LOPEZ V. OROSA AND PLAZA THEATREG.R. Nos.

L-10817-18 February 28, 1958

FACTS:
-Petitioner Lopez was engaged in doing business under the trade name Lopez-Castelo Sawmill.
Orosa, a resident of the same province as Lopez, invited the latter to make an investment in the theatre business. Lopez
declined to invest but agreed to supply the lumber necessary for the construction of the proposed theatre. They had an
oral agreement that Orosa would be personally liable for any account that the said construction might incur and that
payment would be on demand and not cash on delivery basis.
Lopez delivered the which was used for construction amounting to P62,255.85. He was paid only P20,848.50, leaving
a balance of P41,771.35.
The land on which the building was erected previously owned by Orosa, was later on acquired by the corporation.
. As Lopez was pressing Orosa for payment, the latter and president of the corporation promised to obtain a bank loan
by mortgaging the properties of the Plaza Theatre., out of which the unpaid balance would be satisfied. But unknown to
Lopez, the corporation already obtained a loan with Luzon Surety Company as surety, and the corporation in turn
executed a mortgage on the land and building in favor of the said company as counter-security.
Due to the persistent demands of Lopez, Orosa executed a deed of assignment over his shares of stock in the
corporation.
As it remained unsettled, Lopez filed a case against Orosa and Plaza theatre praying that they be sentenced to pay him
jointly and severally of the unpaid balance; and in case defendants fail to pay, the land and building owned by the
corporation be sold in public auction with the proceeds be applied to the balance; or the shares of stock be sold in
public auction.
The lower court held that defendants were jointly liable for the unpaid balance and Lopez thus acquired the material
mans lien over the construction. The lien was merely confined to the building and did not extend to the on which the
construction was made.
Lopez tried to secure a modification of the decision, but was denied.

ISSUES:
Whether the material mans lien for the value of the materials used in the construction of the building attaches to said
structure alone and doesnt extend to the land on which the building is adhered to.
Whether the lower court and CA erred in not providing that the material mans liens is superior to the mortgage
executed in favor of surety company not only on the building but also on the land.

HELD:
-The material mans lien could be charged only to the building for which the credit was made or which received the
benefit of refection, the lower court was right in, holding at the interest of the mortgagee over the land is superior and
cannot be made subject to the material man's lien.
-Generally, real estate connotes the land and the building constructed thereon, it is obvious that the inclusion of the
building in the enumeration of what may constitute real properties could only mean one thingthat a building is by
itself an immovable property.
-In the absence of any specific provision to the contrary, a building is an immovable property irrespective of whether or
not said structure and the land on which it is adhered to belong to the same owner.

-The law gives preference to unregistered refectionary credits only with respect to the real estate upon which the
refectionary or work was made.

- The lien so created attaches merely to the immovable property for the construction or repair of which the obligation
was incurred. Therefore, the lien in favor of appellant for the unpaid value of the lumber used in the construction of the
building attaches only to said structure and to no other property of the obligors.
 Bicerra v. Teneza
[G.R. No. L-16218. November 29, 1962.]

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

ISSUE:
W/N the action involves title to real propety.
W/N the dismissal of the complaint was proper.

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

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

2. Recovery of damages not exceeding P2,000 and involving no real property belong to the Justice of the Peace Court
The complaint is for recovery of damages, the only positive relief prayed for. Further, a declaration of being the owners
of the dismantled house and/or of the materials in no wise constitutes the relief itself which if granted by final
judgment could be enforceable by execution, but is only incidental to the real cause of action to recover damages. As
this is a case for recovery of damages where the demand does not exceed PhP 2,000 and that there is no real property
litigated as the house has ceased to exist, the case is within the jurisdiction of the Justice of the Peace Court (as per
Section 88, RA 296 as amended) and not the CFI (Section 44, id.)
 STANDARD OIL COMPANY V JARAMILLO
The Power of the Registry of Deeds is Ministerial, and The absolute criterion to determine between real and personal
property is NOT supplied by the civil code. Parties may agree what to treat as personal property and what to treat as
real property.

FACTS
On November 27, 1922, Gervasia de la Rosa was the lessee of a parcel of land situated in the City of Manila and owner
of the house of really tough materials built thereon. She executed that fine day a document in the form of a chattel
mortgage, purporting to convey to Standard Oil Company of New York (by way of mortgage) both the leasehold
interest in said lot and the building.

