Mindanao Bus Co. v.

City Assessor Digest

G.R. No. L-17870 29 September 1962
Facts: Petitioner is a public utility company engaged in the transport of passengers and cargo by motor vehicles
in Mindanao with main offices in Cagayan de Oro (CDO). Petitioner likewise owned a land where it maintains
a garage, a repair shop and blacksmith or carpentry shops. The machineries are placed thereon in wooden and
cement platforms. The City Assessor of CDO then assessed a P4,400 realty tax on said machineries and repair
equipment. Petitioner appealed to the Board of Tax Appeals but it sustained the City Assessor's decision, while
the Court of Tax Appeals (CTA) sustained the same.

Note: This is merely a case digest to aid in remembering the important points of a case. It is still advisable for
any student of law to read the full text of assigned cases.

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

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

Said equipments are not considered immobilized as they are merely incidental, not esential and principal to the
business of the petitioner. The transportation business could be carried on without repair or service shops of its
rolling equipment as they can be repaired or services in another shop belonging to another
Caltex v. Central Board of Assesment
Caltex (Philippines) Inc., vs. Central Board of Assessment Appeals and City Assessor of Pasay 

Facts: 
This case is about the realty tax on machinery and equipment installed by Caltex (Philippines) Inc. in its
gas stations located on leased land. The machines and equipment consists of underground tanks, elevated
tank, elevated water tanks, water tanks, gasoline pumps, computing pumps, water pumps, car washer, car
hoists, truck hoists, air compressors and tireflators. The city assessor of Pasay City characterized the said
items of gas station equipment and machinery as taxable realty. The realty tax on said equipment amounts
to P4,541.10 annually (p. 52, Rollo). The city board of tax appeals ruled that they are personalty. The
assessor appealed to the Central Board of Assessment Appeals. The Board, which was in its decision of
June 3, 1977 that the said machines and equipment are real property under the Real Property Tax Code,
Presidential Decree No. 464, which took effect on June 1, 1974. The decision was reiterated by the Board
in its resolution of January 12, 1978, denying Caltex's motion for reconsideration, a copy of which was
received by its lawyer on April 2, 1979.On May 2, 1979 Caltex filed this certiorari petition wherein it
prayed for the setting aside of the Board's decision and for a declaration that t he said machines and
equipment are personal property not subject to realty tax. We hold that the said equipment and machinery,
as appurtenances to the gas station building or shed owned by Caltex (as to which it is subject to realty
tax) and which fixtures are necessary to the operation of the gas station, for without them the gas station
would be useless, and which have been attached or affixed permanently to the gas station site or
embedded therein, are taxable improvements and machinery within the meaning of the Assessment Law
and the Real Property Tax Code. Caltex invokes the rule that machinery which is movable in its nature
only becomes immobilized when placed in a plant by the owner of the property or plant but not when so
placed by a tenant, a usufructuary, or any person having only a temporary right, unless such person acted
as the agent of the owner (Davao Saw Mill Co. vs. Castillo, 61 Phil 709).

Issue: 
Whether the pieces of gas station equipment and machinery already enumerated are subject to realty tax  

Held: 
Yes. This issue has to be resolved primarily under the provisions of the Assessment Law and the Real
Property Tax Code. Under, Sec. 38 of the said law: “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.” The equipment and machinery, are considered 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. Improvements on
land are commonly taxed as realty even though for some purposes they might be considered personalty.
"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".
Serg's v. PCI Leasing
Serg’s Products, Inc. vs. PCI Leasing G.R. No. 137705. August 22, 2000 

FACTS: 
PCI Leasing and Finance filed a complaint for sum of money, with an application for a writ of replevin. 
Judge issued a writ of replevin directing its sheriff to seize and deliver the machineries and equipment to
PCI Leasing after 5 days and upon the payment of the necessary expenses. 
The sheriff proceeded to petitioner's factory, seized one machinery, with word that he would return for
other machineries. 
Petitioner (Serg’s Products) filed a motion for special protective order to defer enforcement of the writ of
replevin. 
PCI Leasing opposed the motion on the ground that the properties were still personal and therefore can
still be subjected to seizure and writ of replevin. 
Petitioner asserted that properties sought to be seized were immovable as defined in Article 415 of the
Civil Code. 
Sheriff was still able to take possession of two more machineries 
In its decision on the original action for certiorari filed by the Petitioner, the appellate court, Citing the
Agreement of the parties, held that the subject machines were personal property, and that they had only
been leased, not owned, by petitioners; and ruled that the "words of the contract are clear and leave no
doubt upon the true intention of the contracting parties." 

ISSUE: Whether or not the machineries became real property by virtue of immobilization. 

Ruling: 
Petitioners contend that the subject machines used in their factory were not proper subjects of the Writ
issued by the RTC, because they were in fact real property. 

Writ of Replevin: Rule 60 of the Rules of Court provides that writs of replevin are issued for the recovery
of personal property only. 

Article 415 (5) of the Civil Code provides that machinery, receptacles, instruments or implements
intended by the owner of the tenement for an industry or works which may be carried on in a building or
on a piece of land, and which tend directly to meet the needs of the said industry or works 

In the present case, the machines that were the subjects of the Writ of Seizure were placed by petitioners
in the factory built on their own land. They were essential and principal elements of their chocolate-
making industry. Hence, although each of them was movable or personal property on its own, all of them
have become “immobilized by destination because they are essential and principal elements in the
industry.” 

