DAVAO SAW MILL VS CASTILLO AND DAVAO LIGHT AND POWER. CO.

INC

FACTS

Davao Sawmill Co. is the holder of a lumber concession from the Philippines, and the land

upon which the business was conducted belonged to another person.On the land, Davao Sawmill
erected a building which housed the machinery

(sawmill) used by it. In the contract of lease, Davao Sawmill agreed to turn over, free of charge, all

improvements and the building erected by it on the premises with the exception of machineries, which
shall remain with the Davao Sawmill. Another action was brought by the Davao Light and Power Co.
(mortgagee) where the judgment was rendered against Davao Sawmill (mortgagor). A writ of execution
was issued and the machineries placed on the sawmill were levied upon by the sheriff.

Davao Light and Power Co. proceeded to purchase the machinery and other properties

auctioned by the sheriff.

ISSUES

Whether or not the machinery involved is a

real property

Relevant ARGUMENTS

Davao Light and Power (Plaintiff- Apellant)

Art. 334, Paragraphs 1 and 5 of the Civil

Code:

Real Property consists of (1) Land, buildings, roads and constructions of all kinds adhering

to the soil; (5) Machinery, liquid containers, instruments or implements intended by the

owner of any building or land for use in connection with any industry xxx

Relevant DOCTRINE or PRONOUNCEMENT

As a rule, the machinery only becomes immobilized if placed in a plant by the owner of the property or
plant

It should be considered personal property, if the objects are placed by a mere tenant, usufructuary, or
any person having only a temporary right UNLESS, the person acted as the agent of the owner

Relevant DECISION

The machinery (saw mill) must be classified as personal property since it was agreed by both of the
parties that the machinery be returned to Davao Saw Mill on the expiration or abandonment of the
lease
20. 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. 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 on the ground that the same are not real properties.

ISSUE: Whether or not the machineries and equipment are considered immobilized and thus
subject to a realty tax

HELD:

NO. The Supreme Court held that said machineries and equipment are not subject to the
assessment of real estate tax. Art. 415 of the NCC classifies the following as immovable property
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;

Said equipment are not considered immobilized as they are merely incidental, not essential 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
Aside from the element of essentiality the Art.415 (5) also requires that the industry or works be
carried on in a building or on a piece of land. As such, the equipment in question are not deemed
real property and not subject to realty tax, because the transportation business is not carried on
in a building or permanently on a piece of land, as demanded by law.
Benguet Corp. vs CBAA 218 SCRA 271

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

Petitioner contended that the the dam cannot be subjected to realty tax as a separate and
independent property because it does not constitute an "assessable improvement" on the mine
because it is an integral part of the mine.
On the other hand, Solicitor General's argues that the dam is an assessable improvement
because it enhances the value and utility of the mine.

Issue: Whether or not the tailings dam in question is an "improvement" upon the land within the
meaning of the Real Property Tax Code and it classified as immovable property?

Held:
Yes.
The court ruled that the subject dam falls within the definition of an "improvement" because it is
permanent in character and it enhances both the value and utility of petitioner's mine. The
immovable nature of the dam defines its character as real property under Article 415 of the Civil
Code and thus makes it taxable under Section 38 of the Real Property Tax Code.

It is a construction adhered to
the soil which cannot be separated or detached without breaking the material or causing
destruction on
the land upon which it is attached. The immovable nature of the dam as an improvement
determines its
character as real property, hence taxable under Section 38 of the Real Property Tax Code.
(P.D. 464).
RICARDO PRESBITERO vs, FERNANDEZ (Immovable – Calinisan)
Facts:
1) ESPERIDION Presbitero failed to furnish Nava the value of the
Properties under litigation.

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 avail.

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 Deeds.

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) Bottom-line, Presbitero did not meet his

obligations, and the auction sale was scheduled.

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 Deeds.
Issue:
W/N the sugar quotas are real (immovable) or personal properties.
Held:
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 levyAmount to no levy at all
NAVARRO v. PINEDA
With regard to third persons who are not parties to the contract, a house is still
considered as an immovable property.

FACTS:
Pineda and his mother secured a loan from Navarro. In line with this, they executed a
REM over the land owned by his mother, and a Chattel Mortgage over the residential
house. They defaulted on the payment of the loan, but they were able to ask for an
extension. However, they still defaulted, which caused Navarro to file for a foreclosure
of the mortgages.

ISSUE:
Whether or not the house should be considered as a movable or immovable property?

