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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 man's 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. 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 ISSUES: Whether the material man's lien for the value of the materials used in the construction of the building attaches to said structure alone and doesn't 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 man's 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 thing-that 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.

Lopez v. Orosa, G.R. Nos. L-10817-18, 103 SCRA 98, 28 February 1958 FACTS: -Petitioner Lopez was engaged in doing business under the trade name Lopez-Castelo Sawmill.

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personal properties may be the only subjects of a chattel mortgage, the execution of the chattel mortgage covering said building is null and void. Bicerra v. Teneza, L-16218, 6 SCRA 648, 29 November 1962 Facts: appellants were the owners of the house, worth P200.00, built on and owned by them and situated in the said municipality Lagangilang; that sometime in January 1957 appealed forcibly demolished the house, claiming to be the owners thereof; that the materials of the house, after it was dismantled, were placed in the custody of the barrio lieutenant of the place; and that as a result of appellate's refusal to restore the house or to deliver the material appellants the latter have suffered damages. Issue: whether the action involves title to real property. Ruling/ Rationale: A house is classified as immovable property by reason of its adherence to the soil on which it is built (Art. 415, par. 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. Evangelista v. Alto Surety & Insurance Co., Inc., G.R. No. L11139, 23 April 1958 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

- 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 v. Iya, 103 SCRA 972 FACTS: Spouses Valino were the owners of a house, payable on installments from Philippine Realty Corporation. To be able to purchase on credit rice from NARIC, they filed a surety bond subscribed by petitioner and therefor, they executed an alleged chattel mortgage on the house in favor of the surety company. The spouses didn't own yet the land on which the house was constructed on at the time of the undertaking. After being able to purchase the land, to be able to secure payment for indebtedness, the spouses executed a real estate mortgage in favor of Iya. The spouses were not able to satisfy obligation with NARIC, petitioner was compelled to pay. The spouses weren't able to pay the surety company despite demands and thus, the company foreclosed the chattel mortgage. It later learned of the real estate mortgage over the house and lot secured by the spouses. This prompted the company to file an action against the spouses. Also, Iya filed another civil action against the spouses, asserting that she has a better right over the property. The trial court heard the two cases jointly and it held that the surety company had a preferred right over the building as since when the chattel mortgage was secured, the land wasn't owned yet by the spouses making the building then a chattel and not a real property. HELD: 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. To hold it the other way, the possibility is not remote that it would result in confusion, for to cloak the building with an uncertain status made dependent on ownership of the land, would create a situation where apermanent fixture changes its nature or character as the ownership of the land changes hands. In the case at bar, as

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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 v. Strong Machinery Co., G.R. No. L-11658, 15 February 1918 FACTS The Compania Agricola Filipina (CAF) purchased from Strong Machinery Co. rice-cleaning machines which CAF installed in one of its buildings. As security for the purchase price, CAF executed a chattel mortgage on the machines and the building on which they had been installed. When CEF failed to pay, the registered mortgage was foreclosed and Strong Machinery Co. purchased the building. This sale was annotated in the Chattel Mortgage Registry. Later, Strong Machinery Co. also purchased from Agricola the lot on which the building was constructed. The sale wasn't registered in the Registry of Property BUT Strong Machinery Co. took possession of the building and the lot. However, the same building had been previously purchased by Leung Yee, a creditor of Agricola, at a sheriff's sale despite his knowledge of the prior sale in favor of Strong Machinery Co.. The sale to Leung Yee was registered in the Registry of Property.

