Cases:

US vs Tambunting 41 Phil 364

Berkenkotter vs Cu Unjieng 61 Phil 663
Philippine Refining Co. vs Jarque 61 Phil 229
Mindanao Bus Co. vs. City Assessor 6 SCRA 197
Davao Sawmill vs. Castillo 61 SCRA 709
Prudential Bank vs Panis 153 SCRA 390
Caltex vs Central Board of Assessment Appeals114 SCRA 273
Benguet Corp. vs CBAA 218 SCRA 271
Tumalad vs Vicencio et al 41 SCRA 143
Serg's Products vs PCI Leasing 338 SCRA 499

Case Digests:
US vs Tambunting 41 Phil 364

Facts:
Manuel Tambunting and his wife were occupants of the upper floor of a house that had
previously been installed by the Manila Gas Corporation with apparatus for the delivery
of gas.

It was found out that gas was being used, without the knowledge and consent of the gas
company, for cooking in the quarters occupied by the defendants.

Issue:
whether gas can be the subject to larceny.
(Larceny: The unauthorized taking and removal of the Personal Property of another by
an individual who intends to permanently deprive the owner of it.)

Held: Yes.
There is nothing in the nature of gas used for illuminating purposes which renders it
incapable of being feloniously taken and carried away. It is a valuable article of
merchandise, bought and sold like other personal property, susceptible of being severed
from a mass or larger quantity and of being transported from place to place. Likewise
water which is confined in pipes and electricity which is conveyed by wires are subjects
of larceny. (Quoted from "Larceny," at page 34, Vol. 17, of Ruling Case Law)

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Berkenkotter vs Cu Unjieng 61 Phil 663

Berkenkotter - plaintiff-appellant
CU UNJIENG E HIJOS - defendants-appellees.

Facts:
The Mabalacat Sugar Co., Inc., owner of the sugar central, obtained from the
defendants, Cu Unjieng e Hijos, a loan secured two parcels and land "with all its
buildings, improvements, etc. and whatever forms part or is necessary complement of
said sugar-cane mill ... now existing or that may in the future exist is said lots."

Shortly after said mortgage had been constituted, the Mabalacat Sugar Co., Inc., bought
additional machinery and equipment. Plaintiff, B.H. Berkenkotter, was asked by the
company president, B.A. Green, to advance the necessary amount for the purchase of
said machinery and equipment. Plaintiff was promised to get reimbursement when an
additional loan from the mortgagees is obtained. Green failed to obtain said loan.

Appellant's Contention:
Installation of the machinery and equipment claimed by him in the sugar central was not
permanent in character ... in case Green should fail to obtain an additional loan said
machinery and equipment would become security for the company's debt to him.

Issue:
Whether or not the additional machinery and equipment is considered an improvement
subject to the mortgage executed in favor of Mabalacat Sugar Co., Inc. by Cu Unjieng e
Hijos.

Held:
Yes.
The installation of the machinery and equipment in question in the central converted
them into real property by reason of their purpose. As essential and principal elements
of a sugar central, without them the sugar central would be unable to function or carry on
the industrial purpose for which it was established. Inasmuch as the central is permanent
in character, the necessary machinery and equipment installed for carrying on the sugar
industry for which it has been established must necessarily be permanent.

Case Cited: Bischoff vs. Pomar and Compania General de Tabacos (cited with approval
in the case of Cea vs. Villanueva)

(1) in a mortgage of real estate, the improvements on the same are included; therefore,
all objects permanently attached to a mortgaged building or land, although they may
have been placed there after the mortgage was constituted, are also included.

(2) when it was stated in the mortgage that the improvements, buildings, and machinery
that existed thereon were also comprehended, it is indispensable that the exclusion
thereof be stipulated between the contracting parties.

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Philippine Refining Co. vs Jarque 61 Phil 229

Facts:
The Philippine Refining Co., Inc., and Francisco Jarque executed three mortgages on
the motor vessels Pandan and Zaragoza. A fourth mortgage was executed by Francisco
Jarque and Ramon Aboitiz on the motorship Zaragoza.

Thereafter, a petition was filed with the CFI of Cebu praying that Francisco Jarque be
declared an insolvent debtor, said petition was granted and an assignment of all the
properties of the insolvent was executed in favor of Jose Corominas.

