Property Cases Reviewer
Part 1
1. Serg’s Products vs PCI Leasing and Finance
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. Indisputably,
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."16 In that sense, petitioners
are correct in arguing that the said machines are real, not personal, property
pursuant to Article 415 (5) of the Civil Code.17
"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."
2. Ruby Tsai vs CA
Petitioners contend that the nature of the disputed machineries, i.e., that they
were heavy, bolted or cemented on the real property mortgaged by EVERTEX
to PBCom, make them ipso facto immovable under Article 415 (3) and (5) of
the New Civil Code. This assertion, however, does not settle the issue. Mere
nuts and bolts do not foreclose the controversy. We have to look at the parties'
intent.
While it is true that the controverted properties appear to be immobile, a
perusal of the contract of Real and Chattel Mortgage executed by the parties
herein gives us a contrary indication.
In the instant case, the parties herein: (1) executed a contract styled as "Real
Estate Mortgage and Chattel Mortgage," instead of just "Real Estate
Mortgage" if indeed their intention is to treat all properties included therein as
immovable, and (2) attached to the said contract a separate "LIST OF
MACHINERIES & EQUIPMENT". These facts, taken together, evince the
conclusion that the parties' intention is to treat these units of machinery as
chattels. A fortiori, the contested after-acquired properties, which are of the
same description as the units enumerated under the title "LIST OF
MACHINERIES & EQUIPMENT," must also be treated as chattels.
Moreover, a purchaser in good faith and for value is one who buys the
property of another without notice that some other person has a right to or
interest in such property and pays a full and fair price for the same, at the
time of purchase, or before he has notice of the claims or interest of some
other person in the property.
3. Fels Energy vs Province of Batangas
As found by the appellate court, the CBAA and LBAA power barges are real
property and are thus subject to real property tax.
Moreover, Article 415 (9) of the New Civil Code provides that "[d]ocks 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.51
4. Prudential Bank vs Hon. Panis
In the enumeration of properties under Article 415 of the Civil Code of the
Philippines, this Court ruled that, "it is obvious that the inclusion of "building"
separate and distinct from the land, in said provision of law can only mean
that a building is by itself an immovable property."
Thus, while it is true that a mortgage of land necessarily includes, in the
absence of stipulation of the improvements thereon, buildings, still a building
by itself may be mortgaged apart from the land on which it has been built.
Such a mortgage would be still a real estate mortgage for the building would
still be considered immovable property even if dealt with separately and apart
from the land. In the same manner, this Court has also established that
possessory rights over said properties before title is vested on the grantee,
may be validly transferred or conveyed as in a deed of mortgage.
 5. Davao Saw Mill vs Castillo
As connecting up with the facts, it should further be explained that the Davao
Saw Mill Co., Inc., has on a number of occasions treated the machinery as
personal property by executing chattel mortgages in favor of third persons.
One of such persons is the appellee by assignment from the original
mortgages.
Article 334, paragraphs 1 and 5, of the Civil Code, is in point. According to the
Code, real property consists of —
1. Land, buildings, roads and constructions of all kinds adhering to the
soil;
5. Machinery, liquid containers, instruments or implements intended
by the owner of any building or 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 of industry.
It must further be pointed out that while not conclusive, the characterization of
the property as chattels by the appellant is indicative of intention and
impresses upon the property the character determined by the parties
A similar question arose in Puerto Rico, and on appeal being taken to the
United States Supreme Court, it was held 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.
Following the Code Napoleon, the Porto Rican Code treats as immovable
(real) property, not only land and buildings, but also attributes immovability in
some cases to property of a movable nature, that is, personal property,
because of the destination to which it is applied. "Things," says section 334 of
the Porto Rican Code, "may be immovable either by their own nature or by
their destination or the object to which they are applicable."
6. Tumalad vs Vicencio
The rule about the status of buildings as immovable property is stated in Lopez
vs. Orosa, Jr. and Plaza Theatre Inc.,15cited in Associated Insurance Surety
Co., Inc. vs. Iya, et al. 16 to the effect that —
... it is obvious that the inclusion of the building, separate and distinct
from the land, in the enumeration of what may constitute real
properties (art. 415, New Civil Code) could only mean one thing —
that a building is by itself an immovable property irrespective of
whether or not said structure and the land on which it is adhered to
belong to the same owner.
Certain deviations, however, have been allowed for various reasons. In
the case of Manarang and Manarang vs. Ofilada,17 this 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. 18 In the latter
case, the mortgagor conveyed and transferred to the mortgagee by way
of mortgage "the following described personal property." 19 The "personal
property" consisted of leasehold rights and a building. Again, in the case
of Luna vs. Encarnacion,20 the subject of the contract designated as
Chattel Mortgage was a house of mixed materials, and this Court hold
therein that it was a valid Chattel mortgage because it was so expressly
designated and specifically that the property given as security "is a house
of mixed materials, which by its very nature is considered personal
property.
