CLASSIFICATION OF PROPERTY

1. COMMISSIONER OF CUSTOMS- PETITIONER, AND APPELLANT VS. CARIDAD

CAPISTRANO- RESPONDENT, AND APPELLEE, GR. No. L-11075, JUNE 30, 1960
Paras, C.J.:

FACTS:
On March 31, 1995, Capistrano was bound to Hongkong, upon reaching the Customs she was
checked and found in her position the following: 1) 156 pcs. of 50 peso bills, 2) 17 pcs. of 20 US
Dollar bills 3) 1 pc of 10 US Dollar bill, although her licensed from Central Bank only allowed her to
carry 200 US Dollar in cash and 150 US Dollar in travelers check.

The bills mentioned were seized by Customs and rendered decisions forfeiting it in favor of the
government.

Capistrano was dissatisfied and brought the matter to the CTA.

CTA said that the seizure and forfeiture of the Philippine Peso are in excess of that allowed by the
Central Bank is not provided in the law.

CTA ordered that the 156 peso bills be returned to Capistrano.

Customs appealed to the SC.

ISSUE:
WHETHER OR NOT CA ERRED IN REVOKING THE ORDER OF FORFEITURE OF PHILIPPINE
PESO AND RETURNED TO CAPISTRANO.

RULING:
SC reversed the ruling of the CTA.

The court said that the Philippine Peso bills come within the concept of "merchandise". When
merchandise use as a reference to importations or exportations, it includes goods, wares, and in
general anything that may be the subject of importation or exportation.

Money in the country where it is current is both a measure of value and a medium of exchange,
while in other countries it is a commodity bought and sold in the market, and its value fluctuates in
the market like that of the other commodities.
In the same manner in the Philippines, the US dollar bills which have ceased to be legal tender, are
considered merchandise, and the Philippine peso when attempted to be exported and may have
been taken out of the circulation could be treated as a commodity.

2. MA. LOURDES C. FERNANDO v. ST. SCHOLASTICA'S COLLEGE

GR No. 161107, 2013-03-12
Facts:
Respondent SSC is the owner of four (4) parcels of land measuring a total of 56,306.80 square
meters, located in Marikina Heights and covered by Transfer Certificate Title (TCT) No. 91537.
Located within the property are SSA-Marikina, the residence of the sisters of the
Benedictine Order, the formation house of the novices, and the retirement house for the elderly
sisters. The property is enclosed by a tall concrete perimeter fence built some thirty (30) years ago.
Abutting the fence along the West Drive are buildings, facilities, and other... improvements.[3]
The petitioners are the officials of the City Government of Marikina. On September 30, 1994, the
Sangguniang Panlungsod of Marikina City enacted Ordinance No. 192,[4] entitled "Regulating the
Construction of Fences and Walls in the Municipality of
Marikina." In 1995 and 1998, Ordinance Nos. 217[5] and 200[6] were enacted to amend Sections 7
and 5, respectively. Ordinance No. 192, as amended, is reproduced hereunder, as follows:
Section 3. The standard height of fences or walls allowed under this ordinance are as follows:
(1)
Fences on the front yard shall be no more than one (1) meter in height. Fences in excess of one (1)
meter shall be of an open fence type, at least eighty percent (80%) see-thru
Section 5. In no case shall walls and fences be built within the five (5) meter parking area allowance
located between the front monument line and the building line of commercial and industrial
establishments and educational and religious institutions.[7]
Issues:
The ultimate question before the Court is whether Sections 3.1 and 5 of Ordinance No. 192 are valid
exercises of police power by the City Government of Marikina.
Ruling:
The test of a valid ordinance... substantive requirements: (1) must not contravene the Constitution or
any statute; (2) must not be unfair or oppressive; (3) must not be partial or discriminatory; (4) must
not prohibit but may regulate trade;
(5) must be general and consistent with public policy; and (6) must not be unreasonable.
The Court joins the CA in finding that the real intent of the setback requirement was to make the
parking space free for use by the public, considering that it would no longer be for the exclusive use
of the respondents as it would also be available for use by the general... public. Section 9 of Article
III of the 1987 Constitution, a provision on eminent domain, provides that private property shall not
be taken for public use without just compensation.
Section 5 to be unreasonable and oppressive as it will substantially divest the respondents of the
beneficial use of their property solely for aesthetic purposes. Accordingly, Section 5 of Ordinance
No. 192 is... invalid.
The principal purpose of Section 3.1 is "to discourage, suppress or prevent the concealment of
prohibited or unlawful acts." The ultimate goal of this objective is clearly the prevention of crime to
ensure public safety and security. The means employed by the petitioners,... however, is not
reasonably necessary for the accomplishment of this purpose and is unduly oppressive to private
rights.
The petitioners have not adequately shown, and it does not appear obvious to this Court, that an
80% see-thru fence would provide better protection and a higher level of security, or serve as a more
satisfactory criminal deterrent, than a tall solid concrete wall. It may even be... argued that such
exposed premises could entice and tempt would-be criminals to the property, and that a see-thru
fence would be easier to bypass and breach. It also appears that the respondents' concrete wall has
served as more than sufficient protection over the last 40 years.
`
As to the beautification purpose of the assailed ordinance, as previously discussed, the State may
not, under the guise of police power, infringe on private rights solely for the sake of the aesthetic
appearance of the community. Similarly, the Court cannot perceive how a... see-thru fence will foster
"neighborliness" between members of a community.
Compelling the respondents to construct their fence in accordance with the assailed ordinance is,
thus, a clear encroachment on their right to property, which necessarily includes their right to decide
how best to protect their property.
It also appears that requiring the exposure of their property via a see- thru fence is violative of their
right to privacy, considering that the residence of the Benedictine nuns is also located within the
property. The right to privacy has long been considered a fundamental... right guaranteed by the
Constitution that must be protected from intrusion or constraint. The right to privacy is essentially the
right to be let alone,[37] as governmental powers should stop short of certain intrusions into the
personal life of its... citizens
Considering the invalidity of Sections 3.1 and 5, it is clear that the petitioners were acting in excess
of their jurisdiction in enforcing Ordinance No. 1 92 against the respondents. The CA was correct in
affirming the decision of the RTC in issuing the writ of prohibition. The... petitioners must
permanently desist from enforcing Sections 3.1 and 5 of the assailed ordinance on the respondents'
property in Marikina City.
Principles:
The test of a valid ordinance... substantive requirements: (1) must not contravene the Constitution or
any statute; (2) must not be unfair or oppressive; (3) must not be partial or discriminatory; (4) must
not prohibit but may regulate trade;
(5) must be general and consistent with public policy; and (6) must not be unreasonable.
Social Justice Society (SJS) v. Atienza, Jr.:[28]
As with the State, local governments may be considered as having properly exercised their police
power only if the following requisites are met: (1) the interests of the public generally, as
distinguished from those of a particular class, require its exercise and (2)... the means employed are
reasonably necessary for the accomplishment of the purpose and not unduly oppressive upon
individuals. In short, there must be a concurrence of a lawful subject and lawful method.
Lacking a concurrence of these two requisites, the police power measure shall be struck down as an
arbitrary intrusion into private rights and a violation of the due process clause.

