You are on page 1of 33

Ladera, et. al. vs. Hodges, et. al. , O.G No.

8027-R, September 23, 1952

Facts: Paz G. Ladera entered into a contract with C.N Hodges, whereby the latter
promised to sell a parced of land to the former subject to the stipulation of the
contract saying that the failure of the purchaser to pay within sixty days after it fell
due would render the contract annulled or rescinded. Furthermore, it is likewise
stipulated that the sums of money paid under the contract would be considered
rentals and the owner would be at liberty to dispose of the said lands with all its
improvements to other persons as if this contract had never been made. After the
execution of the contract, Ladera built a house on the lot. Upon her failure to pay,
Hodges filed an action for ejectment. The court decided that Ladera is to vacate and
surrender possession of the lot. Also, on that day, Ladera paid Hodges P188.50
which the latter recorded as rental payment. A writ of execution was then issued
and the City Sheriff levied upon all rights, interest and participation over the
house. The Sheriff then sold the house to Avelina A. Magno who in turn sold the
house to Manuela Villa. But this transaction was not recorded. Upon knowledge of
this, Ladera went to see the Sheriff and paid him to redeem the property but was
received as rental payment. This amount, however, was not turned over to Hodges.
Issue: Whether or not the house built on a land owned by another person, should be
regarded in law as movable or personal property
Held: No. The sale of the land was not made without the proper publication required
by law of the sale of immovable property. In this instance, the determination of
whether or not the house in dispute is an immovable or movable property is vital.
The undisputed rule is whether it is immovable by destination (place by the owner
of the tenement), an immovable by incorporation (attachment not necessarily made
by the owner of the tenement) or an accession. A true building is an immovable or
real property whether the owner of the land is a usufructuary or lessee erects it.
Moreover, when Ladera built the house in question, she was not a mere lessee but
occupied the land under a valid contract with Hodges to sell it to her. Thus, the
object of the levy and the sale was real property. The publication in a newspaper in
a general circulation was made making the execution sale void and conferred no
title to the purchaser. Furthermore, there was a valid exercise of redemption. So, at
the time Magno sold the property to Villa, Magno no longer had title over the
property strengthening the fact that since there was no title, the subsequent sale
was null and void.
Evangelista v. Alto Surety
Evangelista v. Alto Surety
In 1949, Santos Evangelista instituted Civil Case No. 8235 of the CFI Manila (Santos
Evangelista vs. Ricardo Rivera) 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, by filing copy of said writ and the
corresponding notice of attachment with the Office of the Register of Deeds of
Manila. 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 on 8 October 1951. The corresponding definite deed of sale was issued to

him on 22 October 1952, upon expiration of the period of redemption. 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
10 May 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, on 29 September 1950, in
compliance with a writ of execution issued in Civil Case 6268 of the same court (Alto
Surety & Insurance vs. Maximo Quiambao, Rosario Guevara and Ricardo Rivera)" in
which judgment for the sum of money, had been rendered in favor of Alto Surety.
Hence, on 13 June 1953, 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. The decision was however
reversed by the Court of Appeals, which absolved Alto Surety from the complaint on
account that although the writ of attachment in favor of Evangelista had been filed
with the Register of Deeds of Manila prior to the sale in favor of Alto Surety,
Evangelista did not acquire thereby a preferential lien, the attachment having been
levied as if the house in question were immovable property.
Whether or not a house constructed by the lessee of the land on which it is built,
should be dealt with, for purpose of attachment, as immovable property?
The court ruled that the house is not personal property, much less a debt, credit or
other personal property not capable of manual delivery, but immovable property. As
held in Laddera vs. Hodges (48 OG 5374), "a true building 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, 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. Parties to a deed of chattel
mortgage may agree to consider a house as personal property for purposes of said
contract. However, this view is good only insofar as the contracting parties are
concerned. It is based, partly, upon the principle of estoppel. Neither this principle,
nor said view, is applicable to strangers to said contract. The rules on execution do
not allow, and should not be interpreted as to allow, the special consideration that
parties to a contract may have desired to impart to real estate as personal property,
when they are not ordinarily so. Sales on execution affect the public and third
persons. The regulation governing sales on execution are for public officials to
follow. The form of proceedings prescribed for each kind of property is suited to its
character, not to the character which the parties have given to it or desire to give it.
The regulations were never intended to suit the consideration that parties, may
have privately given to the property levied upon. The court therefore affirms the
decision of the CA with cost against Alto Surety.

9 SCRA 631
Pineda and his mother executed real estate and chattel mortgages in favor of
Navarro, to secure a loan they got from the latter. The REM covered a parcel of land
owned by the mother while the chattel mortgage covered a residential house.
Due to the failure to pay the loan, they asked for
extensions to pay for the loan. On the second extension, Pineda executed a
PROMISE wherein in case of default in payment, he wouldnt ask for any additional
extension and there would be no need for any formal demand. In spite of this, they
still failed to pay.
Navarro then filed for the foreclosure of the mortgages. The court decided in his
Where a house stands on a rented land belonging to another person, it may
be the subject matter of a chattel mortgage as personal property if so stipulated in
the document of mortgage, and in an action by the mortgagee for the foreclosure,
the validity of the chattel mortgage cannot be assailed
by one of the parties to the contract of mortgage.
Furthermore, although in some instances, a house of mixed materials has been
considered as a chattel between the parties and that the validity of the contract
between them, has been recognized, it has been a constant criterion that
with respect to third persons, who are not parties to the
contract, and specially in execution proceedings, the house is considered as
immovable property.
41 SCRA 143
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.
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.
Lopez v. Orosa
LOPEZ V. OROSA AND PLAZA THEATREG.R. Nos. L-10817-18 February 28,
-Petitioner Lopez was engaged in doing business under the trade name LopezCastelo Sawmill.
Orosa, a resident of the same province as Lopez, invited the latter to make an
investment in the theatre business. Lopez declined to invest but agreed to supply
the lumber necessary for the construction of the proposed theatre. They had an oral
agreement that Orosa would be personally liable for any account that the said
construction might incur and that payment would be on demand and not cash on
delivery basis.
Lopez delivered the which was used for construction amounting to P62,255.85. He
was paid only P20,848.50, leaving a balance of P41,771.35.
The land on which the building was erected previously owned by Orosa, was later on
acquired by the corporation.
. As Lopez was pressing Orosa for payment, the latter and president of the
corporation promised to obtain a bank loan by mortgaging the properties of the
Plaza Theatre., out of which the unpaid balance would be satisfied. But unknown to
Lopez, the corporation already obtained a loan with Luzon Surety Company as
surety, and the corporation in turn executed a mortgage on the land and building in
favor of the said company as counter-security.
Due to the persistent demands of Lopez, Orosa executed a deed of assignment
over his shares of stock in the corporation.
As it remained unsettled, Lopez filed a case against Orosa and Plaza theatre praying
that they be sentenced to pay him jointly and severally of the unpaid balance; and
in case defendants fail to pay, the land and building owned by the corporation be
sold in public auction with the proceeds be applied to the balance; or the shares of
stock be sold in public auction.

The lower court held that defendants were jointly liable for the unpaid balance and
Lopez thus acquired the material mans lien over the construction. The lien was
merely confined to the building and did not extend to the on which the construction
was made.
Lopez tried to secure a modification of the decision, but was denied.

