Article 415 par.

Ladera v. Hodges, O.G. No. 8027-R,

23 Sep 1952

FACTS:
Paz G. Ladera entered into a contract with C.N Hodges, whereby
the latter promised to sell a parcel of land to the former subject to the
stipulation of the contract saying that the failure of the purchaser to
pay within sixty days after it fell due would render the contract
annulled or rescinded. Furthermore, it is likewise stipulated that the
sums of money paid under the contract would be considered rentals
and the owner would be at liberty to dispose of the said lands with all
its improvements to other persons as if this contract had never been
made. After the execution of the contract, Ladera built a house on the
lot. Upon her failure to pay, Hodges filed an action for ejectment. The
court decided that Ladera is to vacate and surrender possession of the
lot. Also, on that day, Ladera paid Hodges P188.50 which the latter
recorded as rental payment. A writ of execution was then issued and
the City Sheriff levied upon “all rights, interest and participation over
the house.” The Sheriff then sold the house to Avelina A. Magno who
in turn sold the house to Manuela Villa. But this transaction was not
recorded. Upon knowledge of this, Ladera went to see the Sheriff and
paid him to redeem the property but was received as rental payment.
This amount, however, was not turned over to Hodges.

ISSUE:
Whether or not the house built on a land owned by another
person, should be regarded in law as movable or personal property.

RULING:
No. The sale of the land was not made without the proper
publication required by law of the sale of immovable property. In this
instance, the determination of whether or not the house in dispute is
an immovable or movable property is vital. The undisputed rule is
whether it is immovable by destination (place by the owner of the
tenement), an immovable by incorporation (attachment not
necessarily made by the owner of the tenement) or an accession. A true
building is an immovable or real property whether the owner of the
land is a usufructuary or lessee erects it. Moreover, when Ladera built
the house in question, she was not a mere lessee but occupied the land
under a valid contract with Hodges to sell it to her. Thus, the object of
the levy and the sale was real property. The publication in a newspaper
in a general circulation was made making the execution sale void and

1
conferred no title to the purchaser. Furthermore, there was a valid
exercise of redemption. So, at the time Magno sold the property to
Villa, Magno no longer had title over the property strengthening the
fact that since there was no title, the subsequent sale was null and void.

2
 Punzalan Jr. v. Vda. De Lacsamana
G.R. No. L-55729, 28 March 1983

FACTS:
Antonio Punzalan mortgaged his land to PNB for P10,000.
However, it was foreclosed because he failed to pay the mortgage fee.
The land was given to PNB being the highest bidder in the foreclosure.

In 1974, Punzalan constructed a warehouse on the land and

declared it for tax purposes. The warehouse was leased to Hermogenes
Sibal for 10 years from January 1975. PNB secured the title of the land
in December 1977.

On July 27, 1978, PNB and Lacsamana entered a Deed of Sale

which was amended on July 31, 1978, to include, the building and
improvement thereon. By virtue of the said instruments. Lacsamana
secured the title over the property in her name.

Punzalan commenced a suit for Annulment of the Deed of Sale

with Damages against PNB and Lacsamana. He questioned the
validity of the sale of the building. He claimed that PNB violated the
principle against ‘pactum commisorium’ because the sale was limited
to the land and does not include the building.

Lacsamana asserted the lack of cause of action because she was

a purchaser for value and the principle that the ‘accessory follows the
principal’. PNB filed a Motion to Dismiss on the ground of improper
venue considering that the building was real property under article
415 (1) of the New Civil Code and therefore section 2(a) of Rule 4
should apply.

The lower court granted the Motion to Dismiss for improper

venue. It resolved that the construction of the warehouse on the land
of PNB is a real action affecting title to real property which, under
Section 2, Rule 4 of the New Rules of Court, must be tried in the
province where the property or any part thereof lies.

ISSUE:
Whether the warehouse claimed to be owned by Punzalan is an
immovable or movable property.

RULING:
The warehouse is an immovable property.

3
 Article 415 (1) provides that buildings are always immovable. A
building treated separately from the land on which it stood is
immovable property and the mere fact that the parties to a contract
seem to have dealt with it separate and apart from the land on which
it stood in no wise changed its character as immovable property.

Punzalan’s action for annulment of sale and his claim for

damages are closely intertwined with the issue of ownership of the
building which, under the law, is considered immovable property.

An action for the annulment or rescission of a sale of real

property does not operate to efface the fundamental and prime
objective and nature of the case, which is to recover said real property.
It is a real action.

4
 Midway Maritime and Technological Foundation v. Marissa E.
Castro, et al.,
G.R. No. 189061, 6 Aug 2014

FACTS:
The two parcels of land, on a portion of which the residential
building stand, were originally owned by the respondents’ father
Louis Castro, Sr. The elder Castro was also the president of
Cabanatuan City Colleges (CCC). On August 15, 1974, Castro
mortgaged the property to Bancom Development Corporation
(Bancom) to secure a loan. During the subsistence of the mortgage,
CCC’s board of directors agreed to a 15-year lease of a portion of the
property to the Castro children, herein respondents, who subsequently
built the residential house now in dispute. The lease was to expire in
1992.

