4. SIBAL V.

VALDEZ

FACTS:
As a first cause of action, plaintiff(Sibal) alleged that defendant deputy sheriff of the Province of
Tarlac, by virtue of a writ of execution issued by the Court of First Instance of Pampanga,
attached and sold to the defendant Emiliano J. Valdez the sugar cane planted by the plaintiff
and his tenants on seven parcels of land. Within one year from the date of the attachment and
sale the plaintiff offered to redeem said sugar cane and tendered to Valdez the amount
sufficient to cover the price paid, interest and any assessments or taxes which he may have
paid after the purchase, and the corresponding interest. But Valdez refused to accept the
money and to return the sugar cane to the plaintiff.

As a second cause of action, plaintiff Valdez was trying to harvest palay from 4 out of 7 parcels
of land. So, Sibal filed for preliminary injunction to prevent Valdez from distributing the lands,
harvesting and selling the sugar canes, and palay. The writ for preliminary injunction was issued
in favor of Sibal and prevented Valdez from planting and harvesting the lands. Valdez appealed,
claiming that he was the rightful owner of many of the alleged lands and that he also owns the
crops growing therefrom. The court awarded Valdez P9k because according to the court, Sibal,
unduly denied Valdez the right to plant in his land and thus prevented him from gaining profit.

ISSUE: Whether the sugar cane is personal o real property, considering that Sibal’s sugar cane
came from land that now belongs to Valdez?

HELD:
The sugarcane in this case is personal property and is subject to attachment and sale.

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

Art. 415, has been modified by the Code of Civil Procedure and Act No. 1508, such that for the
purpose of attachment, execution, and Chattel Mortgage Law, ungathered products
partake the nature of personal property.

7. PRUDENTIAL BANK V. PANIS

FACTS:
Spouses Magcale secured a loan from Prudential Bank. To secure payment, they executed a
real estate mortgage over a residential building. The mortgage included also the right to occupy
the lot and the information about the sales patent applied for by the spouses for the lot to which
the building stood. After securing the first loan, the spouses secured another from the same
bank. To secure payment, another real estate mortgage was executed over the same
properties. The Secretary of Agriculture then issued a Miscellaneous Sales Patent over the land
which was later on mortgaged to the bank. The spouses then failed to pay for the loan and the
REM was extrajudicially foreclosed and sold in public auction despite opposition from the
spouses. The respondent court held that the REM was null and void.

ISSUE: Whether or not a valid REM mortgage can be constituted on the building erected on the
belonging to another.

HELD:
Yes. A real estate mortgage can be constituted on the building erected on the land belonging to
another. The inclusion of building distinct and separate from the land in the Civil Code. 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. As to the second mortgage, it was done after the sales
patent was issued and thus prohibits pertinent provisions of the Public Land Act.

NOTE:
sales application- for residential purposes
sales patent- for agricultural purposes

8. TSAI V. CA

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. EVERTEX's
failed to meet its obligation. PBCom, commenced extrajudicial foreclosure of the mortgage,
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.

HELD:
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 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.

9. DAVAO SAWMILL V. CASTILLO

FACTS:
Davao Saw Mill Co., Inc., a holder of a lumber concession, has operated sawmill in a land which
it does not own. The company erected a building therein which housed the machinery used by
it. In the lease contract between the sawmill company and the owner of the land, it has been
agreed that after the lease period or in case the company should leave or abandon the land
leased before the said period, ownership of all the improvements and buildings except
machineries and accessories, made by the company shall pass to the owner of the land without
any obligation on its part to pay any amount for said improvements and buildings.

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 favor of the company.

ISSUE: Whether or not the subject properties are personal in nature?

HELD:
YES. 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.

NOTE: The machinery placed by the tenant for use on the land of the landlord should be
considered personal property because the machinery was not placed on the land (tenement) by
the owner of the land. Immobilization by destination or purpose, generally, cannot be made by a
person whose possession of the property (tenement) is only temporary. Otherwise, we will be
forced to presume that the tenant intended to permanently give the machinery away in favor of
the landlord. Machinery which is movable by nature becomes immobilized when placed in a
plant by the owner of the property or plant (tenement), but not when so placed by a tenant, a
usufructuary, or a person having only a temporary right – unless such person acted as the agent
of the owner.

10. BOARD OF ASSESSMENT APPEALS V. MERALCO

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’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/S: Whether or not the steel towers of an electric company constitute real property for the
purposes of real property tax.
HELD:
NO, 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.
Petitioner is not engaged in an industry or works on the land in which the steel supports or
towers are constructed.

11. CALTEX PHILS INC., V. BOARD OF ASSESSMENT APPEALS

FACTS:
Caltex installed various tanks, pumps, car washers, hoists, air compressors, and tire
inflators in its gas stations located on leased land. The machines were attached to the
pavement covering the entire lot and were also loaned by Caltex to gas station
operators under lease contracts. They were to be returned to Caltex upon demand.

The City Assessor of Pasay treated the machines as taxable realty and imposed real
taxes upon them. 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.

ISSUE: Whether or not the machines leased to the gas stations are real properties
subject to realty tax?

HELD:
Yes. 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 personal properties.

13. SERG’S PRODUCTS V. PCI LEASING

FACTS:
Serg’s Products and PCI Leasing entered into a lease agreement providing that the machines to
be leased by Serg’s were to be considered as personal properties, even if the machines are
essential and principle elements in the chocolate-making business of Serg’s Products. The
Agreement between Serg’s and PCI clearly provided that the property shall 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.

HELD:
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). In the present case, the Lease Agreement clearly provides that the machines
are to be considered as personal properties. As a result, Serg’s Products is estopped from
denying the characterization of the machines as personal properties. However, the Court ruled
that the characterization of the machines as personal properties is only good and binding insofar
as the contracting parties are concerned. Innocent third parties are not affected by such
stipulation.

14. MERALCO V. CENTRAL BOARD OF ASSESSMENT APPEALS

FACTS:
Petitioner owns two oil storage tanks, made of steel plates wielded and assembled on the spot.
Their  bottoms  rest  on  a  foundation  consisted  of compacted earth, sand pad as immediate
layer, and asphalt stratum as top layer.  The tanks are within the Caltex refinery compound.
They are used for storing fuel oil for Meralco's power plants.

The municipal treasurer of Batangas made an assessment for realty tax on the two tanks, based
on the report of the Board of Assessors. Meralco contends that the said oil storage tanks do not
fall within any of the kinds of real property enumerated in article 415 of the Civil Code the tanks
are not attached to the land and that they were placed on leased land, not on the land owned by
Meralco.

ISSUE: Whether or not the oil storage tanks constitute real property for the purposes of real
property tax.

HELD:
YES. While the two storage tanks are not embodied in the land, they may nevertheless
be considered as improvements in the land, enhancing its utility and rendering it useful to the oil
industry. It is undeniable that the two tanks have been installed with some degree of
permanence as receptacles for the considerable quantities of oil needed by Meralco for its
operations.
 
For purposes of taxation, the term real property may include things, which should generally
be considered as personal property. It is a familiar phenomenon to see things classified as
real property for purposes of taxation which on general principle may be considered as personal

property.