PROPERTY NAVARRO V PINEDA
A. CONCEPT FACTS:
EVANGELISTA V ABAD
FACTS:
On October 9, 1954 a co-partnership was formed under
the name of "Evangelista & Co." On June 7, 1955 the Articles of
Co-partnership were amended so as to include herein
respondent, Estrella Abad Santos, as industrial partner, with
herein petitioners Domingo C. Evangelista, Jr., Leonarda Atienza
Abad Santos and Conchita P. Navarro, the original capitalist
partners, remaining in that capacity, with a contribution of
P17,500 each
On December 17, 1963 herein respondent filed suit
against the three other partners, alleging that the partnership,
which was also made a party-defendant, had been paying
dividends to the partners except to her; and that
notwithstanding her demands the defendants had refused and
continued to refuse to let her examine the partnership books or
to give her information regarding the partnership affairs or to
pay her any share in the dividends declared by the partnership
The defendants, in their answer, denied ever having
declared dividends or distributed profits of the partnership;
denied likewise that the plaintiff ever demanded that she be
allowed to examine the partnership books; and by way of
affirmative defense alleged that the amended Articles of Co-
partnership did not express the true agreement of the parties,
which was that the plaintiff was not an industrial partner; that
she did not in fact contribute industry to the partnership.
ISSUE:
Whether Abad Santos is entitled to see the partnership
books because she is an industrial partner in the partnership
HELD:
Yes, Abad Santos is entitled to see the partnership books.
The Supreme Court ruled that according to
ART. 1299. Any partner shall have the right to a formal account
as to partnership affairs:
(1)If he is wrongfully excluded from the partnership business
or possession of its property by his co-partners;
(2)If the right exists under the terms of any agreement;
(3)As provided by article 1807;
(4)Whenever other circumstances render it just and
reasonable."
In the case at hand, the company is estopped from denying
Abad Santos as an industrial partner because it has been 8
years and the company never corrected their agreement in
order to show their true intentions. The company never
bothered to correct those up until Abad Santos filed a
complaint.
Pineda and his mother executed real estate and chattel
mortgages in favor of Navarro, to secure a loan they got from
the latter. The REM covered a parcel of land owned by the
mother while the chattel mortgage covered a residential
house. Due to the failure to pay the loan, they asked
for extensions to pay for the loan. On the second extension,
Pineda executed a PROMISE wherein in case of default in
payment, he wouldn’t ask for any additional extension and
there would be no need for any formal demand. In spite of this,
they still failed to pay.
Navarro then filed for the foreclosure of the mortgages. The
court decided in his favor.
ISSUE:
W/N the deed of real estate mortgage and chattel mortgage
appended to the complaint is valid notwithstanding the fact
that the house was made subject of chattel mortgage for the
reason that it is erected on a land that belongs to a third person.
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.
MANARANG V OFILEDA
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.
ISSUE:
W/N the fact that the parties entering into a contract regarding
a house gave said property the consideration of personal
property in their contract, binding the sheriff in advertising the
property's sale at public auction as personal property.
HELD:
There is no question that a building of mixed materials may be
a subject of chattel mortgage, in which case it is considered as
between the parties as personal property.
The mere fact that a house was the subject of chattel mortgage
and was considered as personal property by the parties
doesn’t make the said house personal property for purposes
of the notice to be given for its sale in public auction. It is real
property within the purview of Rule 39, Section 16 of the Rules
of Court as it has become a permanent fixture on the land,
which is real property.
B. CLASSIFICATION MOVABLE & IMMOVABLE
DAVAO SAWMILL V CASTILLO
FACTS:
Petitioner is the holder of a lumber concession. It operated a
sawmill on a land, which it doesn’t own. Part of the lease
agreement was a stipulation in which after the lease agreement,
all buildings and improvements would pass to the ownership of
the lessor, which would not include machineries and
accessories. In connection to this, petitioner had in its
sawmill machineries and other equipment wherein some were
bolted in foundations of cement.
Issue:
Whether or not the trial judge erred in finding that the subject
properties are personal in nature.
