TSAI V.

COURT OF APPEALS 336 SCRA 324 FACTS: EVERTEX secured a loan from PBC, guaranteed by a real estate and chattel mortgage over a parcel of land where the factory stands, and the chattels located therein, as included in a schedule attached to the mortgage contract. Another loan was obtained secured by a chattel mortgage over properties with similar descriptions listed in the first schedule. During the date of execution of the second mortgage, EVERTEX purchased machineries and equipment. Due to business reverses, EVERTEX filed for insolvency proceedings. It failed to pay its obligation and thus, PBC initiated extrajudicial foreclosure of the mortgages. PBC was the highest bidder in the public auctions, making it the owner of the properties. It then leased the factory premises to Tsai. Afterwards, EVERTEX sought the annulment of the sale and conveyance of the properties to PBC as it was allegedly a violation of the INSOLVENCY LAW. The RTC held that the lease and sale were irregular as it involved properties not included in the schedule of the mortgage contract. HELD: While it is true that the controverted properties appear to be immobile, a perusal of the contract of REM and CM executed by the parties gives a contrary indication. In the case at bar, both the trial and appellate courts show that the intention was to treat the machineries as movables or personal property. Assuming that the properties were considered immovables, nothing detracts the parties from treating it as chattels to secure an obligation under the principle of estoppel.

SERGS PRODUCTS AND GOQUIOLAY V. PCI LEASING AND FINANCE 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 machineries, subject of a chattel mortgage executed by petitioner in favor of PCI. Machineries of petitioner were seized and petitioner filed a motion for special protective order. It asserts that the machineries were real property and could not be subject of a chattel mortgage. The Issue A. Whether or not the machineries purchased and imported by SERGS became real property by virtue of immobilization. HELD: The machineries 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.

PRUDENTIAL BANK V. PANIS 153 SCRA 390 FACTS: Spouses Magcale secured a loan from Prudential Bank. To secure payment, they executed a real estate mortgage over a residential building. The mortgage included also the right to occupy the lot and the information about the sales patent applied for by the spouses for the lot to which the building stood. After securing the first loan, the spouses secured another from the same bank. To secure payment, another real estate mortgage was executed over the same properties.

The Secretary of Agriculture then issued a Miscellaneous Sales Patent over the land which was later on mortgaged to the bank. The spouses then failed to pay for the loan and the REM was extrajudicially foreclosed and sold in public auction despite opposition from the spouses. The respondent court held that the REM was null and void. ISSUES: 1. WHETHER OR NOT THE DEEDS OF REAL ESTATE MORTGAGE ARE VALID; AND 2. WHETHER OR NOT THE SUPERVENING ISSUANCE IN FAVOR OF PRIVATE RESPONDENTS OF MISCELLANEOUS SALES PATENT NO. 4776 ON APRIL 24, 1972 UNDER ACT NO. 730 AND THE COVERING ORIGINAL CERTIFICATE OF TITLE NO. P2554 ON MAY 15,1972 HAVE THE EFFECT OF INVALIDATING THE DEEDS OF REAL ESTATE MORTGAGE. HELD: A 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 Civil Code can only mean that the building itself is an immovable property. While it is true that a mortgage of land necessarily includes in the absence of stipulation of the improvements thereon, buildings, still a building in itself may be mortgaged by itself apart from the land on which it is built. Such a mortgage would still be considered as a REM for the building would still be considered as immovable property even if dealt with separately and apart from the land. The original mortgage on the building and right to occupancy of the land was executed before the issuance of the sales patent and before the government was divested of title to the land. Under the foregoing, it is evident that the mortgage executed by private respondent on his own building was a valid mortgage.

