Lopez v.

Orosa
G.R. L-10817-18
Feb. 28, 1958
Felix, J.
Facts
-

Lopez (owner of Sawmill company) was persuaded by Orosa to invest

in Plaza Theatre
o He would supply timber and would be paid on demand
Only P20, 848.50 was paid out of P62, 255.85 leaving a balance of P
41, 771.35
Lopez was informed that the pres. Would obtain a bank loan by
mortgaging the land of the theatre
o Did not know that before that, they had already obtained a loan
from PNB iwht Luzon Surety Co. as surety who in turn mortgaged
on the land and building as counter-surety
o Mortgage did not appear when land was registered
Upon demand form Lopes, Orosa executed a deed of assignment of his
420 shares of stock on Plaza Theatre, Inc.
Still unpaid, he filed a complaint with the CFI (pay/land/shares be sold
at public auction and proceeds become payment)
Orosas defense:
o 420 shares assigned and conveyed as direct security for
payment are personal properties, therefore Lopez cannot recover
any deficiency if the proceeds of the sale are insufficient to cover
the obligation
Surety co., upon discovering the land was registered under the Torrens
System filed a petition to annotate the rights and interests of the co.
over properties
o Opposed by Lopez, asserting the amount demanded by him
constituted a preferred lien over the properties

Issue/Held/Ratio
-

W/N a materialmans lien for the value of the materials used in

the construction of a bldg. attaches to said structure alone and
does not extend to the land on which the building is adhered
to
o NO; Generally, real estate connotes both the land and the bldg..
constructed thereon, the inclusion of the bldg.., separate and
distinct from the land, in the enumeration of Art. 1923 of what
may constituted real properties means that a bldg. is by itself an

immovable property. In the absence of any specific provision to

the contrary, a bldg.. is an immovable property irrespective of
w/n said structure and the land on which it is adhered to belong
to the same owner
W/N lover court and CA erred in not providing that the material
mans liens is superior to the mortgage executed in favor of
surety company on the bldg. and the land
o NO; The lien in favor of Lopez attaches only to the bldg. and to
no other property of the obligors. Law gives preference to
unregistered refectionary credits only with respect to the real
estate upon which the refection or work was made. Therefore,
the lien attaches merely to the immovable property for the
construction or repair of which the obligation was incurred

Associated Insurance and Surety v. Iya

G.R. L-10837-38
May 30, 1958
Felix, J.
Facts
-

Sps. Valino own a house for which they executed and registered a
chattel mortgage as a counter-guaranty for a bond with Associated
Insurance in order to purchase rice from NARIC on credit
Land was still registered under Phil. Realty Corp. (sellers of the house
by installment)
Subsequently, as security for indebtedness, Sps. Executed a real estate
mortgage over the lot and house in favor of Iya, which was duly
registered and annotated at the back of the title
Valino failed to pay NARIC and surety co. was compelled to pay
pursuant to the bond and Associated Insurance demanded
reimbursement from Valino
Thereafter, upon failure to pay, they foreclosed on the chattel
mortgage over the house and subsequently bought it at a public
auction
Upon learning of the real estate mortgage, Associated Insurance filed a
case praying for exclusion of the house from the real estate mortgage
and declaration of their right of ownership over the house
Iyas defense:
o Due to the real estate mortgage, she acquired a real right over
the lot and house, that the public auction pursuant to the chattel
mortgage is null and void for noncompliance with the form
required by law

Iya filed a case demanding payment of the Sps. Debt + interest,

including Associated Insurance as defendant
Associated Insurances defense:
o Lot on which the house was build did not belong to the sps. At
the time the chattel mortgage was executed, then the house is
only considered as personal property

Issue/Held/Ratio
-

W/N the house is personal/real property

o Real; cites Lopez v. Orosa
o a bldg.. cannot be divested of its character of a realty by the fact
that the land it was built on belongs to another
o The execution of the chattel mortgage, then, is null and void.
Where the interest conveyed is in the nature of a real property,
the registration of the document in the registry of chattels is a
futile act and thus produces no effect.
o Neither have they acquired ownership through the public auction
because a mortgage creditor who purchases real properties at
an extrajudicial foreclosure sale thereof by virtue of a chattel
mortgage constituted in his favor, which mortgage has been
declared null and void with respect to said real properties ,
acquires no right thereto by virtue of said sale (De la Riva v. Ah
Keo)

