LOPEZ V. OROSA AND PLAZA THEATREG.R. Nos.

L10817-18 February 28, 1958

FACTS:
-Petitioner Lopez was engaged in doing business
under the trade name Lopez-Castelo Sawmill.
Orosa, a resident of the same province as Lopez,
invited the latter to make an investment in the
theatre business. Lopez declined to invest but
agreed to supply the lumber necessary for the
construction of the proposed theatre. They had
an oral agreement that Orosa would be
personally liable for any account that the said
construction might incur and that payment would
be on demand and not cash on delivery basis.
Lopez delivered the which was used for
construction amounting to P62,255.85. He was
paid only P20,848.50, leaving a balance of
P41,771.35.
The land on which the building was erected
previously owned by Orosa, was later on acquired
by the corporation.
. As Lopez was pressing Orosa for payment, the
latter and president of the corporation promised
to obtain a bank loan by mortgaging the
properties of the Plaza Theatre., out of which the
unpaid balance would be satisfied. But unknown
to Lopez, the corporation already obtained a loan
with Luzon Surety Company as surety, and the
corporation in turn executed a mortgage on the
land and building in favor of the said company as
counter-security.
Due to the persistent demands of Lopez, Orosa
executed a deed of assignment over his shares
of stock in the corporation.
As it remained unsettled, Lopez filed a case
against Orosa and Plaza theatre praying that they
be sentenced to pay him jointly and severally of
the unpaid balance; and in case defendants fail to
pay, the land and building owned by the
corporation be sold in public auction with the
proceeds be applied to the balance; or the shares
of stock be sold in public auction.
The lower court held that defendants were jointly
liable for the unpaid balance and Lopez thus
acquired the material mans lien over the
construction. The lien was merely confined to the
building and did not extend to the on which the
construction was made.
Lopez tried to secure a modification of the
decision, but was denied.
ISSUES:

Whether the material mans lien for the value of

the materials used in the construction of the
building attaches to said structure alone and
doesnt extend to the land on which the building
is adhered to.
Whether the lower court and CA erred in not
providing that the material mans liens is superior
to the mortgage executed in favor of surety
company not only on the building but also on the
land.
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.
ASSOCIATED INSURANCE and SURETY COMPANY,
INC., plaintiff,
vs.
ISABEL IYA, ADRIANO VALINO and LUCIA
VALINO, defendants.
ISABEL IYA, plaintiff,
vs.
ADRIANO VALINO, LUCIA VALINO and ASSOCIATED
INSURANCE and SURETY COMPANY.
INC., defendants.
Jovita L. de Dios for defendant Isabel Iya.
M. Perez Cardenas and Apolonio Abola for
defendant Associated Insurance and Surety Co.,
Inc.

FELIX, J.:
Adriano Valino and Lucia A. Valino, husband and
wife, were the owners and possessors of a house
of strong materials constructed on Lot No. 3,
Block No. 80 of the Grace Park Subdivision in
Caloocan, Rizal, which they purchased on
installment basis from the Philippine Realty
Corporation. On November 6, 1951, to enable her
to purchase on credit rice from the NARIC, Lucia
A. Valino filed a bond in the sum of P11,000.00
(AISCO Bond No. G-971) subscribed by the
Associated Insurance and Surety Co., Inc., and as
counter-guaranty therefor, the spouses Valino
executed an alleged chattel mortgage on the
aforementioned house in favor of the surety
company, which encumbrance was duly
registered with the Chattel Mortgage Register of
Rizal on December 6, 1951. It is admitted that at
the time said undertaking took place, the parcel
of land on which the house is erected was still
registered in the name of the Philippine Realty
Corporation. Having completed payment on the
purchase price of the lot, the Valinos were able to
secure on October 18, 1958, a certificate of title
in their name (T.C.T. No. 27884). Subsequently,
however, or on October 24, 1952, the Valinos, to
secure payment of an indebtedness in the
amount of P12,000.00, executed a real estate
mortgage over the lot and the house in favor of
Isabel Iya, which was duly registered and
annotated at the back of the certificate of title.
On the other hand, as Lucia A. Valino, failed to
satisfy her obligation to the NARIC, the surety
company was compelled to pay the same
pursuant to the undertaking of the bond. In turn,
the surety company demanded reimbursement
from the spouses Valino, and as the latter
likewise failed to do so, the company foreclosed
the chattel mortgage over the house. As a result
thereof, a public sale was conducted by the
Provincial Sheriff of Rizal on December 26, 1952,
wherein the property was awarded to the surety
company for P8,000.00, the highest bid received
therefor. The surety company then caused the
said house to be declared in its name for tax
purposes (Tax Declaration No. 25128).
Sometime in July, 1953, the surety company
learned of the existence of the real estate
mortgage over the lot covered by T.C.T. No.
26884 together with the improvements thereon;
thus, said surety company instituted Civil Case
No. 2162 of the Court of First Instance of Manila
naming Adriano and Lucia Valino and Isabel Iya,
the mortgagee, as defendants. The complaint
prayed for the exclusion of the residential house
from the real estate mortgage in favor of
defendant Iya and the declaration and recognition
of plaintiff's right to ownership over the same in
virtue of the award given by the Provincial Sheriff
of Rizal during the public auction held on
December 26, 1952. Plaintiff likewise asked the