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ISSUES 1. Was the property's nature changed by its registration in the Chattel Mortgage Registry? 2. Who has a better right to the property? HELD 1. Where the interest conveyed is of the nature of real property, the placing of the document on record in the Chattel Mortgage Registry is a futile act. Chattel Mortgage refers to the mortgage of Personal Property executed in the manner and form prescribed in the statute. Since the building is REAL PROPERTY, its sale as annotated in the Chattel Mortgage Registry cannot be given the legal effect of registration in the Registry of Real Property. The mere fact that the parties decided to deal with the building as personal property does not change its character as real property. Neither the original registry in the chattel mortgage registry, nor the annotation in said registry of the sale of the mortgaged property had any effect on the building. Art. 1473 of the New Civil Code provides the following rules on determining ownership of property which has been sold to different vendees: If Personal Property - grant ownership to person who 1st possessed it in good faith If Real Property - grant ownership to person who 1st recorded it in the Registry If no entry - grant to person who 1st possessed in good faith If no proof of possession - grant to person who presents oldest title Since Leung Yee purchased the property despite knowledge of the previous purchase of the same by Strong Machinery Co., it follows that Leung Yee was not a purchaser in good faith. "One who purchases real estate with knowledge of a defect or lack of title in his vendor cannot claim that he has acquired title thereto in good faith as against the true owner of the land or of an interest therein. The same rule must be applied to one who has knowledge of facts which should have put him upon such inquiry and investigation as might be necessary to acquaint him with the defects in the title of his vendor." Good Faith, or the want of it, is a "state or condition of mind which can only be judged of by actual or fancied tokens or signs." (Wilder vs. Gilman, 55Vt., 504, 505; Cf. Cardenas Lumber Co. vs. Shadel, 52 La. Ann., 2094-2098; Pinkerton Bros. Co. vs. Bromley, 119Mich., 8, 10, 17.) Honesty Of Intention is the honest lawful intent constituting good faith. It implies a freedom from knowledge and circumstances which ought to put a person on inquiry. As such, proof of such knowledge overcomes the presumption of good faith. Following the rule on possessory rights provided in Art. 1473, Strong Machinery Co. has a better right to the property since it first purchased the same ahead of Leung Yee, the latter not being a purchaser in good faith. Standard Oil Co. of New York v. Jaramillo, 44 SCRA 630 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

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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.] Sibal v. Valdez, G.R. No. L-27532, 4 August 1927 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, G.R. No. 120098, 2 October 2001 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

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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 http://www.blogger.com/blogger.g?blogID=1844282339298005116(T sai) 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.

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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 tohttp://www.blogger.com/blogger.g?blogID=1844282339298005116 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 v. Tanada, G.R. No. L-32917, 18 July 1988 Doctrine: Article 415, par. 3 of the Civil Code considers and immovable property as "everything attached to an immovable in a fixed manner, in such a way that it cannot be separated therefrom without breaking the material or deteriorating the object." The pump does not fit this description. It could be, and was, in fact,separated from Yap's premises without being broken of suffering deterioration. Obviously, the separation or removal of the pump involved nothing more complicated that the loosening of bolts or dismantling of other fasteners. Facts: The case began in the City Court of Cebu with the filing of Goulds Pumps International (Phil), Inc. 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 Court rendered judgment in favor of herein respondent after they presented evidence ex-parte due to failure of petitioner Yap to appear before the Court. Petitioner then appealed to the CFI, particularly to the sale of Judge Tanada. For again failure to appear for pre-trial, Yap was declared in default. He filed for a motion for reconsideration which was denied by Judge Tanada. On October 15, 1969, Tanada granted Gould's Motion for Issuance of Writ of Execution. Yap forthwith filed an Urgent Motion for Reconsideration of the said Order. In the meantime, the Sheriff levied on the water pump in question and by notice scheduled the execution sale thereof. But in view of the pendency of Yap's motion, suspension of sale was directed by Judge Tanada. It appears, however, that this was not made known to the Sheriff whocontinued with the auction sale and sold the property to the highest bidder, Goulds. Because of such, petitioner filed a Motion to Set Aside Execution Sale and to Quash Alias Writ of Execution. One of his arguments was that the sale was made without the notice required by Sec. 18, Rule 29 of the New Rules of Court, "i.e. notice by publication in case of execution of sale of real property, the pump and its accessories being immovable because attached to the ground with the character of permanency." Such motion was denied by the CFI. Issue: Whether or not the pump and its accessories are immovable property Held: No. The water pump and its accessories are NOT immovable properties. The argument of Yap that the water pump had become immovable property by its being installed in his residence is untenable. Article 415, par. 3 of the Civil Code considers and immovable property as "everything attached to an immovable in a fixed manner, in such a way that it cannot be separated therefrom without breaking the material or deteriorating the object." The pump does not fit this description. It could be, and was, in fact,separated from Yap's premises without being broken of suffering deterioration. Obviously, the separation or removal of the pump involved nothing more complicated that the loosening of bolts or dismantling of other fasteners. Mindanao Bus Co. v. City Assessor and Treasurer, G.R. No. L17870, 29 September 1962 Doctrine: Movable equipment, to be immobilized in contemplation of Article 415 of the Civil Code, must be the essential and principal elements of an industry or works which are carried on in a building or on a piece of land. Thus, where the business is one of transportation, which is carried on without a repair or service shop, and its rolling equipment is repaired or serviced in a shop belonging to another, the tools and equipment in its repair shop which appear movable are merely incidentals and may not be considered immovables , and, hence, not subject to assessment as real estate for purposes of the real estate tax. Facts: Respondent City Assessor of Cagayan de Oro City assessed at P4,400 petitioner's equipment in its repair or service shop. Petitioner appealed the assessment to the respondent Board of Tax Appeals on the ground that the same are not realty. The Board of

