Makati vs Weaverer

Setting: Makati

Facts: Weaverer discounted and assigned several receivables with MLFC under a Receivable
Purchase Agreement and to secure the collection of receivables, Weaverer executed a chattel
mortgage over a machinery described as an Artos Aero Dryer Stentering Range.

Upon default of Weaverer, Makati filed a extrajudicial foreclosure of the properties mortgage to
it but the sheriff failed to gain entry an was not able to effect the seizure. Makati thereafter filed
a judicial foreclosure with CFI of Rizal. The lower court issued a writ of seizure. Weaverer filed
an MR but it was denied. Finally, the lower court lifted the restraining order and enforce the
said writ. The sheriff removed the main drive motor of the subject machinery.

Weaverer filed a certiorari and prohibition proceedings with CA. The appellate court set aside
the orders of the lower court and ordered to return the drive motor on the basis that the
subject property is a real property.

Issue: Whether the machinery in suit is real or personal property from the point of view of the
parties

Ruling: 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 denying the existence of the chattel
mortgage.

It must be pointed out that the characterization of the subject machinery as chattel by the
private respondent is indicative of intention and impresses upon the property the character
determined by the parties. As stated in Standard Oil Co. of New York v. Jaramillo, 44 Phil. 630, it
is undeniable that the parties to a contract may by agreement treat as personal property that
which by nature would be real property, as long as no interest of third parties would be
prejudiced thereby.

Board vs Meralco

Setting: Manila

Facts: In 1902, Act 484 was enacted authorizing the Municipal Board of Manila to grant a
franchise to construct, maintain and operate electric street railway and electric light, heat and
power system in the City of Manila and its suburbs. Charles M. Swift was awarded the said
franchise. Thereafter, respondedn Meralco became the transferee and owner of the said
franchise.

Meralco's electric power is generated in Botocan Falls, Laguna and is transmitted to Manila by
means of electric transmission wires. The respondent Meralco has constructed 40 of these steel
towers within Quezon City, on land belonging to it. Three steel towers were inspected by the
lower court.The first tower was located at South Tatalon, España Extension, Quezon City. The
second tower was located at Kamuning Road, K-F, Quezon City, and the third tower along
Kamias Road, Quezon City.

On 1955, the petitioner City Assessor of Quezon City declared the aforesaid steel towers subject
to real property tax. After appeal to Board of Assessment Appeals, the latter required to pay the
respondent the sum of P11,651.86. Respondent filed a petition for review with CTA and the
latter rendered a decision ordering the cancellation of tax declarations and the petitioner City
Treasurer of Quezon city to refund Meralco.

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

Ruling: 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
can not 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. Each of these steel towers or supports consists of steel
bars or metal strips, joined together by means of bolts, which can be disassembled by
unscrewing the bolts and reassembled by screwing the same. 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.

Meralco vs CBAA - composed of Secretary of Finance, Secretary of Justice and Secretary of

DILG
Setting: Laguna

Facts: Meralco is a pipeline concessionaire under RA 387 or the Petrolium Act of 1949. Meralco
installed a pipeline system from Batangas to Manila buried on a surface of the public highway,
one pipe for white oil products and one for fuel and black oil which are firmly and solidly
welded together. In order to repair the said pipes, they need to remove or transfer segments of
pipeline by digging or excavating. Meralco has also permit from DPWH.

Pursuant to CA no. 470, the provincial assessor of Laguna treated the pipeline as real property.
Meralco appealed to BAA of Laguna but the latter upheld the assessment of the provincial
assessor. Meralco brought the case to CBAA which upheld the assessments. Hence, the petition
for certiorari.

Issue: Whether the pipelines are real properties

Ruling: Yes. Article 415 (1) 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 (Exh. B, p. 39,
Rollo). 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.

Insofar as the pipeline uses valves, pumps and control devices to maintain the flow of oil, it is in
a sense machinery within the meaning of the Real Property Tax Code.

It should be borne in mind that what are being characterized as real property are not the steel
pipes but the pipeline system as a whole. Meralco Securities has apparently two pipeline
systems. A pipeline for conveying petroleum has been regarded as real property for tax
purposes

CALTEX vs CBAA and City Assessor of Pasay

Setting: Pasay

Facts: Caltex loaned to gas station operators machines and equipment necessary for gas
operations under a lease agreement, in which, upon demand, the operators shall return to
Caltex the machines and equipment in good condition. The lessor of the land does not become
the owner of the machines and equipments. Caltex retains the ownership
The city assessor of Pasay treated the 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 CBAA which treated said machines and equipments as real properties. Hence, this
petition for certiorari.

Issue:

1 .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.