3. Ludo & Luyn Development Corp. v. Barreto

G.R. No. 147266, Sept. 30, 2005
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A. IMMOVABLE vs. MOVABLE

4. Leung Yee v. Strong Machinery Co., G.R. No. L-11658, Feb. 15, 1918

Facts:
Leung Yee’s company bought cleaning equipment from the defendant machinery company. As
payment, it executed a chattel mortgage in favour of the defendant on its building in which the
machinery was installed. This mortgage made no reference as to the land from where the property
was located. Since the plaintiff’s company, was not able to pay, the building together with the
equipment attached to it was foreclosed and the respondent was able to possess the property.
Hence, this action by the plaintiff to recover possession of the building.

Issue: Whether or not the building can be classified as a real property, so as to subject it to a real
estate mortgage

Held:

The disputed building was considered by the court as Real property.

The mere fact that the parties seem to have dealt with it separately and apart from the land would
change its character as real property. Hence, such mortgage would still be a real estate mortgage
for the building that served as a security and the executed chattel mortgage and its consequences
cannot be said to have any legal effect.
Leung Yee v. Strong Machinery Co. 37 Phil. 644

FACTS: The “Compania Agricola Filipina” purchased from “Strong Machinery Co.” rice-cleaning
machines which the former installed in one of its buildings. As security for the purchase price, the
buyer executed a CHATTEL MORTGAGE on the machines and the building on which they had been
installed. Upon buyer’s failure to pay, the registered mortgage was foreclosed, and the building was
purchased by the seller, the “Strong Machinery Co.” This sale was annotated in the Chattel
Mortgage Registry.

Later, the “Agricola” also sold to “Strong Machinery” the lot on which the building had been
constructed. This sale was not registered in the Registry of Property BUT the Machinery Co. took
possession of the building and the lot. Previously however, the same building had been purchased
at a sheriff’s sale by Leung Yee, a creditor of “Agricola,” although Leung Yee knew all the time of the
prior sale in favor of “Strong Machinery.” This sale in favor of Leung Yee was recorded in the
Registry. Leung Yee now sues to recover the property from “Strong Machinery.” Issue: who has a
better right to the property?

HELD: The building is real property, therefore, its sale as annotated in the Chattel Mortgage Registry
cannot be given the legal effect of registration in the Registry of Real Property. The mere fact that
the parties decided to deal with the building as personal property does not change its character as
real property. Thus, neither the original registry in the chattel mortgage registry, nor the annotation in
said registry of the sale of the mortgaged property had any effect on the building. However, since the
land and the building had first been purchased by “Strong Machinery” (ahead of Leung Yee), and
this fact was known to Leung Yee, it follows that Leung Yee was not a purchaser in good faith, and
should therefore not be entitled to the property. “Strong Machinery” thus has a better right to the
property.
5. Lopez v. Orosa, Jr., et. al., G.R. No. L-10817, Feb. 28, 1958

Facts:

After agreeing to make an investment in Orosa’s theatre business and his assurance that he would
be personally liable for any account that the said construction might incur, Lopez delivered the
lumber which was used for the construction of the Plaza Theatre. But of the total cost of the
materials amounting to P62,255.85, Lopez was paid only P20848.50.

Plaza Theatre was erected on a piece of land formerly owned by Orosa, and was acquired by the
corporation. As Lopez was pressing Orosa for payment of remaining unpaid obligation, the latter
promised to obtain a bank loan by mortgaging the properties of Plaza Theatre. Unknown to Lopez,
the corporation already got a loan from a bank with Luzon Surety Company as surety, and the
corporation in turn executed a mortgage on the land and building in favor of said company as
counter-security.

Persistent demand from Lopez caused Orosa to execute an alleged “deed of assignment” of his 480
shares of stock of Plaza Theatre, at P100 per share; and as the obligation still remain unsettled,
Lopez filed a complaint against Orosa and Plaza Theatre Inc, praying that xxx in case defendants
fail to pay, the building and land owned by corporation be sold at public auction, or the shares of the
capital stock be sold, and the proceeds thereof be applied to said indebtedness.

As a defense, Orosa contended that the shares of stocks were personal properties and cannot be
made to cover and satisfy the obligation. it was thus prayed that he be declared exempted from
payment of deficiency in case the proceeds from the sale of properties are not enough.

The surety company, upon discovery that the land was already registered, file a petition to annotate
the rights and interests of the surety company over the said properties, which was opposed by
Lopez who asserted that he has preferred lien over the properties.

The two cases were heard jointly, and lower court held that Orosa were liable for the unpaid balance
of the cost of lumber used in the construction, and Lopez thus acquired materialman’s lien over it. In
making the pronouncement that tyhe lien was merely confined to the building and did not extend to
the land where it was built, the trial jduge took into consideration that xxx codal provisions specifying
that refection credits are preferred could refer to buildings which are also classified as real properties
upon which the refaction was made. Orosa were thus required to xxx with respect tohe building,
said mortgage was subject to materialmen’s lien in favor of Lopez.

Lopez tried to secure a modification of decision in so far as it declared that lien did not extend to the
land, but was denied by court. Hence, the appeal.

Issue:

Whether a materialmen’s lien for the value of materials used in the construction of building attaches
to said structure alone, and does not extend to the land on which building is adhered to.

Held:

Yes. Such lien attaches to structure alone, and does not extend to the land where the building is.
In view of employment of the phrase, “real estate or immovable property”, and in as much as said
provision does not contain any specification delimiting the lien to the building, said article must be
construed as to embrace both the land and building or the structure adhering thereto. SC cannot
subscribe to this view, for while it is true that real estate connotes land and building constructed
thereon, it is obvious that the inclusion of the building, separate and distinct from the land, in the
enumeration of what may constitute real properties could mean only one thing – that the building is
by itself an immovable property. Moreover, in view of the absence of any specific provision of law to
the contrary, a building is an immovable property, irrespective of whether or not said structure and
the land on which it is adhered to belong to the same owner.

