Real Personal Property Classification Treatment
Title Facts
MEC vs The City MERALCO has been successively granted franchises to operate in
Assessor Lucena City beginning 1922 until present time. On February 20,
1989, MERALCO received from the City Assessor of Lucena a copy of
Tax Declaration No. 0196500 covering the following electric facilities,
classified as capital investment, of the company: (a) transformer and
electric post; (b) transmission line; (c) insulator; and (d) electric
meter, located in Quezon Ave. Ext., Brgy. GulangGulang,
Lucena City. Under Tax Declaration No. 0196500, these electric
facilities had a market value of P81,811,000.00 and an assessed
value of P65,448,800.00, and were subjected to real property tax as
of 1985.
MERALCO appealed before the LBAA of Lucena City and
claimed that its capital investment consisted only of its substation
facilities, the true and correct value of which was only
P9,454,400.00; and that MERALCO was exempted from payment of
real property tax on said substation facilities. The LBAA rendered a
Decision14 in LBAA892 on July 5, 1989, finding that under its
franchise, MERALCO was required to pay the City Government of
Lucena a tax equal to 5% of its gross earnings, and “[s]aid tax shall
be due and payable quarterly and shall be in lieu of any and all taxes
of any kind, nature, or description levied, established, or collected x
x x, on its poles, wires, insulators, transformers and structures,
installations, conductors, and accessories, x x x, from which taxes
the grantee (MERALCO) is hereby expressly exempted.”15 As
regards the issue of whether or not the poles, wires, insulators,
transformers, and electric meters of MERALCO were real properties,
the LBAA cited the 1964 case of Board of Assessment Appeals v.
Manila Electric Company16 (1964 MERALCO case) in which the Court
held that: (1) the steel towers fell within the term “poles” expressly
exempted from taxes under the franchise of MERALCO; and (2) the
steel towers were personal properties under the provisions of the
Civil Code and, hence, not subject to real property tax.
The LBAA then declared that Sections 234 and 534(f) of
the Local Government Code repealed the provisions in the franchise
of MERALCO andPresidential Decree No. 551 pertaining to the
exemption of MERALCO from payment of real property tax on its
poles, wires, insulators, transformers, and meters. The LBAA refused
to apply as res judicata its earlier judgment in LBAA892, as affirmed
by the CBAA, because it involved collection of taxes from 1985 to
1989, while the
present case concerned the collection of taxes from 1989 to 1997;
and LBAA is only an administrative body, not a court
or quasijudicial body. The Court of Appeals rendered a Decision on
May 13, 2004 rejecting all arguments proffered by MERALCO. The
appellate court found no deficiency in the Notice of Assessment
issued by the City Assessor of Lucena.
Rep vs Rural The National Irrigation Authority (NIA) is the government-
Bank owned-and-controlled corporation primarily responsible for irrigation
development and management in the country. To carry out its
Issue/s Held
Whether or not the The Petition is partly meritorious. The Court highlights that under Section 199(o) of the Local Government Code, machinery,
Court of Appeals to be deemed real property subject to real property tax, need no longer be annexed to the land or building as these “may
grave committed or may not be attached, permanently or temporarily to the real property,” and in fact, such machinery may even be “mobile.”
The same provision though requires that to be machinery subject to real property tax, the physical facilities for production,
error in affirming in
installations, and appurtenant service facilities, those which are mobile, selfpowered or selfpropelled, or not permanently
toto the decision of attached to the real property (a) must be actually, directly, and exclusively used
the central board of to meet the needs of the particular industry, business, or activity; and (b) by their very nature and purpose, are designed
assessment appeals for, or necessary for manufacturing, mining, logging, commercial, industrial, or agricultural purposes.
which held that the
subject properties The aforequoted conclusions of the Court in the 1964 MERALCO case do not hold true anymore under the Local
are real properties Government Code. While the Local Government Code still does not provide for a specific definition of “real property,”
Sections 199(o) and 232 of the said Code, respectively, gives an extensive definition of what constitutes “machinery” and
subject to real
unequivocally subjects such machinery to real property tax. The Court reiterates that the machinery subject to real property
property tax tax under the Local Government Code “may or may not be attached, permanently or temporarily to the real property”; and
the physical facilities for production, installations, and appurtenant service facilities, those which are mobile, selfpowered