Whether the material mans lien for the value of the materials used in the
construction of the building attaches to said structure alone and doesnt extend to
the land on which the building is adhered to.
Whether the lower court and CA erred in not providing that the material mans liens
is superior to the mortgage executed in favor of surety company not only on the
building but also on the land.
-The material mans lien could be charged only to the building for which the credit
was made or which received the benefit of refection, the lower court was right in,
holding at the interest of the mortgagee over the land is superior and cannot be
made subject to the material man's lien.
-Generally, real estate connotes the land and the building constructed thereon, it is
obvious that the inclusion of the building in the enumeration of what may constitute
real properties could only mean one thingthat a building is by itself an immovable
-In 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.
-The law gives preference to unregistered refectionary credits only with respect to
the real estate upon which the refectionary or work was made.
- The lien so created attaches merely to the immovable property for the
construction or repair of which the obligation was incurred. Therefore, the lien in
favor of appellant for the unpaid value of the lumber used in the construction of the
building attaches only to said structure and to no other property of the obligors.
Mindanao Bus Co. v. City Assessor Digest
G.R. No. L-17870 29 September 1962
Facts: Petitioner is a public utility company engaged in the transport of passengers
and cargo by motor vehicles in Mindanao with main offices in Cagayan de Oro
(CDO). Petitioner likewise owned a land where it maintains a garage, a repair shop

and blacksmith or carpentry shops. The machineries are placed thereon in wooden
and cement platforms. The City Assessor of CDO then assessed a P4,400 realty tax
on said machineries and repair equipment. Petitioner appealed to the Board of Tax
Appeals but it sustained the City Assessor's decision, while the Court of Tax Appeals
(CTA) sustained the same.
Note: This is merely a case digest to aid in remembering the important points of a
case. It is still advisable for any student of law to read the full text of assigned
Issue: Whether or not the machineries and equipments are considered immobilized
and thus subject to a realty tax
Held: The Supreme Court decided otherwise and held that said machineries and
equipments are not subject to the assessment of real estate tax.
Said equipments are not considered immobilized as they are merely incidental, not
esential and principal to the business of the petitioner. The transportation business
could be carried on without repair or service shops of its rolling equipment as they
can be repaired or services in another shop belonging to another
Tsai v. CA
October 2, 2001
Ever Textile Mills, Inc. (EVERTEX) obtained loan from Philippine Bank of
Communications (PBCom), secured by a deed of Real and Chattel Mortgage over the
lot where its factory stands, and the chattels located therein as enumerated in a
schedule attached to the mortgage contract. PBCom again granted a second loan
to EVERTEX which was secured by a Chattel Mortgage over personal properties
enumerated in a list attached thereto. These listed properties were similar to those
listed in the first mortgage deed. After the date of the execution of the second
mortgage mentioned above, EVERTEX purchased various machines and
equipments. Upon EVERTEX's failure to meet
its obligation to PBCom, the latter commenced extrajudicial foreclosure proceedings
against EVERTEX under Act 3135 and Act 1506 or "The Chattel Mortgage Law".
PBCom then consolidated its ownership over the lot and all the properties in it. It
leased the entire factory premises to Ruby Tsai and sold to the same the factory,
lock, stock and barrel including the contested machineries.
EVERTEX filed a complaint for annulment of sale, reconveyance, and
damages against PBCom, alleging inter alia that the extrajudicial foreclosure of
subject mortgage was not valid, and that PBCom, without any legal or factual basis,
appropriated the contested properties which were not included in the Real and
Chattel Mortgage of the first mortgage contract nor in the second contract which is
a Chattel Mortgage, and neither were those properties included in the Notice of
Sheriff's Sale.
1) W/N the contested properties are personal or movable properties

2) W/N the sale of these properties to a third person (Tsai) by the bank through an
irregular foreclosure sale is valid.
1) Nature of the Properties and Intent of the Parties
The nature of the disputed machineries, i.e., that they were heavy, bolted or
cemented on the real property mortgaged does not make them ipso facto
immovable under Article 415 (3) and (5) of the New Civil Code. While it is true that
the properties appear to be immobile, a perusal of the contract of Real and Chattel
Mortgage executed by the parties herein reveal their intent, that is - to treat
machinery and equipment as chattels.
In the first mortgage contract, reflective of the true intention of PBCOM and
EVERTEX was the typing in capital letters, immediately following the printed caption
of mortgage, of the phrase "real and chattel." So also, the "machineries and
equipment" in the printed form of the bank had to be inserted in the blank space of
the printed contract and connected with the word "building" by typewritten slash
marks. Now, then, if the machineries in question were contemplated to be included
in the real estate mortgage, there would have been no necessity to ink a chattel
mortgage specifically mentioning as part III of Schedule A a listing of the
machineries covered thereby. It would have sufficed to list them as immovables in
the Deed of Real Estate Mortgage of the land and building involved. As regards the
second contract, the intention of the parties is clear and beyond question. It refers
solely to chattels. The inventory list of the mortgaged properties is an itemization
of 63 individually described machineries while the schedule listed only machines
and 2,996,880.50 worth of finished cotton fabrics and natural cotton fabrics.
Assuming arguendo that the properties in question are immovable by nature,
nothing detracts the parties from treating it as chattels to secure an obligation
under the principle of estoppel. As far back as Navarro v. Pineda, an immovable
may be considered a personal property if there is a stipulation as when it is used as
security in the payment of an obligation where a chattel mortgage is executed over
2) Sale of the Properties Not Included in the Subject of Chattel Mortgage is Not Valid
The auction sale of the subject properties to PBCom is void. Inasmuch as the
subject mortgages were intended by the parties to involve chattels, insofar as
equipment and machinery were concerned, the Chattel Mortgage Law applies.
Section 7 provides thereof that: "a chattel mortgage shall be deemed to cover only
the property described therein and not like or substituted property thereafter
acquired by the mortgagor and placed in the same depository as the property
originally mortgaged, anything in the mortgage to the contrary notwithstanding."
Since the disputed machineries were acquired later after the two mortgage
contracts were executed, it was consequently an error on the part of the Sheriff to

include subject machineries with the properties enumerated in said chattel

As the lease and sale of said personal properties were irregular and illegal because
they were not duly foreclosed nor sold at the auction, no valid title passed in its
favor. Consequently, the sale thereof to Ruby Tsai is also a nullity under the
elementary principle of nemo dat quod non habet, one cannot give what one does
not have.
Makati Leasing vs. Wearever Textile
Makati Leasing and Financial Corporation vs. Wearever Textile Mills, Inc.
G.R. No. L-58469. May 16, 1983.
De Castro, J.
Doctrine: Where a chattel mortgage is constituted on a machinery permanently
attached to the ground, the machinery is to be considered as personal property.
Facts: Wearever Textile Mills, Inc. discounted and assigned several receivables with
Makati Leasing and Financial Corp. under a Receivable Purchase Agreement so that
the latter would lend money to the former. In order to secure the collection of the
receivables assigned, Wearever executed a Chattel Mortgage over certain raw
materials inventory as well as a machinery (Artos Aero Dryer Stentering Range).
Upon default of Wearever in paying what is due, Makati Leasing filed a petition for
extrajudicial foreclosure of the properties mortgaged to it. The Sheriff assigned to
execute such foreclosure, however, failed to enter the premises of Wearever to
effect the seizure of the machinery. Afterwhich, petitioner filed a complaint for a
judicial foreclosure with the RTC of Rizal which was granted even after the motion
for reconsideration filed by the private respondent. Enforcing then the writ of
seizure issued by the lower court, the Sheriff removed the main drive motor of the
machinery. Upon appeal, CA reversed the ruling of the RTC and ordered the return of
the motor to Wearever since the said machinery cannot be the subject of a replevin
and chattel mortgage for it is a real property pursuant to Art. 415 (3) of the NCC. CA
argued that the machinery is attached to the ground by means of bolts and the only
way to remove it from the respondents plant would be to drill out or destroy the
concrete floor which is why all that the sheriff could do to enforce the writ was to
take the main drive motor of the machinery. Hence, this petition for certiorari.
Issue: Whether the machinery is a personal property.
Held: Yes. By destination, it is a real property but by virtue of the intention of the
parties stipulated in their chattel mortgage contract, the machinery was intended to
be a personal property. The Court made reference to its ruling in Tumalad v. Vicencio
and Standard Oil Co. of New York v. Jaramillo where it held that a real property may
be considered as a 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, and once the parties so agreed, they are already stopped
from claiming otherwise. Private respondent contended that its characterization of
the subject machinery as chattel in their agreement should not be appreciated

against it because it had never represented nor agreed in such as it was merely
required and dictated on by the petitioner to sign a chattel mortgage in blank form.
The Court was not persuaded by its contention as the said issue was not duly raised
in the lower and appellate courts nor will the said signing in blank by the
respondent make the contract void but merely voidable by a proper action in court.
Furthermore as it was undeniable that it benefited from the chattel mortgage, it
cannot be allowed to impugn its efficacy for equity reasons.
Caveat: Anyone who claims this digest as his own without proper authority shall be
held liable under the law of Karma.
Serg's v. PCI Leasing
Sergs Products, Inc. vs. PCI Leasing G.R. No. 137705. August 22, 2000
PCI Leasing and Finance filed a complaint for sum of money, with an application for
a writ of replevin.
Judge issued a writ of replevin directing its sheriff to seize and deliver the
machineries and equipment to PCI Leasing after 5 days and upon the payment of
the necessary expenses.
The sheriff proceeded to petitioner's factory, seized one machinery, with word that
he would return for other machineries.
Petitioner (Sergs Products) filed a motion for special protective order to defer
enforcement of the writ of replevin.
PCI Leasing opposed the motion on the ground that the properties were still
personal and therefore can still be subjected to seizure and writ of replevin.
Petitioner asserted that properties sought to be seized were immovable as defined
in Article 415 of the Civil Code.
Sheriff was still able to take possession of two more machineries
In its decision on the original action for certiorari filed by the Petitioner, the
appellate court, Citing the Agreement of the parties, held that the subject machines
were personal property, and that they had only been leased, not owned, by
petitioners; and ruled that the "words of the contract are clear and leave no doubt
upon the true intention of the contracting parties."
ISSUE: Whether or not the machineries became real property by virtue of
Petitioners contend that the subject machines used in their factory were not proper
subjects of the Writ issued by the RTC, because they were in fact real property.
Writ of Replevin: Rule 60 of the Rules of Court provides that writs of replevin are
issued for the recovery of personal property only.
Article 415 (5) of the Civil Code provides that 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

