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1. LEUNG YEE VS.

STRONG MACHINERY (37 PHIL 644)


Facts:
The "Compañia Agricola Filipina" (CAF) bought a rice-cleaning machinery from the defendant machinery company, and
executed a chattel mortgage including the building of strong materials in which the machinery was installed to secure payment,
without any reference to the land on which it stood. The Chattel was foreclosed due to non-payment and the machinery,
including the building, was sold by the sheriff which was bought by Strong Machinery. The said sale was annotated in the
same registry on December 29, 1913. Later on, CAF sold the lot where the building stood to Strong Machinery thru a deed of
sale which was executed in a public document but was not registered. Strong Machine took possession of the building and
the land.

Leung Yee, another creditor of CAF, bought the same building where the machines were installed and registered in the land
registry of the Province of Cavite.

Issue: Was the property's nature changed by its registration in the Chattel Mortgage Registry?

Held:
Where the interest conveyed is of the nature of real property, the placing of the document on record in the Chattel Mortgage
Registry is a futile act.
Chattel Mortgage refers to the mortgage of Personal Property executed in the manner and form prescribed in the statute.
The building of strong materials in which the rice-cleaning machinery was installed by the "Compañia Agricola Filipina" was
real property, and the mere fact that the parties seem to have dealt with it separate and apart from the land on which it stood
in no wise changed its character as real property. It follows that neither the original registry in the chattel mortgage registry
of the instrument purporting to be a chattel mortgage of the building and the machinery installed therein, nor the annotation
in that registry of the sale of the mortgaged property, had any effect whatever so far as the building was concerned.
2. ANTONIO PUNZALAN ET. AL. VS. REMEDIOS LACSAMANA (GR NO. L-55729)
FACTS: It appears that petitioner, Antonio Punsalan, Jr., was the former registered owner of a parcel of land consisting of 340
square meters situated in Bamban, Tarlac. In 1963, petitioner mortgaged said land to respondent PNB (Tarlac Branch) in the
amount of P10,000.00, but for failure to pay said amount, the property was foreclosed on December 16, 1970. Respondent
PNB (Tarlac Branch) was the highest bidder in said foreclosure proceedings. However, the bank secured title thereto only on
December 14, 1977.
In the meantime, in 1974, while the properly was still in the alleged possession of petitioner and with the alleged acquiescence
of respondent PNB (Tarlac Branch), and upon securing a permit from the Municipal Mayor, petitioner constructed a warehouse
on said property. Petitioner declared said warehouse for tax purposes for which he was issued Tax Declaration No. 5619.
Petitioner then leased the warehouse to one Hermogenes Sibal for a period of 10 years starting January 1975.
On July 26, 1978, a Deed of Sale was executed between respondent PNB (Tarlac Branch) and respondent Lacsamana over
the property. This contract was amended on July 31, 1978, particularly to include in the sale, the building and improvement
thereon.
On November 22, 1979, petitioner commenced suit for "Annulment of Deed of Sale with Damages" against herein respondents
PNB and Lacsamana before respondent Court of First Instance of Rizal, Branch XXXI, Quezon City, essentially impugning the
validity of the sale of the building as embodied in the Amended Deed of Sale.
On March 14, 1980, respondent PNB filed a Motion to Dismiss on the ground that venue was improperly laid considering that
the building was real property under article 415 (1) of the New Civil Code and therefore section 2(a) of Rule 4 should apply.
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Opposing said Motion to Dismiss, petitioner contended that the action for annulment of deed of sale with damages is in the
nature of a personal action, which seeks to recover not the title nor possession of the property but to compel payment of
damages, which is not an action affecting title to real property. On April 25, 1980, respondent Court granted respondent PNB's
Motion to Dismiss.
ISSUE: WON the building was real property under article 415 (1) of the New Civil Code and WON related case should be
dismissed on the ground of improper venue
HELD: We affirm respondent Court's Order denying the setting for pre-trial.
The warehouse claimed to be owned by petitioner is an immovable or real property as provided in article 415(l) of the Civil
Code. Buildings are always immovable under the Code. A building treated separately from the land on which it stood is
immovable property and the mere fact that the parties to a contract seem to have dealt with it separate and apart from the
land on which it stood in no wise changed its character as immovable property.
