Matters under contention under Immovable Property: a) Buildings and b) Machines General Rule: Buildings are Real Properties:

May the parties treat the building as personal property? Yes. Cases: 1) Standard Oil Company of NY vs. Jaramillo Gervasia de la Rosa is a lessee of a parcel of land situated in Manila. She built thereon a house of strong materials and executed a chattel mortgage, conveying the property by way of mortgage to the plaintiff as well as leasehold interest on said lot and the house. Question: May a person execute a chattel mortgage on his house on a rented land? Yes as held in the case of Standard Oil Company of New York vs. Jaramillo Another case is Tumalad vs. Vicencio whereby defendants executed a chattel mortgage over their concrete house on a land they rented from another Madrigal & Company, Inc. This was so because Vicencio owned Tumalad the amount of P4,800 way back in 1956. Unable to pay the loan, the Tumalads foreclosed and the house was sold on public auction with the tumalad being the highest bidder. Subsequently, the Tumalads filed a civil case praying that possession be transferred to them. The court granted possession to the Tumalads. But guess what happened to the house? 2. Leung Yee vs. Strong Machinery Company where the purchaser (Compana Agricola Filipina) of a considerable quantity of rice-cleaning machinery executed a chattel mortgage on the machinery and the building where the machineries were installed. The owner of the building is also the owner of the land. When the owner could no longer pay, mortgagee, Strong Machinery foreclosed on the chattel. It subsequently purchased the building and the land by virtue of a Deed of Sale, though not registered. It immediately occupied the building and the land. This agreement is binding on the parties. However, the owner of the building and land also executed a real estate mortgage on the building in favor of another morgagee, Leung Yee. When the mortgagor was unable to pay, he too foreclosed and bought the building on sheriffs sale. He registered the sale but was aware that prior to the sheriffs sale, Strong Machinery had already bought the property.

Leung Yee now sued Strong Machinery for the ownership of the building? The Supreme Court ruled that since Leung Yee was in bad faith, the ownership of Strong Machinery was upheld. Query: What if Leung Yee did not know that of the prior sale of the building to Strong Machinery? Do you think, Leung Yee would have a better right? Art. 1544 A. First to Record in good faith B. If there was not inscription, first to possess in good faith. C. Oldest title Query: May a Real Estate Mortgage be constituted on the building separate from the land? Yes. A building is classified as a real property on its own under Art. 415. Query: May a Real Estate Mortgage be constituted on the building situated on a land of another? Yes. This is the case of Prudential Bank vs. Panis. Spouses Magcale obtained a loan from Prudential Bank in the amount of 70k and executed a Real Estate Mortgage on the over a 2 storey semi-concrete residential building with warehouse space , which at that time was still owned by the government. The REM was registered under Act 3344 with the Registry of Deeds. Subsequently, the spouses was granted miscellaneous sales patent and the title was registered in their name sometime April 1973. On May 1973, the spouses obtained an additional loan of 20k. Unable to pay, the bank foreclosed. The court declared the mortgages invalid and so the bank went up to the Supreme Court. The Supreme Court ruled that the 1st mortgage was valid however the 2nd mortgage was rendered void. Refer to notes PAGE 11. Rules on Buildings or house being treated as chattel: 01. Intention of the parties to the contract 02.Estoppel Party in chattel cannot question the validy of the chattel mortgage entered into. In the case of Tumalad vs. Vicencio, the defendants who executed a chattel mortgage on their house sought to question the validity of the chattel mortgage. Such cannot be allowed. 03.No third party is prejudiced. B. Machines (par 5) Machinery, receptacles, instruments or implements intended by the owner of the tenement for an industry or works which may be carried on in a building or a piece

of land, and which tend directly to meet the needs of the said industry or works. Movable equipment to be immobilized in contemplation of the law must first be "essential and principal elements" of an industry or works without which such industry or works would be "unable to function or carry on the industrial purpose for which it was established. Query: If the machines were placed by the lessee on a rented land but the machines were intended to meet the business of the lessee, would the machines be treated as personal or real property? Ans: Personal property. Query: Exception: In the case of Davao Sawmil Co. vs. Castillo, how were the machines treated? Ans. As Real Property Query: How come the machines in Davao Sawmill were treated as real property? Ans. Because of the provision in the Lease Contract and because the lessee was treated as an agent of the lessor. *The machines were treated as real property so that the real property tax may be increased since the value of the land increased with the machines thereat treated as real property. Whenever a question is posted as to whether or not to TAX, the doubt is usually resolved in favor of the right of the State to tax Meralco Securities Industrial Corporation vs. Central Board of Assessment Appeals G.R. No. L-46245 Meralcos pipeline was being subjected to realty tax in its pipeline system from Manila to Batangas. The pipes are embedded in the soil and are firmly and solidly welded together so as to preclude breakage or damage thereto and prevent leakage or seepage of the oil. The valves are welded to the pipes so as to make the pipeline system one single piece of property from end to end. In order to repair, replace, remove or transfer segments of the pipeline, the pipes have to be cold-cut by means of a rotary hard-metal pipe-cutter after digging or excavating them out of the ground where they are buried. In points where the pipeline traversed rivers or creeks, the pipes were laid beneath the bed thereof. Hence, the pipes are permanently attached to the land.

However, Meralco Securities notes that segments of the pipeline can be moved from one place to another as shown in the permit issued by the Secretary of Public Works and Communications which permit provides that the government reserves the right to require the removal or transfer of the pipes by and at the concessionaire's expense should they be affected by any road repair or improvement. It should be borne in mind that what are being characterized as real property are not the steel pipes but the pipeline system as a whole. Meralco Securities has apparently two pipeline systems Ruling: the pipeline was held to be real property. In another case also of Meralco, this involves two oil storage tanks on a lot in San Pascual Batangas which it leased from Caltex, Philippines. The tanks are within the Caltex refinery compound. They are used for storing fuel oil for Meralcos power plants. Read Meralco contends that the said oil storage tanks do not fall within any of the kinds of real property enumerated in article 415 of the Civil Code and, therefore, they cannot be categorized as realty by nature, by incorporation, by destination nor by analogy. Stress is laid on the fact that the tanks are not attached to the land and that they were placed on leased land, not on the land owned by Meralco. YES.-While the two storage tanks are not embedded in the land, they may, nevertheless, be considered as improvements on the land, enhancing its utility and rendering it useful to the oil industry. It is undeniable that the two tanks have been installed with some degree of permanence as receptacles for the considerable quantities of oil needed by Meralco for its operations.-For purposes of taxation, the term "real property" may include things which should generally be regarded as personal property. 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. Contrast this with the case of Board of Assessment Appeals vs. Meralco Electric Company. Wherein Meralcos steel towers were held not subject to realty tax. Why ? The steel towers were regarded as poles and under its franchise, Meralcos poles are exempted from taxation.