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.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.
However, 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
Section 12.1 of the Agreement between the parties provides 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.
The machines are personal property and they are proper subjects of the Writ of
Jose Burgos vs. Chief of Staf
G.R. No L-64261
December 26, 1984
Two warrants were issued against petitioners for the search on the premises of
Metropolitan Mail and We Forum newspapers and the seizure of items alleged to
have been used in subversive activities. Petitioners prayed that a writ of preliminary
mandatory and prohibitory injunction be issued for the return of the seized articles,
and that respondents be enjoined from using the articles thus seized as evidence
against petitioner.
Petitioners questioned the warrants for the lack of probable cause and that the two
warrants issued indicated only one and the same address. In addition, the items
seized subject to the warrant were real properties.
Whether or not the two warrants were valid to justify seizure of the items.
The defect in the indication of the same address in the two warrants was held by
the court as a typographical error and immaterial in view of the correct
determination of the place sought to be searched set forth in the application. The
purpose and intent to search two distinct premises was evident in the issuance of
the two warrant.
As to the issue that the items seized were real properties, the court applied the
principle in the case of Davao Sawmill Co. v. Castillo, ruling that machinery which is

movable by nature becomes immobilized when placed by the owner of the

tenement, property or plant, but not so when placed by a tenant, usufructuary, or
any other person having only a temporary right, unless such person acted as the
agent of the owner. In the case at bar, petitioners did not claim to be the owners of
the land and/or building on which the machineries were placed. This being the case,
the machineries in question, while in fact bolted to the ground remain movable
property susceptible to seizure under a search warrant.
However, the Court declared the two warrants null and void.
Probable cause for a search is defined as such facts and circumstances which would
lead a reasonably discreet and prudent man to believe that an offense has been
committed and that the objects sought in connection with the offense are in the
place sought to be searched.
The Court ruled that the affidavits submitted for the application of the warrant did
not satisfy the requirement of probable cause, the statements of the witnesses
having been mere generalizations.
Furthermore, jurisprudence tells of the prohibition on the issuance of general
warrants. (Stanford vs. State of Texas). The description and enumeration in the
warrant of the items to be searched and seized did not indicate with specification
the subversive nature of the said items.
Berkenkotter v. Cu Unjieng
On 26 April 1926, the Mabalacat Sugar Company obtained from Cu Unjieng e Hijos,
a loan secured by a first mortgage constituted on 2 parcels of land "with all its
buildings, improvements, sugar-cane mill, steel railway, telephone line, apparatus,
utensils and whatever forms part or is a necessary complement of said sugar-cane
mill, steel railway, telephone line, now existing or that may in the future exist in said
lots.On 5 October 1926, the Mabalacat Sugar Company decided to increase the
capacity of its sugar central by buying additional machinery and equipment, so that
instead of milling 150 tons daily, itcould produce 250. Green proposed to the
Berkenkotter, to advance the necessary amount for the purchase of said machinery
and equipment, promising to reimburse him as soon as he could obtain an
additional loan from the mortgagees, Cu Unjieng e Hijos, and that in case Green
should fail to obtain an additional loan from Cu Unjieng e Hijos, said machinery and
equipment would become security therefore, said Green binding himself not to
mortgage nor encumber them to anybody until Berkenkotter be fully reimbursed for
the corporation's indebtedness to him .Having agreed to said proposition made in a
letter dated 5 October 1926, Berkenkotter, on 9 October 1926, delivered the sum of
P1,710 to Green, the total amount supplied by him to Green having beenP25,750.
Furthermore, Berkenkotter had a credit of P22,000 against said corporation for
unpaid salary. With the loan of P25,750 and said credit of P22,000, the Mabalacat
Sugar Co., Inc., purchased the additional machinery and equipment. On 10 June
1927, Green applied to Cu Unjieng e Hijos for an additional loan of P75,000 offering
as security the additional machinery and equipment acquired by said Green and
installed in the sugar central after the execution of the original mortgage deed, on

27 April 1927, together with whatever additional equipment acquired with said loan.
Green failed to obtain said loan. Hence, abovementioned mortgage was in effect.
Are the additional machines also considered mortgaged?
Article 1877 of the Civil Code provides that mortgage includes all natural
accessions, improvements, growing fruits, and rents not collected when the
obligation falls due, and the amount of any indemnities paid or due the owner by
the insurers of the mortgaged property or by virtue of the exercise of the power of
eminent domain, with the declarations, amplifications, and limitations established
by law, whether the state continues in the possession of the person who mortgaged
it or whether it passes into the hands of a third person. It is a rule, that 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.
Article 334, paragraph 5, of the Civil Code gives the character of real property to
machinery, liquid containers, instruments or implements intended by the owner of
any building or land for use in connection with any industry or trade being carried
on therein and which are expressly adapted to meet the requirements of such trade
or industry. The installation of a machinery and equipment in a mortgaged sugar
central, in lieu of another of less capacity, for the purpose of carrying out the
industrial functions of the latter and increasing production, constitutes a permanent
improvement on said sugar central and subjects said machinery and equipment to
the mortgage constituted thereon
Star Two (SPV-AMC), Inc., vs Paper City Corporation of the Philippines,
G.R. No. 169211, March 6, 2013
From 1990-1991, Paper City applied for and was granted four (4) loans and credit
accommodations by Rizal Commercial Banking Corporation (RCBC), now substituted
by Star Two (SPV-AMC), Inc by virtue of Republic Act No. 9182. The loans were
secured by four (4) Deeds of Continuing Chattel Mortgages on its machineries and
equipments found inside its paper plants. However, RCBC eventually executed a
unilateral Cancellation of Deed of Contining Chattel Mortgage. In 1992, RCBC, as the
trustee bank, together with Metrobank and Union Bank, entered into a Mortgage
Trust Indenture (MTI), with Paper City. In the said MTI, Paper City acquired additional
loans secured by five (5) Deed of Real Estate Mortgage, plus real and personal
properties in an annex to the MTI, which covered the machineries and equipment of
Paper City. The MTI was later on amended and supplemented three (3) times,
wherein the loan was increased and included the same mortgages with an
additional building and other improvements inthe plant site. Paper City was able to
comply with the loans but only until 1997 due to an economic crisis. RCBC filed a
petition for extra-judicial foreclosure against the real estate executed by Paper City
including all the improvements because of payment default. The property was
foreclosed and subjected to public acution. The three banks and the highest bidder
were issued a Certificate of Sale. Paper City filed a complaint alleging that the sale

was null and void due to lack of prior notice. During the pendency of the
complaint, Paper City filed a motion to remove machinery out of the foreclosed land
and building, that the same were not included in the foreclosure of the real estate
mortgage. The trial court denied the motion, ruling that the machineries and
equipment were included. Thereafter, Paper City's Motion for Reconsideration, the
trial court granted the same and justified the reversal by finding that the
machineries and equipment are chattels by agreement thru the four Deeds of
Continuing Chattel Mortgages; and that the deed of cancellation executed by RCBC
of said mortgage was not valid because it was one unilaterally. RCBC's Motion for
Reconsideration was denied. The case was petitioned at CA that 1. That Paper City
gave its consent to consider the disputedmachineries and equipment as real
properties when they signed the MTI's and all its amendments; 2. That the
machineries and equipment are the same as inthe MTI's, hence treated by
agreement of the parties as real properties. The CA affirmed the orders of the trial
court because it relied on the plain language of the MTI's stating that nowhere from
any of the MTIs executed by the parties can we find the alleged "express"
agreement adverted to by petitioner. There is no provision in any of the parties MTI,
which expressly states to the effect that the parties shall treat the equipments and
machineries as real property. On the contrary, the plain and unambiguous language
of the aforecited MTIs, which described the same as personal properties, contradicts
petitioners claims.
Whether the subsequent contracts of the parties such as Mortgage Trust Indenture
as well as the subsequent supplementary amendments included in its coverage of
mortgaged properties the subject machineries and equipment; and
Whether or not the subject machineries and equipment were considered real
properties and should therefore be included in the extra-judicial foreclosure which in
turn were sold to the banks
Petition was granted.
Repeatedly, the parties stipulated that the properties mortgaged by Paper
City to RCBC are various parcels of land including the buildings and existing
improvements thereon as well as the machineries and equipments, which as stated
in the granting clause of the original mortgage, are "more particularly described and
listed that is to say, the real and personal properties listed in Annexes A and B x x
x of which the Paper City is the lawful and registered owner." Significantly, Annexes
"A" and "B" are itemized listings of the buildings, machineries and equipments
typed single spaced in twenty-seven pages of the document made part of the
records. As held in Gateway Electronics Corp. v. Land Bank of the Philippines,49
the rule in this jurisdiction is that the contracting parties may establish any
agreement, term, and condition they may deem advisable, provided they are not
contrary to law, morals or public policy. The right to enter into lawful contracts
constitutes one of the liberties guaranteed by the Constitution.