Court to sentence the spouses Valino to pay said

surety moral and exemplary damages, attorney's
fees and costs. Defendant Isabel Iya filed her
answer to the complaint alleging among other
things, that in virtue of the real estate mortgage
executed by her co-defendants, she acquired a
real right over the lot and the house constructed
thereon; that the auction sale allegedly
conducted by the Provincial Sheriff of Rizal as a
result of the foreclosure of the chattel mortgage
on the house was null and void for noncompliance with the form required by law. She,
therefore, prayed for the dismissal of the
complaint and anullment of the sale made by the
Provincial Sheriff. She also demanded the amount
of P5,000.00 from plaintiff as counterclaim, the
sum of P5,000.00 from her co-defendants as
crossclaim, for attorney's fees and costs.
Defendants spouses in their answer admitted
some of the averments of the complaint and
denied the others. They, however, prayed for the
dismissal of the action for lack of cause of action,
it being alleged that plaintiff was already the
owner of the house in question, and as said
defendants admitted this fact, the claim of the
former was already satisfied.
On October 29, 1953, Isabel Iya filed another civil
action against the Valinos and the surety
company (Civil Case No. 2504 of the Court of First
Instance of Manila) stating that pursuant to the
contract of mortgage executed by the spouses
Valino on October 24, 1952, the latter undertook
to pay a loan of P12,000.00 with interest at 12%
per annum or P120.00 a month, which
indebtedness was payable in 4 years, extendible
for only one year; that to secure payment thereof,
said defendants mortgaged the house and lot
covered by T.C.T. No. 27884 located at No. 67
Baltazar St., Grace Park Subdivision, Caloocan,
Rizal; that the Associated Insurance and Surety
Co., Inc., was included as a party defendant
because it claimed to have an interest on the
residential house also covered by said mortgage;
that it was stipulated in the aforesaid real estate
mortgage that default in the payment of the
interest agreed upon would entitle the mortgagee
to foreclose the same even before the lapse of
the 4-year period; and as defendant spouses had
allegedly failed to pay the interest for more than
6 months, plaintiff prayed the Court to order said
defendants to pay the sum of P12,000.00 with
interest thereon at 12% per annum from March
25, 1953, until fully paid; for an additional sum
equivalent to 20% of the total obligation as
damages, and for costs. As an alternative in case
such demand may not be met and satisfied
plaintiff prayed for a decree of foreclosure of the
land, building and other improvements thereon to
be sold at public auction and the proceeds
thereof applied to satisfy the demands of plaintiff;
that the Valinos, the surety company and any