A close examination of the provision of the Civil Code reveals that the law gives preference to
unregistered refectionary credits only with respect to the real estate upon the refection or work was
made. The conclusion is that it must be that the lien so created attaches merely to the immovable
property for the construction or repair of which the obligation was incurred. Therefore, the lien in
favor of appellant for the unpaid value of the lumber used in construction of the building attaches
only to said structure and to no other property of the obligors.

Wherefore, and on the strength of the foregoing considerations, the decision appealed from is
hereby affirmed, with costs against appellant. It is so ordered.

6. Bicerra v. Teneza, G.R. No. L-16218, Nov. 29, 1962

FACTS: The Bicerras are supposedly the owners of the house worth P200, built on a lot owned by
them in Lagangilang, Abra; which the Tenezas forcibly demolished in January 1957, claiming to be
the owners thereof. The materials of the house were placed in the custody of the barrio lieutenant.
The Bicerras filed a complaint claiming actual damages of P200, moral and consequential damages
amounting to P600, and the costs. The CFI Abra dismissed the complaint claiming that the action
was within the exclusive (original) jurisdiction of the Justice of the Peace Court of Lagangilang, Abra.

ISSUE:

W/N the action involves title to real propety.

W/N the dismissal of the complaint was proper.

HELD:

The Supreme Court affirmed the order appealed. Having been admitted in forma pauperis, no costs
were adjudged.

1. House is immovable property even if situated on land belonging to a different owner; Exception,
when demolished

A house is classified as immovable property by reason of its adherence to the soil on which it is built
(Article 415, paragraph 1, Civil Code). This classification holds true regardless of the fact that the
house may be situated on land belonging to a different owner. But once the house is demolished, as
in this case, it ceases to exist as such and hence its character as an immovable likewise ceases.
2. Recovery of damages not exceeding P2,000 and involving no real property belong to the Justice
of the Peace Court

The complaint is for recovery of damages, the only positive relief prayed for. Further, a declaration of
being the owners of the dismantled house and/or of the materials in no wise constitutes the relief
itself which if granted by final judgment could be enforceable by execution, but is only incidental to
the real cause of action to recover damages. As this is a case for recovery of damages where the
demand does not exceed PhP 2,000 and that there is no real property litigated as the house has
ceased to exist, the case is within the jurisdiction of the Justice of the Peace Court (as per Section
88, RA 296 as amended) and not the CFI (Section 44, id.)

BICERRA v TENEZA G.R. No. L-16218 November 29, 1962

Facts:

Appellants were the owners of the house, worth P200.00, built on and owned by them and situated
in the said municipality Lagangilang; that sometime in January 1957 appealed forcibly demolished
the house, claiming to be the owners thereof; that the materials of the house, after it was dismantled,
were placed in the custody of the barrio lieutenant of the place; and that as a result of appellate's
refusal to restore the house or to deliver the material appellants the latter have suffered damages.

Issue:

W/N the action involves title to real property.

Ruling/ Rationale:

A house is classified as immovable property by reason of its adherence to the soil on which it is built
(Art. 415, par. 1, Civil Code). This classification holds true regardless of the fact that the house may
be situated on land belonging to a different owner. But once the house is demolished, as in this
case, it ceases to exist as such and hence its character as an immovable likewise ceases.

7. Prudential Bank v. Panis, G.R. No. L-50008, Aug. 31, 1988

Facts:

Spouses Magcale secured a loan from Prudential Bank. As security, respondent’s spouses executed
a real estate mortgage, their residential building as security. Since the respondents was not able to
fulfil their obligation, the security was extrajudiciaily foreclosed and was eventually sold in a public
auction. Hence this case, to assail the validity of the mortgage and to recover the foreclosed land.

Issue:

Whether or not a real estate mortgage can be instituted on the building of a land belonging to
another
Held:

While it is true that a mortgage of land necessarily includes in the absence of stipulation of the
improvements thereon, buildings, still a building in itself may be mortgaged by itself apart from the
land on which it is built. Such a mortgage would still be considered as a REM for the building would
still be considered as immovable property even if dealt with separately and apart from the land. The
original mortgage on the building and right to occupancy of the land was executed before the
issuance of the sales patent and before the government was divested of title to the land. Under the
foregoing, it is evident that the mortgage executed by private respondent on his own building was a
valid mortgage.

PRUDENTIAL BANK V. PANIS G.R. No. L-50008 August 31, 1987

153 SCRA 390

FACTS:

Spouses Magcale secured a loan from Prudential Bank. To secure payment, they executed a real
estate mortgage over a residential building. The mortgage included also the right to occupy the lot
and the information about the sales patent applied for by the spouses for the lot to which the building
stood. After securing the first loan, the spouses secured another from the same bank. To secure
payment, another real estate mortgage was executed over the same properties.

The Secretary of Agriculture then issued a Miscellaneous Sales Patent over the land which was later
on mortgaged to the bank.

The spouses then failed to pay for the loan and the REM was extrajudicially foreclosed and sold in
public auction despite opposition from the spouses. The respondent court held that the REM was
null and void.

ISSUE:

Whether or not a valid RE mortgage can be constituted on the building erected on the belonging to
another.

HELD:

A real estate mortgage can be constituted on the building erected on the land belonging to another.

The inclusion of building distinct and separate from the land in the Civil Code can only mean that the
building itself is an immovable property.

While it is true that a mortgage of land necessarily includes in the absence of stipulation of the
improvements thereon, buildings, still a building in itself may be mortgaged by itself apart from the
land on which it is built. Such a mortgage would still be considered as a REM for the building would
still be considered as immovable property even if dealt with separately and apart from the land.

The original mortgage on the building and right to occupancy of the land was executed before the
issuance of the sales patent and before the government was divested of title to the land. Under the
foregoing, it is evident that the mortgage executed by private respondent on his own
building was a valid mortgage.

As to the second mortgage, it was done after the sales patent was issued and thus prohibits
pertinent provisions of the Public Land Act.

8. MANARANG V. OFILADA, G.R. No. L-8133, May 18, 1956

99 SCRA 108

FACTS:

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

This prompted Manarang to bring this suit to compel the sheriff to accept payment. He averred that
the publication was unnecessary as the house should be considered as personal property per
agreement in the chattel mortgage, and the publication for notice of sale is unnecessary.

ISSUE:

W/N the fact that the parties entering into a contract regarding a house gave said property the
consideration of personal property in their contract, binding the sheriff in advertising the property's
sale at public auction as personal property.

HELD:

There is no question that a building of mixed materials may be a subject of chattel mortgage, in
which case it is considered as between the parties as personal property.

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

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

Facts:

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

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

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

Issue:

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

Held:

The house is a real property.

The general principle of law is that a building permanently fixed to the freehold becomes part of it;
that is, a house is a real estate belonging to the owner of the land on which it stands, even though it
was erected against his will or without his consent. (Accessory follows the principal.)

