1. LOPEZ v.

OROSA
Enrique Lopez vs Vicente Orosa, Jr. and Plaza Theatre Inc.
G.R. Nos. L-10817-18 | February 28, 1958 | Felix, J.:
The Building is an immovable by itself, separate and distinct from the land from which it is
attached.
FACTS:
Orosa invited Lopez to invest with him in building a theatre. Lopez supplied wood for the
construction of the said theatre. The materials totaled 62k but Orosa was only able to pay 20k thus
leaving a balance of almost 42k. Later on respondents acquired a bank loan of 30k, wherein Luzon
Surety Company as their surety and the land and buildings as mortgages. Petitioner sued to collect
the unpaid materials and was able to get a judgment against the respondents making them jointly
liable to pay the remaining amount. Also, he was able to obtain a materialmans lien on the building
of the theatre. The stocks amounting to 42k shall be sold in public auction in case the respondents
default. Petitioner wasnt happy because he also wanted a lien on the land, urging that the judgment
lien should include it since the building and the land are inseparable.
ISSUE:
Whether or not the building and the land are inseperable; and
W/N petitioner can obtain a lien on the land as well?
RULING: NO to both!
The contention that the lien executed in favor of the furnisher of the materials used for the
construction, repair or refection of a building is also extended to land on which the construction
was made is without merit, because while it is true that generally, real estate connotes the land and
the building constructed thereon, it is obvious that the inclusion of the building, separate and
distinct from the land in the enumeration (in the CC) of what may constitute real properties could
mean only one thing- that a building is by itself an immovable property.
The preference to unregistered lien is only with respect to the real estate upon which the refection
or work was made. The materialmans lien could be charged only to the building for which the
credit was made or which received the benefit of refection.
INSEPARABLE COZ IMMOVABLE

2. ASSOCIATED INSURANCE & SURETY v. IYA

Associated Insurance and Surety Company, Inc. vs Isabel Iya, Adriano Valino and Lucia Valino
Isabel Iya vs Adriano Valino, Lucia Valino and Associated Insurance and Surety Company, Inc.
G.R. Nos. L-10837-38 | May 30, 1958 | Felix, J.:
A building is an immovable property irrespective of where or not said structure and the land on
which it is adhered to belong to the same owner.

FACTS:
Adriano Valino and Lucia A. Valino owns a house of strong materials. Filed a bond fr 11k subscribed
by the Associated Insurance and Surety Co., Inc. and as counter-guaranty therefr, the spouses Valino
executed an alleged chattel mortgage on the aforementioned house in favor of the surety company.
The parcel of land on which the house is erected was still registered in the name of the Philippine
Realty Corporation but was able to obtained the same from them after full payment of the purchase
price. Valinos acquired another loan from Iya for 12k, executing an REM over the lot and house.
However they werent able to pay off their other loan so the chattel mortgage was foreclosed. The
surety company was awarded the land as the highest bidder in the auction. The surety company
later on discovered that the land was subject to a REM. The surety company then requested that the
house and lot be excluded from the REM. Iya, in her answer, said that she had a real right over the
property and that the chattel mortgage on which the foreclosure was based should be declared null
and void for non-compliance with the form required by law. CA ed only the foreclosure of the REM
only up to the land and they awarded the structure to the surety company saying that the house is a
personal property and may be subject to chattel mortgage.
ISSUE:
Which of the mortgages should have preference?
RULING:
Lopez v Orosa was used as a precedent here saying that the buildings an immovable itself, separate
and distinct from the land. A building is an immovable property irrespective of where or not said
structure and the land on which it is adhered to belong to the same owner.
Only personal property is subject to a chattel mortgage and since the structure in this case is an
immovable, it cannot subject to a chattel mortgage. Therefore the chattel mortgage and the sale on
which it was based should be declared null and void.
Iya was given the superior right not only to the land but also to the structure to foreclose them in an
auction.