or selfpropelled, or are not permanently attached must (a) be actually, directly, and exclusively used to meet the needs of
the particular industry, business, or activity; and (b) by their very nature and purpose, be designed for, or necessary for
manufacturing, mining, logging, commercial, industrial, or agricultural purposes.
Article 415, paragraph (1) of the Civil Code declares as immovables or real properties “[l]and, buildings, roads
and constructions of all kinds adhered to the soil.” The land, buildings, and roads are immovables by nature “which cannot
be moved from place to place,” whereas the constructions adhered to the soil are immovables by incorporation “which are
essentially movables, but are attached to an immovable in such manner as to be an integral part thereof.”57 Article 415,
paragraph (3) of the Civil Code, referring to “[e]verything 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,” are likewise immovables by
incorporation. In contrast, the Local Government Code considers as real property machinery which “may or may not be
attached, permanently or temporarily to the real property,” and even those which are “mobile.” MERALCO insists on
harmonizing the aforementioned provisions of the Civil Code and the Local Government Code. The Court disagrees,
however, for this would necessarily mean imposing additional requirements for classifying machinery as real property for
real property tax purposes not provided for, or even in direct conflict with, the provisions of the Local Government Code.
As between the Civil Code, a general law governing property and property relations, and the Local Government Code, a
special law granting local government units the power to impose real property tax, then the latter shall prevail.
Therefore, for determining whether machinery is real property subject to real property tax, the definition and
requirements under the Local Government Code are controlling. MERALCO maintains that its electric posts are not machinery
subject to real property tax because said posts are not being exclusively used by MERALCO; these are also being utilized
by cable and telephone companies. This, however, is a factual issue which the Court cannot take cognizance of in the
Petition at bar as it is not a trier of facts. Whether or not the electric posts of MERALCO are actually being used by other
companies or industries is best left to the determination of the City Assessor or his deputy, who has been granted the
authority to take evidence under Article 304 of the Rules and Regulations.
Whether or not the No. We have scrupulously examined the records of the case and found no proof of conveyance
1
payment of just or evidence of transfer of ownership of Lot No. 3080 from its registered owner, RBK to the intervenors. As it is, the TCT is
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compensation for Lot still registered in the name of the RBK. It is not disputed that RBK did not participate in the expropriation proceedings, and
 purpose, NIA was specifically authorized by law to exercise the
power of eminent domain.
NIA needed some parcels of land for the purpose
of constructing the Malitubog- Marigadao Irrigation Project.
Consequently, it filed with a Regional Trial Court a Complaint for the
expropriation of a portion of 3 parcels of land. Among the affected
parcels of land was Lot No. 3080 covered by Transfer Certificate of
Title (TCT) No. T-61963 and registered under the Rural Bank of
Kabacan (RBK). In its answer, RBK alleged, inter alia, that it no
longer owned Lot No. 3080. Subsequently thereafter, in response to
the expropriation complaint, Margarita Tabaoda, Portia Charisma
Ruth Ortiz, Lina Erlinda Ortiz, Mario Ortiz, Juan Mamac and Gloria
Matas (Intervenors) filed their Answer-in-Intervention. They
essentially pointed out that Tabaoda and Portia were the new
owners of Lot No. 3080, which the two acquired from RBK.
After due process, the RTC granted the complaint and
ordered NIA, among others, to forward the payments intended for
RBK to Tabaoda and Portia who have already acquired ownership
over Lot No. 3080. On appeal, the Court of Appeals (CA), affirmed
the RTC’s decision that the payments intended for RBK should be
given to Tabaoda and Portia. The CA based its conclusion on the
non-participation of RBK in the expropriation proceedings and the
latter’s manifestation that it no longer owned Lot No. 3080.
PLDT v. Alvarez To safeguard the integrity of its network, PLDT regularly conducts
investigations on various prepaid cards marketed and sold abroad
to determine alternative calling patterns (ACP) and network fraud
that are being perpetrated against it.
G 179408, March
5, 2014, 718 During a test call placed at the PLDT–ACPDD office, the receiving
SCRA 54 phone reflected a PLDT telephone number as the calling number
used, as if the call was originating from a local telephone in Metro
