WEEK 4

[New Civil Code]

CHAPTER 1
IMMOVABLE PROPERTY
Art. 415. The following are immovable property:
(1) Land, buildings, roads and constructions of all kinds adhered to the soil;
(2) Trees, plants, and growing fruits, while they are attached to the land or form an integral part of an immovable;
(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;
(4) Statues, reliefs, paintings or other objects for use or ornamentation, placed in buildings or on lands by the owner of the immovable
in such a manner that it reveals the intention to attach them permanently to the tenements;
(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;
(6) Animal houses, pigeon-houses, beehives, fish ponds or breeding places of similar nature, in case their owner has placed them or
preserves them with the intention to have them permanently attached to the land, and forming a permanent part of it; the animals in
these places are included;
(7) Fertilizer actually used on a piece of land;
(8) Mines, quarries, and slag dumps, while the matter thereof forms part of the bed, and waters either running or stagnant;
(9) 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;
(10) Contracts for public works, and servitudes and other real rights over immovable property. (334a)

CHAPTER 2
MOVABLE PROPERTY
Art. 416. The following things are deemed to be personal property:
(1) Those movables susceptible of appropriation which are not included in the preceding article;
(2) Real property which by any special provision of law is considered as personal property;
(3) Forces of nature which are brought under control by science; and
(4) In general, all things which can be transported from place to place without impairment of the real property to which they are
fixed. (335a)

Art. 417. The following are also considered as personal property:

(1) Obligations and actions which have for their object movables or demandable sums; and

(2) Shares of stock of agricultural, commercial and industrial entities, although they may have real estate. (336a)

Art. 418. Movable property is either consumable or nonconsumable. To the first class belong those movables which cannot be used in
a manner appropriate to their nature
without their being consumed; to the second class belong all the others.(337)

PROVISIONS COMMON TO THE THREE PRECEDING CHAPTERS

Art. 426. Whenever by provision of the law, or an individual declaration, the expression "immovable things or property," or "movable
things or property," is used, it shall be deemed to include, respectively, the things enumerated in Chapter 1 and Chapter 2.

Whenever the word "muebles," or "furniture," is used alone, it shall not be deemed to include money, credits, commercial
securities, stocks and bonds, jewelry, scientific or artistic collections, books, medals, arms, clothing, horses or carriages and their
accessories, grains, liquids and merchandise, or other things which do not have as their principal object the furnishing or ornamenting
of a building, except where from the context of the law, or the individual declaration, the contrary clearly appears. (346a)

TITLE II
Intellectual Creation
Article 721. By intellectual creation, the following persons acquire ownership:

(1) The author with regard to his literary, dramatic, historical, legal, philosophical, scientific or other work;
(2) The composer; as to his musical composition;
(3) The painter, sculptor, or other artist, with respect to the product of his art;
(4) The scientist or technologist or any other person with regard to his discovery or invention. (n)
Article 722. The author and the composer, mentioned in Nos. 1 and 2 of the preceding article, shall have the ownership of their
creations even before the publication of the same. Once their works are published, their rights are governed by the Copyright laws.

The painter, sculptor or other artist shall have dominion over the product of his art even before it is copyrighted.

The scientist or technologist has the ownership of his discovery or invention even before it is patented. (n)

Article 723. Letters and other private communications in writing are owned by the person to whom they are addressed and delivered,
but they cannot be published or disseminated without the consent of the writer or his heirs. However, the court may authorize their
publication or dissemination if the public good or the interest of justice so requires. (n)

Article 724. Special laws govern copyright and patent. (429a)

[RA8293]
AN ACT PRESCRIBING THE INTELLECTUAL PROPERTY CODE AND ESTABLISHING THE INTELLECTUAL
PROPERTY OFFICE, PROVIDING FOR ITS POWERS AND FUNCTIONS, AND FOR OTHER PURPOSES

Section 4. Definitions. - 4.1. The term "intellectual property rights" consists of:
a) Copyright and Related Rights;
b) Trademarks and Service Marks;
c) Geographic Indications;
d) Industrial Designs;
e) Patents;
f) Layout-Designs (Topographies) of Integrated Circuits; and
g) Protection of Undisclosed Information (n, TRIPS).

Section 22. Non-Patentable Inventions. - The following shall be excluded from patent protection:
22.1. Discoveries, scientific theories and mathematical methods;
22.2. Schemes, rules and methods of performing mental acts, playing games or doing business, and programs for
computers;
22.3. Methods for treatment of the human or animal body by surgery or therapy and diagnostic methods practiced on the
human or animal body. This provision shall not apply to products and composition for use in any of these methods;
22.4. Plant varieties or animal breeds or essentially biological process for the production of plants or animals. This provision
shall not apply to micro-organisms and non-biological and microbiological processes.
Provisions under this subsection shall not preclude Congress to consider the enactment of a law providing sui generis
protection of plant varieties and animal breeds and a system of community intellectual rights protection:
22.5. Aesthetic creations; and
22.6. Anything which is contrary to public order or morality. (Sec. 8, R.A. No. 165a)

CHAPTER XIII
INDUSTRIAL DESIGN

Section 112. Definition of Industrial Design. - An industrial design is any composition of lines or colors or any three-dimensional
form, whether or not associated-with lines or colors: Provided, That such composition or form gives a special appearance to and can
serve as pattern for an industrial product or handicraft. (Sec. 55, R.A. No. 165a)

CHAPTER II
ORIGINAL WORKS

Section 172. Literary and Artistic Works. - 172.1. Literary and artistic works, hereinafter referred to as "works", are original
intellectual creations in the literary and artistic domain protected from the moment of their creation and shall include in particular:

(a) Books, pamphlets, articles and other writings;

(b) Periodicals and newspapers;
(c) Lectures, sermons, addresses, dissertations prepared for oral delivery, whether or not reduced in writing or other material
form;
(d) Letters;
(e) Dramatic or dramatico-musical compositions; choreographic works or entertainment in dumb shows;
 (f) Musical compositions, with or without words;
(g) Works of drawing, painting, architecture, sculpture, engraving, lithography or other works of art; models or designs for
works of art;
(h) Original ornamental designs or models for articles of manufacture, whether or not registrable as an industrial design, and
other works of applied art;
(i) Illustrations, maps, plans, sketches, charts and three-dimensional works relative to geography, topography, architecture or
science;
(j) Drawings or plastic works of a scientific or technical character;
(k) Photographic works including works produced by a process analogous to photography; lantern slides;
(l) Audiovisual works and cinematographic works and works produced by a process analogous to cinematography or any
process for making audio-visual recordings;
(m) Pictorial illustrations and advertisements;
(n) Computer programs; and
(o) Other literary, scholarly, scientific and artistic works.

