STANDARD OIL CO. V.

JARANILLO discovered in the document itself, in relation

(MINISTERIAL DUTY OF THE REGISTRAR OF with the fact of notice. Registration adds
PROPERTY) nothing to the instrument, considered as a
source of title, and affects nobody’s rights
except as a species of constructive notice.
FACTS:

 Gervasia de la Rosa, Vda. de Vera, was the

lessee of a parcel of land situated in the City
of Manila and owner of the house of strong NOTE: When parties present to the registrar of
materials built thereon, upon which date she property a document of chattel mortgage, the
executed a document in the form of a registrar must record it even if, in his opinion, the
chattel mortgage to convey to the Standard object of the contract is real property. His duties are
Oil. Co. by way of mortgage both the purely ministerial in character, so long as the
leasehold interest in said lot and the proper fee is paid. The registrar only has the
building to which it stands. ministerial duty to record the chattel mortgage, and
he is not empowered to determine the nature of any
document sought to be registered as chattel
 After said document had been duly mortgage.
acknowledged and delivered, it was then
presented to Joaquin Jaramillo, Register of
Deeds of the City of Manila, for the purpose
of having the same recorded. Upon
examination of the instrument, the Jaramillo
was of the opinion that it was not 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 the deed may be registered

in the chattel mortgage registry?

RULING:

 Yes, it may be registered. The duties of a

register of deeds in respect to the
registration of chattel mortgages are purely
of a ministerial character, and he is clothed
with no judicial or quasi-judicial power to
determine the nature of the property,
whether real or personal, which is the
subject of the mortgage. 

 Generally speaking, he should accept the

qualification of the property adapted 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 efficacy of the act of recording a chattel