After said document had been duly acknowledged and delivered, Standard Oil presented it to Joaquin Jaramillo, as
register of deeds of the City of Manila, for the purpose of having the same recorded in the book of record of chattel
mortgages. Upon examination of the instrument, Jaramillo opined that it was not chattel mortgage, for the reason that
the interest therein mortgaged did not appear to be personal property, within the meaning of the Chattel Mortgage Law,
and registration was refused on this ground only.

Later this confusion was brought to the Supreme Court upon demurrer by Joaquin Jaramillo, register of deeds of the
City of Manila, to an original petition of the Standard Oil Company of New York, demanding a mandamus to compel
the respondent to record in the proper register a document purporting to be a chattel mortgage executed in the City of
Manila by Gervasia de la Rosa, Vda. de Vera, in favor of the Standard Oil Company of New York.

The Supreme Court overruled the demurrer, and ordered that unless Jaramillo interposes a sufficient answer to the
petition for mandamus by Standard Oil within 5 days of notification, the writ would be issued as prayed, but without
costs.

ISSUE:
w/n the Registry of Deeds can determine the nature of property to be registered.
w/n the Registry of Deeds has powers beyond Ministerial discretion.

RESOLUTION:
1.Jaramillo, register of deeds, does not have judicial or quasi-judicial power to determine nature of document registered
as chattel mortgage Section 198 of the Administrative Code, originally of Section 15 of the Chattel Mortgage Law (Act
1508 as amended by Act 2496), does not confer upon the register of deeds any authority whatever in respect to the
"qualification," as the term is used in Spanish law, of chattel mortgages. His duties in respect to such instruments are
ministerial only. 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.

2.Article 334 and 335 of the Civil Code does not supply absolute criterion on distinction between real and personal
property for purpose of the application of the Chattel Mortgage Law Article 334 and 335 of the Civil Code supply no
absolute criterion for discriminating between real property and personal property for purposes of the application of the
Chattel Mortgage Law. Those articles state rules which, considered as a general doctrine, are law in this jurisdiction;
but it must not be forgotten that under given conditions property may have character different from that imputed to it in
said articles. It is undeniable that the parties to a contract may be agreement treat as personal property that which by
nature would be real property; and it is a familiar phenomenon to see things classed as real property for purposes of
taxation which on general principle might be considered personal property. Other situations are constantly arising, and
from time to time are presented to the Supreme Court, in which the proper classification of one thing or another as real
or personal property may be said to be doubtful.]
 PUNSALAN, JR. V. VDA. DE LACSAMANA
G.R. No. L-55729 March 28, 1983

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.
 Caltex vs CBAA
114 SCRA 296

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 building or shed, the elevated water tank, the car hoist under a separate shed, the air
compressor, the underground gasoline tank, neon lights signboard, concrete fence and pavement and the lot where they
are all placed or erected, all of them used in the pursuance of the gasoline service station business formed the entire
gasoline service-station. The lessor of the land, where the gas station is located, does not become the owner of the
machines and equipment installed therein. Caltex retains the ownership thereof during the term of the lease.

Issue:
Whether or not the pieces of gas station equipment and machinery enumerated are subject to realty tax.

Held:
The Assessment Law provides that the realty tax is due "on real property, including land, buildings, machinery, and
other improvements". SC 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 would 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

Improvements
is a valuable addition made to property or an amelioration in its condition, amounting to more than mere repairs or
replacement of waste, costing labor or capital and intended to enhance its value, beauty or utility or to adapt it for new
or further purposes.

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.
 G.R. No. L-47943 May 31, 1982
MANILA ELECTRIC COMPANY, petitioner,
vs.
CENTRAL BOARD OF ASSESSMENT APPEALS, BOARD OF ASSESSMENT APPEALS OF BATANGAS
and PROVINCIAL ASSESSOR OF BATANGAS, respondents.

AQUINO, J.:
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. They have a total capacity of 566,000 barrels. They are used for storing fuel oil for
Meralco's power plants.