As to the second mortgage, it was done after the sales patent was issued and thus prohibits pertinent provisions of the Public Land Act.
Prudential Bank v. Panis [G.R. No. L-50008. August 31, 1987.] First Division, Paras (J): 4 concur. Facts: On 19 November 1971, Fernando A. Magcale and Teodula Baluyut Magcale secured a loan of P70,000.00 from Prudential Bank. To secure payment of this loan, the Magcales executed in favor of Prudential Bank a deed of Real Estate Mortgage over a 2-storey, semi-concrete residential building with warehouse space (total area of 263 sq.m.); and granting upon the mortgagee the right of occupancy on the lot where the property is erected. A rider is also included in the deed that in the event the Sales Patent on the lot is issued of Bureau of Lands, the Register of Deeds is authorized to hold the Registration until the mortgage is cancelled or annotate the encumbrance on the title upon authority from the Secretary of Agriculture and Natural Resources, which title with annotation release in favor of the mortgage. The Real Estate Mortgage was registered under the Provisions of Act 3344 with the Registry of Deeds of Zambales on 23 November 1971. Subsequently, the Magcales secured an additional loan from Prudential Bank, secured by another deed of Real Estate Mortgage registeed with the Registry of Deeds in Olongapo City, on 2 May 1973. On 24 April 1973, the Secretary of Agriculture issued Miscellaneous Sales Patent 4776 over the parcel of land, possessory rights over which were mortgaged to rudential Bank, in favor of the Magcales. On the basis of the Patent, and upon its transcription in the Registration Book of the Province of Zambales, OCT P-2554 was issued in the name of Fernando Magcale, by the Ex-Oficio Register of Deeds of Zambales, on 15 May 1972. For failure of the Magcales to pay their obligation to the Bank after it became due, the deeds of Real Estate Mortgage were extrajudicially foreclosed. Consequent to the foreclosure was the sale of the properties mortgaged to the bank as the highest bidder in a public auction sale conducted by the City Sheriff on 12 April 1978. The auction sale was held despite written request from the Magcales through counsel, dated 29 March 1978, for the City Sheriff to desist from going with the scheduled public auction sale. The issue was raised to the CF Zambales and Olongapo City which, on 3 November 1978, declared the deeds of Real Estate Mortgage as null and void. The bank filed a motion for reconsideration on 14 December 1978, which the court denied on 10 January 1979 for lack of merit. Hence, the petition. The Supreme Court modified the decision of the CFI Zambales & Olongapo, declaring that the Deed of Real Estate Mortgage for P70,000.00 is valid but ruling that the Deed of Real Estate Mortgage for an additional loan of P20,000.00 is null and void, without prejudice to any appropriate action the Government may take against private respondents. 1. Building separate and distinct from the land In the enumeration of properties under Article 415 of the Civil Code of the Philippines, it is obvious that the inclusion of 'building' separate and distinct from the land, in said provision of law can only mean that a building is by itself an immovable property. (Lopez vs. Orosa, Jr., et al., L-10817-18, Feb. 28, 1958; Associated Inc. and Surety Co., Inc. vs. Iya, et al., L-10837-38, May 30, 1958). 2. Building can be mortgaged apart from the land it is built; possessory rights may be validly transferred in a deed of mortgage

While a mortgage of land necessarily includes, in the absence of stipulation of the improvements thereon, buildings; still 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 (Leung Yee vs. Strong Machinery Co., 37 Phil. 644). Possessory rights over said properties before title is vested on the grantee, may be validly transferred or conveyed as in a deed of mortgage (Vda. de Bautista vs. Marcos, 3 SCRA 438 [1961]). 3. A valid real estate mortgage may be constituted on the building erected on the land belonging to another The original mortgage was executed (19 November 1971) before the issuance of the final patent (24 April 1972) and before the government was divested of its title to the land (15 May 1972), an event which takes effect only on the issuance of the sales patent and its subsequent registration in the Office of the Register of Deeds (Visayan Realty Inc. vs. Meer, 96 Phil. 515; Director of Lands vs. De Leon, 110 Phil. 28; Director of Lands vs. Jurado, L-14702, May 23, 1961; Pea, "Law on Natural Resources", p. 49). In the case at bar, it is evident that the mortgage executed by Magcale on his own building which was erected on the land belonging to the government is to all intents and purposes a valid mortgage. 4. Public land act and RA 730 not violated in first mortgage As to restrictions appearing to the Magcales title; Sections 121, 122 and 124 of the Public Land Act refer to land already acquired under the Public Land Act or any improvement thereon. Section 2 of RA 730 refers to encumbrance or alienation before the patent is issued because it refers specifically to encumbrance or alienation on the land itself and does not mention anything regarding the improvements existing thereon. Both have no application to the assailed mortgage in the case at bar; as the former, the mortgage was executed before such eventuality, and the latter, it does not encumber nor alienate the land. 5. Mortgage made after issuance of Sales Patent an OCT prohibited; Estoppel does not give validating effect to a void contract As regards the second mortgage executed, such mortgage executed after the issuance of the sales patent and of the Original Certificate of Title, falls squarely under the prohibitions stated in Sections 121, 122 and 124 of the Public Land Act and Section 2 of RA 730, and is therefore null and void. Even if the title was voluntary surrendered to the bank for the mortgage to be annotated without the prior approval of the Ministry of Natural Resources; in pari delicto may not be invoked to defeat the policy of the State neither may the doctrine of estoppel give a validating effect to a void contract. Indeed, it is generally considered that as between parties to a contract, validity cannot be given to it by estoppel if it is prohibited by law or is against public policy (19 Am. Jur. 802). It is not within the competence of any citizen to barter away what public policy by law seeks to preserve (Gonzalo Puyat & Sons, Inc. vs. De los Amas and Alino, supra; Arsenal vs. IAC, 143 SCRA 54 [1986]). Such does not, however, preclude new contracts that may be entered into in accordance with the requirements of the law. Any new transaction, however, would be subject to whatever steps the Government may take for the reversion of the land in its favor.