Bicerra v. Teneza
G.R. L-16218
Nov. 29, 1962
Makalintal, J.
Facts
-

Apellants are owners of a house that was forcibly demolished by those

claiming to be owners thereof
The dismantled materials were placed in the custody of the barrio
lieutenant
Apellates refused to restore the house nor deliver the materials
resulting in appellants suffering of damages

Issue/Held/Ratio
-

W/N action involves title to real property, therefore cognizable

by the CFI

o NO; A house is classified as immovable property by reason of its

adherence to the soil on which it is built and regardless of who
owns the land it was built on.
o BUT once the house is demolished, it ceases to exist as such and
hence its character as an immovable also ceases.
Leung Yee v. Strong Machinery Co.
G.R. L-11658
Feb. 15, 1918
Carson, J.
Facts
-

Action to recover possession of bldg.. from machinery co.

Compania Agricola ilipina bought rice-cleaning machinery from the
defendant and executed a chattel mortgage to secure payment of the
purchase price, the deed of which included the building of strong
materials in which the machinery was installed without any reference
to the land on which it stood
Mortgaged property was sold when the debt was left unpaid
A few weeks after, the Compania executed a deed of sale of the land
on which the building stood to the machinery company (not registered
and makes no reference to the building erected)
When the chattel mortgage was executed, the Compania executed
another mortgage to the plaintiff upon the bldg., separate and apart
from the land to secure payment of the balance of its indebtedness
under a contract for the construction of the bldg..
o Unpaid -> plaintiff secured judgment, levied execution, and
bought it at sheriffs sale then had the certificate of sale duly
registered in the land registry
When the execution was levied upon the bldg.., the defendant
machinery co. (in possession) filed a sworn statement setting up its
claim of title and demanding release of the property form the levy
o Plaintiff bought property at public auction from sheriff

Issue/Held/Ratio
-

W/N plaintiff or machinery company own the building

o YES; Art. 1473 CC: If the same thing is sold to different vendees,
ownsership shall transfer to the person who first took possession
thereof in good faith, if it is personal property. If it is real
property, it will belong to the person acquiring it who first
recorded it in the registry. Should there be no entry, the property
shall belong to the person who first took possession of it in good

o
o

o
o

faith, and, in the absence thereof, the person who presents the
oldest title, provided there is good faith.
Registry in the chattel mortgage registry has no legal effect
because it is for personal property
Building of strong materials is real property and the mere fact
that the parties seem to have dealt with it separate and apart
from the land did not change its character as real property.
Inscription on public record presupposes good faith of hi who
enters such inscription
Based on the 2nd paragraph, then, the bldg.. belongs to the
plaintiff. However, since the plaintiff did not act in good faith, it
still belongs to the machinery co. under the 3rd paragraph of
1473.
Plaintiff was duly notified that the machinery co. had
bought the bldg.. from plaintiffs judgment debtor and had
gone into possession long prior to the sheriffs sale and
was in possession at the time when the sheriff executed
the levy

Standard Oil Co v. Jaramillo

G.R. L-20329
March 16, 1923
Street, J.
Facts
-

Mandamus to compel resp., register of deeds, to record in the proper

register a document purporting to be a chattel mortgage
De la Rosa was the lessee of land and owner of the house thereon
o Executed chattel mortgage conveying the leasehold interest on
the building and lot to the petitioner by way of mortgage
Upon examination, Jaramillo refused to register it because he was of
the opinion that it was not a chattel mortgage because the interest
therein mortgaged did not appear to personal property

Issue/Held/Ratio
-

W/N Resp. can validly refuse to register the said mortgage

o NO; Duty to accept the proper fee and place the instrument on
record because the duties of a register of deeds to the
registration of chattel mortgage are of a purely ministerial
character; and no provision of law can be cited which convers
upon him and judicial or quasi-judicial power to determine the
nature of any document of which registration is sought as a

chattel mortgage. The efficacy of recording a chattel mortgage

consists in the fact that it operates as constructive notice of the
existence of the contract, and the legal effects of the contract
must be discovered in the instrument itself in relation with the
fact of notice. Registration adds nothing to the instrument and
affects nobodys rights except as a specifies of notice. It is
undeniable that the parties to a contract may, by agreement,
treat as personal property that which by nature would be real
property.
Punsalan v. Lacsamana
G.R. L-55729
March 28, 1983
Melencio Herrera, J.
Facts
-