While it is true that petitioner does not directly seek the recovery of title or possession of the property in question, his action
for annulment of sale and his claim for damages are closely intertwined with the issue of ownership of the building which,
under the law, is considered immovable property, the recovery of which is petitioner's primary objective. The prevalent doctrine
is that an action for the annulment or rescission of a sale of real property does not operate to efface the fundamental and
prime objective and nature of the case, which is to recover said real property. It is a real action. 9
Respondent Court, therefore, did not err in dismissing the case on the ground of improper venue (Section 2, Rule 4) 10, which
was timely raised (Section 1, Rule 16).
3. STANDARD OIL CO. VS. JARANILLO (44 PHIL 631)
Facts: On 27 November 1922, Gervasia de la Rosa Vda. de Vera was the lessee of a parcel of land situated in the City of
Manila and owner of the house of strong materials built thereon, upon which date she executed a document in the form of a
chattel mortgage, purporting to convey to Standard Oil Company of New York by way of mortgage both the leasehold interest
in said lot and the building which stands thereon. After said document had been duly acknowledged and delivered, Standard
Oil caused the same to be presented to Joaquin Jaramillo, as register of deeds of the City of Manila, for the purpose of having
the same recorded in the book of record of chattel mortgages. Upon examination of the instrument, Jaramillo opined that it
was not chattel mortgage, for the reason that the interest therein mortgaged did not appear to be personal property, within
the meaning of the Chattel Mortgage Law, and registration was refused on this ground only.
A petition for mandamus was filed against the register of deeds. The Supreme Court ruled that the position taken by
the register of deeds is untenable. It is his duty to accept the proper fee and place the instrument on record. The Court
explained that "the duties of a register of deeds in respect to the registration of chattel mortgages are of a purely ministerial
character, and no provision of law can be cited which confers upon him any judicial or quasi-judicial power to determine the
nature of any document of which registration is sought as a chattel mortgage."
4. DAVAO SAWMILL CO. VS. CASTILLO (61 PHIL 709)
Facts:
Davao Saw Mill Co., Inc., is the holder of a lumber concession from the Government of the Philippine Islands. However, the
land upon which the business was conducted belonged to another person. On the land the sawmill company erected a building
which housed the machinery used by it. Some of the implements thus used were clearly personal property, the conflict
concerning machines which were placed and mounted on foundations of cement. In the contract of lease between the sawmill
company and the owner of the land there appeared the following provision: That on the expiration of the period agreed upon,
all the improvements and buildings introduced and erected by the party of the second part shall pass to the exclusive ownership
of the lessor without any obligation on its part to pay any amount for said improvements and buildings; which do not include
the machineries and accessories in the improvements.
In another action wherein the Davao Light & Power Co., Inc., was the plaintiff and the Davao, Saw, Mill Co., Inc., was the
defendant, a judgment was rendered in favor of the plaintiff in that action against the defendant; a writ of execution issued
thereon, and the properties now in question were levied upon as personalty by the sheriff. No third party claim was filed for
such properties at the time of the sales thereof as is borne out by the record made by the plaintiff herein.
It must be noted also that on number of occasion, Davao Sawmill treated the machinery as personal property by executing
chattel mortgages in favor of third persons. One of such is the appellee by assignment from the original mortgages.
The lower court rendered decision in favor of the defendants herein. Hence, this instant appeal.
Issue:
WON the machineries and equipments were personal in nature.
Held:
Yes. The Supreme Court affirmed the decision of the lower court. It said machinery which is movable in its nature only
becomes immobilized when placed in a plant by the owner of the property or plant, but not when so placed by a tenant, a
usufructuary, or any person having only a temporary right, unless such person acted as the agent of the owner.
5. BOARD OF ASSESSMENT APPEALS VS. MANILA ELECTRIC (10 SCRA 68)
FACTS:
On October 20, 1902, the Philippine Commission enacted Act No. 484 which authorized the Municipal Board of Manila to grant
a franchise to construct, maintain and operate an electric street railway and electric light, heat and power system in the City
of Manila and its suburbs to the person or persons making the most favorable bid. Charles M. Swift was awarded the franchise
on March 1903, the terms and conditions of which were embodied in Ordinance No. 44 approved on March 24, 1903.
Respondent MERALCO became the transferee and owner of the franchise.