Makati Leasing and Finance Corporation v. Wearever Textile Mills, Inc. G.R. No. L-58469, May 16, 1983, 122 SCRA 29
De Castro, J.

FACTS: To obtain financial accommodations from the Makati Leasing and Finance Corporation, the Wearever Textile discounted and assigned several receivables with them under a receivable purchase agreement. To secure the collection of receivables assigned, Wearever Textile executed a chattel mortgage over certain raw materials inventory, as well as machinery described as an aero dryer stentering range. Upon default of Wearever Textile, the Makati Leasing petitioned for extrajudicial foreclosure of the properties mortgaged to it. When the sheriff failed to enter Wearever Textiles premises to seize the machinery, Makati Leasing applied for a replevin. Wearever Textile contended that it cannot be a subject of replevin or a chattel mortgage because it is a real property as it is attached to the ground by means of bolts and that the only way to remove it is to destroy the concrete floor.

ISSUE: Whether or not the machinery is real or personal property.

HELD: The machinery is a personal property. The Supreme Court explained that if a house of strong materials may be considered as personal property for purposes of executing a chattel mortgage, 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.

Davao Sawmill Co. v. Castillo 61 Phil. 709

Facts: The Davao Saw Mill Co., Inc., is the holder of a lumber concession from the Government of the PhilippineIslands. It has operated a sawmill in thesi tio of Maa, barrio of Tigatu, municipality of Davao, Province ofDavao. However, the land upon which the business was conducted belonged to another person. On theland the sawmill company erected a building which housed the machinery used by it. Some of theimplements thus used were clearly personal property, the conflict concerning machines which were placedand mounted on foundations of cement. In the contract of lease between the sawmill company and theowner of the land there appeared the following provision: That on the expiration of the period agreed upon, all the improvements and buildings introduced anderected by the party of the second part shall pass to the exclusive ownership of the party of the first partwithout any obligation on its part to pay any amount for said improvements and buildings; also, in theevent the party of the second part should leave or abandon the land leased before the time hereinstipulated, the improvements and buildings shall likewise pass to the ownership of the party of the firstpart as though the time agreed upon had expired: Provided, however, That the machineries andaccessories are not included in the improvements which will pass to the party of the first part on theexpiration or abandonment of the land leased. The trial judge found that those properties were personal in nature and as a consequence absolved the defendants from the complaint. Issue: Whether or not the trial judge erred in finding that the subject properties are personal in nature.

Held: As connecting up with the facts, it should further be explained that the Davao Saw Mill Co., Inc., has on anumber of occasions treated the machinery as personal property by executing chattel mortgages in favorof third persons. One of such persons is the appellee by assignment from the original mortgages. Article 334, paragraphs 1 and 5, of the [Old]Civil Code, is in point. According to the Code, real property consists of 1. Land, buildings, roads and constructions of all kinds adhering to the soil; 5. Machinery, liquid containers, instruments or implements intended by the owner of any building or landfor use in connection with any industry or trade being carried on therein and which are expressly adaptedto meet the requirements of such trade of industry. Appellant emphasizes the first paragraph, and appellees the last mentioned paragraph. We entertain nodoubt that the trial judge and appellees are right in their appreciation of the legal doctrines flowing fromthe facts. As a rule, the machinery should be considered as personal, since it was not placed on the land by theowner of the land immobilization by destination on purpose cannot generally be made by a person, whosepossession of the property is only temporary, otherwise was will be forced to presume that be intended togive the property permanently to the owner of the land. In this case, they had stipulated that the land inthe end thereby be acted as an agent for the owner of the land. In this sense the property (machines foruse in the sawmill) became real property. The judgment appealed from is hereby affirmed.

