Property (Dean Navarro Batch 1 Cases) Ruby L. Tsai G.R. No. 120098 October 2, 2001 Quisimbing, J.

: Facts: On November 26, 1975 respondent Ever Textile Mills, Inc or EVERTEX obtained a 3,000,000php load from petitioner Philippine Bank of Communications or PBCom. As security for the loan EVERTEX executed in favor of PBCom deed of mortgage over a property where the factory stands and chattels located therein as enumerated in the contract namely: 48 units of Vayrow Knitting Machines-Tompkins made in Hongkong 16 sets of Vayrow Knitting Machines made in Taiwan 2 Circular Knitting Machines made in West Germany 4 Winding Machines

After 4 years PBCom granted a second loan of 3,356,000php to EVERTEX such loan was secured by a Chattel Mortgage over personal properties similar to those listed above. On November 19, 1982 due to business reverses, EVERTEX filed insolvency proceedings before the CFI of Pasay City. CFI issued an order declaring the corporation as insolvent thus all its assets were taken into the custody of the Insolvency Court including the collateral for the loans made between PBCom and EVERTEX. PBCom made an extrajudicial foreclosure proceeding against EVERTEX for failure of EVERTEX to meet its obligation in the contract of loan. PBCom became the highest bidder and a Certificate of Sale was issued in its favor thus on May 7, 1984 PBCom consolidated its ownership over the lot and all the properties in it. Ruby Tsai leased the entire factory for 50,000php per month from PBCom then on May 3, 1988 PBCom sold the factory to Tsai for 9,000,000php. EVERTEX averred that PBCom appropriated the contested properties without legal and factual basis because such properties as 14 Interlock Circular Knitting Machines, 1 Jet Drying Equipment, 1 Dryer Equipment, 1 Raisin Equipment and 1 Headset Equipment were not included in the contract of loan. RTC found the lease and sale were irregular and illegal thus the sale was annulled. CA affirmed the decision of the RTC with the reduction of actual damages from 100,000 to 20,000 per month hence, this petition. Issue: Whether or not the machineries are Real properties deemed part of the Mortgage Held: No, though the machineries were heavy, bolted and cemented on the real property mortgaged by EVERTEX to PBCom do not foreclose the controversy. The Supreme Court had look into the intent of the parties. Both the RTC and CA found that the true intention of PBCom and the owner EVERTEX is to treat machinery and equipment as chattels. If the parties have intended to make the whole mortgage as Real they would have been no necessity to ink a chattel mortgage specifically mentioning the list of

machineries covered thereby. It would have sufficed to list them as immovable in the Deed of Real Estate Mortgage of the land and building involved. As far back as Navarro vs Pineda (1963) an immovable maybe considered a personal property if there is a stipulations when it is used as security in the payment of an obligation where a chattel mortgage is executed over it, as in the case at bar. Ruby Tsai cannot be considered as a purchaser in good faith because a purchaser in good faith is one who uys the property of another without notice that some other person has a right to or interest in such property and pays a full and fair price for the same at the time of purchase, or before he has notice of the claims or interest of some other person in the property. The records reveal that when Tsai purchased the properties she knew of the respondents claim as seen from the letter of the respondents counsel apprising her of respondents claim thus she was not in good faith. Sergs Product, INC vs PCI Leasing and Finance, INC G.R. No. 137705 August 22, 2000 Panganiban, J.: Facts: On February 13, 1998, respondent PCI filed with the RTC a complaint for a sum of money with an application for a writ of replevin. Respondent issued a writ of replevin directing its sheriff to seize and deliver the machineries and equipment to PCI leasing after5 days and upon the payment of the necessary expenses. Sheriff seized one of the machines with the word that he would return for the other machines. Petitioner filed a motion for special protective order 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. PCI opposed the motion and claimed that the properties were still personal and therefore still subject to seizure and a writ of replevin. Petitioner contened that the properties sought to be seized were immovable as defined in Article 415 of the Civil Code. The Sheriff was able to take two more machined but was prevented by the workers from taking the rest. A ceritiorari was filed before the CA thus the court held the subject machines were personal properties and that they had only been leased not owned by petitioners. Hence this petition. Issue: Whether or not the machines purchased and imported by SERGES are real property Held: No, at the case at bar the machines that were the subjects of the Writ of Seizure were placed by petitioners in the factory built on their own land. They were essential and principal elements of their chocolate making industry. Hence, although each of them was movable or personal property of it own, all of them have become immobilized by destination because they are essential and principal elements in the industry in that sense the petitioners are correct in arguing that the said machines are real and not personal property under Article 415 of the Civil Code but then again the contracting parties validly stipulate that the machines in question are to be considered as personal property as specified in Section 12.1 of their Agreement thus the petitioners are estopped from denying the characterization of the