Neither of the first two mortgages had appended an affidavit of good faith. The third
mortgage contained such an affidavit, but this mortgage was not registered until within
thirty days prior to the commencement of insolvency proceedings against Jarque while
the fourth mortgage was entered in the chattel mortgage registry within the thirty-day
period before the institution of insolvency proceedings.

Judge Jose M. Hontiveros declined to order the foreclosure of the mortgages and
sustained the special defenses of fatal defectiveness of the mortgages.

Issue:
Whether or not the mortgages of the vessels are governed by the Chattel Mortgage Law.
(Chattel: Moveable items of property which are neither land nor permanently attached to
land or a building, either directly or vicariously through attachment to real property.)

Held:
Yes. Vessels are considered personal property under the civil law. Since the term
"personal property" includes vessels, they are subject to mortgage agreeably to the
provisions of the Chattel Mortgage Law.

A mortgage on a vessel is in the nature a chattel mortgage. The only difference between
a chattel mortgage of a vessel and a chattel mortgage of other personalty is that it is not
now necessary for a chattel mortgage of a vessel to be noted n the registry of the
register of deeds, but it is essential that a record of documents affecting the title to a
vessel be entered in the record of the Collector of Customs at the port of entry.

An affidavit of good faith appended to the mortgage and recorded therewith is required
(Sec. 5 of the CM Law). The absence of the affidavit vitiates a mortgage as against
creditors and subsequent encumbrancers. A chattel mortgage of a vessel lacking an
affidavit of good faith, is unenforceable against third persons.

Note:
If the mortgage is constituted over a vehicle, it must also be made with the LTO (if a
private vehicle) or LTFRB (if it’s a public vehicle.) If it’s a ship, it’s made with the
MARINA.

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Mindanao Bus Co. vs. City Assessor
6 SCRA 197

MINDANAO BUS COMPANY - petitioner

CITY ASSESSOR, et al - respondents

Facts:
Petitioner is engaged in a public utility business, solely engaged in transporting
passengers and cargoes by motor trucks, over its authorized lines in Mindanao. It owns
a main office and branch offices. To be found in their offices are machinery and
equipment, which were assessed by the City Assessor as real properties.

The Court of Tax Appeals held that the petitioner Mindanao Bus Company is liable to
the payment of the realty tax on its maintenance and repair equipment.
Petitioner appealed the assessment, contending that said equipment are not realty.
On the other hand, respondents contend that said equipments, though movable, are
immobilized by destination, citing Art. 415 (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.

Issue:
Whether or not the equipment may be deemed immovable within the meaning of Art. 415
of the NCC.

Held:
No.
Movable equipment to be immobilized in contemplation of law must first be essential and
principal elements of an industry or works without which such industry or works would
be unable to function or carry on the industrial purpose for which it was established.

The tools and equipment in question in this instant case are, by their nature, not
essential and principle municipal elements of petitioner's business of transporting
passengers and cargoes by motor trucks. They are merely incidentals — acquired as
movables and used only for expediency to facilitate and/or improve its service. Even
without such tools and equipment, its business may be carried on as when if its rolling
equipment is repaired or serviced in another shop belonging to another.

Aside from the element of essentiality Art. 415 (5) also requires that the industry or
works be carried on in a building or on a piece of land. In the case at bar the equipments
in question are destined only to repair or service the transportation business, which is
not carried on in a building or permanently on a piece of land, as demanded by the law.

Hence, the equipments in question are not absolutely essential to the petitioner's
transportation business, and petitioner's business is not carried on in a building,
tenement or on a specified land, so said equipment may not be considered real estate.

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Davao Sawmill vs. Castillo 61 SCRA 709

Davao Sawmill - plaintiff-appellant

Castillo et al - defendants-appellees

Facts:
The Davao Saw Mill Co., Inc., is the holder of a lumber concession from the government.
The land upon which the business was conducted belonged to another person. On the
land the sawmill company erected a building which housed the machinery used by it.
Some machines placed in the building are mounted on foundations of cement.

Part of the lease agreement between Davao Sawmill (lessee), and the lessor was a
stipulation in which after the lease all buildings and improvements would pass to the
ownership of the lessor, which would not include machineries and accessories.

