PRUDENTIAL BANK VS PANIS Facts: Magcales obtained a 70k loan from Prudential Bank secured by REM 2-storey building

ng with warehouses includes the right of occupancy on the lot where the above property is erected rider provision: AND IT IS FURTHER AGREED that in the event the Sales Patent on the lot applied for by the Mortgagors as herein stated is released or issued by the Bureau of Lands, the Mortgagors hereby authorize the Register of Deeds to hold the Registration of same until this Mortgage is cancelled, or to annotate this encumbrance on the Title upon authority from the Secretary of Agriculture and Natural Resources, which title with annotation, shall be released in favor of the herein Mortgage.'m mortgagee (Prudential Bank) was at the outset 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. plaintiffs secured an additional loan from defendant Prudential Bank in the Sum of P20,000.00. To secure payment of this additional loan, plaintiffs executed in favor of the said defendant another deed of Real Estate Mortgage over the same properties previously mortgaged On April 24, 1973, the Secretary of Agriculture issued Miscellaneous Sales Patent No. 4776 over the parcel of land, possessory rights over which were mortgaged to defendant Prudential Bank, in favor of plaintiffs. REM was commenced by Bank because of Magcales' failure to settle their obligations auction sale was pushed through despite written letter by defendants' counsel to desist from the foreclosure sale; Bank was declared as highest bidder CFI declared that the REM executed by Sps. Magcale in favor of Prudential Bank are null and void Issue: whether or not a valid real estate mortgage can be constituted on the building erected on the land belonging to another. Answer: Yes Ratio Decidendi: the inclusion of building separate and distinct from land in Art. 415 can only mean that a building is by itself an immovable property while a mortgage of land necessarily includes buildings, still a building by itself may be mortgaged apart from the land on which it has been built. Such a mortgage would still be a REM for the building will still be considered an immovable property even if dealt with separately and apart from the land. Possessory rights thus over a building before title is vested on the grantee may be validly transferred or conveyed as in a deed of mortgage.

It is therefore without question that the original mortgage was executed before the issuance of the final patent and before the government was divested of its title to the land, an event which takes effect only on the issuance of the sales patent and its subsequent registration in the Office of the Register of Deeds it is evident that the mortgage executed by private respondent on his own building which was erected on the land belonging to the government is to all intents and purposes a valid mortgage.

SIBAL VS. VALDEZ Facts: Sibals sugarcane crops were attached and sold to Valdez in order to satisfy a judgment debt. The lot on which the crops were located had been previously attached and sold to another creditor, Macondray. Valdez later purchased the land from Macondray. Sibal sought to redeem the sugarcane from Valdez on the assumption that it was real property (growing fruits attached to the land). Plaintiff contends that the sugarcane is personal property and not subject to redemption. Issue: How should the sugar cane be regarded as real property or as personal property? Answer: the sugarcane, although considered as growing fruits and therefore ordinarily real property under Par. 2 of Art. 415 must be regarded as personal property for purposes of the Chattel Mortgage law and also for purposes of attachment. Ratio Decidendi the right to the growing crops mobilizes (makes personal) the crops by Anticipation. 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. SIBAL v. VALDEZ Doctrine: A crop raised on leased premises belongs to the lessee and in no sense forms part of the immovable. Ungathered products have the nature of personal property. In other words, the phrase personal property should be understood to include ungathered products. Crops, whether growing or standing in the field ready to be harvested, are, when produced by annual cultivation, no part of the realty . A valid sale may be made of a thing, which though not yet actually in existence, is reasonably certain to come into existence. A man may sell property of which he is potentially and not actually possessed. Facts: Plaintiff alleged that the defendant Vitaliano Mamawal, deputy sheriff of the Province of Tarlac, by virtue of a writ of execution issued by the Court of First Instance of

Pampanga, attached and sold to the defendant Emiliano J. Valdez the sugar cane planted by the plaintiff and his tenants on seven parcels of land. 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. However, Valdez refused to accept the money and to return the sugar cane to the plaintiff. Meanwhile, defendant argued that the sugar cane was personal property hence not subject to redemption. Issue: 1. Whether or not the sugar cane is to be classified as personal property 2. Whether or not future crops to be harvested can be considered a valid object of sale Held: 1. No. A crop raised on leased premises in no sense forms part of the immovable. It belongs to the lessee, and may be sold by him, whether it be gathered or not, and it may be sold by his judgment creditors. Ungathered products have the nature of personal property. In other words, the phrase personal property should be understood to include ungathered products. Crops, whether growing or standing in the field ready to be harvested, are, when produced by annual cultivation, no part of the realty. 2. Yes. 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 (Emerson vs. European Railway Co., 67 Me., 387; Cutting vs. Packers Exchange, 21 Am. St. Rep., 63.). A man may sell property of which he is potentially and not actually possessed.