other person claiming interest on the mortgaged

properties be barred and foreclosed of all rights,
claims or equity of redemption in said properties;
and for deficiency judgment in case the proceeds
of the sale of the mortgaged property would be
insufficient to satisfy the claim of plaintiff.
Defendant surety company, in answer to this
complaint insisted on its right over the building,
arguing that as the lot on which the house was
constructed did not belong to the spouses at the
time the chattel mortgage was executed, the
house might be considered only as a personal
property and that the encumbrance thereof and
the subsequent foreclosure proceedings made
pursuant to the provisions of the Chattel
Mortgage Law were proper and legal. Defendant
therefore prayed that said building be excluded
from the real estate mortgage and its right over
the same be declared superior to that of plaintiff,
for damages, attorney's fees and costs.
Taking side with the surety company, defendant
spouses admitted the due execution of the
mortgage upon the land but assailed the
allegation that the building was included thereon,
it being contended that it was already
encumbered in favor of the surety company
before the real estate mortgage was executed, a
fact made known to plaintiff during the
preparation of said contract and to which the
latter offered no objection. As a special defense,
it was asserted that the action was premature
because the contract was for a period of 4 years,
which had not yet elapsed.
The two cases were jointly heard upon agreement
of the parties, who submitted the same on a
stipulation of facts, after which the Court
rendered judgment dated March 8, 1956, holding
that the chattel mortgage in favor of the
Associated Insurance and Surety Co., Inc., was
preferred and superior over the real estate
mortgage subsequently executed in favor of
Isabel Iya. It was ruled that as the Valinos were
not yet the registered owner of the land on which
the building in question was constructed at the
time the first encumbrance was made, the
building then was still a personality and a chattel
mortgage over the same was proper. However, as
the mortgagors were already the owner of the
land at the time the contract with Isabel Iya was
entered into, the building was transformed into a
real property and the real estate mortgage
created thereon was likewise adjudged as proper.
It is to be noted in this connection that there is no
evidence on record to sustain the allegation of
the spouses Valino that at the time they
mortgaged their house and lot to Isabel Iya, the
latter was told or knew that part of the
mortgaged property, i.e., the house, had
previously been mortgaged to the surety
company.

The residential building was, therefore, ordered

excluded from the foreclosure prayed for by
Isabel Iya, although the latter could exercise the
right of a junior encumbrance. So the spouses
Valino were ordered to pay the amount
demanded by said mortgagee or in their default
to have the parcel of land subject of the
mortgage sold at public auction for the
satisfaction of Iya's claim.
There is no question as to appellant's right over
the land covered by the real estate mortgage;
however, as the building constructed thereon has
been the subject of 2 mortgages; controversy
arise as to which of these encumbrances should
receive preference over the other. The decisive
factor in resolving the issue presented by this
appeal is the determination of the nature of the
structure litigated upon, for where it be
considered a personality, the foreclosure of the
chattel mortgage and the subsequent sale
thereof at public auction, made in accordance
with the Chattel Mortgage Law would be valid and
the right acquired by the surety company
therefrom would certainly deserve prior
recognition; otherwise, appellant's claim for
preference must be granted. The lower Court,
deciding in favor of the surety company, based its
ruling on the premise that as the mortgagors
were not the owners of the land on which the
building is erected at the time the first
encumbrance was made, said structure partook
of the nature of a personal property and could
properly be the subject of a chattel mortgage. We
find reason to hold otherwise, for as this Court,
defining the nature or character of a building, has
said:
. . . while it is true that generally, real estate
connotes the land and the building constructed
thereon, it is obvious that the inclusion of the
building, separate and distinct from the land, in
the enumeration of what may constitute real
properties (Art. 415, new Civil Code) could only
mean one thing that a building is byitself an
immovable property . . . Moreover, and in view of
the absence of any specific provision to the
contrary, a building is an immovable property
irrespective of whether or not said structure and
the land on which it is adhered to belong to the
same owner. (Lopez vs. Orosa, G.R. Nos. supra, p.
98).
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 the ownership of the land, would
create a situation where a permanent fixture
changes its nature or character as the ownership
of the land changes hands. In the case at bar, as
personal properties could only be the subject of a