Manila. Upon verification with the PLDT’s Integrated Customer
Management (billing) System, the ACPDD learned that the
subscriber of the reflected telephone number is Abigail R. Razon
Alvarez. It further learned that several lines are installed at this
address with Abigail and Vernon R. Razon (respondents), among
others, as subscribers.
To validate its findings, the ACPDD conducted the same test calls
revealing the same results. The caller–id–equipped receiving phone
reflected telephone numbers13 that are in the address of the
occupant Abigail.
No. 3080 should be that it manifested that it no longer owned Lot No. 3080. The trial court should have nevertheless required it and the
made to Taboada intervenors to show proof or evidence pertaining to the conveyance of the subject lot. The court cannot rely on mere
and Portia inference, considering that the payment of just compensation is intended to be awarded solely owner based on the latter’s
proof of ownership. There is doubt as to the real owner of Lot No. 3080. Despite the fact that the lot was covered by TCT
No. T-61963 and was registered under its name, the RBK manifested that it no longer owned the lot, but the intervenors;
however, it presented no proof as to the conveyance thereof.
We also uphold the CA ruling, which deleted the inclusion of the value of the excavated soil in the payment for
just compensation. There is no legal basis to separate the value of the excavated soil from that of the expropriated
properties, contrary to what the trial court did. In the context of expropriation proceedings, the soil has no value separate
from that of the expropriated land. Just compensation ordinarily refers to the value of the land to compensate for what the
owner actually loses. Such value could only be that which prevailed at the time of the taking.
In National Power Corporation v. Ibrahim, et al., 526 SCRA 149 (2007), we held that rights over lands are
indivisible, viz.: [C]onsequently, the CA’s findings which upheld those of the trial court that respondents owned and
possessed the property and that its substrata was possessed by petitioner since 1978 for the underground tunnels, cannot
be disturbed. Moreover, the Court sustains the finding of the lower courts that
the subterrain portion of the property similarly belongs to respondents. This conclusion is drawn from Article 437 of the
Civil Code which provides: ART. 437. The owner of a parcel of land is the owner of its surface and of everything under it,
and he can construct thereon any works or make any plantations and excavations which he may deem proper, without
detriment to servitudes and subject to special laws and ordinances. He cannot complain of the reasonable requirements of
aerial navigation.
Thus, the ownership of land extends to the surface as well as to the subsoil under it. xxx xxx xxx Registered
landowners may even be ousted of ownership and possession of their properties in the event the latter are reclassified as
mineral lands because real properties are characteristically indivisible. For the loss sustained by such owners, they are
entitled to just compensation under the Mining Laws or in appropriate expropriation proceedings. Moreover, petitioner’s
argument that the landowners’ right extends to the subsoil insofar as necessary for their practical interests serves only to
further weaken its case. The theory would limit the right to the subsoil upon the economic utility which such area offers to
the surface owners. Presumably, the landowners’ right extends to such height or depth where it is possible for them to
obtain some benefit or enjoyment, and it is extinguished beyond such limit as there would be no more interest protected
by law.
whether telephone On January 13, 2009 (or while the present petition was pending in court), the Court En Banc unanimously granted
services or the PLDT’s motion for reconsideration.39 The Court ruled that even prior to the passage of the RPC, jurisprudence is settled
business of that “any personal property, tangible or intangible, corporeal or incorporeal, capable of appropriation can be the object of
providing these theft.” 40 This jurisprudence, in turn, applied the prevailing legal meaning of the term “personal property” under the old
services could be the Civil Code as “anything susceptible of appropriation and not included in the foregoing chapter (not real
subject of theft property).” 41 PLDT’s telephone service or its business of providing this was appropriable personal property and was, in
under the RPC fact, the subject of appropriation in an ISR operation, facilitated by means of the unlawful use of PLDT’s facilities.
In this regard, the Amended Information inaccurately describes the offense by making it appear that what [Laurel] took
were the international long distance telephone calls, rather than respondent PLDT’s business.
Indeed, while it may be conceded that “international long distance calls,” the matter alleged to be stolen xxx, take the