172.2. Works are protected by the sole fact of their creation, irrespective of their mode or form of expression, as well as of their
content, quality and purpose. (Sec. 2, P.D. No. 49a)

CHAPTER III
DERIVATIVE WORKS

Section 173. Derivative Works. - 173.1. The following derivative works shall also be protected by copyright:

(a) Dramatizations, translations, adaptations, abridgments, arrangements, and other alterations of literary or artistic works; and
(b) Collections of literary, scholarly or artistic works, and compilations of data and other materials which are original by reason
of the selection or coordination or arrangement of their contents. (Sec. 2, [P] and [Q], P.D. No. 49)

173.2. The works referred to in paragraphs (a) and (b) of Subsection 173.1 shall be protected as new works: Provided however,
That such new work shall not affect the force of any subsisting copyright upon the original works employed or any part thereof,
or be construed to imply any right to such use of the original works, or to secure or extend copyright in such original works.
(Sec. 8, P.D. 49; Art. 10, TRIPS)

CHAPTER V
COPYRIGHT OR ECONOMIC RIGHTS

Section 177. Copyright or Economic Rights. - Subject to the provisions of Chapter VIII, copyright or economic rights shall consist of
the exclusive right to carry out, authorize or prevent the following acts:

177.1. Reproduction of the work or substantial portion of the work;

177.2. Dramatization, translation, adaptation, abridgment, arrangement or other transformation of the work;
177.3. The first public distribution of the original and each copy of the work by sale or other forms of transfer of
ownership;
177.4. Rental of the original or a copy of an audiovisual or cinematographic work, a work embodied in a sound
recording, a computer program, a compilation of data and other materials or a musical work in graphic form, irrespective of
the ownership of the original or the copy which is the subject of the rental; (n)
177.5. Public display of the original or a copy of the work;
177.6. Public performance of the work; and
177.7. Other communication to the public of the work. (Sec. 5, P. D. No. 49a)

[CASES]
THE UNITED STATES, plaintiff-appellee, vs. MANUEL TAMBUNTING, defendant-appellant.
G.R. No. L-16513 | January 18, 1921 | STREET, J.:

The Case: This appeal was instituted for the purpose of reversing a judgment of the Court of First Instance of the city of Manila,
finding the accused, Manuel Tambunting, guilty of stealing a quantity of gas belonging to the Manila Gas Corporation.
Doctrine: There is nothing in the nature of gas used for illuminating purposes which renders it incapable of being feloniously taken and carried away. It is a
valuable article of merchandise, bought and sold like other personal property, susceptible of being severed from a mass or larger quantity and of being transported
from place to place. Likewise water which is confined in pipes and electricity which is conveyed by wires are subjects of larceny.

Summary: Manuel Tambunting and his wife were found using gas which belonged to Manila Gas Corporation for their house was
previously occupied by said corporation whp previously installed it. The court held that gas can be subject to larceny and held them
liable for a total of 4 pesos to be paid to the company as payment for using the said gas.
Facts:
 In January of the year 1918, the accused, Manuel Tambunting and his wife became occupants of the upper floor of the house
situated at No. 443, Calle Evangelista, in the city of Manila.
 In this house the Manila Gas Corporation had previously installed apparatus for the delivery of gas on both the upper and lower
floors, consisting of the necessary piping and a gas meter, which last mentioned apparatus was installed below.
 When the occupants at whose request this installation had been made vacated the premises, the gas company disconnected the gas
pipe and removed the meter, thus cutting off the supply of gas from said premises.
 Upon June 2, 1919, one of the inspectors of the gas company visited the house in question
 He found that gas was being used, without the knowledge and consent of the gas company, for cooking in the quarters occupied
by the defendant and his wife: to effect which a short piece of iron pipe had been inserted in the gap where the gas meter had
formerly been placed, and piece of rubber tubing had been used to connect the gas pipe of rubber tubing had been used to connect
the gas pipe in kitchen with the gas stove, or plate, used for cooking.
 Manuel admitted to the agent of the gas company that he had made the connection with the rubber tubing between the
gas pipe and the stove,
 though he denied making the connection below.
 He also admitted that he knew he was using gas without the knowledge of the company and that he had been so using
it for 2-3 months

Issue:
1. Whether gas can be the subject to larceny - YES.
 In U.S. vs. Genato (15 Phil., 170, 175), this court, speaking through Mr. Justice Torres, said ". . . the right of the ownership of
electric current is secured by article 517 and 518 of the Penal Code.
 These expressions were used in a case which involved the subtraction and appropriation of electrical energy and the
court held, in accordance with the analogy of the case involving the theft of gas, that electrical energy could also be the
subject of theft.
 The same conclusion was reached in U.S. vs. Carlos (21 Phil., 553), which was also a case of prosecution for stealing electricity.
 The precise point whether the taking of gas may constitute larceny has never before, so far as the present writer is aware, been the
subject of adjudication in this court, but the decisions of Spanish, English, and American courts all answer the question in the
affirmative. (See U.S. vs. Carlos, 21 Phil., 553, 560.)
 In this connection it will suffice to quote the following from the topic "Larceny," at page 34, Vol. 17, of Ruling Case Law:
 There is nothing in the nature of gas used for illuminating purposes which renders it incapable of being feloniously taken and carried away. It
is a valuable article of merchandise, bought and sold like other personal property, susceptible of being severed from a mass or larger quantity
and of being transported from place to place. Likewise water which is confined in pipes and electricity which is conveyed by wires are subjects
of larceny."