When CCC failed to pay its obligation, Bancom foreclosed the

mortgage and the property was sold at public auction in 1979,
with Bancom as the highest bidder. Bancom thereafter assigned the
credit to Union Bank of the Philippines (Union Bank), and later on,
Union Bank consolidated its ownership over the properties in 1984 due
to CCC’s failure to redeem the property. When Union Bank sought the
issuance of a writ of possession over the properties, which included
the residential building, respondents opposed the same.

In the meantime, Adoracion’s father, Tomas Cloma (Tomas),

bought the two parcels of land from Union Bank in an auction sale
conducted on July 13, 1993. Tomas subsequently leased the property
to the petitioner and thereafter, sold the same to Adoracion. Several
suits were brought by the respondents against the petitioner.

ISSUE:
Whether there was a lease agreement between the petitioner
and the respondents as regards the residential building.

RULING:
YES. The petitioner’s payment of the foregoing rentals confirms
the existence of its agreement to lease the residential building from the
respondents.

Given the existence of the lease, the petitioner’s claim denying

the respondents’ ownership of the residential house must be rejected.

5
 "A building by itself is a real or immovable property distinct
from the land on which it is constructed and therefore can... be a
separate subject of contracts." Whatever Adoracion acquired from her
father is still subject to the limitation pronounced by the Court in
Castro, and the sale between Adoracion and Tomas is confined only to
the two parcels of land and excluded the residential building owned
by the respondents. It is beyond question that Tomas, and
subsequently, Adoracion, could not have acquired a right greater than
what their predecessors-in-interest CCC and later, Union Bank had.

6
 Prudential Bank v. Honorable Domingo D. Panis, et al.,
G.R. No. L-50008, 31 Aug 1987

FACTS:
De la Rosa was the lessee of a piece of land, on which a house
she owns was built. She executed a chattel mortgage in favor of the
petitioner—purporting the leasehold interest in the land and the
ownership of house. After such, the petitioner moved for its
registration with the Register of Deeds, for the purpose of having the
same recorded in the book of record of chattel mortgages. After said
document had been duly acknowledge and delivered, the petitioner
caused the same to be presented to the respondent, Joaquin Jaramillo,
as register of deeds of the City of Manila, for the purpose of having the
same recorded in the book of record of chattel mortgages. Upon
examination of the instrument, the respondent was of the opinion that
it was not a chattel mortgage, for the reason that the interest therein
mortgaged did not appear to be personal property, within the meaning
of the Chattel Mortgage Law, and registration was refused on this
ground only.

ISSUE:
Whether or not respondent’s position is tenable.

RULING:
No. The respondent’s duties, as a register of deeds, in respect to
the registration of chattel mortgage are of a purely ministerial
character; and no provision of law can be cited which confers upon
him any judicial or quasi-judicial power to determine the nature of any
document of which registration is sought as a chattel mortgage.
Generally, he should accept the qualification of the property adopted
by the person who presents the instrument for registration and should
place the instrument on record, upon payment of the proper fee,
leaving the effects of registration to be determined by the court if such
question should arise for legal determination. The Civil Code supplies
no absolute criterion in discriminating between real property and
personal property for purposes of the application of the Chattel
Mortgage Law. The articles state general doctrines, nonetheless, it
must not be forgotten that under given conditions, property may have
character different from that imputed to it in the said articles. It is
undeniable that the parties in a contract may by agreement treat as
personal property that which by nature would be real property.

7
 Standard Oil Company of New York v. Joaquin Jaramillo,
G.R. No. L-20329, 16 March 1923

FACTS:
Meralco’s electric power is generated by its hydro-electric plant
located at Botocan Falls, Laguna and is transmitted to the City of
Manila by means of electric transmission wires, running from the
province of Laguna to the said City. These electric transmission wires
which carry high voltage current, are fastened to insulators attached
on steel towers. Meralco has constructed 40 of these steel towers within
Quezon City, on land belonging to it.

The QC City Assessor declared the MERALCO's steel towers

subject to real property tax. After the denial of MERALCO's petition to
cancel these declarations, an appeal was taken to the QC Board of
Assessment Appeals, which required respondent to pay real property
tax on the said steel towers for the years 1952 to 1956.

MERALCO paid the amount under protest, and filed a petition

for review in the Court of Tax Appeals (CTA) which rendered a
decision ordering the cancellation of the said tax declarations and the
refunding to MERALCO by the QC City Treasurer.

ISSUE:
Whether or not the steel towers of an electric company constitute
real property for the purposes of real property tax.

RULING:
NO. The steel towers of an electric company do not constitute
real property for the purposes of real property tax. Steel towers are not
immovable property under paragraph 1, 3 and 5 of Article 415 (NCC)
because they do not constitute buildings or constructions adhered 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 cannot 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. These steel towers or supports do not also
fall under paragraph 5, for they are not machineries or receptacles,
instruments or implements, and even if they were, they are not
intended for industry or works on the land.