TUMALAD V. VICENCIO 41 SCRA 143 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 a 12% per annum interest. The mortgage was extrajudicially foreclosed upon failure to pay the loan. The house was sold at a public auction and the plaintiffs were the highest bidder. A corresponding certificate of sale was issued. Thereafter, the plaintiffs filed an action for ejectment against the defendants, praying that the latter vacate the house as they were the proper owners. ISSUE: WHETHER OR NOT THE SUBJECT MATTER OF THE MORTGAGE, A HOUSE OF STRONG MATERIALS, BE THE OBKECT OF A CHATTEL MORTGAGE? HELD: 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 stop 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 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.

Associated Insurance & Surety v. Iya [G.R. Nos. L-10837-38. May 30, 1958.] En Banc, Felix (J): 9 concur Facts: Spouses Adriano and Lucia A. Valino were the owners and possessors of a house of strong materials constructed on Lot 3, Block 80 of the Grace Park Subdivision in Caloocan, Rizal, which they purchased on installment basis from the Philippine Realty Corporation. On 6 November 1951, to enable her to purchase on credit rice from the NARIC, Lucia Valino filed a bond (P11,000.00; AISCO Bond 971) subscribed by the Associated Insurance & Surety Co. and as counter-guaranty therefor, the Valinos executed an alleged chattel mortgage on the aforementioned house in favor of the surety company, which encumbrance was duly registered with the Chattel Mortgage Register of Rizal on 6 December 1951. It is admitted that at the time said undertaking took place, the parcel of land on which the house is erected was still registered in the name of the Philippine Realty Corporation. Having completed payment on the purchase price of the lot, the Valinos were able to secure on 18 October 1958, a certificate of title in their name (TCT 27884). Subsequently, however, or on 24 October 1952, the Valinos, to secure payment of an indebtedness in the amount of P12,000.00, executed a real estate mortgage over the lot and the house in favor of Isabel Iya, which was duly registered and annotated at the back of the certificate of title. Later, Lucia A. Valino failed to satisfy her obligation to the NARIC, the surety company was compelled to pay the same pursuant to the undertaking of the bond. The surety company demanded reimbursement from the Valinos, who failed to do so. The company foreclosed the chattel mortgage over the house as a consequence. A public sale was conducted thereafter by the Provincial Sheriff of Rizal on 26 December 1952, wherein the property was awarded to the surety company for P8,000.00, the highest bid received therefor. The surety company then caused the said house to be declared in its name for tax purposes (Tax Declaration 25128). Sometime in July 1953, the surety company learned of the existence of the real estate mortgage over the lot covered by TTC 26884 together with the improvements thereon; thus, said surety company instituted Civil Case 2162 with the CFI Manila naming Adriano and Lucia Valino and Isabel Iya, the mortgagee, as defendants. On the other hand, on 29 October 1953, Isabel Iya filed a civil action against the Valinos and the surety company (Civil Case 2504 with CFI Manila) praying for a decree of foreclosure of the land, building and improvements thereon to be sold at public auction and the proceeds applied to satisfy the demands; this pursuant to the contract of mortgage as the Valinos have failed to pay interest for more than 6 months already; the surety company included as it claims to have an interest on the residential house covered by said mortgage.