However, contracting parties may validly stipulate that a real property be considered as personal. After
agreeing to such stipulation, they are consequently estopped from claiming otherwise. Under the principle
of estoppel, a party to a contract is ordinarily precluded from denying the truth of any material fact found
therein. 

Section 12.1 of the Agreement between the parties provides “The PROPERTY is, and shall at all times be
and remain, personal property notwithstanding that the PROPERTY or any part thereof may now be, or
hereafter become, in any manner affixed or attached to or embedded in, or permanently resting upon, real
property or any building thereon, or attached in any manner to what is permanent.” 

The machines are personal property and they are proper subjects of the Writ of Replevin.

TUMALAD vs. VICENCIO, G.R. No. L-30173, September 30, 1971

TUMALAD V. VICENCIO
41 SCRA 143

FACTS:
Vicencio and Simeon executed a chattel mortgage in favor of plaintiffs Tumalad over their house, which
was being rented by Madrigal and company. This was executed to guarantee a loan, payable in one year
with a 12% per annum interest. 

The mortgage was extrajudicially foreclosed upon failure to pay the loan. The house was sold at a public
auction and the plaintiffs were the highest bidder. A corresponding certificate of sale was issued.
Thereafter, the plaintiffs filed an action for ejectment against the defendants, praying that the latter vacate
the house as they were the proper owners.
ISSUE:

W/N the chattel mortgage was null and void ab initio because only personal properties can be subject of a
chattel mortgage.

HELD:

Certain deviations have been allowed from the general doctrine that buildings are immovable property
such as when through stipulation, parties may agree to treat as personal property those by their nature
would be real property. This is partly based on the principle of estoppel wherein the principle is
predicated on statements by the owner declaring his house as chattel, a conduct that may conceivably stop
him from subsequently claiming otherwise.

In the case at bar, though there be no specific statement referring to the subject house as personal
property, yet by ceding, selling or transferring a property through chattel mortgage could only have meant
that defendant conveys the house as chattel, or at least, intended to treat the same as such, so that they
should not now be allowed to make an inconsistent stand by claiming otherwise.

Pastor D. Ago vs CA, Hon. Montaño Ortiz, The Provincial Sheriff of Surigao, and Grace Park
Engineering, Inc.
GR No. L-17898
October 31, 1962
FACTS
Ago bought sawmill machineries and equipment from Grace Park Engineer Domineering, Inc. (GPED) A
chattel mortgage was executed over the said properties to secure the unpaid balance of P32,000, which
Ago agreed to pay in installment basis.
Because Ago defaulted in his payment, GPED instituted extra-judicial foreclosure proceedings of the
mortgage. To enjoin the foreclosure, Ago instituted a special civil case in the CFI of Agusan. The parties
then arrived at a compromise agreement.
However, a year later, Ago still defaulted in his payment. GPED filed a motion for execution with the
lower court, which was executed on September 23, 1959.
Acting upon the writ of execution, the Provincial Sheriff of Surigao levied upon and ordered the sale of
the sawmill machineries and equipment. 
Upon being advised that the public auction sale was set on December 4, 1959, Ago filed a petition
for certiorari and prohibition on December 1, 1959 with the CA. He alleged that his counsel only
received the copy of the judgment on September 25, 1959 – two days after the execution of the writ;
that the order of sale of the levied properties was in grave abuse of discretion and in excess of
jurisdiction; and that the Sheriff acted illegally by levying the properties and attempting to sell them
without prior publication of the notice of sale thereof in some newspaper of general circulation as
required by the Rules of Court.
The CA issued a writ of preliminary injunction against the Sheriff, but it turned out that the properties
were already sold on December 4, 1959. The CA ordered the Sheriff to suspend the issuance of the
Certificate of Sale until the decision of the case. The CA then rendered its decision on November 9, 1960.
ISSUES
1. Is the fact that petitioner was present in open court as the judgment was rendered, sufficient notice of
the said judgment?
2. Was the Sheriff's sale of the machineries and equipment at a public auction valid despite lack of
publication of the notice of sale?
HELD
1) No. The mere pronouncement of the judgment in open court does not constitute a rendition of
judgment. 
The filing of the judge's signed decision with the Clerk of Court constitutes the rendition of a valid and
binding judgment.
Sec. 1, Rule 35 of the Rules of Court require that all judgments be rendered in writing, personally and
directly prepared by the judge, and signed by him, stating clearly and distinctly the facts and the
law on which it is based, filed with the clerk of the court.
Prior to the filing, the decision could still be subject to amendment and change and may not constitute the
real judgment of the court.

Moreover, the hearing of the judgment in open court does not constitute valid notice thereof. No judgment
can be notified to the parties unless it has previously been rendered.
Sec.7 of Rule 27 expressly requires that final orders or judgments be served either personally or by
registered mail.
The signed judgment not having been served upon the petitioner, said judgment could not be effective
upon him who had not received it. As a consequence, the issuance of the writ of execution is null and
void, having been issued before petitioner was served a copy of the decision, personally or by registered
mail.

2) The subject sawmill machineries and equipment became real estate properties in accordance with the
provision of Art. 415 (5) of the NCC:
ART. 415 – The following are immovable property:

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;

The installation of the sawmill machineries in the building of Gold Pacific Sawmill, Inc., for use in the
sawing of logs carried on in the said building converted them into Real Properties as they became a
necessary & permanent part of the building or real estate on which the same was constructed.
And if they are judicially sold on execution without the necessary advertisement of sale by publication in
a newspaper as required in Sec.16 of Rule 39 of the Rules of Court, the sale made by the sheriff would
be null and void.