Contrary to the finding of the CA, the Extra-Judicial Foreclosure of Mortgage
includes the machineries and equipments of respondent. Considering that the
Indenture which is the instrument of the mortgage that was foreclosed exactly
states through the Deed of Amendment that the machineries and equipments listed
in Annexes "A" and "B" form part of the improvements listed and located on the
parcels of land subject of the mortgage, such machineries and equipments are
surely part of the foreclosure of the "real estate properties, including all
improvements thereon" as prayed for in the petition. The real estate mortgages
which specifically included the machineries and equipments were subsequent to the
chattel mortgages. Without doubt, the real estate mortgages superseded the earlier
chattel mortgages.
The real estate mortgage over the machineries and equipments is even in full
accord with the classification of such properties by the Civil Code of the Philippines
as immovable property. Thus:
Article 415. The following are immovable property:
(1) Land, buildings, roads and constructions of all kinds adhered to the soil;
(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
Davao Sawmill Co. vs Castillo
Posted on June 21, 2013
Davao Sawmill Co. vs Castillo
61 PHIL 709
GR No. L-40411
August 7, 1935
A tenant placed machines for use in a sawmill on the landlord's land.
Davao Sawmill Co., operated a sawmill. The land upon which the business was
conducted was leased from another person. On the land, Davao Sawmill erected a
building which housed the machinery it used. Some of the machines were mounted
and placed on foundations of cement. In the contract of lease, Davo Sawmill agreed
to turn over free of charge all improvements and buildings erected by it on the
premises with the exception of machineries, which shall remain with the Davao
Sawmill. In an action brought by the Davao Light and Power Co., judgment was
rendered against Davao Sawmill. A writ of execution was issued and the
machineries placed on the sawmill were levied upon as personalty by the sheriff.
Davao Light and Power Co., proceeded to purchase the machinery and other
properties auctioned by the sheriff.
Are the machineries real or personal property?
Art.415 of the New Civil Code provides that Real Property consists of:

(1) Lands, buildings, roads and constructions of all kinds adhered to the soil;
(5) Machinery, receptacles, instruments or implements intended by the owner pf the
tenement for an industry ot 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
Appellant should have registered its protest before or at the time of the sale of the
property. While not conclusive, the appellant's characterization of the property as
chattels is indicative of intention and impresses upon the property the character
determined by the parties.
Machinery is naturally movable. However, machinery may be immobilized by
destination or purpose under the following conditions:
General Rule: The machinery only becomes immobilized if placed in a plant by the
owner of the property or plant.
Immobilization cannot be made by a tenant, a usufructuary, or any person having
only a temporary right.
Exception: The tenant, usufructuary, or temporary possessor acted as agent of the
owner of the premises; or he intended to permanently give away the property in
favor of the owner.
As a rule, therefore, the machinery should be considered as Personal Property, since
it was not placed on the land by the owner of the said land.
Yap vs. Taada
Julian S. Yap vs. Hon. Santiago O. Taada and
Goulds Pumps International (Phil), Inc.,
G.R. No. L-32917, July 18, 1988
Narvasa, J.
Doctrine: Article 415, par. 3 of the Civil Code considers and immovable property as
everything attached to an immovable in a fixed manner, in such a way that it
cannot be separated therefrom without breaking the material or deteriorating the
object. The pump does not fit this description. It could be, and was, in
fact,separated from Yaps premises without being broken of suffering deterioration.
Obviously, the separation or removal of the pump involved nothing more
complicated that the loosening of bolts or dismantling of other fasteners.
Facts: The case began in the City Court of Cebu with the filing of Goulds Pumps
International (Phil), Inc. of a complaint against Yap and his wife seeking recovery of
P1,459.30, representing the balance of the price and installation cost of a water
pump in the latters premises. The Court rendered judgment in favor of herein
respondent after they presented evidence ex-parte due to failure of petitioner Yap to
appear before the Court. Petitioner then appealed to the CFI, particularly to the sale

of Judge Tanada. For again failure to appear for pre-trial, Yap was declared in default.
He filed for a motion for reconsideration which was denied by Judge Tanada. On
October 15, 1969, Tanada granted Goulds Motion for Issuance of Writ of Execution.
Yap forthwith filed an Urgent Motion for Reconsideration of the said Order. In the
meantime, the Sheriff levied on the water pump in question and by notice
scheduled the execution sale thereof. But in view of the pendency of Yaps motion,
suspension of sale was directed by Judge Tanada. It appears, however, that this was
not made known to the Sheriff whocontinued with the auction sale and sold the
property to the highest bidder, Goulds. Because of such, petitioner filed a Motion to
Set Aside Execution Sale and to Quash Alias Writ of Execution. One of his arguments
was that the sale was made without the notice required by Sec. 18, Rule 29 of the
New Rules of Court, i.e. notice by publication in case of execution of sale of real
property, the pump and its accessories being immovable because attached to the
ground with the character of permanency. Such motion was denied by the CFI.
Issue: Whether or not the pump and its accessories are immovable property
Held: No. The water pump and its accessories are NOT immovable properties. The
argument of Yap that the water pump had become immovable property by its being
installed in his residence is untenable. Article 415, par. 3 of the Civil Code considers
and immovable property as everything attached to an immovable in a fixed
manner, in such a way that it cannot be separated therefrom without breaking the
material or deteriorating the object. The pump does not fit this description. It could
be, and was, in fact,separated from Yaps premises without being broken of suffering
deterioration. Obviously, the separation or removal of the pump involved nothing
more complicated that the loosening of bolts or dismantling of other fasteners.


G.R. No. 52267 January 24, 1996
Almeda and Engineering signed a contract, wherein Engineering undertook to
fabricate, furnish and install the air-conditioning system in the latters building along
Buendia Avenue, Makati in consideration of P210,000.00. Petitioner was to furnish
the materials, labor, tools and all services required in order to so fabricate and
install said system. The system was completed in 1963 and accepted by private
respondent, who paid in full the contract price.
Almeda learned from the employees of NIDC of the defects of the air-conditioning
system of the building. Almeda spent for the repair of the air-conditioning system.
He now sues Engineering for the refund of the repair. Engineering contends that the
contract was of sale and the claim is barred by prescription since the responsibility
of a vendor for any hidden faults or defects in the thing sold runs only for 6 months
(Arts 1566, 1567, 1571). Almeda contends that since it was a contract for a piece of
work, hence the prescription period was ten years (Hence Art 1144 should apply on
written contracts).

