LEUNG YEE, plaintiff-appellant,

vs.
FRANK L. STRONG MACHINERY COMPANY and J. G. WILLIAMSON, defendants-appellees.
G.R. No. L-11658 February 15, 1918
Facts:
Leung Yee’s company bought cleaning equipment from the defendant machinery company. As
payment, it executed a chattel mortgage in favour of the defendant on its building in which the
machinery was installed. This mortgage made no reference as to the land from where the property was
located. Since the plaintiff’s company, was not able to pay, the building together with the equipment
attached to it was foreclosed and the respondent was able to possess the property. Hence, this action by
the plaintiff to recover possession of the building.

Issue: Whether or not the building can be classified as a real property, so as to subject it to a real estate
mortgage

Held:
The disputed building was considered by the court as Real property.
The mere fact that the parties seem to have dealt with it separately and apart from the land would
change its character as real property. Hence, such mortgage would still be a real estate mortgage for the
building that served as a security and the executed chattel mortgage and its consequences cannot be
said to have any legal effect.

Davao Sawmill v. Castillo

Facts:

Davao Saw Mill Co., Inc., is the holder of a lumber concession from the Government of the Philippine
Islands. However, the land upon which the business was conducted belonged to another person. On the
land the sawmill company erected a building which housed the machinery used by it. Some of the
implements thus used were clearly personal property, the conflict concerning machines which were
placed and mounted on foundations of cement. In the contract of lease between the sawmill company
and the owner of the land there appeared the following provision: That on the expiration of the period
agreed upon, all the improvements and buildings introduced and erected by the party of the second
part shall pass to the exclusive ownership of the lessor without any obligation on its part to pay any
amount for said improvements and buildings; which do not include the machineries and accessories in
the improvements.

In another action wherein the Davao Light & Power Co., Inc., was the plaintiff and the Davao, Saw, Mill
Co., Inc., was the defendant, a judgment was rendered in favor of the plaintiff in that action against the
defendant; a writ of execution issued thereon, and the properties now in question were levied upon as
personalty by the sheriff. No third party claim was filed for such properties at the time of the sales
thereof as is borne out by the record made by the plaintiff herein

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It must be noted also that on number of occasion, Davao Sawmill treated the machinery as personal
property by executing chattel mortgages in favor of third persons. One of such is the appellee by
assignment from the original mortgages.

The lower court rendered decision in favor of the defendants herein. Hence, this instant appeal.

Issue:

whether or not the machineries and equipments were personal in nature.

Ruling/ Rationale:

Yes. The Supreme Court affirmed the decision of the lower court.

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.

ASSOCIATED INSURANCE and SURETY COMPANY, INC., plaintiff,

vs.
ISABEL IYA, ADRIANO VALINO and LUCIA VALINO, defendants.
Facts:
Valino & Valino were the owners and possessors of a house of strong materials in Rizal, which
they purchased on installment basis. To enable her to purchase on credit rice from NARIC, Valino filed a
bond (P11,000) subscribed by Associated Insurance and Surety Co Inc, and as a counter-guaranty, Valino
executed an alleged chattel mortgage on the aforementioned house in favour of the surety company. At
the same time, the parcel of land which the house was erected was registered in the name of Philippine
Realty Corporation.
Valino, to secure payment of an indebtedness (P12,000) executed a real estate mortgage over
the lot and the house in favour of Iya.

Valino failed to satisfy her obligation to NARIC, so the surety company was compelled to pay the
same pursuant to the undertaking of the bond. In turn, surety company demanded reimbursement from
Valino, and as they failed to do so, the company foreclosed the chattel mortgage over the house. As a
result, public sale was conducted and the property was awarded to the surety company.

The surety company then learned of the existence of the real estate mortgage over the lot and
the improvements thereon; thus, they prayed for the exclusion of the residential house from the real
estate mortgage and the declaration of its ownership in virtue of the award given during bidding.

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 Iya alleged that she acquired a real right over the lot and the house constructed thereon, and
that the auction sale resulting from the foreclosure of chattel mortgage was null and void.