mortgage consists in the fact that
registration operates as constructive notice
of the existence of the contract, and the
legal effects of the instrument must be
LEUNG YEE V. STRONG MACHINERY CO.
(Mixed property/Semi-movables)
FACTS:
 Compania Agricola bought rice-cleaning
machinery from Strong Machinery and
executed a chattel mortgage to secure
payment of the purchase price.
 The chattel mortgage (loan for a
manufactured home or other movable
personal property) deed included the
building wherein the machinery was
installed without referencing to the land on
which the building stood.
 Agricola failed to pay for the machinery, so
the mortgaged property (the building) was
sold by the sheriff in pursuance of the
mortgage instrument. The property was
bought in by Strong Machinery.
 The mortgage was registered in the chattel
mortgage registry and the sale of the
property to Strong Machinery in satisfaction
of the mortgage was annotated in the same
registry.
 Agricola executed a deed of sale of a piece
of land where the mortgaged building stood
in favor of Strong Machinery. However, this
deed was not registered
and does not reference to any building
erected on it.
 Around the time the chattel mortgage was
executed in favor of Strong Machinery,
Agricola executed another mortgage to
plaintiff Leung Yee upon the same building,
separate from the land upon which it stood,
to secure payment of the balance of
Agricola’s indebtedness to Leung Yee under
a construction contract.
 Agricola failed to pay Leung Yee, so Leung
Yee secured judgment for that amount and
levied execution upon the building. Leung
Yee bought the building in at the sheriff’s
sale and registered the certificate of sale in
the land registry of Cavite.
 When the execution was levied upon the
building, Strong Machinery (which
possessed the building), set up its claim of
title and demanded the property’s release
from the levy.
 Leung Yee instituted an action to recover
possession of the building from Strong
Machinery.
 The trial court ruled in favor of Strong
Machinery on the ground that Strong
Machinery registered its title to the building
(with the chattel mortgage registry) before
Leung Yee’s registration (with the land
registry).
 The court relied on Art. 1473, which states
that if a thing is sold to different vendees,
the ownership shall be transferred to the
one who may have first taken possession
thereof in good faith if it is personal
property. If real property, it shall belong to
the person who first recorded it in the
registry.
ISSUES:
 Whether or not the registration of a deed
of sale of a real property with a chattel
mortgage registry has any legal effect?
NO.
SC eventually ruled in favor of Strong
Machinery. 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 mortgage of
personal property executed in the manner
and form prescribed in the statute. Since the
building is real property, its sale annotated
in the Chattel Mortgage Registry cannot be
given the legal effect of registration in the
Registry of Real Property. The mere fact
that that the parties decided to deal with
the building as personal property does
not change its character as real property.
 Whether or not the fact that the parties
dealt with the building as personal
property changes its character as real
property? NO.
Strong Machinery must be the owner of
the property because it first took
possession of the property. Furthermore,
the building and land were sold to
Strong Machinery long before the
sheriff’s sale to Leung Yee.
When Leung Yee bought the building at
the sheriff’s sale and inscribed the same
in the Cavite land registry, Leung Yee
knew that Strong Machinery had already
bought the building from Agricola and
long possessed the same. Leung Yee,
therefore, was not a purchaser in good
faith. (Art. 1544 provides: If personal
property – grant ownership to person who
first possessed it in good faith o If real
property – grant ownership to person who
first recorded it in the registry § If no
inscription – grant ownership to person who
first possessed it in good faith § If no proof
of possession – grant to person who
presents oldest title (with good faith))
SC concluded that the prior decision in favor
of Strong Machinery cannot be sustained
because the original registration with the
chattel mortgage registry of the chattel
mortgage on the building had no legal
effect. However, SC opined that said
decision in favor of Strong Machinery must
be upheld in the end because Leung Yee,
having known that Strong Machinery took
first possession of the building, was not a
buyer in good faith.
NOTE: The building is real property;
therefore, its sale as annotated in the
Chattel Mortgage Registry cannot be given
the legal effect of registration in the Registry
of Real Property. In case such a building is
made the subject of a chattel mortgage, and
the mortgage is registered in the chattel
mortgage registry, the mortgage would still
 be void insofar as third persons are
concerned.
PRUDENTIAL BANK V. PANIS (SEMI
MOVABLE)
FACTS:
 Spouses Magcale initially secured a
loan from Prudential Bank amounting to
P70,000. Spouses Magcale executed a
real estate mortgage (1st REM) over a
residential building and occupancy right
of a lot in favor of Prudential Bank in
order to secure payment of the loans.
 Notably, Prudential Bank was
completely aware that spouses Magcale
already filed a Miscellaneous Sales
Application over the lot whose
possessory rights were mortgaged to