subject machines as personal property. It should be stressed that the machines should be deemed personal property pursuant to the Lease Agreement is only good insofar as the contracting parties are concerened. 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 but in any event there is no showing that any specific third party would be adversely affected. Fels Energy, INC. vs The Province of Batangas G.R. No. 168557 February 16, 2007 Callejo, Sr., J.: Facts: NAPOCOR entered into a lease contract with Polar Energy, Inc over 3x30 MW diesel engine power barges moored at Balayan Bay in Calaca Batangas. The contract denominated as an Energy Conversion Agreement, was for a period of 5 years. Polar Every Inc assigned its rights under the Agreement to FELS. On August 7, 1996 FELS received an assessment of real property taxes on the power barges from the Provincial Assessor Lauro C. Andaya of Batangas City and the assessed tax due for 1994 amounted to 56,184,088.04 per annum. FELS referred the matter to NAPOCOR, reminding it of its obligation under to pay all real estate taxes as Article 10 of its Agreement with Polar Energy Inc. states. NAPOCOR filed a petition with the Local Board of Assessment Appeals for the setting aside of the assessment and the declaration of the barges as non-taxable items. In the answer to the petition Provincial Assessor averred that the barges were real property for purposes of taxation under Section 199(c) of RA No. 7160. LBAA argued that the barges are to be considered real property because they are installed at a specific location with a character of permanency. LBAA also pointed out that the owner of the barges-FELS is the one being taxed and not NPC. FELS appealed to the Central Board of Assessment Appeals (CBAA) who rendered a Decision finding the power barges exempt from real property taxes. Provincial Assessor filed a motion for reconsideration which was opposed by FELS and NPC. The CBAA issued a Resolution reversing the earlier decision and affirming the decision of the LBAA of Batangas. FELS filed a petition for review before the CA and NPC filed a separate petition for review. The petition for review was denied by the CA for lack of merit. Hence this petition. Issue: Whether or not the power barges, which are floating and movable, are personal properties and therefore not subject to real property tax Held: No, Article 415 (9) of the New Civil Code provides that docks and structures which, though floating are intended by their nature and object to remain at a fixed place on a river, lake, or coast are considered immovable property. Thus, power barges are categorized as immovable property by destination, being in the nature of machinery and other implements intended by the owner for an industry or work which may be carried on in a building or on a piece of land and which tend directly to meet the needs of said industry. However petitioner contends that the machineries are exempt from real estate tax under

Section 234 (c) of R.A. No. 7160 because they are actually, directly and exclusively used by petitioner NAPOCOR, a government owned and controlled corporation engaged in the supply, generation and transmission of electric power. Supreme Court finds such argument not with merit because under Section 2.11, Article 2 of the Agreement it states that the ownership of power barges shall be with Polar a private corporation which shall operate, manage maintain the power barges for the piurpose of converting Fuel of NAPOCOR into electricity. Thus FELS cannot find solace in the exemption found under Section 234 of R.A. 7160. On the undertaking of petitioner NPC under Section 10.1 of the Agreement, that it shall be responsible for the payment of all real estate taxes and assessments, does not justify the exemption. The privilege granted to petitioner NAPOCOR cannot be extended to FELS. The agreement is between FELS and NPC and does not bind a third person not privy thereto, in this case, the Province of Batangas. Prudential Bank vs Panis G.R. No. L-50008 August 31, 1987 Paras, J.: Facts: On November 19, 1971 plaintiffs-spouses Fernando A Magcale and Teodula Baluyut Magcale secured a loan in the sum of 70,000php from the defendant Prudential Bank. To secure payment of such loan the spouses executed in favor of the defendant bank a deed of Real Estate Mortgage over a 2-storey semiconcrete residential building with warehouse spaces containing a total floor area of 263 sq. meters and rights of occupancy on Lot No. 720 with an area of 465 sq. meters more or less. Prudential Bank was aware of the fact that the mortgagors have already filed a Miscellaneous Sales Application over the lot, possessory rights over which, were mortgaged to it. On May 2, 1973 plaintiffs secured an additional loan from Prudential Bank in the sum of 20,000php and the plaintiffs executed in favor of the said defendant another deed of Real Estate Mortgage over the same properties previously mortgaged. The Secretary of Agriculture issued a Miscellaneous Patent No, 4776 over the parcel of land, possessory rights over which were mortgaged to defendant Prudential Bank. Plaintiffs failed to pay their obligation thus the lands were extra judicially foreclosed. Petitioner bank became the highest bidder in the public auction. Trial Court declared the Real Estate Mortgage as null and void. Motion for reconsideration was filed but was denied due to lack of merit. Hence this instant petition to the Supreme Court. Issue: Whether or not a valid real estate mortgage can be constituted on the building erected on the land belonging to another Held: Yes, in the enumeration of properties under Article 415 of the Civil Code of the Philippines SC ruled that it is obvious that the inclusion of building separate and distinct from the land, in said provision of law can only mean that a building is by itself an immovable property. Thus, it is true that a mortgage of land necessarily includes, in the absence of stipulation of the improvements thereon, buildings, still a building