chattel mortgage (Section 1, Act 3952) and as

obviously the structure in question is not one, the
execution of the chattel mortgage covering said
building is clearly invalid and a nullity. While it is
true that said document was correspondingly
registered in the Chattel Mortgage Register of
Rizal, this act produced no effect whatsoever for
where the interest conveyed is in the nature of a
real property, the registration of the document in
the registry of chattels is merely a futile act.
Thus, the registration of the chattel mortgage of
a building of strong materials produce no effect
as far as the building is concerned (Leung Yee vs.
Strong Machinery Co., 37 Phil., 644). Nor can we
give any consideration to the contention of the
surety that it has acquired ownership over the
property in question by reason of the sale
conducted by the Provincial Sheriff of Rizal, for as
this Court has aptly pronounced:
A mortgage creditor who purchases real
properties at an extrajudicial 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 (De la Riva vs. Ah Keo, 60 Phil., 899).
Wherefore the portion of the decision of the lower
Court in these two cases appealed from holding
the rights of the surety company, over the
building superior to that of Isabel Iya and
excluding the building from the foreclosure
prayed for by the latter is reversed and appellant
Isabel Iya's right to foreclose not only the land
but also the building erected thereon is hereby
recognized, and the proceeds of the sale thereof
at public auction (if the land has not yet been
sold), shall be applied to the unsatisfied judgment
in favor of Isabel Iya. This decision however is
without prejudice to any right that the Associated
Insurance and Surety Co., Inc., may have against
the spouses Adriano and Lucia Valino on account
of the mortgage of said building they executed in
favor of said surety company. Without
pronouncement as to costs. It is so ordered.
Paras, C.J., Bengzon, Montemayor, Reyes, A.,
Bautista Angelo, Labrador, Concepcion, Reyes,
J.B.L., and Endencia, JJ., concur.
BICERRA v TENEZA G.R. No. L-16218 November
29, 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.
LEUNG YEE VS STRONG MACHINERY
Multiple Sale to Different Vendees Real vs
Personal Property
In 1913, Compania Agricola Filipina was indebted
to two personalities: Leung Yee and Strong
Machinery Co. CAF purchased some rice cleaning
machines from SMCo. CAF installed the machines
in a building. As security for the purchase price,
CAF executed a chattel mortgage on the rice
cleaning machines including the building where
the machines were installed. CAF failed to pay
SMCo, hence the latter foreclosed the mortgage
the same was registered in the chattel mortgage
registry.
CAF also sold the land (where the building was
standing) to SMCo. SMCo took possession of the
building and the land.
On the other hand, Yee, another creditor of CAF
who engaged in the construction of the building,
being the highest bidder in an auction conducted
by the sheriff, purchased the same building
where the machines were installed. Apparently
CAF was also executed a chattel mortgage in
favor Yee. Yee registered the sale in the registry
of land. Yee was however aware that prior to his
buying, the property has been sold in favor of
SMCo evidence is the chattel mortgage already
registered by SMCo.
ISSUE: Who is the owner of the building?
HELD: The SC ruled that SMCo has a better right
to the contested property. Yee cannot be
regarded as a buyer in good faith as he was
already aware of the fact that there was a prior
sale of the same property to SMCo.
The SC also noted that the Chattel Mortgage Law
expressly contemplates provisions for chattel
mortgages which only deal with personal
properties. The fact that the parties dealt the
building as if its a personal property does not
change the nature of the thing. It is still a real
property. Its inscription in the Chattel Mortgage
registry does not modify its inscription the
registry of real property.
STANDARD OIL CO. OF NEW YORK V. JARAMILLO
44 SCRA 630