According to Meralco, the storage tanks are made of steel plates welded and assembled on the spot. Their bottoms rest
on a foundation consisting of compacted earth as the outermost layer, a sand pad as the intermediate layer and a two-
inch thick bituminous asphalt stratum as the top layer. The bottom of each tank is in contact with the asphalt layer,

The steel sides of the tank are directly supported underneath by a circular wall made of concrete, eighteen inches thick,
to prevent the tank from sliding. Hence, according to Meralco, the tank is not attached to its foundation. 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 tank merely sits on its foundation. Each empty tank can be floated by flooding its dike-
inclosed location with water four feet deep. (pp. 29-30, Rollo.)

On the other hand, according to the hearing commissioners of the Central Board of Assessment Appeals, the area where
the two tanks are located is enclosed with earthen dikes with electric steel poles on top thereof and is divided into two
parts as the site of each tank. The foundation of the tanks is elevated from the remaining area. On both sides of the
earthen dikes are two separate concrete steps leading to the foundation of each tank.

Tank No. 2 is supported by a concrete foundation with an asphalt lining about an inch thick. Pipelines were installed on
the sides of each tank and are connected to the pipelines of the Manila Enterprises Industrial Corporation whose
buildings and pumping station are near Tank No. 2.

The Board concludes that while the tanks rest or sit on their foundation, the foundation itself and the walls, dikes and
steps, which are integral parts of the tanks, are affixed to the land while the pipelines are attached to the tanks. (pp. 60-
61, Rollo.) In 1970, the municipal treasurer of Bauan, Batangas, on the basis of an assessment made by the provincial
assessor, required Meralco to pay realty taxes on the two tanks. For the five-year period from 1970 to 1974, the tax and
penalties amounted to P431,703.96 (p. 27, Rollo). The Board required Meralco to pay the tax and penalties as a
condition for entertaining its appeal from the adverse decision of the Batangas board of assessment appeals.

The Central Board of Assessment Appeals (composed of Acting Secretary of Finance Pedro M. Almanzor as chairman
and Secretary of Justice Vicente Abad Santos and Secretary of Local Government and Community Development Jose
Roo as members) in its decision dated November 5, 1976 ruled that the tanks together with the foundation, walls,
dikes, steps, pipelines and other appurtenances constitute taxable improvements.

Meralco received a copy of that decision on February 28, 1977. On the fifteenth day, it filed a motion for
reconsideration which the Board denied in its resolution of November 25, 1977, a copy of which was received by
Meralco on February 28, 1978.

On March 15, 1978, Meralco filed this special civil action of certiorari to annul the Board's decision and resolution. It
contends that the Board acted without jurisdiction and committed a grave error of law in holding that its storage tanks
are taxable real property.

Meralco contends that the said oil storage tanks do not fall within any of the kinds of real property enumerated in
article 415 of the Civil Code and, therefore, they cannot be categorized as realty by nature, by incorporation, by
destination nor by analogy. Stress is laid on the fact that the tanks are not attached to the land and that they were placed
on leased land, not on the land owned by Meralco.

This is one of those highly controversial, borderline or penumbral cases on the classification of property where strong
divergent opinions are inevitable. The issue raised by Meralco has to be resolved in the light of the provisions of the
Assessment Law, Commonwealth Act No. 470, and the Real Property Tax Code, Presidential Decree No. 464 which
took effect on June 1, 1974.

Section 2 of the Assessment Law provides that the realty tax is due "on real property, including land, buildings,
machinery, and other improvements" not specifically exempted in section 3 thereof. This provision is reproduced with
some modification in the Real Property Tax Code which provides:
Sec. 38. Incidence of Real Property Tax. They shall be levied, assessed and collected in all provinces, cities and
municipalities an annual ad valorem tax on real property, such as land, buildings, machinery and other improvements
affixed or attached to real property not hereinafter specifically exempted.

The Code contains the following definition in its section 3:

k) Improvements is a valuable addition made to property or an amelioration in its condition, amounting to more than
mere repairs or replacement of waste, costing labor or capital and intended to enhance its value, beauty or utility or to
adapt it for new or further purposes.

We hold that while 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.

Oil storage tanks were held to be taxable realty in Standard Oil Co. of New Jersey vs. Atlantic City, 15 Atl. 2nd 271.