MERALCO's electric power is generated by its hydro-electric plant located at Botocan Falls, Laguna and is transmitted to the
City of Manila by means of electric transmission wires, running from the province of Laguna to the said City. These electric
transmission wires which carry high voltage current, are fastened to insulators attached on steel towers constructed by
respondent at intervals, from its hydro-electric plant in the province of Laguna to the City of Manila. The respondent Meralco
has constructed 40 of these steel towers within Quezon City, on land belonging to it.
On November 15, 1955, petitioner City Assessor of Quezon City declared the steel towers for real property tax. After denying
respondent's petition to cancel the tax declarations, an appeal was taken by respondent to the Board of Assessment Appeals
of Quezon City, which required respondent to pay the amount of P11,651.86 as real property tax on the steel towers for the
years 1952 to 1956. Respondent paid the amount under protest, and filed a petition for review with the Court of Tax Appeals
(CTA). The CTA then rendered a decision on December 29, 1958, ordering the cancellation of the tax declarations and the
petitioner City Treasurer of Quezon City to refund to the respondent the sum of P11,651.86 stating that the steel towers are
personal properties not subject to real property tax. The motion for reconsideration having been denied, the instant petition
for review was filed.
ISSUE(S):
Whether or not the steel bars come in purview of real properties subject to real property tax.
RULING:
The Court in upholding the assailed decision referred to Article 415 of the Civil Code for the definition of an immovable
property, as such was not provided in the tax law. According to Article 415, the following are immovable property: "(1) Land,
buildings, roads, and constructions of all kinds adhered to the soil; xxx xxx xxx (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 object;
xxx xxx xxx (5) Machinery, receptacles, instruments or implements intended by the owner of the tenement for an industry or
works which may be carried in a building or on a piece of land, and which tends directly to meet the needs of the said industry
or works;" xxx xxx xxx
It was held that the steel towers or supports in question, do not come within the objects mentioned in paragraph 1, because
they do not constitute buildings or constructions adhered to the soil. They are not constructions analogous to buildings nor
adhering to the soil. As per description, given by the lower court, they are removable and merely attached to a square metal
frame by means of bolts, which when unscrewed could easily be dismantled and moved from place to place. They cannot be
included under paragraph 3, as they are not attached to an immovable in a fixed manner, and they can be separated without
breaking the material or causing deterioration upon the object to which they are attached. Each of the steel towers or supports
consists of steel bars or metal strips, joined together by means of bolts, which can be disassembled by unscrewing the bolts
and reassembled by screwing the same. Also, the steel towers or supports do not fall under paragraph 5, for they are not
machineries or receptacles, instruments or implements, and even if they were, they are not intended for industry or works on
the land as the petitioner is not engaged in an industry or works on the land in which the steel supports or towers are
constructed.
6. MAKATI LEASING AND FINANCE CORP. VS. WEAREVER TEXTILE MILLS, INC. (22 SCRA 296)
Facts:
It appears that in order to obtain financial accommodations from herein petitioner Makati Leasing and Finance Corporation,
the private respondent Wearever Textile Mills, Inc., discounted and assigned several receivables with the former under a
Receivable Purchase Agreement. To secure the collection of the receivables assigned, private respondent executed a Chattel
Mortgage over certain raw materials inventory as well as a machinery described as an Artos Aero Dryer Stentering Range.
Upon default, Makati Leasing filed a petition for judicial foreclosure of the properties mortgaged. Acting on Makati Leasing’s
application for replevin, the lower court issued a writ of seizure. Pursuant thereto, the sheriff enforcing the seizure order
seized the machinery subject matter of the mortgage. In a petition for certiorari and prohibition, the Court of Appeals ordered
the return of the machinery on the ground that the same can-not be the subject of replevin because it is a real property
pursuant to Article 415 of the new Civil Code, the same being attached to the ground by means of bolts and the only way to
remove it from Wearever textile’s plant would be to drill out or destroy the concrete floor. When the motion for reconsideration
of Makati Leasing was denied by the Court of Appeals, Makati Leasing elevated the matter to the Supreme Court.
Issue:
Whether or not the machinery in suit is real or personal property from the point of view of the parties.