For it is now settled that an object placed on land by one who had only a
temporary right to the same, such as the lessee or usufructuary, does not
become immobilized by attachment
In the contract now before Us, the house on rented land is not only expressly
designated as Chattel Mortgage; it specifically provides that "the mortgagor ...
voluntarily CEDES, SELLS and TRANSFERS by way of Chattel
Mortgage23 the property together with its leasehold rights over the lot on which
it is constructed and participation ..." 24 Although there is no specific statement
referring to the subject house as personal property, yet by ceding, selling or
transferring a property by way of chattel mortgage defendants-appellants
could only have meant to convey 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.
 7. Associated Insurance vs Iya
The lower Court, deciding in favor of the surety company, based its ruling on
the premise that as the mortgagors were not the owners of the land on which
the building is erected at the time the first encumbrance was made, said
structure partook of the nature of a personal property and could properly be
the subject of a chattel mortgage. We find reason to hold otherwise, for as this
Court, defining the nature or character of a building, has said:
. . . while it is true that generally, real estate connotes the land and the
building constructed thereon, it is obvious that the inclusion of the
building, separate and distinct from the land, in the enumeration of
what may constitute real properties (Art. 415, new Civil Code) could
only mean one thing — that a building is by itself an immovable
property . . . Moreover, and in view of the absence of any specific
provision to the contrary, a building is an immovable property
irrespective of whether or not said structure and the land on which it
is adhered to belong to the same owner. (Lopez vs. Orosa, G.R.
Nos. supra, p. 98).
A building certainly cannot be divested of its character of a realty by the
fact that the land on which it is constructed belongs to another. To hold it
the other way, the possibility is not remote that it would result in confusion,
for to cloak the building with an uncertain status made dependent on the
ownership of the land, would create a situation where a permanent fixture
changes its nature or character as the ownership of the land changes
hands. In the case at bar, as personal properties could only be the subject
of a chattel mortgage (Section 1, Act 3952) 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.
8. Mindanao Bus Company vs City Assessor & Treasurer
Respondents contend that said equipments, tho 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 equipment are placed on
wooden or cement platforms. They can be moved around and about in
petitioner's repair shop. In the case of B. H. Berkenkotter vs. Cu Unjieng, 61
Phil. 663, the Supreme Court said:
Article 344 (Now Art. 415), 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."
If the installation of the machinery and equipment in question in the
central of the Mabalacat Sugar Co., Inc., in lieu of the other of less
capacity existing therein, for its sugar and industry, converted them
into real property by reason of their purpose, it cannot be said that
their incorporation therewith was not permanent in character
because, as essential and principle elements of a sugar central,
without them the sugar central would be unable to function or carry on
the industrial purpose for which it was established. Inasmuch as the
central is permanent in character, the necessary machinery and
equipment installed for carrying on the sugar industry for which it has
been established must necessarily be permanent. (Emphasis ours.)
So that movable equipments to be immobilized in contemplation of the law
must first be "essential and principal elements" of an industry or works without
which such industry or works would be "unable to function or carry on the
industrial purpose for which it was established." We may here distinguish,
therefore, those movable which become immobilized by destination because
they are essential and principal elements in the industry for those which may
not be so considered immobilized because they are merely incidental, not
essential and principal. Thus, cash registers, typewriters, etc., usually found
and used in hotels, restaurants, theaters, etc. are merely incidentals and are
not and should not be considered immobilized by destination, for these
businesses can continue or carry on their functions without these equity
comments. Airline companies use forklifts, jeep-wagons, pressure pumps, IBM
machines, etc. which are incidentals, not essentials, and thus retain their
movable nature. On the other hand, machineries of breweries used in the
manufacture of liquor and soft drinks, though movable in nature, are
immobilized because they are essential to said industries; but the delivery
trucks and adding machines which they usually own and use and are found
within their industrial compounds are merely incidental and retain their
movable nature.
Similarly, 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.
But in 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.
9. Makati Leasing and Finance Corp Vs Wearever Textile Mills Inc.
If a house of strong materials, like what was involved in the above 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 denying the existence
of the chattel mortgage.
In rejecting petitioner's assertion on the applicability of the Tumalad doctrine,
the Court of Appeals 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 of the subject machinery as
chattel by the private respondent is indicative of 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 real property, as long as no interest of third parties would be
prejudiced thereby.
10. Santos vs Alto Surety and Insurance Co.
It is, our considered opinion that said house is not personal property, much
less a debt, credit or other personal property not capable of manual delivery,
but immovable property. As explicitly held, in Laddera vs. Hodges (48 Off.