For purposes of taxation, the term "real property" may include things which should generally be regarded as personal
property(84 C.J.S. 171, Note 8). 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 (Standard Oil Co. of New York vs.
Jaramillo, 44 Phil. 630, 633).

The case of Board of Assessment Appeals vs. Manila Electric Company, 119 Phil. 328, wherein Meralco's steel towers
were held not to be subject to realty tax, is not in point because in that case the steel towers were regarded as poles and
under its franchise Meralco's poles are exempt from taxation. Moreover, the steel towers were not attached to any land
or building. They were removable from their metal frames.

Nor is there any parallelism between this case and Mindanao Bus Co. vs. City Assessor, 116 Phil. 501, where the tools
and equipment in the repair, carpentry and blacksmith shops of a transportation company were held not subject to
realty tax because they were personal property.

WHEREFORE, the petition is dismissed. The Board's questioned decision and resolution are affirmed. No costs.
SO ORDERED.
 PIANSAY V. DAVID12 SCRA 227

FACTS:
David secured a loan from Vda. De Uy Kim, and to secure the payment, he executed a chattel mortgage over a house in
favor of Kim. Due to failure to pay, the CM was foreclosed and Kim was the highest bidder in the public auction. Kim
then sold the house to Mangubat. The latter then filed charges against David for the collection of loan and praying that
the deed of sale issued by Kim in favor of Piansay be declared null and void. The trial court held David liable to
Mangubat but dismissed the complaint with regard Kim and Piansay. Kim and Piansay then filed charges against David
and Mangubat. Due to the civil case, David demanded from Piansay the payment of rentals for the use of the house,
which the latter claims to be his property.

HELD:
Regardless of the validity of a contract constituting a chattel mortgage on a house, as between the parties to the said
contract, the same cannot and doesnt bind third persons who arent parties to the aforementioned contract or their
privies. As a consequence, the sale of the house in question in the proceedings for the sale of the house in question in
the proceedings for the extrajudicial foreclosure of said chattel mortgage, is null and void insofar as Mangubat is
concerned and didnt confer upon Kim as buyer in said sale, any dominical right in and to said house.
 PHIL. REFINING CO. V. JARQUE61 PHIL 229

FACTS:
Philippine Refining and Jarque has entered into mortgages over two motor vessels. These have been denominated as
chattel mortgages. The fourth mortgage was instituted 30 days before insolvency proceedings to which Jarque prayed
that he be declared as an insolvent debtor, which soon was granted and all his rights to his properties were assigned to
Corominas. The trial court declined to order the foreclosure of the mortgages.

HELD:
Vessels are considered as personal property under the civil laws. Similarly, under common law, they are considered as
personal property but at some circumstances are considered as peculiar kind of personal property. Since the term
personal property includes vessels, it may be the subject to the provisions of the Chattel Mortgage Law
 LEUNG YEE V. F.L STRONG MACHINERY CO. AND WILLIAMSON
37 SCRA 644

FACTS:
1. First mortgage: Compania Agricola Filipina bought rice-cleaning machinery from the machinery company and this
was secured by a chattel mortgage on the machinery and the building to which it was installed. Upon failure to pay, the
chattel mortgage was foreclosed, the building and machinery sold in public auction and bought by the machinery
company.

2. Days after, the Compania Agricola Filipina executed a deed of sale over the land to which the building stood in favor
of the machinery company. This was done to cure any defects that may arise in the machinery companys ownership of
the building.

3. Second mortgage: on or about the date to which the chattel mortgage was excecuted, Compania executed a real
estate mortgage over the building in favor of Leung Yee, distinct and separate from the land. This is to secure payment
for its indebtedness for the construction of the building. Upon failure to pay, the mortgage was foreclosed.

4. The machinery company then filed a case, demanding that it be declared the rightful owner of the building. The trial
court held that it was the machinery company which was the rightful owner as it had its title before the building was
registered prior to the date of registry of Leung Yees certificate.

HELD:
The building in which the machinery was installed was real property, and the mere fact that the parties seem to have
dealt with it separate and apart from the land on which it stood in no wise changed the character as real property.