form of electrical energy, it cannot be said that such international long distance calls were personal properties belonging
to PLDT since the latter 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. PLDT not being the owner
of said telephone calls, then it could not validly claim that such telephone calls were taken without its consent. It is the
use of these communications facilities without the consent of PLDT that constitutes the crime of theft, which is the
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unlawful taking of the telephone services and business.
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In the cards they tested, however, once the caller enters the
access and pin numbers, the respondents would route the
call via the internet to a local telephone number (in this case, a
PLDT telephone number) which would connect the call to the
receiving phone. Since calls through the internet never pass the toll
center of the PLDT’s IGF, users of these prepaid cards can place a
call to any point in the Philippines (provided the local line is NDD–
capable) without the call appearing as coming from abroad.15
On November 6, 2003 and November 19, 2003, Mr. Lawrence
Narciso of the PLDT’s Quality Control Division, together with the
operatives of the Philippine National Police (PNP), conducted an
ocular inspection at 17 Dominic Savio St., Savio Compound and at
No. 38 Indonesia St., Better Living Subdivision – both in Barangay
Don Bosco, Paranaque City – and discovered that PLDT telephone
lines were connected to several pieces of equipment.
On December 3, 2003, Police Superintendent Gilbert C. Cruz filed a
consolidated application for a search warrant18 before Judge
Francisco G. Mendiola of the RTC, for the crimes of theft and
violation of PD No. 401. According to PLDT, the respondents are
engaged in a form of network fraud known as International Simple
Resale (ISR) which amounts to theft under the RPC.
ISR is a method of routing and completing international long
distance calls using lines, cables, antennae and/or wave
frequencies which are connected directly to the domestic exchange
facilities of the country where the call is destined (terminating
country); and, in the process, bypassing the IGF at the terminating
country.19
Judge Mendiola found probable cause for the issuance of the
search warrants applied for. Accordingly, four search
warrants20 were issued for violations of Article 308, in relation to
Article 309, of the RPC (SW A–1 and SW A–2) and of PD No. 401,
as amended (SW B–1 and SW B–2) for the ISR activities being. The
four search warrants enumerated the objects to be searched and
seized.
Therefore, the business of providing telecommunication and the telephone service are personal property under Article 308
of the Revised Penal Code, and the act of engaging in ISR is an act of “subtraction” penalized under said article.42
The Court En Banc’s reversal of its Laurel Division ruling during the pendency of this petition significantly impacts on how
the Court should resolve the present case for two reasons:
First, the Laurel En Banc ruling categorically equated an ISR activity to theft under the RPC. In so doing, whatever alleged
factual variance there may be between Laurel and the present case cannot render Laurel inapplicable.
Second, in quashing SW A–l and SW A–2, note that the CA relied on the Laurel Division ruling at the time when it was still
subject of a pending motion for reconsideration.
xxx
As the RTC itself found, PLDT successfully established in its application for a search warrant a probable cause for theft by
evidence that Laurel’s ISR activities deprived PLDT of its telephone services and of its business of providing these services
without its consent. xxx
Under the Rules, the following personal property may be subject of search warrant: (i) the subject of the offense; (ii)
fruits of the offense; or (iii) those used or intended to be used as the means of committing an offense. In the present
case, we sustain the CA’s ruling nullifying paragraphs 7, 8 and 9 of SW B–l and SW B–2 for failing the test of particularity.
More specifically, these provisions do not show how the enumerated items could have possibly been connected with the
crime for which the warrant was issued, i.e., P.D. No. 401. xxx
We disagree with PLDT. The fact that the printers and scanners are or may be connected to the other illegal connections
to the PLDT telephone lines does not make them the subject of the offense or fruits of the offense, much less could they
become a means of committing an offense.
xxx The crime for which these search warrants were issued does not pertain to the crime of theft – where matters of
personal property and the taking thereof with intent to gain become significant – but to PD No. 401.
These items could not be the subject of a violation of PD No. 401 since PLDT itself does not claim that these items
themselves comprise the unauthorized installations. xxx