Punsalan was the former registered owner of land which he mortgaged

to respondent PNB. Upon failure to pay, property was foreclosed. PNB
was the highest bidder, but obtained the title in 1977, 7 years after the
sale.
In 1974, Punsalan built a warehouse on the land, allegedly with PNBs
permission and subsequently declared it for tax purposes then leased
it for a period of 10 years
Deed of sale was issued between PNB and respondent Lacsamana
which was amended to include the building and improvements
thereon. Subsequently, she secured the title of the property
Petitioner instituted a suit for Annulment of Deed of Sale with Damages
PNB argued that the venue was improper because the building was real
property under 415 of the NCC

Issue/Held/Ratio
-

W/N respondent court erred in denying the Motion to Set Case

for Pre-trial as the case has been dismissed on the ground of
improper venue
o NO; The warehouse s real/immovable property under the NCC.
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.
o An action for 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.

Prudential Bank v. Panis

G.R. L-50008
August 31, 1987
Paras, J.
Facts
-

Sps. Magcale secured a loan from Prudential Bank and executed a

mortgage over their warehouse and its lot as security. Annotated at the
bottom of the deed of mortgage was: in the event the Sales Patent on
the lot applied for by the Mortgagors is released or issued by the
Bureau of Lands the Mortgagors hereby authorize the Register of
Deeds to hold the Registration of same until this Mortgage is cancelled,
or to annotate this encumbrance on the Title upon authority from the
Secretary of Agriculture and Natural Resources, which title with
annotation, shall be released in favor of the herein Mortgage.
(Prudential was aware of the Sales Patent)
Sps. Secured a second loan, obtaining a 2nd mortgage over the same
properties, from Prudential.
Sec. of Agriculture issued Miscellaneous Sales Patent over the land,
possessory rights over which were mortgaged to the Bank, in favor of
Sps.
Sps. Failed to pay the obligation and the properties were extra
judicially foreclosed then sold to the Bank in a public auction sale,
despite written request from the plaintiffs to the Sheriff to desist

Issue/Held/Ratio
-

W/N a valid real estate mortgage can be constituted on the

building erected on the land belonging to another
o YES; While a mortgage of land necessary includes buildings and
improvements thereon, in the absence of stipulation, still a
building by itself may be mortgaged apart from the land on
which it has been built. It would still be a real estate mortgage,
because the building is an immovable property even if dealt with
separately and apart from the land. Similarly, possessory rights
over said properties before title is vested on the grantee may be
validly transferred or conveyed as in a deed of mortgage.
W/N the Deeds of Real Estate Mortgage are Valid
o YES; In this case, the first mortgage was executed before the
issuance of the final patent and before the government was
divested of its title to the land. It is a valid mortgage.

o NO; the 2nd mortgage, though, was executed after the Sales
Patent was issued. As such, it falls under the restrictions stated in
the Public Land Act and Sec. 2 of RA 730, and is therefore null
and void.
Navarro v. Pineda
G.R. L-18456
Nov. 30, 1963
Paredes, J.
Facts
-

Pineda and his mother secured a loan from Navarro with a Deed of Real
Estate and Chattel Mortgages on a piece of land belonging to his
mother, and by way of a chattel mortgage, mortgaged his house
erected on a lot belonging to another, and a motor truck registered
under his own name (both of which were contained in one instrument)
Defendants failed to pay but were granted 2 extensions (stating that
there would be no further need for demand and no more extensions
would be requested).
Navarro filed a complaint for foreclosure of the mortgage and damages
upon failure and refusal to pay by the defendants.

Issue/Held/Ratio
-

W/N the residential house, subject of the mortgage, can be

considered a Chattel
o Under certain conditions, a property may have a character
different from that imputed to it in Art. 415 and 416. Parties to a
contract may, by agreement, treat as personal property that
which by nature would be real property. Personal property may
retain its character as such where it is so agreed by the parties
interested even though annexed to the realty. It is good only
insofar as the contracting parties are concerned. With respect to
3rd persons who are not parties to the contract, however, the
house is considered as an immovable property.
o Through the doctrine of estoppel, the parties expressly agreed to
consider the house as chattel for its smallness and mixed
materials of sawali and wood. The house was treated as personal
or movable property by the parties to the contract themselves
because it was grouped along with the truck, a personal property.
Moreover, the house was not even declared for taxation
purposes and was small and made of light construction

materials. The Iya and Lopez cases are not applicable because
the properties therein were made of strong materials and were
permanently attached to the soil. Leung Yee is also not
applicable because there it was a 3rd person who assailed the
validity of the chattel mortgage, while here it is one of the
parties to the contract who is assailing its validity.
Tumalad v. Vicencio
G.R. L-30173
Sept. 30, 1971
Reyes, J.B.L., J.
Facts
-

