LOPEZ V. OROSA AND PLAZA THEATREG.R. Nos.
L-10817-18 February 28, 1958 HELD:
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.
-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.
ASSOCIATED INSURANCE and SURETY COMPANY, INC., plaintiff,
vs.
ISABEL IYA, ADRIANO VALINO and LUCIA VALINO, defendants.
Facts:
Valino & Valino were the owners and possessors of a house of strong materials in Rizal, which
they purchased on installment basis. To enable her to purchase on credit rice from NARIC,
Valino filed a bond (P11,000) subscribed by Associated Insurance and Surety Co Inc, and as a
counter-guaranty, Valino executed an alleged chattel mortgage on the aforementioned house
in favour of the surety company. At the same time, the parcel of land which the house was
erected was registered in the name of Philippine Realty Corporation.
Valino, to secure payment of an indebtedness (P12,000) executed a real estate mortgage over
the lot and the house in favour of Iya.
Valino failed to satisfy her obligation to NARIC, so the surety company was compelled to pay
the same pursuant to the undertaking of the bond. In turn, surety company demanded
reimbursement from Valino, and as they failed to do so, the company foreclosed the chattel
mortgage over the house. As a result, public sale was conducted and the property was
awarded to the surety company.
The surety company then learned of the existence of the real estate mortgage over the lot and
the improvements thereon; thus, they prayed for the exclusion of the residential house from
the real estate mortgage and the declaration of its ownership in virtue of the award given
during bidding.
Iya alleged that she acquired a real right over the lot and the house constructed thereon, and
that the auction sale resulting from the foreclosure of chattel mortgage was null and void.
Surety company argued that as the lot on which the house was constructed did not belong to
the spouses at the time the chattel mortgage was executed, the house might be considered as
personal property, and they prayed that the said building be excluded from the real estate
mortgage.
Issue:
There is no question over Iyas right over the land by real estate mortgage; however, as the
building instructed thereon has been the subject of two mortgages, controversy arise as to
which of these encumbrances should receive preference over the other.
Held:
The building is subject to the real estate mortgage, in favour of Iya. Iyas right to foreclose not
only the land but also the building erected thereon is recognised.
While it is true that 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 of what may constitute real properties (Article 415), could only mean that a
building is by itself an immovable property. Moreover, in view of 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.
A building certainly cannot be divested of its character of a realty by the fact that the land on
which it is constructed belongs to another.
In the case at bar, as personal properties could only be the subject of a chattel mortgage and
as obviously the structure in question is not one, the execution of the chattel mortgage
covering said building is clearly invalid and a nullity. While it is true that said document was
correspondingly registered in Chattel Mortgage Registry of Rizal, this act produced no effect
whatsoever, for where the interest conveyed is in the nature of real property, the registration
of the document in the registry of chattels is merely a futile act. Thus, the registration of the
chattel mortgage of a building of strong materials produced no effect as far as the building is
concerned.
Bicerra v. Teneza
[G.R. No. L-16218. November 29, 1962.]
En Banc, Makalintal (J): 10 concur.
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.)
Evangelista v. Alto Surety
Facts:
In 1949, Santos Evangelista instituted Civil Case No. 8235 of the CFI Manila (Santos Evangelista
vs. Ricardo Rivera) for a sum of money. On the same date, he obtained a writ of attachment,
which was 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. In due course, judgment was rendered in favor of Evangelista,
who bought the house at public auction held in compliance with the writ of execution issued
in said case on 8 October 1951. The corresponding definite deed of sale was issued to him on
22 October 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 10 May 1952, a definite deed of sale of the
same house had been issued to Alto Surety, as the highest bidder at an auction sale held, on
29 September 1950, in compliance with a writ of execution issued in Civil Case 6268 of the
same court (Alto Surety & Insurance vs. Maximo Quiambao, Rosario Guevara and Ricardo
Rivera)" in which judgment for the sum of money, had been rendered in favor of Alto Surety.
Hence, on 13 June 1953, Evangelista instituted an action against Alto Surety and Ricardo
Rivera, for the purpose of establishing his title over said house, and 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, P40.00 a month from October 1952, until said delivery.
The decision was however reversed by the Court of Appeals, which absolved Alto Surety from
the complaint on account 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 Alto Surety,
Evangelista did not acquire thereby a preferential lien, the attachment having been levied as if
the house in question were immovable property.
Issue:
Whether or not a house constructed by the lessee of the land on which it is built, should be
dealt with, for purpose of attachment, as immovable property?
Held:
The court ruled that the house is not personal property, much less a debt, credit or other
personal property not capable of manual delivery, but immovable property. As held in Laddera
vs. Hodges (48 OG 5374), "a true building is immovable or real property, whether it is erected
by the owner of the land or by a usufructuary or lessee. The opinion that the house of Rivera
should have been attached, as "personal property capable of manual delivery, by taking and
safely keeping in his custody", for it declared that "Evangelista could not have validly
purchased Ricardo Rivera's house from the sheriff as the latter was not in possession thereof
at the time he sold it at a public auction is untenable. Parties to a deed of chattel mortgage
may agree to consider a house as personal property for purposes of said contract. However,
this view is good only insofar as the contracting parties are concerned. It is based, partly, upon
the principle of estoppel. Neither this principle, nor said view, is applicable to strangers to said
contract. The rules on execution do not allow, and should not be interpreted as to allow, the
special consideration that parties to a contract may have desired to impart to real estate as
personal property, when they are not ordinarily so. Sales on execution affect the public and
third persons. The regulation governing sales on execution are for public officials to follow.
The form of proceedings prescribed for each kind of property is suited to its character, not to
the character which the parties have given to it or desire to give it. The regulations were never
intended to suit the consideration that parties, may have privately given to the property levied
upon. The court therefore affirms the decision of the CA with cost against Alto Surety.
Leung Yee vs Frank Strong Machinery Co.