The two cases were jointly heard upon agreement of the parties, who submitted the same on a stipulation of facts, after which the Court rendered judgment dated 8 March 1956, holding that the chattel mortgage in favor of the Associated Insurance & Surety was preferred and superior over the real estate mortgage subsequently executed in favor of Isabel Iya. It was ruled that as the Valinos were not yet the registered owner of the land on which the building in question was constructed at the time the first encumbrance was made, the building then was still a personalty and a chattel mortgage over the same was proper. However, as the mortgagors were already the owners of the lot at the time the contract with Isabel Iya was entered into, the building was transformed into a real property and the real estate mortgage created thereon was likewise adjudged as proper. The residential building was, therefore, ordered excluded from the foreclosure prayed for by Isabel Iya, although the latter could exercise the right of a junior encumbrancer. The spouses Valino were ordered to pay the amount demanded by said mortgagee or in their default to have the parcel of land subject of the mortgage sold at public auction for the satisfaction of Iya's claim. The Supreme Court reversed the decision of the lower court, recognized Isabel Iya's right to foreclose not only the land but also the building erected thereon, and ordered that the proceeds of the sale thereof at public auction (if the land has not yet been sold), be applied to the unsatisfied judgment in favor of Isabel Iya. The decision however is without prejudice to any right that the Associated Insurance & Surety may have against the Valinos on account of the mortgage of said building they executed in favor of said surety company. Without pronouncement as to costs. 1. Nature of property encumbered is the decisive factor in determination of preferential right The decisive factor in resolving the issue as to which of these encumbrances should receive preference over the other is the determination of the nature of the structure litigated upon, for where it be considered a personalty, the foreclosure of the chattel mortgage and the subsequent sale thereof at public auction, made in accordance with the Chattel Mortgage Law would be valid and the right acquired by the surety company therefrom would certainly deserve prior recognition; otherwise, appellant's claim for preference must be granted. 2. Building always immovable While it is true that generally, real estate connotes the land and the building constructed thereon, it is obvious that the inclusion of the building, separate and distinct from the land, in the enumeration of what may constitute real properties (Art. 415, new Civil Code) could only mean one thing: that a building is by itself an immovable property. Moreover, and in view of the absence of any specific provision to the contrary, a building is an immovable property irrespective of whether or not said structure and the land on which it is adhered to belong to the same owner." (Lopez vs. Orosa). 3. Building cannot be divested of character as realty when constructed on land belonging to another A building certainly cannot be divested of its character of a realty by the fact that the land on which it is constructed belongs to another. To hold it the other way, the possibility is not remote that it would result in confusion, for to cloak the building with an uncertain status made dependent on the ownership of the land, would create a situation where a permanent fixture changes its nature or character as the ownership of the land changes hands. 4. Execution of a chattel mortgage over a building invalid and a nullity As personal properties could only be the subject of a chattel mortgage (Section 1, Act 3952), the execution of the chattel mortgage covering a building is clearly invalid and a nullity. While it is true that said document was correspondingly registered in the Chattel Mortgage Register, this act produced no effect whatsoever for where the interest conveyed is in the nature of a real property, the registration of the document in the registry of chattels is merely a futile act. Thus, the registration of

the chattel mortgage of a building of strong materials produce no effect as far as the building is concerned (Leung Yee vs. Strong Machinery Co., 37 Phil., 644). 5. No right acquired by chattel mortgage creditor who purchases real properties in an extrajudicial foreclosure sale 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 vs. Ah Keo, 60 Phil., 899).

Mindanao Bus Company v. The City Assessor and Treasurer G.R. No. L-17870, September 29, 1962, 6 SCRA 197 Labrador, J.

FACTS: Petitioner Mindanao Bus Company is a public utility solely engaged in transporting passengers and cargoes by motor trucks, over its authorized lines in the Island of Mindanao, collecting rates approved by the Public Service Commission. Respondent sought to assess the following real properties of the petitioner; (a) Hobart Electric Welder Machine, (b) Storm Boring Machine; (c) Lathe machine with motor; (d) Black and Decker Grinder; (e) PEMCO Hydraulic Press; (f) Battery charger (Tungar charge machine) and (g) D-Engine Waukesha-M-Fuel. It was alleged that these machineries are sitting on cement or wooden platforms, and that petitioner is the owner of the land where it maintains and operates a garage for its TPU motor trucks, a repair shop, blacksmith and carpentry shops, and with these machineries, which are placed therein. Respondent City Assessor of Cagayan de Oro City assessed at P4, 400 petitioner's above-mentioned equipment. Petitioner appealed the assessment to the respondent Board of Tax Appeals on the ground that the same are not realty. Respondents contend that said equipments, though movable, are immobilized by destination, in accordance with paragraph 5 of Article 415 of the New Civil Code.

ISSUE: Whether the equipments in question are immovable or movable properties.