2. Whether the quantity of gas appropriated in the two months, during which the accused admitted having used the
same, has been established with sufficient certainty to enable the court to fix an appropriate penalty. - NO but the
evaluation of the lower courts may remain

 As to the amount and value of the gas appropriated by the accused in the period during which he admits having used it, the proof
is not entirely satisfactory.
 Nevertheless we think the trial court was justified in fixing the value of the gas at P2 per month, which is the minimum charge for
gas made by the gas company, however small the amount consumed.
 Absolute certainty as to the full amount taken is of course impossible, because no meter was used; but absolute certainty upon this
point is not necessary, when it is certain that the minimum that could have been taken was worth a determinable amount

3. Whether accused’s acquittal under section 504 of the Revised Ordinances of the city of Manila bars prosecution of
theft under the RPC. – NO

 The contention is evidently not well founded, since the two offenses are of totally distinct nature. Furthermore, a prosecution for
violation of a city ordinance is not ordinarily a bar to a subsequent prosecution for the same offense under the general law of the
land.
RULING
The conclusion is that the accused is properly subject to punishment under No. 5 of article 518 of the Penal Code, for the gas taken in
the course of two months at the rate of P2 per month. There being no aggravating or attenuating circumstance to be estimated, it results
that the proper penalty is two months and one day of arresto mayor, as fixed by the trial court. The judgment will therefore be affirmed,
with costs against the appellant, it being under stood that the amount of the indemnity which the accused shall pay to the gas company
is P4, instead of P2, with subsidiary imprisonment for one day in case of insolvency. So ordered.

[24] BERKENKOTTER v. CU UNJIENG

G.R. No. L-41643 | July 31, 1935 | Villa-real, J.

SUMMARY: Mabalacat Sugar obtained a load from Co Unjieng secured by a mortgage on two parcels of land including all
improvements therein. Subsequently, the company purchased additional machinery and equipment acquired using funds from
Berkenkotter. The issue in this case is whether the new machinery and equipment acquired are in the nature of real property included
in the mortgage in favor of Co Unjieng. The Court answered in the affirmative.

DOCTRINE: Installation of machinery and equipment for use in any industry or trade being carried therein converts them into real
property by reason of their purpose by virtue of Article 334 of the (old) Civil Code. It, therefore, cannot be said that
such machinery and equipment are not permanently attached to a building for the purpose of determining whether they are included
in a mortgage, as provided in Article 1877.

PROVISION:
Article 1877, CC. A 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 estate continues
in the possession of the person who mortgaged it or whether it passes into the hands of a third person.

FACTS:
 April 26, 1926: Mabalacat Sugar Co., Inc., (Mabalacat) owner of the sugar central situated in Mabalacat, Pampanga, obtained
from respondent Cu Unjieng de Hijos a loan secured by a first mortgage constituted on two parcels of land "with all its
buildings, improvements, sugar-cane mill, steel railway, telephone line, apparatus, utensils and whatever forms
part or is necessary complement of said sugar-cane mill, steel railway, telephone line, now existing or that may in
the future exist is said lots."
 October 5, 1926: Mabalacat decided to increase the capacity of its sugar central by buying additional machinery and equipment
costing approximately P100,000.
o To carry out this plan, B.A. Green, the president of Mabalacat proposed to plaintiff B.H. 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 Cu Unjieng de Hijos. Plaintiff agreed.
 Berkenkotter delivered a total of P25,750 to B.A. Green. Furthermore, he had a credit of P22,000 against the corporation for
unpaid salary.
o Mabalacat used this total amount to purchase the additional machinery and equipment now in litigation.
 June 10, 1927: Green applied to respondent Cu Unjieng e Hijos for an additional loan of P75,000 offering as security the
machinery and equipment already acquired (using the money from Berkenkotter) , and whatever equipment acquired with
said loan.
o Cu Unjieng did not grant the loan

ISSUE and RULING:

Whether or not the additional machinery and equipment, as improvement incorporated with the central are subject to the
mortgage deed executed in favor of the defendants Cu Unjieng e Hijos? [YES]
 Article 1877 of the Civil Code: A 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 estate 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.
  Installation of the machinery and equipment for the purpose of improving its sugar 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 principal 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.
 Fact that B.A. Green bound himself to the plaintiff B.H. Berkenkotter to hold said machinery and equipment as security for
the payment of the Berkentkotterr's credit and to refrain from mortgaging or otherwise encumbering them until Berkenkotter
has been fully reimbursed therefor, is not incompatible with the permanent character of the incorporation of said machinery
and equipment with the sugar central of the Mabalacat Sugar Co., Inc., as nothing could prevent B.A. Green from giving
them as security at least under a second mortgage.
 COURT’s CONCLUSION
 That 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 (article 1877, Civil Code);
 that the fact that the purchaser of the new machinery and equipment has bound himself to the person supplying
him the purchase money to hold them as security for the payment of the latter's credit, and to refrain from
mortgaging or otherwise encumbering them does not alter the permanent character of the incorporation of said
machinery and equipment with the central; and
 that the sale of the machinery and equipment in question by the purchaser who was supplied the purchase money,
as a loan, to the person who supplied the money, after the incorporation thereof with the mortgaged sugar central,
does not vest the creditor with ownership of said machinery and equipment but simply with the right of redemption.

DISPOSITIVE : Wherefore, finding no error in the appealed judgment, it is affirmed in all its parts, with costs to the appellant. So
ordered.