Defendants executed a chattel mortgage in favor of the paintiffs over

their house and over lots which were being rented as a guaranty for a
loan
Def. defaulted and the mortgage was extrajudicially foreclosed. The
ouse was sld at public auction and as the highest bidder, plaintiffs were
issued the certificate of sale. Plaintiffs commenced a case praying that
the house be vacated and its possession surrendered to them and for
defendants to pay rent until such surrender
Defendants argue that the chattel mortgage is void because it is a
houe of strong materials, and being an immovable, it can only be the
subject of a reastate mortgage and not a chattel mortgage.

Issue/Held/Ratio
-

W/N the Chattel Mortgage is Valid

o VALID; Parties to a contract may by agreement treat as personal
property that which by nature would be real property. In this
case, it is expressly designated as Chattel Mortgage (the
mortgagor voluntarily cedes, sells, and transfers by way of
Chattel Mortgage the property together with its leasehold rights
over the lot on which it is constructed). Defendants could only
have meant to convey 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.
o The house stood on a rented lot to which the defendants only
had temporary right as lessee, and though this cannot in itself
alone determine the status of the property, it does so when
combined with other factors to sustain the interpretation that the
parties intended to treat the house as personal. Under the

doctrine of estoppel, they cannot assail the treatment of the

house as personal property, for they are parties to the contract
themselves.
Makati Leasing and Finance v. Weaver Textile Mills
G.R. L-58469
May 16, 1983
De Castro, J..
Facts
-

To obtain financial accommodations from the petitioner, resp.

discounted and assigned several receivables with the former. To secure
the collection of the receivables assigned, they executed a Chattel
Mortgage over certain raw materials inventory as well as a machine.
Upon default, petitioner filed a petition for extrajudicial foreclosure.
The Sheriff assigned to implement such failed to gain entry into their
premises and was not able to seize the machinery. Pet. Filed for a
petition for judicial foreclosure with the CFI. The court issued a writ of
seizure and the Sheriff seized the main motor of the machine.
The CA ordered the return of the drive motor after ruling that the
machinery cannot be the subject of a replevin, much less of a chattel
mortgage because it is a real property under Art. 415, being attached
to the land by bolts and which could only be removed by way of drilling
or destroying the concrete floor.

Issue/Held/Ratio
-

W/N the Machinery in Suit is Real or Personal Property from

the POV of the Parties
o Cite the previous case (Tumalad)
Parties to a contract may by agreement treat as personal
property that which by nature would be real property. In
this case, it is expressly designated as Chattel Mortgage
(the mortgagor voluntarily cedes, sells, and transfers by
way of Chattel Mortgage the property together with its
leasehold rights over the lot on which it is constructed).
Defendants could only have meant to convey 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.
o No logical justification to rule out the present case from the same
pronouncement. If a house of strong materials, as what was

involved above, may be considered as personal property, there is

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. One who has so agreed is estopped
form denying the existence of the chattel mortgage.
Sergs Products Inc. v. PCI Leasing and Finance
G.R. 137705
Aug. 22, 2000
Panganiban, J.
Facts
-

Resp. PCI Leasing filed with the RTC a complaint for a sum of money
with an application or a writ of replevin
o RTC directed sheriff to seize and deliver the machineries and
equipment to PCI
Sheriff proceeded to petitioners factory, seized one machinery with
word that he would return for the other machineries
Petitioners filed for a motion for special protective order, arguing in
their reply that the properties sought were immovable under 415, the
parties agreement to the contrary notwithstanding. To give effect to
the agreement would be prejudicial to innocent 3rd parties.