37 Phil. 644 Civil Law Law on Property Multiple Sale to Different Vendees Real vs
Personal Property
In 1913, Compania Agricola Filipina (CAF) was indebted to two personalities: Leung Yee and
Frank L. Strong Machinery Co. CAF purchased some rice cleaning machines from Strong
Machinery. CAF installed the machines in a building. As security for the purchase price, CAF
executed a chattel mortgage on the rice cleaning machines including the building where the
machines were installed. CAF failed to pay Strong Machinery, hence the latter foreclosed the
mortgage the same was registered in the chattel mortgage registry.
CAF also sold the land (where the building was standing) to Strong Machinery. Strong
Machinery took possession of the building and the land.
On the other hand, Yee, another creditor of CAF who engaged in the construction of the
building, being the highest bidder in an auction conducted by the sheriff, purchased the same
building where the machines were installed. Apparently CAF also executed a chattel mortgage
in favor Yee. Yee registered the sale in the registry of land. Yee was however aware that prior
to his buying, the property has been sold in favor of Strong Machinery evidence is the
chattel mortgage already registered by Strong Machinery (constructive notice).
ISSUE: Who is the owner of the building?
HELD: The SC ruled that Strong Machinery has a better right to the contested property. Yee
cannot be regarded as a buyer in good faith as he was already aware of the fact that there was
a prior sale of the same property to Strong Machinery.
The SC also noted that the Chattel Mortgage Law expressly contemplates provisions for chattel
mortgages which only deal with personal properties. The fact that the parties dealt the
building as if its a personal property does not change the nature of the thing. It is still a real
property. Its inscription in the Chattel Mortgage registry does not modify its inscription the
registry of real property.
Standard Oil Co. vs Jaranillo
44 PHIL 631
GR No. L-20329
March 16, 1923
FACTS
Gervasia de la Rosa, Vda. de Vera, who was renting a parcel of land in Manila, constructed a
building of strong materials thereon, which she conveyed to Standard Oil Company of New
York by way of chattel mortgage.
When the mortgagee presented the deed to the Register of Deeds of Manila for registration in
the Chattel Mortgage Registry, Joaquin Jaranillo, the Registrar refused to allow the registration
on the ground that the building was a real property, and therefore could not be the subject of
a valid chattel mortgage.
ISSUES
1. May the deed be registered in the chattel mortgage registry?
2. Whether the interests conveyed in the instrument are real or personal.
HELD
1. Yes. The Registrar's duty is MINISTERIAL in character.
There is no legal provision conferring upon him any judicial or quasi-judicial power to
determine or qualify the nature of the document presented before him.
The determination of the nature of the property lies with the courts of justice, and not by the
Register of Deeds.
Moreover, the act of recording a chattel mortgage 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 and affects nobody's rights except as a speciefies of notice.
As such, the Registrar should therefore accept the legal fees being tendered, and place the
document on record.
2. Art.334 and 335 of the Civil Code do not supply an absolute criterion for discriminating
between real and personal property for the purpose of applying the Chattel Mortgage Law.
It should also be noted that under given conditions property may have character different
from that imputed in said articles. Parties to a contract may, by agreement, treat as personal
property that which by nature would be real property.
It is undeniable that the parties to a contract may by agreement treat aspersonal property
that which by nature would be a real property, as long as no interest of third parties would be
prejudiced thereby.
However, it should be reiterated that the determination of the nature of the property, with
reference to the placing of the document on record, is neither a function or an authority
granted to the Registrar of the Registry of Deeds.
SIBAL v. VALDEZ
FACTS: The deputy sheriff of Tarlac attached and sold to Valdez the sugarcane planted by the
plaintiff. The plaintiff asked for the redemption of the sugarcane. Valdez said that it cannot be
subject to redemption because it is a personal property.
ISSUE: WON the sugarcane in question is a personal or real property.
HELD:Sugarcane is under real property as ungathered products. The Supreme Court of
Louisiana provided that standing crops are considered as part of the land to which they are
attached but the immovability provided for is only one in abstract. The existence of a right on
the growing crop is mobilization by anticipation, a gathering as it were in advance, rendering
the crop movable quoad the right acquired therein.
-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.
-Act 1508 (Chattel Mortgage Law) recognize growing crops as personal property.
Crops whether growing or ready to be harvested, when produced by annual cultivation, is
not part of realty.
Paragraph 2 of Art. 334 of the Civil Code has been modified by Sec. 450 of Code of Civil
Procedure and Act no. 1508 in the sense that for purposes of attachment and execution and
Chattel Mortgage Law, ungathered products have the nature of personal property.
Tsai v. CA
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.
Yap vs. Taada
Facts:
The case began in the City Court of Cebu with the filing by Goulds Pumps International
(Phil.),Inc. (Goulds for brevity) of a complaint against Yap and his wife, seeking recovery of
P1,459.30 representing the balance of the price and installation cost of a water pump in the
latter's premises. The City Court ruled in favor of Goulds and ordered Yap to pay the former
the sum of P1,459.30 with interest at the rate of 12% per annum until fully paid. Yap appealed
to the Court of First Instance. The appeal was assigned to the sala of respondent Judge
Taada. Taada affirmed the decision of the City Court. A writ of execution was issued. With
this, the Sheriff levied on the water pump in question and scheduled the execution sale. The
said property was sold to Goulds as the highest bidder.Yap filed his petition for review before
the Supreme Court.
Issue:
Whether or not the pump installed had become immovable property by its being installed in
his residence.
Held:
The Court ruled on the negative. The Civil Code considers as immovable property, among
others, anything "attached to an immovable in a fixed manner, in such a way that it cannot be
separated therefrom without breaking the material or deterioration of the object." The pump
does not fit this description. It could be, and was in fact separated from Yap's premises
without being broken or suffering deterioration. Obviously the separation or removal of the
pump involved nothing more complicated than the loosening of bolts or dismantling of other
fasteners.