Gaz., 5374), "a true building (not merely superimposed on the soil) is
immovable or real property, whether it is erected by the owner of the land or
by usufructuary or lessee. This is the doctrine of our Supreme Court in Leung
Yee vs. Strong Machinery Company, 37 Phil., 644. And it is amply supported
by the rulings of the French Court. . . ."
It is true that the parties to a deed of chattel mortgage may agree to consider
a house as personal property for purposes of said contract
(Luna vs. Encarnacion, * 48 Off. Gaz., 2664; Standard Oil Co. of New
York vs. Jaramillo, 44 Phil., 630; De Jesus vs. Juan Dee Co., Inc., 72 Phil.,
464). 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. Much less
is it in point where there has been no contract whatsoever, with respect to the
status of the house involved, as in the case at bar. Apart from this, in Manarang
vs. Ofilada (99 Phil., 108; 52 Off. Gaz., 3954), we held:
The question now before us, however, is: Does the fact that the parties
entering into a contract regarding a house gave said property the
consideration of personal property in their contract, bind the sheriff in
advertising the property's sale at public auction as personal property?
It is to be remembered that in the case at bar the action was to collect
a loan secured by a chattel mortgage on the house. It is also to be
remembered that in practice it is the judgment creditor who points out
to the sheriff the properties that the sheriff is to levy upon in execution,
and the judgment creditor in the case at bar is the party in whose favor
the owner of the house had conveyed it by way of chattel mortgage
and, therefore, knew its consideration as personal property.
These considerations notwithstanding, we hold that the rules on execution
do not allow, and, we should not interpret them in such a way as to allow, the
special consideration that parties to a contract may have desired to impart to
real estate, for example, as personal property, when they are, not ordinarily
so. Sales on execution affect the public and third persons.
We therefore hold that the mere fact that a house was the subject of
the chattel mortgage and was considered as personal property by the
parties does not make said house personal property for purposes of
the notice to be given for its sale of public auction. This ruling is
demanded by the need for a definite, orderly and well defined
regulation for official and public guidance and would prevent confusion
and misunderstanding.
 11. Sibal vs Valdez
The first question raised by the appeal is, whether the sugar cane in question
is personal or real property. 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."
From the foregoing it appears (1) that, under Spanish authorities, pending
fruits and ungathered products may be sold and transferred as personal
property; (2) that the Supreme Court of Spain, in a case of ejectment of a
lessee of an agricultural land, held that the lessee was entitled to gather the
products corresponding to the agricultural year, because said fruits did not go
with the land but belonged separately to the lessee; and (3) that under the
Spanish Mortgage Law of 1909, as amended, the mortgage of a piece of land
does not include the fruits and products existing thereon, unless the contract
expressly provides otherwise.
An examination of the decisions of the Supreme Court of Louisiana may give
us some light on the question which we are discussing. Article 465 of the Civil
Code of Louisiana, which corresponds to paragraph 2 of article 334 of our Civil
Code, provides: "Standing crops and the fruits of trees not gathered, and trees
before they are cut down, are likewise immovable, and are considered as part
of the land to which they are attached."
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."
Mr. Mechem says that a valid sale may be made of a thing, which though not
yet actually in existence, is reasonably certain to come into existence as the
natural increment or usual incident of something already in existence, and then
belonging to the vendor, and then title will vest in the buyer the moment the
thing comes into existence.
We may, therefore, conclude that paragraph 2 of article 334 of the Civil Code
has been modified by section 450 of the Code of Civil Procedure and by Act
No. 1508, in the sense that, for the purpose of attachment and execution, and
for the purposes of the Chattel Mortgage Law, "ungathered products" have the
nature of personal property. The lower court, therefore, committed no error in
holding that the sugar cane in question was personal property and, as such,
was not subject to redemption
12. Board of Assessment Appeals vs Manila Electronic Company
It is evident, therefore, 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 as contemplated thereon, should be understood and taken
as a part of the electric power system of the respondent Meralco, for the
conveyance of electric current from the source thereof to its consumers. If the
respondent would be required to employ "wooden poles", or "rounded poles"
as it used to do fifty years back, then one should admit that the Philippines is
one century behind the age of space. It should also be conceded by now that
steel towers, like the ones in question, for obvious reasons, can better
effectuate the purpose for which the respondent's franchise was granted.
Granting for the purpose of argument that the steel supports or towers in
question are not embraced within the termpoles, the logical question posited
is whether they constitute real properties, so that they can be subject to a real
property tax. The tax law does not provide for a definition of real property; but
Article 415 of the Civil Code does, by stating 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
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 construction 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 can not 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 these 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. These steel
towers or supports do not also fall under paragraph 5, for they are not
machineries, receptacles, instruments or implements, and even if they were,
they are not intended for industry or works on the land. Petitioner is not
engaged in an industry or works in the land in which the steel supports or
towers are constructed.
Property Law Reviewer

Part 2

1.