[11] Mindanao Bus Co. v. City Assessor

No. L-17870. September 29, 1962.
LABRADOR, J.:

Topic: With reference to the object: things that may be the subject of property rights
Petitioner: MINDANAO BUS COMPANY
Respondents: THE CITY ASSESSOR & TREASURER and the BOARD OF TAX APPEALS of Cagayan de Oro City

SUMMARY

Petitioner Bus Co. appealed the decision of the City Assessor that said that the Bus Co. should pay for realty taxes for some of their
equipment. Petitioner argued that the listed equipment are immovable properties and should thus be exempt from realty tax. The City
Assessor cited the Civil Code which said that machinery and certain equipments that tend to meet the needs of a particular industry are
considered as immovable property (Art. 415). The SC held in favor of petitioners. For equipment to be considered as immovable
property, their purpose must be essential, and not merely incidental, to the industry that uses them.

DOCTRINE/PROVISION

Art. 415.—The following are immovable properties:

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.
 So that movable equipment to be immobilized in contemplation of the law, it must first be “essential and principal elements”
of an industry or works without which such industry or works would be “unable to function or carry on the industrial purposes
for which it was established.”

Facts
 Petitioner is a public utility solely engaged in transporting passengers and cargo by motor trucks, over its authorized lines
in the Island of Mindanao, collecting rates approved by the Public Service Commission
 There are 7 machineries sought to be assessed by the respondent as real properties
 Hobart Electric Welder Machine, Storm Boring Machine, Lathe machine with motor, Black and Decker Grinder, PEMCO
Hydraulic Press, Battery charger (Tungar charge machine), D-Engine Waukesha-M-Fuel
  That these machineries are sitting on cement or wooden platforms
 Petitioner is the owner of the land where it maintains and operates a garage for its motor trucks; a repair shop; blacksmith
and carpentry shops, and with these machineries which are placed therein, its trucks are made; body constructed; and same are
repaired in a condition to be serviceable in the TPU land transportation business it operates;
 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, and having denied a motion for reconsideration, petitioner brought the case to this Court
 Respondents contend that said equipment, 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:
xxxx
“(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.” (Italics ours.)
Issue: W/N the machineries and equipment are considered immobilized and thus subject to a realty tax - NO

Ratio
 The Supreme Court decided otherwise and held that said machineries and equipments are not subject to the assessment of real
estate tax.
 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

 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
 B. H. Berkenkotter vs. Cu Unjieng:
 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 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 principal 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.” (Italics ours.)
 machinery, liquid containers, and instruments or implements” are found in a building constructed on the land
 But in the case at bar: Equipment 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 equipment may not, therefore,
be deemed real property.

 So that movable equipment 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.”
 2 Types
 movables which become immobilized by destination because they are essential and principal elements in the industry
 those which may not be so considered immobilized because they are merely incidental, not essential and principal

Tools and equipment in question, by their nature, not essential and principal 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 equipment, its business may be carried on, as petitioner
has carried on, without such equipmens, before the war.
Ruling: Equipment in question declared not subject to assessment as real estate for the purposes of the real estate tax

[12] Davao Saw Mill Co., Inc., v. Castillo

GR No. 40411 | August 7, 1935 | Malcolm, J.

This case is about the determination of the nature of the properties whether they are personal or real. Petitioner Davao Saw Mill
entered into a Contract of Lease with the landowner in which the saw mill was constructed, that in the event the contract expires of the
lessee leaves the place, the improvements shall belong to the lessor without any corresponding payment. The issue involves whether
the machineries that were mounted on the foundation of cement is personal property or not, thus, not included in the improvements.
 DOCTRINE: 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

PROVISION:
[OLD CIVIL CODE] Article 334 – 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 or industry."

FACTS:
 Davao Saw Mill Co. Inc.is the holder of a lumber concession from the Government of the Philippine Islands. It operated a sawmill
in sitio Maa, barrio Tigatu, municiplaity of Davao, Province of Davao
 The land upon which the business was conducted belonged to another person. On the land, Davao Saw Mill also erected a building
which housed the machinery used by it.
 Some implements were clearly personal property. The conflict conc erns the machines that were placed and mounted on
the foundations of the cement.
 The provisions of the CONTRACT OF LEASE between the sawmill company and the land owner:
 Upon expiration of the period agreed upon, all the improvements and buildings introduced and erected by the party (lessee)
shall pass to the exclusive ownership of the lessor without any obligation on its part to pay any amount for said improvements
and buidlings
 Same rules apply in the event the lessee should leave or abandon the land before the time stipulated
 PROVIDED, however, that the machineries and accessories are NOT included in the improvements which will pass to the
lessor on the expiration or abandonment of the lease.
 In another case, Davao Light & Power v. Davao Saw Mill. Judgment was rendered in favor of plaintiff and against defendant.
Properties in question were levied upon by the sheriff. The bidder, which was the Davao Light, proceeded to take possession of
the machinery and other properties described in the certificates of sale.
 Additional facts: Davao Saw Mill on a number of occassions treated the machinery as personal property by executing chattel
mortgages in favor of third persons. (one of such persons is the appellee)
RULING: Judgment affirmed.

Whether or not the machinery of Davao Sawmill is real property for the purpose of execution of the writ – NO, it is personal
property.
 Article 334 paragraphs 1 and 5 of the (old) 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 bulidling or land for use in connection with any industry or trade being
carried on therein and which are expressly adapated to meet the requirements of such trade of industry.
 Arguments of parties:
a. Davao Saw Mill (appellant) : emphasizes the first paragraph
b. Davao Light & Power (appellee) empahizes: the fifth paragraph
 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 arties (Standard Oil Co. of New York v. Jaramillo)
 The Philippine Supreme Court cited Valdes v Central Altagracia, the US Supreme Court decision written by Chief Justice White
involving a similar question. This case was a Puerto Rican case elevated to the US SC.
Pertinent portions
“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.
“The distinction rests, as pointed out by Demolombe, upon the fact that one only having a temporary right to the possession or enjoyment of property
is not presumed by the law to have applied movable property belonging to him so as to deprive him of it by causing it by an act of immobilization to become
the property of another.
But because of the express provisions of the lease, the concrete immobilization took place. Since the lease in substance required the putting in of
improved machinery, deprived the tenant of any right to charge against the lessor the cost of such machinery, and it was expressly stipulated that the
machinery so put in should become a part of the plant belonging to the owner without compensation to the lessee. Under such conditions the tenant in
putting in the machinery was acting but as the agent of the owner in compliance with the obligations resting upon him, and the immobilization of the
machinery which resulted arose in legal effect from the act of the owner in giving by contract a permanent destination to the machinery. “

 Things may be immovable either (1) by their own nature OR (2) by their destination or the object to thich they are applicable.