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Tax Appeals of the City sustained the city assessor, so petitioner herein filed with the Court of Tax Appeals a petition for the review of the assessment. The Court of Tax Appeals having sustained the respondent city assessor's ruling, and having denied a motion for reconsideration, petitioner brought the case to this Court. Issue: Whether the Tax Court erred in its interpretation of paragraph 5 of Article 415 of the New Civil Code, and holding that pursuant thereto, the movable equipments are taxable realties, by reason of their being intended or destined for use in an industry. Held: Yes. Movable equipments, to be immobilized in contemplation of Article 415 of the Civil Code, must be the essential and principal elements of an industry or works which are carried on in a building or on a piece of land. Thus, where the business is one of transportation, which is carried on without a repair or service shop, and its rolling equipment is repaired or serviced in a shop belonging to another, the tools and equipments in its repair shop which appear movable are merely incidentals and may not be considered immovables, and, hence, not subject to assessment as real estate for purposes of the real estate tax. Similarly, the tool and equipment in question in this instant case are, by their nature, not essential and principal elements of petitioner's business of transporting passengers and cargoes by motor trucks. They are merely incidentals - acquired as movables and used only for expediency to facilitate and/or improve its service. Even without such tools and equipment, its business may be carried on, as petitioner has carried on without such equipments, before the war. The transportation business could be carried on without the repair or service shop if its rolling equipment is repaired or serviced in another shop belonging to another. Article 415 of the Civil Code requires that the industry or works be carried on in a building or on a piece of land. But in the case at bar the equipments in question are destined only to repair or service the transportation business, which is not carried on in a building or permanently on a piece of land, as demanded by the law. Said equipment may not, therefore, be deemed as real property. Fels Energy, Inc. v. Province of Batangas, et al., G.R. No. 168557, 16 February 2007 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 city's 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 NPC's 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

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LBAA also pointed out that the owner of the barges-FELS, a private corporation-is 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 city's 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

10
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 government's 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. Davao Sawmill Co. v. Castillo, G.R. No. 40411, 7 August 1935 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.

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Makati Leasing and Financial Corporation v. Wearever Textile Mills, Inc., G.R. No. L-58469, 16 May 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 Leasing's 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 textile's 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 petitioner's 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 v. MERALCO, 10 SCRA 68 (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?