Surety company argued 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 as personal
property, and they prayed that the said building be excluded from the real estate mortgage.
Issue:
There is no question over Iya’s right over the land by real estate mortgage; however, as the
building instructed thereon has been the subject of two mortgages, controversy arise as to which of
these encumbrances should receive preference over the other.
Held:
The building is subject to the real estate mortgage, in favour of Iya. Iya’s right to foreclose not
only the land but also the building erected thereon is recognised. While it is true that 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 (Article
415), could only mean that a building is by itself an immovable property. Moreover, 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.
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. In the case at bar, as personal properties could only be the
subject of a chattel mortgage 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 Chattel Mortgage Registry of Rizal, this act produced no effect
whatsoever, for where the interest conveyed is in the nature of 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 produced no effect as far as the building is concerned.

Mindanao Bus Co. v. City Assessor & Treasurer

GR No. L-17870

Property Law: Immovable Property

Facts:

The City Assessor of Cagayan De Oro City assessed a realty tax on several equipment and machineries of
Mindanao Bus Co., a public utility solely engaged in transporting passengers and cargoes by motor
trucks.. The machineries sought to be assessed by the respondent as real properties are sitting on
cement or wooden platforms.

The petitioner appealed the assessment to the Board of Tax Appeals on the ground that the same are
not realty. The Board of Tax Appeals sustained the assessment of the city assessor.

Additional note (for recit purposes):

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– The machineries sought to be assessed by the respondent as real properties are the following:

o Hobart Electric Welder Machine;

o Storm Boring machine;

o Lathe machine with motor;

o Black and Decker Grinder;

o PEMCO Hydraulic Press;

o Battery charger (Tungar charge machine); and

o D-Engine Waukesha-M-Fuel.

– These 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 for which petitioner has never engaged in, to
date.”

Issue:

Whether the equipment and machineries in question, are considered immovable properties, and
therefore, subject to realty tax.

Held:

No. The equipment and machineries in question, are movable properties, and therefore, not subject to
realty tax.

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 in question in this instant case are, by their nature, not essential and principal
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. Even without such tools and equipment, its business may be carried on, as petitioner has carried
on, without such equipment, before the war. The transportation business could be carried on without
the repair or service shops if its rolling equipment is repaired or serviced in another shop belonging to
another.

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Aside from the element of essentiality, Article 415 (5) of the New Civil Code also 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 equipment 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 real property.

Board of Assessment Appeals

vs Manila Electronic Company

Ponente: Paredes

Facts:

October 1902, Philippine Commission enacted Act. No. 484 authorizing the Municipal Board of Manila to
grant a franchise to operate an electric street railway and electric light in Manila to the most favorable
bid. Swift was awarded the franchise on March 1903.

Meralco's electric power is transmitted by means of electric transmission wires which are fastened to
insulators on steel towers.

November 1955, city assessor of QC declared the steel towers (Espana, Kamuning and Kamias towers)
for real property tax. After the denial of Meralco's petition to cancel the declarations, an appeal was
taken to the Board of Assessment Appeals of QC, which required Meralco to pay real property tax for
year 1952-1956. Meralco paid the amount under protest, and filed for review in CTA which rendered a
decision to cancel the tax declarations and refund Meralco. The motion for reconsideration was denied
too, an instant petition for review was filed.

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.

The tax exemption privilege of the petitioner is quoted hereunder:

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PAR 9. The grantee shall be liable to pay the same taxes upon its real estate, buildings, plant (not
including poles, wires, transformers, and insulators), machinery and personal property as other persons
are or may be hereafter required by law to pay ...

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 as contemplated thereon, should be understood and taken as a part of
the electric power system of the respondent Meralco, for the conveyance of electric current from the
source thereof to its consumers.

Issue:

Whether the steel towers constitute real properties, so that they can be subject to real property
tax.

Article 415 of the Civil Code; the following are immovable property:

(1) Land, buildings, roads, and constructions of all kinds adhered to the soil;

xxxxxxxxx

(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;

xxxxxxxxx

(5) Machinery, receptacles, instruments or implements intended by the owner of the tenement for an
industry

or works which may be carried in a building or on a piece of land, and which tends directly to meet the
needs

of the said industry or works;

Held:

The steel towers or supports in question do not come within the objects mentioned in paragraph 1,
because they do not constitute buildings or constructions adhered to the soil. They are not construction
analogous to buildings nor adhering to the soil. As per description, given by the lower court, they are
removable and merely attached to a square metal frame by means of bolts, which when unscrewed
could easily be dismantled and moved from place to place. They cannot be included under paragraph 3,
as they are not attached to an immovable in a fixed manner, and they can be separated without
breaking the material or causing deterioration upon the object to which they are attached.