Issue: are the steel towers or poles of the MERALCO considered real or personal properties? Answer: they are personal properties

Ratio Decidendi: The word "pole" means "a long, comparatively slender usually cylindrical piece of wood or timber, as typically the stem of a small tree stripped of its branches; also by extension, a similar typically cylindrical piece or object of metal or the like". that the concept of the "poles" for which exemption is granted, is not determined by their place or location, nor by the character of the electric current it carries, nor the material or form of which it is made, but the use to which they are dedicated. It is evident, therefore, that the word "poles", as used in Act No. 484 and incorporated in the petitioner's franchise, should not be given a restrictive and narrow interpretation, as to defeat the very object for which the franchise was granted. The poles as contemplated thereon, should be understood and taken as a part of the electric power system of the respondent Meralco, for the conveyance of electric current from the source thereof to its consumers. If the respondent would be required to employ "wooden poles", or "rounded poles" as it used to do fifty years back, then one should admit that the Philippines is one century behind the age of space. It should also be conceded by now that steel towers, like the ones in question, for obvious reasons, can better effectuate the purpose for which the respondent's franchise was granted. The steel towers do not come under Par. 1 of Art. 415 because they are neither buildings nor constructions adhered to the soil. They do not come under par. 3 because they are not attached to an immovable in a fixed manner, that is they can be separated without breaking the material or causing deterioration of the object to which they are attached. They do not come under par. 5 because they are not machineries, receptacle, or instruments, but even if they are, they are not intended for an industry to be carried on in the premises.

BOARD OF ASSESSMENT APPEALS VS MERALCO Facts: Phil. Commission granted the municipal board of Manila to grant 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. Swift got the franchise which was subsequently transferred to Meralco Meralco has constructed 40 steel towers within Quezon City, on land belonging to it to transmit electricity from Laguna to Manila City Assessor of Quezon City declared the aforesaid steel towers for real property taxunder tax declarations After denying respondent's petition to cancel these declarations, an appeal was taken by respondent to the Board of Assessment Appeals of Quezon City, which required respondent to pay the amount of P11,651.86 as real property tax on the said steel towers for the years 1952 to 1956. CTA on the other hand ordered the cancellation of the tax declarations and further ordered the refund to the respondent the amount paid

TUMALAD VS VICENCIO Facts: Vicencio executed a chattel mortgage of their house of strong material (being rented from Madrigal & Co. Inc) in favor of Tumalad to guaranty a loan of P4,800.00 When defendants-appellants defaulted in paying, the mortgage was extrajudicially foreclosed MTC issued the writ of execution in favor of Tumalad but the decision on the writ of possession cannot be enforced because the house had already been demolished pursuant to the order of the court in a separate civil case (No. 25816) for ejectment against the present defendants for non-payment of rentals on the land on

which the house was constructed. Issue: WON the chattel mortgage contract is void ab initio on the ground of fraud, deceit & trickery and that the mortgaged property is an immovable property, hence can only be the subject of REM and not chattel mortgage. Answer there is no evidence of deceit, fraud or trickery the parties intended that the house be a personal property Ratio Decidendi: contention of deceit, fraud & trickery are not supported by evidence and are mere allegations. Moreover, even granting that the charge is true, fraud or deceit does not render a contract void ab initio, and can only be a ground for rendering the contract voidable or annullable pursuant to Article 1390 of the New Civil Code, by a proper action in court. General rule: buildings are immovable exception: the parties to a contract may by agreement treat as personal property that which by nature would be real property the house on rented land is not only expressly designated as Chattel Mortgage; it specifically provides that "the mortgagor ... voluntarily CEDES, SELLS 23 and TRANSFERS by way of Chattel Mortgage the property together with its leasehold rights over the lot on which it is constructed and participation the mortgagors also are only renting the said property from Madrigal & CO. Inc, thus, although ownership cannot in itself determine the character of the property, it does so when combined with other factors to sustain the interpretation that the parties, particularly the mortgagors, intended to treat the house as personalty doctrine of estoppel applies since the parties themselves have treated the property as personal property It follows that the court below erred in requiring the mortgagors to pay rents for the year following the foreclosure sale, as well as attorney's fees. TUMALAD V. VICENCIO Although a building is an immovable; the parties to a contract may by agreement treat as personal property that which by nature is a real property however they are estopped from subsequently claiming otherwise. FACTS: Alberta Vicencio and Emiliano Simeon received a loan of P4, 800 from Gavino and Generosa Tumalad. To guaranty said loan, Vicencio executed a chattel mortgage in favor of Tumalad over their house of strong materials which stood on a land which was rented from the Madrigal & Company, Inc. When Vicencio defaulted in paying, the house was extrajudicially foreclosed, pursuant to their contract. It was sold to Tumalad and they instituted a Civil case in the Municipal Court of Manila to have Vicencio vacate the house and pay rent. The MTC decided in favor of Tumalad ordering Vicencio to vacate the house and pay