On the same date, the PNP searched the premises indicated in the
warrants. On January 14, 2004, the PLDT and the PNP filed with
the Department of Justice a joint complaint–affidavit for theft and
for violation of PD No. 401 against the respondents.23

On February 18, 2004, the respondents filed with the RTC a motion

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to quash2 the search warrants. On March 12, 2004, PLDT opposed

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the respondents' motion.25
 In a July 6, 2004 order,26 the RTC denied the respondents' motion
to quash. Having been rebuffed27in their motion for
reconsideration,28 the respondents filed a petition for certiorari with
the CA.” 29
On August 11, 2006, the CA rendered the assailed decision and
resolution, granting the respondents' petition for certiorari. The
CA quashed SW A–l and SW A–2 (for theft) on the ground that
they were issued for “non–existent crimes.” With the denial of its
motion for reconsideration PLDT went to this Court via this Rule 45
petition.
Laurel v. Petitioner is one of the accused in Criminal Case No. 99-2425, filed
Abrogar with the RTC. The Amended Information charged the accused with
theft under Article 308 of the Revised Penal Code committed by
feloniously taking, stealing and using the international long
distance calls belonging to PLDT by conducting International
Simple Resale (ISR), which is a method of routing and completing
GR 155076, Jan.
international long distance calls using lines, cables, antenae, and/or
13, 2009, 576 air wave frequency which connect directly to the local or domestic
SCRA 41 exchange facilities of the country where the call is destined,
effectively stealing this business from PLDT while using its facilities
in the estimated amount of P20,370,651.92.
Petitioner filed a “Motion to Quash (with Motion to Defer
Arraignment),” on the ground that the factual allegations in the
Amended Information do not constitute the felony of theft.
The RTC denied the Motion to Quash the Amended Information, as
well as petitioner’s subsequent MR.
Petitioner’s special civil action for certiorari was dismissed by the
Court of Appeals. Thus, petitioner filed the instant petition for
review with this Court.
February 27, 2006 SC’s First Division granted the petition and
directed the RTC to issue an order granting the motion to quash
the Amended Information.
Respondent Philippine Long Distance Telephone Company (PLDT)
filed a Motion for Reconsideration with Motion to Refer the Case to
the Supreme Court En Banc.
MR is granted but the case is remanded to the trial court for proper clarification of
the Amended Information (RE: international long distance calls, although personal
properties, do not belong to PLDT; it is the use of these communications facilities without the consent of PLDT that
constitutes the crime of theft, which is the unlawful taking of the telephone services and business)
Prior to the passage of the Revised Penal Code on December 8, 1930, the
definition of the term “personal property” in the penal code provision on theft had been established in Philippine
jurisprudence. This Court, in United
States v. Genato, United States v. Carlos, and United States v. Tambunting,
consistently ruled that any personal property, tangible or intangible, corporeal or incorporeal, capable of appropriation
can be the object of theft.
Moreover, since the passage of the Revised Penal Code on December 8,
1930, the term “personal property” has had a generally accepted definition in civil law. In Article 335 of the Civil Code of
Spain, “personal property” is defined as “anything susceptible of appropriation and not included in the foregoing chapter
(not real property).” Thus, the term “personal property” in the Revised Penal Code should be interpreted in the context of
the Civil Code provisions.
In fact, this Court used the Civil Code definition of “personal property” in interpreting the theft provision of the penal code
in United States v. Carlos.
Cognizant of the definition given by jurisprudence and the Civil Code of Spain to the term “personal property” at the time
the old Penal Code was being revised, still the legislature did not limit or qualify the definition of “personal property” in
the Revised Penal Code. Neither did it provide a restrictive definition or an exclusive enumeration of “personal property”
in the Revised Penal Code, thereby showing its intent to retain for the term an extensive and unqualified interpretation.
Consequently, any property which is not included in the enumeration of real properties under the Civil Code and capable
of appropriation can be the subject of theft under the Revised Penal Code.
The only requirement for a personal property to be the object of theft under the penal code is that it be capable of
appropriation. It need not be capable of “asportation,” which is defined as “carrying away.”[7] Jurisprudence is settled
that to “take” under the theft provision of the penal code does not require asportation or carrying away.[8]
To appropriate means to deprive the lawful owner of the thing.[9] The word “take” in the Revised Penal Code includes
any act intended to transfer possession which, as held in the assailed Decision, may be committed through the use of the
offenders’ own hands, as well as any mechanical device, such as an access device or card as in the instant case. This
4
includes controlling the destination of the property stolen to deprive the owner of the property, such as the use of a
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meter tampering, as held in Natividad v. Court of Appeals,[10] use of a device to fraudulently obtain gas, as held in
United States v. Tambunting, and the use of a jumper to divert electricity,
as held in the cases of United States v. Genato, United States v. Carlos, and United States v. Menagas.