Jul 6, 2014
MINDANAO BUS COMPANY v. THE CITY ASSESSOR & TREASURER and the
BOARD OF TAX APPEALS of Cagayan de Oro City
G.R. No. L-17870 September 29, 1962
FACTS:
Petitioner is a public utility solely engaged in transporting passengers and cargoes by motor
trucks. It owns a land where it maintains and operates a garage for its TPU motor trucks; a
repair shop; blacksmith and carpentry shops, and with machineries placed therein, its TPU
trucks are made; body constructed; and same are repaired in a condition to be serviceable in
the TPU land transportation business it operates.
The machineries have never been or were never used as industrial equipment to produce
finished products for sale, nor to repair machineries, parts and the like offered to the general
public indiscriminately for business or commercial purposes.
Respondent City Assessor of Cagayan de Oro City assessed at P4,400 petitioners above-
mentioned equipment. 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 CTA held the petitioner liable to the payment of the realty tax on its maintenance and
repair equipment mentioned above. Hence, this petition.
ISSUE:
Should the tools and equipment in the petitioner companys repair shop be considered
immovable taxable real properties?
DOCTRINE:
NO. Movable equipment 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 equipment are not essential and principle municipal elements of
petitioners business of transporting passengers and cargoes by motor trucks. They are merely
incidentals acquired as movables and used only for expediency to facilitate and/or improve
its service. 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.
FELS ENERGY, INC. V THE PROVINCE OF BATANGAS and THE OFFICE OF
THE PROVINCIAL ASSESSOR OF BATANGAS
G.R. No. 168557 February 16, 2007
FACTS
Two consolidated cases were filed by FELS Energy, Inc. (FELS) and National Power Corporation
(NPC), respectively.
NPC entered into a lease contract with Polar Energy, Inc. over diesel engine power barges
moored at Batangas. The contract, denominated as an Energy Conversion Agreement, was for
a period of five years wherein, NPC shall be responsible for the payment of:
(a) all taxes, import duties, fees, charges and other levies imposed by the National
Government
(b) all real estate taxes and assessments, rates and other charges in respect of the Power
Barges
Subsequently, Polar Energy, Inc. assigned its rights under the Agreement to FELS. Thereafter,
FELS received an assessment of real property taxes on the power barges. The assessed tax,
which likewise covered those due for 1994, amounted to P56,184,088.40 per annum. 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 sought reconsideration of the Provincial Assessors decision to assess real property taxes
on the power barges. However, the motion was denied. The Local Board of Assessment
Appeals (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.
FELS appealed the LBAAs ruling to the Central Board of Assessment Appeals (CBAA). The
CBAA rendered a Decision finding the power barges exempt from real property tax.
It was later reversed by the cbaa upon reconsideration and affirmed by the CA
ISSUE
Whether power barges, which are floating and movable, are personal properties and
therefore, not subject to real property tax.
RULING
No. Article 415 (9) of the New Civil Code provides that "[d]ocks 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.
The findings of the LBAA and CBAA that the owner of the taxable properties is petitioner FELS
is the entity being taxed by the local government. As stipulated under 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,
the law states that the machinery must be actually, directly and exclusively used by the
government owned or controlled corporation;
The agreement POLAR undertakes that until the end of the Lease Period, it will operate the
Power Barges to convert such Fuel into electricity. Therefore, FELS shall be liable for the realty
taxes and not the NPC who is not actually, directly and exclusively using the same. It is a basic
rule that obligations arising from a contract have the force of law between the parties.
Davao Sawmill Co. vs Castillo
61 PHIL 709
GR No. L-40411
August 7, 1935
A tenant placed machines for use in a sawmill on the landlord's land.
FACTS
Davao Sawmill Co., operated a sawmill. The land upon which the business was conducted was
leased from another person. On the land, Davao Sawmill erected a building which housed the
machinery it used. Some of the machines were mounted and placed on foundations of
cement. In the contract of lease, Davo Sawmill agreed to turn over free of charge all
improvements and buildings erected by it on the premises with the exception of machineries,
which shall remain with the Davao Sawmill. In an action brought by the Davao Light and
Power Co., judgment was rendered against Davao Sawmill. A writ of execution was issued and
the machineries placed on the sawmill were levied upon as personalty by the sheriff. Davao
Light and Power Co., proceeded to purchase the machinery and other properties auctioned by
the sheriff.
ISSUE
Are the machineries real or personal property?
HELD
Art.415 of the New Civil Code provides that Real Property consists of:
(1) Lands, buildings, roads and constructions of all kinds adhered to the soil;
xxx
(5) Machinery, receptacles, instruments or implements intended by the owner pf the
tenement for an industry ot works which may be carried on in a building or on a piece of land,
and which tend directly to meet the needs of the said industry or works;
Appellant should have registered its protest before or at the time of the sale of the property.
While not conclusive, the appellant's characterization of the property as chattels is indicative
of intention and impresses upon the property the character determined by the parties.
Machinery is naturally movable. However, machinery may be immobilized by destination or
purpose under the following conditions:
General Rule: The machinery only becomes immobilized if placed in a plant by the owner of
the property or plant.
Immobilization cannot be made by a tenant, a usufructuary, or any person having only a
temporary right.
Exception: The tenant, usufructuary, or temporary possessor acted as agent of the owner of
the premises; or he intended to permanently give away the property in favor of the owner.
As a rule, therefore, the machinery should be considered as Personal Property, since it was
not placed on the land by the owner of the said land.
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 denied by the Court of Appeals, Makati Leasing elevated the matter to the Supreme
Court.
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.