3. BICERRA v. TENEZA
Antonio Bicerra, Domingo Bicerra, Bernardo Bicerra, Cayetano Bicerra, Linda Bicerra, Pio Bicerrra
and Eufricina Bicerra vs Tomasa Teneza and Benjamin Barbosa
G.R. No. L-16218 | November 29, 1962 |Makalintal, J.:
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.)

4. LEUNG YEE v. STRONG MACHINERY CO.

Leung Yee vs Frank L. Strong Machinery Company and J. G. Williamson
G.R. No. L-11658 | February 15, 1918 | Carson, J.:
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 has been purchases 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." The 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. STANDARD OIL CO. v. JARAMILLO

The Standard Oil Company of New York vs Joaquin Jaramillo, as register of deeds of the City of
Manila
G.R. No. L-20329 | March 16, 1923 | Street, J.:
FACTS:
Gervasia dela Rosa executed a document in the form of a Chattel Mortgage purporting to convey to
Standard Oil Co. by way of mortgage both the leasehold interest of the land she leases in Manila and
the building which stands thereon.
The clauses in said document describe the property as personal including the right, title and
interest of the mortgagor in and to the contract of lease and also the building of the said premises
therein.
After said document had been duly acknowledge and delivered, the petitioner presented it to
Joaquin Jaramillo, as register of deeds of the City of Manila, for the purpose of having the same
recorded. The respondent opined that it was not a chattel mortgage for the interests 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:
1. Whether or not said property could be a subject for mortgage.
2. Whether the respondent is clothe with authority to determine such.
RULING:
The duties of a register of deeds in respect to the registration of chattel mortgages are of purely
ministerial character and no provision of law can be cited which confers upon him any judicial or
quasi-judicial power to determine the nature of any document of which registration is sought as a
chattel mortgage. The efficacy of the act of recording a chattel mortgage consists in the fact that it
operates as constructive notice of the existence of the contract, and the legal effects of the contract
must be discovered in the instrument itself in relation with the fact of notice. Registration adds
nothing to the instrument, considered as a source of title, and affects nobodys rights except as a
species of notice.

The parties to a contract may by agreement treat as personal property that which by nature would
be real property and it is a familiar phenomenon to see things classed as real property for purposes
of taxation which on general principle might be considered personal property.
It is unnecessary to determine whether or not the property described in the document is real or
personal. The issue is to be determined by the Court and not by the register of deeds.

6. PUNZALAN, JR. v. LACSAMANA

Antonio Punsalan, Jr. vs Remedios Vda. de Lacsamana and The Honorable Judge Rodolfo A. Ortiz
G.R. No. L-55729 | March 28, 1983 | Melencio-Herrera, J.:
FACTS:
Punsalan was the owner of a piece of land, which he mortgaged in favor of PNB. Due to his failure to
pay, the mortgage was foreclosed and the land was sold in a public auction to which PNB was the
highest bidder.
On a relevant date, while Punsalan was still the possessor of the land, it secured a permit for the
construction of a warehouse.
A deed of sale was executed between PNB and Punsalan. This contract was amended to include the
warehouse and the improvement thereon. By virtue of these instruments, respondent Lacsamana
secured title over the property in her name.
Petitioner then sought for the annulment of the deed of sale. Among his allegations was that the
bank did not own the building and thus, it should not be included in the said deed.
Petitioners complaint was dismissed for improper venue. The trial court held that the action being
filed in actuality by petitioner is a real action involving his right over a real property.
ISSUE:
W/N the trial court erred in dismissing the case on the ground of improper venue. W/N the
warehouse is an immovable and must be tried in the province where the property lies.
HELD:
Warehouse claimed to be owned by petitioner is an immovable or real property. Buildings are
always immovable under the Code. A building treated separately from the land on which it is stood
is immovable property and the mere fact that the parties to a contract seem to have dealt with it
separate and apart from the land on which it stood in no wise changed its character as immovable
property.