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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. Machinery & Engineering Supplies, Inc. v. CA, No. L-7057, 29 October 1954 Doctrine: The special civil action of replevin is applicable only to personal property. When the machinery and equipment in question appeared to be attached to the land, particularly to the concrete foundation of said premises, in a fixed manner, in such a way that the former could not be separated from the latter without breaking the material or deterioration of the object, it had become an immovable property under Art. 415(3). Facts: Herein petitioner filed a complaint for replevin in the CFI of Manila against Ipo Limestone Co., and Dr. Antonio Villarama, for the recovery of the machineries and equipments sold and delivered to said defendants at their factory in Barrio Bigti, Norzagaray, Bulacan. The respondent judge issued an order, commanding Provincial Sheriff of Bulacan to seize and take immediate possession of the properties specified in the order. Two deputy sheriffs of Bulacan, Ramon S. Roco(president of Machinery), and a crew of technical men and laborers proceeded to Bigti, for the purpose of carrying the court's order into effect. Leonardo Contreras, Manager of the respondent Company, and Pedro Torres, in charge thereof, met the deputy sheriffs, and Contreras handed to them a letter addressed to Atty. Palad (ex-officio Provincial Sheriff of Bulacan), protesting against the seizure of the properties in question, on the ground that they are not personal properties. Later on, they went to the factory. Roco's attention was called to the fact that the equipments could not possibly be dismantled without causing damages or injuries to the wooden frames attached to them. But Roco insisted in dismantling the equipments on his own responsibility, alleging that the bond was posted for such eventuality, the deputy sheriffs directed that some of the supports thereof be cut. The defendant Company filed an urgent motion for the return of the properties seized by the deputy sheriffs. On the same day, the trial court issued an order, directing the Provincial Sheriff of Bulacan to return the machineries to the place where they were installed. The deputy sheriffs returned the properties seized, by depositing them along the road, near the quarry, of the defendant Company, at Bigti, without the benefit of inventory and without re-installing them in their

13
former position and replacing the destroyed posts, which rendered their use impracticable. The trial court ordered Roco to furnish the Provincial Sheriff with the necessary funds, technical men, laborers, equipments and materials. Roco raised the issue to the CA; a writ of preliminary injunction was issued but the CA subsequently dismissed for lack of merit. A motion for reconsideration was denied. Issue: Whether or not the machineries and equipments were personal properties and, therefore, could be seized by replevin. Held: No. The special civil action known as replevin, governed by the Rules of Court, is applicable only to "personal property." When the sheriff repaired to the premises of respondent company, the machinery and equipment in question appeared to be attached to the land, particularly to the concrete foundation of said premises, in a fixed manner, in such a way that the former could not be separated from the latter "without breaking the material or deterioration of the object." Hence, in order to remove said outfit, it became necessary, not only to unbolt the same, but, also, to cut some of its wooden supports. Moreover, said machinery and equipment were "intended by the owner of the tenement for an industry" carried on said immovable and tended "directly to meet the needs of the said industry." For these reasons, they were already immovable property pursuant to paragraphs 3 and 5 of Article 415 of the Civil Code. Mr. Ramon Roco, insisted "on the dismantling of at his own responsibility," stating that, precisely, "that is the reason why plaintiff posted a bond." In this manner, petitioner clearly assumed the corresponding risks. It is well settled that, when restitution of what has been ordered, the goods in question shall be returned in substantially the same condition as when taken. It follows that petitioner must also do everything necessary to the reinstallation of said property in conformity with its original condition. Punsalan, Jr. v. Vda. De Lacsamana, 121 SCRA 331 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. Petitioner's 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. 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, 153 SCRA 390 FACTS: Spouses Magcale secured a loan from Prudential Bank. To secure payment, they executed a real estate mortgage over a residential building. The mortgage included also the right to occupy the lot and the information about the sales patent applied for by the spouses for the lot to which the building stood. After securing the first loan, the spouses secured another from the same bank. To secure payment, another real estate mortgage was executed over the same properties.

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The Secretary of Agriculture then issued a Miscellaneous Sales Patent over the land which was later on mortgaged to the bank. The spouses then failed to pay for the loan and the REM was extrajudicially foreclosed and sold in public auction despite opposition from the spouses. The respondent court held that the REM was null and void. HELD: A real estate mortgage can be constituted on the building erected on the land belonging to another. The inclusion of building distinct and separate from the land in the Civil Code can only mean that the building itself is an immovable property. While it is true that a mortgage of land necessarily includes in the absence of stipulation of the improvements thereon, buildings, still a building in itself may be mortgaged by itself apart from the land on which it is built. Such a mortgage would still be considered as a REM for the building would still be considered as immovable property even if dealt with separately and apart from the land. The original mortgage on the building and right to occupancy of the land was executed before the issuance of the sales patent and before the government was divested of title to the land. Under the foregoing, it is evident that the mortgage executed by private respondent on his own building was a valid mortgage. As to the second mortgage, it was done after the sales patent was issued and thus prohibits pertinent provisions of the Public Land Act. 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. 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.