8
 Petitioner is not engaged in an industry or works on the land in
which the steel supports or towers are constructed.

9
 Board of Assessment Appeals v. Manila Electric Co.,
G.R. No. L-15334, 31 Jan 1964

FACTS:
The Philippine Commission (enacted Act No. 484) authorized
the Municipal Board of Manila to grant a franchise to construct,
maintain and operate an electric street railway and electric light, heat
and power system in Manila to the most favorable
bid. Meralco became the transferee and owner of the franchise
and constructed 40 steel towers (with insulators where electric
transmission wires are attached, carrying high voltage current from its
hydro-electric plant in Laguna.)

City Assessor of Quezon City declared the steel towers for real
property tax. Meralco paid the amount under protest, and filed a
petition for review in CTA which rendered a decision to cancel the tax
declarations and refund Meralco, holding that: (1) the steel towers
come within the term "poles" which are declared exempt from taxes;
(2) the steel towers are personal properties and are not subject to real
property tax; and (3) the City Treasurer of Quezon City is held
responsible for the refund of the amount paid.

The word "poles” (as used in Act No. 484) should not be given a
restrictive and narrow interpretation, as to defeat the very object for
which the franchise was granted. The poles should be understood and
taken as a part of the electric power system of the respondent Meralco,
for the conveyance of electric current from the source thereof to its
consumers.

ISSUE:
Whether they constitute real properties, so that they can be
subject to a real property tax. (NO)

RULING:
No. Article 415 of the Civil Code - the following are immovable
property:
(1) Land, buildings, roads, and constructions of all kinds adhered to
the soil;
(3) Everything attached to an immovable in a fixed manner, in such a
way that it cannot be separated therefrom without breaking the
material or deterioration of the object;
(5) Machinery, receptacles, instruments or implements intended by the
owner of the tenement for an industry or works which may be carried

10
in a building or on a piece of land, and which tends directly to meet
the needs of the said industry or works;

The steel towers do not come within the objects mentioned in

paragraph (1). 
• They do not constitute buildings or constructions adhered to
the soil. 
• They are not construction analogous to buildings nor
adhering to the soil. 
• 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 cannot be included under paragraph (3).

• They are not attached to an immovable in a fixed manner. 
• They can be separated without breaking the material or
causing deterioration upon the object to which they are
attached. Each of the steel towers 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).
• 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.

11
 Article 415 par. 2

Inter-Regional Development Corporation v. Court of Appeals and

Ricardo Caballero,
G.R. No. L-39677, 22 July 1975

FACTS:
There was a dispute over the ownership of land between Inter-
Regional Development and a certain Estrada. The dispute was heard
by the lower court which ultimately resolved the case by ordering
Inter-Regional to surrender the possession of lots to Estrada.

Estrada then leased the lots to Caballero.

Inter-Regional filed another civil action before the CFI to settle

the question of ownership of the sugar crops which it allegedly planted
in good faith on the land leased by Caballero -- the same land which
was litigated earlier.

The CFI issued a writ of preliminary injunction preventing

Caballero from cutting and milling the crops. Caballero then sought to
set this order aside.

ISSUE:
(a) Are the crops real or personal property?
(b) Did Caballero acquire ownership of the crops planted on the
land?

RULING:
(a) Real property. Under Art 415, trees, plants and growing
fruits, while they are attached to the land, are immovable
property

(b) When a person plants in good faith on land belonging to

another, the landowner does not ipso facto acquire ownership
of what has been planted; he must first indemnify the planter
before he can appropriate the same as provided under Art.
448.

12
 Leon Sibal v. Emiliano J. Valdez,
G.R. No. L-26278, 4 Aug 1927

FACTS:
For the purpose of satisfying the judgment won by the defendant
(Valdez), the sheriff attached the sugar cane that was then growing on
the lots of the plaintiff (Sibal).

Said lots incidentally had already been previously attached by

another judgment creditor of the plaintiff (Sibal).

Within the one-year period given by law for redemption, the

plaintiff (Sibal) wanted to redeem the lots from one creditor, and the
sugar cane from the other creditor.

The lots were redeemed, the redemption of the sugar cane was
however refused by the defendant (Valdez), who contended that the
sugar cane was personal property, and therefore could not be the
subject of the legal redemption sought to be enforced.

The plaintiff (Sibal) upon the other hand claimed that the sugar
cane was real property for same could be considered as “growing
fruits” under par. 2 of Art. 415.

ISSUE:
Whether or not the sugar cane is personal or real property.

RULING:
Manresa, the eminent commentator of the Spanish Civil Code, in
discussing section 334 of the Civil Code, in view of the recent decisions
of the supreme Court of Spain, admits that growing crops are
sometimes considered and treated as personal property. Moreover,
from an examination of the reports and codes of the State of California
and other states we find that the settle doctrine followed in said states
in connection with the attachment of property and execution of
judgment is, that growing crops raised by yearly labor and cultivation
are considered personal property.

On the other hand, Act No. 1508, the Chattel Mortgage Law, fully
recognized that growing crops are personal property. Section 2 of said
Act provides: "All personal property shall be subject to mortgage,
agreeably to the provisions of this Act, and a mortgage executed in
pursuance thereof shall be termed a chattel mortgage." Section 7 in part
provides: "If growing crops be mortgaged the mortgage may contain

13
an agreement stipulating that the mortgagor binds himself properly to
tend, care for and protect the crop while growing.

