Law on Property

Prelim 15%; Midterms 15%; Finals 30%; Class standing 40%

Textbook: not required. Can be paras. Supplement: jurado, tolentino, dean pineda
Read up to movable properties including up to case of ignacio vs director of lands (11 cases)
Prepare for short exam

As to nature of ownership:
(a) res nullius (belonging to no one)
(b) res communes (belonging to everyone)
(c) res alicujus (belonging to someone)

Cadaver / Corpse - not property. But can be donated, but they can never be part of commercial transaction.
Blood - not property if in the body. Property if already extracted/separated from body because it can exist on
its own.

Real estate mortgage: non-movable property

Chattel mortgage: for movable property

Republic Act No. 386 / June 18, 1949

The Civil Code of the Philippines

AN ACT TO ORDAIN AND INSTITUTE THE CIVIL CODE OF THE PHILIPPINES BOOK II
PROPERTY, OWNERSHIP, AND ITS MODIFICATIONS
Title I. - CLASSIFICATION OF PROPERTY
PRELIMINARY PROVISIONS

Art. 414. All things which are or may be the object of appropriation are considered either:
(1) Immovable or real property; or
(2) Movable or personal property. (333)

CHAPTER 1
IMMOVABLE PROPERTY

Art. 415. The following are immovable property:

(1) Land, buildings, roads and constructions of all kinds adhered to the soil;
(2) Trees, plants, and growing fruits, while they are attached to the land or form an integral part of an immovable;
(3) Everything attached to an immovable in a fixed manner, in such a way that it cannot be separated therefrom without breaking
the material or deterioration of the object;
(4) Statues, reliefs, paintings or other objects for use or ornamentation, placed in buildings or on lands by the owner of the
immovable in such a manner that it reveals the intention to attach them permanently to the tenements;
(5) Machinery, receptacles, instruments or implements intended by the owner of the tenement for an industry or works which may
be carried on in a building or on a piece of land, and which tend directly to meet the needs of the said industry or works;
(6) Animal houses, pigeon-houses, beehives, fish ponds or breeding places of similar nature, in case their owner has placed them or
preserves them with the intention to have them permanently attached to the land, and forming a permanent part of it; the animals
in these places are included;
(7) Fertilizer actually used on a piece of land;
(8) Mines, quarries, and slag dumps, while the matter thereof forms part of the bed, and waters either running or stagnant;
(9) Docks and structures which, though floating, are intended by their nature and object to remain at a fixed place on a river, lake,
or coast;
(10) Contracts for public works, and servitudes and other real rights over immovable property. (334a)

Case Digest:

1. PRUDENTIAL BANK V. PANIS 153

SCRA 390
Facts:
Spouses Magcale secured a loan from Prudential Bank. As security, respondent’s spouses executed
a real estate mortgage, their residential building as security. Since the respondents was not able to
fulfil their obligation, the security was extrajudiciaily foreclosed and was eventually sold in a public
auction. Hence this case, to assail the validity of the mortgage and to recover the foreclosed land.

Issue:
Whether or not a real estate mortgage can be instituted on the building of a land belonging to another

Held:
While it is true that a mortgage of land necessarily includes in the absence of stipulation of the
improvements thereon, buildings, still a building in itself may be mortgaged by itself apart from the
land on which it is built. Such a mortgage would still be considered as a REM for the building would
still be considered as immovable property even if dealt with separately and apart from the land. The
original mortgage on the building and right to occupancy of the land was executed before the
issuance of the sales patent and before the government was divested of title to the land.
Under the foregoing, it is evident that the mortgage executed by private respondent on his
own building was a valid mortgage.

2. LEUNG YEE V. F.L STRONG

MACHINERY CO. AND WILLIAMSON 37
SCRA 644
Leung Yee v Strong Machinery Company, GR No. L-11658, Feb. 15, 1918
37 Phil. 644 – Civil Law – Law on Property – Multiple Sale to Different Vendees – Real vs Personal
Property
FACTS:
In 1913, Compania Agricola Filipina (CAF) was indebted to two personalities: Leung Yee and Frank L.
Strong Machinery Co. CAF purchased some rice cleaning machines from Strong Machinery. CAF
installed the machines in a building. As security for the purchase price, CAF executed a chattel
mortgage on the rice cleaning machines including the building where the machines were installed.
CAF failed to pay Strong Machinery, hence the latter foreclosed the mortgage – the same was
registered in the chattel mortgage registry.

CAF also sold the land (where the building was standing) to Strong Machinery. Strong Machinery took
possession of the building and the land. On the other hand, Yee, another creditor of CAF who
engaged in the construction of the building, being the highest bidder in an auction conducted by the
sheriff, purchased the same building where the machines were installed. Apparently CAF also
executed a chattel mortgage in favor Yee. Yee registered the sale in the registry of land. Yee was
however aware that prior to his buying, the property has been sold in favor of Strong Machinery –
evidence is the chattel mortgage already registered by Strong Machinery (constructive notice).

ISSUE: Who is the owner of the building?