HELD:
The machinery must be classified as personal property.
The lessee placed the machinery in the building erected on land
belonging to another, with the understanding that the
machinery was not included in the improvements which would
pass to the lessor on the expiration of the lease agreement.
The lessee also treated the machinery as personal
property in executing chattel mortgages in favor of third
persons. The machinery was levied upon by the sheriff as
personalty pursuant to a writ of execution obtained without
any protest being registered.
Furthermore, machinery only becomes immobilized when
placed in a plant by the owner of the property or plant, but not
when so placed by a tenant, usufructuary, or any person
having temporary right, unless such person acted as the
agent of the owner.
LOPEZ V OROSA
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 man’s lien
over the construction. The lien was merely confined to the
building and did not extend to the on which the construction
was made.
Lopez tried to secure a modification of the decision, but was
denied.
ISSUES:
Whether the material man’s lien for the value of the materials
used in the construction of the building attaches to said
structure alone and doesn’t extend to the land on which the
building is adhered to.
Whether the lower court and CA erred in not providing that the
material mans liens is superior to the mortgage executed in
favor of surety company not only on the building but also on the
land.
HELD:
-The material man’s lien could be charged only to the building
for which the credit was made or which received the benefit of
refection, the lower court was right in, holding at the interest of
the mortgagee over the land is superior and cannot be made
subject to the material man's lien.
-Generally, real estate connotes the land and the building
constructed thereon, it is obvious that the inclusion of the
building in the enumeration of what may constitute real
properties could only mean one thing—that a building is by
itself an immovable property.
-In the absence of any specific provision to the contrary, a
building is an immovable property irrespective of whether or
not said structure and the land on which it is adhered to belong
to the same owner.
-The law gives preference to unregistered refectionary credits
only with respect to the real estate upon which the refectionary
or work was made.
- 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.
CALTEX V BOARD OF ASSESSMENT APPEALS
Facts:
This case is about the realty tax on machinery and equipment
installed by Caltex (Philippines) Inc. in its gas stations located
on leased land. The machines and equipment consists of
underground tanks, elevated tank, elevated water tanks, water
tanks, gasoline pumps, computing pumps, water pumps, car
washer, car hoists, truck hoists, air compressors and tireflators.
The city assessor of Pasay City characterized the said items of
gas station equipment and machinery as taxable realty. The
realty tax on said equipment amounts to P4,541.10 annually (p.
52, Rollo). The city board of tax appeals ruled that they are
personalty. The assessor appealed to the Central Board of
Assessment Appeals. The Board, which was in its decision of
June 3, 1977 that the said machines and equipment are real
property under the Real Property Tax Code, Presidential Decree
No. 464, which took effect on June 1, 1974. The decision was
reiterated by the Board in its resolution of January 12, 1978,
denying Caltex's motion for reconsideration, a copy of which
was received by its lawyer on April 2, 1979.On May 2, 1979
Caltex filed this certiorari petition wherein it prayed for the
setting aside of the Board's decision and for a declaration that t
he said machines and equipment are personal property not
subject to realty tax. We hold that the said equipment and
machinery, as appurtenances to the gas station building or shed
owned by Caltex (as to which it is subject to realty tax) and
which fixtures are necessary to the operation of the gas station,
for without them the gas station would be useless, and which
have been attached or affixed permanently to the gas station
site or embedded therein, are taxable improvements and
machinery within the meaning of the Assessment Law and the
Real Property Tax Code. Caltex invokes the rule that machinery
which is movable in its nature only becomes immobilized when
placed in a plant by the owner of the property or plant but not
when so placed by a tenant, a usufructuary, or any person
having only a temporary right, unless such person acted as the
agent of the owner (Davao Saw Mill Co. vs. Castillo, 61 Phil
709).