Issue:
whether or not the sawmill machineries is classified as real property (immovable).
Held:
No. The machinery must be classified as personal property.

The lessee placed the machinery in the building erected on land belonging to another,
with the understanding that the machinery was not included in the improvements which
would pass to the lessor on the expiration of the lease agreement.

The lessee also treated the machinery as personal property in executing chattel
mortgages in favor of third persons. As consequence of the judgment rendered in
favor of the Davao Light and Power Co. against Davao Sawmill, the machineries in
question were levied upon by the sheriff as personalty (as opposed to a realty) pursuant
to a writ of execution obtained without any protest being registered.

Furthermore, machineries 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 temporary right, unless such person acted as the agent of the owner.
(Citing US SC decision in Valdes vs. Central Altagracia)

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Prudential Bank vs Panis 153 SCRA 390

Facts:
Spouses Magcale secured a loan with Prudential Bank. To further secure said loan, the
spouses executed a Real Estate Mortgage over the residential building, with a right to
occupy the lot. The Real Estate Mortgage also included information about the Sales
Patent applied for by the spouses for the lot to which the building stood. The spouses
obtained a second loan, which was secured by another Real Estate Mortgage over the
same properties. The Sec. of Agriculture issued a Miscellaneous Sales Patent over the
lot which was then mortgaged to the bank in favor of the Macales.

The spouses defaulted on both loans. Thus, the property was extrajudicially foreclosed,
and sold in a public auction.

(Miscellaneous Sales Patent: RA 730 is an act permitting sale without public auction of
alienable and disposable lands of the public domain for residential purpose. The
application to purchase the land is called the Miscellaneous Sales Application and the
corresponding patent is called the Miscellaneous Sales Patent.)

The RTC held that the Real Estate Mortgage was null and void.

Issue:
Whether or not a valid real estate mortgage can be constituted on the building erected
on the land belonging to another.

Held:
Yes.
The inclusion of "building" distinct and separate from the land In the enumeration
of properties under Article 415 of the NCC can only mean that the building itself is an
immovable property.
A building by itself may be mortgaged apart from the land on which it has been built.
Such a mortgage would be still a real estate mortgage for the building would still be
considered immovable property even if dealt with separately and apart from the land.
Furthermore, the fact that the spouses executed the Real Estate Mortgage over the
building before executing the second Real Estate Mortgage over the land proved that the
spouses intended for the building to be an immovable separate and distinct from the
land on which it is built.

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Caltex vs Central Board of Assessment Appeals
114 SCRA 273

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 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. But The city board of tax appeals ruled that they are
personalty.

Issue:
Whether or not the subject machinery and equipment installed by Caltex in its gas
stations should be considered realty.

Held:
Yes.
Improvements on land are commonly taxed as realty. The equipment and machinery as
appurtenances to the gas station building or shed owned by Caltex 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 and fixed 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.

(appurtenance: an object that is used with or for something)

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Benguet Corp. vs CBAA 218 SCRA 271

Facts:
In 1985, the Provincial Assessor of Zambales assessed the petitioner's tailings dam as
taxable improvements.

Petitioner contended that the the dam cannot be subjected to realty tax as a separate
and independent property because it does not constitute an "assessable improvement"
on the mine because it is an integral part of the mine.

To supporty its contention, petitioner cited the following cases:

(1) Municipality of Cotabato v. Santos
dikes and gates constructed in connection with a fishpond operation as integral parts of
the fishpond.
(2) Bislig Bay Lumber Co. v. Provincial
Government of Surigao the realty tax was not imposed on a road constructed by the
timber concessionaire because the government had the right to use the road to promote
its varied activities.
(3) Kendrick v. Twin Lakes Reservoir Co. (American Case)
A reservoir dam went with and formed part of the reservoir
(4) Ontario Silver Mining Co. v. Hixon (Canada)
Involved drain tunnels constructed when mining operations were expanded... it was held
that "whatever value they have is connected with and in fact is an integral part of the
mine itself."

On the other hand, Solicitor General's argues that the dam is an assessable
improvement because it enhances the value and utility of the mine.

Issue: Whether or not the tailings dam in question is an "improvement" upon the land
within the meaning of the Real Property Tax Code.

Held:
Yes.
The court ruled 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. 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.