As illustrated in the above cases, appropriation of forces of nature which are brought under control by science such as
electrical energy 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, petitioner was charged with engaging in International Simple Resale (ISR) or the
unauthorized routing and completing of international long distance calls using lines, cables, antennae, and/or air wave
frequency and connecting these calls directly to the local or domestic exchange facilities of the country where destined.

As early as 1910, the Court declared in Genato that ownership over electricity (which an international long distance call
consists of), as well as telephone service, is protected by the provisions on theft of the Penal Code.

The acts of subtraction punished by the provisions on theft of the Penal Code then in force, thus:

The acts of “subtraction” include: (a) tampering with any wire, meter, or other apparatus installed or used for generating,
containing, conducting, or measuring electricity, telegraph or telephone service; (b) tapping or otherwise wrongfully
deflecting or taking any electric current from such wire, meter, or other apparatus; and (c) using or enjoying the benefits
of any device by means of which one may fraudulently obtain any current of electricity or any telegraph or telephone
service.

In the instant case, the act of conducting ISR operations by illegally connecting various equipment or apparatus to private
respondent PLDT’s telephone system, through which petitioner is able to resell or re-route international long distance calls
using respondent PLDT’s facilities constitutes all three acts of subtraction mentioned above.

The business of providing telecommunication or telephone service is likewise personal property which can be the object of
theft under Article 308 of the Revised Penal Code. Business may be appropriated under Section 2 of Act No. 3952 (Bulk
Sales Law), hence, could be object of theft.

In Strochecker v. Ramirez,[12] this Court stated:

With regard to the nature of the property thus mortgaged which is one-half interest in the business above described, such
interest is a personal property capable of appropriation and not included in the enumeration of real properties in article
335 of the Civil Code, and may be the subject of mortgage.

Interest in business was not specifically enumerated as personal property in the Civil Code in force at the time the above
decision was rendered. Yet, interest in business was declared to be personal property since it is capable of appropriation
and not included in the enumeration of real properties. Article 414 of the Civil Code provides that all things which are or
may be the object of appropriation are considered either real property or personal property. Business is likewise not
enumerated as personal property under the Civil Code. Just like interest in business, however, it may be appropriated.
Following the ruling in Strochecker v. Ramirez, business should also be classified as personal property. Since it is not
included in the exclusive enumeration of real properties under Article 415, it is therefore personal property.

As can be clearly gleaned from the above disquisitions, petitioner’s acts constitute theft of respondent PLDT’s business
and service, committed by means of the unlawful use of the latter’s facilities. In this regard, the Amended Information
inaccurately describes the offense by making it appear that what petitioner took were the international long distance
telephone calls, rather than respondent PLDT’s business.

