LEUNG YEE V. F.L STRONG MACHINERY CO.

AND
WILLIAMSON
37 SCRA 644
FACTS:
1. First mortgage: Compania Agricola Filipina bought ricecleaning machinery from the machinery company and this was
secured by a chattel mortgage on the machinery and the
building to which it
was installed. Upon failure to pay, the chattel mortgage
was foreclosed, the building and machinery sold in public
auction and bought by the machinery company.

dealt with it separate and apart from the land on which it

stood in no wise changed the character as real property.
It follows that neither the original registry in the chattel mortgage
registry of the instrument purporting to be a chattel mortgage of
the building and the machinery installed therein, nor the
annotation in the registry of the sale of the mortgaged
property, had any effect whatever so far as the building is
concerned. *LANDMARK CASE

PUNZALAN V. LACSAMANA

2. Days after, the Compania Agricola Filipina executed a deed

of sale over the land to which the building stood in favor of the
machinery company. This was done to cure any defects that
may arise in the
machinery companys ownership of the building.

Buildings are always treated as immovable or real property

under the Code even if it was dealt with separately from the
land upon which it stood

3. Second mortgage: on or about the date to which the

chattel mortgage was excecuted, Compania executed a
real estate mortgage over the building in favor of Leung
Yee, distinct and
separate from the land. This is to secure payment for its
indebtedness for the construction of the building. Upon failure
to pay, the mortgage was foreclosed.

FACTS:

4. The machinery company then filed a case, demanding

that it be declared the rightful owner of the building. The
trial court held that it was the machinery company which was
the rightful owner
as it had its title before the building was registered prior
to the date of registry of Leung Yees certificate.

Sometime 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, whom in lieu of the said
sale secured a title over the property involving the warehouse
allegedly owned and constructed by the plaintiff.

HELD:
The building in which the machinery was installed was real
property, and the mere fact that the parties seem to have

Some land belonging to Antonio Punzalan was foreclosed by the

Philippine National Bank Tarlac, Branch in failure of the former to pay
the mortgaged fee amounting to P10 grand Since PNB was the
highest bidder, the land went to PNB.

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
involved ownership of or title to property but denied by the court for
lack of merit. A motion for pre-trial was also set by Punzalan but was
also denied by the court invoking that the case was already
dismissed.
Hence, a petition for certiorari was filed by the petitioner.

ISSUE:
Whether or not the judgment rendered by the court is proper.

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 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.

Personal Observation: The venue was improperly laid by the

petitioner in the case at bar. Such ground was sufficient to render
dismissal of the case, as the same is one of the grounds provided for
under Rule 16 (c) of the Rules of Court.
The Denial of Motion to Dismiss rendered by the court in the instant
case is appealable. If such denial constitute grave abuse of discretion
on the part of the court , Punzalan may file either Prohibition or
Certiorari under Rule 65 of the Rules of Court

. Punsalan vs. Lacsamana, 21 SCRA 331

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.
Petitioners 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 warehouse is an immovable and must be tried in the province
where the property lies.
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.

Standard Oil Co. of New York vs. 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
said document had been duly acknowledge and delivered, the
petitioner caused the same to be presented to the respondent,
Joaquin Jaramillo, as register of deeds of the City of Manila, for the
purpose of having the same recorded in the book of record of chattel
mortgages. Upon examination of the instrument, the respondent was
of the opinion that it was not a chattel mortgage, for the reason that
the interest therein mortgaged did not appear to be personal property,
within the meaning of the Chattel Mortgage Law, and registration was
refused on this ground only.
ISSUE:

Whether

or

not

respondents

position

is

tenable?

HELD:
No. The respondents duties, as a register of deeds, in respect to the
registration of chattel mortgage are of a purely ministerial character;
and no provision of law can be cited which confers upon him any

judicial or quasi-judicial power to determine the nature of any

document of which registration is sought as a chattel mortgage.
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.