However, where improvement is made with the consent of the landowner, it shall remain as personal
property.

In determining whether property remains personal or real, the following must be considered: its
annexation to the soil, either actual or constructive and the intention of the parties.

The house was made subject of a contract but it does not give the character of one of personal
property to it although it is the intention of the parties when they executed the chattel mortgage.

This is because the rules on execution does not allow special consideration that the parties to a
contract may have desired to impart to real estate when they are not ordinarily so. When the rules
speak of personal property, it means a property which is ordinarily considered as such and when it
speaks of real property, it means property which is generally known as real property. The rules were
never intended to suit the consideration that parties may have given to the property levied upon.

The mere fact that a house was the subject of a chattel mortgage and was considered as personal
property by the parties, it does not make the house a personal property for purposes of the notice to
be given for its sale at public auction. This is to prevent confusion and misunderstanding.

9. Luna v. Encarnacion, G.R. No. L-4637, June 30, 1952.

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10. Sibal v. Valdez, G.R. No. L-26278, August 4, 1927

Ponente: Johnson
Facts:

Sibal alleged that Mamawal, deputy sheriff of Tarlac attached and sold to Valdez the sugar cane
planted by Sibal on several parcels of land. Valdez refused to returned the cane and money to Sibal.
As 2nd cause of action, Sibal alleged that Valdez was attempting to harvest the palay planted in four
of the seven parcels of land mentioned. The court after hearing both parties, issued the writ of
preliminary injunction prayed for in the complaint.

The defendant Emiliano J. Valdez, in his amended answer, denied generally and specifically each
and every

allegation of the complaint and step up the following defenses:

(a) That the sugar cane in question had the nature of personal property and was not, therefore,
subject to redemption;

(b) That he was the owner of parcels 1, 2 and 7 described in the first cause of action of the
complaint;

(c) That he was the owner of the palay in parcels 1, 2 and 7; and

(d) That he never attempted to harvest the palay in parcels 4 and 5. After hearing the evidence,
Judge Lukban rendered in favor of the defendants.

Issue:

(1) Whether the sugar cane is personal or real property?

Held:

It is contended that sugar cane comes under the classification of real property as "ungathered
products" in paragraph 2 of article 334 of the Civil Code. Said paragraph 2 of article 334 enumerates
as real property the following: Trees, plants, and ungathered products, while they are annexed to the
land or form an integral part of any immovable property." That article, however, has received in
recent years an interpretation by the Tribunal Supremo de España, which holds that, under certain
conditions, growing crops may be considered as personal property.

In some cases, "standing crops" may be considered and dealt with as personal property. In the case
of Lumber Co. vs. Sheriff and Tax Collector (106 La., 418) the Supreme Court said: "True, by article
465 of the Civil Code it is provided that 'standing crops and the fruits of trees not gathered and trees
before they are cut down . . . are considered as part of the land to which they are attached, but the
immovability provided for is only one in abstracto and without reference to rights on or to the crop
acquired by others than the owners of the property to which the crop is attached. . . . The existence
of a right on the growing crop is a mobilization by anticipation, a gathering as it were in advance,
rendering the crop movable quoad the right acquired therein. Our jurisprudence recognizes the
possible mobilization of the growing crop."

For the purpose of attachment and execution, and for the purposes of the Chattel Mortgage Law,
"ungathered products" have the nature of personal property. SC lowered the award for damages to
the defendant to 8,900.80 by acknowledging the fact that some of the sugar canes were owned by
the petitioner and by reducing the calculated expected yield or profit that defendant would have
made if petitioner did not judicially prevent him from planting and harvesting his lands.

Sibal vs. Valdez (G.R. No. L-26278, August 4, 1927)

JOHNSON, J.:

Facts: Plaintiff alleged that the defendant Vitaliano Mamawal, deputy sheriff of the Province of
Tarlac, attached and sold to the defendant Emiliano J. Valdez the sugar cane planted by the plaintiff
and his tenants on parcels of land.

Within one year from the date of the attachment and sale the plaintiff offered to redeem said sugar
cane and tendered to the defendant Valdez the amount sufficient to cover the price paid by the
latter, the interest thereon and any assessments or taxes which he may have paid thereon after the
purchase, and the interest corresponding thereto and that Valdez refused to accept the money and
to return the sugar cane to the plaintiff.

Plaintiff alleged that the defendant Emiliano J. Valdez was attempting to harvest the palay planted in
four of the seven parcels of land and that he had harvested and taken possession of the palay in one
of said seven parcels and in another parcel and that all of said palay belonged to the plaintiff.

Plaintiff prayed that a writ of preliminary injunction be issued against the defendant Emiliano J.
Valdez his attorneys and agents, restraining them (1) from distributing him in the possession of the
parcels of land described in the complaint; (2) from taking possession of, or harvesting the sugar
cane in question; and (3) from taking possession, or harvesting the palay in said parcels of land.

Plaintiff also prayed that a judgment be rendered in his favor and against the defendants ordering
them to consent to the redemption of the sugar cane in question, and that the defendant Valdez be
condemned to pay to the plaintiff the sum of P1,056 the value of palay harvested by him in the two
parcels of land, with interest and costs.

The trial court rendered a judgment against the plaintiff and in favor of the defendants. It appeared
that the eight parcels of land belonging to Sibal were attached and Macondray Co., Inc. bought the
eight parcels of land. Within 1 year from the sale, Sibal paid Macondray Co., Inc. for the account of
the redemption price.

The deputy sheriff attached the personal property of Sibal, which included the sugar cane now in
question in the seven parcels of land. Said personal properties were sold to Valdez in a public
auction. Real property of Sibal was also attached, consisting of 11 parcels of land, 8 of which were
bought by Valdez in an auction held by the sheriff. The remaining 3 parcels were released by virtue
of claims of Cuyugan and Tizon.

On that same date, Macondray sold all of its rights to Valdez in the eight parcels of land acquired, for
the unpaid balance of the redemption price of said eight parcels of land. Valdez became the
absolute owner of the land.

Issue: Whether or not pending crops which have potential existence may be the valid subject matter
of a sale.
Held: Yes, it can be a valid subject matter of a sale.

From an examination of the reports and codes of the State of California and other states we find that
the settle doctrine followed in said states in connection with the attachment of property and
execution of judgment is, that growing crops raised by yearly labor and cultivation are considered
personal property.

Mr. Floyd R. Mechem (He is the author of A Treatise on the Law of Sale of Personal Property) says
that a valid sale may be made of a thing, which though not yet actually in existence, is reasonably
certain to come into existence as the natural increment or usual incident of something already in
existence, and then belonging to the vendor, and then title will vest in the buyer the moment the
thing comes into existence. Things of this nature are said to have a potential existence.

