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Property Case Reviewer

Property Case Reviewer

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Published by Janz Serrano
Property Case Reviewer under Prof. EA Labitag
Property Case Reviewer under Prof. EA Labitag

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Published by: Janz Serrano on Nov 03, 2011
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1
Property Case Reviewer Prof. E.A. Labitag1
 st 
semester AY 2010-2011
 Janz Hanna Ria N. Serrano 
Case Title Quick Facts Held/Ratio/DoctrineDavao Sawmill v. Castillo
 August 7, 1935Malcolm, J.
A lessee placed machinery in a building erected on land belonging toanother, with the understanding that the machinery was not included inthe improvements which would pass on the lessor on the expiration of the lease.Lessee also treated the machinery as personal property by executingchattel mortgages in favor of 3
rd
personsThe machinery unit must be classified as a personal property.Machinery which is movable in its nature becomes immobilized whenplaced in a plant 
by the owner of the property or plant, but not whenplaced by a tenant, a usufructuary, or any person having only atemporary right, unless such person acted as an agent of the owner.Berkenkotter v. Cu Unjieng e Hijos
 July 31, 1935Villa-Real, J.
Mabalacat Sugar Co. obtained from D a loan secured by a 1
st 
mortgage on
2 parcels of land “with all its buildings, improvements, mill, steel
reailway, telephone line, apparatus, utensils and whatever forms part or
is a necessary complement of said […]
or that may in the future exist in said lots.
 After some months, MSC bought additional machinery and equipment toincrease its capacity.
Petitioner advanced the amount for the addt’l equipment, with promise
to be reimbursed.The installation of a machinery and equipment in a mortgaged sugarcentral constitutes a permanent improvement, which subjects saidmachinery and equipment to the mortgage constituted thereon.
Lopez v. Orosa, Jr. and Plaza Theatre, Inc.
February 28, 1958 Felix, J.
Orosa proposed to Lopez to invest in a theatre business, which would beerecte
d on O’s land. Lopez refused, but agreed to supply the lumber
necessary for the construction. Payment, as agreed, would be upondemand and not COD. Lopez was paid only a portion of the amount.As Lopez was demanding payment, O obtained a bank loan bymortgaging the theatre to pay for the balance due L. However, thetheater was already mortgaged to PNB
Appellant’s contention that the lien executed in favor of the furnisher of 
the materials used for the construction, repair or refection of a buildingis also extended to land on which it was constructed
is without merit,
because while it is true generally that real estate connotes the land andthe building constructed thereon, it is obvious that the inclusion of thebuilding, separate and distinct from the land, in the enumeration of what constitutes real property, could mean only one thing:
that a building isby itself an immovable property Associated Ins. & Surety Co. v. Iya
May 30, 1958 Felix, J.
 
Sps. Valino owned and possessed a house of strong materials In GracePark Subd, Caloocan, which they purchased on installment from PRC.Wife purchased rice with AISC as surety, and as counter-guaranty,executed a chattel mortgage on their house. At that time, the land was
still in PRC’s name.
 After completion of paym
ent of purchase price, TCT in Valino’s name
was secured. Then, to secure an indebtedness, executed a REM over thelot and house in favor of Iya.A building is an immovable property irrespective of whether or not saidstructure and the land on which it is adhered to belong to the sameowner. It cannot be divested of its character of a realty by the fact that the land on which it was constructed belongs to another.As personal properties could only be the subject of a chattel mortgage,the execution of a CM on a building is invalid and a nullity, theregistration of the chattel notwithstanding.
Tumalad v. Vicencio
Vicencio and Simeon executed a chattel mortgage in favor of theTumalads over their house of strong materials located at 550 Int. 3,Quezon Boulevard, Quiapo, Manila, over Lot 6-B and 7-B, Block 2554,which were being rented from Madrigal & Company, Inc.When Vicencio and Simeon defaulted in paying, the mortgage wasextrajudicially foreclosed, and on 27 March 1956, the house was sold at public auction pursuant to the said contract. As highest bidder, theTumalads were issued the corresponding certificate of sale.On 18 April 1956, the Tumalads commenced Civil Case 43073 in themunicipal court of Manila, praying, among other things, that the houseCertain deviations from the rule in Lopez and Iya, however, have beenallowed for various reasons.Hence, if a house belonging to a person stands on a rented landbelonging to another person, it may be mortgaged as a personalproperty as so stipulated in the document of mortgage. It should benoted, however that the principle is predicated on statements by theowner declaring his house to be a chattel, a conduct that mayconceivably estop him from subsequently claiming otherwise.Unlike in the Iya cases, Lopez vs. Orosa, Jr. and Plaza Theatreand LeungYee vs. F. L. Strong Machinery and Williamson, wherein third personsassailed the validity of the chattel mortgage, it is the defendants-appellants themselves, as debtors-mortgagors, who are attacking the
 