It is clear from the foregoing provisions that Act No. 1508 was
enacted on the assumption that "growing crops" are personal property.
This consideration tends to support the conclusion hereinbefore
stated, that paragraph 2 of article 334 of the Civil Code has been
modified by section 450 of Act No. 190 and by Act No. 1508 in the sense
that "ungathered products" as mentioned in said article of the Civil
Code have the nature of personal property. In other words, the phrase
"personal property" should be understood to include "ungathered
products."

We may, therefore, conclude that paragraph 2 of article 334 of

the Civil Code has been modified by section 450 of the Code of Civil
Procedure and by Act No. 1508, in the sense that, for the purpose of
attachment and execution, and for the purposes of the Chattel
Mortgage Law, "ungathered products" have the nature of personal
property.

14
 Article 415 par. 3

Ruby L. Tsai v. Hon. Court of Appeals, Ever Textile Mills Inc. and
Mamerto R. Villaluz,
G.R. No. 120098, 2 Oct 2001

FACTS:
Ever Textile Mills, Inc. (EVERTEX) obtained loan from
Philippine Bank of Communications (PBCom), secured by a 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 similar to
those listed in the first mortgage deed. During the execution of the
second mortgage, EVERTEX purchased various machines and
equipment. Upon EVERTEX's failure to meet its obligation. PBCom,
commenced extrajudicial foreclosure of the mortgage. PBCom 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 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.

ISSUE:
Whether or not the machineries and equipment were personal
properties.

RULING:
YES, the machineries and equipment are personal properties.
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. 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 with a

15
listing of the machineries covered thereby. Assuming 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, where 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.

16
 Article 415 par. 5

Davao Saw Mill Co., Inc. v. Aproniano G. Castillo and Davao Light
and Power Co., Inc.,
G.R. No. L-40411, 7 Aug 1935

FACTS:
Davao Sawmill Co., operated a sawmill. However, the land upon
which the business was conducted was leased from another person.
On the land, Davao Sawmill erected a building which housed the
machinery it used. Some of the machines were mounted and placed on
foundations of cement. The contract of lease stated that on the
expiration of the period agreed upon, all the improvements and
buildings introduced and erected by Davao sawmill 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, a writ of execution was issued against the company
and the properties in question were levied upon. The company
assailed the said writ contending that the machineries and accessories
were personal in nature, hence, not subject to writ of execution. The
trial judge ruled in favour of the company.

ISSUE:
Whether or not the machineries and equipment were personal
property

RULING:
Yes, the subject properties are personal in nature. Art.415 (NCC)
provides that real property consists of (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. Machinery is naturally movable. However,
machinery only becomes immovable when placed in a land by the
owner of the property or land but not when so placed by a tenant or
any person having only a temporary right, unless such person acted as
the agent of the owner. In the case at bar, the machinery is intended
not by the owner of the land but by the saw mill company for use in
connection with its trade.

17
 Burgos v. Chief of Staff,
G.R. No. L-64261, 26 Dec 1984

FACTS:
Petitioners were accused of the crime subversion; the respondent
judge issued two search warrants to "Metropolitan Mail" and "We
Forum" newspapers.

During the search, the office and printing machines, equipment,

paraphernalia, motor vehicles and other articles used in the printing,
publication and distribution of the said newspapers, as well as
numerous papers, documents, books and other written literature
alleged to be in the possession and control of petitioner Jose Burgos, Jr.
publisher-editor of the "We Forum" newspaper, were seized.

Petitioners argued that the machines seized were real properties

and not personal properties and that it was not susceptible to seizure
under a search warrant.

ISSUE:
Whether the machines seized were considered real or personal
properties.

RULING:
Article 415[5] of the Civil Code of the Philippines states 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, are considered immovable
property. The court however stated the case of Davao Sawmill Co. v.
Castillo9 as an example. The Court ruled that machinery is by nature
a movable property but if immobilized by the owner of the tenement,
property or plant it becomes immovable, 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.

The petitioners do not claim to be the owners of the land and/or

building on which the machineries were placed. This being the case,
the machineries in question, while in fact bolted to the ground remain
movable property susceptible to seizure under a search warrant.

18
 B.H. Berkenkotter v. Cu Unjieng E. Hijos, et al.,
G.R. No. L-41643, 31 July 1935

FACTS:
On 26 April 1926, the Mabalacat Sugar Company obtained from
Cu Unjieng e Hijos, a loan secured by a first mortgage constituted on
2 parcels of land "with all its buildings, improvements, sugarcane mill,
steel railway, telephone line, apparatus, utensils and whatever form’s
part or is a necessary complement of said sugarcane mill, steel railway,
telephone line, now existing or that may in the future exist in said lots.”

On 5 October 1926, the Mabalacat Sugar Company decided to

increase the capacity of its sugar central by buying additional
machinery and equipment, so that instead of milling 150 tons daily, it
could produce 250. Green proposed to the Berkenkotter, to advance
the necessary amount for the purchase of said machinery and
equipment, promising to reimburse him as soon as he could obtain an
additional loan from the mortgagees, Cu Unjieng e Hijos, and that in
case Green should fail to obtain an additional loan from Cu Unjieng e
Hijos, said machinery and equipment would become security
therefore, said Green binding himself not to mortgage nor encumber
them to anybody until Berkenkotter be fully reimbursed for the
corporation's indebtedness to him.