7. PRUDENTIAL BANK v. PANIS

Prudential Bank vs Honorable Domingo D. Panis, Presiding Judge of Branch III, Court of First
Instance of Zambales and Olongapo City; Fernando Magcale & Teodula Baluyut-Magcale
G.R. No. L-50008 | August 31, 1987 | Paras, J.:
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. NAVARRO v. PINEDA
Conrado P. Navarro vs Rufino G. Pineda, Ramona Reyes, et al
G.R. No. L-18456 | November 30, 1963 | Paredes, J.:
FACTS:
Pineda and his mother executed real estate and chattel mortgages in favor of Navarro, to secure a
loan they got from the latter. The REM covered a parcel of land owned by the mother while the
chattel mortgage covered a residential house. Due to the failure to pay the loan, they asked for
extensions to pay for the loan. On the second extension, Pineda executed a PROMISE wherein in
case of default in payment, he wouldnt ask for any additional extension and there would be no
need for any formal demand. In spite of this, they still failed to pay. Navarro then filed for the
foreclosure of the mortgages. The court decided in his favor.
ISSUE:
W/N the deed of real estate mortgage and chattel mortgage appended to the complaint is valid
notwithstanding the fact that the house was made subject of chattel mortgage for the reason that it
is erected on a land that belongs to a third person.
HELD:
Where a house stands on a rented land belonging to another person, it may be the subject matter of
a chattel mortgage as personal property if so stipulated in the document of mortgage, and in an
action by the mortgagee for the foreclosure, the validity of the chattel mortgage cannot be assailed
by one of the parties to the contract of mortgage. Furthermore, although in some instances, a house
of mixed materials has been considered as a chattel between the parties and that the validity of the
contract between them, has been recognized, it has been a constant criterion that with respect to
third persons, who are not parties to the contract, and specially in execution proceedings, the house
is considered as immovable property.

9. TUMALAD v. VICENCIO
Gavino A. Tumalad and Generosa R. Tumalad vs Alberta Vicencio and Emiliano Simeon
G.R. No. L-30173 | September 30, 1971 | Reyes, J.B.L., J.:
FACTS:
Vicencio and Simeon executed a chattel mortgage in favor of plaintiffs Tumalad over their house,
which was being rented by Madrigal and company. This was executed to guarantee a loan, payable
in one year with a 12% per annum interest. The mortgage was extrajudicially foreclosed upon
failure to pay the loan. The house was sold at a public auction and the plaintiffs were the highest
bidder. A corresponding certificate of sale was issued. Thereafter, the plaintiffs filed an action for
ejectment against the defendants, praying that the latter vacate the house as they were the proper
owners.

ISSUE:
W/N the chattel mortgage was null and void ab initio because only personal properties can be
subject of a chattel mortgage.
HELD:
Certain deviations have been allowed from the general doctrine that buildings are immovable
property such as when through stipulation, parties may agree to treat as personal property those
by their nature would be real property. This is partly based on the principle of estoppel wherein the
principle is predicated on statements by the owner declaring his house as chattel, a conduct that
may conceivably stop him from subsequently claiming otherwise. In the case at bar, though there be
no specific statement referring to the subject house as personal property, yet by ceding, selling or
transferring a property through chattel mortgage could only have meant that defendant conveys
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.

10. MAKATI LEASING AND FINANCE CORP v. WEAVER TEXTILE MILLS

Makati Leasing and Finance Corporation vs Wearever Textile Mills, Inc., and Honorable Court of
Appeals
G.R. No. L-58469 | May 16, 1983 | de Castro, J.:
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 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.