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These steel towers or supports do not also fall under paragraph 5, for they are not machineries,
receptacles, instruments or implements, and even if they were, they are not intended for industry or
works on the land. Petitioner is not engaged in an industry or works in the land in which the steel
supports or towers are constructed.

CTA erred.

TUMALAD vs. VICENCIO, G.R. No. L-30173, September 30, 1971

TUMALAD V. VICENCIO

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.

ISSUE:

W/N the chattel mortgage was null and void ab initio because only personal properties can be subject of
a chattel mortgage.

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.

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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.

PUNSALAN, JR. V. VDA. DE LACSAMANA G.R. No. L-55729 March 28, 1983

PUNSALAN, JR. V. VDA. DE LACSAMANA

G.R. No. L-55729 March 28, 1983

FACTS:

Punsalan was the owner of a piece of land, which he mortgaged in favor of PNB. Due to his failure to
pay, the mortgage was foreclosed and the land was sold in a public auction to which PNB was the
highest bidder.

On a relevant date, while Punsalan was still the possessor of the land, it secured a permit for the
construction of a warehouse.

A deed of sale was executed between PNB and Punsalan. This contract was amended to include the
warehouse and the improvement thereon. By virtue of these instruments, respondent Lacsamana
secured title over the property in her name.

Petitioner then sought for the annulment of the deed of sale. Among his allegations was that the bank
did not own the building and thus, it should not be included in the said deed.

Petitioner’s complaint was dismissed for improper venue. The trial court held that the action being filed
in actuality by petitioner is a real action involving his right over a real property.

ISSUE:

W/N the trial court erred in dismissing the case on the ground of improper venue.

W/N the warehouse is an immovable and must be tried in the province where the property lies.

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HELD:

Warehouse claimed to be owned by petitioner is an immovable or real property. Buildings are always
immovable under the Code. A building treated separately from the land on which it is stood is
immovable property and the mere fact that the parties to a contract seem to have dealt with it separate
and apart from the land on which it stood in no wise changed its character as immovable property.

Makati Leasing and Finance Corp. v. Wearever Textile Mills, Inc.

GR No. L-58469

Property Law: Immovable Property

Facts:

In order to obtain financial accommodations from petitioner Makati Leasing and Finance Corporation,
the private respondent Wearever Textile Mills, Inc., discounted and assigned several receivables with
the former under a Receivable Purchase Agreement. To secure the collection of the receivables
assigned, private respondent executed a Chattel Mortgage over certain raw materials inventory as well
as machinery described as an Artos Aero Dryer Stentering Range.

Upon default, petitioner filed a petition for extrajudicial foreclosure of the properties mortgage to it.
Acting on petitioner’s application for replevin, the lower court issued a writ of seizure. Then after, the
sheriff enforcing the seizure order repaired to the premises of private respondent and removed the
main drive motor of the subject machinery.

The Court of Appeals, in certiorari and prohibition proceedings ordered the return of the seized drive
motor, after ruling that the machinery in suit cannot be the subject of replevin, much less of a chattel
mortgage, because it is a real property pursuant to Article 415 of the New Civil Code, the same being
attached to the ground by means of bolts and the only way to remove it from respondent’s plant would
be to drill out or destroy the concrete floor, the reason why all that the sheriff could do to enforce the
writ was to take the main drive motor of said machinery.

Issue:

Whether the seized drive motor cannot be a subject of chattel mortgage, because it is a real property
pursuant to Article 415 of the new Civil Code

Held:

No. The seized drive motor can be a subject of chattel mortgage.

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Examining the records of the instance case, the Supreme Court found no logical justification to exclude
and rule out, as the appellate court did, the present case from the application of the pronouncement in
the TUMALAD v. VICENCIO CASE (41 SCRA 143) where a similar, if not identical issue was raised. If a
house of strong materials, like what was involved in the Tumalad case may be considered as personal
property for purposes of executing a chattel mortgage thereon as long as the parties to the contract so
agree and no innocent third party will be prejudiced thereby, there is absolutely no reason why a
machinery, which is movable in its nature and becomes immobilized only by destination or purpose,
may not be likewise treated as such. This is really because one who has so agreed is estopped from
denying the existence of the chattel mortgage.