RTC found that Engineering failed to install certain parts and accessories called for
by the contract, and deviated from the plans of the system, thus reducing its
operational effectiveness to achieve a fairly desirable room temperature.
1) Whether the contract for the fabrication and installation of a central airconditioning system in a building, one of sale or for a piece of work? CONTRACT
2) Corrollarily whether the claim for refund was extinguished by prescription? NO.
1) A contract for a piece of work, labor and materials may be distinguished from a
contract of sale by the inquiry as to whether the thing transferred is one not in
existence and which would never have existed but for the order, of the person
desiring it. In such case, the contract is one for a piece of work, not a sale. On the
other hand, if the thing subject of the contract would have existed and been the
subject of a sale to some other person even if the order had not been given, then
the contract is one of sale.
A contract for the delivery at a certain price of an article which the vendor in the
ordinary course of his business manufactures or procures for the general market,
whether the same is on hand at the time or not is a contract of sale, but if the goods
are to be manufactured specially for the customer and upon his special order, and
not for the general market, it is a contract for a piece of work .
The contract in question is one for a piece of work. It is not petitioners line of
business to manufacture air-conditioning systems to be sold off-the-shelf. Its
business and particular field of expertise is the fabrication and installation of such
systems as ordered by customers and in accordance with the particular plans and
specifications provided by the customers. Naturally, the price or compensation for
the system manufactured and installed will depend greatly on the particular plans
and specifications agreed upon with the customers.
2)The original complaint is one for damages arising from breach of a written
contract and not a suit to enforce warranties against hidden defects we here
with declare that the governing law is Article 1715 (supra). However, inasmuch as
this provision does not contain a specific prescriptive period, the general law on
prescription, which is Article 1144 of the Civil Code, will apply. Said provision states,
inter alia, that actions upon a written contract prescribe in ten (10) years. Since
the governing contract was
executed on September 10, 1962 and the complaint was filed on May 8, 1971, it is
clear that the action has not prescribed.
Board of Assessment Appeals, Q.C. vs Meralco
10 SCRA 68
GR No. L-15334
January 31, 1964
On November 15, 1955, the QC City Assessor declared the MERALCO's steel towers
subject to real property tax. After the denial of MERALCO's petition to cancel these

declarations, an appeal was taken to the QC Board of Assessment Appeals, which

required respondent to pay P11,651.86 as real property tax on the said steel towers
for the years 1952 to 1956.
MERALCO paid the amount under protest, and filed a petition for review in the Court
of Tax Appeals (CTA) which rendered a decision ordering the cancellation of the said
tax declarations and the refunding to MERALCO by the QC City Treasurer of
Are the steel towers or poles of the MERALCO considered real or personal
Pole long, comparatively slender, usually cylindrical piece of wood, timber, object
of metal or the like; an upright standard to the top of which something is affixed or
by which something is supported.
MERALCO's steel supports consists of a framework of 4 steel bars/strips which are
bound by steel cross-arms atop of which are cross-arms supporting 5 high-voltage
transmission wires, and their sole function is to support/carry such wires. The
exemption granted to poles as quoted from Part II, Par.9 of respondent's franchise is
determined by the use to which such poles are dedicated.
It is evident that the word poles, as used in Act No. 484 and incorporated in the
petitioner's franchise, should not be given a restrictive and narrow interpretation, as
to defeat the very object for which the franchise was granted. The poles should be
taken and understood as part of MERALCO's electric power system for the
conveyance of electric current to its consumers.
Art. 415 of the NCC classifies the following as immovable property:
(1) Lands, buildings, roads and constructions of all kinds adhered to the soil;
(3) 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
(5) Machinery, receptacles, instruments or implements intended by the owner pf the
tenement for an industry ot 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
Following these classifications, MERALCO's steel towers should be considered
personal property. It should be noted that the steel towers:
(a) are neither buildings or constructions adhered to the soil;

(b) are not attached to an immovable in a fixed manner they can be separated
without breaking the material or deterioration of the object;
are not machineries, receptacles or instruments, and even if they are, they are
not intended for an industry to be carried on in the premises.
This case is about the imposition of the realty tax on two oil storage tanks installed
in 1969 by Manila Electric Company on a lot in San Pascual, Batangas which it
leased in 1968 from Caltex (Phil.), Inc. The storage tanks are made of steel plates
welded and assembled on the spot. Their bottoms rest on a foundation consisting of
compacted earth as the outermost 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
merely sits on its foundation. Pipelines were installed on the sides of each tank and
are connected to the pipelines of the Manila Enterprises Industrial Corporation. The
Board concludes that while the tanks restor sit on their foundation, the foundation
itself and the walls, dikes and steps, which are integral parts of the tanks, are
affixed to the land while the pipelines are attached to the tanks and required
Meralco to pay realty taxes on the two tanks.
Whether or not the 2 oil tanks installed by Meralco in Batangas is a subject to a
realty tax.
The SC ruled that while the two storage tanks are not embedded in the land, they
may, nevertheless, be considered as improvements on the land, enhancing its utility
and rendering it useful to the oil industry. It is undeniable that the two tanks have
been installed with some degree of permanence as receptacles for the considerable
quantities of oil needed by Meralco for its operations. Thus, the two tanks should be
held subject to realty tax because they were considered real property. Henceforth,
the petition is dismissed. The Board's questioned decision and resolution are
Fels Energy vs. Batangas
Fels Energy, Inc. vs. Province of Batangas
G.R. No. 168557. February 16, 2007.
Callejo Sr., J.
Doctrine: In Consolidated Edison Company of New York, Inc., et al. v. The City of
New York, et al., a power company brought an action to review property tax
assessment. On the citys motion to dismiss, the Supreme Court of New York held
that the barges on which were mounted gas turbine power plants designated to
generate electrical power, the fuel oil barges which supplied fuel oil to the power

plant barges, and the accessory equipment mounted on the barges were subject to
real property taxation.
Moreover, 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. Thus, 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.
Facts: On January 18, 1993, NPC entered into a lease contract with Polar Energy, Inc.
over 330 MW diesel engine power barges moored at Balayan Bay in Calaca,
Batangas. The contract, denominated as an Energy Conversion Agreement, was for
a period of five years. Article 10 states that NPC shall be responsible for the
payment of taxes. (other than (i) taxes imposed or calculated on the basis of the net
income of POLAR and Personal Income Taxes of its employees and (ii) construction
permit fees, environmental permit fees and other similar fees and charges. Polar
Energy then assigned its rights under the Agreement to Fels despite NPCs initial
FELS received an assessment of real property taxes on the power barges from
Provincial Assessor Lauro C. Andaya of Batangas City. FELS referred the matter to
NPC, reminding it of its obligation under the Agreement to pay all real estate taxes.
It then gave NPC the full power and authority to represent it in any conference
regarding the real property assessment of the Provincial Assessor. NPC filed a
petition with the LBAA. The LBAA ordered Fels to pay the real estate taxes. The
LBAA ruled that the power plant facilities, while they may be classified as movable
or personal property, are nevertheless considered real property for taxation
purposes because they are installed at a specific location with a character of
permanency. The LBAA also pointed out that the owner of the bargesFELS, a
private corporationis the one being taxed, not NPC. A mere agreement making NPC
responsible for the payment of all real estate taxes and assessments will not justify
the exemption of FELS; such a privilege can only be granted to NPC and cannot be
extended to FELS. Finally, the LBAA also ruled that the petition was filed out of time.
Fels appealed to the CBAA. The CBAA reversed and ruled that the power barges
belong to NPC; since they are actually, directly and exclusively used by it, the power
barges are covered by the exemptions under Section 234(c) of R.A. No. 7160. As to
the other jurisdictional issue, the CBAA ruled that prescription did not preclude the
NPC from pursuing its claim for tax exemption in accordance with Section 206 of
R.A. No. 7160. Upon MR, the CBAA reversed itself.
Issue: Whether or not the petitioner may be assessed of real property taxes.
Held: YES. The CBAA and LBAA power barges are real property and are thus subject
to real property tax. This is also the inevitable conclusion, considering that G.R. No.
165113 was dismissed for failure to sufficiently show any reversible error. Tax
assessments by tax examiners are presumed correct and made in good faith, with
the taxpayer having the burden of proving otherwise. Besides, factual findings of

administrative bodies, which have acquired expertise in their field, are generally
binding and conclusive upon the Court; we will not assume to interfere with the
sensible exercise of the judgment of men especially trained in appraising property.
Where the judicial mind is left in doubt, it is a sound policy to leave the assessment
undisturbed. We find no reason to depart from this rule in this case.
In Consolidated Edison Company of New York, Inc., et al. v. The City of New York, et
al., a power company brought an action to review property tax assessment. On the
citys motion to dismiss, the Supreme Court of New York held that the barges on
which were mounted gas turbine power plants designated to generate electrical
power, the fuel oil barges which supplied fuel oil to the power plant barges, and the
accessory equipment mounted on the barges were subject to real property taxation.
Moreover, 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. Thus, 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.
Petitioners maintain nevertheless that the power barges are exempt from real
estate tax under Section 234 (c) of R.A. No. 7160 because they are actually, directly
and exclusively used by petitioner NPC, a government- owned and controlled
corporation engaged in the supply, generation, and transmission of electric power.
We affirm the findings of the LBAA and CBAA that the owner of the taxable
properties is petitioner FELS, which in fine, is the entity being taxed by the local
government. As stipulated under Section 2.11, Article 2 of the Agreement:
OWNERSHIP OF POWER BARGES. POLAR shall own the Power Barges and all the
fixtures, fittings, machinery and equipment on the Site used in connection with the
Power Barges which have been supplied by it at its own cost. POLAR shall operate,
manage and maintain the Power Barges for the purpose of converting Fuel of
NAPOCOR into electricity.
It follows then that FELS cannot escape liability from the payment of realty taxes by
invoking its exemption in Section 234 (c) of R.A. No. 7160. Indeed, the law states
that the machinery must be actually, directly and exclusively used by the
government owned or controlled corporation; nevertheless, petitioner FELS still
cannot find solace in this provision because Section 5.5, Article 5 of the Agreement
OPERATION. POLAR undertakes that until the end of the Lease Period, subject to
the supply of the necessary Fuel pursuant to Article 6 and to the other provisions
hereof, it will operate the Power Barges to convert such Fuel into electricity in
accordance with Part A of Article 7.