11. SERGS PRODUCTS, INC. v. PCI LEASING AND FINANCE, INC.

Sergs Products, Inc., and Sergio T. Goquiolay vs PCI Leasing and Finance, Inc.
G.R. No. 137705 | August 22, 2000 | Panganiban, J.:
FACTS:
PCI filed a case for collection of a sum of money as well as a writ of replevin for the seizure of
machineries, subject of a chattel mortgage executed by petitioner in favor of PCI. Machineries of
petitioner were seized and petitioner filed a motion for special protective order. It asserts that the
machineries were real property and could not be subject of a chattel mortgage.
HELD:
The machineries in question have become immobilized by destination because they are essential
and principal elements in the industry, and thus have become immovable in nature. Nonetheless,
they are still proper subjects for a chattel mortgage. Contracting parties may validly stipulate that a
real property be considered as personal. After agreement, they are consequently estopped from
claiming otherwise

12. MANARANG v. OFILADA

Manuel C. Manarang and Lucia D. Manarang vs Macario M. Ofilada, Sheriff of the City of Manila and
Ernesto Esteban
G.R. No. L-8133 | May 18, 1956 | Labrador, J.:
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 doesnt 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.

13. EVANGELISTA v. ALTO SURETY AND INSURANCE CO.

Santos Evangelista vs Alto Surety & Insurance Co., Inc.
G.R. No. L-11139 | April 23, 1958 | Concepcion, J.:
FACTS:
On June 4, 1949, petitioner herein, Santos Evangelista, instituted Civil Case No. 8235 of the Court of
First, Instance of Manila for a sum of money. On the same date, he obtained a writ of attachment,
which levied upon a house, built by Rivera on a land situated in Manila and leased to him, by filing
copy of said writ and the corresponding notice of attachment with the Office of the Register of
Deeds of Manila, on June 8, 1949. In due course, judgment was rendered in favor of Evangelista,
who, on October 8, 1951, bought the house at public auction held in compliance with the writ of

execution issued in said case. The corresponding definite deed of sale was issued to him on October
22, 1952, upon expiration of the period of redemption. When Evangelista sought to take possession
of the house, Rivera refused to surrender it, upon the ground that he had leased the property from
the Alto Surety & Insurance Co., Inc. and that the latter is now the true owner of said property. It
appears that on May 10, 1952, a definite deed of sale of the same house had been issued to
respondent, as the highest bidder at an auction sale held, on September 29, 1950, in compliance
with a writ of execution issued in Civil Case No. 6268 of the same court for the sum of money, had
been rendered in favor respondent herein, as plaintiff therein. Hence, on June 13, 1953, 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.
After due trial, the CFI Manila rendered judgment for Evangelista, sentencing Rivera and Alto Surety
to deliver the house in question to Evangelista and to pay him, jointly and severally, P40 a month
from Oct. 1952 until said delivery, plus costs.
On appeal taken by respondent, this decision was reversed by the Court of Appeals, which absolved
said respondent from the complaint, upon the ground 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, although in the opinion of the Court of
Appeals, it is "ostensibly a personal property.
ISSUE:
W/N a house constructed by the lessee of the land on which it is built, should be dealt with, for the
purpose of attachment, as immovable property.
HELD:
The said house is not personal property, much less a debt, credit or other personal property not
capable of manual delivery, but immovable property. As explicitly held, in Laddera vs. Hodges (48
Off. Gaz., 5374), "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. This is the
doctrine of our Supreme Court in Leung Yee vs. Strong Machinery Company, 37 Phil., 644.
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 (Luna vs. Encarnacion, * 48 Off. Gaz., 2664; Standard Oil Co.
of New York vs. Jaramillo, 44 Phil., 630; De Jesus vs. Juan Dee Co., Inc., 72 Phil., 464). 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.

14. DAVAO SAWMILL CO., INC. v. CASTILLO

Davao Saw Mill Co., Inc. vs Aproniano G. Castillo and Davao Light & Power Co., Inc.
G.R. No. L-40411 | August 7, 1935 | Malcolm, J.;
FACTS:
Petitioner is the holder of a lumber concession. It operated a sawmill on a land, which it doesnt
own. Part of the lease agreement was a stipulation in which after the lease agreement, all buildings
and improvements would pass to the ownership of the lessor, which would not include machineries
and accessories. In connection to this, petitioner had in its sawmill machineries and other
equipment wherein some were bolted in foundations of cement.
ISSUE:
Whether or not the trial judge erred in finding that the subject properties are personal in nature.
HELD:
The machinery must be classified as personal property.
The lessee placed the machinery in the building erected on land belonging to another, with the
understanding that the machinery was not included in the improvements which would pass to the
lessor on the expiration of the lease agreement. The lessee also treated the machinery as personal
property in executing chattel mortgages in favor of third persons. The machinery was levied upon
by the sheriff as personality pursuant to a writ of execution obtained without any protest being
registered.
Furthermore, machinery only becomes immobilized when placed in a plant by the owner of the
property or plant, but not when so placed by a tenant, usufructuary, or any person having
temporary right, unless such person acted as the agent of the owner.