HELD: The SC ruled that Strong Machinery has a better right to the contested property. Yee cannot
be regarded as a buyer in good faith as he was already aware of the fact that there was a prior sale of
the same property to Strong Machinery. The SC also noted that the Chattel Mortgage Law expressly
contemplates provisions for chattel mortgages which only deal with personal properties. The fact that
the parties dealt the building as if it’s a personal property does not change the nature of the thing. It is
still a real property. Its inscription in the Chattel Mortgage registry does not modify its inscription the
registry of real property.

FACTS
The Compania Agricola Filipina (CAF) purchased from Strong Machinery Co. rice–cleaning machines
which CAF installed in one of its buildings. As security for the purchase price, CAF executed a chattel
mortgage on the machines and the building on which they had been installed.

When CEF failed to pay, the registered mortgage was foreclosed and Strong Machinery Co.
purchased the building. This sale was annotated in the Chattel Mortgage Registry. Later, Strong
Machinery Co. also purchased from Agricola the lot on which the building was constructed. The sale
wasn't registered in the Registry of Property BUT Strong Machinery Co. took possession of the
building and the lot. However, the same building had been previously purchased by Leung Yee, a
creditor of Agricola, at a sheriff's sale despite his knowledge of the prior sale in favor of Strong
Machinery Co.. The sale to Leung Yee was registered in the Registry of Property.

ISSUES
1. Was the property's nature changed by its registration in the Chattel Mortgage Registry?
2. Who has a better right to the property?
HELD
1. Where the interest conveyed is of the nature of real property, the placing of the document on record
in the Chattel Mortgage Registry is a futile act.

Chattel Mortgage refers to the mortgage of Personal Property executed in the manner and form
prescribed in the statute.
Since the building is REAL PROPERTY, its sale as annotated in the Chattel Mortgage Registry
cannot be given the legal effect of registration in the Registry of Real Property. The mere fact that the
parties decided to deal with the building as personal property does not change its character as real
property.
Neither the original registry in the chattel mortgage registry, nor the annotation in said registry of the
sale of the mortgaged property had any effect on the building.
Art. 1473 of the New Civil Code provides the following rules on determining ownership of property
which has been sold to different vendees:

If Personal Property – grant ownership to person who 1st possessed it in good faith
If Real Property – grant ownership to person who 1st recorded it in the Registry

If no entry – grant to person who 1st possessed in good faith

If no proof of possession – grant to person who presents oldest title

Since Leung Yee purchased the property despite knowledge of the previous purchase of the same by
Strong Machinery Co., it follows that Leung Yee 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. 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.”

Good Faith, or the want of it, is a “state or condition of mind which can only be judged of by actual or
fancied tokens or signs.” (Wilder vs. Gilman, 55Vt., 504, 505; Cf. Cardenas Lumber Co. vs. Shadel,
52 La. Ann., 2094-2098; Pinkerton Bros. Co. vs. Bromley, 119Mich., 8, 10, 17.)

Honesty Of Intention is the honest lawful intent constituting good faith. It implies a freedom from
knowledge and circumstances which ought to put a person on inquiry.

As such, proof of such knowledge overcomes the presumption of good faith.

Following the rule on possessory rights provided in Art. 1473, Strong Machinery Co. has a better right
to the property since it first purchased the same ahead of Leung Yee, the latter not being a purchaser
in good faith.
 3. JULIAN YAP vs SANTIAGO TANADA;
and GOULDS PUMPS INTERNATIONAL,
INC.
PROMULGATED: July 18, 1988
PONENTE: J. NARVASA

FACTS:
This is a petition for certiorari to review the orders of CFI Cebu City.

Doctrine: Article 415, par. 3 of the Civil Code considers and immovable property as “everything attached to
an immovable in a fixed manner, in such a way that it cannot be separated therefrom without breaking the
material or deteriorating the object.” The pump does not fit this description. It could be, and was, in fact,
separated from Yap’s premises without being broken of suffering deterioration. Obviously, the separation or
removal of the pump involved nothing more complicated that the loosening of bolts or dismantling of other
fasteners.

The case began in the City Court of Cebu with the filing of Goulds Pumps International (Phil), Inc. of 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. The Court rendered judgment in favor of herein
respondent after they presented evidence ex-parte due to failure of petitioner Yap to appear before the Court.
Petitioner then appealed to the CFI, particularly to the sala of Judge Tanada. For again failure to appear for
pre-trial, Yap was declared in default. He filed for a motion for reconsideration which was denied by Judge
Tanada.

On October 15, 1969, Tanada granted Gould’s Motion for Issuance of Writ of Execution. Yap forthwith filed
an Urgent Motion for Reconsideration of the said Order. In the meantime, the Sheriff levied on the water
pump in question and by notice scheduled the execution sale thereof. But in view of the pendency of Yap’s
motion, suspension of sale was directed by Judge Tanada. It appears, however, that this was not made
known to the Sheriff who continued with the auction sale and sold the property to the highest bidder, Goulds.
Because of such, petitioner filed a Motion to Set Aside Execution Sale and to Quash Alias Writ of Execution.
One of his arguments was that the sale was made without the notice required by Sec. 18, Rule 29 of the New
Rules of Court, “i.e. notice by publication in case of execution of sale of real property, the pump and its
accessories being immovable because attached to the ground with the character of permanency.” Such
motion was denied by the CFI.