Having agreed to said proposition made in a letter dated 5

October 1926, Berkenkotter, on 9 October 1926, delivered the sum of
P1,710 to Green, the total amount supplied by him to Green having
been P25,750. Furthermore, Berkenkotter had a credit of P22,000
against said corporation for unpaid salary. With the loan of P25,750
and said credit of P22,000, the Mabalacat Sugar Co., Inc., purchased
the additional machinery and equipment.

On 10 June 1927, Green applied to Cu Unjienge Hijos for an

additional loan of P75,000 offering as security the additional
machinery and equipment acquired by said Green and installed in the
sugar central after the execution of the original mortgage deed, on 27
April 1927, together with whatever additional equipment acquired
with said loan. Green failed to obtain said loan. Hence, above
mentioned mortgage was in effect.

ISSUE:
Are the additional machines also considered mortgaged?

19
RULING:
Article 1877 of the Civil Code provides that mortgage includes
all natural accessions, improvements, growing fruits, and rents not
collected when the obligation falls due, and the amount of any
indemnities paid or due the owner by the insurers of the mortgaged
property or by virtue of the exercise of the power of eminent domain,
with the declarations, amplifications, and limitations established by
law, whether the state continues in the possession of the person who
mortgaged it or whether it passes into the hands of a third person. It is
a rule, that in a mortgage of real estate, the improvements on the same
are included; therefore, all objects permanently attached to a
mortgaged building or land, although they may have been placed
there after the mortgage was constituted, are also included.

Article 334, paragraph 5, of the Civil Code gives the character of

real property to machinery, liquid containers, instruments or
implements intended by the owner of any building or land for use in
connection with any industry or trade being carried on therein and
which are expressly adapted to meet the requirements of such trade or
industry. The installation of a machinery and equipment in a
mortgaged sugar central, in lieu of another of less capacity, for the
purpose of carrying out the industrial functions of the latter and
increasing production, constitutes a permanent improvement on said
sugar central and subjects said machinery and equipment to the
mortgage constituted thereon.

20
 Government Service Insurance System v. Calsons Inc., Cesario P.
Calanoc, and Nenita Godinez,
G.R. No. L-19867, 29 May 1968

FACTS:
On April 11, 1957 appellant CALSONS, INC. applied for a loan
of P2,000,000.00 from GSIS to in order to pay the balance of the
purchase price of certain parcels of land situated at the corner of Globo
de Oro and Elizondo Streets, Quiapo, Manila, and to finance the
construction of a two-storey textile market building on said land. The
application was approved by appellee's Board of Trustees on August
26, 1957.

In connection with said loan appellants executed on October 31,

1957 a promissory note binding themselves jointly and severally to pay
appellee the sum of P2,000,000.00, with interest at the rate of 7% per
annum compounded monthly, in 120 equal monthly installments of
P23,221.69 each. Under said note "the first installment shall be due and
payable beginning the month following the last release and/or the
month following the expiration of the period for the construction of
the textile market building, whichever is earlier, and the rest on the 7th
day of every month thereafter until the principal of TWO MILLION
PESOS (P2,000,000.00) and the interest shall have been fully paid."

To secure payment of the note, appellants executed on the same

date a first mortgage in favor of appellee on five (5) parcels of land
particularly described in the mortgage contract, "together with all the
buildings and improvements now existing thereon or which may
hereafter be constructed on the mortgaged property (ies) of which
MORTGAGOR is the absolute owner, free from all liens and
encumbrances." The five (5) parcels of land were among the properties
acquired by appellant CALSONS, INC., from Tuason & Sampedro,
Inc., under a Deed of Assignment dated October 29, 1957.

The first release in the amount of P819,000.00 was made on

November 7, 1957, while the second (and last) release in the amount of
P30,000.00 was made on May 15, 1958. The checks covering both
releases were drawn in favor of the vendor of the mortgaged
properties.

In accordance with the agreement between the parties, the old

building standing on the mortgaged properties was insured for
P300,000.00 on December 1, 1959. Appellee advanced the sum of

21
P5,628.00 for the annual premium, but appellants failed to reimburse
the same.

Appellee filed a complaint for the foreclosure of the mortgage

with the Court of First Instance of Manila on August 11, 1958, alleging
among others that without the prior written consent of plaintiff
defendants removed and disposed of the complete band sawmill and
filing machine which formed part of the properties mortgaged.

ISSUE:
Whether or not the band sawmill and filing machine forms part
of the properties mortgaged. (Third assignment of error)

RULING:
Yes. The band sawmill and filing machine forms part of the
properties mortgaged.

The Court held that the band sawmill and filing machine part of
the immovable pursuant to Article 415 of the Civil Code, and need not
be the subject of a separate chattel mortgage in order to be deemed
duly encumbered in favor of appellee.

The appellants did not deny the fact that they removed and
disposed of the machineries installed in the building which were
standing on the mortgaged properties Their only contention was that
the said machineries were not included in the mortgage.

However, the Court finds that the mortgage was on the lands
"together with all the buildings and improvements now existing or
which may hereafter be constructed" thereon. And the machineries
were permanently attached to the property, and installed there by the
former owner to meet the needs of certain works or industry therein.