In the assailed Decision, it was conceded that in making the international phone calls, the human voice is converted into
electrical impulses or electric current which are transmitted to the party called. A telephone call, therefore, is electrical
energy. It was also held in the assailed Decision that intangible property such as electrical energy is capable of
appropriation because it may be taken and carried away. Electricity is personal property under Article 416 (3) of the Civil

5
Code, which enumerates “forces of nature which are brought under control by science.”[17]

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Indeed, while it may be conceded that “international long distance

Serg’s vs. PCI Respondent PCI Leasing and Finance, Inc. filed with the RTC-QC a
Leasing complaint for sum of money with an application for a writ of
replevin.
Respondent judge issued a writ of replevin directing its sheriff to
GR 137705, Aug. seize and deliver the machineries and equipment to PCI Leasing
22, 2000, 338 after 5 days and upon the payment of the necessary expenses. In
SCRA 499 implementing said writ, the sheriff proceeded to petitioner’s
factory, seized one machinery with [the] word that he [would]
return for the other machineries.
Petitioners filed a motion for special protective order. This motion
was opposed by PCI Leasing on the ground that the properties
[were] still personal and therefore still subject to seizure and a writ
of replevin.
In their Reply, petitioners asserted that the properties sought to be
seized [were] immovable as defined in Article 415 of the Civil Code,
the parties’ agreement to the contrary notwithstanding. They
argued that to give effect to the agreement would be prejudicial to
innocent third parties. They further stated that PCI Leasing [was]
estopped from treating these machineries as personal because the
contracts in which the alleged agreement [were] embodied [were]
totally sham and farcical.
"On April 6, 1998, the sheriff again sought to enforce the writ of
seizure and take possession of the remaining properties. He was
able to take two more, but was prevented by the workers from
taking the rest.
They went to [the CA] via an original action for certiorari. Citing the
Agreement of the parties, the appellate court held that the subject
machines were personal property, and that they had only been
leased, not owned, by petitioners. Hence, this Petition.
calls,” the matter alleged to be stolen in the instant case, take the
form of electrical energy, it cannot be said that such international
long distance calls were personal properties belonging to PLDT since the latter 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. PLDT not being the owner of said telephone calls, then it could not
validly claim that such telephone calls were taken without its consent. It is the use of these communications
facilities without the consent of PLDT that constitutes the crime of theft, which is the unlawful taking of
the telephone services and business.
Therefore, the business of providing telecommunication and the telephone service are personal property
under Article 308 of the Revised Penal Code, and the act of engaging in ISR is an act of “subtraction”
penalized under said article. However, the Amended Information describes the thing taken as, “international long
distance calls,” and only later mentions “stealing the business from PLDT” as the manner by which the gain was derived
by the accused. In order to correct this inaccuracy of description, this case must be remanded to the trial court and the
prosecution directed to amend the Amended Information, to clearly
state that the property subject of the theft are the services and business of respondent PLDT.
Whether or not the Rule 60 of the Rules of Court provides that writs of replevin are issued for the recovery of personal property only. On the
machineries other hand, Article 415 of the Civil Code enumerates immovable or real property as follows:
purchased and
imported by SERG’S
"ART. 415. The following are immovable property: x x x (5) Machinery, receptacles, instruments or implements
became real
intended by the owner of the tenement for an industry or works which may be carried on in a building or on a piece of
property by virtue of
land, and which tend directly to meet the needs of the said industry or works; x x x xxx x x x"
immobilization.
In the present case, the machines that were the subjects of the Writ of Seizure were placed by petitioners in the factory
built on their own land. Indisputably, they were essential and principal elements of their chocolate-making industry.
Hence, although each of them was movable or personal property on its own, all of them have become "immobilized by
destination because they are essential and principal elements in the industry."16 In that sense, petitioners are correct in
arguing that the said machines are real, not personal, property pursuant to Article 415 (5) of the Civil Code.17
Be that as it may, we disagree with the submission of the petitioners that the said machines are not proper subjects of
the Writ of Seizure.
The Court has held that contracting parties may validly stipulate that a real property be considered as personal.18After
agreeing to such stipulation, they are consequently estopped from claiming otherwise. This is really because one who has