15. TSAI v. COURT OF APPEALS

Ruby L. Tsai vs Hon. Court of Appeals, Ever Textile Mills, Inc. and Mamerto R Villaluz
G.R. No. 120098 | October 2, 2001| Quisumbing, J.:
FACTS:
Ever Textile Mills, Inc. (EVERTEX) obtained loan from Philippine Bank of Communications
(PBCom), secured by a deed of Real and Chattel Mortgage over the lot where its factory stands, and
the chattels located therein as enumerated in a schedule attached to the mortgage contract. PBCom
again granted a second loan to EVERTEX which was secured by a Chattel Mortgage over personal
properties enumerated in a list attached thereto. These listed properties were similar to those
listed in the first mortgage deed. After the date of the execution of the second mortgage mentioned
above, EVERTEX purchased various machines and equipments. Upon EVERTEX's failure to meet its
obligation to PBCom, the latter commenced extrajudicial foreclosure proceedings against EVERTEX

under Act 3135 and Act 1506 or "The Chattel Mortgage Law". PBCom then consolidated its
ownership over the lot and all the properties in it. It leased the entire factory premises to Ruby Tsai
and sold to the same the factory, lock, stock and barrel including the contested machineries.
EVERTEX filed a complaint for annulment of sale, reconveyance, and damages against PBCom,
alleging inter alia that the extrajudicial foreclosure of subject mortgage was not valid, and that
PBCom, without any legal or factual basis, appropriated the contested properties which were not
included in the Real and Chattel Mortgage of the first mortgage contract nor in the second contract
which is a Chattel Mortgage, and neither were those properties included in the Notice of Sheriff's
Sale.
ISSUES:
1) W/N the contested properties are personal or movable properties
2) W/N the sale of these properties to a third person (Tsai) by the bank through an irregular
foreclosure sale is valid.
HELD:
1) Nature of the Properties and Intent of the Parties
The nature of the disputed machineries, i.e., that they were heavy, bolted or cemented on the real
property mortgaged does not make them ipso facto immovable under Article 415 (3) and (5) of the
New Civil Code. While it is true that the properties appear to be immobile, a perusal of the contract
of Real and Chattel Mortgage executed by the parties herein reveal their intent, that is - to treat
machinery and equipment as chattels.
In the first mortgage contract, reflective of the true intention of PBCOM and EVERTEX was the
typing in capital letters, immediately following the printed caption of mortgage, of the phrase "real
and chattel." So also, the "machineries and equipment" in the printed form of the bank had to be
inserted in the blank space of the printed contract and connected with the word "building" by
typewritten slash marks. Now, then, if the machineries in question were contemplated to be
included in the real estate mortgage, there would have been no necessity to ink a chattel mortgage
specifically mentioning as part III of Schedule A a listing of the machineries covered thereby. It
would have sufficed to list them as immovables in the Deed of Real Estate Mortgage of the land and
building involved. As regards the second contract, the intention of the parties is clear and beyond
question. It refers solely to chattels. The inventory list of the mortgaged properties is an itemization
of 63 individually described machineries while the schedule listed only machines and 2,996,880.50
worth of finished cotton fabrics and natural cotton fabrics.
UNDER PRINCIPLE OF STOPPEL 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. As far back as Navarro v. Pineda, 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.
2) Sale of the Properties Not Included in the Subject of Chattel Mortgage is Not Valid
The auction sale of the subject properties to PBCom is void. Inasmuch as the subject mortgages
were intended by the parties to involve chattels, insofar as equipment and machinery were
concerned, the Chattel Mortgage Law applies. Section 7 provides thereof that: "a chattel mortgage

