1. G.R. No.
L-11658            February 15, 1918, LEUNG YEE, plaintiff-appellant,
vs. FRANK L. STRONG MACHINERY COMPANY and J. G.
WILLIAMSON, defendants-appellees.
FACTS:
 The "Compañia Agricola Filipina" bought a considerable quantity of rice-cleaning
machinery company from FRANK STRONG (STRONG) machinery company, and
executed a chattel mortgage thereon to secure payment of the purchase price.
 It included in the mortgage deed the building of strong materials in which the
machinery was installed, without any reference to the land on which it stood.
 The indebtedness secured by this instrument not having been paid when it fell due, the
mortgaged property was sold by the sheriff, in pursuance of the terms of the mortgage
instrument, and was bought in by the machinery company.
 The mortgage was registered in the chattel mortgage registry, and the sale of the
property to the machinery company in satisfaction of the mortgage was annotated in
the same registry on December 29, 1913.
 A few weeks thereafter, on or about the 14th of January, 1914, the "Compañia
Agricola Filipina" executed a deed of sale of the land upon which the building stood to
the machinery company, but this deed of sale, although executed in a public
document, was not registered.
 At or about the time when the chattel mortgage was executed in favor of the machinery
company, the mortgagor, the "Compañia Agricola Filipina" executed another mortgage
to LEUNG YEE (YEE) upon the building, separate and apart from the land on which it
stood, to secure payment of the balance of its indebtedness to the plaintiff under a
contract for the construction of the building.
 Upon the failure of the mortgagor to pay the amount of the indebtedness secured by
the mortgage, the YEE secured judgment for that amount, levied execution upon the
building, bought it in at the sheriff's sale on or about the 18th of December, 1914, and
had the sheriff's certificate of the sale duly registered in the land registry of the
Province of Cavite.
 At the time when the execution was levied upon the building, the defendant machinery
company, which was in possession, filed with the sheriff a sworn statement setting up
its claim of title and demanding the release of the property from the levy. Thereafter,
upon demand of the sheriff, YEE executed an indemnity bond in favor of the sheriff in
the sum of P12,000, in reliance upon which the sheriff sold the property at public
auction to the YEE, who was the highest bidder at the sheriff's sale.
 HENCE, this action was instituted by the YEE to recover possession of the building
from the machinery company.
 TRIAL COURT: The trial judge, relying upon the terms of article 1473 of the Civil
Code, gave judgment in favor of the machinery company, on the ground that the
company had its title to the building registered prior to the date of registry of YEE’S
certificate.
ISSUE: WHETHER OR NOT THE MACHINERY COMPANY HAS THE BETTER
RIGHT OVER THE PROPERTY.
RULING: The Court ruled in favor of the machinery company, however, explained that
the ground assigned by the trial court be sustained.
The Court explained that the registry her referred to is of course the registry of real
property, and it must be apparent that the annotation or inscription of a deed of sale of
real property in a chattel mortgage registry cannot be given the legal effect of an
inscription in the registry of real property. By its express terms, the Chattel
Mortgage Law contemplates and makes provision for mortgages of personal property;
and the sole purpose and object of the chattel mortgage registry is to provide for the
registry of "Chattel mortgages," that is to say, mortgages of personal property
executed in the manner and form prescribed in the statute. The building of strong
materials in which the rice-cleaning machinery was installed by the "Compañia
Agricola Filipina" was real property, and the mere fact that the parties seem to have
dealt with it separate and apart from the land on which it stood in no wise changed its
character as real property. HENCE, it follows that neither the original registry in
the chattel mortgage of the building and the machinery installed therein, not the
annotation in that registry of the sale of the mortgaged property, had any effect
whatever so far as the building was concerned.
HOWEVER, being that said the Court that the judgment of the trial court must be
sustained on the ground that the agreed statement of facts discloses that neither the
purchase of the building by the YEE nor his inscription of the sheriff's certificate
of sale in his favor was made in good faith, and that the machinery company
must be held to be the owner of the property under the third paragraph of the
Article 1473, it appearing that the company first took possession of the property; and
further, that the building and the land were sold to the machinery company long prior to
the date of the sheriff's sale to the plaintiff.
EXPLANATION:
The agreed statement of facts clearly discloses that YEE, when he bought the building
at the sheriff's sale and inscribed his title in the land registry, was duly notified that the
machinery company had bought the building from plaintiff's judgment debtor; that it
had gone into possession long prior to the sheriff's sale; and that it was in possession
at the time when the sheriff executed his levy. The execution of an indemnity bond by
the plaintiff in favor of the sheriff, after the machinery company had filed its sworn
claim of ownership, leaves no room for doubt in this regard. Having bought in the
building at the sheriff's sale with full knowledge that at the time of the levy and sale the
building had already been sold to the machinery company by the judgment debtor,
YEE cannot be said to have been a purchaser in good faith; and of course, the
subsequent inscription of the sheriff's certificate of title must be held to have been
tainted with the same defect.
HENCE, appearing that he had full knowledge of the machinery company's claim of
ownership when he executed the indemnity bond and bought in the property at the
sheriff's sale, and it appearing further that the machinery company's claim of
ownership was well founded, he cannot be said to have been an innocent purchaser
for value. He took the risk and must stand by the consequences; and it is in this
sense that we find that he was not a purchaser in good faith.
One who purchases real estate with knowledge of a defect or lack of title in his vendor
cannot claim that he has acquired title thereto in good faith as against the true owner
of the land or of an interest therein; and the same rule must be applied to one who has
knowledge of facts which should have put him upon such inquiry and investigation as
might be necessary to acquaint him with the defects in the title of his vendor. A
purchaser cannot close his eyes to facts which should put a reasonable man
upon his guard, and then claim that he acted in good faith under the belief that
there was no defect in the title of the vendor. His mere refusal to believe that
such defect exists, or his willful closing of his eyes to the possibility of the
existence of a defect in his vendor's title, will not make him an innocent
purchaser for value, if afterwards develops that the title was in fact defective,
and it appears that he had such notice of the defects as would have led to its
discovery had he acted with that measure of precaution which may reasonably
be acquired of a prudent man in a like situation.
 2. G.R. No. L-17870             September 29, 1962 MINDANAO BUS machineries which are placed therein, its TPU trucks are made; body constructed;
COMPANY, petitioner, vs. THE CITY ASSESSOR & TREASURER and the BOARD and same are repaired in a condition to be serviceable in the TPU land
OF TAX APPEALS of Cagayan de Oro City, respondents. transportation business it operates;

FACTS:
 This is a petition for the review of the decision of the CTA holding that the petitioner
Mindanao Bus Company (MBC) is liable to the payment of the realty tax on its
maintenance and repair equipment hereunder referred to.
6. That these machineries have never been or were never used as industrial
equipments to produce finished products for sale, nor to repair machineries, parts
and the like offered to the general public indiscriminately for business or commercial
purposes for which petitioner has never engaged in, to date.
 CTA RULING: The CTA sustained the ruling of the respondent CDO CITY.

 Respondent City Assessor of Cagayan de Oro City CDO CITY assessed at P4,400
MBC’s above-mentioned equipment. MBC’s appealed the assessment to the CDO ISSUE: Whether or not the said tools, equipments or machineries are immovable
CITY’s Board of Tax Appeals on the ground that the same are not realty. taxable real properties.

 The Board of Tax Appeals of the City sustained the city assessor, so petitioner herein RULING: NO. The Court ruled that the machineries owned by MBC are not taxable
filed with the Court of Tax Appeals a petition for the review of the assessment. real properties. As explained by the Court, movable equipment to be immobilized in
contemplation of the law must first be “essential and principal elements” of an industry
 In the Court of Tax Appeals the parties submitted the following stipulation of facts: or works without which such industry or works would be “unable to function or carry on
the industrial purpose for which it was established.”
1. That petitioner is a public utility solely engaged in transporting passengers and
cargoes by motor trucks, over its authorized lines in the Island of Mindanao,
collecting rates approved by the Public Service Commission; In this case, the tools and equipment are not essential and principle municipal
elements of petitioner’s business of transporting passengers and cargoes by motor
2. That MBC has its main office and shop at Cagayan de Oro City. It maintains trucks. They are merely incidentals — acquired as movables and used only for
Branch Offices and/or stations at Iligan City, Lanao; Pagadian, Zamboanga del Sur; expediency to facilitate and/or improve its service. The transportation business could
Davao City and Kibawe, Bukidnon Province; be carried on without the repair or service shop if its rolling equipment is repaired or
serviced in another shop belonging to another.
3. That the machineries sought to be assessed by the CDO CITY as real properties
are the following: HENCE, the decision subject of the petition for review is hereby set aside and the
(a) Hobart Electric Welder Machine, appearing in the attached equipment in question declared not subject to assessment as real estate for the
photograph, marked Annex "A"; purposes of the real estate tax.
(b) Storm Boring Machine, appearing in the attached photograph,
marked Annex "B";
(c) Lathe machine with motor, appearing in the attached photograph,
marked Annex "C";
(d) Black and Decker Grinder, appearing in the attached photograph,
marked Annex "D";
(e) PEMCO Hydraulic Press, appearing in the attached photograph,
marked Annex "E";
(f) Battery charger (Tungar charge machine) appearing in the
attached photograph, marked Annex "F"; and
(g) D-Engine Waukesha-M-Fuel, appearing in the attached
photograph, marked Annex "G".