Board of Assessment Appeals, Q.C. vs Meralco
10 SCRA 68
GR No. L-15334
January 31, 1964
FACTS
On November 15, 1955, the QC City Assessor declared the MERALCO's steel towers subject to
real property tax. After the denial of MERALCO's petition to cancel these declarations, an
appeal was taken to the QC Board of Assessment Appeals, which required respondent to pay
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 (CTA) which rendered a decision ordering the cancellation of the said tax declarations
and the refunding to MERALCO by the QC City Treasurer of P11,651.86.
ISSUE
Are the steel towers or poles of the MERALCO considered real or personal properties?
HELD
Pole long, comparatively slender, usually cylindrical piece of wood, timber, object of metal
or the like; an upright standard to the top of which something is affixed or by which
something is supported.
MERALCO's steel supports consists of a framework of 4 steel bars/strips which are bound by
steel cross-arms atop of which are cross-arms supporting 5 high-voltage transmission wires,
and their sole function is to support/carry such wires. The exemption granted to poles as
quoted from Part II, Par.9 of respondent's franchise is determined by the use to which such
poles are dedicated.
It is evident that the word poles, as used in Act No. 484 and incorporated in the petitioner's
franchise, should not be given a restrictive and narrow interpretation, as to defeat the very
object for which the franchise was granted. The poles should be taken and understood as part
of MERALCO's electric power system for the conveyance of electric current to its consumers.
Art. 415 of the NCC classifies the following as immovable property:
(1) Lands, buildings, roads and constructions of all kinds adhered to the soil;
xxx
(3) Everything attached to an immovable in a fixed manner, in such a way that it cannot be
separated therefrom without breaking the material or deterioration of the object;
xxx
(5) Machinery, receptacles, instruments or implements intended by the owner pf the
tenement for an industry ot works which may be carried on in a building or on a piece of land,
and which tend directly to meet the needs of the said industry or works;
Following these classifications, MERALCO's steel towers should be considered personal
property. It should be noted that the steel towers:
(a) are neither buildings or constructions adhered to the soil;
(b) are not attached to an immovable in a fixed manner they can be separated without
breaking the material or deterioration of the object;
are not machineries, receptacles or instruments, and even if they are, they are not
intended for an industry to be carried on in the premises.
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.
Prudential Bank v. Panis, G.R. No. 5008
(August 31, 1988)
Article 415 of the Civil Code: Real Property
Facts:
The spouses Magcale obtained a Php 70, 000 loan from Prudential Bank secured by a Deed of
Real Estate Mortgage over a 2-storey, semi-concrete residential building including the right of
occupancy on the land.
When the spouses Magcale executed this mortgage, the land still belonged to the government
as the Sales Patent over the lot applied for by the spouses Magcale was not yet issued.
Issue:
Whether or not a real estate mortgage over a building erected on the land belonging to
another is valid.
Held:
Yes, a real estate mortgage over a building erected on the land belonging to another is valid.
Article 415 of the Civil Code provides the inclusion of "building" separate and distinct from the
land, which can only mean that a building is by itself an immovable property.
A mortgage of land necessarily includes buildings unless otherwise stipulated. A building by
itself, however, may be mortgaged apart from the land on which it has been built. Such a
mortgage would still be a real estate mortgage for the building alone would still be considered
an immovable property.
TUMALAD V. VICENCIO
41 SCRA 143
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.
Sergs Products, Inc. vs. PCI Leasing
G.R. No. 137705. August 22, 2000
FACTS:
PCI Leasing and Finance filed a complaint for sum of money, with an application for a writ of
replevin.
Judge issued a writ of replevin directing its sheriff to seize and deliver the machineries and
equipment to PCI Leasing after 5 days and upon the payment of the necessary expenses.
The sheriff proceeded to petitioner's factory, seized one machinery, with word that he would
return for other machineries.
Petitioner (Sergs Products) filed a motion for special protective order to defer enforcement of
the writ of replevin.
PCI Leasing opposed the motion on the ground that the properties were still personal and
therefore can still be subjected to seizure and writ of replevin.
Petitioner asserted that properties sought to be seized were immovable as defined in Article
415 of the Civil Code.
Sheriff was still able to take possession of two more machineries
In its decision on the original action for certiorari filed by the Petitioner, the appellate court,
Citing the Agreement of the parties, held that the subject machines were personal property,
and that they had only been leased, not owned, by petitioners; and ruled that the "words of
the contract are clear and leave no doubt upon the true intention of the contracting parties."
ISSUE: Whether or not the machineries became real property by virtue of immobilization.
Ruling:
Petitioners contend that the subject machines used in their factory were not proper subjects
of the Writ issued by the RTC, because they were in fact real property.
Writ of Replevin: Rule 60 of the Rules of Court provides that writs of replevin are issued for
the recovery of personal property only.
Article 415 (5) of the Civil Code provides that machinery, receptacles, instruments or
implements intended by the owner of the tenement for an industry or works which may be
carried on in a building or on a piece of land, and which tend directly to meet the needs of the
said industry or works
In the present case, the machines that were the subjects of the Writ of Seizure were placed by
petitioners in the factory built on their own land.They were essential and principal elements of
their chocolate-making industry.Hence, although each of them was movable or personal
property on its own, all of them have become immobilized by destination because they are
essential and principal elements in the industry.
However, contracting parties may validly stipulate that a real property be considered as
personal. After agreeing to such stipulation, they are consequently estopped from claiming
otherwise.Under the principle of estoppel, a party to a contract is ordinarily precluded from
denying the truth of any material fact found therein.
Section 12.1 of the Agreement between the parties provides The PROPERTY is, and shall at
all times be and remain, personal property notwithstanding that the PROPERTY or any part
thereof may now be, or hereafter become, in any manner affixed or attached to or embedded
in, or permanently resting upon, real property or any building thereon, or attached in any
manner to what is permanent.
The machines are personal property and they are proper subjects of the Writ of Replevin.