rent until they have completely vacated the house. Vicencio is questioning the legality of the chattel mortgage on the ground that 1) the signature on it was obtained thru fraud and 2) the mortgage is a house of strong materials which is an immovable therefore can only be the subject of a REM. On appeal, the CFI found in favor of Tumalad, and since the Vicencio failed to deposit the rent ordered, it issued a writ of execution, however the house was already demolished pursuant to an order of the court in an ejectment suit against Vicencio for non-payment of rentals. Thus the case at bar. ISSUE: Whether or not the chattel mortgage is void since its subject is an immovable HELD: NO. Although a building is by itself an immovable property, parties to a contract may treat as personal property that which by nature would be real property and it would be valid and good only insofar as the contracting parties are concerned. By principle of estoppel, the owner declaring his house to be a chattel may no longer subsequently claim otherwise. When Vicencio executed the Chattel Mortgage, it specifically provides that the mortgagor cedes, sells and transfers by way of Chattel mortgage. They intended to treat it as chattel therefore are now estopped from claiming otherwise. Also the house stood on rented land which was held in previous jurisprudence to be personalty since it was placed on the land by one who had only temporary right over the property thus it does not become immobilized by attachment. [Vicencio though was not made to pay rent since the action was instituted during the period of redemption therefore Vicencio still had a right to remain in possession of the property]

SERG'S PRODUCT VS PCI LEASING (par. 5 of Art. 415) Facts: PCI filed a writ of replevin with damages for the seizure of the mortgaged chattels which was opposed by the petitioners petitioners submit that the mortgaged properties are immovable under Art. 415, notwithstanding their agreement on the contrary; and that giving effect to the rd agreement would be prejudicial to 3 parties (workers o f the company) Citing the Agreement of the parties, the appellate court held that the subject machines were personal property, and that they had only been leased, not owned, by petitioners. Issue: whether the said machines are personal, not immovable, property which may be a proper subject of a writ of replevin. Answer: the questioned properties are proper subjects of the Writ of Seizure Ratio Decidendi:

 After agreeing to a contract stipulating that a real or immovable property be considered as personal or movable, a party is estopped from subsequently claiming otherwise. Hence, such property is a proper subject of a writ of replevin obtained by the other contracting party. although each of them was movable or personal property on its own, all of them have become immobilized by destination because they are e ssential and principal elements in the industry. In that sense, petitioners are correct in arguing that the said machines are real, not personal, property pursuant to Article 415 (5) of the Civil Code The Court has held that contracting parties may validly stipulate that a real property be considered as personal Under the principle of estoppel, a party to a contract is ordinarily precluded from denying the truth of any material fact found therein. [19] in Tumalad v. Vicencio, the Court upheld the intention of the parties to treat a house as a personal property because it had been made the subject of a chattel mortgage. [20] in Makati Leasing and Finance Corp. v. Wearever Textile Mills also held that the machinery used in a factory and essential to the industry, as in the present case, was a proper subject of a writ of replevin because it was treated as personal property in a contract. the Lease Agreement clearly provides that the machines in question are to be considered as personal property. It should be stressed, however, that the holding -- that the machines should be deemed personal property pursuant to the Lease Agreement is good only insofar as the contracting parties are concerned. 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. In any event, there is no showing that any specific third party would be adversely affected. The validity of the lease agreement cannot be assailed in a Pet for Cert, it can only be determined in a full blown trial within the jurisdiction of the RTC.