4. That these machineries are sitting on cement or wooden platforms as may be

seen in the attached photographs which form part of this agreed stipulation of facts;

5. That MBC is the owner of the land where it maintains and operates a garage for
its TPU motor trucks; a repair shop; blacksmith and carpentry shops, and with these
 3. G.R. No. L-58469 May 16, 1983 MAKATI LEASING and FINANCE
CORPORATION, petitioner, vs. WEAREVER TEXTILE MILLS, INC., and
HONORABLE COURT OF APPEALS, respondents.
FACTS: This is a petition for review on certiorari of the decision of CA, setting aside
certain Orders of CFI.
 It appears that in order to obtain financial accommodations from herein petitioner
Makati Leasing and Finance Corporation (MLFC), the private respondent Wearever
Textile Mills, Inc.(WEAVER), discounted and assigned several receivables with the
former under a Receivable Purchase Agreement.
 To secure the collection of the receivables assigned, private respondent executed a
Chattel Mortgage over certain raw materials inventory as well as a machinery
described as an Artos Aero Dryer Stentering Range.
 Upon WEAVER’s default, MFLC filed a petition for extrajudicial foreclosure of the
properties mortgage to it. However, the Deputy Sheriff assigned to implement the
foreclosure failed to gain entry into WEAVER’s premises and was not able to effect the
seizure of the aforedescribed machinery.
 MFLC thereafter filed a complaint for judicial foreclosure with the CFI.
 CFI RULING: The lower court issued a writ of seizure, the enforcement of which was
however subsequently restrained upon WEAVER’S filing of a motion for
reconsideration. After several incidents, the lower court finally issued on February 11,
1981, an order lifting the restraining order for the enforcement of the writ of seizure
and an order to break open the premises of WEAVER to enforce said writ.
Examining the records of the instance case, the Supreme Court found no logical
justification to exclude and rule out, as the appellate court did, the present case from
the application of the pronouncement in the TUMALAD v. VICENCIO CASE (41 SCRA
143) where a similar, if not identical issue was raised. If a house of strong materials,
like what was involved in the Tumalad case may be considered as personal property
for purposes of executing a chattel mortgage thereon as long as the parties to the
contract so agree and no innocent third party will be prejudiced thereby, there is
absolutely no reason why a machinery, which is movable in its nature and becomes
immobilized only by destination or purpose, may not be likewise treated as such. This
is really because one who has so agreed is estopped from 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.
Private respondent contends that estoppel cannot apply against it because it had
never represented nor agreed that the machinery in suit be considered as personal
property but was merely required and dictated on by herein petitioner to sign a printed
form of chattel mortgage which was in a blank form at the time of signing. This
contention lacks persuasiveness. As aptly pointed out by petitioner and not denied by
the respondent, the status of the subject machinery as movable or immovable was
never placed in issue before the lower court and the Court of Appeals except in a
supplemental memorandum in support of the petition filed in the appellate court.

 On July 13, 1981, the sheriff enforcing the seizure order, repaired to the premises of
private respondent and removed the main drive motor of the subject machinery.

 CA RULING: The CA set aside the Orders of the lower court and ordered the return of
the drive motor seized by the sheriff pursuant to said Orders, after ruling that the
machinery in suit cannot be the subject of replevin, much less of a chattel mortgage,
because it is a real property pursuant to Article 415 of the new Civil Code, the same
being attached to the ground by means of bolts and the only way to remove it
from WEAVERS plant would be to drill out or destroy the concrete floor, the
reason why all that the sheriff could do to enfore the writ was to take the main drive
motor of said machinery.

Moreover, the CA rejected petitioner's argument that private respondent is estopped

from claiming that the machine is real property by constituting a chattel mortgage
thereon.

ISSUE: Whether the seized drive motor cannot be a subject of chattel mortgage,
because it is a real property pursuant to Article 415 of the new Civil Code

RULING: No. The seized drive motor can be a subject of chattel mortgage.
 4. [G.R. No. L-11139. April 23, 1958.] SANTOS EVANGELISTA, Petitioner, v. ALTO
SURETY & INSURANCE CO., INC., Respondent. Gonzalo D. David for Petitioner.
Raul A. Aristorenas and Benjamin Relova for Respondent.
FACTS:
 Petitioner Santos Evangelista sued Rivera for collection of sum of money on June 4,
1949. On the same date, he obtained a writ of preliminary attachment, which was
levied upon a house built by Rivera, a lessee, on a land owned by respondent lessor
Alto Surety. The levy was made pursuant to the rules governing the levy of real
properties.
 In due course, judgment was rendered in favor of Evangelista, who, on October 8,
1951, bought the house at the public auction made to satisfy the judgment. The
corresponding deed of sale was issued to him on October 22, 1952.
 When Evangelista sought to take possession of the house, he was told that Alto Surety
was now the owner of the house because the latter allegedly bought the house at an
auction sale on September 29, 1950.
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.
As held in Manarang v Ofilada, “Sales on execution affect the public and third persons.
The regulation governing sales on execution are for public officials to follow. The form
of proceedings prescribed for each kind of property is suited to its character, not to the
character, which the parties have given to it or desire to give it. When the rules speak
of personal property, property which is ordinarily so considered is meant; and when
real property is spoken of, it means property which is generally known as real property.
The regulations were never intended to suit the consideration that parties may have
privately given to the property levied upon. Enforcement of regulations would be
difficult were the convenience or agreement of private parties to determine or govern
the nature of the proceedings. 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.”

 It turned out that Alto Surety likewise filed an action against Rivera and likewise
obtained a favorable judgment. The corresponding deed was issued to Alto Surety on
May 10, 1952.

 Subsequently, Evangelista instituted an action against Alto Surety and Rivera for the
purpose of establishing his title over said house.

 TRIAL COURT RULING: The trial court ruled in favor of Evangelista.

 CA RULING: On appeal, however, the Court of Appeals reversed the decision of the
trial court on the ground that Evangelista did not acquire a preferential lien through the
preliminary writ of attachment because the house was levied as if it were an
immovable property. The Court of Appeals was of the opinion that the house should
have been levied pursuant to the rules governing the levy of personal property
(apparently for the reason that the house was constructed on a land belonging to
another).

ISSUE: Whether a house, constructed by the lessee of the land on which it is built,
should be dealt with, for purpose, of attachment, as immovable property, or as
personal property.

RULING: The Court ruled that the house is an immovable property. As explicitly held,
in Ladera v. Hodges, 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.