ISSUE: Whether or not the pump and its accessories are immovable property

HELD:
No. The water pump and its accessories are NOT immovable properties. The argument of Yap that the water
pump had become immovable property by its being installed in his residence is untenable. Article 415, par. 3
of the Civil Code considers and immovable property as “everything attached to an immovable in a fixed
manner, in such a way that it cannot be separated therefrom without breaking the material or deteriorating the
object.” The pump does not fit this description. It could be, and was, in fact, separated from Yap’s premises
without being broken of suffering deterioration. Obviously, the separation or removal of the pump involved
nothing more complicated that the loosening of bolts or dismantling of other fasteners.

4. NAVARRO V. PINEDA
9 SCRA 631

FACTS:
Pineda and his mother executed real estate and chattel mortgages in favor of Navarro, to secure a loan they
got from the latter. The REM covered a parcel of land owned by the mother while the chattel mortgage
covered a residential house. Due to the failure to pay the loan, they asked for extensions to pay for
the loan. On the second extension, Pineda executed a PROMISE wherein in case of default in payment, he
wouldn’t ask for any additional extension and there would be no need for any formal demand. In spite of this,
they still failed to pay. Navarro then filed for the foreclosure of the mortgages. The court decided in his favor.

ISSUE:
W/N the deed of real estate mortgage and chattel mortgage appended to the complaint is valid
notwithstanding the fact that the house was made subject of chattel mortgage for the reason that it is erected
on a land that belongs to a third person.

HELD:
Where a house stands on a rented land belonging to another person, it may be the subject matter of a
chattel mortgage as personal property if so stipulated in the document of mortgage, and in an action by the
mortgagee for the foreclosure, the validity of the chattel mortgage cannot be assailed by one of the parties to
the contract of mortgage.
Furthermore, although in some instances, a house of mixed materials has been considered as a chattel
between the parties and that the validity of the contract between them, has been recognized, it has
been a constant criterion that with respect to third persons, who are not parties to the contract, and
specially in execution proceedings, the house is considered as immovable property.

5. LUNA V. ENCARNACION
FACTS:
A chattel mortgage was executed by petitioner Jose Luna covering his house with mixed materials to
respondent Trinidad Reyes to secure payment for a promissory note. Luna failed to pay the promissory note
and as such, Trinidad requested the sheriff to sell the property through an extrajudicial foreclosure to satisfy
the obligation. Luna contends that the foreclosure isinvalid because the property is under chattel mortgage
and as such, it is not covered by RA3135 that only speaks of real estate mortgage.
ISSUE: WON the mortgaged property can be covered by chattel mortgage even
though it is a real property.

HELD:Even though the property is a real property, it may be covered by a chattel

mortgage for as long as it was agreed upon by the parties. Hence, the foreclosure is
invalid because it is only applicable for real properties. The Remedy of the respondent
is to file an action for recovery of possession and not a writ of possession.

6. BOARD OF ASSESSMENT APPEALS

V. MANILA ELECTRIC COMPANY
19. MERALCO V. CBAA
L-47943
May 31, 1982

FACTS:
In 1969, a realty tax was imposed on two oil storage tanks installed by Manila Electric Company
(Meralco) on a lot in San Pascual, Batangas which it leased in 1968 from Caltex (Phil.), Inc. With a total
capacity of 566,000 barrels, the tanks are used for storing fuel oil for Meralco's power plants.
According to Meralco, the storage tanks are not attached to its foundation. It is not anchored or
welded to the concrete circular wall; its bottom plate is not attached to any part of the foundation by bolts,
screws or similar devices. In fact, each empty tank can be floated by flooding its location with water 4ft deep.

On the other hand, according to the Central Board of Assessment Appeals, while the tanks rest or sit
on their foundation, the foundation itself and the walls, dikes and steps, which are integral parts of the tanks,
are affixed to the land while the pipelines are attached to the tanks.
In 1970, the municipal treasurer of Bauan, Batangas required Meralco to pay realty taxes on the two
tanks based on an assessment made by the provincial assessor, amounting to P431,703.96 from 1970 to
1974.
The Central Board of Assessment Appeals ruled that the tanks together with the foundation, walls,
dikes, steps, pipelines and other appurtenances constitute taxable improvements. Meralco filed a motion for
reconsideration, which the Board denied. So, Meralco filed a special civil action of certiorari to annul the
Board's decision, contending that its storage tanks are not taxable real property since: a) the tanks are not
attached to the land; b) these were placed on leased land, not on the land owned by Meralco; c) these tanks
do not fall under the kinds of real property in Art. 415 of the Civil Code, so they cannot be categorized as
realty by nature, by incorporation, by destination nor by analogy.
ISSUE:
Whether or not the storage tanks of Meralco are real properties, thus taxable.