Issue:
Whether the pieces of gas station equipment and machinery
already enumerated are subject to realty tax
Held:
Yes. This issue has to be resolved primarily under the
provisions of the Assessment Law and the Real Property Tax
Code. Under, Sec. 38 of the said law: “Machinery shall embrace
machines, mechanical contrivances, instruments, appliances
and apparatus attached to the real estate. It includes the
physical facilities available for production, as well as the
installations and appurtenant service facilities, together with
all other equipment designed for or essential to its
manufacturing, industrial or agricultural purposes.” The
equipment and machinery, are considered as appurtenances to
the gas station building or shed owned by Caltex (as to which it
is subject to realty tax) and which fixtures are necessary to the
operation of the gas station, for without them the gas station
would be useless, and which have been attached or affixed
permanently to the gas station site or embedded therein, are
taxable improvements and machinery within the meaning of
the Assessment Law and the Real Property Tax Code.
Improvements on land are commonly taxed as realty even
though for some purposes they might be considered personalty.
"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"
BOARD OF ASSESSMENT APPEALS V MERALCO
Facts:
In 1902, Philippine Commission enacted Act No. 484 which
authorized the Municipal Board of Manila to grant a franchise
to construct, maintain and operate an electric street railway
and electric light, heat and power system in the City of Manila
and its suburbs to the person or persons making the most
favorable bid. Charles M. Swift was awarded the said franchise,
the terms and conditions of which were embodied in Ordinance
No. 44 in 1903.
In 1955, petitioner City Assessor of Quezon City declared the
aforesaid steel towers for real property tax under Tax
declaration Nos. 31992 and 15549. After denying respondent's
petition to cancel these declarations, an appeal was taken by
respondent to the Board of Assessment Appeals of Quezon City,
which required respondent to pay the amount of P11,651.86 as
real property tax on the said steel towers for the years 1952 to
1956. Respondent paid the amount under protest, and filed a
petition for review in the CTA which rendered a decision on
December 29, 1958, ordering the cancellation of the said tax
declarations and the petitioner City Treasurer of Quezon City to
refund to the respondent the sum of P11,651.86. The motion
for reconsideration having been denied, on April 22, 1959, the
instant petition for review was filed.
Issue:
Whether the aforesaid steel towers is a real property, making
petitioners liable for real property tax.

Ruling:
In upholding the cause of respondents, the CTA held that: (1)
the steel towers come within the term "poles" which are
declared exempt from taxes under part II paragraph 9 of
respondent's franchise; (2) the steel towers are personal
properties and are not subject to real property tax; and (3) the
City Treasurer of Quezon City is held responsible for the refund
of the amount paid. These are assigned as errors by the
petitioner in the brief.
Even if steel supports or towers in question are not embraced
within the term poles, the logical question posted is whether
they constitute real properties, so that they can be subject to a
real property tax. The tax law does not provide for a definition
of real property neither does it fall in any of the definitions of
real property in Art. 415 of the Civil Code.
SIBAL V VALDEZ
Facts:
On 11 May 1923, the deputy-sheriff of the Province of Tarlac, by
virtue of a writ of execution in civil case 20203 of the CFI
Manila (Macondray & Co., Inc. vs. Leon Sibal), levied an
attachment on Leon Sibal’s 8 parcels of land for the sum of
P4,273.93. 2 months later, or on 30 July 1923, Macondray & Co.,
Inc., bought said parcels of land, at the auction held by the
sheriff of the Province of Tarlac. Within 1 year from the sale of
said parcels of land, or on 24 September 1923, Sibal paid
P2,000 to Macondray for the account of the redemption price of
said parcels of land, without specifying which said amount was
to be applied. The redemption price of the parcels was reduced
to P2,579.97 including interest.
On 29 April 1924, the deputy sheriff of the Province of Tarlac,
by virtue of a writ of execution in civil case 1301 of the
Province of Pampanga (Emiliano J. Valdez vs. Leon Sibal 1.º),
attached the personal property of Sibal located in Tarlac, among
which was included the sugar cane in question in the 7 parcels
of land described in the complaint. He also attached Sibal’s real
property in Tarlac, including rights, interest and participation
therein, which consists of 11 parcels of land and a house and
camarin situated in one of said parcels. On 9-10 May 1924, the
deputy sheriff sold at public auction said personal properties to
Emiliano J. Valdez, who paid therefor the sum of P1,550, of
which P600 was for the sugar cane. On 25 June 1924, 8 of the
11 parcels, including the camarin and the house were bought by
Valdez at the auction held by the sheriff for the sum of P12,200.