by itself maybe mortgaged apart from the land on which it has been built. Such mortgage would be still be a real estate mortgage. Makati Leasing Finance Corporation vs Wearever Textile Mills, Inc G.R. No. L-58469 May 16, 1983 De Castro, J.: Facts: A Financial accommodation from Makati Leasing Finance Corp was made by the private respondent Wearever Textile Mills. As security from the loan private respondent executed a Chattel Mortgage over certain raw materials inventory as well as a machinery described as an Artos Aero Dryer Stentering Range. Private Respondent defaulted thus petitioner filed a extrajudicial foreclosure of the properties motgage to it. Deputy Sheriff failed to enter into private respondents premises and was not able to effect the seizure on the machinery. Petitioner filed a complaint for judicial foreclosure with the CFI of Rizal. The court issued a writ of seizure which the Sheriff enforced. Sheriff removed the main drive motor of the subject machinery. Issue: Whether or not the machinery is a real property and not to be subject of replevin Held: No, it must be pointed out that the characterization of the subject machinery as chattel by the private respondent is indicative of intention impresses upon the property. 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. Private respondent is estopped from claiming that they never represented nor agreed that the machinery in suit be considered personal property but was merely required and dictated on by herein petitioner to sign a printed form of a chattel mortgage agreement which was in blank from at the time of signing because there is nothing on the record to show that the mortgage has been annulled neither there are steps that was taken to nullify the same. Private respondent undeniable benefited from said contract thus 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 he has benefited therefrom. Davao Sawmill Co. vs Castillo et al. Facts: Davao Sawmill Co., Inc., is a holder of lumber concession from the Government of the Philippine Island. It has operated a sawmill in sitio Maa, barrio of Tigatu municipality of Davao. However, the land upon which the business was conducted belonged to another person. Issue:

Whether or not the machinery mounted on foundation of cement and installed by the lessee on a lease of land be regarded as real property Held: No, a 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 an agent of the owner. Immobilization by destination or purpose cannot generally be made by a person whose possession of property is only temporary otherwise we will be forced to presume that he intended to give the property permanently away in favor of the owner of the premises. Tumalad vs Vicencio G.R. No. L-30173 September 30, 1971 Reyes, J.B.L., J.: Facts: On September 1, 1955 defendants-appellants executed a chattel mortgage in favor of the plaintiffappellees over their house of strong materials located in Quiapo, Manila which were being rented from Madrigal & Company, Inc. Such mortgage was made to guarantee a loan of 4,800.00php payable within one year at 12% interest per annum. Defendants defaulted in paying thus the mortgage was extra judicially foreclose and on March 27 1956 the house was sold at public auction pursuant to the said contract. Plaintiffs-appellees was declared as the highest bidder and was issued a corresponding certificate of sale. The lower court ruled in favor of the plaintiffs ordering them to pay 200php monthly until the premise is completely vacated. The said decision was appealed to the Court of Appeals which, in turn, certified the appeal to this Court. Issue: Whether or not the Chattel Mortgage is void ab initio because the subject matter is an immovable property Held: No, the principle of estoppel applies to herein defendants having treated the subject house as personal property. Though the contract itself did not expressly designated that it is a Chattel Mortgage; it specifically provides that the mortgagor voluntarily cedes, sells and transfer by way of Chattel Mortgage the property together with its leasehold rights over the lot on which it is constructed and participation Thus the defendants 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. Hence the decision appealed from is reversed and another one entered, dismissing the complaint. With costs against plaintiffs-appellees. Associated Insurance and Surety Company, Inc. vs Isabel Iya G.R. Nos. L-10837-38 May 30, 1958