HELD:
YES. Sec. 2 of the Assessment Law provides that the realty tax is due "on real property, including land,
buildings, machinery, and other improvements" not exempted in Sec. 3.
Sec. 28 of Real Property Tax Code similarly provides that real property tax “shall be levied, assessed
and collected in all provinces, cities and municipalities an annual ad valorem tax on real property, such as
land, buildings, machinery and other improvements affixed or attached to real property not hereinafter
specifically exempted.”
And, the Real Property Tax Code defines “improvements” as “a valuable addition made to property or
an amelioration in its condition, amounting to more than mere repairs or replacement of waste, costing labor
or capital and intended to enhance its value, beauty or utility or to adapt it for new or further purposes.”
From the aforesaid provisions of law, the Court ruled that although the two storage tanks were not
embedded in the land, they may, nevertheless, be considered as improvements on the land, enhancing its
utility and rendering it useful to the oil industry. The two tanks had been installed with permanence as
receptacles for oil needed by Meralco for its operations. The tanks are considered as real properties, thus
they are subject to realty taxes.
This case is different from Board of Assessment Appeals vs. Manila Electric Company, where
Meralco's steel towers were not subject to realty tax, since its steel towers were regarded as poles and under
its franchise, Meralco's poles are exempt from taxation. Also, the steel towers were not attached to any land
or building, but rather they were removable.

Therefore, the Court dismissed Meralco’s petition.

7. Davao Sawmill v. Castillo

DAVAO SAW MILL vs. APRONIANO G. CASTILLO and DAVAO LIGHT & POWER CO., INC. G.R. No.
L-40411 August 7, 1935

Facts:
Davao Saw Mill Co., Inc., is the holder of a lumber concession from the Government of the Philippine Islands.
However, the land upon which the business was conducted belonged to another person. On the land the
sawmill company erected a building which housed the machinery used by it. Some of the implements thus
used were clearly personal property, the conflict concerning machines which were placed and mounted on
foundations of cement. In the contract of lease between the sawmill company and the owner of the land there
appeared the following provision: That on the expiration of the period agreed upon, all the improvements and
buildings introduced and erected by the party of the second part shall pass to the exclusive ownership of the
lessor without any obligation on its part to pay any amount for said improvements and buildings; which do not
include the machineries and accessories in the improvements.

In another action wherein the Davao Light & Power Co., Inc., was the plaintiff and the Davao, Saw, Mill Co.,
Inc., was the defendant, a judgment was rendered in favor of the plaintiff in that action against the defendant;
a writ of execution issued thereon, and the properties now in question were levied upon as personalty by the
sheriff. No third party claim was filed for such properties at the time of the sales thereof as is borne out by the
record made by the plaintiff herein

It must be noted also that on number of occasion, Davao Sawmill treated the machinery as personal property
by executing chattel mortgages in favor of third persons. One of such is the appellee by assignment from the
original mortgages.

The lower court rendered decision in favor of the defendants herein. Hence, this instant appeal.

Issue:
whether or not the machineries and equipments were personal in nature.

Ruling/ Rationale:
Yes. The Supreme Court affirmed the decision of the lower court.

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.
 8. Pastor Ago v CA 6 SCRA 530
FACTS :
Ago bought sawmill machineries and equipments 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. 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. (Sawmill machineries and equipment are real properties in accordance with
Art. 415 (5)

By reason of installment in a building, the said sawmill machineries and equipments became real estate
properties in accordance with the provision of Art. 415(5) of the Civil Code. It is interpreted similarly to the
case of Berkenkotter vs. Cu Unjieng e Hijos, where the Court held that the installation of the machinery and
equipment in the central of the Mabalacat Sugar Company for use in connection with the industry carried by
that company, converted the said machinery and equipment into real estate by reason of their purpose. In the
present case, the installation of the sawmill machineries in the building of the Golden Pacific
Sawmill, Inc., for use in the sawing of logs carried on in said building, the same became a necessary and
permanent part of the building or real estate on which the same was constructed, converting the said
machineries and equipments into real estate within the meaning of Article 415(5) of the Civil Code of
thePhilippines.)

9. BOARD OF ASSESSMENT APPEALS

V. MANILA ELECTRIC COMPANY
10 SCRA 68

FACTS:
City Assessor of QC declared the steel towers for real property tax under Tax Declarations. After denying the
respondent’s petition to cancel these declarations, an appeal was taken with the CTA which held that the
steel towers come under the exception of “poles” under the franchise given to MERALCO; the steel
towers are personal properties; and the City Treasurer is liable for the refund of the amount paid.

HELD:
The steel towers of an electric company don’t constitute real property for the purposes of real property tax.

The steel towers or supports in question, do not come within the objects mentioned in paragraph 1, because
they do not constitute buildings or constructions adhered to the soil. They are not construction analogous to
buildings nor adhering to the soil. As per description, given by the lower court, they are removable and merely
attached to a square metal frame by means of bolts, which when unscrewed could easily be dismantled and
moved from place to place. They can not be included under paragraph 3, as they are not attached to an
immovable in a fixed manner, and they can be separated without breaking the material or causing
deterioration upon the object to which they are attached. Each of these steel towers or supports consists of
steel bars or metal strips, joined together by means of bolts, which can be disassembled by unscrewing the
bolts and reassembled by screwing the same. These steel towers or supports do not also fall under
paragraph 5, for they are not machineries, receptacles, instruments or implements, and even if they were,
they are not intended for industry or works on the land. Petitioner is not engaged in an industry or works in
the land in which the steel supports or towers are constructed.