It follows that neither the original registry in the chattel mortgage registry of the instrument purporting to be a chattel
mortgage of the building and the machinery installed therein, nor the annotation in the registry of the sale of the
mortgaged property, had any effect whatever so far as the building is concerned. *LANDMARK CASE
 Laurel v. Abrogar GR# 155076/ Jan. 13, 2009 (576 SCRA 41)

FACTS
PLDT sued Laurel, for violation of Art 308 RPC (theft), allegedly using international long distance calls belonging to
PLDT, without its knowledge and consent

Laurel filed motion to quash information, contending international calls are not personal property

PLDT: calls & rig ht to conduct business, both capable of appropriation, thus personal property

ISSUE: WON the international calls as well as the business of providing telecommunication or telephone service are
personal properties capable of appropriation and can be objects of theft.

HELD:
Case remanded to trial court. Crime is properly designated as theft. Prosecution directed to amend information, to
clearly state the property subject of the theft are services & business of PLDT.

Intl long distance calls are not personal properties. PLDT:

Could not have acquired ownership over such calls, merely encodes, enhances, decodes, and transmits said calls could
not validly claim that such call were taken without its consent. Use of the facilities w/o PLDT consent is the unlawful
taking of the telephone services and business. Only reqt for a personal property to be the object of theft under the RPC
is that it be capable of appropriation. The word take in the RPC maybe committed through the use of the offenders
own hands as well as any mechanical device.

Business of providing telecommunication or telephone services is likewise personal property. Business is not
enumerated as real property in Art 415. Thus it is personal property.
 DAVAO SAW MILL vs. APRONIANO G. CASTILLO and DAVAO LIGHT & POWER CO., INC. G.R. No. L-
40411 August 7, 1935

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

In another action wherein the Davao Light & Power Co., Inc., was the plaintiff and the Davao, Saw, Mill Co., Inc., was
the defendant, a judgment was rendered in favor of the plaintiff in that action against the defendant; a writ of execution
issued thereon, and the properties now in question were levied upon as 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/ Rationale:
Yes. The Supreme Court affirmed the decision of the lower court.

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

FACTS: City assessor of Cagayan de Oro assessed at $4,400 petitioners equipment. Petitioner appealed the
assessment saying that it is not a realty. Petitioner is engaged in transportation business. The machines are sitting on
cement and wooden platforms.
ISSUE: WON it is a real property.

HELD: Movable equipments to be immobilized must first be essential and principal elements of industry and work
without which such industry or works would b unable to function or carry out its business. In this case, the tools and
equipments are not essential and principal elements of petitioners business of transporting passengers and cargoes.
They are merely incidental. Aside from essentiality, the industry or work must be carried on in a building or on a piece
of land. In this case, the equipment are destined only to repair and service the transportation business, not carried on in
a building or permanently on a piece of land.
 BOARD OF ASSESMENT VS MERALCO

Facts:
The Philippine Commission enacted Act No. 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.

Meralco's electric power is generated by its hydro-electric plant located at Botocan Falls, Laguna and is transmitted to
the City of Manila by means of electric transmission wires, running from the province of Laguna to the said City.
These electric transmission wires which carry high voltage current, are fastened to insulators attached on steel towers
constructed by respondent at intervals, from its hydro- electric plant in the province of Laguna to the City of Manila.
The respondent Meralco has constructed 40 of these steel towers within Quezon City, on land belonging to it.

The City Assessor of Quezon City declared the aforesaid steel towers for real property tax under Tax.

Respondent paid the amount under protest, and filed a petition for review in the Court of Tax Appeals

Issue:
Whether or not the Meralco poles constitute real properties so as they can be subjected to a real property tax.

Held:
The SC ruled that Meralco's steel towers were considered poles within the meaning of paragraph 9 of its franchise
which exempts its poles from taxation. The steel towers were considered personalty because they were removable and
merely attached to square metal frames by means of bolts and could be moved from place to place when unscrewed
and dismantled. Furthermore, 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.

Note:
Poles
- was used to denote the steel towers of an electric company engaged in the generation of hydro-electric power
generated from its plant.
 Fels Energy, Inc. vs. Province of Batangas
G.R. No. 168557. February 16, 2007.

Callejo Sr., J.