In rejecting petitioner’s assertion on the applicability of the Tumalad doctrine, the Court of Appeals lays
stress on the fact that the house involved therein was built on a land that did not belong to the owner of
such house. But the law makes no distinction with respect to the ownership of the land on which the
house is built and we should not lay down distinctions not contemplated by law.

Private respondent contends that estoppel cannot apply against it because it had never represented nor
agreed that the machinery in suit be considered as personal property but was merely required and
dictated on by herein petitioner to sign a printed form of chattel mortgage which was in a blank form at
the time of signing. This contention lacks persuasiveness. As aptly pointed out by petitioner and not
denied by the respondent, the status of the subject machinery as movable or immovable was never
placed in issue before the lower court and the Court of Appeals except in a supplemental memorandum
in support of the petition filed in the appellate court.

G.R. No. L-46245    May 31, 1982

MERALCO SECURITIES INDUSTRIAL CORPORATION, petitioner,

vs.

CENTRAL BOARD OF ASSESSMENT APPEALS, BOARD OF ASSESSMENT APPEALS OF LAGUNA and

PROVINCIAL ASSESSOR OF LAGUNA, respondents.
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.

10
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.

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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.

CASE DIGEST: CALTEX V. CBAA (G.R. NO. L-50466, MAY 31, 1982)

CASE DIGEST: CALTEX (PHILIPPINES) INC., petitioner, vs. CENTRAL BOARD OF ASSESSMENT APPEALS
and CITY ASSESSOR OF PASAY, respondents. (G.R. No. L-50466, May 31, 1982)

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.

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Said machines and equipment are loaned by Caltex to gas station operators under an appropriate lease
agreement or receipt. It is stipulated in the lease contract that the operators, upon demand, 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.

ISSUE: Are the pieces of machinery and equipment subject to realty tax despite them having been
placed by a lessee?

HELD: Yes, they are subject to realty tax.

Here, the question is whether the gas station equipment and machinery permanently affixed by Caltex
to its gas station and pavement (which are indubitably taxable realty) should be subject to the realty tax.
This question is different from the issue raised in the Davao Saw Mill case.

Improvements on land are commonly taxed as realty even though for some purposes they might be
considered personalty.

PRUDENTIAL BANK V. PANIS G.R. No. L-50008 August 31, 1987

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.

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ISSUE:
Whether or not a valid RE mortgage can be constituted on the building erected on the belonging to
another.

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.

Serg's v. PCI Leasing

Serg’s 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.

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 (Serg’s 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.

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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."

ISSUE: Whether or not the machineries became real property by virtue of immobilization.

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.

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

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.”

15
The machines are personal property and they are proper subjects of the Writ of Replevin

Tsai v. Court of Appeals G.R. No. 120098 October 2, 2001

A chattel mortgage shall be deemed to cover only the property described therein and not like or
substituted property thereafter acquired by the mortgagor and placed in the same depository as the
property originally mortgaged,

Facts:

Ever Textile Mills, Inc. (EVERTEX) obtained a loan from petitioner Philippine Bank of Communications
(PBCom). As security for the loan, EVERTEX executed in favor of PBCom, a deed of Real and Chattel
Mortgage over the lot where its factory stands, and the chattels located therein as enumerated in a
schedule attached to the mortgage contract. PBCom granted a second loan to EVERTEX. The loan was
secured by a Chattel Mortgage over personal properties enumerated in a list attached thereto. The
listed properties were similar to those listed in the first mortgage deed. Due to business reverses,
EVERTEX filed insolvency proceedings docketed. The CFI issued an order on declaring the corporation
insolvent. All its assets were taken into the custody of the Insolvency Court, including the collateral, real
and personal, securing the two mortgages as abovementioned.