2. Whether the pieces of gas station equipment and machinery already enumerated are subject
to realty tax.

3. Whether 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

Ruling:

1. Improvements on land are commonly taxed as realty even though for some purposes they
might be considered personalty (84 C.J.S. 181-2, Notes 40 and 41). "It is a familiar phenomenon
to see things classed as real property for purposes of taxation which on general principle might
be considered personal property"

2. 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.

3. 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 for purposes 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).
 Benguet vs CBAA

Setting: Zambales

Facts: Benguet Corporation is engaged in mining business. It constructed tailings dam which
receives, retains and hold water coming from the operations of the mine. In 1985, the Provincial
Assessor of Zambales assessed the tailings dam as taxable improvements. Upon appeal to BAA
of Province of Zambales, the same was dismissed. Benguet elevated the matter to CBAA which
reveresed the decision of the Board but agreed that the tailings dam and lands submerged
thereunder were subject to realty tax. Hence, this petition for certiorari under Rule 65 of Rules
of Court.

Issue: Whether the tailings dam an improvement on the mine

Ruling: The Court is convinced that the subject dam falls within the definition of an
"improvement" because it is permanent in character and it enhances both the value and utility
of petitioner's mine. Moreover, the immovable nature of the dam defines its character as real
property under Article 415 of the Civil Code and thus makes it taxable under Section 38 of the
Real Property Tax Code.

Even without the tailings dam, the petitioner's mining operation can still be carried out because
the primary function of the dam is merely to receive and retain the wastes and water coming
from the mine. There is no allegation that the water coming from the dam is the sole source of
water for the mining operation so as to make the dam an integral part of the mine. In fact, as a
result of the construction of the dam, the petitioner can now impound and recycle water
without having to spend for the building of a water reservoir. And as the petitioner itself points
out, even if the petitioner's mine is shut down or ceases operation, the dam may still be used
for irrigation of the surrounding areas

RELATED CASES: Kendrick v. Twin Lakes Reservoir Co. (144 Pacific 884), an American case, where
it was declared that the reservoir dam went with and formed part of the reservoir and that the
dam would be "worthless and useless except in connection with the outlet canal, and the water
rights in the reservoir represent and include whatever utility or value there is in the dam and
headgates."

Ontario Silver Mining Co. v. Hixon (164 Pacific 498), also from the United States. This
case involved drain tunnels constructed by plaintiff when it expanded its mining operations
downward, resulting in a constantly increasing flow of water in the said mine. It was held that:
Whatever value they have is connected with and in fact is an integral part of the mine itself. Just
as much so as any shaft which descends into the earth or an underground incline, tunnel, or
drift would be which was used in connection with the mine.
 Strochecker vs Ramirez

Setting: Intramuros, Manila

Facts: There were three mortgagees and each of whom claimed preference: Fidelity & Surety
Co., Ildefonso Ramirez and Conception Ayala (her claim was rejected and she did not appeal).
The half interest in the drug business known as Antigua Botica Ramirez owned by Srta. Dolores
Del Rosario and Paul Strochecker was mortgaged to Fidelity. However, Ramirez claims that the
mortgage is not valid because the property which is the subject-matter thereof is not capable of
being mortgaged, and the description of said property is not sufficient.

Issue: Whether 1/2 interest in a drug business is a personal property which can be mortgaged

Ruling: With regard to the nature of the property thus mortgaged, which is one-half interest in
the business above described, such interest is a personal property capable of appropriation and
not included in the enumeration of real properties in article 335 of the Civil Code, and may be
the subject of mortgage. All personal property may be mortgaged.

Moreover, the appellant cannot deny the preferential character of the mortgage in favor of the
Fidelity & Surety Co. because in the very document executed in his favor it was stated that his
mortgage was a second mortgage, subordinate to the one made in favor of the Fidelity & Surety
Co.

Chua Guan vs Samahang Magsasaka Inc.

Setting: Cabanatuan, Nueva Ecija

Facts: Gonzalo H. Co Toco was the owner of 5,894 shares of the capital stock of the Samahang
Magsasaka, Inc. Co toco, a resident of Manila, mortgaged and delivered the certificate of stocks
to Chua Chiu to guarantee the payment of P20,000.00. Said mortgage was duly registered in the
office of RoD of Manila and in the office of said corporation. Chua Chiu assigned all his right and
interest in the said mortgage to the plaintiff and the assignment was registered in the same
place. When Co Toco defaulted in payment, Chua Guan foreclosed said mortgage and delivered
certificates of stocks and copies of the mortgage and assignment to the sheriff of the City of
Manila. On auction, Chua Guan being the highest bidder, the sheriff executed in his favor the
certificate of sale of said shares.

Chua Guan demanded with the corporation to issue new certificates in his name. However,
officers of the said corporation refused. Chua Guan filed a petition for writ of mandamus to
cancel the old certificates and issue new ones in his name.

Issue: Whether shares of stock in a corporation are chattels in the sense in which that word is
used chattel mortgage statutes.

