PUNZALAN V.

LACSAMANA
Buildings are always treated as immovable or real property under the Code even if
it was dealt with separately from the land upon which it stood

FACTS:
Some land belonging to Antonio Punzalan was foreclosed by the Philippine National
Bank Tarlac, Branch in failure of the former to pay the mortgaged fee amounting to
P10 grand Since PNB was the highest bidder, the land went to PNB.
Sometime 1974, while the property was still in the possession of Punzalan, Punzalan
constructed a warehouse on the said land by virtue of the permit secured from the
Municipal Mayor of Bamban, Tarlac. Subsequently, in 1978, a contract of sale was
entered into by PNB and Remedios Vda. De Lacsamana, whom in lieu of the said
sale secured a title over the property involving the warehouse allegedly owned and
constructed by the plaintiff.
Punzalan filed a suit for annulment of the Deed of Sale with damages against PNB
and Lacsamana before the Court of First Instance of Rizal, Branch 31, impugning the
validity of the sale of the building, requesting the same to be declared null and void
and that damages in the total sum of P23, 200 more or less be awarded to him.
Respondent Lacsamana in his answer averred the affirmative defense of lack of
cause of action contending that she was a purchaser for value, while, PNB filed a
Motion to Dismiss on the ground of improper venue, invoking that the building was
a real property under Article 415 of the Civil Code, and therefore, Section 4 (a) of
the Rules of Court should apply.
Punzalan filed a Motion for Reconsideration asserting that the action he filed is
limited to the annulment of sale and that, it does not involved ownership of or title
to property but denied by the court for lack of merit. A motion for pre-trial was also
set by Punzalan but was also denied by the court invoking that the case was already
dismissed.
Hence, a petition for certiorari was filed by the petitioner.

ISSUE:

Whether or not the judgment rendered by the court is proper.

HELD:
While it is true that the petitioner does not directly seek the recovery of the title or
possession of the property in question, his action for annulment of sale and his
claim for damages are closely intertwined with the issue of ownership of the
building, which, under the law, is considered immovable property, the recovery of
which is petitioners primary objective. The prevalent doctrine is that an action for
the annulment or rescission of a sale of real property does not operate to efface the
objective and nature of the case, which is to recover said property. It is a real action.
Respondent Court did not err in dismissing the case on the ground of improper
venue under Section 12 Rule 4 which was timely raised under Section 1 Rule 16 of
the Rules of Court.
Personal Observation: The venue was improperly laid by the petitioner in the case at
bar. Such ground was sufficient to render dismissal of the case, as the same is one
of the grounds provided for under Rule 16 (c) of the Rules of Court.
The Denial of Motion to Dismiss rendered by the court in the instant case is
appealable. If such denial constitute grave abuse of discretion on the part of the
court , Punzalan may file either Prohibition or Certiorari under Rule 65 of the Rules
of Court

Leung Yee vs Strong Machinery Co

Posted on June 22, 2013
Leung Yee vs Strong Machinery Co.
37 PHIL 644
GR No. L-11658
February 15, 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 machinesand 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
ofAgricola, 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.
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. vs Jaranillo

Posted on June 21, 2013
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.

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 wouldnt ask for any additional
extension and there would be no need for any formal demand. In spite of this, they
still failed to pay.

Navarro then filed for the foreclosure of the mortgages. The court decided in his
favor.
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.

Lopez v. Orosa
LOPEZ V. OROSA AND PLAZA THEATREG.R. Nos. L-10817-18 February 28, 1958
FACTS:
-Petitioner Lopez was engaged in doing business under the trade name LopezCastelo Sawmill.
Orosa, a resident of the same province as Lopez, invited the latter to make an
investment in the theatre business. Lopez declined to invest but agreed to supply
the lumber necessary for the construction of the proposed theatre. They had an oral
agreement that Orosa would be personally liable for any account that the said
construction might incur and that payment would be on demand and not cash on
delivery basis.
Lopez delivered the which was used for construction amounting to P62,255.85. He
was paid only P20,848.50, leaving a balance of P41,771.35.
The land on which the building was erected previously owned by Orosa, was later on
acquired by the corporation.
. As Lopez was pressing Orosa for payment, the latter and president of the
corporation promised to obtain a bank loan by mortgaging the properties of the

Plaza Theatre., out of which the unpaid balance would be satisfied. But unknown to
Lopez, the corporation already obtained a loan with Luzon Surety Company as
surety, and the corporation in turn executed a mortgage on the land and building in
favor of the said company as counter-security.
Due to the persistent demands of Lopez, Orosa executed a deed of assignment
over his shares of stock in the corporation.
As it remained unsettled, Lopez filed a case against Orosa and Plaza theatre praying
that they be sentenced to pay him jointly and severally of the unpaid balance; and
in case defendants fail to pay, the land and building owned by the corporation be
sold in public auction with the proceeds be applied to the balance; or the shares of
stock be sold in public auction.
The lower court held that defendants were jointly liable for the unpaid balance and
Lopez thus acquired the material mans lien over the construction. The lien was
merely confined to the building and did not extend to the on which the construction
was made.
Lopez tried to secure a modification of the decision, but was denied.