10. MAKATI LEASING v. WEAREVER

TEXTILE MILLS, GR No. 58469,
1983-05-16

Facts:

It appears that in order to obtain financial accommodations from herein petitioner Makati Leasing and
Finance Corporation, the private respondent Wearever Textile Mills, Inc, 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 private respondent's default, petitioner 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
private respondent's premises and was not able to effect... the seizure of the aforedescribed machinery.
Petitioner thereafter filed a complaint for judicial foreclosure with the Court of First Instance of Rizal, Branch
VI, docketed as Civil Case No. 36040, the case before the lower court.

the lower Court issued a writ of seizure, the enforcement of which was however subsequently restrained
upon private respondent'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 private respondent to enforce said writ. The lower court reaffirmed its
stand upon private respondent's filing of a further motion for... reconsideration.
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.

The Court of Appeals, in certiorari and prohibition proceedings subsequently filed by herein private
respondent, 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 respondent's
plant would be to drill... out or destroy the concrete floor, the reason why all that the sheriff could do to
enforce the writ was to take the main drive motor of said machinery.

Issues:

whether the machinery in suit is real or personal property from the point of view of the parties, with
petitioner arguing that it is a personalty, while the respondent claiming the contrary, and was... sustained by
the appellate court, which accordingly held that the chattel mortgage constituted thereon is null and void, as
contended by said respondent.

Ruling:

A similar, if not identical issue was raised in Tumalad vs. Vicencio, 41 SCRA 143 where this Court, speaking
through Justice J.B.L. Reyes, ruled:

"Although there is no specific statement referring to the subject house as personal property, yet by ceding,
selling or transferring a property by way of chattel mortgage defendants-appellants could only have meant
to convey the house as chattel, or at least, intended to... treat the same as such, so that they should not now
be allowed to make an inconsistent stand by claiming otherwise. Moreover, the subject house stood on a
rented lot to which defendants-appellants merely had a temporary right as lessee, and although this can not
in itself alone... determine the status of the property, it does so when combined with other factors to sustain
the interpretation that the parties, particularly the mortgagors, intended to treat the house as personalty.
Finally, unlike in the Iya cases, Lopez vs. Orosa, Jr. & Plaza

Theatre, Inc. & Leung Yee vs. F.L. Strong Machinery & Williamson, wherein third persons assailed the validity
of the chattel mortgage, it is the defendants appellants themselves, as debtors-mortgagors, who are
attacking the validity of the chattel mortgage in... this case. The doctrine of estoppel therefore applies to the
herein defendants-appellants, having treated the subject house as personalty."

Examining the records of the instant case, We find no logical justification to exclude and rule out, as the
appellate court did, the present case from the application of the above-quoted pronouncement. If a house of
strong materials, like what was involved in the above Tumalad case, may be considered as personal property
for purposes of executing a chattel mortgage thereon as long as the parties to the contract so agree and no
innocent third party will be prejudiced thereby, there is absolutely no reason why a machinery, which is
movable in... its nature and becomes immobilized only by destination or purpose, may not be likewise
treated as such. This is really because one who has so agreed is estopped from denying the existence of the
chattel mortgage.

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. Moreover, even granting that the charge is true, such fact alone does not render
a contract void ab initio, but can only be a ground for rendering said contract... voidable or annullable
pursuant to Article 1390 of the new Civil Code, by a proper action in court. There is nothing on record to
show that the mortgage has been annulled. Neither is it disclosed that steps were taken to nullify the same.
On the other hand, as pointed out by... petitioner and again not refuted by respondent, the latter has
indubitably benefited from said contract. Equity dictates that one should not benefit at the expense of
another. Private respondent could not now therefore, be allowed to impugn the efficacy of the chattel
mortgage... after it has benefited therefrom.

CHAPTER 2 MOVABLE PROPERTY

 

Art. 416. The following things are deemed to be personal property:

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

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

(1) Obligations and actions which have for their object movables or demandable sums; and 
(2) Shares of stock of agricultural, commercial and industrial entities, although they may have real estate. (336a) 

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

Aug 26, 2020

FELS V. PROVINCE OF BATANGAS (G.R.
NO. 168557, FEBRUARY 16, 2007)
FELS ENERGY, INC., Petitioner, -versus- THE PROVINCE OF BATANGAS and THE OFFICE OF THE PROVINCIAL
ASSESSOR OF BATANGAS, Respondents.

FACTS:
NPC entered into a lease contract with Polar Energy over power barges. NPC agreed to be responsible for
the payment of all taxes, fees, charges or levies to which Polar may become subject to in relation to the
performance of its obligations under the agreement. Later, Polar assigned its rights under the contract to
FELS.

Province of Batangas sent FELS an assessment of real property taxes on the power barges, covering also
those due for 1994, amounting to 56 million per annum. FELS told NPC about the assessment and FELS gave
NPC full power and authority to represent it in any conference regarding the real property assessment of the
Provincial Assessor.