FACTS:
De la Rosa was the lessee of a piece of land, on
which a house she owns was built. She
executed a chattel mortgage in favor of the
petitionerpurporting the leasehold interest in
the land and the ownership of house.
After such, the petitioner moved for its
registration with the Register of Deeds, for the
purpose of having the same recorded in the book
of record of chattel mortgages. After
examination, the respondent was in the
opinion that the properties were not subjects of a
chattel mortgage.
HELD:
Position taken by the respondent is
untenable. His duties are mainly ministerial
only in nature and no law confers upon him
any judicial or quasi-judicial power.
Generally, he should accept the qualification
of the property adopted by the person
who presents the instrument for
registration and should place the instrument on
record, upon payment of the proper fee, leaving
the effects of registration to be determined by
the court if such question should arise for legal
determination.
The Civil Code supplies no absolute criterion in
discriminating between real property and
personal property for purposes of the
application of the Chattel Mortgage Law. The
articles state general doctrines, nonetheless, it
must not be forgotten that under given
conditions, property may have
character different from that imputed to it in
the said articles. It is undeniable that the
parties in a contract may by agreement
treat as personal property that which by nature
would be real property.
Mindanao Bus Co. vs. City Assessor and Treasurer
G.R. No. L-17870. September 29, 1962.
Labrador, J.
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 petitioners
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 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 assessors 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 petitioners
business of transporting passengers and cargoes
by motor trucks. They are merely incidentals
acquired as movables and used only for
expediency to facilitate and/or improve its
service. 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.
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.
Board of Assessment Appeals, Q.C. vs Meralco
10 SCRA 68
GR No. L-15334
January 31, 1964

FACTS
On November 15, 1955, the QC City Assessor
declared the MERALCO's steel towers subject to
real property tax. After the denial of MERALCO's
petition to cancel these declarations, an appeal
was taken to the QC Board of Assessment
Appeals, which required respondent to pay
P11,651.86 as real property tax on the said steel
towers for the years 1952 to 1956.
MERALCO paid the amount under protest, and
filed a petition for review in the Court of Tax
Appeals (CTA) which rendered a decision ordering
the cancellation of the said tax declarations and
the refunding to MERALCO by the QC City
Treasurer of P11,651.86.
ISSUE
Are the steel towers or poles of the MERALCO
considered real or personal properties?
HELD
Pole long, comparatively slender, usually
cylindrical piece of wood, timber, object of metal
or the like; an upright standard to the top of
which something is affixed or by which something
is supported.
MERALCO's steel supports consists of a
framework of 4 steel bars/strips which are bound
by steel cross-arms atop of which are cross-arms
supporting 5 high-voltage transmission wires, and
their sole function is to support/carry such wires.
The exemption granted to poles as quoted
from Part II, Par.9 of respondent's franchise is
determined by the use to which such poles are
dedicated.
It is evident that the word poles, as used in Act
No. 484 and incorporated in the petitioner's
franchise, should not be given a restrictive and
narrow interpretation, as to defeat the very object
for which the franchise was granted. The poles
should be taken and understood as part of
MERALCO's electric power system for the
conveyance of electric current to its consumers.
Art. 415 of the NCC classifies the following as
immovable property:
(1) Lands, buildings, roads and constructions of
all kinds adhered to the soil;
xxx
(3) Everything attached to an immovable in a
fixed manner, in such a way that it cannot be
separated therefrom without breaking the
material or deterioration of the object;
xxx
(5) Machinery, receptacles, instruments or
implements intended by the owner pf the
tenement for an industry ot works which may be
carried on in a building or on a piece of land, and
which tend directly to meet the needs of the said
industry or works;
Following these classifications, MERALCO's steel
towers should be considered personal property. It
should be noted that the steel towers:

(a) are neither buildings or constructions adhered

to the soil;
(b) are not attached to an immovable in a fixed
manner they can be separated without breaking
the material or deterioration of the object;
are not machineries, receptacles or
instruments, and even if they are, they are not
intended for an industry to be carried on in the
premises.
GR L-55729, 28 March 1983
FACTS:
A land belonging to Antonio Punzalan was
foreclosed by the Philippine National Bank (PNB)
Tarlac, Branch in failure of the former to pay the
mortgaged fee amounting to P10,000.00. Since
PNB was the highest bidder, the land was
awarded to PNB.
In 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, who, by virtue 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 involve
ownership of or title to property. It was denied by
the court for lack of merit. Hence, a petition for
certiorari was filed by the petitioner.
ISSUE:
Whether or not the the action is a real action and
thus, should be filed in the court where the
property is located
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 fundamental and
prime 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.
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.
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.