Serg's Products and Goquiola v. PCI Leasing and Finance, 338 SCRA 499 FACTS: PCI filed a case for collection of a sum of money as well as a writ of replevin for the seizure of machineries, subject of a chattel mortgage executed by petitioner in favor of PCI. Machineries of petitioner were seized and petitioner filed a motion for special protective order. It asserts that the machineries were real property and could not be subject of a chattel mortgage.

15
16 of the Rules of Court as it has become a permanent fixture on the land, which is real property. Navarro v. Pineda, 9 SCRA 631 FACTS: Pineda and his mother executed real estate and chattel mortgages in favor of Navarro, to secure a loan they got from the latter. The REM covered a parcel of land owned by the mother while the chattel mortgage covered a residential house. Due to the failure to pay the loan, they asked for extensions to pay for the loan. On the second extension, Pineda executed a PROMISE wherein in case of default in payment, he wouldn't ask for any additional extension and there would be no need for any formal demand. In spite of this, they still failed to pay. Navarro then filed for the foreclosure of the mortgages. The court decided in his favor. HELD: Where a house stands on a rented land belonging to another person, it may be the subject matter of a chattel mortgage as personal property if so stipulated in the document of mortgage, and in an action by the mortgagee for the foreclosure, the validity of the chattel mortgage cannot be assailed by one of the parties to the contract of mortgage. Furthermore, although in some instances, a house of mixed materials has been considered as a chattel between the parties and that the validity of the contract between them, has been recognized, it has been a constant criterion that with respect to third persons, who are not parties to the contract, and specially in execution proceedings, the house is considered as immovable property. Manila Electric Co., v. Central Board of Assessment Appeals, 114 SCRA 273 FACTS: Petitioner owns two oil storage tanks, made of steel plates wielded and assembled on the spot. Their bottoms rest on a foundation

HELD: The machineries in question have become immobilized by destination because they are essential and principal elements in the industry, and thus have become immovable in nature. Nonetheless, they are still proper subjects for a chattel mortgage. Contracting parties may validly stipulate that a real property be considered as personal. After agreement, they are consequently estopped from claiming otherwise. Manarang and Manarang v. Ofilada and Esteban, 99 SCRA 108 FACTS: Manarang secured a loan from Esteban guaranteed by a chattel mortgage over a house of mixed materials. Due to failure to pay, the chattel mortgage was foreclosed. Before the sale of the property, Manarang tried to pay for the property but the sheriff refused to accept tender unless there is payment for the publication of the notice of sale in the newspapers. This prompted Manarang to bring this suit to compel the sheriff to accept payment. He averred that the publication was unnecessary as the house should be considered as personal property per agreement in the chattel mortgage, and the publication for notice of sale is unnecessary. HELD: There is no question that a building of mixed materials may be a subject of chattel mortgage, in which case it is considered as between the parties as personal property. The mere fact that a house was the subject of chattel mortgage and was considered as personal property by the parties doesn't make the said house personal property for purposes of the notice to be given for its sale in public auction. It is real property within the purview of Rule 39, Section