 GENERAL RULE: Machinery is movable in its nature (personal property)

 o EXCEPTION: Machinery becomes immobilized when placed in a plant by the OWNER of the property or
plant. Such result would not be accomplished, therefore, by the placing of machinery in a plant by a tenant
or usufructuary or any person having only a temporary right.

PRUDENTIAL BANK v. PANIS

G.R. No. L-50008 | August 31, 1987 | J. Paras

PROVISIONS:
 Art. 415. The following are immovable property:
1. Land, buildings, roads and constructions of all kinds adhered to the soil;
[xxx]
(10) Contracts for public works, and servitudes and other real rights over immovable property. (334a)

SUMMARY: Spouses Magcale secured a loan from Prudential Bank. To secure payment, they executed a real estate mortgage over
a residential building. The mortgage included also the right to occupy the lot and the information about the sales patent applied for by
the spouses for the lot to which the building stood. After securing the first loan, the spouses secured another from the same bank.
To secure payment, another real estate mortgage was executed over the same properties.
The Secretary of Agriculture then issued a Miscellaneous Sales Patent over the land which was later on mortgaged to the
bank.
The spouses then failed to pay for the loan and the REM was extrajudicially foreclosed and sold in public auction despite
opposition from the spouses. The respondent court held that the REM was null and void, which the petitioners assail in this case.

DOCTRINE: The inclusion of 'building' separate and distinct from the land, in Article 415 can only mean that a building is by itself
an immovable property.
While it is true that a mortgage of land necessarily includes, in the absence of stipulation of the improvements thereon,
buildings, still a building 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

FACTS
 Nov. 19, 1971 - Plaintiff-Sps. Magcale secured a loan in the sum of P70,000 from Prudential Bank. To secure payment, the
Sps. executed in favor of Prudential a deed of Real Estate mortgage over:
o 2 story, semi-concrete, residential building with warehouse space, made of mixed hard wood and concrete, declared
in Fernando Magcale’s name, issued by Assessor of Olongapo City – assessed value of P 35, 290.00 (building is
only improvement on lot)
o Property conveyed by way of mortgage includes right of occupancy on lot where above property is erected, and
more particularly described and bound as follows:
 1st class residential bldg. (Lot 720 in Olongapo Townsite Subdivision, Ardoin Street, East
Bajac-Bajac, Olongapo -465 sqm) declared and assessed in Fernando Magcale’s name issued
by Assessor of Olongapo City with an assessed value of P1860.00 bounded on all corners of
lot marked by cylindrical monuments
 Rider in document: further agreed that in the event that the Sales Patent on the lot applied for
by Mortgagers is released or issued by Bureau of Lands, Mortgagors authorize the Registrar of
Deeds to hold the registration until the mortgage is cancelled, or annotate this encumbrance
on the title upon authority from Secretary of Agriculture and Natural Resources, which title
with annotation, shall be released in favor of mortgage
 From stipulation, it’s obvious that mortgagee Prudential was aware of the fact that mortgagors (Sps) have already filed a
Miscellaneous Sales Application over lot, possessory rights over which were mortgaged to it.
 Real Estate Mortgage (REM) was registered under Act 3344 provisions with Zambales Registry of Deeds on Nov 1971.
 May 2, 1973 - Sps secured additional loan from Prudential Bank for P20k
o Executed in their favor another Real Estate mortgage to secure payment over same properties previously
mortgaged
 Also registered in Registry of Deeds, but this time in Olongapo City on May 1973
 April 24, 1972 - Sec. of Agriculture issued Miscellaneous Sales Patent 4476 over parcel of land, possessory rights of which
were mortgaged to Prudential Bank, in favor of Plaintiff Sps on basis of aforesaid patent and upon transcription in
Registration Book of Zambales Province
o Original certificate title was issued in name of Fernando Magcale by Ex-Officio Register of Deeds of Zambales on
May 1972
 For failure to pay obligation to bank after it became due, and upon application of bank, deeds of REM were extrajudicially
foreclosed.
 Apr 12, 1978 Consequently, foreclosed properties were sold to highest bidder in public auction sale conducted by City Sheriff
 o Auction was held despite Sps written request through counsel on March 29, 1978 for Sheriff to desist from going
with public auctions sale
 Nov 3, 1978 - Respondent Court declared deeds of REM as null and void
 Dec 14, 1978 - Prudential Bank filed MR
o (Jan 1979) Opposed by Sps, MR was denied for lack of Merit – hence petition
 March 9, 1979 - 1st Div of Court resolved to require Sps to comment which order was complied with the Resolution, and
Pru Bank filed it’s reply (June 1979)
 June 13, 1979 - Resolution gave petition due course and parties were required to submit their simultaneous memos