2
Property Case Reviewer Prof. E.A. Labitag1
 st 
semester AY 2010-2011
 Janz Hanna Ria N. Serrano 
be vacated and its possession surrendered to them, and for Vicencio andSimeon to pay rent of P200.00 monthly from 27 March 1956 up to thetime the possession is surrendered. MC ruled in favor of TumaladNearly a year after the foreclosure sale the mortgaged house had beendemolished on 14 and 15 January 1957 by virtue of a decision obtainedby the lessor of the land on which the house stood.validity of the chattel mortgage in this case. The doctrine of estoppeltherefore applies to the herein defendants-appellants, having treated thesubject house as personalty.
Makati Leasing and Finance Corp v. Wearever Textile Mills, Inc.
May 16, 1983De Castro, J.
 
To be able to secure financial accommodations from the petitioner,the private respondent discounted and assigned several receivablesunder a Receivable Purchase Agreement.
To secure thecollection of the receivables, a chattel mortgage was executedover machinery found in the factory of the private respondent 
.As the private respondent failed to pay, the mortgage wasextrajudicially foreclosed. Nonetheless, the sheriff was unable toseize the machinery. This prompted petitioner to file an action forreplevin.The CA reversed the decision of the trial court and ordered the returnof the drive motor, after ruling that the machinery may not be thesubject of a chattel mortgage, given that it was an immovable under theprovisions of Article 415. The same was attached to the ground bymeans of bolts and the only way to remove it from the plant would be todrill the ground.There is no logical justification to exclude the rule out that themachinery may be considered as personal property, and subject toa chattel mortgage. If a house may be considered as personal propertyfor purposes of executing a chattel mortgage, what more a machinery,which is movable by nature andbecomes immobilized only by destination or purpose, may not belikewise treated as such.Tumalad doctrine applies.
Board of Assessment Appeals v. Manila Electric Co.
 January 31, 1964.Paredes, J.
The Philippine Commission enacted Act No. 484 which authorized theMunicipal Board of Manila to grant a franchise to construct, maintainand operate an electric street railway and electric light, heat and powersystem in the City of Manila.Meralco's electric power is generated by its hydro-electric plant locatedat Botocan Falls, Laguna and is transmitted to the City of Manila bymeans of electric transmission wires, running from the province of Laguna to the said City.These electric transmission wires which carry high voltage current, arefastened toinsulators attached on steel towers constructed by respondent at intervals, from its hydroelectricplant in the province of Laguna to theCity of Manila. The respondent Meralco has constructed 40 of these steeltowers within Quezon City, on land belonging to it.The City Assessor of Quezon City declared the aforesaid steel towers forreal property tax under Tax.The SC ruled that Meralco's steel towers were considered poles withinthe meaning of paragraph 9 of its franchise which exempts its poles fromtaxation. The steel towers were considered personality because theywere removable and merely attached to square metal frames by meansof bolts and could be moved from place to place when unscrewed anddismantled. Furthermore, they are not attached to an immovable in afixed manner, and they can be separated without breaking the materialor causing deterioration upon the object to which they are attached.
 