The 3 remaining parcels were released from attachment by
virtue of claims presented by Cayugan and Tizon. On the same
date, Macondray sold and conveyed to Valdezfor P2,579.97 all
of its rights and interest in the 8 parcels of land acquired by it in
connection with civil case 20203 of the CFI Manila.
On 14 December 1924, action was commenced in the CFI of the
Province of Tarlac. The plaintiff alleged that the deputy sheriff
of Tarlac Province attached and sold to Valdezthe sugar cane
planted by the plaintiff and his tenants on 7 parcels of land, and
that within 1 year from the date of the attachment and sale the
plaintiff ordered to redeem said sugar cane and tendered to
Valdezthe amount sufficient to cover the price paid by the latter,
with taxes and interests, and that Valdez refused to accept the
money and return the sugar cane to the plaintiff. After hearing
and on 28 April 1926, the judge (Lukban) rendered judgment in
favor of the defendant holding that the sugar cane in question
was personal property and, as such, was not subject to
redemption; among others. Hence, the appeal.
Paragraph 2, Article 334 of the Civil Code interpreted by the
Tribunal Supremo de Espana as that growing crops may be
considered as personal property
Sugar cane may come under the classification of real property
as "ungathered products" in paragraph 2 of article 334 of the
Civil Code, which enumerates as real property as "Trees, plants,
and ungathered products, while they are annexed to the land or
form an integral part of any immovable property." That article,
however, has received in recent years an interpretation by the
Tribunal Supremo de Espanñ a, which holds that, under certain
conditions, growing crops may be considered as personal
property. (Decision of March 18, 1904, vol. 97, Civil
Jurisprudence of Spain.) Thus, under Spanish authorities,
pending fruits and ungathered products may be sold and
transferred as personal property. Also, the Supreme Court of
Spain, in a case of ejectment of a lessee of an agricultural land,
held that the lessee was entitled to gather the Products
corresponding to the agricultural year because said fruits did
not go with the land but belonged separately to the lessee. And
further, under the Spanish Mortgage Law of 1909, as amended,
the mortgage of a piece of land does not include the fruits and
products existing thereon, unless the contract expressly
provides otherwise.
Manresa admits growing crops as personal property
Manresa, the eminent commentator of the Spanish Civil Code,
in discussing section 334 of the Civil Code, in view of the recent
decisions of the Supreme Court of Spain, admits that growing
crops are sometimes considered and treated as personal
property.
Paragraph 2, Article 344 of the Civil Code corresponds to Article
465 of the Civil Code of Louisiana
Article 465 of the Civil Code of Louisiana, which corresponds to
paragraph 2 of article 334 of the Civil Code, provides: "Standing
crops and the fruits of trees not gathered, and trees before they
are cut down, are likewise immovable, and are considered as
part of the land to which they are attached."
Louisiana jurisprudence: Growing crop’s mobilization by
anticipation
Standing crops and the fruits of trees not gathered and trees
before they are cut down are considered as part of the land to
which they are attached,' but the immovability provided for is
only one in abstracto and without reference to rights on or to
the crop acquired by others than the owners of the property to
which the crop is attached. The existence of a right on the
growing crop is a mobilization by anticipation, a gathering as it
were in advance, rendering the crop movable quoad the right
acquired therein. Jurisprudence recognizes the possible
mobilization of the growing crop. (Citizens' Bank vs. Wiltz, 31
La. Ann., 244; Porche vs. Bodin, 28 La. Ann., 761; Sandel vs.
Douglass, 27 La. Ann., 629; Lewis vs. Klotz, 39 La. Ann., 267.; as
cited in Lumber Co. vs. Sheriff and Tax Collector [106 La., 418],
c.f. Citizen’s Bankv. Wiltz [31 La. Ann., 244])
 mortgage executed in pursuance thereof shall be termed a
Louisiana jurisprudence: Standing crops as immovable or chattel mortgage." Section 7 in part provides that "If growing
movable based on owned and leased premises; seizure by crops be mortgaged the mortgage may contain an agreement
creditors stipulating that the mortgagor binds himself properly to tend.