Judge issued a writ of replevin directing its sheriff

to seize and deliver the machineries and
equipment to PCI Leasing after 5 days and upon
the payment of the necessary expenses.
The sheriff proceeded to petitioner's factory,
seized one machinery, with word that he would
return for other machineries.
Petitioner (Sergs Products) filed a motion for
special protective order to defer enforcement of
the writ of replevin.
PCI Leasing opposed the motion on the ground
that the properties were still personal and
therefore can still be subjected to seizure and writ
of replevin.
Petitioner asserted that properties sought to be
seized were immovable as defined in Article 415
of the Civil Code.
Sheriff was still able to take possession of two
more machineries
In its decision on the original action for certiorari
filed by the Petitioner, the appellate court, Citing
the Agreement of the parties, held that the
subject machines were personal property, and
that they had only been leased, not owned, by
petitioners; and ruled that the "words of the
contract are clear and leave no doubt upon the
true intention of the contracting parties."

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.

ISSUE: Whether or not the machineries became

real property by virtue of immobilization.

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.

Article 415 (5) of the Civil Code provides that

machinery, receptacles, instruments or
implements intended by the owner of the
tenement for an industry or works which may be
carried on in a building or on a piece of land, and
which tend directly to meet the needs of the said
industry or works

Sergs Products, Inc. vs. PCI Leasing G.R. No.

137705. August 22, 2000
FACTS:
PCI Leasing and Finance filed a complaint for sum
of money, with an application for a writ of
replevin.

Ruling:
Petitioners contend that the subject machines
used in their factory were not proper subjects of
the Writ issued by the RTC, because they were in
fact real property.
Writ of Replevin: Rule 60 of the Rules of Court
provides that writs of replevin are issued for the
recovery of personal property only.

In the present case, the machines that were the

subjects of the Writ of Seizure were placed by
petitioners in the factory built on their own
land.They were essential and principal elements
of their chocolate-making industry.Hence,
although each of them was movable or personal
property on its own, all of them have become
immobilized by destination because they are
essential and principal elements in the industry.
However, contracting parties may validly
stipulate that a real property be considered as

personal. After agreeing to such stipulation, they

are consequently estopped from claiming
otherwise.Under the principle of estoppel, a party
to a contract is ordinarily precluded from denying
the truth of any material fact found therein.
Section 12.1 of the Agreement between the
parties provides The PROPERTY is, and shall at
all times be and remain, personal property
notwithstanding that the PROPERTY or any part
thereof may now be, or hereafter become, in any
manner affixed or attached to or embedded in, or
permanently resting upon, real property or any
building thereon, or attached in any manner to
what is permanent.
The machines are personal property and they are
proper subjects of the Writ of Replevin
MANARANG 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 doesnt
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 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, tosecure 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.
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
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 vs Central Board of Assessment Appeals &

City Assessor of Pasay
GR No. L-50466
May 31, 1982
This case is about the realty tax on machinery
and equipment installed by Caltex (Philippines)
Inc., in its gas stations located on leased land.
FACTS
Caltex loaned machines and equipment to gas
station operators under an appropriate lease
agreement or receipt. The lease contract
stipulated that upon demand, the operators shall
return to Caltex the machines and equipment in
good condition as when received, ordinary wear
and tear excepted.
The lessor of the land, where the gas station is
located, does not become the owner of the
machines and equipment installed therein. Caltex
retains the ownership thereof during the term of
the lease.
PHILIPPINE REFINING COMPANY V. JARQUE
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
Jarques 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.
PIANSAY V. DAVID
As it may be true that the parties who agreed to
attach the house in a chattel mortgage may be
bound thereto under the doctrine of estoppel, the
same does not bind third persons.
FACTS:
Conrado S. David received a loan of P3,000 with
interest at 12% per annum from Claudia B. Vda.
de Uy Kim, one of the plaintiffs, and to secure the
payment of the same, Conrado S. David executed
a chattel mortgage on a house situated at 1259
Sande Street, Tondo, Manila. The mortgage was
foreclosed and was sold to Kim to satisfy the
debt. 2 years later after the foreclosure, the
house was sold by Kim to Marcos Magubat. The
latter then filed to collect the loan from David and
to declare the sale issued by Kim in favour of
Piansay null and void. (It appears that Kim sold
the house to two people, namely Piansay and
Magubat) The trial court approved of the
collection of the loan from David but dismissed
the complaint regarding the questioned sale
between Kim and Piansay, declaring the latter as
rightful owner of the house and awarding
damages to him. CA reversed the decision
making David the rightful owner and ing him and
his co-defendant, Mangubat, to levy the house.
Now Petitioners are trying to release the said
property from the aforementioned levy by
claiming that Piansay is the rightful owner of the
house.