NPC sought reconsideration of the assessment. It was denied and NPC was advised to pay. NPC filed a
petition with the Local Board of Assessment Appeals (LBAA) for the setting aside of the assessment and the
declaration of the barges as non-taxable items.

The Department of Finance (DOF) rendered an opinion that the power barges were not real property.
Despite this, the LBAA ruled that the power plant facilities are considered real property for taxation purposes
because they are installed at a specific location with a character of permanency.

Also, the LBAA said that NPC cannot extend its exemption to FELS by mere agreement and FELS, a private
corporation that owns the barges, is being taxed, not the NPC. FELS went up to the Central Board of
Assessment Appeals (CBAA).

A Notice of Levy and Warrant by Distraint (NLWD) was issued and served against FELS seeking to collect real
property taxes amounting to 232 million pesos.

The CBAA lifted the order of levy and distraint before it issued a decision finding the power barges exempt
from real property tax. Ruling in favor of FELS and NPC, the CBAA reasoned that the power barges belong to
NPC.

No, Province of Batangas wants to nullify the decision of CBAA for having no jurisdiction over the appeal due
to failure of FELS to file it within the period provided by law.
ISSUE: ​Did FELS follow the proper procedure in assailing the decision of the LBAA?

HELD:
No, it did not. Instead of appealing to the CBAA, it filed a motion for reconsideration.

Section 226 of R.A. No. 7160 gives the taxpayer 60 days to appeal from a decision of the LBAA to the CBAA.
Instead of appealing to the Board of Assessment Appeals (as stated in the notice), NPC opted to file a motion
for reconsideration of the Provincial Assessors decision, a remedy not sanctioned by law.

The last action of the local assessor on a particular assessment shall be the notice of assessment; it is this last
action which gives the owner of the property the right to appeal to the LBAA. The procedure likewise does
not permit the property owner the remedy of filing a motion for reconsideration before the local assessor.

ISSUE: ​While FELS pursued its claim, NPC filed a petition for review with the Supreme Court. Does this
constitute forum shopping?

HELD:
Yes, this constitutes forum shopping.

To recall, FELS gave NPC the full power and authority to represent it in any proceeding regarding real
property assessment. Therefore, when petitioner NPC filed its petition for review docketed as G.R. No.
165113, it did so not only on its behalf but also on behalf of FELS. Moreover, the assailed decision in the
earlier petition for review filed in this Court was the decision of the appellate court in CA-G.R. SP No. 67490,
in which FELS was the petitioner. Thus, the decision in G.R. No. 165116 is binding on petitioner FELS under
the principle of privity of interest. In fine, FELS and NPC are substantially identical parties as to warrant the
application of res judicata. FELSs argument that it is not bound by the erroneous petition filed by NPC is thus
unavailing.

ISSUE: Are the barges real property, thus, subject to real property taxation?

HELD:
Yes, they are real property.

Article 415 (9) of the New Civil Code provides that [d]ocks and structures which, though floating, are
intended by their nature and object to remain at a fixed place on a river, lake, or coast are considered
immovable property. Thus, power barges are categorized as immovable property by destination, being in the
nature of machinery and other implements intended by the owner for an industry or work which may be
carried on in a building or on a piece of land and which tend directly to meet the needs of said industry or
work.

ISSUE: Should the realty tax be paid by FELS despite agreement between NPC and
FELS regarding responsibility in payment thereof?

HELD:
Yes, because the owner of the taxable properties is FELS.

It follows then that FELS cannot escape liability from the payment of realty taxes by invoking its exemption in
Section 234 (c) of R.A. No. 7160. The law states that, to be exempt, the machinery must be actually, directly
and exclusively used by the GOCC.

The mere undertaking of petitioner NPC under Section 10.1 of the Agreement, that it shall be responsible for
the payment of all real estate taxes and assessments, does not justify the exemption. The privilege granted
to petitioner NPC cannot be extended to FELS. The covenant is between FELS and NPC and does not bind a
third person not privy thereto, in this case, the Province of Batangas.

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.

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

Lopez v. Orosa
LOPEZ V. OROSA AND PLAZA THEATREG.R. Nos. L-10817-18 February 28, 1958

FACTS:
-Petitioner Lopez was engaged in doing business under the trade name Lopez-Castelo Sawmill.

Orosa, a resident of the same province as Lopez, invited the latter to make an investment in the theatre
business. Lopez declined to invest but agreed to supply the lumber necessary for the construction of the
proposed theatre. They had an oral agreement that Orosa would be personally liable for any account that
the said construction might incur and that payment would be on demand and not cash on delivery basis.

Lopez delivered the which was used for construction amounting to P62,255.85. He was paid only P20,848.50,
leaving a balance of P41,771.35.

The land on which the building was erected previously owned by Orosa, was later on acquired by the
corporation.

. As Lopez was pressing Orosa for payment, the latter and president of the corporation promised to obtain a
bank loan by mortgaging the properties of the Plaza Theatre., out of which the unpaid balance would be
satisfied. But unknown to Lopez, the corporation already obtained a loan with Luzon Surety Company as
surety, and the corporation in turn executed a mortgage on the land and building in favor of the said
company as counter-security.