Standing crops are considered as immovable and as part of the care for and protect the crop while growing." The above
land to which they are attached, and the fruits of an immovable provisions of Act 1508 were enacted on the assumption that
gathered or produced while it is under seizure are considered "growing crops" are personal property.
as making part thereof, and inure to the benefit of the person
making the seizure. But the evident meaning of these articles is, Personal property includes ungathered products; Paragraph 2,
where the crops belong to the owner of the plantation, they Article 334 of the Civil Code modified by Act 190 and 1508
form part of the immovable, and where it is seized, the fruits Paragraph 2 of article 334 of the Civil Code has been modified
gathered or produced inure to the benefit of the seizing by section 450 of Act No. 190 and by Act No. 1508 in the sense
creditor. A crop raised on leased premises in no sense forms that "ungathered products" as mentioned in said article of the
part of the immovable. It belongs to the lessee, and may be sold Civil Code have the nature of personal property; or that in the
by him, whether it be gathered or not, and it may be sold by his sense that, for the purposes of attachment and execution, and
judgment creditors. (Porche vs. Bodin [28 La. An., 761]) for the purposes of the Chattel Mortgage Law, "ungathered
products" have the nature of personal property. In other words,
Louisiana jurisprudence: Law cannot be interpreted result in the phrase "personal property" should be understood to
absurd consequences include "ungathered products." In the case at bar, the sugar
If crop necessarily forms part of the leased premises the result cane in question was personal property and was not subject to
would be that it could not be sold under execution separate and redemption.
apart from the land. If a lessee obtain supplies to make his crop,
the factor's lien would not attach to the crop as a separate thing TUMALAD V VICENCIO
belonging to his debtor, but the land belonging to the lessor
FACTS:
would be affected with the recorded privilege. The law cannot
be construed so as to result in such absurd consequences.
Vicencio and Simeon executed a chattel mortgage in favor of
plaintiffs Tumalad over their house, which was being rented by
American jurisprudence: growing crops by yearly labor and
Madrigal and company. This was executed to guarantee a loan,
cultivation personal property
payable in one year with a 12% per annum interest.
The settled doctrine followed in the State of California and
other states in connection with the attachment of property and
The mortgage was extrajudicially foreclosed upon failure to pay
execution of judgment is, that growing crops raised by yearly
the loan. The house was sold at a public auction and the
labor and cultivation are considered personal property. All
plaintiffs were the highest bidder. A corresponding certificate of
annual crops which are raised by yearly manurance and labor,
sale was issued. Thereafter, the plaintiffs filed an action for
and essentially owe their annual existence to cultivation by
ejectment against the defendants, praying that the latter vacate
man, may be levied on as personal property. Crops, whether
the house as they were the proper owners.
growing or standing in the field ready to be harvested, are,
when produced by annual cultivation, no part of the realty.
ISSUE:
They are, therefore, liable to voluntary transfer as chattels. It is
equally well settled that they may be seized and sold under
W/N the chattel mortgage was null and void ab initio because
execution.
only personal properties can be subject of a chattel mortgage.
Source of provisions on execution of judgment in Code of Civil
HELD:
Procedure (Act 190); Growing crops are personal property
Section 450 and most of the other sections of the Code of Civil
Certain deviations have been allowed from the general doctrine
Procedure relating to the execution of judgments were taken
that buildings are immovable property such as when through
from the Code of Civil Procedure of California. Section 450 of
stipulation, parties may agree to treat as personal property
the Code of Civil Procedure enumerates the property of a
those by their nature would be real property. This is partly
judgment debtor which may be subjected to execution, and
based on the principle of estoppel wherein the principle is
reads as "All goods, chattels, moneys, and other property, both
predicated on statements by the owner declaring his house as
real and personal, shall be liable to execution." The Supreme
chattel, a conduct that may conceivably stop him from
Court of California, under section 688 of the Code of Civil
subsequently claiming otherwise.