DAVAO SAWMILL V. CASTILLO

G.R.
No.
L-40411
August

7,

1935

FACTS:
Davao Sawmill Co., operated a sawmill. However, 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.. The
contract of lease stated that on the expiration of the period
agreed upon, all the improvements and buildings introduced and
erected by Davao sawmill 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, a writ of execution was issued against the
company and the properties in question were levied upon. The
company assailed the said writ contending that the machineries
and accessories were personal in nature, hence, not subject to
writ of execution. The trial judge ruled in favour of the company.

for the purposes of real property tax

HELD:

ISSUE: Whether or not the machineries and equipment were

personal property
HELD
Yes, the subject properties are personal in nature.
Art.415 (NCC) provides that real property consists of (5)
Machinery, receptacles, instruments or implements intended by
the owner of the tenement for an industry or works which may
be carried on in a building or on a piece of land, and which tend
directly to meet the needs of the said industry or works.
Machinery is naturally movable. However, machinery only
becomes immovable when placed in a land by the owner of the
property or land but not when so placed by a tenant or any
person having only a temporary right, unless such person acted
as the agent of the owner. In the case at bar, the machinery is
intended not by the owner of the land but by the saw mill
company for use in connection with its trade
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
are within the Caltex refinery compound. They are used for
storing
fuel
oil
for
Meralco's
power
plants.
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 contends that the said oil storage tanks do
not fall within any of the kinds of real property enumerated in
article 415 of the Civil Code the tanks are not attached to the
land and that they were placed on leased land, not on the land
owned
by
Meralco.
ISSUE : Whether or not the oil storage tanks constitute real property

YES. 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. It is undeniable that the two tanks
have been installed with some degree of permanence as
receptacles for the considerable quantities of oil needed by
Meralco
for
its
operations.
For purposes
things, which
property.
It
classified as
on general
property.

of taxation, the term real property may include

should generally be considered as personal
is a familiar phenomenon to see things
real property for purposes of taxation which
principle may be considered as personal

Makati Leasing and Finance Corporation vs Wennever Texttile Mills

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.

requires that the industry or works be carried on in a building or

on a piece of land. As such, the equipment in question are not
deemed real property and not subject to realty tax, because the
transportation business is not carried on in a building or
permanently on a piece of land, as demanded by law.

MINDANAO BUS CO. V. CITY ASSESSOR DIGEST

G.R. No. L-17870 29 September 1962
FACTS:
Petitioner is a public utility company engaged in the transport of
passengers and cargo by motor vehicles. Petitioner likewise
owned a land where it maintains a garage, a repair shop and
blacksmith or carpentry shops. The machineries are placed
thereon in wooden and cement platforms. The City Assessor of
CDO then assessed a P4,400 realty tax on said machineries
and repair equipment. Petitioner appealed on the ground that
the same are not real properties.
ISSUE: Whether or not the machineries and equipment are
considered immobilized and thus subject to a realty tax
HELD:
NO. The Supreme Court held that said machineries and
equipment are not subject to the assessment of real estate tax.
Art. 415 of the NCC classifies the following as immovable
property xxx (5) Machinery, receptacles, instruments or
implements intended by the owner of the tenement for an
industry or works which may be carried on in a building or on a
piece of land, and which tend directly to meet the needs of the
said industry or works;
Said equipment are not considered immobilized as they are
merely incidental, not essential and principal to the business of
the petitioner. The transportation business could be carried on
without repair or service shops of its rolling equipment as they
can be repaired or services in another shop belonging to
another
Aside from the element of essentiality the Art.415 (5) also

Caltex vs Central Board of Assessment Appeals

Posted on June 24, 2013
Caltex vs Central Board of Assessment Appeals & City Assessor
of Pasay
GR No. L-50466
May 31, 1982
his 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.
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 wasteintended 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.
Sergs Products and Gaquiloy vs. PCI Leasing and Finance 338
SCRA 499
FACTS:
PCI filed a case for collection of a sum of money as well as a
writ of replevin for the seizure of machineries, subject of a
chattel mortgage executed by petitioner in favor of PCI. Machineries
of petitioner were seized and petitioner filed a motion for special
protective order. It asserts that the machineries were real property
and could not be subject of a chattel mortgage.
Issue: Whether or not the machineries become real property by virtue
of immobilization.
HELD:
The machineries in question have become immobilized by
destination because they are essential and principal elements in the
industry, and thus have become immovable in nature.
Nonetheless, they are still proper subjects for a chattel mortgage.
Contracting parties may validly stipulate that a real property be
considered as personal. After agreement, they are consequently
estopped from claiming otherwise.

