Punzalan, Jr. v. Vda.

De Lacsamana 121 SCRA 331 (1983)

FACTS:
In this case, Punzalan mortgaged with PNB a parcel of land situated in Tarlac which was eventually
foreclosed by PNB in 1970. However, the bank secured title thereto only in 1977. In the meantime, while
the property was still in the possession of Punzalan, he constructed thereon in 1974 a warehouse
allegedly with the permission of PNB.
In 1978, PNB sold the land, including the building thereon, to Vda. de Lacsamana. Thus, Punzalan fi led
an action to annul the sale with respect to the building. He fi led the action in Quezon City. The court
dismissed the action on the ground of improper venue because the action is for recovery of a real
property. The court ruled that the venue should have been Tarlac.
HELD: In sustaining the decision of the lower court, the Supreme Court ruled that the warehouse
claimed to be owned by (Punzalan) is an immovable or real property as provided in Article 415(1) of the
Civil Code and that buildings are always immovable under the Code. The Court further ruled that the
prevalent doctrine is that an action for the annulment or rescission of a sale of real property does not
operate to efface the fundamental and prime objective and nature of the case, which is to recover said
real property. It is a real action.

Leung Yee v. Strong Machinery Co. 37 Phil. 644

FACTS:
The Compania Agricola Filipina purchased from Strong Machinery Co. rice-cleaning machines which
the former installed in one of its buildings. As security for the purchase price, the buyer executed a
CHATTEL MORTGAGE on the machines and the building on which they had been installed. Upon buyers
failure to pay, the registered mortgage was foreclosed, and the building was purchased by the seller, the
Strong Machinery Co. This sale was annotated in the Chattel Mortgage Registry. Later, the Agricola
also sold to Strong Machinery the lot on which the building had been constructed. This sale was not
registered in the Registry of Property BUT the Machinery Co. took possession of the building and the lot.
Previously however, the same building had been purchased at a sheriffs sale by Leung Yee, a creditor of
Agricola, although Leung Yee knew all the time of the prior sale in favor of Strong Machinery. This
sale in favor of Leung Yee was recorded in the Registry. Leung Yee now sues to recover the property
from Strong Machinery. Issue: who has a better right to the property?
HELD: The building is real property, therefore, its sale as annotated in the Chattel Mortgage Registry
cannot be given the legal effect of registration in the Registry of Real Property. The mere fact that the
parties decided to deal with the building as personal property does not change its character as real
property. Thus, neither the original registry in the chattel mortgage registry, nor the annotation in said
registry of the sale of the mortgaged property had any effect on the building. However, since the land
and the building had fi rst been purchased by Strong Machinery (ahead of Leung Yee), and this fact

was known to Leung Yee, it follows that Leung Yee was not a purchaser in good faith, and should
therefore not be entitled to the property. Strong Machinery thus has a better right to the property.

Bicerra, et al. v. Teneza, et al.

L-16218, Nov. 29, 1962
FACTS: A complaint was fi led in the Court of First Instance (now Regional Trial Court) alleging that the
defendants had forcibly demolished the house of the plaintiffs worth P200. The plaintiffs asked for
damages or for a declaration that the materials belong to them.
Issue: Does the CFI (now RTC) have jurisdiction?
HELD: No, because no real property is being sued upon, the house having ceased to exist, and the
amount of damages sought does not exceed the jurisdictional amount in inferior courts. While it is true
that the complaint also seeks that the plaintiffs be declared the owners of the dismantled house or the
materials, such does not in any way constitute the relief itself, but is only incidental to the real cause of
action which concerns the recovery of damages.

Davao Sawmill Co. v. Castillo 61 Phil. 709

FACTS: Plaintiff operated a sawmill. The land upon which the business was conducted was leased from
another person. On the land, the sawmill company erected a building which housed the machinery used
by it. Some of the machines were mounted and placed on foundations of cement. In the contract of
lease, plaintiff agreed to turn over free of charge all improvements and buildings erected by it on the
premises with the exception of machineries, which shall remain with the plain tiff. In an action brought
by the defendant herein, judgment was rendered against plaintiff. A writ of execution was issued and
the machineries placed on the sawmill were levied upon as personalty by the sheriff.
ISSUE: The question raised in this case involves the determination of the nature of the machineries, for
plaintiff claimed that they were immobilized and they belonged to the owner of the land.
HELD:In holding that the machinery is not immobilized, the Court explained 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, usufructuary, or any person having only a temporary right,
unless such person acted as the agent of the owner.