HELD: The equipments in question are movable. So that movable equipments to be immobilized in contemplation of the law, it 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." Thus, the Court distinguished those movable which become immobilized by destination because they are essential and principal elements in the industry from those which may not be so considered immobilized because they are merely incidental, not essential and principal.

The tools and equipments 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 incidentalsacquired as movables and used only for expediency to facilitate and/or improve its service. Even without such tools and equipments, its business may be carried on, as petitioner has carried on, without such equipments, before the war. 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.

Santos Evangelista v. Alto Surety and Insurance Co., Inc. G.R. No. L-11139, April 23, 1958, 103 Phil. 401 Concepcion, J.

FACTS: On June 4, 1949, Santos Evangelista instituted a civil case for a sum of money. On the same date, he obtained a writ of attachment, which was levied upon a house, built by Rivera on a land situated in Manila and leased to him. In due course, judgment was rendered in favor of Evangelista, who bought the house at public auction held in compliance with the writ of execution issued in said case. When Evangelista sought to take possession of the house, Rivera refused to surrender it, upon the ground that he had leased the property from the Alto Surety & Insurance Co., Inc. and that the latter is now the true owner of said property. It appears that on May 10, 1952, a definite deed of sale of the same house had been issued to Alto Surety, as the highest bidder at an auction sale held. Hence, Evangelista instituted an action against Alto Surety and Ricardo Rivera, for the purpose of establishing his title over said house, and securing possession thereof, apart from recovering damages. After due trial, the CFI Manila rendered judgment for Evangelista, sentencing Rivera and Alto Surety to deliver the house in question to Evangelista and to pay him, jointly and severally, P40.00 a month from October, 1952, until said delivery, plus costs.

ISSUE: Whether or not a house constructed by the lessee of the land on which it is built, should be dealt with, for purposes of attachment, as immovable property or as personal property.

HELD: The house is not personal property, much less a debt, credit or other personal property not capable of manual delivery, but immovable property. As explicitly held, in Ladera vs. Hodges (48 OG 5374), "a true building (not merely superimposed on the soil) is immovable or real property, whether it is erected by the owner of the land or by a usufructuary or lessee. The opinion that the house of Rivera should have been attached in accordance with subsection (c) of said section 7, as "personal property capable of manual delivery, by taking and safely keeping in his custody", for it declared that "Evangelista could not have validly purchased Ricardo Rivera's house from the sheriff as the latter was not in possession thereof at the time he sold it at a public auction is untenable.

Sibal v. Valdez [G.R. No. 26278. August 4, 1927.]