HELD:
The stipulation of the parties still govern. Thus, with regard to a building erected on a lot
belonging to another, this may be the subject matter of a chattel mortgage if the parties
so stipulate. However, with regard to third persons who are not parties to the contract,
the house is still considered as an immovable property.
ISABEL IYA, ADRIANO VALINO and LUCIA VALINO, defendants
Facts:
Valino&Valino were the owners and possessors of a house of strong materials in Rizal, which they
purchased on installment
basis. To enable her to purchase on credit rice from NARIC, Valino filed a bond (P11,000) subscribed by
Associated Insurance
and Surety Co Inc, and as a counter-guaranty, Valino executed an alleged chattel mortgage on the
aforementioned house in
favour of the surety company. At the same time, the parcel of land which the house was erected was
registered in the name of
Philippine Realty Corporation
Valino, to secure payment of an indebtedness (P12,000) executed a real estate mortgage over the lot and
the house in favour of
Iya
Valino failed to satisfy her obligation to NARIC, so the surety company was compelled to pay the same
pursuant to the
undertaking of the bond. In turn, surety company demanded reimbursement from Valino, and as they
failed to do so, the
company foreclosed the chattel mortgage over the house. As a result, public sale was conducted and the
property was awarded to
the surety company
The surety company then learned of the existence of the real estate mortgage over the lot and the
improvements thereon; thus,
they prayed for the exclusion of the residential house from the real estate mortgage and the declaration of
its ownership in virtue
of the award given during bidding.
Iya alleged that she acquired a real right over the lot and the house constructed thereon, and that the
auction sale resulting from
the foreclosure of chattel mortgage was null and void
Surety company argued that as the lot on which the house was constructed did not belong to the spouses
at the time the chattel
mortgage was executed, the house might be considered as personal property, and they prayed that the said
building be excluded
from the real estate mortgage
Issue:
There is no question over Iya’s right over the land by real estate mortgage; however, as the building
instructed thereon has been
the subject of two mortgages, controversy arise as to which of these encumbrances should receive
preference over the other
Held:
The building is subject to the real estate mortgage, in favour of Iya. Iya’s right to foreclose not only the
land but also the building
erected thereon is recognized
While it is true that real estate connotes the land and the building constructed thereon, it is obvious that
the inclusion of the
building, separate and distinct from the land, in the enumeration of what may constitute real properties
(Article 415), could only
mean that a building is by itself an immovable property. Moreover, in view of the absence of any specific
provision to the
contrary, a building is an immovable property irrespective of whether or not said structure and the land on
which it is adhered to
belong to the same owner
A building certainly cannot be divested of its character of a realty by the fact that the land on which it is
constructed belongs to
another.
In the case at bar, as personal properties could only be the subject of a chattel mortgage and as obviously
the structure in question
is not one, the execution of the chattel mortgage covering said building is clearly invalid and a nullity.
While it is true that said
document was correspondingly registered in Chattel Mortgage Registry of Rizal, this act produced no
effect whatsoever, for
where the interest conveyed is in the nature of real property, the registration of the document in the
registry of chattels is merely a
futile act. Thus, the registration of the chattel mortgage of a building of strong materials produced no
effect as far as the building
is concerned
PIANSAY v. DAVID

As it may be true that the parties who agreed to attach the house in a chattel mortgage may be
bound thereto under the doctrine of estoppel, the same does not bind third persons.

FACTS:
Conrado S. David received a loan of P3,000 with interest at 12% per annum from Claudia B. Vda. de
Uy Kim, one of the plaintiffs, and to secure the payment of the same, Conrado S. David executed a
chattel mortgage on a house situated at 1259 Sande Street, Tondo, Manila. The mortgage was
foreclosed and was sold to Kim to satisfy the debt. 2 years later after the foreclosure, the house was
sold by Kim to Marcos Magubat. The latter then filed to collect the loan from David and to declare
the sale issued by Kim in favour of Piansay null and void. (It appears that Kim sold the house to two
people, namely Piansay and Magubat) The trial court approved of the collection of the loan from
David but dismissed the complaint regarding the questioned sale between Kim and Piansay,
declaring the latter as rightful owner of the house and awarding damages to him. CA reversed the
decision making David the rightful owner and ing him and his co-defendant, Mangubat, to levy the
house. Now Petitioners are trying to release the said property from the aforementioned levy by
claiming that Piansay is the rightful owner of the house.

Issue: whether or not real property can be subject to chattel Mortgage?

Held: No buildings and constructions are regarded as mere accessories to the land it is logical
that said accessories should partake of the nature of the principal thing, which is the land
forming, as they do, but a single object with it in contemplation of law. A mortgage creditor who
purchases real properties at an extra-judicial foreclosure sale by virtue of a chattel mortgage
constituted in his favor, which mortgage has been declared null and void with respect to said
real properties acquires no right thereto by virtue of said sale.in this caseThus, Mrs. Uy Kim had
no right to foreclose the alleged chattel mortgage constituted in her favor as well as the sherift
sold it public auction. And the sale between plaintiff and pinsay was no effect. this Act produced
no effect, the registration of the document in the registry of chattels is merely a futile act. Thus
the registration of the chattel mortgage of a building of strong materials produced no effect as
far as the building is concerned (Leung Yee vs. Strong Machinery Co., 37 Phil. 644