ISSUES:
Whether the material mans lien for the value of the materials used in the
construction of the building attaches to said structure alone and doesnt extend to
the land on which the building is adhered to.
Whether the lower court and CA erred in not providing that the material mans liens
is superior to the mortgage executed in favor of surety company not only on the
building but also on the land.
HELD:
-The material mans lien could be charged only to the building for which the credit
was made or which received the benefit of refection, the lower court was right in,
holding at the interest of the mortgagee over the land is superior and cannot be
made subject to the material man's lien.
-Generally, real estate connotes the land and the building constructed thereon, it is
obvious that the inclusion of the building in the enumeration of what may constitute
real properties could only mean one thingthat a building is by itself an immovable

property.
-In the absence of any specific provision to the contrary, a building is an immovable
property irrespective of whether or not said structure and the land on which it is
adhered to belong to the same owner.
-The law gives preference to unregistered refectionary credits only with respect to
the real estate upon which the refectionary or work was made.
- The lien so created attaches merely to the immovable property for the
construction or repair of which the obligation was incurred. Therefore, the lien in
favor of appellant for the unpaid value of the lumber used in the construction of the
building attaches only to said structure and to no other property of the obligors.

SIBAL v. VALDEZ
July 5, 2013 Leave a comment
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.
Mindanao Bus Company vs City Assessor
Posted on June 24, 2013
Mindanao Bus Company vs City Assessor
116 PHIL 501
GR No. L-17870
September 29, 1962
FACTS
The City Assessor of Cagayan de Oro City assessed a realty tax on several
equipment and machineries of Mindanao Bus Co. These equipment were placed on
wooden or cement platforms and can be moved around in the bus companys repair
shop. The bus company appealed the assessment to the Board of Tax Appeals on
the ground that the same are not realty. The Board of Tax Appeals of the City,
however, sustained the city assessor. Thus, the bus company appealed to the Court
of Tax Appeals, which likewise sustained the city assessor.
HELD
Art. 415 of the NCC classifies the following as immovable property:
xxx
(5) Machinery, receptacles, instruments or implements intended by the owner pf 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;
Note that the stipulation expressly states that the equipment are placed on wooden
or cement platforms. They can be moved around and about in petitioner's repair
shop.
Before movables may be deemed immobilized in contemplation of Article 415 (5), it
is necessary that they 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.
In this case, the tools and equipment in question are by their nature, not essential
and principal elements of Mindanao Bus Co.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 equipments, its business may be carried on.
Aside from the element of essentiality the Art.415 (5) also requires that the industry
or works be carried on in a building or on a piece of land. A sawmill would also be
installed in a building on land more or less permanently, and the sawing is
conducted in the land/building.
However, in the instant case, 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 law. The equipments in question
are not absolutely essential to the petitioner's transportation business, and
petitioner's business is not carried on in a building, tenement or on a specified land.
As such, the equipments in question are not deemed real property because the
transportation business is not carried on in a building or permanently on a piece of
land,as demanded by law.
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.
Therefore, the imposition of realty tax on the maintenance and repair equipment
was not proper because the properties involved were not real property under Article
415 (5).
Davao Sawmill Co. vs Castillo
Posted on June 21, 2013
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.
US vs Carlos
G.R. No. 6295, 21 Phil 543September 1, 1911
FACTS:
Ignacio Carlos has been a consumer of electricity furnished by the Manila Electric
Railroad and Light Company for a building containing theresidence of the accused
and 3 other residences. Believing that more light is consumed than what is shown in
the meter installed, the company installedan additional meter on the pole outside

Carloss house to compare the actual consumption. They found out that Carlos used
a jumper. Further, a jumper was found in a drawer of a small cabinet in the room of
the defendants house where the meter was installed. In the absence of any
explanation for hispossession of said device, the presumption raised was that Carlos
was the owner of the device whose only use was to deflect the flow of
electricity,causing loss to the Meralco of over 2000 kilowatts of current. Accused of
theft, Carloss defense was that electricity was an unknown force, not a fluid, and
being intangible, could not be the object of theft.
ISSUE:
Whether the court erred in declaring that electricity can be the object of theft.
HELD:
While electric current is not a fluid, still, its manifestations and effects like those of
gas may be seen and felt. The true test of what may be stolenis not whether it is
corporeal or incorporeal, but whether, being possessed of value, a person other
than the owner may appropriate the same. Electricity,like gas, is a valuable
merchandise and may thus be stolen. (See also U.S. v. Tambunting, 41 Phil.
364).The court further ruled that electricity, the same as gas, is a valuable article of
merchandise, bought and sold like other personal property and is capableof
appropriation by another. It is also susceptible of being severed from a mass or
larger quantity and of being transported from place to place. Hence, noerror was
committed by the trial court in holding that electricity is a subject of larceny.