Tumalad vs. 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.
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.

Pastor Ago v CA
Posted on June 21, 2013
Pastor D. Ago vs CA, Hon. Montao Ortiz, The Provincial
Sheriff of Surigao, and Grace Park Engineering, Inc.
GR No. L-17898
October 31, 1962
FACTS
Ago bought sawmill machineries and equipments from Grace
Park Engineer Domineering, Inc. (GPED) A chattel mortgage
was executed over the said properties to secure the unpaid
balance of P32,000, which Ago agreed to pay in installment
basis.
Because Ago defaulted in his payment, GPED instituted extrajudicial foreclosure proceedings of the mortgage. To enjoin the
foreclosure, Ago instituted a special civil case in the CFI of
Agusan. The parties then arrived at a compromise agreement.
However, a year later, Ago still defaulted in his payment. GPED
filed a motion for execution with the lower court, which was
executed on September 23, 1959.

Acting upon the writ of execution, the Provincial Sheriff of

Surigao levied upon and ordered the sale of the sawmill
machineries and equipment.
Upon being advised that the public auction sale was set on
December 4, 1959, Ago filed a petition for certiorari and
prohibition on December 1, 1959 with the CA. He alleged
that his counsel only received the copy of the judgment on
September 25, 1959 two days after the execution of the writ;
that the order of sale of the levied properties was in grave abuse
of discretion and in excess of jurisdiction; and that the Sheriff
acted illegally by levying the properties and attempting to sell
them without prior publication of the notice of sale thereof in
some newspaper of general circulation as required by the Rules
of Court.
The CA issued a writ of preliminary injunction against the
Sheriff, but it turned out that the properties were already sold on
December 4, 1959. The CA ordered the Sheriff to suspend the
issuance of the Certificate of Sale until the decision of the case.
The CA then rendered its decision on November 9, 1960.
ISSUES
1. Is the fact that petitioner was present in open court as the
judgment was rendered, sufficient notice of the said judgment?
2. Was the Sheriff's sale of the machineries and equipment at a
public auction valid despite lack of publication of the notice of
sale?
HELD
1) No. The mere pronouncement of the judgment in open court
does not constitute a rendition of judgment.
The filing of the judge's signed decision with the Clerk of Court
constitutes the rendition of a valid and binding judgment.
Sec. 1, Rule 35 of the Rules of Court require that all judgments
be rendered in writing, personally and directly prepared by
the judge, and signed by him, stating clearly and distinctly
the facts and the law on which it is based, filed with the
clerk of the court.

Prior to the filing, the decision could still be subject to

amendment and change and may not constitute the real
judgment of the court.

ART. 415 The following are immovable property:

Moreover, the hearing of the judgment in open court does not

constitute valid notice thereof. No judgment can be notified to
the parties unless it has previously been rendered.
Sec.7 of Rule 27 expressly requires that final orders or
judgments be served either personally or by registered
mail.
The signed judgment not having been served upon the
petitioner, said judgment could not be effective upon him who
had not received it. As a consequence, the issuance of the writ
of execution is null and void, having been issued before
petitioner was served a copy of the decision, personally or by
registered mail.

(5) Machinery, receptacles, instruments or implements

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

2) The subject sawmill machineries and equipment became real

estate properties in accordance with the provision of Art. 415
(5) of the NCC:

xxxx

The installation of the sawmill machineries in the building of

Gold Pacific Sawmill, Inc., for use in the sawing of logs carried
on in the said building converted them into Real Properties as
they became a necessary & permanent part of the building or
real estate on which the same was constructed.
And if they are judicially sold on execution without the
necessary advertisement of sale by publication in a newspaper
as required in Sec.16 of Rule 39 of the Rules of Court, the
sale made by the sheriff would be null and void.