Manarang vs. Ofilada
G.R. No. L-8133 May 18, 1956
Facts:
Lucia Manarang obtained a loan of 200 pesos from Ernesto Esteban. She executed a chattel
mortgage over a house of mixed materials to secure its payment. When she failed to pay the
loan, Esteban brought an action for the recovery of the money he loaned to her. Judgment
was rendered in favor of the former. Execution was issued against the mortgaged property.
Before the property could be sold in a judicial sale, Manarang offered to pay the amount of
227 pesos representing the amount of judgment, interest, costs, and sheriff fees. The sheriff
refused the tender unless the amount of 260 pesos representing the payment of the
publication of the notice of sale is paid also.
Manarang filed a petition to compel the sheriff to accept the amount of 227 pesos and to
annul the notice of sale. The contention of Manarang is that the house in question should be
considered as personal property and publication of notice of sale is not necessary. The Court
of First Instance held that although sometimes real property may be considered as personal
property, the sheriff is duty bound to cause the publication of notice of sale to make the sale
valid and to prevent it from being declared void or voidable; and that the sheriff did not err in
causing the publication of the notice. Consequently, the petition was dismissed.
Issue:
Whether the house made of mixed materials and subject of a chattel mortgage is one of
personal or real property.
Held:
The house is a real property.
The general principle of law is that a building permanently fixed to the freehold becomes part
of it; that is, a house is a real estate belonging to the owner of the land on which it stands,
even though it was erected against his will or without his consent. (Accessory follows the
principal.)
However, where improvement is made with the consent of the landowner, it shall remain as
personal property.
In determining whether property remains personal or real, the following must be considered:
its annexation to the soil, either actual or constructive and the intention of the parties.
The house was made subject of a contract but it does not give the character of one of
personal property to it although it is the intention of the parties when they executed the
chattel mortgage.
This is because the rules on execution does not allow special consideration that the parties to
a contract may have desired to impart to real estate when they are not ordinarily so. When
the rules speak of personal property, it means a property which is ordinarily considered as
such and when it speaks of real property, it means property which is generally known as real
property. The rules were never intended to suit the consideration that parties may have given leakage or seepage of the oil. The valves are welded to the pipes so as to make the pipeline
to the property levied upon. system one single piece of property from end to end.

The mere fact that a house was the subject of a chattel mortgage and was considered as
personal property by the parties, it does not make the house a personal property for purposes
of the notice to be given for its sale at public auction. This is to prevent confusion and
misunderstanding.
In order to repair, replace, remove or transfer segments of the pipeline, the pipes have to be
cold-cut by means of a rotary hard-metal pipe-cutter after digging or excavating them out of
the ground where they are buried. In points where the pipeline traversed rivers or creeks, the
pipes were laid beneath the bed thereof. Hence, the pipes are permanently attached to the
land.

Pursuant to the Assessment Law, Commonwealth Act No. 470, the provincial assessor of
Conrado P. Navarro vs. Rufino Pineda, et al.
Laguna treated the pipeline as real property and issued tax declarations, containing the
G.R. No. L 18456 November 30, 1963, 9 SCRA 631
assessed values of portions of the pipeline.
Facts: Defendant-appellants, Rufino Penida and his mother Juana Gonzales, borrowed a sum
Meralco appealed the assessments to the defendants, but the latter ruled that pipeline is
of money payable on or before June 14, 1960 to the plaintiff Conrado Navarro. As a security,
subject to realty tax. The defendants argued that the pipeline is subject to realty tax because
Rufino executed a Deed of Real Estate and Chattel Mortgage. In the said mortgage his
they are contemplated in Assessment Law and Real Property Tax Code; that they do not fall
mother, by way of Real Estate Mortgage pledge a parcel of land belonging to her. Rufino, on
within the category of property exempt from realty tax under those laws; that Articles 415 &
the other hand, executed a Chattel mortgage of his two storey residential house made of G.I.
416 of the Civil Code, defining real and personal property have no applications to this case
sheet roofing, sawali walls and wooden posts, and a truck. The said mortgages are contained
because these pipes are constructions adhered to soil and things attached to the land in a
in one document, and were duly registered. However, the house was erected on the land of
fixed manner, and that Meralco Securities is not exempt from realty tax under petroleum law.
Attorney Vicente Castro. After two extensions they failed to pay their obligation.
Meralco insists that its pipeline is not subject to realty tax because it is not real property
Issue: Whether or Not, a house erected on a land that belongs to a third person may be the
within the meaning of Art. 415.
subject of a chattel mortgage.
Issue:
Ruling: That the property subject of the controversy is a chattel since it was built on a rented
Whether the aforementioned pipelines are subject to realty tax.
land that belongs to another. As such, it does not become immobilized by attachment, so as to
make it a real property. Moreover, the stipulation of the parties expressly states in the
Held:
document that it is a chattel. By express declaration of the parties in the contract, appellants
Yes, the pipelines are subject to realty tax.
are estopped from claiming otherwise. However, this is good only insofar as the contracting
parties are concerned. With respect to third persons who are not parties to the contract, the
Section 2 of the Assessment Law provides that the realty tax is due on real property,
house is considered as immovable property.
including land, buildings, machinery, and other improvements. This provision is reproduced
with some modification in Section 38, Real Property Tax Code, which provides that there shall
be levied, assessed, and collected xxx annual ad valorem tax on real property such as land,
MERALCO SECURITIES INDUSTRIAL CORPORATION, petitioner, buildings, machinery, and other improvements affixed or attached to real property xxx.
vs.
CENTRAL BOARD OF ASSESSMENT APPEALS, BOARD OF ASSESSMENT It is incontestable that the pipeline of Meralco Securities does not fall within any of the classes
of exempt real property enumerated in section 3 of the Assessment Law and section 40 of the
APPEALS OF LAGUNA and PROVINCIAL ASSESSOR OF LAGUNA,
Real Property Tax Code.
respondents.