ISSUE:
Whether or not the sale between Kim and Piansay
was valid?
RULING:
Since it is a rule in our law that buildings and
constructions are regarded as mere accesories to
the land (following the Roman maxim omne quod
solo inaedificatur solo credit) it is logical that said
accessories should partaked of the nature of the
principal thing, which is the land forming, as they
do, but a single object (res) with it in
contemplation of law. A mortgage creditor who
purchases real properties at an extra-judicial
foreclosure sale thereof by virtue of a chattel
mortgage constituted in his favor, which
mortgage has been declared null and void with
respect to said real properties acquires no right
thereto by virtue of said sale Thus, Mrs. Uy Kim
had no right to foreclose the alleged chattel
mortgage constituted in her favor, because it was
in reality a mere contract of an unsecured loan. It
follows that the Sheriff was not authorized to sell
the house as a result of the foreclosure of such
chattel mortgage. And as Mrs. Uy Kim could not
have acquired the house when the Sheriff sold it
at public auction, she could not, in the same
token, it validly to Salvador Piansay. Conceding
that the contract of sale between Mrs. Uy Kim
and Salvador Piansay was of no effect, we cannot
nevertheless set it aside upon instance of
Mangubat because, as the court below opined, he
is not a party thereto nor has he any interest in
the subject matter therein, as it was never sold or
mortgaged to him At any rate, regardless of the
validity of a contract constituting a chattel
mortgage on a house, as between the parties to
said contract, the same cannot and does not bind
third persons, who are not parties to the
aforementioned contract or their privies. As a
consequence, the sale of the house in question in
the proceedings for the extrajudicial foreclosure
of said chattel mortgage, is null and void insofar
as defendant Mangubat is concerned, and did not
confer upon Mrs. Uy Kim, as buyer in said sale,
any dominical right in and to said house, so that
she could not have transmitted to her assignee,
plaintiff Piansay any such right as against
defendant Mangubat. In short plaintiffs have no
cause of action against the defendants herein.
Luis Marcos Laurel vs Hon. Zeus Abrogar
GR No. 155076
January 13, 2009
FACTS
Laurel was charged with Theft under Art. 308 of
the RPC for allegedly taking, stealing, and
using PLDT's international long distance calls by
conducting International Simple Resale (ISR) a
method of outing and completing international
long-distance calls using lines, cables, antennae,

and/or air wave frequency which connect directly

to the local/domestic exchange facilities of the
country where the call is destined. PLDT alleged
that this service was stolen from them using their
own equipment and caused damage to them
amounting to P20,370,651.92.
PLDT alleges that the international calls and
business of providing telecommunication or
telephone service are personal properties capable
of appropriation and can be objects of theft.
ISSUE
WON Laurel's act constitutes Theft
HELD
Art.308, RPC: Theft is committed by any person
who, with intent to gain but without
violence against, or intimidation of persons nor
force upon things, shall take personal property of
another without the latters consent.
Elements of Theft under Art.308, RPC:
There be taking of Personal Property;
Said Personal Property belongs to another;
Taking be done with Intent to Gain;
Taking be done without the owners consent;
No violence against, or intimidation of, persons
or force upon things
Personal Property anything susceptible of
appropriation and not included in Real Property
Thus, the term personal property as used
in Art.308, RPC should be interpreted in the
context of the Civil Code's definition of real and
personal property. Consequently, any personal
property, tangible or intangible, corporeal or
incorporeal, capable of appropriation may be the
subject of theft (*US v Carlos; US v Tambunting;
US v Genato*), so long as the same is not
included in the enumeration of Real Properties
under the Civil Code.
The only requirement for personal property to
capable of theft, is that it be subject to
appropriation.
Art. 416 (3) of the Civil Code deems Forces of
Nature which are brought under the control of
science, as Personal Property.
The appropriation of forces of nature which are
brought under control by science can be achieved
by tampering with any apparatus used for
generating or measuring such forces of nature,
wrongfully redirecting such forces of nature from
such apparatus, or using any device to
fraudulently obtain such forces of nature.
In the instant case, the act of conducting ISR
operations by illegally connecting various
equipment or apparatus to PLDTs telephone
system, through which petitioner is able to resell
or re-route international long distance calls using
PLDTs facilities constitute Subtraction.
Moreover, interest in business should be
classified as personal property since it is capable
of appropriation, and not included in the
enumeration of real properties.