the bank.
 Later, the Sec. of Agriculture issued a
miscellaneous sales patent over the lot
supposedly mortgaged to Prudential
Bank. The lot now belongs to the
government.
 After the sales patent was issued, an
additional loan amounting to P20,000
was also secured by the spouses by
way of another REM (2nd REM)
covering the same properties.
 When the spouses failed to pay back
Prudential Bank, the bank extrajudicially
foreclosed both REMs.
 Despite the spouses’ request for the
sheriff to desist from pushing through
with the public auction sale, the
foreclosed properties were sold in an
auction sale.
 The lower court, however, declared the
REMs as null and void. So, Prudential
Bank filed a Motion for Reconsideration
before the lower court which was denied
for lack of merit.
ISSUES:
 Whether or not a valid REM can still
bind a building that is erected on a land
or lot belonging to the government?
YES; but only insofar as the 1st REM
for the P70k loan is concerned
because the 1st REM was executed
prior to the issuance of the sales
patent.
 Whether or not the second REM for the
P20k loan executed over the properties
after the sales patent was issued is
valid? NO; it is null and void under the
Public Land Act.
RULING:
 While a mortgage of land necessarily
includes, in the absence of
stipulation of the improvements
thereon, buildings, a building by itself
may be mortgaged apart from the
land on which it has been built. Such
a mortgage would still be a real
estate mortgage for the building
would still be considered immovable
property even if dealt with separately
and apart from the land.
 A building by itself may be validly
mortgaged apart from the land/lot
upon which it has been built. This
mortgage is still a valid REM because
the building is still considered
immovable/real property even if
considered as separate and apart
from the land/lot.
 The inclusion of building in Art. 415
(immovable property) which is separate
and distinct from “land” means that a
building is an immovable property by
and in itself.
 Hence, the first real estate mortgage
executed by Magcale (for the P70k
loan) on his own building erected on
the land belonging to the government
is still a valid REM.
 However, the second mortgage
executed over the properties for the
additional loan of P20k after the sales
patent was already issued by the Sec.
of Agriculture is null and void
because it is prohibited by the Public
Land Act. The Act prohibits the
mortgaging of land or any improvement
thereon (i.e. building) already acquired
under the Public Land Act.
 On the contrary, the first REM (for the
P70k loan) is completely valid because it
was executed before the issuance of the
sales patent and is not prohibited by the
Public Land Act.
NOTE: While a mortgage of land necessarily
includes, in the absence of stipulation of the
improvements thereon, buildings, still a building
by itself may be mortgaged apart from the land
on which it has been built. Such a mortgage
would still be a real estate mortgage for the
building would still be considered immovable
property even if dealt with separately and apart
from the land.
BOARD OF ASSESSMENT APPEALS
V. MERALCO (Semi Movable)
FACTS:
 Act No. 484 authorized the Municipal
Board of Manila to grant a franchise to
construct, maintain, and operate and
electric street railway and power system
in Manila and its suburbs to the most
favorable bidder.
 One Charles Swift was awarded the
franchise, and Meralco became the
transferee and owner of said franchise.
 Meralco constructed steel towers from
its hydroelectric plant in Laguna to
Manila – 40 of which are within Quezon
City
 The Quezon City Assessor declared 3
steel towers for real property tax, and
the Board of Assessment Appeals
required Meralco to pay around P11k as
real property tax on the towers.
 Meralco paid the amount under protest
and filed a petition for review before the
CTA.
 The CTA decided in favor of Meralco
and ordered the cancellation of the tax
declarations. The City Treasurer of
Quezon was also ordered to refund the
P11k paid by Meralco.
 BoAA’s Motion for Reconsideration was
denied by the lower court, so the
present petition for review was filed
before the Court.
 CTA, in support of Meralco, held that:
(1) The steel towers are personal
properties and thus not subject to real
property tax; and (2) The steel towers
are “poles” which are declared tax-
exempt under Meralco’s franchise.
conveyance of electric current from the
source to its consumers.
 “Poles” are defined not by their material,
location, or characteristics but by the
use/purpose to which they are
dedicated.
 Jurisprudence is settled on the fact
that steel supports or towers which
convey electric power to consumers
can be denominated as electric poles.
 The steel towers of an electric
company do not constitute real
property for the purposes of real
property tax.
 Assuming arguendo that Meralco’s steel
towers are not poles, the said towers
cannot be considered as real
properties subject to real property tax
because they don’t fall under any of
the categories in Art. 415 of the Civil
Code. To wit: 415[1] – The towers are
not buildings or constructions adhered to
soil; they are also not constructions
analogous to buildings nor adhering to
soil. These towers are removable and
merely attached. and while in general,
immovable property is that which is fixed
in a definite place, there are still many
exceptions to the general criterion.