Second Division, Johnson (J): 5 concur Facts: On 11 May 1923, the deputy-sheriff of the Province of Tarlac, by virtue of a writ of execution in civil case 20203 of the CFI Manila (Macondray & Co., Inc. vs. Leon Sibal), levied an attachment on Leon Sibals 8 parcels of land for the sum of P4,273.93. 2 months later, or on 30 July 1923, Macondray & Co., Inc., bought said parcels of land, at the auction held by the sheriff of the Province of Tarlac. Within 1 year from the sale of said parcels of land, or on 24 September 1923, Sibal paid P2,000 to Macondray for the account of the redemption price of said parcels of land, without specifying which said amount was to be applied. The redemption price of the parcels was reduced to P2,579.97 including interest. On 29 April 1924, the deputy sheriff of the Province of Tarlac, by virtue of a writ of execution in civil case 1301 of the Province of Pampanga (Emiliano J. Valdez vs. Leon Sibal 1.), attached the personal property of Sibal located in Tarlac, among which was included the sugar cane in question in the 7 parcels of land described in the complaint. He also attached Sibals real property in Tarlac, including rights, interest and participation therein, which consists of 11 parcels of land and a house and camarin situated in one of said parcels. On 9-10 May 1924, the deputy sheriff sold at public auction said personal properties to Emiliano J. Valdez, who paid therefor the sum of P1,550, of which P600 was for the sugar cane. On 25 June 1924, 8 of the 11 parcels, including the camarin and the house were bought by Valdez at the auction held by the sheriff for the sum of P12,200. The 3 remaining parcels were released from attachment by virtue of claims presented by Cayugan and Tizon. On the same date, Macondray sold and conveyed to Valdez for P2,579.97 all of its rights and interest in the 8 parcels of land acquired by it in connection with civil case 20203 of the CFI Manila. On 14 December 1924, action was commenced in the CFI of the Province of Tarlac. The plaintiff alleged that the deputy sheriff of Tarlac Province attached and sold to Valdez the sugar cane planted by the plaintiff and his tenants on 7 parcels of land, and that within 1 year from the date of the attachment and sale the plaintiff ordered to redeem said sugar cane and tendered to Valdez the amount sufficient to cover the price paid by the latter, with taxes and interests, and that Valdez refused to accept the money and return the sugar cane to the plaintiff. After hearing and on 28 April 1926, the judge (Lukban) rendered judgment in favor of the defendant holding that the sugar cane in question was personal property and, as such, was not subject to redemption; among others. Hence, the appeal. 1. Paragraph 2, Article 334 of the Civil Code interpreted by the Tribunal Supremo de Espana as that growing crops may be considered as personal property Sugar cane may come under the classification of real property as "ungathered products" in paragraph 2 of article 334 of the Civil Code, which enumerates as real property as "Trees, plants, and ungathered products, while they are annexed to the land or form an integral part of any immovable property." That article, however, has received in recent years an interpretation by the Tribunal Supremo de Espaa, which holds that, under certain conditions, growing crops may be considered as personal property. (Decision of March 18, 1904, vol. 97, Civil Jurisprudence of Spain.) Thus, under Spanish authorities, pending fruits and ungathered products may be sold and transferred as personal property. Also, the Supreme Court of Spain, in a case of ejectment of a lessee of an agricultural land, held that the lessee was entitled to gather the Products corresponding to the agricultural year because said fruits did not go with the land but belonged separately to the lessee. And further, under the Spanish Mortgage Law of 1909, as amended, the mortgage of a piece of land does not include the fruits and products existing thereon, unless the contract expressly provides otherwise. 2. Manresa admits growing crops as personal property Manresa, the eminent commentator of the Spanish Civil Code, in discussing section 334 of the Civil Code, in view of the recent decisions of the Supreme Court of Spain, admits that growing crops are sometimes considered and treated as personal property.

3. Paragraph 2, Article 344 of the Civil Code corresponds to Article 465 of the Civil Code of Louisiana Article 465 of the Civil Code of Louisiana, which corresponds to paragraph 2 of article 334 of the Civil Code, provides: "Standing crops and the fruits of trees not gathered, and trees before they are cut down, are likewise immovable, and are considered as part of the land to which they are attached." 4. Louisiana jurisprudence: Growing crops mobilization by anticipation Standing crops and the fruits of trees not gathered and trees before they are cut down are considered as part of the land to which they are attached,' but the immovability provided for is only one in abstracto and without reference to rights on or to the crop acquired by others than the owners of the property to which the crop is attached. The existence of a right on the growing crop is a mobilization by anticipation, a gathering as it were in advance, rendering the crop movable quoad the right acquired therein. Jurisprudence recognizes the possible mobilization of the growing crop. (Citizens' Bank vs. Wiltz, 31 La. Ann., 244; Porche vs. Bodin, 28 La. Ann., 761; Sandel vs. Douglass, 27 La. Ann., 629; Lewis vs. Klotz, 39 La. Ann., 267.; as cited in Lumber Co. vs. Sheriff and Tax Collector [106 La., 418], c.f. Citizens Bank v. Wiltz [31 La. Ann., 244]) 5. Louisiana jurisprudence: Standing crops as immovable or movable based on owned and leased premises; seizure by creditors Standing crops are considered as immovable and as part of the land to which they are attached, and the fruits of an immovable gathered or produced while it is under seizure are considered as making part thereof, and inure to the benefit of the person making the seizure. But the evident meaning of these articles is, where the crops belong to the owner of the plantation, they form part of the immovable, and where it is seized, the fruits gathered or produced inure to the benefit of the seizing creditor. A crop raised on leased premises in no sense forms part of the immovable. It belongs to the lessee, and may be sold by him, whether it be gathered or not, and it may be sold by his judgment creditors. (Porche vs. Bodin [28 La. An., 761]) 6. Louisiana jurisprudence: Law cannot be interpreted result in absurd consequences If crop necessarily forms part of the leased premises the result would be that it could not be sold under execution separate and apart from the land. If a lessee obtain supplies to make his crop, the factor's lien would not attach to the crop as a separate thing belonging to his debtor, but the land belonging to the lessor would be affected with the recorded privilege. The law cannot be construed so as to result in such absurd consequences. 7. American jurisprudence: growing crops by yearly labor and cultivation personal property The settled doctrine followed in the State of California and other states in connection with the attachment of property and execution of judgment is, that growing crops raised by yearly labor and cultivation are considered personal property. All annual crops which are raised by yearly manurance and labor, and essentially owe their annual existence to cultivation by man, may be levied on as personal property. Crops, whether growing or standing in the field ready to be harvested, are, when produced by annual cultivation, no part of the realty. They are, therefore, liable to voluntary transfer as chattels. It is equally well settled that they may be seized and sold under execution. 8. Valid sale of a thing not yet in existence; thing must be owned by the vendor A valid sale may be made of a thing, which though not yet actually in existence, is reasonably certain to come into existence as the natural increment or usual incident of something already in existence, and then belonging to the vendor, and the title will vest in the buyer the moment the thing comes into existence. (Emerson vs. European Railway Co., 67 Me., 387; Cutting vs. Packers Exchange, 21 Am. St. Rep., 63.) The thing sold, however, must be specific and identified. They must be also owned at the time by the vendor. (Hull vs. Hull, 48 Conn., 250 [40 Am. Rep., 165].) 9. Source of provisions on execution of judgment in Code of Civil Procedure (Act 190); Growing crops are personal property Section 450 and most of the other sections of the Code of Civil Procedure relating to the execution of judgments were taken from the Code of Civil Procedure of California. Section 450 of the Code of Civil Procedure