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. 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
 5. G.R. No. 120098            October 2, 2001RUBY L. TSAI, petitioner,
vs.vHON. COURT OF APPEALS, EVER TEXTILE MILLS, INC. and MAMERTO R
VILLALUZ, respondents.
FACTS:
 Ever Textile Mills, Inc. (EVERTEX) obtained loan from Philippine Bank of
Communications (PBCom), secured by a deed of Real and Chattel Mortgage over the
lot where its factory stands, and the chattels located therein as enumerated in a
schedule attached to the mortgage contract.
 PBCom again granted a second loan to EVERTEX which was secured by a Chattel
Mortgage over personal properties enumerated in a list attached thereto. These listed
properties were similar to those listed in the first mortgage deed.
 After the date of the execution of the second mortgage mentioned above, EVERTEX
purchased various machines and equipments. Upon EVERTEX's failure to meet its
obligation to PBCom, the latter commenced extrajudicial foreclosure proceedings
against EVERTEX under Act 3135 and Act 1506 or "The Chattel Mortgage Law".
 PBCom then consolidated its ownership over the lot and all the properties in it. It
leased the entire factory premises to Ruby Tsai and sold to the same the factory, lock,
stock and barrel including the contested machineries.
 EVERTEX filed a complaint for annulment of sale, reconveyance, and damages
against PBCom, alleging inter alia that the extrajudicial foreclosure of subject
mortgage was not valid, and that PBCom, without any legal or factual basis,
appropriated the contested properties which were not included in the Real and Chattel
Mortgage of the first mortgage contract nor in the second contract which is a Chattel
Mortgage, and neither were those properties included in the Notice of Sheriff's Sale.
ISSUES: (1) Whether or not the contested properties are personal or movable
properties
(2) Whether or not the sale of these properties to a third person (Tsai) by the bank
through an irregular foreclosure sale is valid.
RULING:
First Issue: Nature of the Properties and Intent of the Parties
YES. The Court ruled that the disputed machineries are personal or movable.
The nature of the disputed machineries, i.e., that they were heavy, bolted or cemented
on the real property mortgaged does not make them ipso facto immovable under
Article 415 (3) and (5) of the New Civil Code. While it is true that the properties appear
to be immobile, a perusal of the contract of Real and Chattel Mortgage executed by
the parties herein reveal their intent, that is - to treat machinery and equipment as
chattels.
In the first mortgage contract, reflective of the true intention of PBCOM and EVERTEX
was the typing in capital letters, immediately following the printed caption of mortgage,
of the phrase "real and chattel." So also, the "machineries and equipment" in the
printed form of the bank had to be inserted in the blank space of the printed contract
and connected with the word "building" by typewritten slash marks. Now, then, if the
machineries in question were contemplated to be included in the real estate mortgage,
there would have been no necessity to ink a chattel mortgage specifically mentioning
as part III of Schedule A a listing of the machineries covered thereby. It would have
sufficed to list them as immovables in the Deed of Real Estate Mortgage of the land
and building involved. As regards the second contract, the intention of the parties is
clear and beyond question. It refers solely to chattels. The inventory list of the
mortgaged properties is an itemization of 63 individually described machineries while
the schedule listed only machines and 2,996,880.50 worth of finished cotton fabrics
and natural cotton fabrics.
UNDER PRINCIPLE OF ESTOPPEL
Assuming arguendo that the properties in question are immovable by nature, nothing
detracts the parties from treating it as chattels to secure an obligation under the
principle of estoppel. As far back as Navarro v. Pineda, an immovable may be
considered a personal property if there is a stipulation as when it is used as security in
the payment of an obligation where a chattel mortgage is executed over it.
Second Issue: The court ruled that the sale of the properties not included in the
subject of chattel mortgage is not valid.
The auction sale of the subject properties to PBCom is void. Inasmuch as the subject
mortgages were intended by the parties to involve chattels, insofar as equipment and
machinery were concerned, the Chattel Mortgage Law applies.
Section 7 provides thereof that: "a chattel mortgage shall be deemed to cover only the
property described therein and not like or substituted property thereafter acquired by
the mortgagor and placed in the same depository as the property originally mortgaged,
anything in the mortgage to the contrary notwithstanding."
Since the disputed machineries were acquired later after the two mortgage contracts
were executed, it was consequently an error on the part of the Sheriff to include
subject machineries with the properties enumerated in said chattel mortgages.
As the lease and sale of said personal properties were irregular and illegal because
they were not duly foreclosed nor sold at the auction, no valid title passed in its favor.
Consequently, the sale thereof to Ruby Tsai is also a nullity under the elementary
principle of nemo dat quod non habet, one cannot give what one does not have.
 6. G.R. No. 137705               August 22, 2000 SERG'S PRODUCTS, INC., and
SERGIO T. GOQUIOLAY,  petitioners,vs.PCI LEASING AND FINANCE,
INC., respondent.
FACTS:
 On February 13, 1998, respondent PCI Leasing and Finance, Inc. ("PCI Leasing" for
short) filed with the RTC-QC a complaint for [a] sum of money (Annex 'E'), with an
application for a writ of replevin docketed as Civil Case No. Q-98-33500.
 On March 6, 1998, upon an ex-parte application of PCI Leasing, respondent judge
issued a writ of replevin (Annex 'B') 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.
 On March 24, 1998, in implementation of said writ, the sheriff proceeded to petitioner's
factory, seized one machinery with [the] word that he [would] return for the other
machineries.
 On March 25, 1998, petitioners filed a motion for special protective order (Annex 'C'),
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.
 This motion was opposed by PCI Leasing (Annex 'F'), on the ground that the
properties [were] still personal and therefore still subject to seizure and a writ of
replevin.
 In their Reply, petitioners asserted that 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 further stated 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.
Writ of Replevin: Rule 60 of the Rules of Court provides that writs of replevin are
issued for the recovery of personal property only.
RULING:
First Issue: 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
The Court ruled that the machines were real properties and not personal property
considering that 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.”
Second Issue: However, the court explained that it must be noted and given
emphasized that contracting parties may validly stipulate that a real property be
considered as personal. After agreeing to such stipulation, they are consequently
estopped from claiming otherwise. Under the principle of estoppel, a party to a contract
is ordinarily precluded from denying the truth of any material fact found therein.
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.”
HENCE, being that said, the machines are personal property and they are proper
subjects of the Writ of Replevin

 CA RULING: Citing the Agreement of the parties, the appellate court held that
the subject machines were personal property, and that they had only been leased,
not owned, by petitioners. It also ruled that 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," it ruled that he "should have realized the import of the
document he signed."

 Hence, this Petition.

 ISSUE: (1) Whether or not the machines are personal property or real property
(2) Whether or not the machine may be subject of writ of replevin.

Clarification: 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.
 7. G.R. No. L-64261 December 26, 1984 JOSE BURGOS, SR., JOSE BURGOS, bolted to the ground remain movable property susceptible to seizure under a search
JR., BAYANI SORIANO and J. BURGOS MEDIA SERVICES, INC., petitioners, warrant.
vs. THE CHIEF OF STAFF, ARMED FORCES OF THE PHILIPPINES, THE CHIEF,
PHILIPPINE CONSTABULARY, THE CHIEF LEGAL OFFICER, PRESIDENTIAL
SECURITY COMMAND, THE JUDGE ADVOCATE GENERAL, ET AL., respondents.

SUBJECT: Machinery becomes immovable only when placed by the owner of the land
or his agent;

FACTS:

 Respondent Judge Ernani Cruz-Pano of the Court of First Instance of Rizal issued two
search warrants directed to law enforcement officers to search and seize the offices of
the "Metropolitan Mail" and "We Forum" with the addresses No. 19, Road 3, Project 6,
Quezon City, and 784 Units C & D, RMS Building, Quezon Avenue, Quezon City for
allegedly publishing articles that incite subversion.

 The officers seized all the printing machines, motor vehicles, office equipment and
other articles used in the printing, publication and distribution of the newspapers, as
well as numerous documents and other written literature alleged to be in the
possession of petitioner Jose Burgos, Jr. publisher-editor of the "We Forum"
newspaper.

 Petitioners prayed that a writ of preliminary mandatory and prohibitory injunction be

issued for the return of the seized articles. They also questioned the validity of the
warrants on the following grounds: (a) Judge Pano failed to conduct an examination
under oath or affirmation of the applicant and his witnesses. (b)The two search
warrants pinpointed only one place. (c) Articles belonging to co- petitioners were also
seized although the warrants were directed against Jose Burgos, Jr. alone (d) Real
properties were also seized. (e) The application accompanied by the Joint Affidavit of
the members of the Metrocom Intelligence and Security Group under Col. Abadilla
could not gave provided sufficient basis for the finding of a probable cause for the
issuance of the search warrant.

 In defense, the respondent law enforcement officers sought to dismiss the petition on
the following grounds: (a) The petitioners should have filed a motion to quash the
search warrants first before Judge Pano before challenging their validity. (b) It should
be dismissed on the ground of laches because the petitioners only filed the case after
an unreasonable length of time. (c) Burgos is now estopped from challenging the
validity of the search warrants since he had used and marked as evidence some of the
seized documents in a criminal case against him.

ISSUE: Whether or not the Machinery are personal or real property.

RULING: The Court ruled that machinery which is movable by nature becomes
immobilized when placed by the owner of the tenement, property or plant, but not so
when placed by a tenant, usufructuary, or any other person having only a temporary
right, unless such person acted as the agent of the owner. (See Davao Sawmill Co. v.
Castillo)

Hence, in the case at bar, petitioners do not claim to be the owners of the land and/or
building on which the machineries were placed. Hence, the machineries, while in fact
 8. G.R. Nos. L-10817-18             February 28, 1958 ENRIQUE LOPEZ, petitioner, RULING: Yes. The Court ruled that such lien attaches to structure alone, and does
vs. VICENTE OROSA, JR., and PLAZA THEATRE, INC., respondents. not extend to the land where the building is.