Issue/Held/Ratio
-

W/N the Machineries became real property by virtue of

immobilization
o YES; the machineries are essential and principal elements of
their chocolate-making industry. They have become immobilized
by destination because they are essential and principal elements
in the industry.
o HOWEVER: Contracting parties may validly stipulate that a real
property be considered as personal. In this case, the Lease
Agreement clearly provides that the machineries in question are
to be considered as personal property. 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. Petitioners are estopped form denying the
characterization of the subject machines as personal property.
This is good only insofar as the contracting parties are
concerned. Hence, while the parties are bound by the

Agreement, 3rd persons acting in good faith are not affected by

its stipulation characterizing the subject machinery as personal.
Also, there is no showing that any specific 3rd party would be
adversely affected.
o After agreeing to a contract stipulating that a real or immovable
property be considered as personal or Movable, a party is
estopped from subsequently claiming otherwise. Hence, such
property is a proper subject of a writ of replevin obtained by the
other contracting party.
Manarang v. Ofilada
G.R. L-8133
May 18, 1956
Labrador, J.
Facts
-

Manarang obtained a loan from Esteban and secured it with a chattel

mortgage over a house of mixed materials. Upon failure to pay, he
brought an action against her in court for its recovery. Execution was
issued against the same property.
Before the house could be sold, Manarang offered to pay a sum
representing the amount of the judgment, the interest, costs, and
sheriffs fees. The sheriff reused to accept unless they pay an
additional amount representing the publication of the notice of sale in
2 newspapers.
Defendants brought this suit to compel the sheriff to accept the
amount as full payment of the judgment and to annul the published
notice of sale.
Counsel for Manarang contended that the house should be considered
as personal property and the publication of the notice of sale at public
auction in execution is unnecessary.

Issue/Held/Ratio
-

W/N the house is considered real/personal property

o YES; Among the principal criteria for determining whether
property remains personal or becomes realty are annexation to
the soil, either actual or construction, and the intention of the
parties. Personal property may retain its character as such where
it is so agreed by the parties interested even though annexed to
the realty, or where it is affixed in the soil to be used for a
particular purpose for a short period and then removed as soon
as it has served its purpose.

W/N the fact that the parties entering into a contract re: a
house gave said property the consideration of personal
property in their contract, bind the sheriff in advertising the
propertys sale at public auction as personal property?
o Rules on execution do not allow the special consideration that
parties to a contract may have desired to impart to real estate
when they are not ordinarily so. Sales on execution affect the
public and 3rd persons. The regulation governing sales on
execution are for public officials to follow. The form of properties
prescribed for each kind of property is suited to its character, not
to the character which the parties have given to it or desire to
give it. When the rules speak of personal property, property
which is ordinarily so considered is meant and when real
property is spoken of, it means property which is generally
known as real property. Regulations were never intended to suit
the consideration hat parties may have privately given to the
property levied upon. Enforcement of regulations would be
difficult were the convenience or agreement of private parties to
determine or govern the nature of the proceedings.
o The mere fact that a house was the subject of a chattel mortgage
and was considered as personal property by the parties does not
make said house personal property for purposes of the notice to
be given for its sale at public auction. This is demanded by the
need for a definite, orderly, and well-defined regulation for
official and public guidance and which would prevent confusion
and misunderstanding.

Evangelista v. Alto Surety and Insurance

G.R. L-11139
April 23, 1958
Concepcion, J.
Facts
-

Petitioner instituted a civil case for a sum of money, obtained a writ of

attachment which levied upon a house built by Rivera and leased to
him. Judgment was rendered in favor of Evangelista, who bought the
house at a public auction. Deed of sale was issued to him.
Rivera refused to surrender the house, upon the ground that he had
leased the property from Alto Surety and that the latter is not the true
owner of said property.
It appears that Alto Surety bought the house prior to the public
auction.

Issue/Held/Ratio
-

W/N a house, constructed by the lessee of the land on which it

is built, should be dealt with, for purpose of attachment, as
immovable property or as personal property
o IMMOVABLE; a true building is immovable or real, whether it is
erected by the owner of the land or by usufructuary or lessee.
Doctrine of estoppel is not applicable because there is no
contract whatsoever with respect to the status of the house
involved. (cites Manarang re: sheriffs publication)
The form of properties prescribed for each kind of property
is suited to its character, not to the character which the
parties have given to it or desire to give it. When the rules
speak of personal property, property which is ordinarily so
considered is meant and when real property is spoken of, it
means property which is generally known as real property.
Regulations were never intended to suit the consideration
hat parties may have privately given to the property levied
upon. Enforcement of regulations would be difficult were
the convenience or agreement of private parties to
determine or govern the nature of the proceedings.