Held:
It is similar to that of the Tumalad v Vicencio case. If a house of strong materials, like what was involved in the Tumalad case,
may be considered as personal property for purposes of executing a chattel mortgage thereon as long as the parties to the
contract so agree and no innocent third party will be prejudiced thereby, there is absolutely no reason why a machinery, which
is movable in its nature and becomes immobilized only by destination or purpose, may not be likewise treated as such. This
is really because one who has so agreed is estopped from the denying the existence of the chattel mortgage.
In rejecting petitioner’s assertion on the applicability of the Tumalad doctrine, the CA lays stress on the fact that the house
involved therein was built on a land that did not belong to the owner of such house. But the law makes no distinction with
respect to the ownership of the land on which the house is built and we should not lay down distinctions not contemplated by
law.
It must be pointed out that the characterization by the private respondent is indicative of the intention and impresses upon
the property the character determined by the parties. As stated in Standard Oil Co. of New York v. Jaramillo, 44 Phil. 630, it
is undeniable that the parties to a contract may, by agreement, treat as personal property that which by nature would be a
real property as long as no interest of third parties would be prejudiced thereby.
The status of the subject matter as movable or immovable property was not raised as an issue before the lower court and the
CA, except in a supplemental memorandum in support of the petition filed in the appellate court. There is no record showing
that the mortgage has been annulled, or that steps were taken to nullify the same. On the other hand, respondent has
benefited from the said contract.
Equity dictates that one should not benefit at the expense of another.
As such, private respondent could no longer be allowed to impugn the efficacy of the chattel mortgage after it has benefited
therefrom.
Therefore, the questioned machinery should be considered as personal property.
7. MINDANAO BUS COMPANY VS. CITY ASSESSOR (116 PHIL 501)
Facts:

• Mindanao Bus Company is a public utility engaged in transporting passengers and cargoes by motor trucks in Mindanao
Island;
• City Assessor of Cagayan assessed the machineries of the respondent, which are either sitting on cement or wooden
platforms, as real properties for P4,400. Petitioner is the owner of the land where it operates and garage for its buses, a
repair shop; blacksmith and carpentry shops where the buses are made; body constructed and repaired for it to be serviceable.
The said machines were never used as industrial equipments to produce finished products for sale or offered to the general
public for business.
Issue:
• WON the Honorable Court of tax Appeals erred in upholding respondents’ contention that the questioned assessment are
valid; and that the said tools, equipments or machineries are immovable taxable real properties;
Held:
• Respondents contend that said equipments, though movable, are immobilized by destination, in accordance with paragraph
5 of Article 415 of the New Civil Code which provides:
Art. 415. — The following are immovable properties:
xxx xxx xxx
(5) Machinery, receptacles, instruments or implements intended by the owner of the tenement for an industry or works which
may be carried on in a building or on a piece of land, and which tend directly to meet the needs of the said industry or works.
(Emphasis ours.)
• Note that the stipulation expressly states that the equipments are placed on wooden or cement platforms. They can be
moved around and about in petitioner's repair shop. 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 incidentals — acquired 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.
• The case at bar, the equipments in question are destined only to repair or service the transportation business, which is not
carried on in a building or permanently on a piece of land, as demanded by the law. Said equipments may not, therefore, be
deemed real property.
• We hold that the equipments in question are not absolutely essential to the petitioner's transportation business, and
petitioner's business is not carried on in a building, tenement or on a specified land, so said equipment may not be considered
real estate within the meaning of Article 415 (c) of the Civil Code.
8. CALTEX PHILIPPINES INC. VS. CENTRAL BOARD OF ASSESSMENT APPEALS AND CITY ASSESSOR OF PASAY
(GR NO. L-50466)
FACTS: This case is about the realty tax on machinery and equipment installed by Caltex (Philippines) Inc. in its gas stations
located on leased land.
The machines and equipment consists of underground tanks, elevated tank, elevated water tanks, water tanks, gasoline
pumps, computing pumps, water pumps, car washer, car hoists, truck hoists, air compressors and tireflators.
The said machines and equipment are loaned by Caltex to gas station operators under an appropriate lease agreement or
receipt. It is stipulated in the lease contract that the operators, upon demand, shall return to Caltex the machines and
equipment in good condition as when received, ordinary wear and tear excepted.
The lessor of the land, where the gas station is located, does not become the owner of the machines and equipment installed
therein. Caltex retains the ownership thereof during the term of the lease.