ISSUES:
 Whether or not Meralco’s steel towers
are personal properties/“poles” which
are tax-exempt under Meralco’s
franchise? YES.
 Assuming arguendo that Meralco’s steel
towers are not “poles”, are the steel
towers to be considered real properties
that can be subjected to real property
tax? NO.

RULING:
 The word “poles” as used in Act No.
484 and in Meralco’s franchise
should not be restricted and
narrowed down as to defeat the
purpose of the franchise. “Poles”
should be understood as a part of the
electric power system of Meralco for the
SERG’S PRODUCTS V. PCI LEASING  In the present case, the Lease
(Eliminated Real Rights) Agreement clearly provides that the
machines are to be considered as
FACTS: personal properties. As a result, Serg’s
 Serg’s Products and PCI Leasing Products is estopped from denying the
entered into a lease agreement characterization of the machines as
providing that the machines to be leased personal properties.
by Serg’s were to be considered as  However, the Court ruled that the
personal properties, even if the characterization of the machines as
machines are essential and principle personal properties is only good and
elements in the chocolate-making binding insofar as the contracting
business of Serg’s Products. parties are concerned. Innocent third
 The Agreement between Serg’s and PCI parties are not affected by such
clearly provided that the property shall stipulation.
remain personal property even if affixed
or attached to real property or any
building.
 PCI Leasing, later, filed with the RTC a
complaint for sum of money and writ of
replevin to recover the personal
properties.
 The lower court judge ruled in favor of
PCI and issued the sought writ of
replevin. The sheriff proceeded to the
factory of Serg’s and started seizing the
machineries
 On the other hand, Serg’s contended
that the machines were real properties
because they were immobilized by
destination or purpose – notwithstanding
the prior agreement to the contrary (that
the machineries were personal
properties). Hence, Serg’s contended
that the writ of replevin shouldn’t be
given effect.
 The case reached CA, and the CA ruled
that the machines were personal
properties because they were only
leased to Serg’s, and the contract
showed clearly the parties’ intention to
consider the machines as personal
properties.

ISSUE: Whether or not the machines became

real properties by virtue of immobilization (by
destination or purpose)? NO.

RULING:
 It is true that the machineries, ideally,
should be considered immovable
because they were essential for the
chocolatemaking industry and were
immobilized by destination.
 However, the contracting parties may
validly stipulate that a real property
be considered as personal property.
After agreeing to this, the parties are
estopped from claiming otherwise
(that the machines are real
properties).
CALTEX V. BOARD OF ASSESSMENT lessee. The sheriff, in that case, rightly
APPEALS treated the machinery as personal
property.
FACTS:  The question here is whether the
 Caltex installed various tanks, pumps, machineries permanently affixed by
car washers, hoists, air compressors, Caltex to its gas stations and pavement
and tire inflators in its gas stations (which are undoubtedly taxable realty)
located on leased land. should be subject to realty tax. This
 The aforementioned machines were question is different from the issue
attached to the pavement covering the raised in Davao Sawmills.
entire lot.  CBAA v. Meralco doesn’t apply to this
 The machines were also loaned by case either because the question raised
Caltex to gas station operators under there was whether or not Meralco’s steel
lease contracts. They were to be towers are considered poles within Par.
returned to Caltex upon demand. 9 of its franchise, which exempts poles
from taxation. The steel towers were
 The City Assessor of Pasay treated the
then considered personalty because
machines as taxable realty and imposed
they can be easily moved from place to
real taxes upon them.
place when unscrewed and dismantled.
 The City Board of Tax Appeals ruled
that they are personal properties and
are not subject to realty tax. However,
the Central Board of Assessment
Appeals reversed CBTA’s ruling and
found that the machines were real
properties under the Real Property Tax
Code and P.D. 464.
 CBAA also ruled that the definitions of
real and personal property in Arts. 415
and 416 of the Civil Code cannot apply
in this case.
 *Hence, this case was elevated by
Caltex to the Supreme Court.

ISSUE:
 Whether or not the machines leased to
the gas stations are real properties
subject to realty tax? YES.
 Whether or not Davao Sawmills ruling
applies to this case? NO.
 Whether or not CBAA v. Meralco ruling
applies to this case? NO.

RULING:
 Equipment and machinery necessary
to the operation of a gas station and
which are attached or affixed
permanently thereto or embedded
therein are improvements and
machineries that are taxable under
the Assessment Law and Real
Property Tax Code.
 Improvements on land are commonly
taxed as realty even if, for other
purposes, they might be considered
personalty.
 Davao Sawmills does not apply to the
present case because the question in
Davao Sawmills involves whether or not
machinery installed by a lessee should
be regarded as real property for
purposes of execution against the