Pipeline means a line of pipe connected to pumps, valves and control devices for conveying
Facts: liquids, gases or finely divided solids. It is a line of pipe running upon or in the earth, carrying
with it the right to the use of the soil in which it is placed.
Pursuant to a pipeline concession issued under the Petroleum Act of 1949, Republic Act No.
387, Meralco Securities installed from Batangas to Manila a pipeline system consisting of
cylindrical steel pipes joined together and buried not less than one meter below the surface Article 415[l] and [3] provides that real property may consist of constructions of all kinds
along the shoulder of the public highway. The pipes are embedded in the soil and are firmly adhered to the soil and everything attached to an immovable in a fixed manner, in such a way
and solidly welded together so as to preclude breakage or damage thereto and prevent
that it cannot be separated therefrom without breaking the material or deterioration of the
object.
The pipeline system in question is indubitably a construction adhering to the soil. It is attached
to the land in such a way that it cannot be separated therefrom without dismantling the steel
pipes which were welded to form the pipeline.
Caltex vs Central Board of Assessment Appeals & City Assessor of Pasay
GR No. L-50466
May 31, 1982
This case is about the realty tax on machinery and equipment installed by Caltex (Philippines)
Inc., in its gas stations located on leased land.
FACTS
Caltex loaned machines and equipment to gas station operators under an appropriate lease
agreement or receipt. The lease contract stipulated that upon demand, the operators shall
return to Caltex the machines and equipment in good condition as when received, ordinary
wear and tear excepted.
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.
The City Assessor of Pasay City characterized the said items of gas station equipment and
machinery as taxable realty. However, the City Board of Tax Appeals ruled that they are
personalty. The Assessor appealed to the Central Board of Assessment Appeals.
The Board held on June 3, 1977 that the said machines are real property within the meaning
of Ses. 3(k) & (m) and 38 of the Real Property Tax Code, PD 464, and that the Civil Code
definitions of real and personal property in Articles 415 and 416 are not applicable in this
case.
ISSUE
WON the pieces of gas station equipment and machinery permanently affixed by Caltex to its
gas station and pavement should be subject to realty tax.
HELD
Sec.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 Sec.3
thereof.
Sec.3 of the Real Property Tax Code provides the following definitions:
k) Improvements a valuable addition made to property or an amelioration in its condition
more than mere repairs or replacement of wasteintended to enhance its value, beauty, or
utility
m) Machinery machines, mechanical contrivances, instruments, appliances, and apparatus
attached to the real estateincludes the physical facilities available for production
installation and appurtenant service facilities.
The subject machines and equipment are taxable improvement and machinery within the
meaning of the Assessment Law and the Real Property Tax Code, because the same are
necessary to the operation of the gas station and have been attached/affixed/embedded
permanently to the gas station site.
Improvements on land are commonly taxed as realty even though they might be considered
personalty. It is a familiar phenomenon to see things classified as real property for purposes
of taxation which on general principle might be considered personal property (Standard Oil
Co., vs Jaramillo, 44 PHIL 630).
This case is also easily distinguishable from Board of Assessment Appeals vs. Manila Electric
Co., (119 Phil. 328) where Meralco's steel towers were exempted from taxation. The steel
towers were considered personalty because they were attached to square metal frames by
means of bolts and could be moved from place to place when unscrewed and dismantled.
Nor are Caltex's gas station equipment and machinery the same as the tools and equipment in
the repair shop of a bus company which were held to be personal property not subject to
realty tax (Mindanao Bus Co. vs. City Assessor, 116 Phil. 501).
Philippine Refining Co., Inc. v. Aboitiz & Co.,
G.R. No. L-41506 (March 25, 1935)
Facts:
Philippine Refining Co., Inc., and Francisco Jarque executed three chattel mortgages on the
motor vessels Pandan and Zaragoza, which were recorded in the record of transfers and
incumbrances of vessels for the port of Cebu. The mortgages had no appended affidavit of
good faith except for the 3rd mortgage, which was not registered in the customs house within
the period of 30 days prior to the start of the insolvency proceedings against Francisco Jarque.
A fourth mortgage was executed by Francisco Jarque and Ramon Aboitiz on the motorship
Zaragoza and was entered in the chattel mortgage registry of the register of deeds.
Francisco Jarque was then declared to be an insolvent debtor that resulted to an assignment
of all his properties in favor of Jose Corominas.
Judge Jose M. Hontiveros declined the foreclosure of the mortgages and sustained the special
defenses of fatal defectiveness of the mortgages.
Issue:
Whether or not the mortgages are defective.
Held:
Vessels are considered personal property under the civil law. (Code of Commerce, article 585.)
Similarly under the common law, vessels are personal property although occasionally referred
to as a peculiar kind of personal property.
Since the term "personal property" includes vessels, they are subject to mortgage agreeably
to the provisions of the Chattel Mortgage Law. (Act No. 1508, section 2.)
The only difference between a chattel mortgage of a vessel and a chattel mortgage of other
personalty is that it is not now necessary for a chattel mortgage of a vessel to be noted n the
registry of the register of deeds, but it is essential that a record of documents affecting the
title to a vessel be entered in the record of the Collector of Customs at the port of entry.
Otherwise a mortgage on a vessel is generally like other chattel mortgages as to its requisites
and validity.
A good chattel mortgage according to Section 5 of The Chattell Mortgage Law, includes the
requirement of an affidavit of good faith appended to the mortgage and recorded therewith.
The absence of the affidavit vitiates a mortgage as against creditors and subsequent
encumbrancers. As a consequence a chattel mortgage of a vessel wherein the affidavit of good
faith required by the Chattel Mortgage Law is lacking, is unenforceable against third persons.