ISSUES w/ RULING & RATIO

[1] W/N a valid real estate mortgage can be constituted on the building erected on the land belonging to another. - YES
 Under Art 415, Civil Code, the inclusion of a building separate and distinct from the land means that a building is by itself an
immovable property. (Lopez v Orosa)
o While it’s true that mortgage of land includes, in the absence of stipulation of improvements, buildings – building
by itself may be mortgaged apart from the land on which it’s been built.
o Mortgage still a real estate mortgage for building = still considered immovable property even if dealt with separately
from the land
 Possessory rights over property before title is vested on the grantee may be validly transferred as in a deed of mortgage.
 Original mortgage deed on 2-story residential building was executed on Nov 1971 and registered under act 3344 with
Zambales Register of Deeds on
o Miscellaneous Sales Patent 4776 on land issued on Apr 1972 on basis of which OCT 2554 was issued in name of
Fernando Magcale on May 1972
 Therefore without question that original mortgage and the right to occupancy of the land was executed
before issuance of final patent and before government was divested of its title to the land (an
event which takes effect only on the issuance of the sales patent and its subsequent registration in the
Office of the Register of Deeds)
o Under foregoing, it’s a valid mortgage – mortgage was executed by Sps on his own building which was erected
on the land belonging to the government
 Different matter re: 2nd mortgage executed over same properties on May 1973 for 20k loan registered in Olongapo City
Registry of Deeds on same date
 Evident that such mortgage executed after issuance of sales patent and original certificate of title, falls squarely
under Public Land Act and RA 730 = null and void

RULING: CFI decision of Zambales and Olongapo City is MODIFIED, declaring Deed of REM for P70k is valid but Deed of REM
for additional P20k is null and void, without prejudice to appropriate government action against Sps.

CALTEX v. CENTRAL BOARD OF ASSESSMENT APPEALS

G.R. No. L-50466| 31 May 1982 | Aquino, J.

Petitioner: Caltex (Philippines) Inc.

Respondents: Central Board of Assessment Appeals and City Assessor of Pasay

TOPIC: I. The General Law on Property Rights > Formal Classifications of Property > 2. With reference to the object: things that
may be subject of property rights > a) Corporeal

SUMMARY
Caltex Inc. installed in its gas stations machinery and equipment. The city assessor of Pasay City characterized the said items of gas
station equipment and machinery as taxable realty. The city board of tax appeals ruled that they are personalty. The assessor appealed
to the Central Board of Assessment Appeals. The Board held that said machines and equipment are real property by virtue of the Real
Property Tax Code and that the definitions in articles 415 and 416 of the Civil code are not applicable. Caltex filed a certiorari petition.
The Supreme Court held that said equipment and machinery are taxable within the definition of the Assessment Law and the Real
Property Tax Code because such equipment and machinery are necessary to the operation of the gas station.

DOCTRINE
 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.
 Despite being movable, for purposes of taxation, are considered as real property.
 o The Civil Code provides the general principles of classification of property.
o The tax law does not need to follow the classifications in the Civil Code because the purpose of the tax law is to
generate revenue for the government.

PROVISIONS
Sec. 2, Assessment Law (CA 470). Incidence of Real Property Tax.— Except in chartered cities, there shall be levied, assessed, and
collected, an annual ad valorem tax on real property, including land, buildings, machinery, and other improvements not hereinafter
specifically exempted.

Sec. 3(k)(m), Real Property Tax Code (PD 464). Definition of Terms.— When used in this Code –
(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).

Sec. 38, Real Property Tax Code (PD 464). Incidence of Real Property Tax.— There shall be levied, assessed and collected in all provinces,
cities and municipalities an annual ad valorem tax on real property, such as land, buildings, machinery and other improvements affixed or
attached to real property not hereinafter specifically exempted.

DEFINITION (Black’s Law)

Realty – land and anything growing on, attached to, or erected on it, that cannot be removed without injury to the land; also termed
real property.

Personalty – things that are considered movable by law, though fix or real property either actually (as with a fixture) or fictitiously (as
with a lease for years).

FACTS
 The Case is about the realty tax on machinery and equipment installed by Caltex (Philippines) Inc. in its gas stations located
on leased land.
o The machines and equipment consist 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 city assessor said that:
o As to whether the subject properties are attached and affixed to the tenement–
o It is clear they are, for the tenement we consider in this particular case are (is) the pavement covering the
entire lot which was constructed by the owner of the gasoline station; and the improvement which holds all the
properties under question, they are attached and affixed to the pavement and to the improvement.
 The underground gasoline tank is attached to the shed by the steel pipe to the pump, so with the water
tank, it is connected also by a steel pipe to the pavement, then to the electric motor which electric motor
is placed under the shed.
o So to say that the gasoline pumps, water pumps and underground tanks are outside of the service station,
and to consider only the building as the service station is grossly erroneous.
 The said machines and equipment are loaned by Caltex to gas station operators under an appropriate lease agreement or
receipt.
o 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 city assessor of Pasay City characterized the said items of gas station equipment and machinery as taxable realty.
o The realty tax on said equipment amounts to P4,541.10 annually.
 The city board of tax appeals ruled that they are personalty.
 The assessor appealed to the Central Board of Assessment Appeals.
 The Board held in its decision of June 3, 1977 that:
o The machines and equipment are real propertywithin the meaning of Sec. 3(k) & (m) and 38 of the Real
Property Tax Code, PD No. 464(took effect on June 1, 1974).
o The definitions of real property and personal property in articles 415 and 416 of the Civil Code are not
applicable to this case.
 The board was composed of Sec. of Finance Cesar Virata as chairman, Acting Secretary of Justice
Catalino Macaraig, Jr. and Sec. of Local Government and Community Development Jose Roño.
 The Board denied Caltex’s motion for reconsideration in its Jan 12, 1978 resolution.
 o Minister Vicente Abad Santos took Macaraig's place.
 On May 2, 1979, Caltex filed current certiorari petition.
 Court: The SolGen’s contention that the CTA has exclusive appellate jurisdiction over this case is not correct.
o The only remedy available for seeking a review of the decision of the Central Board of Assessment Appeals is the
special civil action of certiorari.

ISSUE
W/N the pieces of gas station equipment and machinery already enumerated are subject to realty tax –YES, SC says that this issue
has to be resolved primarily under the provisions of the Assessment Law and the Real Property Tax Code.