whether the machinery in suit is real or personal property from the point of view of the parties Answer: the intent of the parties gave the machinery in question the character of a personal property Ratio Decidendi: If a house of strong materials, like what was involved in the above Tumalad case, may be considered as personal property for purposes of executing a chattel mortgage thereon as long as the parties to the contract so agree and no innocent third party will be prejudiced thereby, there is absolutely no reason why a machinery, which is movable in its nature and becomes immobilized only by destination or purpose, may not be likewise treated as such. This is really because one who has so agreed is estopped from denying the existence of the chattel mortgage. It must be pointed out that the characterization of the subject machinery as chattel by the private respondent is indicative of intention and impresses upon the property the character determined by the parties. As stated in Standard Oil Co. of New York v. Jaramillo, 44 Phil. 630, it is undeniable that the parties to a contract may by agreement treat as personal property that which by nature would be real property, as long as no interest of third parties would be prejudiced thereby. On estoppel: As aptly pointed out by petitioner and not denied by the respondent, the status of the subject machinery as movable or immovable was never placed in issue before the lower court and the Court of Appeals except in a supplemental memorandum in support of the petition filed in the appellate court. Moreover, even granting that the charge is true, such fact alone does not render a contract void ab initio, but can only be a ground for rendering said contract voidable, or annullable pursuant to Article 1390 of the new Civil Code, by a proper action in court. the error of the appellate court in ruling that the questioned machinery is real, not personal property, becomes very apparent CA decision reversed and RTC decision reinstated. MAKATI LEASING VS. WEAREVER TEXTILE MAKATI LEASING AND FINANCIAL CORPORATION VS. WEAREVER TEXTILE MILLS, INC. Doctrine: Where a chattel mortgage is constituted on a machinery permanently attached to the ground, the machinery is to be considered as personal property. Facts: Wearever Textile Mills, Inc. discounted and assigned several receivables with Makati Leasing and Financial Corp. under a Receivable Purchase Agreement so that the latter would lend money to the former. In order to secure the collection of the receivables assigned, Wearever executed a Chattel Mortgage over certain raw materials inventory as well as a machinery (Artos Aero Dryer Stentering Range). Upon default of Wearever in paying what is due, Makati Leasing filed a petition for extrajudicial foreclosure of the properties mortgaged to it. The Sheriff assigned to execute such foreclosure, however, failed to enter the premises of Wearever to effect the seizure of the machinery. Afterwhich, petitioner filed a complaint for a judicial

MAKATI LEASING & FINANCE CORP. VS WEAREVER TEXTILE MILLS Facts: Wherever obtained financial accommodations from MLFC secured by chattel mortgage of some raw materials inventory and a machinery upon default of payment, MFLC commenced an EJF of the property but subsequently applied for judicial foreclosure RTC issued the writ of seizure CA reversed the RTC decision & ordered the return of the machine after ruling that the machinery in suit cannot be the subject of replevin, much less of a chattel mortgage, because it is a real property pursuant to Article 415 of the new Civil Code, the same being attached to the ground by means of bolts and the only way to remove it from respondent's plant would be to drill out or destroy the concrete floor, the reason why all that the sheriff could do to enfore the writ was to take the main drive motor of said machinery. Issue:

foreclosure with the RTC of Rizal which was granted even after the motion for reconsideration filed by the private respondent. Enforcing then the writ of seizure issued by the lower court, the Sheriff removed the main drive motor of the machinery. Upon appeal, CA reversed the ruling of the RTC and ordered the return of the motor to Wearever since the said machinery cannot be the subject of a replevin and chattel mortgage for it is a real property pursuant to Art. 415 (3) of the NCC. CA argued that the machinery is attached to the ground by means of bolts and the only way to remove it from the respondents plant would be to drill out or destroy the concrete floor which is why all that the sheriff could do to enforce the writ was to take the main drive motor of the machinery. Hence, this petition for certiorari. Issue: Whether the machinery is a personal property. Held: Yes. By destination, it is a real property but by virtue of the intention of the parties stipulated in their chattel mortgage contract, the machinery was intended to be a personal property. The Court made reference to its ruling in Tumalad v. Vicencio and Standard Oil Co. of New York v. Jaramillo where it held that a real property may be considered as a personal property for purposes of executing a chattel mortgage thereon as long as the parties to the contract so agree and no innocent third party will be prejudiced thereby, and once the parties so agreed, they are already stopped from claiming otherwise. Private respondent contended that its characterization of the subject machinery as chattel in their agreement should not be appreciated against it because it had never represented nor agreed in such as it was merely required and dictated on by the petitioner to sign a chattel mortgage in blank form. The Court was not persuaded by its contention as the said issue was not duly raised in the lower and appellate courts nor will the said signing in blank by the respondent make the contract void but merely voidable by a proper action in court. Furthermore as it was undeniable that it benefited from the chattel mortgage, it cannot be allowed to impugn its efficacy for equity reasons.