Doctrine: In Consolidated Edison Company of New York, Inc., et al. v. The City of New York, et al., a power company
brought an action to review property tax assessment. On the citys motion to dismiss, the Supreme Court of New York
held that the barges on which were mounted gas turbine power plants designated to generate electrical power, the fuel
oil barges which supplied fuel oil to the power plant barges, and the accessory equipment mounted on the barges were
subject to real property taxation.
Moreover, 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 or work.

Facts: On January 18, 1993, NPC entered into a lease contract with Polar Energy, Inc. over 330 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 five years. Article 10 states that NPC shall be responsible for the payment of taxes.
(other than (i) taxes imposed or calculated on the basis of the net income of POLAR and Personal Income Taxes of its
employees and (ii) construction permit fees, environmental permit fees and other similar fees and charges. Polar
Energy then assigned its rights under the Agreement to Fels despite NPCs initial opposition.
FELS received an assessment of real property taxes on the power barges from Provincial Assessor Lauro C. Andaya of
Batangas City. FELS referred the matter to NPC, reminding it of its obligation under the Agreement to pay all real
estate taxes. It then gave NPC the full power and authority to represent it in any conference regarding the real property
assessment of the Provincial Assessor. NPC filed a petition with the LBAA. The LBAA ordered Fels to pay the real
estate taxes. The LBAA ruled that the power plant facilities, while they may be classified as movable or personal
property, are nevertheless considered real property for taxation purposes because they are installed at a specific
location with a character of permanency. The LBAA also pointed out that the owner of the bargesFELS, a private
corporationis the one being taxed, not NPC. A mere agreement making NPC responsible for the payment of all real
estate taxes and assessments will not justify the exemption of FELS; such a privilege can only be granted to NPC and
cannot be extended to FELS. Finally, the LBAA also ruled that the petition was filed out of time.
Fels appealed to the CBAA. The CBAA reversed and ruled that the power barges belong to NPC; since they are
actually, directly and exclusively used by it, the power barges are covered by the exemptions under Section 234(c) of
R.A. No. 7160. As to the other jurisdictional issue, the CBAA ruled that prescription did not preclude the NPC from
pursuing its claim for tax exemption in accordance with Section 206 of R.A. No. 7160. Upon MR, the CBAA reversed
itself.

Issue: Whether or not the petitioner may be assessed of real property taxes.

Held: YES. The CBAA and LBAA power barges are real property and are thus subject to real property tax. This is also
the inevitable conclusion, considering that G.R. No. 165113 was dismissed for failure to sufficiently show any
reversible error. Tax assessments by tax examiners are presumed correct and made in good faith, with the taxpayer
having the burden of proving otherwise. Besides, factual findings of administrative bodies, which have acquired
expertise in their field, are generally binding and conclusive upon the Court; we will not assume to interfere with the
sensible exercise of the judgment of men especially trained in appraising property. Where the judicial mind is left in
doubt, it is a sound policy to leave the assessment undisturbed. We find no reason to depart from this rule in this case.
In Consolidated Edison Company of New York, Inc., et al. v. The City of New York, et al., a power company brought
an action to review property tax assessment. On the citys motion to dismiss, the Supreme Court of New York held that
the barges on which were mounted gas turbine power plants designated to generate electrical power, the fuel oil barges
which supplied fuel oil to the power plant barges, and the accessory equipment mounted on the barges were subject to
real property taxation.