Felix, J.: Facts: Adriano and Lucia Valino are husband and wife who are owners and possessors of a house of strong materials constructed in Caloocan, Rizal, They purchased it on installment basis from the Philippine Realty Corporation. To purchase on credit some rice from the NARIC, Lucia Valino filed a bond in the sum of 11,000php subscribed by the petitioner and as counter-guaranty thereof, the spouses executed an alleged chattel mortgage on the aforementioned house in favor of the surety company, which encumbrance was duly registered with the Chattel Mortgage Register of Rizal and at this time the parcel of land which the house was erected was still registered under the name of Philippine Realty Corporation. It is only on October 18, 1958 that the spouses were able to complete the payment on the lot. Lucia failed to satisfy the obligation to NARIC thus the surety company was compelled to pay the same pursuant to the undertaking of the bond. In turn, the surety company demanded reimbursement from the spouses which they failed to do thus the company foreclosed the chattel mortgage over the house. In the public auction the surety company was declared as the highest bidder. Sometime in July, 1953 the surety company learned of the existence of a real estate mortgage over the lot together with the improvements thereon thus the surety company instituted a civil action against the defendants and the mortgagee Isabel Iya. The spouses admitted that the chattel mortgage in favor of the surety company was first executed before the real estate mortgage and the building including thereon was not included in the real estate mortgage, Issue: Whether or not the Chattel Mortgage is valid Held: No, a building certainly cannot be divested of its character of realty by the fact that the land on which it is constructed belongs to another. The possibility is not remote that it would result in confusion, for to cloak the building with an uncertain status made dependent on the ownership of the land, would create a situation where a permanent fixture changes its nature or character as the ownership of the land changes hands. In the case at bar, personal properties could only be the subject of a chattel mortgage and as obviously the structure in question is not one thus the chattel mortgage covering said bulding is clearly invalid and null. The registration of the chattel mortgage of a building of strong materials produce no effect as far as the building is concerned thus the Supreme Court ruled in favor of Isabel Iya. Applying the proceeds of the sale in the public auction to the unsatisfied judgment of Isabel Iya and granting the right to foreclose not only the land but the building erected thereon. Mindanao Bus Company vs The City Assessor & Treasurer G.R. No. L-17870 September 29, 1962 Labrador, J.: Facts:

The City Assessor of Cagayan de Oro assessed at 4,400php as tax from the petitioner. Petitioner appealed that the property assessed are not realty. The machines sought to be assessed are as follows: Hobart Electric Welder Machine Storm Boring Machine Lathe Machine with motor Black and Decker Grinder PEMCO Hydraulic Press Battery charger D-Engine Waukesha-M-Fuel

These machines are sitting on cement or wooden platforms and were never used as industrial equipments to produce finished products for sale, nor to repair machineries, parts and the like offered to the general public indiscriminately for business or commercial purposes for which petitioner has never engaged in, to date. The CTA sustained the City Assessors ruling and having denied a motion for reconsideration, petitioner brought the case to the Supreme Court hence this appeal. Issue: Whether or not the machineries are real property Held: No, in the case at bar the tools and equipments in question are by their nature not essential and principle municipal elements of petitioners business of transporting passengers and cargoes by motor trucks. They are merely incidentals - acquired as movables and used only for expediency to facilitate and/or improve its service. Even without such tools and equipments, its business may carry on as petitioner has carried on without such equipments before the war. Thus the clause expressly adapted to meet the requirement of such trade or industry of Article 415 par (5) would not be applicable. Wherefore the decision of the petition for review is hereby set aside and the equipment in question declared not subject to assessment as real estate for the purposes of the real estate tax. Evangelista vs Alto Surety and Insurance Co., Inc., G.R. No. L-11139 April 23, 1958 Concepcion, J.: Facts: Santos Evangelista obtained a writ of attachment which levied upon a house built by Rivera on a land situated in Manila and leased to him. Judgment was rendered in favor of Evangelista who bought the house at a public auction held in compliance of the writ of execution issued in said case. The period of redemption expired and Rivera refused to surrender it upon the ground that he had leased the property from the respondent. And that the latter is now the true owner of said property. The records shows that the same house had been issued to respondent as the highest bidder at an auction sale held on September 29, 1950. CFI rendered a decision for Evangelista sentencing Rivera and respondent to