A man may sell property of which he is potentially and not actually possessed. He may make a valid
sale of the wine that a vineyard is expected to produce; or the gain a field may grow in a given time;
or the milk a cow may yield during the coming year; or the wool that shall thereafter grow upon
sheep; or what may be taken at the next cast of a fisherman’s net; or fruits to grow; or young animals
not yet in existence; or the good will of a trade and the like. The thing sold, however, must be
specific and identified. They must be also owned at the time by the vendor. (Hull vs. Hull, 48 Conn.,
250 [40 Am. Rep., 165].)

The Supreme Court held that pending crops which have potential existence may be the valid subject
matter of sale and may be dealt with separately from the land on which they grow. Judgment
appealed from AFFIRMED.

11. Valdez v. Central Altagracia, 225 US 58

------

12. Davao Sawmill v. Castillo, G.R. No. L-40411, August 7, 1935

Facts:

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

In another action wherein the Davao Light & Power Co., Inc., was the plaintiff and the Davao, Saw,
Mill Co., Inc., was the defendant, a judgment was rendered in favor of the plaintiff in that action
against the defendant; a writ of execution issued thereon, and the properties now in question were
levied upon as personal 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
Davao Saw Mill v. Castillo G.R. No. L-40411 August 7, 1935

FACTS:

The Davao Saw Mill Co., Inc., operates a sawmill. 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 machines 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 lessee shall pass to the exclusive ownership of the lessor without any obligation on its
part to pay any amount for said improvements and buildings; also, in the event the lessee should
leave or abandon the land leased before the time herein stipulated, the improvements and buildings
shall likewise pass to the ownership of the lessor 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 lessor on the expiration or abandonment of the land leased.

In another action, wherein Davao Saw Mill 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 personal by the sheriff.

Davao Saw Mill 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.

ISSUE:

Whether or not the machinery in dispute is a personal property.

RULING:

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.

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.

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.

“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.”

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.

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

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

Issue:

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

Ruling/ Rationale:

Yes. The Supreme Court affirmed the decision of the lower court.

Machinery which is movable in its nature only becomes immobilized when placed in a plant by the
owner of the property or plant, but not when so placed by a tenant, a usufructuary, or any person
having only a temporary right, unless such person acted as the agent of the owner.

13. B.H. Berkenkotter v. Cu Unjieng, G.R. No. L-41643, July 31, 1935

G.R. No. L-41643 July 31, 1935

FACTS: This is an appeal taken by the plaintiff, B. H. Berkenkotter, from the judgment of the Court of
First Instance of Manila, dismissing said plaintiff’s complaint against Cu Unjieng e Hijos et al.

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

Shortly after said mortgage had been constituted, the Mabalacat Sugar Co., Inc., decided to
increase the capacity of its sugar central by buying additional machinery and equipment, so that
instead of milling 150 tons daily, it could produce 250. The estimated cost of said additional
machinery and equipment was approximately P100,000. B.A. Green, president of said corporation,
proposed to the plaintiff, B.H. Berkenkotter, to advance the necessary amount for the purchase of
said machinery and equipment, promising to reimburse him as soon as he could obtain an additional
loan from the mortgagees, the herein defendants Cu Unjieng e Hijos. Berkenkotter agreed to the
said proposition and delivered to him a total sum of P25,750. Berkenkotter had a credit of P22,000
against said corporation for unpaid salary. With the loan of P25,750 and said credit of P22,000, the
Mabalacat Sugar Co., Inc., purchased the additional machinery and equipment now in litigation.

B.A. Green, president of the Mabalacat Sugar Co., Inc., applied to Cu Unjieng e Hijos for an
additional loan of P75,000 offering as security the additional machinery and equipment acquired by
said B.A. Green and installed in the sugar central after the execution of the original mortgage deed,
together with whatever additional equipment acquired with said loan. B.A. Green failed to obtain said
loan.

Appellants contention: the installation of the machinery and equipment claimed by him in the sugar
central of the Mabalacat Sugar Company, Inc., was not permanent in character inasmuch as B. A.
Green, in proposing to him to advance the money for the purchase thereof, that in case B. A. Green
should fail to obtain an additional loan from the defendants Cu Unjieng e Hijos, said machinery and
equipment would become security therefor.

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

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

Article 334, paragraph 5, of the Civil Code gives the character of real property to “machinery, liquid
containers, instruments

14. Machinery and Engineering Supplies v. CA & Pecson, G.R. No. L-7057,

Oct. 29, 1954

Issue:

W/N the equipment can be seized by the sheriff

15. THE STANDARD OIL COMPANY OF NEW YORK, petitioner, vs. JOAQUIN JARAMILLO, as
register of deeds of the City of Manila, respondent.

G.R. No. L-20329 March 16, 1923

Facts:

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

Issue:

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

Held:
Yes, it may be registered. The duties of a register of deeds in respect to the registration of chattel
mortgages are purely of a ministerial character, and he is clothed with no judicial or quasi-judicial
power to determine the nature of the property, whether real or personal, which is the subject of the
mortgage. Generally speaking, he should accept the qualification of the property adapted by the
person who presents the instrument for registration and should place the instrument on record, upon
payment of the proper fee, leaving the effects of registration to be determined by the court if such
question should arise for legal determination. The efficacy of the act of recording a chattel mortgage
consists in the fact that registration operates as constructive notice of the existence of the contract,
and the legal effects of the instrument must be discovered in the document itself, in relation with the
fact of notice. Registration adds nothing to the instrument, considered as a source of title, and
affects nobody’s rights except as a species of constructive notice.
16. Ago v. CA. G.R. No. L-17898, October 31, 1962

-------

17. PEOPLE'S BANK AND TRUST CO. vs. DAHICAN LUMBER COMPANY G.R. No. L-17500
May 16, 1967

G.R. No. L-17500 May 16, 1967

Facts:

On September 8, 1948, Atlantic Gulf & Pacific Company of Manila, a West Virginia corporation
licensed to do business in the Philippines sold and assigned all its rights in the Dahican Lumber
concession to Dahican Lumber Company - hereinafter referred to as DALCO - for the total sum of
$500,000.00, of which only the amount of $50,000.00 was paid. Thereafter, to develop the
concession, DALCO obtained various loans from the People's Bank & Trust Company amounting, as
of July 13, 1950, to P200,000.00. In addition, DALCO obtained, through the BANK, a loan of
$250,000.00 from the Export-Import Bank of Washington D.C., evidenced by five promissory notes
of $50,000.00 each, maturing on different dates, executed by both DALCO and the Dahican America
Lumber Corporation, a foreign corporation and a stockholder of DALCO,

As security for the payment of the abovementioned loans, on July 13, 1950 DALCO executed in
favor of the BANK a deed of mortgage covering five parcels of land situated in the province of
Camarines Norte together with all the buildings and other improvements existing thereon and all the
personal properties of the mortgagor located in its place of business in the municipalities of
Mambulao and Capalonga, Camarines Norte. On the same date, DALCO executed a second
mortgage on the same properties in favor of ATLANTIC to secure payment of the unpaid balance of
the sale price of the lumber concession amounting to the sum of $450,000.00. Both deeds contained
a provision extending the mortgage lien to properties to be subsequently acquired by the mortgagor.