Procedure of that state, to which the Code of Civil Procedure
was pattered, has held, without variation, that growing crops
In the case at bar, though there be no specific statement
were personal property and subject to execution.
referring to the subject house as personal property, yet by
ceding, selling or transferring a property through chattel
Chattel Mortgage Law recognizes growing crops as personal
mortgage could only have meant that defendant conveys the
property
house as chattel, or at least, intended to treat the same as such,
Act 1508, the Chattel Mortgage Law, fully recognizes that
so that they should not now be allowed to make an inconsistent
growing crops are personal property. Section 2 of said Act
stand by claiming otherwise.
provides that "All personal property shall be subject to
mortgage, agreeably to the provisions of this Act, and a MAKATI LEASING V WEAREVER, 122 SCRA 296
FACTS:
To obtain financial accommodations from Makati Leasing,
Wearever Textile discounted and assigned several receivables
under a Receivable Purchase Agreement with Makati Leasing.
To secure the collection of receivables, it executed a chattel
mortgage over several raw materials and a machinery – Artos
Aero Dryer Stentering Range (Dryer).
Wearever defaulted thus the properties mortgaged were
extrajudicially foreclosed. The sheriff, after the restraining
order was lifted, was able to enter the premises of Wearever
and removed the drive motor of the Dryer. The CA reversed the
order of the CFI, ordering the return of the drive motor since it
cannot be the subject of a replevin suit being an immovable
bolted to the ground. Thus the case at bar.
ISSUE:
Whether the dryer is an immovable property
HELD: NO
The SC relied on its ruling in Tumalad v. Vicencio, that if a house
of strong materials can be the subject of a Chattel Mortgage as
long as the parties to the contract agree and no innocent 3rd
party will be prejudiced then moreso that a machinery may
treated as a movable since it is movable by nature and becomes
immobilized only by destination. And treating it as a chattel by
way of a Chattel Mortgage, Wearever is estopped from claiming
otherwise.
MINDANAO BUS CO. V CITY ASSESSOR
FACTS:
Petitioner is a public utility solely engaged in transporting
passengers and cargoes by motor trucks. It owns a land where
it maintains and operates a garage for its TPU motor trucks; a
repair shop; blacksmith and carpentry shops, and with
machineries placed therein, its TPU trucks are made; body
constructed; and same are repaired in a condition to be
serviceable in the TPU land transportation business it operates.
The machineries have never been or were never used as
industrial equipment to produce finished products for sale, nor
to repair machineries, parts and the like offered to the general
public indiscriminately for business or commercial purposes.
Respondent City Assessor of Cagayan de Oro City assessed at
P4,400 petitioner’s above-mentioned equipment. 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 CTA held the petitioner liable to the payment of the realty
tax on its maintenance and repair equipment mentioned above.
Hence, this petition.
ISSUE:
Should the tools and equipment in the petitioner company’s
repair shop be considered immovable taxable real properties?
DOCTRINE:
NO. 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.” The tools and equipment are not
essential and principle municipal elements of petitioner’s
business of transporting passengers and cargoes by motor
trucks. They are merely incidentals — acquired as movables
and used only for expediency to facilitate and/or improve its
service. 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.
MERALCO SECURITIES V BOARD OF ASSESSMENT APPEALS
Facts:
Pursuant to a pipeline concession issued under the Petroleum
Act of 1949, Republic Act No. 387, Meralco Securities installed
from Batangas to Manila a pipeline system consisting of
cylindrical steel pipes joined together and buried not less than
one meter below the surface along the shoulder of the public
highway. 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.
Pursuant to the Assessment Law, Commonwealth Act No. 470,
the provincial assessor of Laguna treated the pipeline as real
property and issued tax declarations, containing the assessed
values of portions of the pipeline.