Ruling: The practical application of the Chattel Mortgage Law to shares of stock of a corporation
presents considerable difficulty and we have obtained little aid from the decisions of other
jurisdictions because that form of mortgage is ill suited to the hypothecation of shares of stock
and has been rarely used elsewhere. In fact, it has been doubted whether shares of stock in a
corporation are chattels in the sense in which that word is used chattel mortgage statutes. This
doubt is reflected in our own decision in the case of Fua Cun vs. Summers and China Banking
Corporation (44 Phil., 705), in which we said:

". . . an equity in shares of stock is of such an intangible character that it is somewhat difficult to
see how it can be treated as a chattel and mortgaged in such a manner that the recording of the
mortgage will furnish constructive notice to third parties. . . ."And we held that the chattel
mortgage there involved: "at least operated as a conditional equitable assignment." In that case
we quoted the following from Spalding vs. Paine's Adm'r. (81 Ky., 416), with regard to a chattel
mortgage of shares of stock:

"These certificates of stock are in the pockets of the owner, and go with him where he may
happen to locate, as choses in action, or evidence of his right, without any means on the part of
those with whom he proposes to deal on the faith of such a security of ascertaining whether or
not this stock is in pledge or mortgaged to others. He finds the name of the owner on the books
of the company as a subscriber of paid-up stock, amounting to 180 shares, with the certificates
in his possession, pays for these certificates their full value, and has the transfer to him made on
the books of the company, thereby obtaining a perfect title. What other inquiry is he to make,
so as to make his investment certain and secure? Where is he to look, in order to ascertain
whether or not this stock has been mortgaged? The chief office of the company may be at one
place today and at another tomorrow. The owner may have no fixed or permanent abode, and
with his notes in one pocket and his certificates of stock in the other — the one evidencing the
extent of his interest in the stock of the corporation, the other his right to money owing him by
his debtor, we are asked to say that the mortgage is effectual as to the one and inoperative as to
the other."

Bachrach Motor Co. vs Ledesma

Setting: Manila
Facts: Ledesma pledged and mortgaged real properties and his stock certificates/shares of
Central Talisay-Silay Milling Co. with PNB to answer for the debts/obligations contracted by the
said corporation with the said bank.

Thereafter, PNB brought an action with CFI of Bacolod against Ledesma and his wife Concepcion
Diaz for the recovery of the said mortgage credit. However, PNB amended its complaint and
included Bacharach Motor Co. as defendant because they claim to have rights to some of the
subject matter which was denied by the latter. The lower court rendered judgment in favor of
PNB and sentenced Ledesma to pay the amount claimed by the said bank and upon failure to
satisfy said amount, the real properties will be sold at public auction. December 20, 1929:

Bachrach brought an action in the CFI of Iloilo against the Talisay-Silay Milling Co., Inc., to
recover P13,850 against the bonus or dividend had declared in favor of Ledesma as one of the
owners of the hacienda which had been mortgaged to the PNB to secure the obligation of the
Talisay-Silay Milling Co., Inc. in favor of said bank. The lower court rendered judgement in favor
of Bacharach.

Issue: Whether shares of stock are real properties

Bicera vs Teneza

Setting: Lagangilang

Facts: Petitioner Bicerra were the owners of a house situated in Lagangilang. However, in 1957,
Defendants Teneza et. al forcibly demolished the house and claimed to be the owner thereof.
The materials of the dismantled house were placed in the custody of the barrio lieutenant. The
defendants refused to restore the house or to deliver the materials. The petitioner filed a case
in CFI of Abra praying that they be declared the owners of the house. and the defendants to pay
the damages.

Issue: Whether the property in question cease to exist after being demolished.

Ruling: The dismissal of the complaint was proper. A house is classified as immovable property
by reason of its adherence to the soil on which it is built (Art. 415, par. 1, Civil Code). This
classification holds true regardless of the fact that the house may be situated on land belonging
to a different owner. But once the house is demolished, as in this case, it ceases to exist as such
and hence its character as an immovable likewise ceases.

US vs Carlos
 Setting: Manila
Facts: Carlos is a consumer of electricity of MERALCO for a building containing his residence.
Upon suspicion that more light was being used, the representatives of MERALCO installed
additional meter on a pole outside the defendant’s house. A search warrant was duly served by
police officer (Hartpence) for the examination of defendant’s house and found “jumper” device
that consumes ten times greater than the normal meter in the drawer of the accused.

The trial court ruled that the electricity is subject of larceny. On hearing, the counsel for the
defendant insists that the electricity stolen by the defendant could not be the subject of the
crime of larceny because it is not tangible, movable or something which could be taken in
possession and carried away.

Issue: Whether electricity is a personal property capable of appropriation

Ruling: Electricity, the same as gas, is a valuable article of merchandise, bought and sold like
other personal property and is capable of appropriation by another. So no error was committed
by the trial court in holding that electricity is a subject of larceny.