although in the opinion of the Court of Appeals, it is "ostensibly a personal property." As such, the Court of Appeals held, "the order of attachment . . . should have been served in the manner provided in subsection (e) of section 7 of Rule 59," of the Rules of Court Issue: whether the house of Ricardo Rivera is real property or not. Answer: said house is a real property Ratio Decidendi: said house is not personal property, much less a debt, credit or other personal property not capable of manual delivery, but immovable property. In such a case as a building is made the subject of a chattel mortgage, and the mortgage is registered in the chattel mortgage registry, the mortgage would still rd be void in so far as 3 persons are concerned. "a true building (not merely superimposed on the soil) 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 thecontracting parties are concerned. It is based, partly, upon the principle of estoppel. the mere fact that a house was the subject of the chattel mortgage and was considered as personal property by the parties does not make said house personal property for purposes of the notice to be given for its sale of public auction . This ruling is demanded by the need for a definite, orderly and well defined regulation for official and public guidance and would prevent confusion and misunderstanding decision of CA reversed and CFI decision reinstated.

SANTOS EVANGELISTA VS. ALTO SURETY & INS. CO. Facts: To satisfy the claim for sum of money of Evangelista against Rivera, a writ of attachment of the latter's house was obtained by Evangelista Evangelista being the highest bidder in an auction sale sought possession of the property but was refused by Rivera on the ground that the he had leased the property from the Alto Surety & Insurance Co., Inc. and that the latter is now the true owner of said property. Alto had become the highest bidder on a separate auction sale over the same property; mortgage and auction sale preceded that of the auction sale in favor of Evangelista. Evangelista instituted the present action against respondent and Ricardo Rivera, for the purpose of establishing his (Evangelista) title over said house, securing possession thereof, apart from recovering damages. CFI rendered judgment in favor of Evangelista CA reversed the CFI decision saying that although the writ of attachment in favor of Evangelista had been filed with the Register of Deeds of 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, MINDANAO BUS CO. VS. THE CITY ASSESSOR Facts: CTA found Mindanao Bus Co liable to pay realty tax on its maintenance and repair equipments That the machineries sought to be assessed by the respondent as real properties; the machineries are sitting on cement or wooden platforms Issue: are the machineries in question real properties thus subject to realty tax? Answer: these machineries are immovable properties therefore not subject to realty tax Ratio Decidendi: So that movable equipments to be immobilized in contemplation of the law must first be "essential and principal elements" of an industry or works without which such industry or works would be "unable to function or carry on the industrial purpose for which it was established." the tools and equipments in question in this instant case are, by their nature, not essential and principle municipal elements of petitioner's business of transporting passengers and cargoes by motor trucks.

 Aside from the element of essentiality the above-quoted provision also requires that the industry or works be carried on in a building or on a piece of land. But in the case at bar the equipments in question are destined only to repair or service the transportation business, which is not carried on in a building or permanently on a piece of land, as demanded by the law. Said equipments may not, therefore, be deemed real property. Resuming what we have set forth above, we hold that the equipments in question are not absolutely essential to the petitioner's transportation business, and petitioner's business is not carried on in a building, tenement or on a specified land, so said equipment may not be considered real estate within the meaning of Article 415 (c) of the Civil Code. Mindanao Bus Co. v. City Assessor Digest Facts: Petitioner is a public utility company engaged in the transport of passengers and cargo by motor vehicles in Mindanao with main offices in Cagayan de Oro (CDO). Petitioner likewise owned a land where it maintains a garage, a repair shop and blacksmith or carpentry shops. The machineries are placed thereon in wooden and cement platforms. The City Assessor of CDO then assessed a P4,400 realty tax on said machineries and repair equipment. Petitioner appealed to the Board of Tax Appeals but it sustained the City Assessor's decision, while the Court of Tax Appeals (CTA) sustained the same. Note: This is merely a case digest to aid in remembering the important points of a case. It is still advisable for any student of law to read the full text of assigned cases. Issue: Whether or not the machineries and equipments are considered immobilized and thus subject to a realty tax Held: The Supreme Court decided otherwise and held that said machineries and equipments are not subject to the assessment of real estate tax. Said equipments are not considered immobilized as they are merely incidental, not esential and principal to the business of the petitioner. The transportation business could be carried on without repair or service shops of its rolling equipment as they can be repaired or services in another shop belonging to another . DAVAO SAWMILL CO. VS CASTILLO Facts: Davao Saw Mill Co., Inc., is the holder of a lumber concession from the Government of the Philippine Islands 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. The trial judge found that those properties were personal in nature, and as a consequence absolved the defendants from the complaint, with costs against the plaintiff. Issue:

WON the properties in question are personal properties or real Answer: personal properties Ratio Decidendi: as a rule, machinery should be considered as personal. Since it was not placed on the land by the owner of the land. Immobilization by destination or purpose cannot generally be made by a person whose possession of the 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.

DAVAO SAWMILL V. CASTILLO 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 personalty by the sheriff. No third party claim was filed for such properties at the time of the sales thereof as is borne out by the record made by the plaintiff herein It must be noted also that on number of occasion, 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/ Yes. The Rationale: lower court.

Supreme

Court

affirmed

the

decision

of

the

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 TSAI vs. CA Facts: 1975, Evertex obtained 3M loan from PBCom secured by REM (lot where its factory stands) and Chattel mortgage (listed on Annex A of motgage) nd 1979, Evertex obtained a 2 loan of 3,356,000.00 secured by the same st chattels listed on Annex A of the 1 mortgage Evertex was declared insolvent in a proceeding and all the assets of the company were taken into the custody of the Insolvency Court, including those mortgaged under the 2 mortgages with PBCom PBCom on the other hand commenced a EJF proceeding because of Evertex's default in the payment of its obligations PBCom upon consolidation of its ownership over the properties, leased the property to Ruby Tsai for 50k a month & the properties were sold to Tsai for 9M Evertex filed a case for annulment of sale & conveyance with damages against PBCom with Tsai saying that the sale was in violation of the Insolvency Law and that the properties conveyed to Tsai were not included in the 2 mortgages and were not even included in the Notice of Sheriff's Sale & COS RTC ruled that the foreclosure of the subject properties were irregular and illegal as they were not included in the Notice of Sale and COS, decision affirmed by CA except for award of damages Issue: whether or not the inclusion of the questioned properties in the foreclosed properties is proper. whether or not the sale of these properties to petitioner Ruby Tsai is valid Answer: the inclusion of the questioned properties in the foreclosure is improper because they were acquired in 1981 and not involve in the 1985 & 1979 mortgages Sale to Tsai is invalid as she is not a purchaser in good faith. Ratio Decidendi: both the trial and the appellate courts reached the same finding that the true intention of PBCOM and the owner, EVERTEX, is to treat machinery and equipment as chattels. assuming arguendo that the properties in question are immovable by nature, nothing detracts the parties from treating it as chattels to secure an obligation under the principle of estoppel. an immovable may be considered a personal property if there is a stipulation as when it is used as security in the payment of an obligation where a chattel mortgage is executed over it (Navarro v. Pineda) since the disputed machineries were acquired in 1981 and could not have been involved in the 1975 or 1979 chattel mortgages, it was consequently an error on

the part of the Sheriff to include subject machineries with the properties enumerated in said chattel mortgages. As the auction sale of the subject properties to PBCom is void, no valid title passed in its favor. Consequently, the sale thereof to Tsai is also a nullity under the elementary principle of nemo dat quod non habet, Tsai cannot be considered a purchaser in good faith as she failed to substantially prove her claim Moreover, a purchaser in good faith and for value is one who buys 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 1 before he has notice of the claims or interest of some other person in the property. Records reveal, however, that when Tsai purchased the controverted properties, she knew of respondent's claim thereon. the mere fact that the lot where the factory and the disputed properties stand is in PBCom's name does not automatically make PBCom the owner of everything found therein, especially in view of EVERTEX's letter to Tsai enunciating its claim.