It is a basic rule that obligations arising from a contract have the force of law
between the parties. Not being contrary to law, morals, good customs, public order
or public policy, the parties to the contract are bound by its terms and conditions.
Time and again, the Supreme Court has stated that taxation is the rule and
exemption is the exception. The law does not look with favor on tax exemptions and
the entity that would seek to be thus privileged must justify it by words too plain to
be mistaken and too categorical to be misinterpreted. Thus, applying the rule of
strict construction of laws granting tax exemptions, and the rule that doubts should
be resolved in favor of provincial corporations, we hold that FELS is considered a
taxable entity.
The mere undertaking of petitioner NPC under Section 10.1 of the Agreement, that
it shall be responsible for the payment of all real estate taxes and assessments,
does not justify the exemption. The privilege granted to petitioner NPC cannot be
extended to FELS. The covenant is between FELS and NPC and does not bind a third
person not privy thereto, in this case, the Province of Batangas.
It must be pointed out that the protracted and circuitous litigation has seriously
resulted in the local governments deprivation of revenues. The power to tax is an
incident of sovereignty and is unlimited in its magnitude, acknowledging in its very
nature no perimeter so that security against its abuse is to be found only in the
responsibility of the legislature which imposes the tax on the constituency who are
to pay for it. The right of local government units to collect taxes due must always be
upheld to avoid severe tax erosion. This consideration is consistent with the State
policy to guarantee the autonomy of local governments and the objective of the
Local Government Code that they enjoy genuine and meaningful local autonomy to
empower them to achieve their fullest development as self-reliant communities and
make them effective partners in the attainment of national goals.
In conclusion, we reiterate that the power to tax is the most potent instrument to
raise the needed revenues to finance and support myriad activities of the local
government units for the delivery of basic services essential to the promotion of the
general welfare and the enhancement of peace, progress, and prosperity of the
1) ESPERIDION Presbitero failed to furnish Nava the value of the properties under
2) Presbitero was ordered by the lower court to pay Nava to settle his debts.
3) Nava's counsel still tried to settle this case with Presbitero, out of court. But to no
4) Thereafter, the sheriff levied upon and garnished the sugar quotas allotted to the
plantation and adhered to the Ma-ao Mill District and registered in the name of
Presbitero as the original plantation owner.
5) The sheriff was not able to present for registration thererof to the Registry of

.6) The court then ordered Presbitero to segregate the portion of Lot 608 pertaining
to Nava from the mass of properties belonging to the defendant within a period to
expire on August 1960.
7) Bottomline, Presbitero did not meet his obligations, and the auction sale was
8) Presbitero died after.
9) RICARDO Presbitero, the estate administrator, then petitioned that the sheriff
desist in holding the auction sale on the ground that the levy on the sugar quotas
was invalid because the notice thereof was not registered with the Registry of
Issue: W/N the sugar quotas are real (immovable) or personal properties.
1) They are real properties.
2) Legal bases:
a) The Sugar Limitation Law xxx attaching to the land xxx (p 631)b) RA 1825xxx to
be an improvement attaching to the land xxx (p 631)c) EO # 873"plantation" xxx to
which is attached an allotment of centrifugal sugar.
3) Under the express provisions of law, the sugar quota allocations are accessories
to the land, and cannot have independent existence away from a plantation.4)
Since the levy is invalid for non-compliance with law, xxx the levy amount to no levy
at all
For the purpose of attachment and execution, and for the purposes of the Chattel
Mortgage Law, "ungathered products" have the nature of personal property.
(this case has a lot of confusing facts, just read the original if this digest fails to
compress everything) The Deputy Sheriff of the Province of Tarlac, by virtue of a writ
of execution issued by the Court of First Instance of Pampanga, attached and sold to
the defendant Emiliano J. Valdez the sugar cane planted by the plaintiff and his
tenants on seven parcels of land. Included also in those attached were real
properties wherein 8mout of the 11 parcels of land, house and camarin which was
first acquired by Macondray & Co and then later on bought by Valdez in an auction.
First Cause for petitioner: That Within one year from the date of the attachment and
sale the plaintiff offered to redeem said sugar cane and tendered to the defendant
Valdez the amount sufficient to cover the price paid by the latter, the interest
thereon and any assessments or taxes which he may have paid thereon after the
purchase, and the interest corresponding thereto and that Valdez refused to accept
the money and to return the sugar cane to the plaintiff. Second Cause for petitioner:
That Valdez was trying to harvest palay from four out of seven parcels of land.
Petitioner filed for preliminary injunction to stop defendant from 1) distributing the
lands 2) harvesting and selling the sugar canes, and 3) harvesting and selling the
palay. The writ was issued which prevented defendant from planting and harvesting
the lands. Defendant later appealed claiming that he was the owner of many of the

alleged land thus he also owns the crops of it. The court awarded the defendant
9,439.08 because the petitioner unduly denied the defendant to plant in his land
thus preventing him to profit thereto.

Whether the sugar cane is personal o real property? (The relevance of the issue is
with regards to the sugar cane of the Petitioner which came from the land that now
belongs to the defendant)

It is contended that sugar cane comes under the classification of real property as
"ungathered products" in paragraph 2 of article 334 of the Civil Code. Said
paragraph 2 of article 334 enumerates as real property the following: 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.
In some cases "standing crops" may be considered and dealt with as personal
property. In the case of Lumber Co. vs. Sheriff and Tax Collector (106 La., 418) the
Supreme Court said: "True, by article 465 of the Civil Code it is provided that
'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. Our jurisprudence recognizes the possible mobilization of
the growing crop."
For the purpose of attachment and execution, and for the purposes of the Chattel
Mortgage Law, "ungathered products" have the nature of personal property. SC
lowered the award for damages to the defendant to 8,900.80 by acknowledging the
fact that some of the sugar canes were owned by the petitioner and by reducing the
calculated expected yield or profit that defendant would have made if petitioner did
not judicially prevent him from planting and harvesting his lands.
Luis Marcos Laurel vs Hon. Zeus Abrogar
GR No. 155076
January 13, 2009
Laurel was charged with Theft under Art. 308 of the RPC for allegedly taking,
stealing, and using PLDT's international long distance calls by conducting

International Simple Resale (ISR) a method of outing and completing international

long-distance calls using lines, cables, antennae, and/or air wave frequency which
connect directly to the local/domestic exchange facilities of the country where the
call is destined. PLDT alleged that this service was stolen from them using their
own equipment and caused damage to them amounting to P20,370,651.92.
PLDT alleges that the international calls and business of providing
telecommunication or telephone service are personal properties capable of
appropriation and can be objects of theft.
WON Laurel's act constitutes Theft
Art.308, RPC: Theft is committed by any person who, with intent to gain but without
violence against, or intimidation of persons nor force upon things, shall take
personal property of another without the latters consent.
Elements of Theft under Art.308, RPC:
There be taking of Personal Property;
Said Personal Property belongs to another;
Taking be done with Intent to Gain;
Taking be done without the owners consent;
No violence against, or intimidation of, persons or force upon things
Personal Property anything susceptible of appropriation and not included in Real
Thus, the term personal property as used in Art.308, RPC should be interpreted in
the context of the Civil Code's definition of real and personal property.
Consequently, any personal property, tangible or intangible, corporeal or
incorporeal, capable of appropriation may be the subject of theft (*US v Carlos; US v
Tambunting; US v Genato*), so long as the same is not included in the enumeration
of Real Properties under the Civil Code.
The only requirement for personal property to capable of theft, is that it be subject
to appropriation.
Art. 416 (3) of the Civil Code deems Forces of Nature which are brought under the
control of science, as Personal Property.
The appropriation of forces of nature which are brought under control by science
can be achieved by tampering with any apparatus used for generating or measuring
such forces of nature, wrongfully redirecting such forces of nature from such
apparatus, or using any device to fraudulently obtain such forces of nature.
In the instant case, the act of conducting ISR operations by illegally connecting
various equipment or apparatus to PLDTs telephone system, through which
petitioner is able to resell or re-route international long distance calls using PLDTs
facilities constitute Subtraction.