FACTS:
 After agreeing to make an investment in Orosa’s theatre business and his assurance
that he would be personally liable for any account that the said construction might
incur, Lopez delivered the lumber which was used for the construction of the Plaza
Theatre. But of the total cost of the materials amounting to P62,255.85, Lopez was
paid only P20848.50.
 Plaza Theatre was erected on a piece of land formerly owned by Orosa, and was
acquired by the corporation. As Lopez was pressing Orosa for payment of remaining
unpaid obligation, the latter promised to obtain a bank loan by mortgaging the
properties of Plaza Theatre. Unknown to Lopez, the corporation already got a loan
from a bank with Luzon Surety Company as surety, and the corporation in turn
executed a mortgage on the land and building in favor of said company as counter-
security.
 Persistent demand from Lopez caused Orosa to execute an alleged “deed of
assignment” of his 480 shares of stock of Plaza Theatre, at P100 per share; and as the
obligation still remain unsettled, Lopez filed a complaint against Orosa and Plaza
Theatre Inc, praying that xxx in case defendants fail to pay, the building and land
owned by corporation be sold at public auction, or the shares of the capital stock be
sold, and the proceeds thereof be applied to said indebtedness.
 As a defense, Orosa contended that the shares of stocks were personal properties and
cannot be made to cover and satisfy the obligation. it was thus prayed that he be
declared exempted from payment of deficiency in case the proceeds from the sale of
properties are not enough.
In view of employment of the phrase, “real estate or immovable property”, and in as
much as said provision does not contain any specification delimiting the lien to the
building, said article must be construed as to embrace both the land and building or
the structure adhering thereto.
The Court cannot subscribe to this view, for while it is true that real estate connotes
land and 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 could mean only one thing – that the building is by itself an immovable
property. Moreover, in view of the absence of any specific provision of law to the
contrary, a building is an immovable property, irrespective of whether or not said
structure and the land on which it is adhered to belong to the same owner.
A close examination of the provision of the Civil Code reveals that the law gives
preference to unregistered refectionary credits only with respect to the real estate upon
the refection or work was made. The conclusion is that it must be that the lien so
created attaches merely to the immovable property for the construction or repair of
which the obligation was incurred. Therefore, the lien in favor of appellant for the
unpaid value of the lumber used in construction of the building attaches only to said
structure and to no other property of the obligors.
Wherefore, and on the strength of the foregoing considerations, the decision appealed
from is hereby affirmed, with costs against appellant. It is so ordered.

 The surety company, upon discovery that the land was already registered, file a
petition to annotate the rights and interests of the surety company over the said
properties, which was opposed by Lopez who asserted that he has preferred lien over
the properties.

 The two cases were heard jointly, and lower court held that Orosa were liable for the
unpaid balance of the cost of lumber used in the construction, and Lopez thus
acquired materialman’s lien over it. In making the pronouncement that tyhe lien was
merely confined to the building and did not extend to the land where it was built, the
trial jduge took into consideration that xxx codal provisions specifying that refection
credits are preferred could refer to buildings which are also classified as real properties
upon which the refaction was made. Orosa were thus required to xxx with respect
tohe building, said mortgage was subject to materialmen’s lien in favor of Lopez.

 Lopez tried to secure a modification of decision in so far as it declared that lien did not
extend to the land, but was denied by court. Hence, the appeal.

ISSUE: Whether a materialmen’s lien for the value of materials used in the
construction of building attaches to said structure alone, and does not extend to the
land on which building is adhered to.
9. G.R. No. L-32917 July 18, 1988 JULIAN S. YAP, petitioner,

contrary, a building is
vs. HON. SANTIAGO O. TAÑADA, etc., and GOULDS PUMPS INTERNATIONAL
(PHIL.), INC., respondents.

from the land, in the an immovable property

enumeration of what irrespective of whether
may constitute real or not said structure
properties could only and the land on which
mean one thing—that it is adhered to
a building is by itself belong to the same
an immovable owner. The lien so
property. In view of created attaches
the merely to the
absence of any specific immovable
provision to the
property for the property of the
construction or repair obligors.
of which the obligation Yap v. Tañada
was incurred. G.R. No. L-32917, July
Therefore, 18, 1988, 163 SCRA
the lien in favor of 464
appellant for the unpaid Narvasa, J.
value of the lumber FACTS: Goulds
used in the construction Pumps International
of the building attaches (Phil.), Inc. filed a
only to said structure complaint against Yap
and to no other and his
wife seeking recovery Judge Tañada requiring
of P1,459.30 Yap to pay to
representing the Goulds the unpaid
balance of the price balance of the pump
and purchased by him and
installation cost of a interest of 12% per
water pump in the annum.
latter's premises. Thereafter, the water
Goulds presented pump in question was
evidence ex levied by the sheriff
parte and judgment by and by notice dated
default was rendered by November 4, 1969,
scheduled the execution
sale thereof. But in Hence, the Deputy
view of the pendency Provincial Sheriff went
of ahead with the
Yap's motion for scheduled auction sale
reconsideration, and
suspension of the sold the property levied
sale was directed. It on to Goulds as the
appears highest bidder.
however that a copy of Yap argues that "the
the order suspending sale was made without
the sale was not the notice required by
transmitted to the Sec. 18, Rule 39, of
sheriff
the New Rules of ISSUE: Whether or not
Court," i.e., notice by the water pump in
publication in case of question is an
execution sale of real immovable property.
property, the pump HELD: No. Yap's
and its accessories argument is
being immovable untenable. The Civil
because attached to Code considers as
the immovable
ground with character property, among others,
of permanency (Art. anything "attached to
415, Civil Code). an immovable in a
fixed manner, in such
a way that it Obviously, the
cannot be separated separation or removal
therefrom without of the pump involved
breaking the material nothing more
or complicated
deterioration of the than the loosening of
object." The pump does bolts or dismantling of
not fit this description. other fasteners.
It could be, and was
in fact separated from Machinery and
Yap's premises without Engineering Supplies,
being broken or Inc. v. Court of
suffering deterioration. Appeals
G.R. No. L-7057, delivered to Ipo
October 29, 1954, 96 Limestone Co.
Phil. 70 An order was issued to
Concepcion, J. seize and take
FACTS: Petitioner immediate possession
Machinery and of the properties
Engineering Supplies specified
filed a complaint for in the order. Upon
replevin for carrying out the court’s
the recovery of the order, Roco, the
machinery and company’s President,
equipment sold and along
with a crew of technical his duty is purely
men and labourers, ministerial, they all
proceeded to the went to the factory and
factory. The manager dismantled the
of equipment
Ipo Limestone Co. and despite the fact that the
Torres protested equipment could not be
against the seizure of dismantled without
the properties on the causing damage or
ground that they are not injuries to the wooden
personal properties. frames attached to
However, since the them. Consequently,
sheriff contended that they had to cut some of
the supports of the equipment in question
equipment which appeared to be attached
rendered its use to the land, particularly
impracticable. to the concrete
ISSUE: Whether or not foundation of said
the machinery and premises, in a fixed
equipment in question manner, in such a way
could be the subject that the former could
of replevin. not
HELD: No. Replevin be separated from the
is applicable only to latter without breaking
personal property. the material or
The machinery and
deterioration of the
object.
Hence, in order to
remove the said outfit,
it became necessary not
only to unbolt the
same, but also to cut
some of its wooden
supports. Moreover,
of the tenement for an
industry carried on said
immovable. For these
reasons, they were
already immovable
pursuant to paragraphs
3
and 5 of Article 415 of
the Civil C
FACTS:

said machinery and  Goulds Pumps International (Phil.), Inc. filed a complaint against Yap and his wife
seeking recovery of P1,459.30 representing the balance of the price and installation
cost of a water pump in the latter's premises.

equipment were  Goulds presented evidence ex parte and judgment by default was rendered by Judge
Tañada requiring Yap to pay to Goulds the unpaid balance of the pump purchased by
him and interest of 12% per annum.

intended by the owner  Thereafter, the water pump in question was levied by the sheriff and by notice dated
November 4, 1969, scheduled the execution sale thereof. But in view of the pendency
of Yap's motion for reconsideration, suspension of the sale was directed.
 It appears however that a copy of the order suspending the sale was not transmitted to
the sheriff Hence, the Deputy Provincial Sheriff went ahead with the scheduled auction
sale and sold the property levied on to Goulds as the highest bidder.

 Yap argues that "the sale was made without the notice required by Sec. 18, Rule 39,
of the New Rules of Court," i.e., notice by publication in case of execution sale of real
property, the pump and its accessories being immovable because attached to the
ground with character of permanency (Art. 415, Civil Code).

ISSUE: Whether or not the water pump in question is an immovable property.

RULING: No. Yap's argument is untenable.

The Civil Code considers as immovable property, among others, anything "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." The pump does not fit this
description. It could be, and was in fact separated from Yap's premises without being
broken or suffering deterioration. Obviously, the separation or removal of the pump
involved nothing more complicated than the loosening of bolts or dismantling of other
fasteners.
 10. G.R. No. L-7057           October 29, 1954 MACHINERY & ENGINEERING
SUPPLIES, INC., petitioner, vs. THE HONORABLE COURT OF APPEALS, HON.
POTENCIANO PECSON, JUDGE OF THE COURT OF FIRST INSTANCE OF
MANILA, IPO LIMESTONE CO., INC., and ANTONIO VILLARAMA, respondents.