Davao Sawmill v. Castillo

G.R. L-40411
Aug. 7, 1935
Malcolm, J.
Facts
-

Petitioner is the holder of a lumber concession and has operated as a

sawmill, its land belonging to another. The co. erected a bldg.. which
housed machinery used by it.
Contract of lease between parties: upon expiration of the period, all
improvements and bldgs.. introduced and erected by the party shall
pass to the exclusive ownership of the owner of the land without any
obligation to pay any amount for said improvements and bldgs.. Same
will happen if the lessee abandons the property before the expiration
of the period, provided that the machineries and accessories are not
included in the improvements which will pass to the lessor.
In another case a writ of execution was levied upon the properties now
in question as personalty by the sheriff. No 3rd party claim was filed for
such properties at the time of the sales thereof.

Petitioner has treated the machinery as personal property by executing

chattel mortgages in favor of 3rd persons in several occasions, one of
which was by assignment from the original mortgages.

Issue/Held/Ratio
-

W/N properties are personal or real

o YES; Appellant should have registered its protest on or before
the sale. While not conclusive, the characterization of the
property as chattels by appellant is indicative of intention and
impresses upon the property the character determined by the
parties.
o It is machinery not intended by the owner of any building or land
for use inconnection therewith, but intended by a lessee for use
in a bldg.. erected on the land by the latter to be returned to the
lessee on the expiration or abandonment of the lease. 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
so when placed by a tenant, a usufructuary, or any person
having only a temporary right, unless such person acted as the
agent of the owner.

Tsai v. CA
G.R. 120098
Oct. 2, 2001
Quisumbing, J.
Facts
-

Resp. Ever Textile obtained a loan from PBCom. As security, they

executed a deed of Real and Chattel Mortgage over the lot where its
factory stands, and the chattels located therein in favor of petitioner.
Later, PBCom granted a 2nd loan, secured by a Chattel Mortgage over
personal properties enumerated in a list attached thereto, similar to
those in the 1st deed. Afterwards, pet. Purchased various machines and
equipment.
Evertex filed insolvency proceedings and was declared as such. All its
assets were taken into custody of the Insolvency Court, including the
collateral, real and personal, securing the 2 mortgages.
Upon failure to pay, PBCom commenced extrajudicial foreclosure.
PBCom emerged as the highest bidder at both public auctions. PBCom
then consolidated its ownership over the lot and all the properties in it
then elased the entire factory premises to Tsai. Eventually, it sold the
factory, lock, stock, and barrel to Tsai.

Evertex filed a complaint for annulment of sale, reconveyance, and

damages alleging the foreclosure was in violation of the Insolvency
Law. Further, they alleged that PBCom illegally appropriated the
contested properties which were not included in the mortgages nor the
Notice of Sheriffs Sale.

Issue/Held/Ratio
-

W/N the inclusion of the questioned properties in the

foreclosed properties is proper
o Petitioners contend that the nature of the disputed machineries
(heavy, bolted or cemented on the real property mortgaged by
Evertex) make them ipso facto immovable under 415.
o True intention of both parties is to treat the machinery and
equipment as chattels. The form used was a Real Estate
Mortgage. If the parties intended to treat them as real property,
there should have been no need to ink a chattel mortgage
specifically mentioning the list of machineries covered. It would
have sufficed to list them as immovable. In the 2nd contract, they
refer solely to chattels.
o Assuming, arguendo, that the properties are immovable in
nature, nothing detracts the parties from treating it as chattels to
secure an obligation under the principle of estoppel.
o Because they are chattels, it should follow the Chattel Mortgage
Law which states that only those properties 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.
o Moreover, because the disputed machineries were acquired
AFTER both mortgages, it could not have been involved.
Consequently, the sale thereof to Tsai is void.

Mindanao Bus Co v. City Assessor and Treasurer

G.R. L-17870
Sept. 29, 1962
Labrador, J.
Facts
-

Resp. assessed petitioners equipment. Petitioner appealed on the

ground that the same are not realty. CTA sustained the City Assessors
ruling. Petitioners contend that the equipment, though movable, are

immobilized by destination, in accordance with 415. The equipment

are placed on wooden or cement platforms and can be moved around
and about in petitioners repair shop.
Issue/Held/Ratio
-

W/N such equipment are immovable property

o NO; Movable equipment, to be immobilized in contemplation of
the law, must first e essential and principal elements of an
industry or works without such industry or works would be
unable to function or carry on the industrial purpose for which it
was established. (essential and principal vs. incidental
machinery)
o Those mentioned here are, by their nature, not essential and
principle municipal elements of petitioners business of
transporting passengers and cargoes by motor trucks. They are
merely incidentals acquired as movables and used only for
expediency to facilitate and/or improve its service. Even without
them, its business may be carried on, as it has before the war,
without such. 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.
o Further, the industry or works must be carried on in a bldg.. or
piece of land. In this case, the machines 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 law.