Moreover, interest in business should be classified as personal property since it is

capable of appropriation, and not included in the enumeration of real properties.
Therefore, the business of providing telecommunication or telephone service are
personal property which can be the object of theft under Art. 308 of the RPC. The
act of engaging in ISR is an act of subtraction penalized under the said article.
While international long-distance calls take the form of electrical energy and may be
considered as personal property, the said long-distance calls do not belong to PLDT
since it could not have acquired ownership over such calls. PLDT merely encodes,
augments, enhances, decodes and transmits said calls using its complex
communications infrastructure and facilities.
Since PLDT does not own the said telephone calls, then it could not validly claim
that such telephone calls were taken without its consent.
What constitutes Theft is the use of the PLDT's communications facilities without
PLDT's consent. The theft lies in the unlawful taking of the telephone services &
The Amended Information should be amended to show that the property subject of
the theft were services and business of the offended party.
! PNB v. Aznar, et al.
G.R. 171805 May 30, 2011
! Facts:
This case is consolidated with G.R. 172021, Merelo and Matias Aznar v. PNB
1958: Rural Insurance and Surety Company, Inc. (RISCO) ceased operation due to
business reverses
- In plaintiffs (Anzar et al.) desire to rehabilitate RISCO, they contributed a total
amount of
- This was used to purchase 3 parcels of land in Cebu
- 2 in the Minicipality of Talisay and 1 in the District of Lahug, Cebu City
- Marami yung nag-contribute for the P212k, lahat sila kasama ni Aznar as
After the purchase of the lots, titles were issued in the name of RISCO
The amount contributed by plaintiffs constituted as liens and encumbrances on
the properties as annotated
in the titles of said lots
- Such annotation was made pursuant to the Minutes of the Special Meeting of the
Board of
Directors of RISCO on March 14, 1961, and a part of it says:
- And that the respective contributions above-mentioned (Aznar et al.) shall
constitute as their
lien or interest on the property described above, if and when said property are titled
in the name

of RISCO, subject to registration as their adverse claim in pursuance of the Provision

of Land
Registration Act, until such time their respective contributions are refunded to them
Thereafter, various subsequent annotations were made on the same titles,
including the Notice of
Attachment and Writ of Execution both dated August 3,1962 in favour of Philippine
National Bank
As a result, a Certificate of Sale was issued in favor of PNB, being the lone and
highest bidder of the 3
parcels of land
- This prompted Aznar et al. to file the instant case seeking the quieting of their
supposed title to the
subject properties
Trial court ruled against PNB on the basis that there was an express trust created
over the subject
properties whereby RISCO was the trustee and the stockholders, Aznar, et al., were
the beneficiaries
Court of Appeals opined that the monetary contributions made by Aznar, et al. to
RISCO can only be
characterised as a load secured by a lien on the subjected lots, rather than an
expressed trust
Whether or not there was a trust contract between RISCO and Aznar, et al.
NO. At the outset, the Court agrees with the Court of Appeals that the agreement
contained in the Minutes of
the Special Meeting of the RISCO Board of Directors held on March 14, 1961 was a
loan by the therein
named stockholders to RISCO. Careful perusal of the Minutes relied upon by
plaintiffs-appellees in their
claim, showed that their contributions shall constitute as lien or interest on the
property. The term lien as
used in the Minutes is defined as "a discharge on property usually for the payment
of some debt or
obligation. Hence, from the use of the word "lien" in the Minutes, We find that the
money contributed by
plaintiffs-appellees was in the nature of a loan, secured by their liens and interests
duly annotated on the
titles. The annotation of their lien serves only as collateral and does not in any way
vest ownership of
property to plaintiffs.
We are not persuaded by the contention of Aznar, et al., that the language of the
subject Minutes created an

express trust. Trust is the right to the beneficial enjoyment of property, the legal
title to which is vested in another. It is a
fiduciary relationship that obliges the trustee to deal with the property for the
benefit of the beneficiary.
Express trusts are intentionally created by the direct and positive acts of the settlor
or the trustor - by some
writing, deed, or will or oral declaration. It is created not necessarily by some
written words, but by the direct
and positive acts of the parties. The creation of an express trust must be manifested
with reasonable
certainty and cannot be inferred from loose and vague declarations or from
ambiguous circumstances
susceptible of other interpretations.
At most, what Aznar, et al., had was merely a right to be repaid the amount loaned
to RISCO. Unfortunately,
the right to seek repayment or reimbursement of their contributions used to
purchase the subject properties is
already barred by prescription
10 Years because it was based on a written contract (the minutes by the Board of
Directors) in 1961
and the quieting of the title suit was brought only in 1998
WHEREFORE, the petition of Aznar, et al., in G.R. No. 172021 is DENIED for lack of
merit. The petition of
PNB in G.R. No. 171805 is GRANTED. The Complaint, docketed as Civil Case No.
CEB-21511, filed by
Aznar, et al., is hereby DISMISSED. No costs.
FACTS: Respondent KJS Eco-Framework System is a corporation engaged in the sale
of steel scaffoldings, while petitioner Sonny Lo, doing business under the name of
Sans Enterprises, is a building contractor.
1. In February 1990, petitioner ordered scaffolding equipments from the
respondent amounting to P540, 425.80. He paid a down payment of P150,000 and
the balance was to be paid in 10 monthly installments
2. However, Lo was only able to pay the first 2 monthly installments due to
financial difficulties despite demands from the respondent
3. In October 1990, petitioner and respondent executed a deed of assignment
whereby petitioner assigned to respondent his receivables of P335,462.14 from
Jomero Realty Corp
4. But when respondent tried to collect the said credit from Jomero Realty Corp,
the latter refused to honor the deed of assignment because it claimed that the
petitioner was also indebted to it. As such, KJS sent Lo a demand letter but the
latter refused to pay, claiming that his obligation had been extinguished when they
executed the deed of assignment
5. Subsequently, respondent filed an action for recovery of sum of money against
6. Petitioner argued that his obligation was extinguished with the execution of the
deed of assignment of credit. Respondent alleged that Jomero Realty Corp refused

to honor the deed of assignment because it claimed that the petitioner had
outstanding indebtedness to it
7. The trial court dismissed the complaint on the ground that the assignment of
credit extinguished the bligation
8. Upon appeal, CA reversed the trial court decision and held in favor of KJS. CA
held that
a. Petitioner failed to comply with his warranty under the deed
b. The object of the deed did not exist at the time of the transaction, rendering it
void under Art 1409 NCC
c. Petitioner violated the terms of the deed of assignment when he failed to
execute and do all acts necessary to effectually enable the respondent to recover
the collectibles
ISSUE: WON the deed of assignment extinguished the petitioners obligation
HELD: No, the petitioners obligation was not extinguished with the execution of the
deed of assignment.
An assignment of credit is an agreement by virtue of which the owner of a credit,
known as the assignor, by a legal cause, such as sale, dacion en pago, exchange or
donation, and without the consent of the debtor, transfers his credit and accessory
rights to another, known as the assignee, who acquires the power to enforce it to
the same extent as the assignor could enforce it against the debtor.
In dacion en pago, as a special mode of payment, the debtor offers another thing to
the creditor who accepts it as equivalent of payment of an outstanding debt. In
order that there be a valid dation in payment, the following are the requisites: (1)
There must be the performance of the prestation in lieu of payment (animo
solvendi) which may consist in the delivery of a corporeal thing or a real right or a
credit against the third person; (2) There must be some difference between the
prestation due and that which is given in substitution (aliud pro alio); (3) There must
be an agreement between the creditor and debtor that the obligation is immediately
extinguished by reason of the performance of a prestation different from that due.
The undertaking really partakes in one sense of the nature of sale, that is, the
creditor is really buying the thing or property of the debtor, payment for which is to
be charged against the debtors debt. As such, the vendor in good faith shall be
responsible, for the existence and legality of the credit at the time of the sale but
not for the solvency of the debtor, in specified circumstances.
Hence, it may well be that the assignment of credit, which is in the nature of a sale
of personal property, produced the effects of a dation in payment which may
extinguish the obligation. However, as in any other contract of sale, the vendor or
assignor is bound by certain warranties. More specifically, the first paragraph of
Article 1628 of the Civil Code provides:
The vendor in good faith shall be responsible for the existence and legality of the
credit at the time of the sale, unless it should have been sold as doubtful; but not
for the solvency of the debtor, unless it has been so expressly stipulated or unless
the insolvency was prior to the sale and of common knowledge.