enumerates the property of a judgment debtor which may be subjected to execution, and reads as "All goods, chattels, moneys, and other property, both real and personal, shall be liable to execution." The Supreme Court of California, under section 688 of the Code of Civil Procedure of that state, to which the Code of Civil Procedure was pattered, has held, without variation, that growing crops were personal property and subject to execution. 10. Chattel Mortgage Law recognizes growing crops as personal property Act 1508, the Chattel Mortgage Law, fully recognizes that growing crops are personal property. Section 2 of said Act provides that "All personal property shall be subject to mortgage, agreeably to the provisions of this Act, and a mortgage executed in pursuance thereof shall be termed a chattel mortgage." Section 7 in part provides that "If growing crops be mortgaged the mortgage may contain an agreement stipulating that the mortgagor binds himself properly to tend. care for and protect the crop while growing." The above provisions of Act 1508 were enacted on the assumption that "growing crops" are personal property. 11. Personal property includes ungathered products; Paragraph 2, Article 334 of the Civil Code modified by Act 190 and 1508 Paragraph 2 of article 334 of the Civil Code has been modified by section 450 of Act No. 190 and by Act No. 1508 in the sense that "ungathered products" as mentioned in said article of the Civil Code have the nature of personal property; or that in the sense that, for the purposes of attachment and execution, and for the purposes of the Chattel Mortgage Law, "ungathered products" have the nature of personal property. In other words, the phrase "personal property" should be understood to include "ungathered products." In the case at bar, the sugar cane in question was personal property and was not subject to redemption. 12. Absence from trial and failure to cross-examine lend weight to the evidence presented by the other party The absence of the plaintiff from the trial and his failure to cross-examine the defendant have lent considerable weight to the evidence then presented for the defense. The court has been inclined to to give more weight to the evidence adduced by him than to the evidence adduced by the plaintiff, with respect to the ownership of parcels of land. 13. Lack of evidence of bad faith in planting palay in questioned parcels entitles plaintiff to of the crop There being no evidence of bad faith on the plaintiffs part, in planting the palay in the disputed parcels of land and harvested therefrom 190 cavans, he is therefore entitled to one-half of the crop, or 95 cavans, not 190 cavans as ordered by the lower court.

BOARD OF ASSESSMENT APPEALS V. MANILA ELECTRIC COMPANY 10 SCRA 68

FACTS: City Assessor of QC declared the steel towers for real property tax under Tax Declarations. After denying the respondents petition to cancel these declarations, an appeal was taken with the CTA which held that the steel towers come under the exception of poles under the franchise given to MERALCO; the steel towers are personal properties; and the City Treasurer is liable for the refund of the amount paid. HELD: The steel towers of an electric company dont constitute real property for the purposes of real property tax.