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Tumalad vs Vicencio et al 41 SCRA 143

Tumalad - plaintiffs-appellees
Vicencio et al - defendants-appellants.

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 an interest of 12% pa.

When defendants-appellants defaulted in paying, the mortgage was extrajudicially

foreclosed. The house was sold at a public auction and the plaintiffs were the highest
bidder. Thereafter, the plaintiffs filed an action for ejectment against the defendants,
praying that the latter vacate the house as they were the proper owners.

Defendants-appellants, questioned the legality of the chattel mortgage. They maintained

the nullity of the chattel mortgage based on two grounds:
(a) that, their signatures on the chattel mortgage were obtained through fraud, deceit, or
trickery; and
(b) that the subject matter of the mortgage is a house of strong materials, and, being an
immovable, it can only be the subject of a real estate mortgage and not a chattel
mortgage.
Issue: Whether or not the property in question can be the subject matter of a chattel
mortgage.

Held:
Yes.
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 estop 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 or intends to treat the house
as chattel, so that they should not now be allowed to make an inconsistent stand
by claiming otherwise. Moreover, the subject house stood on a rented lot to which
defendats-appellants merely had a temporary right as lessee, and although this can not
in itself alone determine the status of the property, it does so when combined with other
factors to sustain the interpretation that the parties, particularly the mortgagors, intended
to treat the house as personalty.

Furthermore, unlike the cases of Lopez vs. Orosa and Leung Yee vs. F. L. Strong
Machinery, wherein third persons assailed the validity of the chattel mortgage, it is the
defendants-appellants themselves, as debtors-mortgagors, who are attacking the validity
of the chattel mortgage in this case. The doctrine of estoppel therefore applies to the
herein defendants-appellants, having treated the subject house as personalty.

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Serg's Products vs PCI Leasing 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 machinery, subject of a chattel mortgage executed by petitioner
in favor of PCI.

Machinery of petitioner were seized and petitioner filed a motion for special
protective order. It asserts that the machinery were real property and could not be
subject of a chattel mortgage.

Issue: Whether or not the machinery purchased and imported by SERG’S became real
property by virtue of immobilization.

Held:
The machinery 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.

Note:
*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.

*Writ of Replevin: an action or a writ issued to recover an item of personal property

wrongfully taken; a legal remedy in which a court requires a defendant to return specific
goods to the plaintiff at the beginning of the action.

Summary:
US vs Tambunting
Under Art. 416 (3) of the NCC, forces of nature which are brought under the control of
science such as gas, electricity, water, etc. are considered to be (personal) property.
Therefore, these can be the subjest of larceny (or theft).

Berkenkotter vs Cu Unjieng
Machinery and equipment deemed as essential and principal elements of an industry or
work is classified as immovable under Art. 415 (5) of the NCC.

Philippine Refining Co. vs Jarque

Vessels (as well as land vehicles) are considered personal property under the civil law. A
mortgage on a vessel is in the nature a chattel mortgage.

Mindanao Bus Co. vs. City Assessor

For movable equipment to be immobilized in contemplation of law, (1) it must be
absolutely essential to the business (industry or work); amd (2) it must be in the place
where said business id carried on.

Davao Sawmill vs. Castillo

Machineries only becomes immobilized when placed in a building by the owner of the
property or building, but not when so placed by a tenant, usufructuary, or any person
having temporary right over the property, unless such person acted as the agent of
the owner.

Prudential Bank vs Panis

A valid real estate mortgage can be constituted on the building erected on the land
belonging to another. The inclusion of "building" distinct and separate from the land
In the enumeration of properties under Article 415 (1) of the NCC can only mean that the
building itself is an immovable property.

Caltex vs Central Board of Assessment Appeals

Improvements on land are commonly taxed as realty moreso when the fixtures are
necessary to the operation of the industry or work and have been attached and fixed (or
embedded) permanently to the site where the business is carried on.
Art. 415 (3) and (5) of the NCC applies.

Benguet Corp. vs CBAA

an "improvement" on a property is permanent in character and enhances both the value
and utility of said property. Its immovable nature efines its character as real property.

Tumalad vs Vicencio
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.
Principle of estoppel: by declaring his house as chattel, the owner is etopped from
subsequently claiming otherwise.

Serg's Products vs PCI Leasing

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.