From the above provision, petitioner, as vendor or assignor, is bound to warrant the
existence and legality of the credit at the time of the sale or assignment. When
Jomero claimed that it was no longer indebted to petitioner since the latter also had
an unpaid obligation to it, it essentially meant that its obligation to petitioner has
been extinguished by compensation. In other words, respondent alleged the nonexistence of the credit and asserted its claim to petitioners warranty under the
assignment. Therefore, it necessary for the petitioner to make good its warranty
and pay the obligation.
Furthermore, the petitioner breached his obligation under the Deed of Assignment,
to execute and do all such further acts and deeds as shall be reasonably necessary
to effectually enable said ASSIGNEE to recover whatever collectibles said ASSIGNOR
has in accordance with the true intent and meaning of these presents.
Indeed, by warranting the existence of the credit, petitioner should be deemed to
have ensured the performance thereof in case the same is later found to be
inexistent. He should be held liable to pay to respondent the amount of his
GUZMAN, JR., Respondents. G.R. No. 160347; November 29, 2006


NATURE OF THE CASE: This case reached the Supreme Court as an appeal to the
decision of the CA ruling against the spouses Carandang and denying their motion
for reconsideration. The CA affirmed the RTCs decision that Milagros de Guzman,
the decedents wife, is not an indispensable party in the complaint, hence, her noninclusion in the case does not warrant a dismissal of the complaint.
FACTS: Spouses Carandang and the decedent Quirino de Guzman were stockholders
and corporate officers of Mabuhay Broadcasting System (MBS). The Carandangs
have equities at 54 % while Quirino has 46%.
When the capital stock of MBS was increased on November 26, 1983, the
Carandangs subscribed P345,000 from it, P293,250 from the said amount was
loaned by Quirino to the Carandangs. In the subsequent increase in MBS capital
stock on March 3, 1989, the Carandangs subscribed again to the increase in the
amount of P93,750. But, P43,125 out of the mentioned amount was again loaned by
When Quirino sent a demand letter to the Carandangs for the payment of
the loan, the Carandangs refused to pay. They contend that a pre-incorporation
agreement was executed between Arcadio Carandang and Quirino, whereby Quirino
promised to pay for the stock subscriptions of the Arcadio without cost, in

consideration for Arcadios technical expertise, his newly purchased equipment, and
his skill in repairing and upgrading radio/communication equipment therefore, there
is no indebtedness on the part of the Carandangs.
Thereafter, Quirino filed a complaint seeking to recover the P336,375 total amount
of the loan together with damages. The RTC ruled in favor of Quirino and ordered
the Carandangs to pay the loan plus interest, attorneys fees, and costs of suit. The
Carandangs appealed the trial courts decision to the CA, but the CA affirmed the
same. The subsequent Motion for Reconsideration filed by the Carandangs were
also denied. Hence, this appeal to the SC.
SPOUSES CARANDANG: Three of the four checks used to pay their stock
subscriptions were issued in the name of Milagros de Guzman, the decedents wife.
Thus, Milagros should be considered as an indispensable party in the complaint.
Being such, the failure to join Milagros as a party in the case should cause the
dismissal of the action by reason of a jurisprudence stating that: (i)f a suit is not
brought in the name of or against the real party in interest, a motion to dismiss may
be filed on the ground that the complaint states no cause of action."
ISSUE: Whether or not the RTC should have dismissed the case for failure to state a
cause of action, considering that Milagros de Guzman, allegedly an indispensable
party, was not included as a party-plaintiff.
HELD: No. Although the spouses Carandang were correct in invoking the
aforementioned doctrine, the ground set forth entails an examination of whether
the parties presently pleaded are interested in the outcome of the litigation, and not
whether all persons interested in such outcome are actually pleaded. The first
query seeks to answer the question of whether Milagros is a real party in interest,
while the latter query is asking if she is an indispensable party. Since the issue of
this case calls for the definition of an indispensable party, invoking the
abovementioned doctrine is irrelevant to the case because the doctrine talks about
a real party in interest and not an indispensable party. Although it is important to
take note that an indispensable party is also a real party in interest.
> Real party in interest the party who stands to be benefited or injured by the
judgment of the suit, or the party entitled to the avails of the suit.
> Indispensable party a party in interest without whom no final determination can
be had of an action
> Necessary party one who is not indispensable but who ought to be joined as a
party if complete relief is to be accorded as to those already parties, or for a
complete determination or settlement of the claim subject of the action
> Pro-forma parties those who are required to be joined as co-parties in suits by or
against another party as may be provided by the applicable substantive law or
procedural rule.
An example is provided by Section 4, Rule 3 of the Rules of Court:
Sec. 4. Spouses as parties. Husband and wife shall sue or be sued jointly, except
as provided by law.
Pro-forma parties can either be indispensable, necessary or neither indispensable
nor necessary. The third case occurs if, for example, a husband files an action to

recover a property which he claims to be part of his exclusive property. The wife
may have no legal interest in such property, but the rules nevertheless require that
she be joined as a party.
Quirino and Milagros de Guzman were married before the effectivity of the Family
Code on 3 August 1988. As they did not execute any marriage settlement, the
regime of conjugal partnership of gains govern their property relations.
All property acquired during the marriage, whether the acquisition appears to have
been made, contracted or registered in the name of one or both spouses, is
presumed to be conjugal unless the contrary is proved. Credits are personal
properties, acquired during the time the loan or other credit transaction was
executed. Therefore, credits loaned during the time of the marriage are presumed
to be conjugal property.
Assuming that the four checks are credits, they are assumed to be conjugal
properties of Quirino and Milagros. There being no evidence to the contrary, such
presumption subsists. As such, Quirino de Guzman, being a co-owner of specific
partnership property, is certainly a real party in interest.
Now, with regard to the discussion on the effect of non-inclusion of parties in the
complaint filed: in indispensable parties, when an indispensable party is not before
the court, the action should be dismissed. The absence of an indispensable party
renders all subsequent actuations of the court void, for want of authority to act, not
only as to the absent parties but even as to those present. For necessary parties,
the non-inclusion of a necessary party does not prevent the court from proceeding
in the action, and the judgment rendered therein shall be without prejudice to the
rights of such necessary party. Non-compliance with the order for the inclusion of a
necessary party would not warrant the dismissal of the complaint. Lastly, for proforma parties, the general rule under Section 11, Rule 3 must be followed: such nonjoinder is not a ground for dismissal. Hence, in a case concerning an action to
recover a sum of money, we held that the failure to join the spouse in that case was
not a jurisdictional defect. The non-joinder of a spouse does not warrant dismissal
as it is merely a formal requirement which may be cured by amendment.
Conversely, in the instances that the pro-forma parties are also indispensable or
necessary parties, the rules concerning indispensable or necessary parties, as the
case may be, should be applied. Thus, dismissal is warranted only if the pro-forma
party not joined in the complaint is an indispensable party.
Under Art. 147 of the Civil Code which was superceded by Art. 108 of the Family
Code, the conjugal partnership shall be governed by the rules on the contract of
partnership. Thus, Milagros is a co-owner of the subject personal property in this
case the credit incurred by spouses Carandang. Being co-owners of the alleged
credit, Quirino and Milagros de Guzman may separately bring an action for the
recovery thereof.
In sum, in suits to recover properties, all co-owners are real parties in interest.
However, pursuant to Article 487 of the Civil Code and relevant jurisprudence, any
one of them may bring an action, any kind of action, for the recovery of co-owned

properties. Therefore, only one of the co-owners, namely the co-owner who filed the
suit for the recovery of the co-owned property, is an indispensable party thereto.
The other co-owners are not indispensable parties. They are not even necessary
parties, for a complete relief can be accorded in the suit even without their
participation, since the suit is presumed to have been filed for the benefit of all coowners.
Thus, Milagros de Guzman is not an indispensable party in the action for the
recovery of the allegedly loaned money to the spouses Carandang. As such, she
need not have been impleaded in said suit, and dismissal of the suit is not
warranted by her not being a party thereto. (The Civ Pro issue was not the main
issue in the case.)