Both mortgages were registered in the Office of the Register of Deeds of Camarines Norte. In
addition thereto DALCO and DAMCO pledged to the BANK 7,296 shares of stock of DALCO and
9,286 shares of DAMCO to secure the same obligation.

Upon DALCO's and DAMCO's failure to pay the fifth promissory note upon its maturity, the BANK
paid the same to the Export-Import Bank of Washington D.C., and the latter assigned to the former
its credit and the first mortgage securing it. Subsequently, the BANK gave DALCO and DAMCO up
to April 1, 1953 to pay the overdue promissory note.

After July 13, 1950 - the date of execution of the mortgages mentioned above - DALCO purchased
various machineries, equipment, spare parts and supplies in addition to, or in replacement of some
of those already owned and used by it on the date aforesaid. Pursuant to the provision of the
mortgage deeds quoted theretofore regarding "after acquired properties," the BANK requested
DALCO to submit complete lists of said properties but the latter failed to do so. In connection with
these purchases, there appeared in the books of DALCO as due to Connell Bros. Company
(Philippines) - a domestic corporation who was acting as the general purchasing agent of DALCO
-the sum of P452,860.55 and to DAMCO, the sum of P2,151,678.34.

On December 16, 1952, the Board of Directors of DALCO, in a special meeting called for the
purpose, passed a resolution agreeing to rescind the alleged sales of equipment, spare parts and
supplies by CONNELL and DAMCO to it.

On January 13, 1953, the BANK, in its own behalf and that of ATLANTIC, demanded that said
agreements be cancelled but CONNELL and DAMCO refused to do so. As a result, on February 12,
1953; ATLANTIC and the BANK, commenced foreclosure proceedings in the Court of First Instance
of Camarines Norte against DALCO and DAMCO.

Upon motion of the parties the Court, on September 30, 1953, issued an order transferring the
venue of the action to the Court of First Instance of Manila.

On August 30, 1958, upon motion of all the parties, the Court ordered the sale of all the machineries,
equipment and supplies of DALCO, and the same were subsequently sold for a total consideration of
P175,000.00 which was deposited in court pending final determination of the action. By a similar
agreement one-half (P87,500.00) of this amount was considered as representing the proceeds
obtained from the sale of the "undebated properties" (those not claimed by DAMCO and CONNELL),
and the other half as representing those obtained from the sale of the "after acquired properties".

ISSUE:

WON the "after acquired properties" were subject to the deeds of mortgage mentioned heretofore.
Assuming that they are subject thereto,

WON the mortgages are valid and binding on the properties aforesaid inspite of the fact that they
were not registered in accordance with the provisions of the Chattel Mortgage Law.

HELD:
Under the fourth paragraph of both deeds of mortgage, it is crystal clear that all property of every
nature and description taken in exchange or replacement, as well as all buildings, machineries,
fixtures, tools, equipments, and other property that the mortgagor may acquire, construct, install,
attach; or use in, to upon, or in connection with the premises - that is, its lumber concession - "shall
immediately be and become subject to the lien" of both mortgages in the same manner and to the
same extent as if already included therein at the time of their execution. Such stipulation is neither
unlawful nor immoral, its obvious purpose being to maintain, to the extent allowed by circumstances,
the original value of the properties given as security.

Article 415 does not define real property but enumerates what are considered as such, among them
being machinery, receptacles, instruments or replacements intended by owner of the tenement for
an industry or works which may be carried on in a building or on a piece of land, and shall tend
directly to meet the needs of the said industry or works. On the strength of the above-quoted legal
provisions, the lower court held that inasmuch as "the chattels were placed in the real properties
mortgaged to plaintiffs, they came within the operation of Art. 415, paragraph 5 and Art. 2127 of the
New Civil Code". In the present case, the characterization of the "after acquired properties" as real
property was made not only by one but by both interested parties. There is, therefore, more reason
to hold that such consensus impresses upon the properties the character determined by the parties
who must now be held in estoppel to question it.
18. Board of Assessment Appeals QC v. Meralco, G.R. No. L-15334, January

31, 1964

En Banc, Paredes (J): 8 concur, 1 concur in result, 1 took no part.

Facts:

On 20 October 1902, the Philippine Commission enacted Act 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 44 approved on 24 March 1903. Meralco
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 hydroelectric plant in the province of
Laguna to the City of Manila. Meralco has constructed 40 of these steel towers within Quezon City,
on land belonging to it.

On 15 November 1955, City Assessor of Quezon City declared the aforesaid steel towers for real
property tax under Tax Declaration 31992 and 15549. After denying Meralco’s petition to cancel
these declarations an appeal was taken by Meralco to the Board of Assessment Appeals of Quezon
City, which required Meralco to pay the amount of P11,651.86 as real property tax on the said steel
towers for the years 1952 to 1956. Meralco paid the amount under protest, and filed a petition for
review in the Court of Tax Appeals which rendered a decision on 29 December 1958, ordering the
cancellation of the said tax declarations and the City Treasurer of Quezon City to refund to Meralco
the sum of P11,651.86. The motion for reconsideration having been denied, on 22 April 1959, the
petition for review was filed.

Issue:
Whether or not the steel towers of an electric company constitute real property for the purposes of
real property tax.

Held:

The steel towers of an electric company don’t constitute real property for the purposes of real
property tax.

Steel towers are not immovable property under paragraph 1, 3 and 5 of Article 415.

The steel towers or supports 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 constructions
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 cannot 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 or
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 on the land in which the steel supports or towers
are constructed.

The Supreme Court affirmed the decision appealed from, with costs against the petitioners.

Board of Assessment Appeals

vs Manila Electronic Company

Ponente: Paredes

Facts:

October 1902, Philippine Commission enacted Act. No. 484 authorizing the Municipal Board of
Manila to grant a franchise to operate an electric street railway and electric light in Manila to the
most favorable bid. Swift was awarded the franchise on March 1903.