22
Mindanao Bus Company v. The City Assessor & Treasurer and the
Board of Tax Appeals of Cagayan De Oro City,
G.R. No. L-17870, 29 Sep 1962

FACTS:
Mindanao Bus Co. (MBC) 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. MBC was assessed for real property
taxes for machineries sitting on cement or wooden platforms over one
of its lands. 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 machineries which are placed
therein, its TPU trucks are made; body constructed; and same are
repaired in a condition to be serviceable in the TPU land transportation
business it operates.

The said machine sitting on platforms at MBC’s land have never

been or were never used as industrial equipment’s 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.

ISSUE:
Whether the machineries are considered immovable property to
be properly subjected to real property taxes.

RULING:
No. Movable equipment to be immobilized in contemplation of
the law must first be "essential and principal elements" of an industry
or works without which such industry or works would be "unable to
function or carry on the industrial purpose for which it was
established." The tools and equipment in question in this instant case
are, by their nature, not essential and principle municipal elements of
petitioner's business of transporting passengers and cargoes by motor
trucks. They are merely incidentals — acquired as movables and used
only for expediency to facilitate and/or improve its service. Even
without such tools and equipment’s, its business may be carried on, as
petitioner has carried on, without such equipment’s, before the war.
The transportation business could be carried on without the repair or
service shop if its rolling equipment is repaired or serviced in another
shop belonging to another.

23
 Aside from the element of essentiality, article 415 (par 5) also
requires that the industry or works be carried on in a building or on a
piece of land. But in the case at bar the equipment’s in question are
destined only to repair or service the transportation business, which is
not carried on in a building or permanently on a piece of land, as
demanded by the law. Said equipment’s may not, therefore, be
deemed real property.

24
 Serg’s Products Inc., and Sergio T. Goquiolay v. Pci Leasing and
Finance Inc.,
G.R. No. 137705, 22 Aug 2000

FACTS:
PCI filed a case for collection of a sum of money as well as a writ
of replevin for the seizure of machineries, subject of a chattel mortgage
executed by petitioner in favor of PCI. Machineries of petitioner were
seized and petitioner filed a motion for special protective order. It
asserts that the machineries were real property and could not be
subject of a chattel mortgage.

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

RULING:
The machineries in question have become immobilized by
destination because they are essential and principal elements in the
industry, and thus have become immovable in nature.

Nonetheless, they are still proper subjects for a chattel mortgage.

Contracting parties may validly stipulate that a real property be
considered as personal. After agreement, they are consequently
estopped from claiming otherwise.

25
Makati Leasing and Finance Corporation v. Wearever Textile Mills
Inc., and Honorable Court of Appeals,
G.R. No. L-58469, 16 May 1983

FACTS:
To obtain financial accommodations from Makati Leasing,
Wearever Textile discounted and assigned several receivables under a
Receivable Purchase Agreement with Makati Leasing. To secure the
collection of receivables, it executed a chattel mortgage over several
raw materials and a machinery Artos Aero Dryer Stentering Range
(Dryer). Wearever defaulted thus the properties mortgaged were
extrajudicially foreclosed. The sheriff, after the restraining order was
lifted, was able to enter the premises of Wearever and removed the
drive motor of the Dryer. The CA reversed the order of the CFI,
ordering the return of the drive motor since it cannot be the subject of
a replevin suit being an immovable bolted to the ground. Thus, the
case at bar.

ISSUE:
Whether the dryer is an immovable property.

RULING:
NO. The SC relied on its ruling in Tumalad v. Vicencio, that if a
house of strong materials can be the subject of a Chattel Mortgage as
long as the parties to the contract agree and no innocent 3rd party will
be prejudiced then moreso that a machinery may treated as a movable
since it is movable by nature and becomes immobilized only by
destination. And treating it as a chattel by way of a Chattel Mortgage,
Respondent Wearever is estopped from claiming otherwise.

26
 Article 415 par. 9

Fels Energy Inc. v. The Province of Batangas and the Office of the
Provincial Assessor of Batangas,
G.R. No. 168557, 16 Feb 2007

FACTS:
NPC entered into a lease contract with Polar Energy, Inc.
(POLAR) over diesel engine power barges moored in Batangas. The
contract contained a provision that NPC shall be responsible to the real
estate taxes and assessments, rates, and other charges in respect of the
power barges. Subsequently, POLAR assigned its rights under the
Agreement to Fels Energy, Inc. (FELS). Later, FELS received an
assessment of real property taxes on the power barges from Provincial
Assessor and referred the matter to NPC reminding it of its obligation
under the agreement to pay the real estate taxes.

NPC sought reconsideration of the Provincial Assessor’s

decision to assess real property taxes on the power barges, however,
was denied. The Local Board of Assessment Appeals (LBAA) ruled
that the power plant facilities, while they may be classified as movable
or personal property, are nevertheless considered real property for
taxation purposes because they are installed at a specific location with
a character of permanency.

ISSUE:
Whether power barges, which are floating and movable, are
personal properties and therefore, not subject to real property tax.

RULING:
No. 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.