The city assessor of Pasay City characterized the said items of gas station equipment and machinery as taxable realty. The
realty tax on said equipment amounts to P4,541.10 annually (p. 52, Rollo). The city board of tax appeals ruled that they are
personalty. The assessor appealed to the Central Board of Assessment Appeals.
ISSUE:
1. Whether the pieces of gas station equipment and machinery already enumerated are subject to realty tax
2. Distinguish from the various applications of Art 415
HELD:
1. This issue has to be resolved primarily under the provisions of the Assessment Law and the Real Property Tax Code.
Section 2 of the Assessment Law provides that the realty tax is due "on real property, including land, buildings, machinery,
and other improvements" not specifically exempted in section 3 thereof. The Code contains the following definitions in its
section 3:
k) Improvements — is a valuable addition made to property or an amelioration in its condition, amounting to more than mere
repairs or replacement of waste, costing labor or capital and intended to enhance its value, beauty or utility or to adapt it for
new or further purposes.
m) Machinery — shall embrace machines, mechanical contrivances, instruments, appliances and apparatus attached to the
real estate. It includes the physical facilities available for production, as well as the installations and appurtenant service
facilities, together with all other equipment designed for or essential to its manufacturing, industrial or agricultural purposes
(See sec. 3[f], Assessment Law).
We hold that the said equipment and machinery, as appurtenances to the gas station building or shed owned by Caltex (as
to which it is subject to realty tax) and which fixtures are necessary to the operation of the gas station, for without them the
gas station would be useless, and which have been attached or affixed permanently to the gas station site or embedded
therein, are taxable improvements and machinery within the meaning of the Assessment Law and the Real Property Tax Code.
2. Caltex invokes the rule that machinery which is movable in its nature only becomes immobilized when placed in a plant by
the owner of the property or plant but not when so placed by a tenant, a usufructuary, or any person having only a temporary
right, unless such person acted as the agent of the owner (Davao Saw Mill Co. vs. Castillo, 61 Phil 709).
That ruling is an interpretation of paragraph 5 of article 415 of the Civil Code regarding machinery that becomes real property
by destination. In the Davao Saw Mills case the question was whether the machinery mounted on foundations of cement and
installed by the lessee on leased land should be regarded as real property forpurposes of execution of a judgment against the
lessee. The sheriff treated the machinery as personal property. This Court sustained the sheriff's action. (Compare with
Machinery & Engineering Supplies, Inc. vs. Court of Appeals, 96 Phil. 70, where in a replevin case machinery was treated as
realty).
Here, the question is whether the gas station equipment and machinery permanently affixed by Caltex to its gas station and
pavement (which are indubitably taxable realty) should be subject to the realty tax. This question is different from the issue
raised in the Davao Saw Mill case.
Improvements on land are commonly taxed as realty even though for some purposes they might be considered personalty
(84 C.J.S. 181-2, Notes 40 and 41). "It is a familiar phenomenon to see things classed as real property for purposes of taxation
which on general principle might be considered personal property" (Standard Oil Co. of New York vs. Jaramillo, 44 Phil. 630,
633).
This case is also easily distinguishable from Board of Assessment Appeals vs. Manila Electric Co., 119 Phil. 328, where Meralco's
steel towers were considered poles within the meaning of paragraph 9 of its franchise which exempts its poles from taxation.
The steel towers were considered personalty because they were attached to square metal frames by means of bolts and could
be moved from place to place when unscrewed and dismantled.
Nor are Caltex's gas station equipment and machinery the same as tools and equipment in the repair shop of a bus company
which were held to be personal property not subject to realty tax (Mindanao Bus Co. vs. City Assessor, 116 Phil. 501).
The Central Board of Assessment Appeals did not commit a grave abuse of discretion in upholding the city assessor's is
imposition of the realty tax on Caltex's gas station and equipment.
9. SERG’S PRODCUTS, INC. AND SERGIO T. GOQUIOLAY VS. PCI LEASING AND FINANCE, INC. (GR NO. 137705)
Facts: Serg's Products, Inc. (SPI) and PCI Leasing & Finance, Inc. entered into a lease agreement providing that the machines
in question were to be considered as personal property, although the same were essential and principal elements in the
chocolate-making business of SPI.