16
consisted of compacted earth, sand pad as immediate layer, and asphalt stratum as top layer. The tanks merely sit on its foundation. The municipal treasurer of Batangas made an assessment for realty tax on the two tanks, based on the report of the Board of Assessors. MERALCO wished to oppose this assessment as they averred that the tanks are not real properties. HELD: While the two storage tanks are not embodied in the land, they may nevertheless be considered as improvements in the land, enhancing its utility and rendering it useful to the oil industry. For purposes of taxation, the term real property may include things, which should generally be considered as personal property. it is familiar phenomenon to see things classified as real property for purposes of taxation which on general principle may be considered as personal property. Caltex Philippines v. Central Board of Assessment Appeals, 114 SCRA 296 FACTS: The City Assessor characterized the items in gas stations of petitioner as taxable realty. These items included underground tanks, elevated tank, elevated water tanks, water tanks, gasoline pumps, computing pumps, etc. These items are not owned by the lessor of the land wherein the equipment are installed. Upon expiration of the lease agreement, the equipment should be returned in good condition. HELD: The equipment and machinery as appurtenances to the gas station building or shed owned by Caltex and which fixtures are necessary to the operation of the gas station, for without them the gas station would be useless, and which have been attached and fixed permanently to the gas station site or embedded therein, are taxable improvements and machinery within the meaning of the Assessment Law and the Real Property Tax Code. Phil. Refining Co., Inc. v. Jarque, G.R. No. 41506, 25 March 1953 FACTS: Plaintiff Philippine Refining Co. and defendant Jarque executed three mortgages on the motor vessels Pandan and Zargazo. The documents were recorded as transfer and encumbrances of the vessels for the port of Cebu and each was denominated a chattel mortgage. The first two mortgages did not have an affidavit of good faith. A fourth mortgage was executed by Jarque and Ramon Aboitiz over motorship Zaragoza and was entered in the Chattel Mortgage Registry on May 12, 1932, within the period of 30 days prior to the foreclosure/institution of the insolvency proceedings. Jose Curaminas filed with the CFI of Cebu a petition praying that Francisco Jarque be declared an insolvent debtor. This was granted and Jarque's properties were then assigned to Curaminas. A problem arose when Judge Jose Hontiveros declined to order the foreclosure of the mortgages, and instead, ruled that they were defective because they did not have affidavits of good faith. ISSUE: Whether or not the mortgages of the vessels are governed by the Chattel Mortgage Law Whether or not an affidavit of good faith is needed to enforce achattel mortgage on a vessel RULING: Yes. "Personal property" includes vessels. They are subject to the provisions of the Chattel Mortgage Law. The Chattel Mortgage Law says that a good chattel mortgage includes an affidavit of good faith. The absence of such affidavit makes mortgage unenforceable against creditors and subsequent encumbrances. The judge was correct. Note: A mortgage on a vessel is generally like other chattel mortgages. The only difference between a chattel mortgage of a vessel and a chattel mortgage of other personalty is that the first must be noted in the registry of the register of deeds.

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Rubiso v. Rivera, 37 Phil 72 (1917) FACTS: Rubiso filed a complaint against Rivera for the recovery of a pilot boat. He alleged that he is the rightful owner of a pilot boat, which was stranded and recovered by Rivera. The latter refused to return the said boat as he alleged too that he was the owner thereof. It was known that the original owners of the boat had secretly sold the pilot boat to Rivera on an earlier date than the sale in a public auction to Rubiso. Nonetheless, material is the fact that the entry into the customs registry of the sale of the boat was later than the recording of the sale to Rubiso. HELD: The requisite of registration in the registry, of the purchase of the vessel, is necessary and indispensable in order that the purchaser's rights may be maintained against a third person. Such registration is required both by the Code of Commerce and Act 1900. It is undeniable, ergo, that Rivera doesn't have a better right than Rubiso over the pilot boat. Ships and vessels, whether moved by steam or by sail, partake, to a certain extent of the nature and conditions of real property, on account of their value and importance in world commerce; and for this, the provisions of the Code of Commerce are nearly identical with Article 1473 of the CC defendants have been proved guilty of an infraction of the Gambling Law. Assignment of error No. 2, which requires more serious consideration, is as follows: II. The admission without objection of a coaccused or of a person that ought to be accused with the defendants to testify as government witness does not free his testimony given at the trial from the requisites set forth in Act No. 2709, and said testimony was not sufficient to convict the appellants Donato Inductivo and Francisco Chico and the court below erred in not so holding. For a proper understanding of the question thus presented, it is necessary to include a sketch of the incidents pertaining to this case. The criminal complaint filed in the justice of the peace court of San Antonio, Nueva Ecija, was laid against four persons, Maximo Obdulio, Lucas Lizarondo, Donato Inductivo, and Francisco Chico. Subsequently, a motion was made in the justice of the peace court by the municipal president asking that the complaint against Maximo Obdulio be dismissed "para utilizarle como testigo de cargo" (in order that he might be used as a government witness). This motion was granted by the justice of the peace. Later, an information was filed in the Court of First Instance against three persons, Donato Inductivo, Lucas Lizarondo, and Francisco Chico. The fourth person, Maximo Obdulio, was named as a witness for the prosecution. The cause came to trial before the Honorable Vicente Nepomuceno, without any motion or demurrer to the complaint having been presented. Claro Soriano, the chief of police, was first called as a witness for the prosecution. He testified relative to the arrest of the three defendants and Maximo Obdulio, and identified them as collectors of the prohibited game of jueteng. Maximo Obdulio, who was the second witness for the prosecution, was permitted to begin his testimony without objection of any sort being raised by counsel for the defense. It was only along in the cross-examination that the following appears: Q. Is it not true that the chief of police promised you your release in case you testify as government witness in this cause? A. No, sir. Q. And you are not now accused; how do you explain that? A. Because the judge told me I would be a government witness. Q. What judge? -