HELD/RATIO
 Sec. 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.
 This provision is reproduced with some modification in the Real Property Tax Code which provides:
o SEC. 38. Incidence of Real Property Tax.— There shall be levied, assessed and collected in all provinces, cities and
municipalities an annual ad valorem tax on real property, such as land, buildings, machinery and other improvements
affixed or attached to real property not hereinafter specifically exempted.
 The Code contains the following definitions in its Sec. 3:
o 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.
o 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).
 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.

 Caltex invokes the rule in Davao Saw Mill Co. vs. Castillo.
o 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
 BUT that ruling is an interpretation of par. 5 of Art. 415 of the Civil Code regarding machinery that becomes real
property by destination.
o 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 for purposes of execution of a judgment against the lessee.
o In current case – 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.
o 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.
o "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)
 This case is also easily distinguishable from Board of Assessment Appeals vs. Manila Electric Co.
o In said case, Meralco's steel towers were considered poles within the meaning of par. 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).

RULING
WHEREFORE, the questioned decision and resolution of the Central Board of Assessment Appeals are affirmed. The petition for
certiorari is dismissed for lack of merit. No costs.

BENGUET CORPORATION v CENTRAL BOARD OF ASSESSMENT APPEALS ET AL

G.R. No. 106041 | January 29, 1993
 Cruz, J.

PROVISION:
Article 415, NCC
The following are immovable property:
(1) Lands, buildings 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 object.

DOCTRINE:
 The Real Property Tax Code does not carry a definition of "real property" and simply says that the realty tax is imposed on
"real property, such as lands, buildings, machinery and other improvements affixed or attached to real property." In the
absence of such a definition, we apply Article 415 of the Civil Code, the pertinent portions of which state: ART. 415.
 Section 3 (k) of the Real Property Tax Code defines improvement as follows: (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 adopt it for new or further purposes. The term has
also been interpreted as "artificial alterations of the physical condition of the ground that are reasonably permanent in
character."
 It would appear that whether a structure constitutes an improvement so as to partake of the status of realty would
depend upon the degree of permanence intended in its construction and use, The expression "permanent" as applied
to an improvement does not imply that the improvement must be used perpetually but only until the purpose to which the
principal realty is devoted has been accomplished. It is sufficient that the improvement is intended to remain as long as the
land to which it is annexed is still used for the said purpose.

FACTS:
 In 1985, Provincial Assessor of Zambales assessed petitioner’s tailing dam and land as taxable improvements
 Petitioner protested
 The realty tax assessment amounted to P11,319,304
 The assessment was appealed to the Board of Assessment Appeals of the Province of Zambales
 Dismissed because of petitioner’s failure to pay the realty taxes that fell due during the pendency of the appeal
 On appeal, CBAA reversed the dismissal of the appeal, but agreed that the tailing dam and lands submerged were subject
to realty tax

 Petitioner’s arguments:
 as regards the tailings dam as an "improvement":
 that the tailings dam has no value separate from and independent of the mine; hence. by itself it cannot be
considered an improvement separately assessable;
 that it is an integral part of the mine;
 that at the end of the mining operation of the petitioner corporation in the area, the tailings dam will benefit
the local community by serving as an irrigation facility;
 that the building of the dam has stripped the property of any commercial value as the property is submerged
under water wastes from the mine;
 that the tailings dam is an environmental pollution control device for which petitioner must be commended
rather than penalized with a realty tax assessment;
 that the installation and utilization of the tailings dam as a pollution control device is a requirement imposed
by law;
 as regards the valuation of the tailings dam and the submerged lands:
 that the subject properties have no market value as they cannot be sold independently of the mine;
 that the valuation of the tailings dam should be based on its incidental use by petitioner as a water reservoir
and not on the alleged cost of construction of the dam and the annual build-up expense;
 that the "residual value formula" used by the Provincial Assessor and adopted by respondent CBAA is
arbitrary and erroneous; and
 as regards the petitioner's liability for penalties for non-declaration of the tailings dam and the submerged lands for realty
tax purposes.
 that where a tax is not paid in an honest belief that it is not due, no penalty shall be collected in addition to
the basic tax;
  that no other mining companies in the Philippines operating a tailings dam have been made to declare the
dam for realty tax purposes
 In summation:
 They don’t dispute that tailing dam may be considered realty within meaning of Article 415 of the Civil Code
 But they do insist that 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
 Despite a considerable sum being spent in constructing and maintaining it
 OSG’s arguments:
 Argued that the dam is an assessable improvement because it enhances the value and utility of the mine
 Primary function of the dam is to receive, retain and hold the water coming from the operations of the mine
 It also enables the petitioner to impound water, which is then recycled for use in the plant.

ISSUES:
1. W/N the tailings dam can be considered an immovable property and is subject to realty tax?

HELD:
Yes. Petition is denied. Respondent is right.

RATIO:
 (See doctrine)
 Section 2 of C.A. No. 470 or the Assessment Law provides that the realty tax is due "on the real property, including land, buildings,
machinery and other improvements" not specifically exempted in Section 3 thereof.
 Thus, the tailings dam does not fall under any of the classes of exempt real properties enumerated.
 Is the tailings dam an improvement on the mine? Section 3(k) of the Real Property Tax Code defines improvement as follows:
(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 adopt it for new or further purposes.
 The Court is convinced 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. Moreover, 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
 Moreover, 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.
 The Court also gave respect to the conclusions of quasi-judicial agencies like the CBAA
 Because of the nature of its functions and its frequent exercise, has developed expertise in the resolution of assessment
problems.
 The only exception to this rule is where it is clearly shown that the administrative body has committed grave abuse of
discretion.

WHEREFORE, the petition is DISMISSED.

SERG’S PRODUCTS, INC. VS. PCI LEASING AND FINANCE, INC.

G.R. No. 137705 | August 22, 2000 | Panganiban, J.