Subsequently, PCI filed a complaint against SPI for sum of money, with an application for a writ of replevin. The sheriff
then proceeded to seize the machines in question. SPI contended that the subject machines used in their factory were not
proper subjects of the writ of replevin because they were in fact real property having become immobilized by destination.
SPI went to the Court of Appeals via an original action for certiorari. the Court of Appeals, however, sustained the writ
and held that the machines were personal property. Thus, SPI appealed to the Supreme Court.

Issue: Whether the said machines are personal, not immovable, property which may be a proper subject of a writ of replevin

Held: The Court has held that contracting parties may validly stipulate that a real property be considered as personal. After
agreeing to such stipulation, they are consequently estopped from claiming otherwise. Under the principle of estoppel, a party
to a contract is ordinarily precluded from denying the truth of any material fact found therein.
In the present case, the Lease Agreement clearly provides that the machines in question are to be considered as
personal property. Specifically, Section 12.1 of the Agreement reads as follows:
“12.1 The PROPERTY is, and shall at all times be and remain, personal property notwithstanding that the PROPERTY or any
part thereof may now be, or hereafter become, in any manner affixed or attached to or embedded in, or permanently resting
upon, real property or any building thereon, or attached in any manner to what is permanent.”
Clearly then, petitioners are estopped from denying the characterization of the subject machines as personal property.
Under the circumstances, they are proper subjects of the Writ of Seizure.
It should be stressed, however, that our holding — that the machines should be deemed personal property pursuant
to the Lease Agreement – is good only insofar as the contracting parties are concerned. Hence, while the parties are bound
by the Agreement, third persons acting in good faith are not affected by its stipulation characterizing the subject machinery
as personal. In any event, there is no showing that any specific third party would be adversely affected.
10. TUMALAD VS. VICENCIO (GR NO. L-30173)
Facts:
On 1 September 1955 defendants-appellants executed a chattel mortgage in favor of plaintiffs-appellees over their house of
strong materials located at No. 550 Int. 3, Quezon Boulevard, Quiapo, Manila, over Lot No. 6-B and 7-B, Block No. 2554,
which were being rented from Madrigal & Company, Inc. The mortgage was registered in the Registry of Deeds of Manila on
2 September 1955. The herein mortgage was executed to guarantee a loan of P4,800.00 received from plaintiffs-appellees,
payable within one year at 12% per annum. The mode of payment was P150.00 monthly, starting September, 1955, up to
July 1956, and the lump sum of P3,150 was payable on or before August, 1956.
Defendants-appellants defaulted in paying, the mortgage was extrajudicially foreclosed, and on 27 March 1956, the house
was sold at public auction pursuant to the said contract. As highest bidder, plaintiffs-appellees were issued the corresponding
certificate of sale. Thereafter, on 18 April 1956, plaintiffs-appellees commenced Civil Case No. 43073 in the municipal court
of Manila, praying, among other things, that the house be vacated and its possession surrendered to them, and for defendants-
appellants to pay rent of P200.00 monthly from 27 March 1956 up to the time the possession is surrendered.
Issue: WON the chattel mortgage executed upon an immovable valid?
Held: Yes. Citing Manarang and Manarang vs. Ofilada, the Court stated that "it is undeniable that the parties to a contract
may by agreement treat as personal property that which by ,nature would be real property", citing Standard Oil Company of
New York vs. Jaramillo. Further, the doctrine of estoppel applies in this case as against the defendants in which they are
estopped from taking an inconsistent ground by claiming otherwise. Having previously treated such property as personal
property and that they themselves try to assail the validity as debtor-mortgagor (being privy to the contract) and not third
persons thus, doctrine of estoppel applies.
11. PASTOR D. AGO VS. THE HON. COURT OF APPEALS (GR NO. L-17898)
FACTS:
In 1957, petitioner Pastor D. Ago bought sawmill machineries and equipments from respondent Grace Park Engineering, Inc.,
executing a chattel mortgage over said machineries and equipments to secure the payment of a balance remaining unpaid
totalling P32,000.00, to which petitioner agreed to pay on installment basis.
Petitioner Ago defaulted in his payments and so, in 1958, respondent Grace Park Engineering, Inc. instituted extrajudicial
foreclosure proceedings on the mortgage in the Court of First Instance of Agusan. The parties to the case arrived at a
compromise agreement which was submitted to the court in writing, signed by both petitioner and respondent. The judge of
the Court of First Instance of Agusan then dictated a decision in open court on January 28, 1959.