RUBISO VS. RIVERA
(27PHIL72) G.R. No. L- 11407 October 30, 1917
Facts: The counsel of plaintiff brought a suit alleging that his clients were the owners of the
pilot boat named Valentine, which has been in bad condition and on the date of the
complaint, was stranded in the place called Tingly, of the municipality of Battings. The
defendant Rivera took charge or took possession of the said boat without the knowledge or
consent of the plaintiff and refused to deliver it to them, under the claim that he was the
owner thereof. The refusal on the part of the defendant has caused the plaintiff damages
because they were unable to derive profit from the voyages for which the said pilot boat was
customarily used. The defendant, on the other hand, alleged that they purchased the subject
pilot boat. The plaintiff alleged that the sale on behalf of the defendant Rivera was prior to
that made at public auction to Rubio, but the registration of this latter sale was prior to the
sale made to the defendant.
Issue: Whether or not, the plaintiff still has the better right over the subject vessel?
Held: Under the Code of Commerce, Art 573 provides:
Merchant vessels constitute property that may be acquired and transferred by any of the
means recognized by law. The acquisition of a vessel must be included in a written instrument,
which shall not produce any effect with regard to third persons if not recorded in the
commercial registry.
The requisite of registration in the registry of the purchase of a vessel is necessary and
indispensable in order that the purchasers rights may be maintained against a claim filed by
third person. It is undeniable that Riveras right cannot prevail over those acquired by Rubiso
in the ownership of the pilot boat, thought the latters acquisition of the vessel at public
auction was subsequent to its purchase by the defendant, Rivera.
US V. CARLOS
FACTS:
Mr Carlos stole about 2273 kilowatts of electricity worth 909 pesos from Meralco. The court
issued warrant for arrest. Mr. Carlos demurred and refused to enter a plea. He claimed that
what he did failed to constitute an offense. His counsel further asserted that the crime of
larceny applied only to tangibles, chattels and objects that can be taken into possession and
spirited away.
Deliberation quickly followed at the court which subsequently sentenced him to over a year in
jail. Mr. Carlos contested saying that electrical energy cant be stolen (how can one steal an
incorporeal thing?). He filed an appeal on such grounds and the court of first instance
affirmed the decision. The case reached the supreme court.
ISSUE:
Whether or not larceny can be committed against an intangible such as electricity.
HELD:
Yes, larceny of incorporeal objects is possible. The right of ownership of electrical current was
secured by
Art 517 and 518 of the Penal Code which applies to gas.
Analogically, electricity can be considered as gas which can be stolen. However, the true test
of what constitutes the proper subject of larceny is not whether the subject is corporeal or
incorporeal, but whether is is capable of appropriation by another other than the owner. It is a
valuable article of merchandise, a force of nature brought under the control of science. Mr.
Carlos secretly and with intent to deprive the company of its rightful property, used jumper
cables to appropriate the same for his own use. This constitutes larceny.
PIANSAY v. DAVID
As it may be true that the parties who agreed to attach the house in a chattel mortgage may
be bound thereto under the doctrine of estoppel, the same does not bind third persons.
FACTS:
Conrado S. David received a loan of P3,000 with interest at 12% per annum from Claudia B.
Vda. de Uy Kim, one of the plaintiffs, and to secure the payment of the same, Conrado S.
David executed a chattel mortgage on a house situated at 1259 Sande Street, Tondo, Manila.
The mortgage was foreclosed and was sold to Kim to satisfy the debt. 2 years later after the
foreclosure, the house was sold by Kim to Marcos Magubat. The latter then filed to collect the
loan from David and to declare the sale issued by Kim in favour of Piansay null and void. (It
appears that Kim sold the house to two people, namely Piansay and Magubat) The trial court
approved of the collection of the loan from David but dismissed the complaint regarding the
questioned sale between Kim and Piansay, declaring the latter as rightful owner of the house
and awarding damages to him. CA reversed the decision making David the rightful owner and
ing him and his co-defendant, Mangubat, to levy the house. Now Petitioners are trying to
release the said property from the aforementioned levy by claiming that Piansay is the rightful
owner of the house.
ISSUE:
Whether or not the sale between Kim and Piansay was valid?
RULING:
Since it is a rule in our law that buildings and constructions are regarded as mere accesories to
the land (following the Roman maxim omne quod solo inaedificatur solo credit) it is logical
that said accessories should partaked of the nature of the principal thing, which is the land
forming, as they do, but a single object (res) with it in contemplation of law. A mortgage
creditor who purchases real properties at an extra-judicial foreclosure sale thereof by virtue of
a chattel mortgage constituted in his favor, which mortgage has been declared null and void
with respect to said real properties acquires no right thereto by virtue of said sale Thus, Mrs.
Uy Kim had no right to foreclose the alleged chattel mortgage constituted in her favor,
because it was in reality a mere contract of an unsecured loan. It follows that the Sheriff was
not authorized to sell the house as a result of the foreclosure of such chattel mortgage. And as
Mrs. Uy Kim could not have acquired the house when the Sheriff sold it at public auction, she
could not, in the same token, it validly to Salvador Piansay. Conceding that the contract of sale
between Mrs. Uy Kim and Salvador Piansay was of no effect, we cannot nevertheless set it
aside upon instance of Mangubat because, as the court below opined, he is not a party
thereto nor has he any interest in the subject matter therein, as it was never sold or
mortgaged to him At any rate, regardless of the validity of a contract constituting a chattel
mortgage on a house, as between the parties to said contract, the same cannot and does not
bind third persons, who are not parties to the aforementioned contract or their privies. As a
consequence, the sale of the house in question in the proceedings for the extrajudicial
foreclosure of said chattel mortgage, is null and void insofar as defendant Mangubat is
concerned, and did not confer upon Mrs. Uy Kim, as buyer in said sale, any dominical right in
and to said house, so that she could not have transmitted to her assignee, plaintiff Piansay any
such right as against defendant Mangubat. In short plaintiffs have no cause of action against
the defendants herein.