deliver the house in question to petitioner herein. Court of Appeals reversed the decision which absolved said respondent from the complaint, upon the ground that although the writ of attachment in favor of Evangelista has been filed with the Register of Deeds in Manila prior to the sale in favor of respondent. Evangelista did not acquire thereby a preferential lien, the attachment having been levied as if the house in question were immovable property although in the opinion of the CA it is a personal property. Issue: Whether or not the house is personal property Held: No, the house is not a personal property, much less a debt, credit or other personal property not capable of manual delivery, but an immovable property. A true building is immovable or real property, whether it is erected by the owner of the land or by usufructuary or lessee. It is true that the parties to a deed of chattel mortgage may agree to consider a house as personal property for purposes of said contract however this view is good only insofar as the contracting parties are concerned. It is based; partly, upon the principle of estoppel. Neither this principle nor said view is applicable to strangers to said contract. Much less is it in point where there has been no contract whatsoever, with respect to the status of the house involved, as in the case at bar. Thus the house in question is a real property. Sibal vs Valdez G.R. No. L-26278 August 4, 1927 Johnson, J.: Facts: A writ of execution issued by the CFI of Pampanga attached and sold to the defendant Emiliano Valdez the sugar cane planted by the plaintiff and his tenants on seven 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. Valdez refused to accept the money and to return the sugar cane form the plaintiff. According to the plaintiff Valdez was attempting to harvest the palay planted in four of the seven parcels mentioned earlier. That Valdez harvested and taken possession of the palay in one of the said parcels of land and in another amouting to 300 cavans and all of the said palay belonged to the plaintiff. According to Valdez the sugar cane in question had the nature of personal property and was not therefore subject to redemption. Trial Court ruled against the plaintiff. Issue: Whether or not the sugar cane are personal property and not subject to redemption Held:

Yes, the Supreme Court conclude that par2 of Article 334 (415) has been modified by section 450 of the Code of Civil Procedure and by Act No. 1508 in the sense that for the purpose of attachments and execution, and for the purposes of the Chattel Mortgage Law, ungathered products have the nature of personal property. The lower court therefore did not commit any error in holding that the sugar cane in question was personal property and, as such, was not subject to redemption. Board of Assessment Appeals vs Manila Electric Company G.R. No. L-15334 January 31, 1964 Paredes, J.: Facts: Meralco attached steels tower from its hydro-electric plant in Laguna to the City of Manila. 40 of those are within the area of Quezon City on a land belonging to it. On November 15, 1955 petitioner City Assessor of Quezon City declared the aforesaid steel towers as real property thus taxable under Tax declaration No. 31992 and 15549. The respondent was required to pay the amount 11,651.86 as real property tax on the said steel towers from the years 1952 to 1956. Respondent paid the amount in protest and filed a petition for review in the Court of Tax Appeals which cancelled the said tax declaration and the made the petitioner City Treasurer of Quezon City to refund to the respondent the amount which they paid. The motion for reconsideration was denied thus an instant petition was filed. Issue: Whether or not the steel towers are within the tax exemption under Act No. 484 Held: Yes, the word poles as used in the said act should not be given a restrictive and narrow interpretation, as to defeat the very object for which the franchise was granted. The word pole means a long comparatively slender usually cylindrical piece of wood or timber, as typically the stem of a small stree stripped of its branches. The poles contemplated thereon, should be understood and taken as a party of the electric power system of the respondent Meralco, for the conveyance of the electric current from the source thereof to its consumers. If should also be conceded by now that steel towers, like the ones in question for obvious reason, can better effectuate the purpose for which the respondents franchise was granted. Even if the our Tax laws does not define what real properties are under Article 415 of the Civil Code the steel towers in question do not come within the object mentioned in paragraph 1 because they do not constitute building or constructions adhered to the soil. They are not construction analogous to buildings no adhering to the soil. They are removable and merely attached to a square metal frame by means of bolts. They cannot also be included in 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. They would 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.