27
 Article 415 par. 10

Metropolitan Bank and Trust Corporation v. Alejo,

G.R. No. 141970, 10 Sep 2001

FACTS:
On November 21, 1995 and January 30, 1996, Spouses Raul and
Cristina Acampado obtained loans from petitioner in the amounts of
P5,000,000 and P2,000,000, respectively. As security for the payment of
these credit accommodations, the Acampados executed in favor of
petitioner a Real Estate Mortgage and an Amendment of Real Estate
Mortgage over a parcel of land registered in their names. The land was
covered by TCT in the Registry of Deeds of Valenzuela City. On June
3, 1996, a Complaint for Declaration of Nullity of TCT No. V-41319 was
filed by Respondent Sy Tan Se against Spouses Acampado in the
Regional Trial Court (RTC) of Valenzuela, Branch 172. Despite being
the registered mortgagee of the real property covered by the title
sought to be annulled, petitioner, Metropolitan Bank and Trust
Company was not made a party to the case nor was she notified of its
existence. The respondents Spouses Acampado defaulted in the
payment of their loan, extrajudicial foreclosure proceedings over the
mortgaged property were initiated and the sheriff of Valenzuela
conducted an auction sale of the property, during which petitioner
submitted the highest and winning bid. A Certificate of Sale was
issued in its favor. This sale was entered in the Registry of Deeds of
Valenzuela on July 28, 1997. Upon presentation to the Register of
Deeds of the Affidavit of Consolidation of Ownership, petitioner was
informed of the existence of the Regional Trial Court’s decision in Civil
Case filed, annulling TCT No. V-41319.

ISSUE:
Whether the petitioner has real rights over the assailed real
property.

RULING:
Yes. The Petitioner has real rights over the assailed real property.
The Court held that it is undisputed that the assailed property was
mortgaged to petitioner, and that the mortgage was annotated on the
Transfer Certificate of Title (TCT) before the institution of Civil Case.
It is also undisputed that all subsequent proceedings pertaining to the
foreclosure of the mortgage were entered in the Registry of Deeds. The

28
nullification and cancellation of TCT carried with it the nullification
and cancellation of the mortgage annotation.

Although a mortgage affects the land itself and not merely the
TCT covering it, the cancellation of the TCT and the mortgage
annotation exposed petitioner to real prejudice. Its rights over the
mortgaged property would no longer be known and respected by
third parties. Thus, the nullification of TCT covering the assailed real
property adversely affected its property rights, considering that a real
mortgage is a real right and a real property by itself.

29
 Manila Electric Company v. City Assessor and City Treasurer of
Lucena City,
G.R. No. 166102, 5 Aug 2015

FACTS:
On February 20, 1989, MERALCO received from the City
Assessor of Lucena a notice that electric facilities, classified as capital
investment of the company: (a) transformer and electric post; (b)
transmission line; (c) insulator; and (d) electric meter, were subjected
to real property tax as of 1985. MERALCO appealed the Tax
Declaration before the LBAA of Lucena City and claimed that its
capital investment consisted only of its substation facilities and that
MERALCO was exempted from payment of real property tax on said
substation facilities.

The LBAA rendered a Decision finding that MERALCO was

required to pay the City Government of Lucena a 5% tax of its gross
earnings, whereas the poles, wires, insulators, transformers, and
electric meters of MERALCO, these were real properties and held that:
(1) the steel towers fell within the term “poles” expressly exempted
from taxes under the franchise of MERALCO; and (2) the steel towers
were personal properties under the provisions of the Civil Code and,
hence, not subject to real property tax.

The City Assessor of Lucena filed an appeal with the CBAA,

which the CBAA affirmed the LBAA judgment and which became
final and executory.

MERALCO again received a letter from the City Treasurer of

Lucena six years later, which they were being assessed for real
property delinquency on its machineries beginning 1990. MERALCO
argues that its transformers, electric posts, transmission lines,
insulators, and electric meters are not subject to real property tax,
given that the definition of “machinery” under Section 199(o) of the
Local Government Code, on which real property tax is imposed, must
still be within the contemplation of real or immovable property under
Article 415 of the Civil Code because it is axiomatic that a statute
should be construed to harmonize with other laws on the same subject
matter as to form a complete, coherent, and intelligible system.

ISSUE:
Whether MERALCO is liable for real property tax on its
transformers, electric posts (or poles), transmission lines, insulators,
and electric meters, beginning 1992.

30
RULING:
No. 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,” “instrument,” “appliance,” “apparatus,”
or “installation.”

Article 290(o) of the Rules and Regulations Implementing the

Local Government Code of 1991 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,
furniture 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.

MERALCO maintaining that electric posts are not machinery

subject to real property tax because these are not exclusively used by
MERALCO but likewise by other cable and telephone companies, is
however a factual issue with the Court cannot take cognizance as it is
nota trier of facts. The issue is best left to the determination of the City
Assessor or his deputy who has been granted authority to take
evidence under Article 304 of the Rules and Regulations Implementing
the Local Government Code of 1991.

The Court finds that 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.

Nevertheless, the appraisal and assessment of the transformers,

electric posts, transmission lines, insulators, and electric meters of
MERALCO as machinery under Tax Declaration were not in

31
accordance with the Local Government Code and in violation of the
right to due process of MERALCO and, therefore, null and void.