Meralco appealed the assessments to the defendants, but the
latter ruled that pipeline is subject to realty tax. The defendants
argued that the pipeline is subject to realty tax because they are
contemplated in Assessment Law and Real Property Tax Code;
that they do not fall within the category of property exempt
from realty tax under those laws; that Articles 415 & 416 of the
Civil Code, defining real and personal property have no
applications to this case because these pipes are constructions
adhered to soil and things attached to the land in a fixed
manner, and that Meralco Securities is not exempt from realty
tax under petroleum law.
Meralco insists that its pipeline is not subject to realty tax
because it is not real property within the meaning of Art. 415.
Issue:
Whether the aforementioned pipelines are subject to realty tax.
Held:
Yes, the pipelines are subject to realty tax.
Section 2 of the Assessment Law provides that the realty tax is
due “on real property, including land, buildings, machinery, and
other improvements.” This provision is reproduced with some
modification in Section 38, Real Property Tax Code, which
provides that “there shall be levied, assessed, and collected xxx
annual ad valorem tax on real property such as land, buildings,
machinery, and other improvements affixed or attached to real
property xxx.”
It is incontestable that the pipeline of Meralco Securities does
not fall within any of the classes of exempt real property
enumerated in section 3 of the Assessment Law and section 40
of the Real Property Tax Code.
Pipeline means a line of pipe connected to pumps, valves and
control devices for conveying liquids, gases or finely divided
solids. It is a line of pipe running upon or in the earth, carrying
with it the right to the use of the soil in which it is placed.
Article 415[l] and [3] provides that real property may consist of
constructions of all kinds adhered to the soil and 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.
The pipeline system in question is indubitably a construction
adhering to the soil. It is attached to the land in such a way that
it cannot be separated therefrom without dismantling the steel
pipes which were welded to form the pipeline.
WHEREFORE, the questioned decision and resolution are
affirmed. The petition is dismissed. No costs.
PHIL. REFINING COMPANY (PRC) 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 Jarque’s properties were then assigned to
Curaminas.
A problem arose when Judge Jose Hontiveros declined to order
the foreclosure of the mortgages, and instead, ruled that they
were defective because they did not have affidavits of good
faith.
ISSUE:
1. Whether or not the mortgages of the vessels are
governed by the Chattel Mortgage Law
2. 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.
HONGKONG & SHANGHAI BANK V ALDECOA
FACTS:
Aldecoa and Co. obtained a credit worth P450,000 from HSBC
secured by a mortgage of shares and real properties. On Dec. of
1906, the firm of Aldecoa and Co. went into liquidation and
obtained another P50,000 from the bank upon the condition
that this would be covered by the previous mortgage. In
October 1908, Joaquin and Zoilo Ibanñ ez de Aldecoa filed an
action against the bank for the purpose of annulling the
mortgages executed by them on the grounds that they were
minors at the time incapable of creating a valid mortgage upon
their real property. The Court of First Instance dismissed the
complaint as to Joaquin upon the ground that he had ratified
those mortgages after becoming of age, but entered a judgment
annulling said mortgages with respect to Zoilo. Both parties
appealed from this decision and the case was still pending in
the Supreme Court when HSBC filed an action against Aldecoa
and Co. and its partners for the collection of a sum of money
and foreclosure of the mortgaged properties. Judgement was
entered in favor of the bank.
ISSUE:
Whether or not the action filed by the bank should be
dismissed on the ground of lis pendens.
RULING:
No. A plea of the pendency of a prior action is not available
unless the prior action is of such a character that, had a
judgment been rendered therein on the merits, such a
judgment would be conclusive between the parties and could
be pleaded in bar of the second action.
In the instant case, the former suit is to annul the mortgages
while the other one is for the foreclosure. If the final judgment
in the former action is that the mortgages be annulled, such an
adjudication will deny the right of the bank to foreclose the
mortgages. But a valid decree will not prevent the bank from
foreclosing them. In such an event, the judgment would not be a
bar to the prosecution of the present action. The rule is not
predicated upon such a contingency. It is applicable, between
the same parties, only when the judgment to be rendered in the
action first instituted will be such that, regardless of which
party is successful, it will amount to res adjudicata against the
second action.