shall be deemed to cover only the property described therein and not like or substituted property
thereafter acquired by the mortgagor and placed in the same depository as the property originally
mortgaged, anything in the mortgage to the contrary notwithstanding." Since the disputed
machineries were acquired later after the two mortgage contracts were executed, 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 lease and sale of said personal properties were irregular and illegal because they were not
duly foreclosed nor sold at the auction, no valid title passed in its favor. Consequently, the sale
thereof to Ruby Tsai is also a nullity under the elementary principle of nemo dat quod non habet,
one cannot give what one does not have.

16. MINDANAO BUS CO. v. CITY OF ASSESSOR AND TREASURER

Mindanao Bus Company vs The City Assessor & Treasurer and The Board of Tax Appeals of Cagayan
de Oro City
G.R. No. L-17870 | September 29, 1962 | Labrador, J.:
DOCTRINE:
Movable equipment, to be immobilized in contemplation of Article 415 of the Civil Code, must be
the essential and principal elements of an industry or works which are carried on in a building or
on a piece of land. Thus, where the business is one of transportation, which is carried on without a
repair or service shop, and its rolling equipment is repaired or serviced in a shop belonging to
another, the tools and equipment in its repair shop which appear movable are merely incidentals
and may not be considered immovables , and, hence, not subject to assessment as real estate for
purposes of the real estate tax.
FACTS:
Respondent City Assessor of Cagayan de Oro City assessed at P4,400 petitioners equipment in its
repair or service shop. Petitioner appealed the assessment to the respondent Board of Tax Appeals
on the ground that the same are not realty. The Board of Tax Appeals of the City sustained the city
assessor, so petitioner herein filed with the Court of Tax Appeals a petition for the review of the
assessment. The Court of Tax Appeals having sustained the respondent city assessors ruling, and
having denied a motion for reconsideration, petitioner brought the case to this Court.
ISSUE:
Whether the Tax Court erred in its interpretation of paragraph 5 of Article 415 of the New Civil
Code, and holding that pursuant thereto, the movable equipments are taxable realties, by reason of
their being intended or destined for use in an industry.
HELD: YES.
Movable equipments, to be immobilized in contemplation of Article 415 of the Civil Code, must be
the essential and principal elements of an industry or works which are carried on in a building or
on a piece of land. Thus, where the business is one of transportation, which is carried on without a
repair or service shop, and its rolling equipment is repaired or serviced in a shop belonging to
another, the tools and equipments in its repair shop which appear movable are merely incidentals

and may not be considered immovables, and, hence, not subject to assessment as real estate for
purposes of the real estate tax.
Similarly, the tool and equipment in question in this instant case are, by their nature, not essential
and principal 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 equipment, its business may be
carried on, as petitioner has carried on without such equipments, before the war. The
transportation business could be carried on without the repair or service shop if its rolling
equipment is repaired or serviced in another shop belonging to another.
Article 415 of the Civil Code 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 equipment may not, therefore, be deemed as real property.

17. BOARD OF ASSESSMENT APPEALS v. MANILA ELECTRIC CO.

Board of Assessment Appeals, City Assessor and City Treasurer of Quezon City vs Manila Electric
Company
G.R. No. L-15334 | January 31, 1964 | Paredes, J.:
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. Meralcos 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 Meralcos 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 dont 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.