When petitioner continued to default in his payments, Grace Park Engineering, Inc. filed with the lower court a motion for
execution, which was granted on August 15, 1959. A writ of execution, dated September 23, 1959, later followed. The herein
respondent Provincial Sheriff of Surigao, acting upon the writ of execution issued by the lower court, levied upon and ordered
the sale of the sawmill machineries and equipments. These machineries and equipments had been taken to and installed in a
sawmill building owned by the Golden Pacific Sawmill, Inc., to whom, petitioner alleges, he had sold them on February 16,
1959 (a date after the decision of the lower court but before levy by the Sheriff).
Having been advised by the sheriff that the public auction sale was set for December 4, 1959, petitioner filed the petition for
certiorari and prohibition with preliminary injunction with respondent Court of Appeals on December 1, 1959, alleging: (1)
that a copy of the aforementioned judgment given in open court was served upon petitioner’s counsel only on September 25,
1959 when the writ of execution was dated September 23, 1959; (2) that the order and writ of execution having been issued
by the lower court before petitioner’s counsel received a copy of the judgment, its resultant last order that the "sheriff may
now proceed with the sale of the properties levied" constituted a grave abuse of discretion and was in excess of its jurisdiction;
and (3) that the respondent Provincial Sheriff of Surigao was acting illegally upon the allegedly void writ of execution by
levying the same upon the sawmill machineries and equipments which have become real properties of the Golden Pacific
Sawmill, Inc.
The Court of Appeals issued a writ of preliminary injunction against the sheriff on December 8, 1959. However, it turned out
that the latter had already sold at public auction the machineries on December 4, 1959. The respondent Grace Park
Engineering, Inc. was the only bidder for P15,000.00, although the certificate of sale was not yet executed. The Court of
Appeals instructed the sheriff to suspend the issuance of a certificate of sale until the final decision of the case. On November
9, 1960, the Court of Appeals rendered a decision stating that the lower court did not exceed nor abuse its jurisdiction in
ordering the execution of the judgment.
Petitioner now alleges before this Court that the respondent Court of Appeals erred (1) in holding that the rendition of the
judgment on compromise was a sufficient notice; and (2) in not resolving the other issues raised before it, namely, (a) the
legality of the public auction sale made by the sheriff, and (b) the nature of the machineries in question, whether they are
movables or immovables.
ISSUE(S):
The nature of the machineries and equipments mortgaged and subsequently sold in the public auction.
RULING:
It was held that the sawmill machineries and equipments are real estate properties. The record shows that after petitioner
had purchased the sawmill machineries and equipments, he assigned the same to the Golden Pacific Sawmill, Inc. in payment
of his subscription to the shares of stock of said corporation. Thereafter, the sawmill machineries and equipments were
installed in a building and permanently attached to the ground. By reason of such installment in a building, the said sawmill
machineries and equipments became real estate properties in accordance with the provision of Art. 415 (5) of the Civil Code,
thus: "The following are immovable property - xxx xxx xxx (5) Machinery receptacles instruments or implements intended by
the owner of the tenement for an industry or works which may be carried on in a building or on a piece of land, and which
tend directly to meet the needs of the said industry or works;" xxx xxx xxx
The Court interpreted a similar question raised before in the case of Berkenkotter vs. Cu Unjieng e Hijos (61 Phil. 683) and
held that the installation of the machinery and equipment in the central of the Mabalacat Sugar Co., Inc. for use in connection
with the industry carried by that company, converted the said machinery and equipment into real estate by reason of their
purpose. Paraphrasing the language of the said decision, the Court held that by the installation of the sawmill machineries in
the building of the Golden Pacific Sawmill, Inc., for use in the sawing of logs carried on in said building, the same became a
necessary and permanent part of the building or real estate on which the same was constructed, converting the said
machineries and equipments into real estate within the meaning of Article 415 (5).
Considering that the machineries and equipments in question, valued at more than P15,000.00, appear to have been sold
without the necessary advertisement of sale by publication in a newspaper, as required in Sec. 16 of Rule 39 of the Rules of
Court, the sale made by the sheriff must be declared null and void.