Therefore, the business of providing

telecommunication or telephone service are
personal property which can be the object of theft
under Art. 308 of the RPC. The act of engaging in
ISR is an act of subtraction penalized under the
said article.
While international long-distance calls take the
form of electrical energy and may be considered
as personal property, the said long-distance calls
do not belong to PLDT since it could not have
acquired ownership over such calls. PLDT merely
encodes, augments, enhances, decodes and
transmits said calls using its complex
communications infrastructure and facilities.
Since PLDT does not own the said telephone calls,
then it could not validly claim that such telephone
calls were taken without its consent.
What constitutes Theft is the use of the PLDT's
communications facilities without PLDT's consent.
The theft lies in the unlawful taking of the
telephone services & businesses.
The Amended Information should be amended to
show that the property subject of the theft were
services and business of the offended party.
The City Assessor of Pasay City characterized the
said items of gas station equipment and
machinery as taxable realty. However, the City
Board of Tax Appeals ruled that they are
personalty. The Assessor appealed to the Central
Board of Assessment Appeals.
The Board held on June 3, 1977 that the said
machines are real property within the meaning of
Ses. 3(k) & (m) and 38 of the Real Property Tax
Code, PD 464, and that the Civil Code definitions
of real and personal property in Articles 415 and
416 are not applicable in this case.
ISSUE
WON the pieces of gas station equipment and
machinery permanently affixed by Caltex to its
gas station and pavement should be subject to
realty tax.
HELD
Sec.2 of the Assessment Law provides that the
realty tax is due on real property, including land,
buildings, machinery, and other
improvements not specifically exempted in Sec.3
thereof.
Sec.3 of the Real Property Tax Code provides the
following definitions:
k) Improvements a valuable addition made to
property or an amelioration in its conditionmore
than mere repairs or replacement of waste
intended to enhance its value, beauty, or utility
m) Machinery machines, mechanical
contrivances, instruments, appliances, and
apparatus attached to the real estateincludes
the physical facilities available for production
installation and appurtenant service facilities.
The subject machines and equipment are taxable
improvement and machinery within the meaning

of the Assessment Law and the Real Property Tax

Code, because the same are necessary to the
operation of the gas station and have been
attached/affixed/embedded permanently to the
gas station site.
Improvements on land are commonly taxed as
realty even though they might be considered
personalty. It is a familiar phenomenon to see
things classified as real property for purposes of
taxation which on general principle might be
considered personal property (Standard Oil Co.,
vs Jaramillo, 44 PHIL 630).
This case is also easily distinguishable from Board
of Assessment Appeals vs. Manila Electric Co.,
(119 Phil. 328) where Meralco's steel towers were
exempted from taxation. The steel towers were
considered personalty because they were
attached to square metal frames by means of
bolts and could be moved from place to place
when unscrewed and dismantled.
Nor are Caltex's gas station equipment and
machinery the same as the tools and equipment
in the repair shop of a bus company which were
held to be personal property not subject to realty
tax (Mindanao Bus Co. vs. City Assessor, 116 Phil.
501).
The Central Board of Assessment Appeals did not
commit a grave abuse of discretion in upholding
the City Assessor's imposition of the realty tax on
Caltex's gas station and equipment.