FACTS:

 Petitioner Machinery and Engineering Supplies filed a complaint for replevin for the
recovery of the machinery and equipment sold and delivered to Ipo Limestone Co. An
order was issued to seize and take immediate possession of the properties specified in
the order.

 Upon carrying out the court’s order, Roco, the company’s President, along with a crew
of technical men and labourers, proceeded to the factory. The manager of Ipo
Limestone Co. and Torres protested against the seizure of the properties on the
ground that they are not personal properties.

 However, since the sheriff contended that his duty is purely ministerial, they all went to
the factory and dismantled the equipment despite the fact that the equipment could not
be dismantled without causing damage or injuries to the wooden frames attached to
them.

 Consequently, they had to cut some of the supports of the equipment which rendered
its use impracticable.

ISSUE: Whether or not the machinery and equipment in question could be the subject
of replevin.

HELD: No. Replevin is applicable only to personal property.

The machinery and equipment in question appeared to be attached to the land,

particularly to the concrete foundation of said premises, in a fixed manner, in such a
way that the former could not be separated from the latter without breaking the
material or deterioration of the object.

Hence, in order to remove the said outfit, it became necessary not only to unbolt the
same, but also to cut some of its wooden supports. Moreover, said machinery and
equipment were intended by the owner of the tenement for an industry carried on said
immovable. For these reasons, they were already immovable pursuant to paragraphs
3 and 5 of Article 415 of the Civil Code.
11. G.R. No. 166102, August 05, 2015 MANILA ELECTRIC
COMPANY, Petitioner, v. THE CITY ASSESSOR AND CITY TREASURER OF
LUCENA CITY, Respondents.
FACTS:
 MERALCO is a private corporation authorized to operate as a public utility
engaged in electric distribution. MERALCO has been successively granted
franchises to operate in Lucena City beginning 1922 until the present time.
 In 1989, MERALCO received from the City Assessor of Lucena a copy of Tax
Declaration No. 019-6500 covering the electric facilities, classified as capital
investment, of the company: (a) transformer and electric post; (b) transmission
line;(c) insulator; and (d) electric meter. Under the Tax Declaration, these electric
facilities had a market value of P81,811,000 and an assessed value of
P65,448,800, and were subjected to real property tax as of 1985.
 MERALCO appealed the Tax Declaration before the Local Board of Assessment
Appeals (LBAA) of Lucena City. The LBAA, in affirming the exemption of Meralco,
cited a 1964 MERALCO case which found that the steel towers fell within the term
"poles" expressly exempted from taxes under the franchise of MERALCO. The
steel towers were personal properties under the provisions of the Civil Code and,
hence, not subject to real property tax. Thus, the LBAA found that MERALCO was
exempted from payment of real property tax on said substation facilities. The
LBAA also ruled that under its franchise, MERALCO was required to pay the City
Government of Lucena a tax equal to 5% of its gross earnings, in lieu of any and
all taxes.
 The City Assessor of Lucena filed an appeal with the Central Board of
Assessment Appeals (CBAA) which affirmed the assailed LBAA judgment (LBAA-
89-2). The City Assessor no longer appealed said CBAA Decision and it became
final and executory in 1991.
 Six years later, in 1997, MERALCO received a letter from the City Treasurer of
Lucena, which stated that the company was being assessed real property tax
delinquency on its machineries beginning 1990.
 MERALCO appealed Tax Declaration Nos. 019-6500 and 019-7394 before the
LBAA of Lucena City and posted a surety bond to guarantee payment of its real
property tax delinquency.
 The LBAA declared that Sections 234 and 534(f) of the Local Government Code
(LGC) repealed the provisions in the franchise of MERALCO and Presidential
Decree No. 551 pertaining to the exemption of MERALCO from payment of real
property tax on its poles, wires, insulators, transformers, and meters.
 The LBAA refused to apply as res judicata its earlier judgment in LBAA-89-2, as
affirmed by the CBAA, because it involved collection of taxes from 1985 to 1989,
while the present case concerned the collection of taxes from 1989 to 1997.
 The CBAA agreed with the LBAA that MERALCO could no longer claim
exemption from real property tax on its machineries with the enactment of
Republic Act No. 7160, otherwise known as the Local Government Code of 1991.
Yet, the CBAA modified the ruling of the LBAA by excluding from the real property
tax deficiency assessment the years 1990 to 1991.
 MERALCO sought recourse from the Court of Appeals (CA) by filing a Petition for
Review under Rule 43. The CA sustained the tax liability of MERALCO and held
that the withdrawal of its exemption did not violate the non-impairment clause of
the Constitution.
 Hence, MERALCO filed the present Petition for Review on Certiorari.
ISSUE:
RULING: The transformers, electric posts, transmission lines, insulators, and electric
meters of MERALCO are no longer exempted from real property tax and may qualify
as "machinery" subject to real property tax under the Local Government Code.
Nevertheless, the Court declares null and void the appraisal and assessment of said
properties of MERALCO by the City Assessor in 1997 for failure to comply with the
requirements of the Local Government Code and, thus, violating the right of
MERALCO to due process.
I. In real property tax assessments, payment under protest is a prerequisite
condition before an appeal may be entertained
Section 252 of the Local Government Code mandates that "no protest shall be
entertained unless the taxpayer first pays the tax." It is settled that the requirement of
"payment under protest" is a condition sine qua non before an appeal may be
entertained. Section 231 of the LGC also dictates that "appeal on assessments of real
property x x x shall, in no case, suspend the collection of the corresponding realty
taxes on the property involved as assessed by the provincial or city assessor, without
prejudice to subsequent adjustment depending upon the final outcome of the appeal."
Clearly, under the Local Government Code, even when the assessment of the real
property is appealed, the real property tax due on the basis thereof should be paid to
and/or collected by the local government unit concerned.
II. By posting a surety bond before filing its appeal of the assessment with the
LBAA, MERALCO substantially complied with the requirement of payment under
protest in Section 252, LGC.
MERALCO appealed Tax Declaration Nos. 019-6500 and 019-7394 with the LBAA, but
instead of paying the real property taxes and penalties due, it posted a surety bond in
the amount of PI 7,925,117.34 (equivalent to the value of the assessed taxes and
penalties). By posting the surety bond, MERALCO may be considered to have
substantially complied with Section 252 of the Local Government Code for the said
bond already guarantees the payment to the Office of the City Treasurer of Lucena of
the total amount of real property taxes and penalties due on Tax Declaration Nos. 019-
6500 and 019-7394.
This is not the first time that the Court allowed a surety bond as an alternative to cash
payment of the real property tax before protest/appeal as required by Section 252 of
the Local Government Code. In Camp John Hay Development Corporation vs. CBAA,
the Court applied the "payment under protest" requirement in Section 252 of the Local
Government Code and remanded the case to the LBAA for "further proceedings
subject to a full and up-to-date payment, either in cash or surety, of realty tax on the
subject properties."
III. Beginning January 1, 1992, MERALCO can no longer claim exemption from
real property tax of its transformers, electric posts, transmission lines,
insulators, and electric meters based on its franchise.
MERALCO relies heavily on the 1991 Decision of the CBAA which affirmed the
Decision of the LBAA in LBAA-89-2. Said decisions of the CBAA and the LBAA, in
turn, cited a 1964 MERALCO case. The said decisions recognizing the exemption from
real property tax of the transformers, electric posts, transmission lines, insulators, and
electric meters of MERALCO are no longer applicable because of subsequent
developments that changed the factual and legal milieu for MERALCO in the present
case.
In the 1964 MERALCO case, given the express exemption from taxes and
assessments of the "poles, wires, transformers, and insulators" of MERALCO under
Ordinance No. 44 (issued in 1903), the sole issue was whether or not the steel towers
of MERALCO qualified as "poles" which were exempted from real property tax.
Similarly, under the 20-year franchise granted in 1972 to MERALCO by the Municipal
Board of Lucena City through Resolution No. 2679, the transformers, electric posts,
transmission lines, insulators, and electric meters of MERALCO were expressly made
exempt from real property tax.
Just when the franchise of MERALCO in Lucena City was about to expire, the Local
Government Code took effect on January 1, 1992, Sections 193 and 234 of which
provide:
Section 193. Withdrawal of Tax Exemption Privileges. - Unless otherwise
provided in this Code, tax exemptions or incentives granted to, or presently
enjoyed by all persons, whether natural or juridical, including government-
owned or controlled corporations, except local water districts, cooperatives
duly registered under R.A. No. 6938, non-stock and nonprofit hospitals and
educational institutions, are hereby withdrawn upon the effectivity of this
Code.
Section 234. Exemptions from Real Property Tax. - The following are
exempted from payment of the real property tax:
xxx
Except as provided herein, any exemption from payment of real property tax
previously granted to, or presently enjoyed by, all persons, whether natural or
juridical, including all government-owned or controlled corporations are
hereby withdrawn upon the effectivity of this Code.
The Local Government Code, in addition, contains a general repealing clause under