US V. TAMBUNTING
FACTS:
The Manila Gas Company installed equipment for the transmission of gas in a house at
Evangelista. After the original subscriber left, the apparatus was sealed and the services
discontinued.
Later Mr Tambunting moved in. He was a cheapskate and spliced the tubing to leech free gas
for household use. Alas, the crime was discovered by the gas company. The prosecutor filed
charges and hailed Mr. Tambunting to court
ISSUE:
Whether or not gas can be the subject of larceny.
HELD:
Yes. Gas is a substance which lends itself to felonious appropriation. It is a valuable
merchandise that can be bought and sold like other personal property, susceptible of being
siphoned from a larger mass and transported from place to place. Articles 517 and 518 sets
parameters for the theft of gas and it is a valid ordinance.
INVOLUNTARY INSOLVENCY OF PAUL STROCHECKER V. RAMIREZ (GR
18700, 26 September 1922)
FACTS:
The half-interest in the business (Antigua Botica Ramirez) was mortgaged with Fidelity &
Surety Co. on 10 March 1919, and registered in due time in the registry of property, while
another mortgage was made with Ildefonso Ramirez on 22 September 1919 and registered
also in the registry. Raised in the lower court, the trial court declared the mortgage of Fidelity
& Surety Co. entitled to preference over that of Ildefonso Ramirez and another mortgage by
Concepcion Ayala. Ayala did not appeal, but Ramirez did.
ISSUE:
Whether or not half-interest over a business is a movable property

RULING: Yes.
1. Interest in business may be subject of mortgage With regard to the nature of the property
mortgaged which is one-half interest in the business, such interest is a personal property
capable of appropriation and not included in the enumeration of real properties in articles
335 of the Civil Code, and may be the subject of mortgage. All personal property may be
mortgaged. (Sec. 7, Act 1508.)
2. Description of mortgage property sufficient The description contained in the document is
sufficient. The law (sec. 7, Act 1508) requires only a description of the mortgaged property
shall be such as to enable the parties to the mortgage, or any other person, after reasonable
inquiry and investigation, to identify the same. In the case at bar, his half interest in the drug
business known as Antigua Botica Ramirez, located at Calle Real Nos. 123 and 125, District of
Intramuros, Manila Philippine Islands" is sufficient.
3. Article 1922 (1-3) of the Civil Code applicable only to mortgage property in possession
Numbers 1, 2, and 3 of the article 1922 of the Civil Code are not applicable as neither the
debtor, nor himself, is in possession of the property mortgaged, which is, and since the
registration of the mortgage has been, legally in possession of the surety company
4. Stipulation about personal property not a mortgage upon property - In no way can the
mortgage executed be given effect as of the date of the sale of the store in question; as there
was a mere stipulation about personal security during said date, but not a mortgage upon
property, and much less upon the property in question.
Luis Marcos Laurel vs Hon. Zeus Abrogar
GR No. 155076
January 13, 2009
FACTS
Laurel was charged with Theft under Art. 308 of the RPC for allegedly taking, stealing, and
using PLDT's international long distance calls by conducting International Simple Resale (ISR)
a method of outing and completing international long-distance calls using lines, cables,
antennae, and/or air wave frequency which connect directly to the local/domestic exchange
facilities of the country where the call is destined. PLDT alleged that this service was stolen
from them using their own equipment and caused damage to them amounting to
P20,370,651.92.
PLDT alleges that the international calls and business of providing telecommunication or
telephone service are personal properties capable of appropriation and can be objects of
theft.
ISSUE
WON Laurel's act constitutes Theft
HELD
Art.308, RPC: Theft is committed by any person who, with intent to gain but without violence
against, or intimidation of persons nor force upon things, shall take personal property of
another without the latters consent.
Elements of Theft under Art.308, RPC:
There be taking of Personal Property;
Said Personal Property belongs to another;
Taking be done with Intent to Gain;
Taking be done without the owners consent;
No violence against, or intimidation of, persons or force upon things
Personal Property anything susceptible of appropriation and not included in Real Property
Thus, the term personal property as used in Art.308, RPC should be interpreted in the
context of the Civil Code's definition of real and personal property. Consequently, any
personal property, tangible or intangible, corporeal or incorporeal, capable of appropriation
may be the subject of theft (*US v Carlos; US v Tambunting; US v Genato*), so long as the
same is not included in the enumeration of Real Properties under the Civil Code.
The only requirement for personal property to capable of theft, is that it be subject to
appropriation.
Art. 416 (3) of the Civil Code deems Forces of Nature which are brought under the control of
science, as Personal Property.
The appropriation of forces of nature which are brought under control by science can be
achieved by tampering with any apparatus used for generating or measuring such forces of
nature, wrongfully redirecting such forces of nature from such apparatus, or using any device
to fraudulently obtain such forces of nature.
In the instant case, the act of conducting ISR operations by illegally connecting various
equipment or apparatus to PLDTs telephone system, through which petitioner is able to resell
or re-route international long distance calls using PLDTs facilities constitute Subtraction.
Moreover, interest in business should be classified as personal property since it is capable of
appropriation, and not included in the enumeration of real properties.
Therefore, the business of providing telecommunication or telephone service are personal
property which can be the object of theft under Art. 308 of the RPC. The act of engaging in ISR
is an act of subtraction penalized under the said article.
While international long-distance calls take the form of electrical energy and may be
considered as personal property, the said long-distance calls do not belong to PLDT since it
could not have acquired ownership over such calls. PLDT merely encodes, augments,
enhances, decodes and transmits said calls using its complex communications infrastructure
and facilities.

Since PLDT does not own the said telephone calls, then it could not validly claim that such
telephone calls were taken without its consent.

What constitutes Theft is the use of the PLDT's communications facilities without PLDT's
consent. The theft lies in the unlawful taking of the telephone services & businesses.

The Amended Information should be amended to show that the property subject of the theft
were services and business of the offended party