Petitioner: Sergs Products, Inc., And Sergio T. Goquiolay

Respondent: PCI Leasing And Finance, Inc.

SUMMARY: Respondent filed a complaint for sum of money, with an application for a writ of replevin. Respondent judge issued said
writ 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. Sheriff executed the writ so petitioners filed for motion for special protective order. The contention in this case
was whether said machineries were personal, not immovable property, which may be a proper subject of a writ of replevin. The Court
ruled that machineries are real, and not personal pursuant to Art 415 CC and since they become immobilized by destination as they are
essential and principal elements in the chocolate-making industry. However, the Court said that these machineries are proper subject of
Writ of Seizure as the parties may validly stipulate that a real property be considered as personal.

DOCTRINE:
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.
The consideration of property as personal 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.

PROVISIONS:
SEC. 3 Rule 60 ROC. Order. -- Upon the filing of such affidavit and approval of the bond, the court shall issue an order and the
corresponding writ of replevin describing the personal property alleged to be wrongfully detained and requiring the sheriff forthwith to
take such property into his custody.

Art. 145 CC:. The following are immovable property:

(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;

CASE: A petitioner for Review on Certiorari assailing the January 6, 1999 Decision of CA and its February 26, 1999 Resolution denying
reconsideration.

FACTS:
 February 13, 1998: respondent PCI Leasing and Finance, Inc. (PCI for short) filed with the RTC-QC a complaint for
a sum of money, with an application for a writ of replevin.
 March 6, 1998: upon an ex-parte application of PCI, respondent 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.
 March 24, 1998: in implementation of said writ, the sheriff proceeded to petitioners factory, seized one machinery with
the word that he would return for the other machineries.
 March 25, 1998: petitioners filed a motion for special protective order, invoking the power of the court to control the
conduct of its officers and amend and control its processes, praying for a directive for the sheriff to defer enforcement of the
writ of replevin.
 Opposition by PCI: properties were still personal and therefore still subject to seizure and a writ of replevin.
 Petitioner’s reply: the properties sought to be seized were immovable as defined in Article 415 of the Civil Code,
the parties agreement to the contrary notwithstanding.
 They argued that to give effect to the agreement would be prejudicial to innocent third parties.
 They also said that PCI Leasing [was] estopped from treating these machineries as personal because the
contracts in which the alleged agreement were embodied were totally sham and farcical.
 April 6, 1998: the sheriff again sought to enforce the writ of seizure and take possession of the remaining properties. He was
able to take two more, but was prevented by the workers from taking the rest.
 CA:
 Subject machines were personal property. They had only been leased, not owned, by petitioners.
 The words of the contract are clear and leave no doubt upon the true intention of the contracting parties.
 Observing that Petitioner Goquiolay was an experienced businessman who was not unfamiliar with the ways of the
trade, he should have realized the import of the document he signed.

ISSUE:
W/N said machineries are personal, not immovable property, which may be a proper subject of a writ of replevin – Real property but
may be subject of a writ of replevin

RATIO:
 Sec 3 Rule 60 of the Rules of Court provides that writs of replevin are issued for the recovery of personal property only
while Art 145 CC provides for immovable property.
 Petitioners are correct in arguing that the said machines are real, not personal, property pursuant to Article 415 (5)
of the Civil Code.
 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.
 But the Court disagrees with the submission of the petitioners that the said machines are not proper subjects of the
Writ of Seizure.
 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
  Jurisprudence:
 Tumalad v. Vicencio – house was personal property because it had been made subject of chattel mortgage
 Makati Leasing and Finance Corp. v. Wearever Textile Mills – machinery used in a factory and essential to the industry
was a proper subject of a writ of replevin because it was treated as personal property in a contract
 The Lease Agreement clearly provides that the machines in question are to be considered as personal property.
Thus, they are estopped from denying the characterization of the subject machineries
 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.
 As to third party: 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.

RULING: WHEREFORE, the petition is Denied and the assailed Decision of the Court of Appeals Affirmed. Costs against
petitioners.

OTHER ISSUES: (Not related)

Procedural: Whether it was being filed under Rule 45
 Court: there is no question that the present recourse is under Rule 45. While Judge Laqui should not have been impleaded as
a respondent, substantial justice requires that such lapse by itself should not warrant the dismissal of the present petition. In
this light, the Court deems it proper to remove, motu proprio, the name of Judge Laqui from the caption of the present case.

Validity of Lease agreement

 In their Memorandum, petitioners contend that the Agreement is a loan and not a lease. Submitting documents supposedly
showing that they own the subject machines, petitioners also argue in their Petition that the Agreement suffers from intrinsic
ambiguity which places in serious doubt the intention of the parties and the validity of the lease agreement itself.
 These arguments are unconvincing. The validity and the nature of the contract are the lis mota of the civil action pending
before the RTC. A resolution of these questions, therefore, is effectively a resolution of the merits of the case. Hence, they
should be threshed out in the trial, not in the proceedings involving the issuance of the Writ of Seizure.
 In other words, the law does not allow the defendant to file a motion to dissolve or discharge the writ of seizure (or delivery)
on ground of insufficiency of the complaint or of the grounds relied upon therefor, as in proceedings on preliminary
attachment or injunction, and thereby put at issue the matter of the title or right of possession over the specific chattel being
replevied, the policy apparently being that said matter should be ventilated and determined only at the trial on the merits

Reliance on the Lease Agreement

 Court may rely on the Lease Agreement for nothing on record shows that it has been nullified or annulled. Thus, it must be
presumed valid and binding.

Alleged Injustice Committed on the Part of the Petitioners

 Petitioners contend that if the Court allows these machineries to be seized, then its workers would be out of work and thrown
into the streets
 Court: the mentioned consequences, it they come true, should not be blamed on this Court, but on the petitioners for failing
to avail themselves of the remedy under Sec 5 Rule 60 which allows the filing of a counter-bond.