Moreover, 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 or work.
Petitioners maintain nevertheless that the power barges 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 NPC, a government- owned and
controlled corporation engaged in the supply, generation, and transmission of electric power.
We affirm the findings of the LBAA and CBAA that the owner of the taxable properties is petitioner FELS, which in
fine, is the entity being taxed by the local government. As stipulated under Section 2.11, Article 2 of the Agreement:
OWNERSHIP OF POWER BARGES. POLAR shall own the Power Barges and all the fixtures, fittings, machinery
and equipment on the Site used in connection with the Power Barges which have been supplied by it at its own cost.
POLAR shall operate, manage and maintain the Power Barges for the purpose of converting Fuel of NAPOCOR into
electricity.
It follows then that FELS cannot escape liability from the payment of realty taxes by invoking its exemption in Section
234 (c) of R.A. No. 7160. Indeed, the law states that the machinery must be actually, directly and exclusively used by
the government owned or controlled corporation; nevertheless, petitioner FELS still cannot find solace in this provision
because Section 5.5, Article 5 of the Agreement provides:
OPERATION. POLAR undertakes that until the end of the Lease Period, subject to the supply of the necessary Fuel
pursuant to Article 6 and to the other provisions hereof, it will operate the Power Barges to convert such Fuel into
electricity in accordance with Part A of Article 7.
It is a basic rule that obligations arising from a contract have the force of law between the parties. Not being contrary to
law, morals, good customs, public order or public policy, the parties to the contract are bound by its terms and
conditions.
Time and again, the Supreme Court has stated that taxation is the rule and exemption is the exception. The law does not
look with favor on tax exemptions and the entity that would seek to be thus privileged must justify it by words too
plain to be mistaken and too categorical to be misinterpreted. Thus, applying the rule of strict construction of laws
granting tax exemptions, and the rule that doubts should be resolved in favor of provincial corporations, we hold that
FELS is considered a taxable entity.
The mere 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
NPC cannot be extended to FELS. The covenant is between FELS and NPC and does not bind a third person not privy
thereto, in this case, the Province of Batangas.
It must be pointed out that the protracted and circuitous litigation has seriously resulted in the local governments
deprivation of revenues. The power to tax is an incident of sovereignty and is unlimited in its magnitude,
acknowledging in its very nature no perimeter so that security against its abuse is to be found only in the responsibility
of the legislature which imposes the tax on the constituency who are to pay for it. The right of local government units
to collect taxes due must always be upheld to avoid severe tax erosion. This consideration is consistent with the State
policy to guarantee the autonomy of local governments and the objective of the Local Government Code that they
enjoy genuine and meaningful local autonomy to empower them to achieve their fullest development as self-reliant
communities and make them effective partners in the attainment of national goals.
In conclusion, we reiterate that the power to tax is the most potent instrument to raise the needed revenues to finance
and support myriad activities of the local government units for the delivery of basic services essential to the promotion
of the general welfare and the enhancement of peace, progress, and prosperity of the people.
 Makati Leasing and Finance Corp., vs Wearever Textile Mills, Inc.,
122 SCRA 296
GR No. L-58469
May 16, 1983

FACTS
Wearever Textile Mills, Inc. executed a chattel mortgage contract in favor of Makati Leasing and Finance Corporation
covering certain raw materials and machinery. Upon default, Makati Leasing fi led a petition for judicial foreclosure of
the properties mortgaged. Acting on Makati Leasings application for replevin, the lower court issued a writ of seizure.
Pursuant thereto, the sheriff enforcing the seizure order seized the machinery subject matter of the mortgage. In a
petition for certiorari and prohibition, the Court of Appeals ordered the return of the machinery on the ground that the
same can-not be the subject of replevin because it is a real property pursuant to Article415 of the new Civil Code, the
same being attached to the ground by means of bolts and the only way to remove it from Wearever textiles plant would
be to drill out or destroy the concrete fl oor. When the motion for reconsideration of Makati Leasing was

ISSUE
Whether the machinery in suit is real or personal property from the point of view of the parties.

HELD
There is no logical justification to exclude the rule out the present case from the application of the pronouncement in
Tumalad v Vicencio, 41 SCRA 143. If a house of strong materials, like what was involved in the 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 the denying the existence of
the chattel mortgage.
In rejecting petitioners assertion on the applicability of the Tumalad doctrine, the CA lays stress on the fact that the
house involved therein was built on a land that did not belong to the owner of such house. But the law makes no
distinction with respect to the ownership of the land on which the house is built and We should not lay down
distinctions not contemplated by law.

It must be pointed out that the characterization by the private respondent is indicative of the 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 a real property as long as no interest of third parties would be prejudiced thereby.

The status of the subject matter as movable or immovable property was not raised as an issue before the lower court
and the CA, except in a supplemental memorandum in support of the petition filed in the appellate court. There is no
record showing that the mortgage has been annulled, or that steps were taken to nullify the same. On the other hand,
respondent has benefited from the said contract.

Equity dictates that one should not benefit at the expense of another.
As such, private respondent could no longer be allowed to impugn the efficacy of the chattel mortgage after it has
benefited therefrom.
Therefore, the questioned machinery should be considered as personal property.