Board of Assessment Appeals v. Manila Electric Co.

G.R. L-15334
Jan. 31, 1964
Paredes, J.
Facts
-

Meralco has several steel towers, used to carry high voltage current
through insulators, all over QC. City Assessor declared them for real
property tax
CTA held that the towers come within the term poles which are
declared exempt from taxes under respondents franchise.

Issue/Held/Ratio
-

W/N steel towers are poles and are, thus, exempt from tax

o YES; Def.: long, comparatively slender usually cylinidrical piece

of wood or timber/a similar typically cylindrical piece or object of
metal or the like/an upright standard to the top of which
something is affixed or by which something is supported.
o In the franchise, poles are determined based on the use to which
they are dedicated
o This contention is supported by several U.S. cases
o The word poles should not be given a restrictive and narrow
interpretation as to defeat the very object for which the franchise
was granted. It should be understood and taken as a part of the
electric power system of Meralco, for the conveyance of electric
current from the source thereof to its consumers.
Granting they are not poles, W/N they constitute real property
o NO; Para 1: They are removable and merely attached to a
square metal frame by means of bolts, which when unscrewed
could easily be dismantled and moved form place to place.
o Para 3: Not attached to an immovable in a fixed manner and
can be separated without breaking the material or causing
deterioration upon the object to which they are attached.
o Para 5: Not machineries, receptacles, instruments or
implements, and even if they were, are not intended for industry
or works on the land.

Caltex v. Central Board of Assessment Appeals

G.R. L-50466
May 31, 1982
Aquino, J.
Facts
-

Realty tax on machinery and equipment installed by Caltex in its gas

stations located on leased land (tanks, pumps, etc.). These are loaned
by Caltex to gas station operators under an appropriate lease
agreement or receipt. It is stipulated that upon demand, operators
shall return them to Caltex in good condition as when received,
ordinary wear and tear excepted. The lessor does not become the
owner.

Issue/Held/Ratio
-

W/N pieces of gas station equipment and machinery already

enumerated are subject to realty tax
o Real Property Tax Code defines:

Improvements: valuable addition made to property or an

amelioration in its condition, amounting to more than mere
repairs or replacement of waste, costing labor or capital
and intended to enhance its value, beauty or utility or to
adapt it for new or further purposes.
Machinery: machines, mech. Contrivances, instruments,
appliances and apparatus attached to the real estate,
including 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.
o Such machinery, as appurtenances to the gas station or shed
owned by Caltex and which are necessary to the operation of the
station, and which have been attached or fixed permanently to
the station or embedded therein. Thus, they are taxable
improvements and machinery within the meaning of the law.
o Caltex argues: machinery are movable in its nature and only
becomes immobilized when placed in a plant by the owner of the
property or plant but not when so placed by a tenant or one with
only a temporary right, unless such persona acted as the agent
of the owner.
o Improvements on land are commonly taxed as realty even
though for some purposes they might be considered personalty
(for purposes of taxation).

Meralco v. Central Board of Assessment

G.R. L-47943
May 31, 1982
Aquino, J.
Facts
-

Realty tax on 2 oil storage tanks installed by Meralco on a lot which it

leased from Caltex and used to store fuel oil for Meralcos power
plants. They contend that the said oil storage tanks do not fall within
any of the kinds of real property enumerated in 415 and, therefore,
cannot be categorized as realty by nature, incorporation, destination,
nor analogy. They are not attached to the land and were placed on
leased land.

Issue/Held/Ratio
-

W/N tanks are real property/are subject to realty tax

o YES; Real Property Tax Code defines:

Improvements: valuable addition made to property or an
amelioration in its condition, amounting to more than mere
repairs or replacement of waste, costing labor or capital
and intended to enhance its value, beauty or utility or to
adapt it for new or further purposes.
o While they are not embedded in the land, they may be
considered as improvements on it, enhancing its utility and
rendering it useful to the oil industry. They have been installed
with some degree of permanence as receptacles for large
amounts of oil needed by Meralco for its operation.
o Oil tanks were held to be taxable under Standard Oil Co v.
Jaramillo
o For purposes of taxation, real property may include things which
should generally be regarded as personal.