U.S. v. Carlos, 21 Phil. 553 (1912) This is an appeal from a judgment of the Court of First Instance of Nueva Ecija, finding the defendants Donato Inductivo, Lucas Lizarondo, and Francisco Chico guilty of a violation of Act No. 1757, the Gambling Law, and sentencing each of them to three months' imprisonment and to pay a one-third part of the costs. Appellants rely on four assignments of error. Assignments 1, 3, and 4 require but little consideration. Collectors of jueteng can be convicted of a violation of the Gambling Law if the proof is sufficient. (U. S. vs. De la Cruz, R. G. No.13808.)1 And, in this instance, waiving for the time being any other debatable question, the

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A. The justice of the peace of San Antonio. Q. And what else did the justice of the peace tell you, after telling you that you would be used as a government witness? A. Nothing more than that, that they will use me as witness of the chief. Q. And by reason of the fact that you are now a witness, you are no longer of the accused? FISCAL. Objection for being incompetent and immaterial; it is a conclusion. JUDGE. Objection sustained. YAPCHIONGCO. That is all. Even after it was thus brought to the notice of counsel and of the court that Maximo Obdulio had been dismissed as an accused in order to be used as a government witness, no formal objection was raised nor was any adverse action taken by the trial court. With this the statement of the case and of the facts, judgment was rendered against the three defendants Inductivo, Lizarondo, and Chico. It is only on appeal that counsel for defendants first argue against the competency of Maximo Obdulio as a witness because of the fact that the provisions of Act No. 2709 were not followed. There are two very apparent reasons which disclose why such a contention cannot prosper at this time. In the first place, it is an almost universal rule which has found favor in numerous cases in the Philippines that, aside from matters jurisdictional, which can always be raised for the first time on appeal, and aside from a few other exceptions which need not be notice, questions not raised in the trial court will' not be considered on appeal. an appellate court, strictly speaking, has no question of law to review if the trial court has made no ruling. This incontrovertible proposition would be sufficient to dispose of appellants' second assignment of error. There is, however, another method of approach leading to the same result. It is this The motion intended to secure Maximo Obdulio as a government witness was, it will be recalled, filed in the justice of the peace court; it was not filed in the court of first instance where the trial was had. The justice of the peace court was, under these circumstances, not a "competent court" within the meaning of Act No. 2709. Conceding then that the provisions of this Act were not followed, it is, nevertheless, not fatal, because the clear and convincing testimony of the chief of police is sufficient to warrant the conviction of the three defendants, not taking into consideration the testimony of Maximo Obdulio at all. Parenthetically, it may be remarked that since this is so, and since the record discloses that Maximo Obdulio was equally guilty with the other three defendants, he can now be prosecuted for the same offense. It is a situation somewhat akin to proceedings in a court having no jurisdiction, which is no bar to subsequent prosecution in a court which has jurisdiction of the offense. (U. S. vs. Jayme [1913], 24 Phil., 90; U. S. vs. Rubin [1914], 28 Phil., 631.) What has been said shows that any further discussion of Act No. 2709 would be beside the point. Judgment is affirmed, with a one-third part of the costs of this instance against each appellant. The attention of the provincial fiscal of Nueva Ecija is brought to the advisability of instituting criminal proceedings against Maximo Obdulio for a violation of Act No. 1757. So ordered. Piansay v. David, 12 SCRA 227 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.

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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 U.S. v. Tambunting, 41 Phil 364 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 Strochecker v. Ramirez 44 Phil. 933 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

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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. Laurel v. Abrogar, GR 155076, Jan. 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 latter's 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 owner's 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 PLDT's telephone system, through which petitioner is able to resell or re-route international long distance calls using PLDT's 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.

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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 longdistance 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.