18. CALTEX PHILS., INC. v. BOARD OF ASSESSMENT APPEALS

CALTEX (Philippines) Inc. vs Central Board Of Assessment Appeals and City Assessor of Pasay
G.R. No. L-50466 | May 31, 1982 | Aquino, J.:
FACTS:
This case is about the realty tax on machinery and equipment installed by Caltex (Philippines) Inc.
in its gas stations located on leased land. The machines and equipment consists of underground
tanks, elevated tank, elevated water tanks, water tanks, gasoline pumps, computing pumps, water
pumps, car washer, car hoists, truck hoists, air compressors and tireflators. The city assessor of
Pasay City characterized the said items of gas station equipment and machinery as taxable realty.
The realty tax on said equipment amounts to P4,541.10 annually (p. 52, Rollo). The city board of tax
appeals ruled that they are personalty. The assessor appealed to the Central Board of Assessment
Appeals. The Board, which was in its decision of June 3, 1977 that the said machines and equipment

are real property under the Real Property Tax Code, Presidential Decree No. 464, which took effect
on June 1, 1974. The decision was reiterated by the Board in its resolution of January 12, 1978,
denying Caltex's motion for reconsideration, a copy of which was received by its lawyer on April 2,
1979.On May 2, 1979 Caltex filed this certiorari petition wherein it prayed for the setting aside of
the Board's decision and for a declaration that t he said machines and equipment are personal
property not subject to realty tax. We hold that the said equipment and machinery, as
appurtenances to the gas station building or shed owned by Caltex (as to which it is subject to
realty tax) and which fixtures are necessary to the operation of the gas station, for without them the
gas station would be useless, and which have been attached or affixed permanently to the gas
station site or embedded therein, are taxable improvements and machinery within the meaning of
the Assessment Law and the Real Property Tax Code. Caltex invokes the rule that machinery which
is movable in its nature only becomes immobilized when placed in a plant by the owner of the
property or plant but not when so placed by a tenant, a usufructuary, or any person having only a
temporary right, unless such person acted as the agent of the owner (Davao Saw Mill Co. vs. Castillo,
61 Phil 709).
ISSUE:
Whether the pieces of gas station equipment and machinery already enumerated are subject to
realty tax
HELD: YES.
This issue has to be resolved primarily under the provisions of the Assessment Law and the Real
Property Tax Code. Under, Sec. 38 of the said law: Machinery shall embrace machines, mechanical
contrivances, instruments, appliances and apparatus attached to the real estate. It includes the
physical facilities available for production, as well as the installations and appurtenant service
facilities, together with all other equipment designed for or essential to its manufacturing,
industrial or agricultural purposes. The equipment and machinery, are considered as
appurtenances to the gas station building or shed owned by Caltex (as to which it is subject to
realty tax) and which fixtures are necessary to the operation of the gas station, for without them the
gas station would be useless, and which have been attached or affixed permanently to the gas
station site or embedded therein, are taxable improvements and machinery within the meaning of
the Assessment Law and the Real Property Tax Code. Improvements on land are commonly taxed as
realty even though for some purposes they might be considered personalty. "It is a familiar
phenomenon to see things classed as real property for purposes of taxation which on general
principle might be considered personal property"

19. MANILA ELECTRIC CO. v. CENTRAL BOARD OF ASSESSMENT APPEALS

Manila Electric Company vs Central Board of Assessment Appeals, Board of Assessment Appeals of
Batangas and Provincial Assessor of Batangas
G.R. No. L-47943 | May 31, 1982 | Aquino, J.:
FACTS:
This case is about the imposition of the realty tax on two oil storage tanks installed in 1969 by
Manila Electric Company on a lot in San Pascual, Batangas which it leased in 1968 from Caltex
(Phil.), Inc. The tanks are within the Caltex refinery compound. It is not anchored or welded to the

concrete circular wall. Its bottom plate is not attached to any part of the foundation by bolts, screws
or similar devices. The municipal treasurer required Meralco to pay realty taxes on both tanks.
ISSUE:
WON the tanks should be considered as real property.
HELD:
The two storage tanks are not embedded in the land, they may, nevertheless, be considered as
improvements on the land, enhancing its utility and rendering it useful to the oil industry. It is
undeniable that the two tanks have been installed with some degree of permanence as receptacles
for the considerable quantities of oil needed by Meralco for its operations.