so agreed is estopped from denying the existence of the chattel mortgage."
In the present case, the Lease Agreement clearly provides that the machines in question are to be considered as personal
property. Petitioners are estopped from denying the characterization of the subject machines as personal property. Under
the circumstances, they are proper subjects of the Writ of Seizure.
It should be stressed, however, that our holding -- that the machines should be deemed personal property pursuant to
the Lease Agreement – is good only insofar as the contracting parties are concerned.22 Hence, while the parties are
bound by the Agreement, third persons acting in good faith are not affected by its stipulation characterizing the subject
machinery as personal.23 In any event, there is no showing that any specific third party would be adversely affected.
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Prudential vs. On November 19, 1971, plaintiffs-spouses Fernando A. Magcale
Panis and Teodula Baluyut Magcale secured a loan in the sum of
P70,000.00 from the defendant Prudential Bank. To secure
payment of this loan, plaintiffs executed in favor of defendant on
the aforesaid date a deed of Real Estate Mortgage over a 2-
STOREY, SEMI-CONCRETE, residential building with warehouse
GR L- 50003,
spaces
Aug. 31, 1987,
153 SCRA 391
The mortgagee (defendant Prudential Bank) was at the outset
aware of the fact that the mortgagors (plaintiffs) have already filed
a Miscellaneous Sales Application over the lot, possessory rights
over which were mortgaged to it.
On May 2, 1973, plaintiffs secured an additional loan from
defendant Prudential Bank in the sum of P20,000.00. To secure
payment of this additional loan, plaintiffs executed in favor of the
said defendant another deed of Real Estate Mortgage over the
same properties previously mortgaged.
On April 24, 1973, the Secretary of Agriculture issued Miscellaneous
Sales Patent No. 4776 over the parcel of land, possessory rights
over which were mortgaged to defendant Prudential Bank, in favor
of plaintiffs. On the basis of the aforesaid Patent, and upon its
transcription in the Registration Book of the Province of Zambales,
Original Certificate of Title No. P-2554 was issued in the name of
Plaintiff Fernando Magcale.
Whether or not a In the enumeration of properties under Article 415 of the Civil Code of the Philippines, this Court ruled that, "it is obvious
valid real estate that the inclusion of "building" separate and distinct from the land, in said provision of law can only mean that a building
mortgage can be is by itself an immovable property."
constituted on the
building erected on
Thus, while it is true that a mortgage of land necessarily includes, in the absence of stipulation of the improvements
the land belonging
thereon, buildings, still a building by itself may be mortgaged apart from the land on which it has been built. Such a
to another.
mortgage would be still a real estate mortgage for the building would still be considered immovable property even if dealt
with separately and apart from the land (Leung Yee vs. Strong Machinery Co., 37 Phil. 644). In the same manner, this
Court has also established that possessory rights over said properties before title is vested on the grantee, may be validly
transferred or conveyed as in a deed of mortgage (Vda. de Bautista vs. Marcos, 3 SCRA 438 [1961]).
Coming back to the case at bar, the records show, as aforestated that the original mortgage deed on the 2-storey semi-
concrete residential building with warehouse and on the right of occupancy on the lot where the building was erected,
was executed on November 19, 1971 and registered under the provisions of Act 3344 with the Register of Deeds of
Zambales on November 23, 1971. Miscellaneous Sales Patent No. 4776 on the land was issued on April 24, 1972, on the
basis of which OCT No. 2554 was issued in the name of private respondent Fernando Magcale on May 15, 1972. It is
therefore without question that the original mortgage was executed before the issuance of the final patent and before the
government was divested of its title to the land, an event which takes effect only on the issuance of the sales patent and
its subsequent registration in the Office of the Register of Deeds. Under the foregoing considerations, it is evident that
the mortgage executed by private respondent on his own building which was erected on the land belonging to the
government is to all intents and purposes a valid mortgage.

For failure of plaintiffs to pay their obligation to defendant Bank

after it became due, and upon application of said defendant, the
deeds of Real Estate Mortgage (Exhibits "A" and "B") were
extrajudicially foreclosed. Consequent to the foreclosure was the
sale of the properties therein mortgaged to defendant as the
highest bidder in a public auction sale conducted by the defendant
City Sheriff.

Respondent Court, in a Decision dated November 3, 1978 declared

the deeds of Real Estate Mortgage as null and void.

On December 14, 1978, petitioner filed a Motion for

Reconsideration but the Motion for Reconsideration was denied for
lack of merit. Hence, the instant petition.

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