Section 534(f) which states that "[a]ll general and special laws, acts, city charters,
decrees, executive orders, proclamations and administrative regulations, or part or
parts thereof which are inconsistent with any of the provisions of this Code are hereby
repealed or modified accordingly.
Taking into account the above-mentioned provisions, the evident intent of the Local
Government Code is to withdraw/repeal all exemptions from local taxes, unless
otherwise provided by the Code. The limited and restrictive nature of the tax exemption
privileges under the Local Government Code is consistent with the State policy to
ensure autonomy of local governments and the objective of the Local Government
Code to grant genuine and meaningful autonomy to enable local government units to
attain their fullest development as self-reliant communities and make them effective
partners in the attainment of national goals. The obvious intention of the law is to
broaden the tax base of local government units to assure them of substantial sources
of revenue.
IV. Real Property Tax exemption under the LGC
Section 234 of the Local Government Code
particularly identifies the exemptions from payment
of real property tax :
A. Ownership Exemptions. Exemptions from real
property taxes on the basis of ownership are real
properties owned by:
(i) the Republic,
(ii) a province,
(iii) a city,
(iv) a municipality,
(v) a barangay, and
(vi) registered cooperatives.
B. Character Exemptions. Exempted from real
property taxes on the basis of their character are:
(i) charitable institutions,
(ii) houses and temples of prayer like churches,
parsonages or convents appurtenant thereto,
mosques, and
(iii) nonprofit or religious cemeteries.
C. Usage exemptions. Exempted from real property
taxes on the basis of the actual, direct and exclusive
use to which they are devoted are:
 (i) all lands, buildings and improvements which are
actually directly and exclusively used for religious,
charitable or educational purposes;
(ii) all machineries and equipment actually, directly
and exclusively used by local water districts or by
government-owned or controlled corporations
engaged in the supply and distribution of water
and/or generation and transmission of electric
power; and
(iii) all machinery and equipment used for pollution
control and environmental protection.
V. Expressio unius est exclusio alterius
MERALCO, a private corporation engaged in electric distribution, and its transformers,
electric posts, transmission lines, insulators, and electric meters used commercially do
not qualify under any of the ownership, character, and usage exemptions enumerated
in Section 234 of the Local Government Code.
It is a basic precept of statutory construction that the express mention of one person,
thing, act, or consequence excludes all others as expressed in the familiar maxim
expressio unius est exclusio alterius. Not being among the recognized exemptions
from real property tax in Section 234 of the Local Government Code, then the
exemption of the transformers, electric posts, transmission lines, insulators, and
electric meters of MERALCO from real property tax granted under its franchise was
among the exemptions withdrawn upon the effectivity of the Local Government Code
on January 1, 1998.
VI. Tax exemptions must be clear and unequivocal
It is worthy to note that the subsequent franchises for operation granted to MERALCO,
i.e., under the Certificate of Franchise dated October 28, 1993 issued by the National
Electrification Commission and Republic Act No. 9209 enacted on June 9, 2003 by
Congress, are completely silent on the matter of exemption from real property tax of
MERALCO or any of its properties.
It is settled that tax exemptions must be clear and unequivocal. A taxpayer claiming a
tax exemption must point to a specific provision of law conferring on the taxpayer, in
clear and plain terms, exemption from a common burden. Any doubt whether a tax
exemption exists is resolved against the taxpayer. MERALCO has failed to present
herein any express grant of exemption from real property tax of its transformers,
electric posts, transmission lines, insulators, and electric meters that is valid and
binding even under the Local Government Code.
The transformers, electric posts, transmission lines, insulators, and electric meters of
MERALCO may qualify as "machinery" under the LGC subject to real property tax
Through the years, the relevant laws have consistently considered "machinery" as real
property subject to real property tax. It is the definition of "machinery" that has been
changing and expanding.
MERALCO is a public utility engaged in electric distribution, and its transformers,
electric posts, transmission lines, insulators, and electric meters constitute the physical
facilities through which MERALCO delivers electricity to its consumers. Each may be
considered as one or more of the following: a
"machine,""equipment,""contrivance,"[50] "instrument,""appliance," "apparatus," or
"installation."
VII. Machinery, to be deemed subject to real property tax, may or may not be
attached, permanently or temporarily to the real property
Under Section 199(0) of the Local Government Code, machinery, to be deemed real
property subject to real property tax, need no longer be annexed to the land or building
as these "may or may not be attached, permanently or temporarily to the real
property," and in fact, such machinery may even be "mobile."
The 1964 MERALCO case was decided when The Assessment Law was still in effect
and Section 3(f) of said law still required that the machinery be attached to the real
property.
VIII. Equipments which are of general purpose use are not considered as
machinery for purposes of imposing real property tax
The same provision though requires that to be machinery subject to real property tax,
the physical facilities for production, installations, and appurtenant service facilities,
those which are mobile, self-powered or self-propelled, or not permanently attached to
the real property (1) must be actually, directly, and exclusively used to meet the needs
of the particular industry, business, or activity; and (2) by their very nature and
purpose, are designed for, or necessary for manufacturing, mining, logging,
commercial, industrial, or agricultural purposes.
Thus, Article 290(o) of the Rules and Regulations Implementing the LGC recognizes
the following exemption:
“Machinery which are of general purpose use including but not limited to office
equipment, typewriters, telephone equipment, breakable or easily damaged containers
(glass or cartons), microcomputers, facsimile machines, telex machines, cash
dispensers, furnitures and fixtures, freezers, refrigerators, display cases or racks, fruit
juice or beverage automatic dispensing machines which are not directly and
exclusively used to meet the needs of a particular industry, business or activity shall
not be considered within the definition of machinery under this Rule.”
IX. What constitutes real property (LGC vs. Civil Code)
The conclusions of the Court in the 1964 MERALCO case do not hold true anymore
under the Local Government Code. The reference in said case to the Civil Code
definition of real property was only an alternative argument since the tax law at the
time does not provide for a definition of real property.
While the Local Government Code still does not provide for a specific definition of "real
property," Sections 199(0) and 232 of the LGC, respectively, gives an extensive
definition of what constitutes "machinery" and unequivocally subjects such machinery
to real property tax.
Article 415 (1) of the Civil Code declares as immovables or real properties "[l]and,
buildings, roads and constructions of all kinds adhered to the soil." The land, buildings,
and roads are immovables by nature "which cannot be moved from place to place,"
whereas the constructions adhered to the soil are immovables by incorporation "which
are essentially movables, but are attached to an immovable in such manner as to be
an integral part thereof." Article 415 (3) of the Civil Code, referring to "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," are likewise
immovables by incorporation. In contrast, the Local Government Code considers as
real property machinery which "may or may not be attached, permanently or
temporarily to the real property," and even those which are "mobile."
X. Civil Code provisions for machinery to be considered real property are not
applicable for purposes of assessing real property tax since the LGC has its
own definition of machinery
Article 415 (5) of the Civil Code considers as immovables or real properties
"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
Civil Code, however, does not define "machinery."
The properties under Article 415 (5) of the Civil Code are immovables by destination,
or "those which are essentially movables, but by the purpose for which they have been
placed in an immovable, partake of the nature of the latter because of the added utility
derived therefrom." These properties, including machinery, become immobilized if the
following requisites concur:
(a) they are placed in the tenement by the owner of such tenement;
(b) they are destined for use in the industry or work in the tenement; and
(c) they tend to directly meet the needs of said industry or works.
The first two requisites are not found anywhere in the Local Government Code.
MERALCO insists on harmonizing the provisions of the Civil Code and the Local
Government Code. The Court disagrees, however, for this would necessarily mean
imposing additional requirements for classifying machinery as real property for real
property tax purposes not provided for, or even in direct conflict with, the provisions of
the Local Government Code.
The Court has acknowledged that 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. (see Caltex (Philippines), Inc. vs. CBAA)
Therefore, for determining whether machinery is real property subject to real property
tax, the definition and requirements under the Local Government Code are controlling.
XI. General legislation must give way to special legislation on the same subject
As between the Civil Code, a general law governing property and property relations,