Upon EVERTEX’s failure to meet its obligation to PBCom, the latter commenced extrajudicial foreclosure
proceedings against EVERTEX. PBCom was the highest bidder. Thus, PBCom consolidated its ownership
over the lot and all the properties in it and leased the entire factory premises to petitioner Ruby L. Tsai.
PBCom sold the factory, lock, stock and barrel to Tsai, including the contested machineries. EVERTEX
filed a complaint for annulment of sale, reconveyance, and damages with the Regional Trial Court
against PBCom, alleging inter alia that the extrajudicial foreclosure of subject mortgage was in violation
of the Insolvency Law. EVERTEX claimed that no rights having been transmitted to PBCom over the
assets of insolvent EVERTEX, therefore Tsai acquired no rights over such assets sold to her, and should
reconvey the assets. EVERTEX averred that PBCom, without any legal or factual basis, appropriated the
contested properties, which were not included in the Real and Chattel Mortgages.

Issue: Whether or not the foreclosure on after acquired properties of EVERTEX is valid.

Held:

Inasmuch as the subject mortgages were intended by the parties to involve chattels, insofar as
equipment and machinery were concerned, the Chattel Mortgage Law applies, which provides in Section
7 thereof that: “a chattel mortgage shall be deemed to cover only the property described therein and
not like or substituted property thereafter acquired by the mortgagor and placed in the same depository
as the property originally mortgaged, anything in the mortgage to the contrary notwithstanding.” And,
since the disputed machineries were acquired in 1981 and could not have been involved in the 1975 or
1979 chattel mortgages, it was consequently an error on the part of the Sheriff to include subject
machineries with the properties enumerated in said chattel mortgages. As the auction sale of the

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subject properties to PBCom is void, no valid title passed in its favor. Consequently, the sale thereof to
Tsai is also a nullity under the elementary principle of nemo dat quod non habet, one cannot give what
one does not have

Assuming arguendo that the properties in question are immovable by nature, nothing detracts the
parties from treating it as chattels to secure an obligation under the principle of estoppel. An immovable
may be considered a personal property if there is a stipulation as when it is used as security in the
payment of an obligation where a chattel mortgage is executed over it, as in the case at bar.

Machinery & Engineering Supplies, Inc. v. Court of Appeals

G.R. No. L-7057. October 29, 1954.

Concepcion, J.:

Doctrine: Said machinery and equipment were "intended by the owner of the tenement for an industry"
carried on said immovable and tended "directly to meet the needs of said industry." For these reasons,
they were already immovable pursuant to paragraph 3 and 5 of Article 415 of Civil Code.

Facts: Petitioner filed a complaint for replevin in the CFI of Manila against Ipo Limestone Co., Inc. and Dr.
Antonio Villarama for the recovery of the machineries and equipments sold and delivered to defendants
at their factory in Bigti, Norzagaray, Bulacan. Respondent judge issued order for Provincial Sheriff to
seize and take immediate possession of the properties. But the equipment could not possibly be
dismantled without causing damage to the wooden frames attached to them. As Roco, pet's president,
insisted in dismantling it on his own responsibility, alleging that bond was posted for such, the deputy
sheriffs directed that some of the supports thereof be cut. Defendant filed counter-bond. Trial court
ordered return and reinstallation of machineries. Petitioner deposited them along the road, near the
quarry of the defendant without reinstallation rendering them useless. Petitioner complains that the
respondent Judge had disregarded his manifestation that equipments seized are the Petitioner's
property until fully paid for and as such never became immovable and ordinarily replevin may be
brought to recover any specific personal property unlawfully taken or detained from the owner thereof,
provided such property is capable of identification and delivery; but replevin will not lie for the recovery
of real property or incorporeal personal property.

Issue: W/N the equipment can be seized by the sheriff?

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Ruling: When the sheriff repaired to the premises of respondent, Ipo Limestone Co., Inc., the machinery
and equipment in question appeared to be attached to the land, particularly to the concrete foundation
of said premises, in a fixed manner, in such a way that the former could not be separated from the latter
"without breaking the material or deterioration of the object." Hence, in order to remove said outfit, it
became necessary, not only to unbolt the same, but, also, to cut some of its wooden supports.
Moreover, said machinery and equipment were "intended by the owner of the tenement for an
industry" carried on said immovable and tended "directly to meet the needs of the said industry." For
these reasons, they were already immovable property pursuant to paragraphs 3 and 5 of Article 415 of
Civil Code of the Philippines, which are substantially identical to paragraphs 3 and 5 of Article 334 of the
Civil Code of Spain. As such immovable property, they were not subject to replevin.

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