Due to the persistent demands of Lopez, Orosa executed a “deed of assignment” over his shares of stock in
the corporation.

As it remained unsettled, Lopez filed a case against Orosa and Plaza theatre praying that they be sentenced
to pay him jointly and severally of the unpaid balance; and in case defendants fail to pay, the land and
building owned by the corporation be sold in public auction with the proceeds be applied to the balance; or
the shares of stock be sold in public auction.

The lower court held that defendants were jointly liable for the unpaid balance and Lopez thus acquired the
material man’s lien over the construction. The lien was merely confined to the building and did not extend to
the on which the construction was made.

Lopez tried to secure a modification of the decision, but was denied.

ISSUES: Whether the material man’s lien for the value of the materials used in the
construction of the building attaches to said structure alone and doesn’t extend to the
land on which the building is adhered to.

Whether the lower court and CA erred in not providing that the material mans liens is superior to the
mortgage executed in favor of the surety company not only on the building but also on the land.

HELD:

-The material man’s lien could be charged only to the building for which the credit was made or which
received the benefit of refection, the lower court was right in, holding at the interest of the mortgagee over
the land is superior and cannot be made subject to the material man's lien.
-Generally, real estate connotes the land and the building constructed thereon, it is obvious that the
inclusion of the building in the enumeration of what may constitute real properties could only mean one
thing—that a building is by itself an immovable property.

-In the absence of any specific provision to the contrary, a building is an immovable property irrespective of
whether or not said structure and the land on which it is adhered to belong to the same owner.

-The law gives preference to unregistered refectionary credits only with respect to the real estate upon
which the refectionary or work was made.

- 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
the construction of the building attaches only to said structure and to no other property of the obligors.

Villanueva vs Castaneda 154 SCRA 142

Facts

Respondent Macalino, OIC of the Office of Mayor of San Fernando issued a resolution requiring the
demolition of stalls constructed on what the respondent claims to be a public land which is now proliferated
with the vendors’ stalls called “talipapa.” The petitioners contend that by virtue of the contract of lease
issued to them by the previous municipal council they have the right to stay and do business at the place in
issue. Thus, the petitioners filed a petition for prohibition with the Court of First Instance contending that
they are protected by the lease contract. Their petition was denied hence this action to the Supreme Court
was filed for certiorari.

Issue: Whether or not the land in issue is a public land?

Whether or not the respondent’s act to order the demolition of the stalls amount to grave abuse of
discretion and whimsical?

HELD:
It was held by the Supreme Court that the land in issue is a public land.

In the year 1961, it appears that the municipal council of San Fernando adopted resolution no. 218 that
authorized vendors to construct permanent stalls on the land in issue by virtue of a contract of lease. The
resolution was opposed in a Civil Case no. 2040. In 1964, the municipal council of San Fernando adopted
resolution no. 29 declaring the land as a parking space and a public plaza of the municipality which in effect
impliedly revoked the resolution no. 218. In the Civil Case no. 2040, it was held that a public plaza is beyond
the commerce of men. The decision was not appealed nor reversed hence the court finds no need to disturb
the final adjudication of the Civil Case 2040. It is settled therefore that the land where the stalls were
constructed remains a public land. The petitioners cannot claim the right to occupy the disputed premises by
invoking lease contracts. Being an object beyond the commerce of men, the land in dispute cannot be an
object of a lease contract.

The respondent has the duty to restore the public land to what it is intended in nature and no whimsical
action was taken in ordering the demolition of the stalls. It is an act within the scope of exercising police
power and such police power cannot be bargained away through a lease contract. Thus, the court ruled in
favor of the respondent.

Maneclang v. Intermediate Appellate Court

GR L-66575 24May1988
J. Fernan

FACTS
Petitioners Adriano Maneclang et.al. filed with the CFI a complaint for quieting of title over a certain
fishpond located within the 4 parcels of land belonging to them situated in Bugallon, Pangasinan. The trial
court dismissed the complaint upon a finding that the body of water traversing their land is a creek
constituting a tributary to Agno River and hence public in nature and not subject to private appropriation.
The Maneclangs appealed the decision to the IAC but the IAC affirmed the trial court decision. Hence, this
instant petition for review on certiorari.

However, after having been asked by the Court to comment to the case, Petitioners manifested that for lack
of interest on the part of the awardee in the public bidding, Maza, they desire to amicably settle the case by
submitting a Compromise Agreement praying that judgment be rendered recognizing their ownership over
the land and the body of water found within their titled properties. Petitioners state that there would be no
benefit on their part, but to the advantage of the municipality instead, since it is clear that after the National
Irrigation Authority built the dike over the land, no water gets in or out of the land.

ISSUE: Whether the stipulations in the Compromise Agreement adjudicating

ownership over the questioned fishpond in favor of the Maneclangs are valid.