and the Local Government Code, a special law granting local government units the
power to impose real property tax, then the latter shall prevail.
It is a finely-imbedded principle in statutory construction that a special provision or law
prevails over a general one. Lex specialis derogant generali. General legislation must
give way to special legislation on the same subject, and generally be so interpreted as
to embrace only cases in which the special provisions are not applicable, that specific
statute prevails over a general statute and that where two statutes are of equal
theoretical application to a particular case, the one designed therefor specially should
prevail. (see Disomangcop v. The Secretary of the Department of Public Works and
Highways; Leveriza v. Intermediate Appellate Court)
A general law and a special law on the same subject are statutes in pari materia and
should, accordingly, be read together and harmonized, if possible, with a view to giving
effect to both. The rule is that where there are two acts, one of which is special and
particular and the other general which, if standing alone, would include the same
matter and thus conflict with the special act, the special law must prevail since it
evinces the legislative intent more clearly than that of a general statute and must not
be taken as intended to affect the more particular and specific provisions of the earlier
act, unless it is absolutely necessary so to construe it in order to give its words any
meaning at all. (see Vinzons-Chato v. Fortune Tobacco Corporation)
The circumstance that the special law is passed before or after the general act does
not change the principle. Where the special law is later, it will be regarded as an
exception to, or a qualification of, the prior general act; and where the general act is
later, the special statute will be construed as remaining an exception to its terms,
unless repealed expressly or by necessary implication. (see Vinzons-Chato v. Fortune
Tobacco Corporation)
XII. Appraisal and Assessment of Machinery under the Local Government Code
The Local Government Code defines appraisal and assessment:
(i) "Appraisal" is the act or process of determining the value of property as of
a specific date for a specific purpose.
(ii) "Assessment" is the act or process of determining the value of a property,
or proportion thereof subject to tax, including the discovery, listing,
classification, and appraisal of the properties.
When it comes to machinery, its appraisal and assessment are particularly governed
by Sections 224 and 225 of the Local Government Code, which read:
Section 224. Appraisal and Assessment of Machinery. -
(a) The fair market value of a brand-new machinery shall be the acquisition
cost. In all other cases, the fair market value shall be determined by dividing
the remaining economic life of the machinery by its estimated economic life
and multiplied by the replacement or reproduction cost.
(b) If the machinery is imported, the acquisition cost includes freight,
insurance, bank and other charges, brokerage, arrastre and handling, duties
and taxes, plus cost of inland transportation, handling, and installation
charges at the present site. The cost in foreign currency of imported
machinery shall be converted to peso cost on the basis of foreign currency
exchange rates as fixed by the Central Bank.
Section 225. Depreciation Allowance for Machinery. - For purposes of
assessment, a depreciation allowance shall be made for machinery at a rate
not exceeding five percent (5%) of its original cost or its replacement or
reproduction cost, as the case may be, for each year of use: Provided,
however, That the remaining value for all kinds of machinery shall be fixed at
 not less than twenty percent (20%) of such original, replacement, or
reproduction cost for so long as the machinery is useful and in operation.
It is apparent from these two provisions that every machinery must be individually
appraised and assessed depending on its acquisition cost, remaining economic life,
estimated economic life, replacement or reproduction cost, and depreciation.
Article 304 of the Rules and Regulations Implementing the Local Government Code of
1991 expressly authorizes the local assessor or his deputy to receive evidence for the
proper appraisal and assessment of the real property:
Article 304. Authority of Local Assessors to Take Evidence. - For the purpose of
obtaining information on which to base the market value of any real property, the
assessor of the province, city, or municipality or his deputy may summon the owners of
the properties to be affected or persons having legal interest therein and witnesses,
administer oaths, and take deposition concerning the property, its ownership, amount,
nature, and value.
XII. Notice of assessment of real property tax
The Local Government Code further mandates that the taxpayer be given a notice of
the assessment of real property in the following manner:
Section 223. Notification of New or Revised Assessment. - When real
property is assessed for the first time or when an existing assessment is
increased or decreased, the provincial, city or municipal assessor shall within
thirty (30) days give written notice of such new or revised assessment to the
person in whose name the property is declared. The notice may be delivered
personally or by registered mail or through the assistance of the punong
barangay to the last known address of the person to served.
A notice of assessment, which stands as the first instance the taxpayer is officially
made aware of the pending tax liability, should be sufficiently informative to apprise the
taxpayer the legal basis of the tax.
In Manila Electric Company v. Barlis, the Court described the contents of a valid notice
of assessment of real property and differentiated the same from a notice of collection:
“A notice of assessment as provided for in the [Real Property Tax Code] should
effectively inform the taxpayer of the value of a specific property, or proportion thereof
subject to tax, including the discovery, listing, classification, and appraisal of
properties.” Although the ruling quoted was rendered under the Real Property Tax
Code, the requirement of a notice of assessment has not changed under the Local
Government Code.
The appraisal and assessment of the transformers, electric posts, transmission lines,
insulators, and electric meters of MERALCO as machinery were not in accordance
with the Local Government Code and in violation of the right to due process of
MERALCO and, therefore, null and void.
A perusal of the documents received by MERALCO reveals that none of them
constitutes a valid notice of assessment of the transformers, electric posts,
transmission lines, insulators, and electric meters of MERALCO.
The letter dated October 16, 1997 of the City Treasurer of Lucena (which interestingly
precedes the purported Notice of Assessment dated October 20, 1997 of the City
Assessor of Lucena) is a Notice of Collection, ending with the request for MERALCO
to settle the payable amount soon in order to avoid accumulation of penalties. It only
presented in table form the tax declarations covering the machinery, assessed values
in the tax declarations in lump sums for all the machinery, the periods covered, and the
taxes and penalties due again in lump sums for all the machinery.
The Notice of Assessment dated October 20, 1997 issued by the City Assessor gave a
summary of the new/revised assessment of the "machinery" located in "Quezon
Avenue Ext., Brgy. Gulang-Gulang, Lucena City," covered by Tax Declaration No. 019-
7394, with total market value of P98,173,200.00 and total assessed value of
P78,538,560.00. The Property Record Form basically contained the same information.
Without specific description or identification of the machinery covered by said tax
declaration, said Notice of Assessment and Property Record Form give the false
impression that there is only one piece of machinery covered.
The Court cannot help but attribute the lack of a valid notice of assessment to the
apparent lack of a valid appraisal and assessment conducted by the City Assessor of
Lucena in the first place. It appears that the City Assessor of Lucena simply lumped
together all the transformers, electric posts, transmission lines, insulators, and electric
meters of MERALCO located in Lucena City under Tax Declaration Nos. 019-6500 and
019-7394, contrary to the specificity demanded under Sections 224 and 225 of the
Local Government Code for appraisal and assessment of machinery. The City
Assessor and the City Treasurer of Lucena did not even provide the most basic
information such as the number of transformers, electric posts, insulators, and electric
meters or the length of the transmission lines appraised and assessed under Tax
Declaration Nos. 019-6500 and 019-7394. There is utter lack of factual basis for the
assessment of the transformers, electric posts, transmission lines, insulators, and
electric meters of MERALCO.
XII. Provincial, city or municipal assessor shall declare the real property if the
owner refuses or fails to make such declaration
The Court of Appeals laid the blame on MERALCO for the lack of information because
MERALCO failed to file a sworn declaration of said properties as required by Section
202 of the Local Government Code. As MERALCO explained, it cannot be expected to
file such a declaration when all the while it believed that said properties were personal
or movable properties not subject to real property tax.
More importantly, Section 204 of the Local Government Code exactly covers such a
situation, thus:
Section 204. Declaration of Real Property by the Assessor. -When any
person, natural or juridical, by whom real property is required to be declared
under Section 202 hereof, refuses or fails for any reason to make such
declaration within the time prescribed, the provincial, city or municipal
assessor shall himself declare the property in the name of the defaulting
owner, if known, or against an unknown owner, as the case may be, and shall
 assess the property for taxation in accordance with the provision of this Title.
No oath shall be required of a declaration thus made by the provincial, city or
municipal assessor.