3
Property Case Reviewer Prof. E.A. Labitag1
 st 
semester AY 2010-2011
 Janz Hanna Ria N. Serrano 
Meralco Securities Industrial Corporation v. CBAA
May 31, 1982. Aquino, J.
 
Pursuant to a pipeline concession issued under the Petroleum Act of 1949, Republic Act No. 387, Meralco Securities installed from Batangasto Manila a pipeline system consisting of cylindrical steel pipes joinedtogether and buried not less than one meter below the surface along theshoulder of the public highway.The pipes are embedded in the soil while the valves are welded to thepipes so as to make the pipeline system one single piece of propertyfrom end to end.Pursuant to the Assessment Law,Commonwealth Act No. 470, the provincial assessor of Laguna treatedthe pipeline as real property and issued Tax Declarations.The Court ordered that CBAA did not with grave abuse and discretionand acted within its jurisdiction in sustaining the holding of theprovincial assessor that Meralco Securities Pipeline System in Laguna issubject to a realty tax for the following reasons that the pipes aremachinery or improvements and regarded as realty because they areconstructions adhered to the soil. It is attached to the land in such a waythat it cannot be separated therefromwithout dismantling the steel pipes which are welded to the pipeline. Inso far as the pipelineuses valves, pumps and control devices to maintain the flow of the oil, it is in a sense a machinery within the meaning of the Real Property TaxCode.
Meralco v. CBAA
May 31, 1982 Aquino, J.
 
This case is about the imposition of the realty tax on two oil storagetanks installed in 1969 byManila Electric Company on a lot in San Pascual, Batangas which it leased in 1968 fromCaltex (Phil.), Inc.The storage tanks are made of steel plates welded and assembled on thespot. Theirbottoms rest on a foundation consisting of compacted earth as theoutermost layer. The tank is not attached to its foundation. It is not anchored or welded to the concrete circular wall. Its bottom plate is not attached to any part of the foundation by bolts, screws or similar devices. The tank merelysits on its foundation.Pipelines were installed on the sides of each tank and are connected tothe pipelines of theManila Enterprises Industrial Corporation.The Board concludes that while the tanks rest or sit on their foundation,the foundation itself and the walls, dikes and steps, which are integralparts of the tanks, are affixed to the land while the pipelines are attachedto the tanks and required Meralco to pay realty taxes on the two tanks.The SC ruled that while the two storage tanks are not embedded in theland, they may, nevertheless, be considered as improvements on theland, enhancing its utility and rendering it useful to the oil industry. It isundeniable that the two tanks have been installed with some degree of permanence as receptacles for theconsiderable quantities of oil needed by Meralco for its operations.Thus, the two tanks should be held subject to realty tax because theywere considered real property.
Caltex (Phil.), Inc. v. CBAA
May 31, 1982 Aquino, J.
This case is about the realty tax on machinery and equipment installedby Caltex (Philippines) Inc. in its gas stations located on leased land.The machines and equipment consists of underground tanks, elevatedtank, elevated water tanks, water tanks, gasoline pumps,computing pumps, water pumps, car washer, car hoists, truck hoists, aircompressors and tireflators.The building or shed, the elevated water tank, the car hoist under aseparate shed, the air compressor, the underground gasoline tank,neon lights signboard, concrete fence and pavement and the lot wherethey are all placed or erected, all of them used in the pursuance of thegasoline service station business formedthe entire gasoline service-station.The lessor of the land, where the gas station is located, does not becomeThe Assessment Law provides that the realty tax is due "on realproperty, including land, buildings, machinery, and otherimprovements".SC hold that the said equipment andmachinery, as appurtenances to the gas station building or shed ownedby Caltex (as to which it is subject to realty tax) and which fixtures arenecessary to the operation of the gas station, for without them the gasstation would be useless, and which have been attached or affixedpermanently to the gas station site orembedded therein, are taxable improvements and machinery within themeaning of the Assessment Law and the Real Property Tax Code.

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