Meralco's electric power is transmitted by means of electric transmission wires which are fastened to
insulators on steel towers.

November 1955, city assessor of QC declared the steel towers (Espana, Kamuning and Kamias
towers) for real property tax. After the denial of Meralco's petition to cancel the declarations, an
appeal was taken to the Board of Assessment Appeals of QC, which required Meralco to pay real
property tax for year 1952-1956. Meralco paid the amount under protest, and filed for review in CTA
which rendered a decision to cancel the tax declarations and refund Meralco. The motion for
reconsideration was denied too, an instant petition for review was filed.

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.

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 ...

It is evident, 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.

Issue: Whether the steel towers constitute real properties, so that they can be subject to real
property tax.

Article 415 of the Civil Code; the following are immovable property:

(1) Land, buildings, roads, and constructions of all kinds adhered to the soil;

xxxxxxxxx

(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;

xxxxxxxxx

(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;

Held:

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 cannot 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.

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.

CTA erred.

19. Philippine Refining Co. v. Jarque, G.R. No. L-41506, March 25, 1935

Doctrine:

It is essential that a record of documents affecting the title to a vessel be entered in the record of the
Collector of Customs at the port of entry. Otherwise a mortgage on a vessel is generally like other
chattel mortgages as to its requisites and validity

Facts:

Philippine Refining Co., Inc., and Francisco Jarque executed three mortgages on the motor vessels
Pandan and Zaragoza. These documents were recorded in the record of transfers and
incumbrances of vessels for the port of Cebu and each was therein denominated a "chattel
mortgage".

Neither of the first two mortgages had appended an affidavit of good faith. The third mortgage
contained such an affidavit, but this mortgage was not registered in the customs house until the
period of thirty days prior to the commencement of insolvency proceedings against Francisco
Jarque;

A fourth mortgage was executed by Francisco Jarque and Ramon Aboitiz on the motorship
Zaragoza and was entered in the chattel mortgage registry of the register of deeds on within the
thirty-day period before the institution of insolvency proceedings.

Francisco was declared an insolvent with the result that an assignment of all the properties of the
insolvent was executed in favor of Jose Corominas.

Judge Jose M. Hontiveros declined to order the foreclosure of the mortgages, but on the contrary
sustained the special defenses of fatal defectiveness of the mortgages.

Issue:

Whether or not the mortgages were defective.

Yes. Vessels are considered personal property under the civil law. Similarly, under the common law,
vessels are personal property although occasionally referred to as a peculiar kind of personal
property. They are subject to mortgage agreeably to the provisions of the Chattel Mortgage Law.

The only difference between a chattel mortgage of a vessel and a chattel mortgage of other
personalty is that it is not now necessary for a chattel mortgage of a vessel to be noted in the
registry of the register of deeds, but it is essential that a record of documents affecting the title to a
vessel be entered in the record of the Collector of Customs at the port of entry. Otherwise a
mortgage on a vessel is generally like other chattel mortgages as to its requisites and validity.

In the case, the absence of the affidavit vitiates a mortgage as against creditors and subsequent
encumbrancers. As a consequence, a chattel mortgage of a vessel wherein the affidavit of good faith
required by the Chattel Mortgage Law is lacking, is unenforceable against third persons.
20. McMicking v. Banco Espanol-Filipino, G.R. No. L-5029, April 1, 1909

-------
21. Arroyo v. Yu De Sane, G.R. No. L-31865, Feb. 28, 1930

22. Aleman v. De Catera, G.R. No. L-13693, March 25, 1961

23. Rubiso v. Rivera, G.R. No. L-15260, Aug. 18, 1920
24. THE HONGKONG & SHANGHAI BANKING CORPORATION, plaintiff-appellee, vs. ALDECOA
& CO G.R. No. L-8437 March 23, 1915

FACTS:

Aldecoa and Co. obtained a credit worth P450,000 from HSBC secured by a mortgage of shares and
real properties. On Dec. of 1906, the firm of Aldecoa and Co. went into liquidation and obtained
another P50,000 from the bank upon the condition that this would be covered by the previous
mortgage. In October 1908, Joaquin and Zoilo Ibañez de Aldecoa filed an action against the bank for
the purpose of annulling the mortgages executed by them on the grounds that they were minors at
the time incapable of creating a valid mortgage upon their real property. The Court of First Instance
dismissed the complaint as to Joaquin upon the ground that he had ratified those mortgages after
becoming of age, but entered a judgment annulling said mortgages with respect to Zoilo. Both
parties appealed from this decision and the case was still pending in the Supreme Court when
HSBC filed an action against Aldecoa and Co. and its partners for the collection of a sum of money
and foreclosure of the mortgaged properties. Judgement was entered in favor of the bank.

ISSUE:

Whether or not the action filed by the bank should be dismissed on the ground of lis pendens.

RULING:

No. A plea of the pendency of a prior action is not available unless the prior action is of such a
character that, had a judgment been rendered therein on the merits, such a judgment would be
conclusive between the parties and could be pleaded in bar of the second action.

In the instant case, the former suit is to annul the mortgages while the other one is for the
foreclosure. If the final judgment in the former action is that the mortgages be annulled, such an
adjudication will deny the right of the bank to foreclose the mortgages. But a valid decree will not
prevent the bank from foreclosing them. In such an event, the judgment would not be a bar to the
prosecution of the present action. The rule is not predicated upon such a contingency. It is
applicable, between the same parties, only when the judgment to be rendered in the action first
instituted will be such that, regardless of which party is successful, it will amount to res adjudicata
against the second action.

25. Presbitero v. Fernandez, G.R. No. L-19527, March 30, 1963

--------
26. US v. Tambunting, G.R. No. L-16513, Jan. 18, 1921

27. Hemnani v. Export Control Committee, G.R. No. L-8414, Feb. 28, 1957

-----

28. Chua Guan v. Samahang Magsasaka, G.R. No. L-42091, Nov. 2, 1935
29. Bachrach Motor v. Ledesma, G.R. No. L-42462, Aug. 31, 1937

L-42462 August 31, 1937

Lessons Applicable: Quasi-negotiable Character of Certificate of Stock (Corporate Law)

FACTS:

June 30, 1927: CFI favored Bachrach Motor Co., Inc (Bachrach) against Mariano Lacson Ledesma

Ledesma mortgaged to the Philippine National Bank (PNB) Talisay-Silay Milling Co., Inc shares

September 29, 1928: PNB brought an action against Ledesma and his wife Concepcion Diaz for the
recovery of a mortgage credit

January 2, 1929: PNB amended its complaint by including the Bachrach Motor Co., Inc., as party
defendant because they claim to have rights to some of the subject matters of this complaint