SERGS vs PCI Leasing

Setting: Quezon City

Facts: SERGS, engaged in a chocolate-making industry, entered into a Lease Agreement with PCI
Leasing, the former mortgaging the machines and equipments . Upon default of payment, PCI
filed with RTC-QC a complaint for a sum of money with an application for a writ of replevin. The
writ was granted and the lower court directed the sheriff to seize and deliver the machines and
equipment to PCI Leasing.

Petitioner filed a motion to defer the enforcement of the writ and asserted that the properties
sought to be seized were immovable as defined in Article 415 of the Civil Code. They also
argued that the agreement would be prejudicial to innocent third parties who are the workers.

The sheriff, in enforcing the writ of seizure, took possession of the remaining properties. He was
able to take two more, but was prevented by the workers from taking the rest. On appeal, the
CA ruled the the subject properties are personal. Hence, this petition.

Issue: 1. Whether or not the machineries purchased and imported by SERGS became real
property by virtue of immobilization.

2. Whether said machines cannot be the subject to writ of seizure for being a real property.
Ruling:

1. 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. Indisputably, 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.[16] In that sense, petitioners
are correct in arguing that the said machines are real, not personal, property pursuant to Article
415 (5) of the Civil Code.

2. Be that as it may, we disagree with the submission of the petitioners that the said machines
are not proper subjects of the Writ of Seizure. The Court has held that 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.

The Lease Agreement clearly provides that the machines in question are to be considered as
personal property. Specifically, Section 12.1 of the Agreement reads as follows:[21]

12.1 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.

Clearly then, petitioners are estopped from denying the characterization of the subject
machines as personal property. Under the circumstances, they are proper subjects of the Writ
of Seizure.

It should be stressed, however, that our holding -- that the machines should be deemed
personal property pursuant to the Lease Agreement is good only insofar as the contracting
parties are concerned.[22] Hence, while the parties are bound by the Agreement, third persons
acting in good faith are not affected by its stipulation characterizing the subject machinery as
personal.[23] In any event, there is no showing that any specific third party would be adversely
affected.

FELS Energy vs The Province of Batangas

 Setting: Calaca, Batangas

Facts: NAPOCOR entered into a lease contract with Polar Energy over 3x30 MW diesel engine
power barges moored at Balayan Bay in Calaca, Batangas. Under the agreement, it was stated
that the NAPOCOR shall be responsible for the payment of all taxes imposed by the National
Government. Subsequently, Polar assigned its rights under the Agreement to FELS which was
opposed by NAPOCOR.

In 1995, FELS received an assessment of real property taxes on the power barges from the
provincial assessor of Batangas City. FELS referred the matter to NPC. The latter sought
reconsideration of the assessment but it was denied. NPC filed a petition to LBAA praying that
the barges be declared non-taxable items.

Before the case was decided by LBAA, NPC filed a Manifestation informing the LBAA that the
DOF rendered an opinion stating that the power barges are not real property subject to real
property assessment. Thereafter, LBAA rendered a decision ruling that the power plant facilities,
while they are movable or personal property, are considered real property for taxation purposes
because they are installed at a specific location with a character of permanency.

Issue: Whether the power barges are immovable property be destination

Ruling: Power barges are categorized as immovable property by destination, being in the nature
of machinery and other implements intended by the owner for an industry or work which may
be carried on in a building or on a piece of land and which tend directly to meet the needs of
said industry or work.

Article 415 (9) of the New Civil Code provides that docks and structures which, though floating,
are intended by their nature and object to remain at a fixed place on a river, lake, or coast are
considered immovable property.

Laurel vs Abrogar

Setting: Makati

Facts: Petitioner Laurel stole international long distance calls belonging to PLDT by routing and
completing international long distance calls using lines, cables, antenae, thereby stealing the
business from PLDT. Petitioner filed a MTQ stating that the crime do not constitute the felony of
theft since international long distance calls and the business of providing telecommunication or
telephone services are not personal properties under Article 308 of RPC.

Respondent insists that they are personal properties for being capable of appropriation.
Issue: Whether a telephone call is personal property.

Ruling: The term personal property in the Revised Penal Code should be interpreted in the
context of the Civil Code provisions. If a property is capable of appropriation, it is considered as
personal property. Business is likewise not enumerated as personal property under the Civil
Code. Just like interest in business, however, it may be appropriated. Following the ruling in
Strochecker v. Ramirez, business should also be classified as personal property. Since it is not
included in the exclusive enumeration of real properties under Article 415, it is therefore
personal property.

A telephone call, therefore, is electrical energy. It was also held in the assailed Decision that
intangible property such as electrical energy is capable of appropriation because it may be taken
and carried away. Electricity is personal property under Article 416 (3) of the Civil Code, which
enumerates forces of nature which are brought under control by science.