Mindanao Bus Co. v. City Assessor and Treasurer 6 SCRA 197 (1962)
FACTS:In this case, the City Assessor of Cagayan de Oro City assessed a realty tax on several equipment
and machineries of Mindanao Bus Co., a company engaged in the transportation business. These
equipment were placed on wooden or cement platforms and can be moved around in the bus
companys repair shop. The bus company appealed the assessment to the Board of Tax Appeals on the
ground that the same are not realty. The Board of Tax Appeals of the City, however, sustained the city
assessor. Thus, the bus company appealed to the Court of Tax Appeals, which likewise sustained the city
assessor. In reversing the decision of the Court of Tax Appeals, thereby holding that the equipment in
question are not real property,
HELD: The Supreme Court distinguished between principal and essential elements of the industry from
those that are merely incidental. According to the Court, in order that movable equipments to be
immobilized in contemplation of the law they must fi rst 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. In this case, the tools and equipment in question are by
their nature, not essential and principal elements of Mindanao Bus Co.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 stools and equipments, its
business may be carried on. As explained by the Court, 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

Makati Leasing and Finance Corp. v. Wearever Textile Mills, Inc. 122 SCRA 294 (1983)
FACTS: In this case, Wearever Textile Mills, Inc. executed a chattel mortgage contract in favor of Makati
Leasing and Finance Corporation covering certain raw materials and machinery. Upon default, Makati
Leasing fi led a petition for judicial foreclosure of the properties mortgaged. Acting on Makati Leasings
application for replevin, the lower court issued a writ of seizure. Pursuant thereto, the sheriff enforcing
the seizure order seized the machinery subject matter of the mortgage. In a petition for certiorari and
prohibition, the Court of Appeals ordered the return of the machinery on the ground that the same
cannot be the subject of replevin 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
Wearever textiles plant would be to drill out or destroy the concrete fl oor. When the motion for
reconsideration of Makati Leasing was denied by the Court of Appeals, Makati Leasing elevated the

matter to the Supreme Court. In reversing the decision of the Court of Appeals and reinstating the
decision of the lower court, the Court explained
Examining the records of the instant case, We fi nd no logical justifi cation to exclude the rule
out, as the appellate court did, the present case from the application of the above-quoted
pronouncement. If a house of strong materials, like what was involved in the above 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 the denying the existence of
the chattel mortgage.
In rejecting petitioners assertion on the applicability of the Tumalad doctrine, the Court 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.

Board of Assessment Appeals v. Manila Electric Co. 10 SCRA 68 (1964)

FACTS:In this case, the City Assessor of Quezon City classifi ed the 40 steel towers constructed by
Meralco within Quezon City as real properties for purposes of taxation. Thus, the Board of Assessment
Appeals of Quezon City required Meralco to pay the amount of P11,651.86 as real property tax on the
said steel towers for the years 1952 to 1956. Meralco paid the amount under protest and questioned
the imposition of the tax before the Court of Tax Appeals. The CTA ordered the cancellation of the tax
declarations on the aforesaid steel towers and directed the City Treasurer of Quezon City to refund the
payments made by Meralco. The CTA ruled that the steel towers were personal properties and were
not, therefore, subject to real property tax.
ISSUE: logical question posited is whether they constitute real properties, so that they can be subject to
a real property tax
HELD: On appeal, the Supreme Court sustained the decision of the CTA holding that Granting for the
purpose of argument that the steel supports or towers in question are not embraced within the term
poles.
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

G.R. No. L-50466 May 31, 1982

CALTEX (PHILIPPINES) INC

vs.
CENTRAL BOARD OF ASSESSMENT APPEALS and CITY ASSESSOR OF PASAY
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 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.
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.
ISSUE: Is whether the pieces of gas station equipment and machinery already enumerated are subject to
realty tax.
HELD: This issue has to be resolved primarily under the provisions of the Assessment Law and the Real
Property Tax Code.
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.
That ruling is an interpretation of paragraph 5 of article 415 of the Civil Code regarding machinery that
becomes real property by destination. In the Davao Saw Mills case the question was whether the
machinery mounted on foundations of cement and installed by the lessee on leased land should be
regarded as real property forpurposes of execution of a judgment against the lessee. The sheriff treated
the machinery as personal property. This Court sustained the sheriff's action. (Compare with Machinery
& Engineering Supplies, Inc. vs. Court of Appeals, 96 Phil. 70, where in a replevin case machinery was
treated as realty).