Note that the only difference between the declarations of property made by the
taxpayer, on one hand, and the provincial/city/municipal assessor, on the other, is that
the former must be made under oath. After making the declaration of the property
himself for the owner, the provincial/city/municipal assessor is still required to assess
the property for taxation in accordance with the provisions of the Local Government
Code.

Taxpayer's right to due process is violated when arbitrary or oppressive methods are
used in assessing and collecting taxes

It is true that tax assessments by tax examiners are presumed correct and made in
good faith, with the taxpayer having the burden of proving otherwise. In this case,
MERALCO was able to overcome the presumption because it has clearly shown that
the assessment of its properties by the City Assessor was baselessly and arbitrarily
done, without regard for the requirements of the Local Government Code.

The exercise of the power of taxation constitutes a deprivation of property under the
due process clause, and the taxpayer's right to due process is violated when arbitrary
or oppressive methods are used in assessing and collecting taxes.
The appraisal and assessment of the transformers, electric posts, transmission lines,
insulators, and electric meters of MERALCO under Tax Declaration Nos. 019-6500
and 019-7394, not being in compliance with the Local Government Code, are attempts
at deprivation of property without due process of law and, therefore, null and void.
 12. G.R. No. 180110 CAPITOL WIRELESS, INC., Petitioner,
vs. THE PROVINCIAL TREASURER OF BATANGAS, THE PROVINCIAL
ASSESSOR OF BATANGAS, THE MUNICIPAL TREASURER AND ASSESSOR OF
NASUGBU, BATANGAS, Respondents.
FACTS:
 Capitol Wireless Inc. (Capwire) is a Philippine corporation in the business of providing
international telecommunications services. As such provider, Capwire has signed
agreements with other local and foreign telecommunications companies covering an
international network of submarine cable systems. The agreements provide for co-
ownership and other rights among the parties over the network.
 Capwire claims that as co-owner, it does not own any particular physical part of the
cable system but, consistent with its financial contributions, it owns the right to use a
certain capacity of the said system.This property right is reported in its financial books
as "Indefeasible Rights in Cable Systems."
 However, for loan restructuring purposes, Capwire claims that it was required to
register the value of its right. Capwire submitted a Sworn Statement of True Value of
Real Properties at the Provincial Treasurer's Office, Batangas City, Batangas
Province, for the Wet Segment of the of the Asia Pacific Cable Network (APCN)
System (which connects Australia, Thailand, Malaysia, Singapore, Hong Kong,
Taiwan, Korea, Japan, Indonesia and the Philippines).
 As a result, the Provincial Assessor of Batangas issued Assessments of Real Property
(ARP) against Capwire upon determining that the submarine cable systems described
in Capwire's Sworn Statement of True Value of Real Properties are taxable real
property. Capwire contested the assessment for the reason that the cable system lies
outside of Philippine territory, i.e., on international waters.
 Capwire received a Warrant of Levy and a Notice of Auction Sale from the Provincial
Assessor, which caused Capwireto file a Petition for Prohibition in the RTC.
 The RTC issued an Order dismissing the petition for failure of Capwire to follow the
requisite of payment under protest as well as failure to appeal to the Local Board of
Assessment Appeals (LBAA), as provided for in Sections 206 and 226 of Republic Act
No. 7160, or the Local Government Code (LGC).
 The Court of Appeals affirmed the order of the trial court. Hence, the instant petition for
review of Capwire.
 Capwire asserts that recourse to the Local Board of Assessment Appeals, or payment
of the tax under protest, is inapplicable to the case at bar since there is no question of
fact involved, or that the question involved is not the reasonableness of the amount
assessed but, rather, only a pure question of law since the issue is whether its
submarine cable system, which it claims lies in international waters, is taxable.
 The issues for resolution are: (1) Is the case cognizable by the administrative agencies
and covered by the requirements in Sections 226 and 229 of the Local Government
Code? (2) May submarine communications cables be classified as taxable real
property by the local governments?
ISSUE: Whether or not the submarines or undersea communication cables are
considered machineries subject to real property tax
 
RULING: YES. The Court ruled that submarine or undersea communications cables
are akin to electric transmission lines which this Court has recently declared in Manila
Electric Company v. City Assessor and City Treasurer of Lucena City,as "no longer
exempted from real property tax" and may qualify as "machinery" subject to real
property tax under the Local Government Code.
To the extent that the equipment's location is determinable to be within the taxing
authority's jurisdiction, the Court sees no reason to distinguish between submarine
cables used for communications and aerial or underground wires or lines used for
electric transmission, so that both pieces of property do not merit a different treatment
in the aspect of real property taxation.
Both electric lines and communications cables, in the strictest sense, are not directly
adhered to the soil but pass through posts, relays or landing stations, but both may be
classified under the term "machinery" as real property under Article 415(5) of the Civil
Code for the simple reason that such pieces of equipment serve the owner's business
or tend to meet the needs of his industry or works that are on real estate.
Even objects in or on a body of water may be classified as such, as "waters" is
classified as an immovable under Article 415(8) of the Code. A classic example is a
boathouse which, by its nature, is a vessel and, therefore, a personal property but, if it
is tied to the shore and used as a residence, and since it floats on waters which is
immovable, is considered real property. Besides, the Court has already held that "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.
ADDITIONAL POINTS TO KNOW:
 Portion of submarine cable located in the Philippine waters is subject to the
taxing authority of the LGU

It is not in dispute that the submarine cable system's Landing Station in Nasugbu,
Batangas is owned by PLDT and not by Capwire. Obviously, Capwire is not liable for
the real property tax on this Landing Station. Nonetheless, Capwire admits that it co-
owns the submarine cable system that is subject of the tax assessed and being
collected by public respondents. As the Court takes judicial notice that Nasugbu is a
coastal town and the surrounding sea falls within what the United Nations Convention
on the Law of the Sea (UNCLOS) would define as the country's territorial sea (to the
extent of 12 nautical miles outward from the nearest baseline, under Part II, Sections 1
and 2) over which the country has sovereignty, including the seabed and subsoil, it
follows that indeed a portion of the submarine cable system lies within Philippine
territory and thus falls within the jurisdiction of the said local taxing authorities. It easily
belies Capwire's contention that the cable system is entirely in international waters.
 And even if such portion does not lie in the 12-nautical-mile vicinity of the territorial sea
but further inward, in Prof. Magallona v. Hon. Ermita,  this Court held that "whether
referred to as Philippine 'internal waters' under Article I of the Constitution or as
'archipelagic waters' under UNCLOS Part III, Article 49(1, 2, 4), the Philippines
exercises sovereignty over the body of water lying landward of (its) baselines,
including the air space over it and the submarine areas underneath." Further, under
Part VI, Article 79 of the UNCLOS, the Philippines clearly has jurisdiction with respect
to cables laid in its territory that are utilized in support of other installations and
structures under its jurisdiction.
As far as local government units (LGU) are concerned, the areas described above are
to be considered subsumed under the term "municipal waters" which, under the
Local Government Code, includes "not only streams, lakes, and tidal waters within the
municipality, not being the subject of private ownership and not comprised within the
national parks, public forest, timber lands, forest reserves or fishery reserves, but also
marine waters included between two lines drawn perpendicularly to the general
coastline from points where the boundary lines of the municipality or city touch the sea
at low tide and a third line parallel with the general coastline and fifteen (15) kilometers
from it." Although the term "municipal waters" appears in the LGC in the context of the
grant of quarrying and fisheries privileges for a fee by local governments, its inclusion
in the LGC's Book II which covers local taxation means that it may also apply as guide
in determining the territorial extent of the local authorities' power to levy real property
taxation.
Thus, the jurisdiction or authority over such part of the subject submarine cable system
lying within Philippine jurisdiction includes the authority to tax the same, for taxation is
one of the three basic and necessary attributes of sovereignty, and such authority has
been delegated by the national legislature to the local governments with respect to real
property taxation.
that are part of its franchise, or directly meet the needs of its business, such had been
expressly withdrawn by the Local Government Code, which took effect on January 1,
1992, Sections 193 and 234 of which provide:
Section 193. Withdrawal of Tax Exemption Privileges. - Unless otherwise
provided in this Code, tax exemptions or incentives granted to, or presently
enjoyed by all persons, whether natural or juridical, including government-
owned or controlled corporations, except local water districts, cooperatives
duly registered under R.A. No. 6938, nonstock and nonprofit hospitals and
educational institutions, are hereby withdrawn upon the effectivity of this
Code.
x x x
Section 234. Exemptions from Real Property Tax. - The following arc
exempted from payment of the real property tax: xxx
Except as provided herein, any exemption from payment of real property tax
previously granted to, or presently enjoyed by, all persons, whether natural or
juridical, including all government-owned or controlled corporations arc
hereby withdrawn upon the effectivity of this Code.
Such express withdrawal had been previously held effective upon exemptions
bestowed by legislative franchises granted prior to the effectivity of the Local
Government Code. Capwire fails to allege or provide any other privilege or exemption
that were granted to it by the legislature after the enactment of the Local Government
Code. Therefore, the presumption stays that it enjoys no such privilege or
exemption. Tax exemptions are strictly construed against the taxpayer because taxes
are considered the lifeblood of the nation.

 Burden of proving exemption from local taxation is upon the person whom the
subject real property is declared

 A way for Capwire to claim that its cable system is not covered by such authority is by
showing a domestic enactment or even contract, or an international agreement or treaty
exempting the same from real property taxation. It failed to do so, however, despite the
fact that the burden of proving exemption from local taxation is upon whom the subject
real property is declared.

Under the Local Government Code, every person by or for whom real property is
declared, who shall claim tax exemption for such property from real property taxation
"shall file with the provincial, city or municipal assessor within thirty (30) days from the
date of the declaration of real property sufficient documentary evidence in support of
such claim." Capwire omitted to do so.

 Capwire's real property tax exemption under its legislative franchise has been
withdrawn (repealed) under the LGC


Even under Capwire's legislative franchise, RA 4387, which amended RA 2037, where
it may be derived that there was a grant of real property tax exemption for properties