January 30, 1929: Bachrach field a gen. denial

CFI: favored PNB

December 20, 1929: Bachrach brought an action in the CFI against the Talisay-Silay Milling Co.,
Inc., to recover P13,850 against the bonus or dividend w/c, by virtue of the resolution of December
22, 1923, Central Talisay-Silay Milling Co., Inc., had declared in favor of Ledesma as one of the
owners of the hacienda which had been mortgaged to the PNB to secure the obligation of the
Talisay-Silay Milling Co., Inc. in favor of said bank
CFI: favored Bachrach

ISSUE: W/N shares of stock are personal property and therefore can be subject to pledge or chattel
mortgage

HELD: YES. AFIRMED

section 4 of the Chattel Mortgage Law, in so far as it provides that a chattel mortgage shall not be
valid against any person except the mortgagor, his executors or administrators, unless the
possession of the property is delivered to and retained by the mortgagee or unless the mortgage is
recorded in the office of the register of deeds of the province in which the mortgagor resides.

pledge of the 6,300 stock dividends is valid against the Bachrach because the certificate was
delivered to the creditor bank, notwithstanding the fact that the contract does not appear in a public
instrument

Certificates of stock or of stock dividends, under the Corporation Law, are quasi negotiable
instruments in the sense that they may be given in pledge or mortgage to secure an obligation

certificates of stock, while not negotiable in the sense of the law merchant, like bills and notes, are
so framed and dealt with as to be transferable, when property endorsed, by mere delivery, and as
they frequently convey, by estoppel against the corporation or against prior holders, as good a title to
the transferee as if they were negotiable, and inasmuch as a large commercial use is made of such
certificates as collateral security, and it is to the public interest that such use should be simplify and
facilitated by placing them as nearly as possible on the plane of commercial paper, they are often
spoken of and treated as quasi negotiable, that is as having some of the attributes and partaking of
the character of negotiable instruments, in passing from hand to hand, especially where they are
accompanied by an assignment and power of attorney, executed in blank, to transfer them to
anyone who may obtain possession as holders, even though such assignment and power are under
seal.

Bachrach Motor v. Ledesma, G.R. No. L-42462, Aug. 31, 1937

Held:

30. Black Eagle Mining v. Conroy, 221 Pac, 425, 426

------

Additional Case:

31. MANILA ELECTRIC COMPANY, Petitioner, v. THE CITY ASSESSOR AND CITY
TREASURER OF LUCENA CITY, Respondents.

G.R. No. 166102, August 05, 2015

FACTS:

On February 20, 1989, MERALCO received from the City Assessor of Lucena a notice that electric
facilities, classified as capital investment of the company: (a) transformer and electric post; (b)
transmission line; (c) insulator; and (d) electric meter, were subjected to real property tax as of 1985.
MERALCO appealed the Tax Declaration before the LBAA of Lucena City and claimed that its
capital investment consisted only of its substation facilities and that MERALCO was exempted from
payment of real property tax on said substation facilities.

The LBAA rendered a Decision finding that MERALCO was required to pay the City Government of
Lucena a 5% tax of its gross earnings, whereas the poles, wires, insulators, transformers, and
electric meters of MERALCO, these were real properties and held that: (1) the steel towers fell within
the term “poles” expressly exempted from taxes under the franchise of MERALCO; and (2) the steel
towers were personal properties under the provisions of the Civil Code and, hence, not subject to
real property tax.

The City Assessor of Lucena filed an appeal with the CBAA, which the CBAA affirmed the LBAA
judgment and which became final and executory.

MERALCO again received a letter from the City Treasurer of Lucena six years later, which they were
being assessed for real property delinquency on its machineries beginning 1990. MERALCO argues
that its transformers, electric posts, transmission lines, insulators, and electric meters are not subject
to real property tax, given that the definition of “machinery” under Section 199(o) of the Local
Government Code, on which real property tax is imposed, must still be within the contemplation of
real or immovable property under Article 415 of the Civil Code because it is axiomatic that a statute
should be construed to harmonize with other laws on the same subject matter as to form a complete,
coherent, and intelligible system.

ISSUE:

Whether MERALCO is liable for real property tax on its transformers, electric posts (or poles),
transmission lines, insulators, and electric meters, beginning 1992.

HELD:

No. MERALCO is a public utility engaged in electric distribution, and its transformers, electric posts,
transmission lines, insulators, and electric meters constitute the physical facilities through which
MERALCO delivers electricity to its consumers. Each may be considered as one or more of the
following: a “machine,” “equipment,” “contrivance,” “instrument,” “appliance,” “apparatus,” or
“installation.”

Article 290(o) of the Rules and Regulations Implementing the Local Government Code of 1991
recognizes the following exemption:

Machinery which are of general purpose use including but not limited to office equipment,
typewriters, telephone equipment, breakable or easily damaged containers (glass or cartons),
microcomputers, facsimile machines, telex machines, cash dispensers, furnitures and fixtures,
freezers, refrigerators, display cases or racks, fruit juice or beverage automatic dispensing machines
which are not directly and exclusively used to meet the needs of a particular industry, business or
activity shall not be considered within the definition of machinery under this Rule. (Emphasis
supplied.)

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;

xxxx

(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;

xxxx

(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;

xxxx

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
constructions 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 or 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 on the land in which the steel supports or towers are constructed. (Emphases supplied.)

The aforequoted conclusions of the Court in the 1964 MERALCO case do not hold true anymore
under the Local Government Code. Therefore, for determining whether machinery is real property
subject to real property tax, the definition and requirements under the Local Government Code are
controlling.

MERALCO maintaining that electric posts are not machinery subject to real property tax because
these are not exclusively used by MERALCO but likewise by other cable and telephone companies,
is however a factual issue with the Court cannot take cognizance as it is nota trier of facts. The issue
is best left to the determination of the City Assessor or his deputy who has been granted authority to
take evidence under Article 304 of the Rules and Regulations Implementing the Local Government
Code of 1991.

The Court finds that the transformers, electric posts, transmission lines, insulators, and electric
meters of MERALCO are no longer exempted from real property tax and may qualify as “machinery”
subject to real property tax under the Local Government Code. Nevertheless, the Court declares null
and void the appraisal and assessment of said properties of MERALCO by the City Assessor in
1997 for failure to comply with the requirements of the Local Government Code and, thus, violating
the right of MERALCO to due process.

Nevertheless, the appraisal and assessment of the transformers, electric posts, transmission lines,
insulators, and electric meters of MERALCO as machinery under Tax Declaration were not in
accordance with the Local Government Code and in violation of the right to due process of
MERALCO and, therefore, null and void.