HELD/RATIO
NO, the stipulations in the Compromise Agreement are null and void and have no legal effect for being
contrary to law and public policy.​ The stipulations partake of the nature of an adjudication of ownership in
favor of the Maneclangs of the questioned fishpond that was clearly found to be originally a creek forming a
tributary of the Agno River, which belongs to the public domain and is thus not susceptible to private
appropriation and acquisitive prescription. A creek, defined as a recess or arm extending from a river and
participating in the ebb and flow of the sea, is a property belonging to the public domain which is not
susceptible to private appropriation and acquisitive prescription, and as a public water, it cannot be
registered under the Torrens System in the name of any individual and considering further that neither the
mere construction of irrigation dikes by the National Irrigation Administration which prevented the water
from flowing in and out of the subject fishpond, nor its conversion into a fishpond, alter or change the nature
of the creek as a property of the public domain.

The finding that the subject body of water is a creek belonging to the public domain is a factual
determination binding upon the Supreme Court. The Municipality of Bugallon, acting thru its
duly-constituted municipal council is clothed with authority to pass, as it did,the two resolutions dealing with
its municipal waters, and it cannot be said that petitioners were deprived of their right to due process as
mere publication of the notice of the public bidding suffices as a constructive notice to the whole world.

Short Quiz on Monday Sept 7, 2020 -

Cover discussions from beginning up to villanueva versus Castaneda

SALVADOR H. LAUREL v. RAMON GARCIA,

GR No. 92013, 1990-07-25
Facts:
The subject property in this case is one of the four (4) properties in Japan acquired by the Philippine 
government under the Reparations Agreement entered into with Japan. 

The properties and the capital goods and services procured from the Japanese government for national 
development projects are part of the indemnification to the Filipino people for their losses in life and 
property and their suffering during World War II. 

Rep. Act No. 1789, the Reparations Law,​ prescribes the national policy on procurement and
utilization of reparations and development loans. The procurements are divided into those for use
by the government sector... and those for private parties in projects as the then National Economic
Council shall determine. Those intended for the private sector shall be made available by sale to
Filipino citizens or to one hundred (100%) percent Filipino-owned entities... in national development
projects.

The Roppongi property was acquired from the Japanese government under the Second Year Schedule 
and listed under the heading "Government Sector",... As intended, it became the site of the Philippine 
Embassy... until the latter was transferred to Nampeidai on July 22, 1976when the Roppongi building 
needed major repairs. Due to the failure of our government to provide necessary funds, the Roppongi... 
property has remained undeveloped since that time. 

A proposal was presented to President Corazon C. Aquino by former Philippine Ambassador to Japan, 
Carlos J. Valdez, to make the property the subject of a lease agreement with a Japanese firm - Kajima 
Corporation - which shall construct two (2)... buildings in Roppongi and one (1) building in Nampeidai 
and renovate the present Philippine Chancery in Nampeidai. The consideration of the construction 
would be the lease to the foreign corporation of one (1) of the buildings to be constructed in Roppongi 
and the two (2) buildings in Nampeidai. 

The other building in Roppongi shall then be used as the Philippine Embassy Chancery. At the end of 
the lease period, all the three leased buildings shall be occupied and used by the Philippine 
government. No change of ownership or title shall occur. (See Annex "B" to Reply to Comment) The 
Philippine government retains the title all throughout the lease period and thereafter. However, the 
government has not acted favorably on this proposal which is pending approval and ratification 
between the parties. Instead, on August 11, 1986, President Aquino created a committee to study the 
disposition/utilization of Philippine government properties in Tokyo and Kobe, Japan through 
Administrative Order No. 3, followed by Administrative Orders Numbered 3-A, B, C and D. 

Issues: ​The petitioner in G. R. No. 92013 raises the following issues: 

(1) Can the Roppongi property and others of its kind be alienated by the Philippine Government?; and 

(2) Does the Chief Executive, her officers and agents, have the authority and jurisdiction to sell the 
Roppongi property? 

FACTS:
The subject Roppongi property is one of the properties acquired by the Philippines from Japan pursuant to a
Reparations Agreement. The property is where the Philippine Embassy was once located, before it transferred to the
Nampeidai property. It was decided that the properties would be available to sale or disposition. One of the first
properties opened up for public auction was the Roppongi property, despite numerous oppositions from different
sectors.

HELD:
The Roppongi property was acquired together with the other properties through reparation agreements. They
were assigned to the government sector and that the Roppongi property was specifically designated under the
agreement to house the Philippine embassy.

It is of public dominion unless it is convincingly shown that the property has become patrimonial. The
respondents have failed to do so.

As property of public dominion, the Roppongi lot is outside the commerce of man. It cannot be alienated. Its
ownership is a special collective ownership for general use and payment, in application to the satisfaction of collective
needs, and resides in the social group. The purpose is not to serve the State as the juridical person but the
citizens; it is intended for the common and public welfare and cannot be the object of appropriation.

The fact that the Roppongi site has not been used for a long time for actual Embassy service doesn’t automatically
convert it to patrimonial property. Any such conversion happens only if the property is withdrawn from public use. A
property continues to be part of the public domain, not available for private appropriation or ownership until there is a
formal declaration on the part of the government to withdraw it from being such.