.
Sa first contention concerning sa fraud, trickery, or deceit: Mere
allegations ra ang claim since it is not supported by any evidence as
decided by the MC and the CFI. Moreover, granting nga nay fraud,
trickery, or deceit, it will not render the contract void ab initio but
merely voidable. Nya since wa may evidence nga void, so valid ra.
Nya sa second contention nga only personal properties can be a
subject of chattel mortgage: ESTOPPED si V&S to allege the defense
nga personal properties ra ang pde ma subject sa chattel mortgage.
The view that parties to a deed of chattel mortgage may agree to
consider a house as personal property for the purposes of said
contract, "is good only insofar as the contracting parties are
concerned. It is based, partly, upon the principle of estoppel”. It
should be noted, however that the principle is predicated on
statements by the owner declaring his house to be a chattel, a
conduct that may conceivably estop him from subsequently
claiming otherwise.
Moreover, settled rule na under jurisprudence nga an object placed
on land by one who had only a temporary right to the same, such
as the lessee or usufructuary, does not become immobilized by
attachment.
Nya in this case, ang naa sa ilang contract is “the mortgagor (V&S) ...
voluntarily CEDES, SELLS and TRANSFERS by way of Chattel
Mortgage… the leasehold rights” + the fact nga temporary ra ang
right ni V&S as lessee, hence, ma interpret nga V&S treated the
house as a personal property. Thus, estopped na sila.
Nevertheless, na reverse ra gihapon ang decision sa MC ug CFI
tungod kay gipabayad sa rentals si V&S nga supposedly di pa sila
pabayron. (wa lang sa nako gi apil ang explaination sa rental kay
lisud au sabton mga pre, di ko kasabot, sorry)
_____________________________________________
11. Ago v. CA
(PASTOR AGO BOUGHT SAWMILL MACHINERIES FROM GRACE PARK
AND EXECUTED CHATTEL MORTGAGE ON IT. SUED IN COURT, THEN
COMPROMISE AGREEMENT. BUT AGO STILL DEFAULTED. HENCE
SHERIFF TRIED TO SEIZE PERSONAL PROPERTIES. HOWEVER, AGO
HAS EXCHANGED THE PROPERTIES TO GOLDEN PACIFIC FOR ITS
SHARES. MAY SHERIFF STILL SEIZE IT? ASIDE FROM THE FACT THAT
THERE WAS NO SUFFICIENT NOTICE AS TO THE SALE OF THE
MACHINERIES BY THE SHERIFF, IT IS NOW IMMOVABLE KY
PERMANENTLY ATTACHED.)
Facts: In 1957, petitioner Pastor D. Ago bought sawmill machineries
and equipment from respondent Grace Park Engineer domineering,
Inc., executing a chattel mortgage over said machineries and
equipment to secure the payment of balance of the price remaining
unpaid of P32,000.00, which petitioner agreed to pay on installment
basis.
Petitioner Ago defaulted in his payment and so, in 1958 respondent
Grace Park Engineering, Inc. instituted extra-judicial foreclosure
proceedings of the mortgage. To enjoin said foreclosure, petitioner
herein instituted a case in the Court of First Instance of Agusan. The
parties to the case arrived at a compromise agreement and
submitted the same in court in writing, signed by Pastor D. Ago and
the Grace Park Engineering, Inc. Hon. Ortiz, Judge of the Court of
First Instance of Agusan, then presiding, dictated a decision in open
court on January 28, 1959.
Petitioner continued to default in his payments as provided in the
judgment by compromise, so Grace Park Engineering, Inc. filed with
the lower court a motion for execution, which was granted by the
court. The herein respondent, Provincial Sheriff of Surigao, acting
upon the writ of execution issued by the lower court, levied upon
and ordered the sale of the sawmill machineries and equipment in
question. However, these machineries and equipment had been
taken to and installed in a sawmill building located in Lianga, Surigao
del Sur, and owned by the Golden Pacific Sawmill, Inc., to whom,
petitioner alleges, he had sold them on February 16, 1959 (a date
after the decision of the lower court but before levy by the Sheriff).
Having been advised by the sheriff that the public auction sale was
set for December 4, 1959, petitioner, on December 1, 1959, filed the
petition for certiorari and prohibition with preliminary injunction
with respondent Court of Appeals, alleging that a copy of the
aforementioned judgment given in open court on January 28, 1959
was served upon counsel for petitioner only (ingon siya nga wa daw
siya na hatagan sa copy sa judgment); and that the respondent
Provincial Sheriff of Surigao was acting illegally upon the allegedly
void writ of execution by levying the same upon the sawmill
machineries and equipment which have become real properties of
the Golden Pacific sawmill, Inc., and is about to proceed in selling
the same without prior publication of the notice of sale thereof in
some newspaper of general circulation as required by the Rules of
Court.
Issue: 1. WON there was sufficient notice of judgment; 2. WON the
proceedings undertaken by the sheriff in selling the sawmill
machineries is valid
Ruling:
1. (NOT RELATED) No sufficient notice of judgment. Regarding the
notice of 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; 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.
2. No. The sale made by the sheriff is invalid. The record shows that
after petitioner herein Pastor D. Ago had purchased the sawmill
machineries and equipment he assigned the same to the Golden
Pacific Sawmill, Inc. in payment of his subscription to the shares of
stock of said corporation. Thereafter the sawmill machinery and
equipment were installed in a building and permanently attached to
the ground. By reason of such installment in a building, the said
sawmill machineries and equipment became real estate properties
in accordance with the provision of Art. 415 (5) of the Civil Code,
thus:
ART. 415. The following are immovable property:
(5) Machinery, receptacles, instruments or implements tended 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;
This Court in interpreting a similar question raised before it in the
case of Berkenkotter vs. Cu Unjieng e Hijos, 61 Phil. 683, held that
the installation of the machine and equipment for use in connection
with the industry carried by the company, converted the said
machinery and equipment into real estate by reason of their
purpose. Paraphrasing language of said decision we hold that by the
installment of the sawmill machineries in the building of the Gold
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 equipment into real estate
within the meaning of Article 415(5) above-quoted of the Civil Code
of the Philippines.
Considering that the machineries and equipment 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 Sec. 16 of Rule 39 of the Rules of Court, the sale made by
the sheriff must be declared null and void.

FELS ENERGY VS PROVINCE OF BATANGAS 2/16/07

POWER BARGE – SC SAID IT IS SUBJECT TO REAL PROPERTY TAX BY

DESTINATION, WHICH THOUGH FLOATING, REMAIN ON A FIXED
PLACE, THUS IMMOVABLE PROPERTY… SO, LIBOG.  RPTAX IS AN
ISSUE, BUT 415 WAS USED. HENCE, FLIP-FLOPPING.