32
 Article 416 to Article 418

Involuntary Insolvency of Paul Strochecker v. Ildefonso Ramirez,

G.R. No. 18520, 26 Sep 1922

FACTS:

There were three mortgagees each of whom claimed preference.

Fidelity & Surety Co., Ramirez and Concepcion Ayala. The latter's
claim was rejected by the trial court, and from that ruling she did not
appeal.

The half-interest in the drug business, known as Antigua Botica

Ramirez, was mortgaged with Fidelity & Surety Co. on March 10, 1919,
and registered in due time in the registry of property, while another
mortgage was made with Ildefonso Ramirez on September 22, 1919
and registered also in the registry.

Ramirez claims preference on these grounds: (a) That the

mortgage of Fidelity & Surety Co. is not valid because the property
which is the subject-matter thereof is not capable of being mortgaged,
and the description of said property is not sufficient; and (b) that the
amount due the appellant is a purchase price, citing Article 1922 of the
Civil Code in support thereof, and that his mortgage is but a
modification of the security given by the debtor on February 15, 1919,
that is, prior to the mortgage executed in favor of the Fidelity & Surety
Co.

ISSUES:

1. Whether or the not half-interest over Antigua Botica Ramirez is

considered as personal property and may be the subject of mortgage.
- Yes

2. Whether or not the mortgage of Fidelity & Surety Co. should be

given preference to that of Ramirez. - Yes

RULING:

1. With regard to the nature of the property thus mortgaged, the one-
half interest in Antigua Botica Ramirez is a personal property capable
of appropriation and not included in the enumeration of real
properties in Article 335 of the Civil Code, and may be the subject of
mortgage. All personal property may be mortgaged (Sec. 7, Act 1508).

33
 The description contained in the document is sufficient. The law
(Sec. 7, Act 1508) requires only a description of the mortgaged property
shall be such as to enable the parties to the mortgage, or any other
person, after reasonable inquiry and investigation, to identify the
same. In the case at bar, “his half interest in the drug business known
as Antigua Botica Ramirez, located at Calle Real Nos. 123 and 125,
District of Intramuros, Manila Philippine Islands" is sufficient.

2. Article 1922 (1-3) of the Civil Code as invoked by Ramirez is not

applicable as neither he nor the debtor himself is in possession of the
property mortgaged, which has been, legally in possession of Fidelity
& Surety Co.

34
 PLDT v. Alvarez,
G.R. No. 179408, 5 March 2014

FACTS:
PLDT is the grantee of a legislative franchise which authorizes it
to carry on the business of providing basic and enhanced
telecommunications services in the Philippines and between the
Philippines and other countries and territories to establish, operate,
manage, lease, maintain and purchase telecommunications system for
both domestic and international calls.

To safeguard the integrity of its network, PLDT regularly

conducts investigations on various prepaid cards marketed and sold
abroad to determine alternative calling patterns (ACP) and network
fraud that are being perpetrated against it.

During a test call placed at the PLDT ACP Detection Division

(ACPDD) office, the receiving phone reflected a PLDT telephone
number (2-8243285) as the calling number used, as if the call was
originating from a local telephone in Metro Manila.

According to PLDT, had an ordinary and legitimate call been

made, the screen of the caller–id–equipped receiving phone would not
reflect a local number or any number at all. In the cards they tested,
however, once the caller enters the access and pin numbers, the
respondents would route the call via the internet to a local telephone
number which would connect the call to the receiving phone.

Since calls through the internet never pass the toll center of the
PLDT’s IGF, users of these prepaid cards can place a call to any point
in the Philippines without the call appearing as coming from abroad.

Mr. Lawrence Narciso of the PLDT's Quality Control Division,

together Philippine National Police (PNP), conducted an ocular
inspection at 17 Dominic Savio St., Savio Compound and at No. 38
Indonesia St., Better Living Subdivision - both in Barangay Don Bosco,
Paranaque City - and discovered that PLDT telephone lines were
connected to several pieces of equipment.

Police Superintendent Gilbert C. Cruz filed a consolidated

application for a search warrant before Judge Francisco G. Mendiola
of the RTC, for the crimes of theft and violation of PD No. 401.
According to PLDT, the respondents are engaged in a form of network

35
fraud known as International Simple Resale (ISR) which amounts to
theft under the RPC.

ISSUE:
Whether or not PLDT’s business of providing
telecommunication services for international long-distance calls is a
proper subject of theft under Article 308 of the RPC.

RULING:
NO.

Taking off from the basic rule that penal laws are construed
strictly against the State, the Court ruled that international long-
distance calls and the business of providing telecommunication or
telephone services by PLDT are not personal properties that can be the
subject of theft.

One is apt to conclude that “personal property” standing alone,

covers both tangible and intangible properties and are subject of theft
under the Revised Penal Code. But the words “Personal property”
under the Revised Penal Code must be considered in tandem with the
word “take” in the law. The statutory definition of “taking” and
movable property indicates that, clearly, not all personal properties
may be the proper subjects of theft. The general rule is that, only
movable properties which have physical or material existence and
susceptible of occupation by another are proper objects of theft.

36