Associated Insurance and Surety Company v.

Iya
103 SCRA 972
DOCTRINE:A building is an immovable property irrespective
of where or not said structure and the land on which it is
adhered to belong to the same owner.
FACTS:
Spouses Adriano Valino and Lucia A. Valino own a house of
strong materials. They filed a bond of P 11,000.00 subscribed
by the Associated Insurance and Surety Co., Inc. and as a
counter-guaranty, the spouses Valino executed an alleged
chattel mortgage on the aforementioned house in favor of the
surety company.
The parcel of land on which the house is erected was still
registered in the name of the Philippine Realty Corporation
but was able to obtain the same from them after full payment
of the purchase price. The Valinos acquired another loan from
Isabel Iya for P12,000.00, executing a real estate mortgage
over the house and lot. However, they were unable to pay off
their other loan which caused the foreclosure of the chattel
mortgage. The surety company was awarded the land as the
highest bidder in the auction but later on discovered that the
land was subject to a real estate mortgage. The surety company
then requested that the house and lot be excluded from the
real estate mortgage. Iya, in her answer, said that she had a
real right over the property and that the chattel mortgage on
which the foreclosure was based should be declared null and
void for non-compliance with the form required by law. The
CA ruled that the foreclosure of the real estate mortgage is
limited to the land alone and they awarded the structure to the
surety company saying that the house is a personal property
and may be subject to chattel mortgage.
ISSUE:
Which of the mortgages should have preference?

HELD:
It was held in Lopez vs. Orosa that the building is an
immovable itself, separate and distinct from the land. 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.
Only personal properties can be the subject of a chattel
mortgage and since the structure in this case is an immovable,
it cannot subject to a chattel mortgage. Therefore the chattel
mortgage and the sale on which it was based should be
declared null and void. Also, while it is true that said document
was registered in the Chattel Mortgage Register of Rizal, this
act produced no effect whatsoever for where the interest
conveyed is in the nature of a real property, the registration of
the document in the registry of chattels is merely a futile act
which would produce no legal effect insofar as the building is
concerned.

Leung Yee v. Strong Machinery Co.

G.R. No. L-11658
DOCTRINE: 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.
FACTS:
Compaia Agricola Filipina bought several rice-cleaning
machinery from a machinery company, Frank L. Strong
Machinery Company and executed a chattel mortgage to
secure payment of the purchase price. The deed of mortgage
includes the building where the machinery was installed
without any reference to the land on which it stood. Since
Compaia Agricola Filipina failed to pay when due, the
mortgaged property was sold by the sheriff and was bought by
the machinery company.
Few weeks later, Compaia Agricola Filipina executed a deed
of sale of the land where the building stood to the machinery
company. In effect, the machinery company possessed the
building when the sale took place and continued its possession
ever since.
When the chattel mortgage was executed, Compaia Agricola
Filipina executed another mortgage in favor of Yee over the
building to pay its debt to the machinery company. Since
Compaia Agricola Filipina failed to pay when due, Yee
secured a judgment to levy execution upon the building and
bought the building at the sheriffs sale; Yee secured the
sheriffs certificate of sale and registered it in the land registry.
When the execution was levied upon the building, the
machinery company filed with the sheriff a sworn statement

setting up its claim of title and demanding the release of

property from the levy. On the other hand, Yee filed an action
to recover possession of the building from the machinery
company. Trial court ruled in favor of the machinery company
on the basis of Article 1473 of the Civil Code; it ruled that the
machinery company registered the title to the building prior to
the registration date of Yees certificate.
ISSUE:
Whether or not the nature of property is changed by its
registration in the Chattel Mortgage Registry. -- NO
HELD:
The registry under Article 1473 of the Civil Code refers to
registry of real property and the annotation or inscription of a
deed of sale of real property in a chattel mortgage registry
cannot be given the legal effect of an inscription in the registry
of real property.
The Chattel Mortgage Law contemplates mortgages of
personal property. The sole purpose and object of the chattel
mortgage registry is the registration of personal property
mortgages executed in the manner and form prescribed in the
statute.
In this case, the building where the rice-cleaning machinery
was installed was real property. The mere fact that the parties
dealt with it as separate and apart from the land on which it
stood does not change its character as real property. Neither
the original registry of the building in the chattel mortgage nor
the annotation of sale of the mortgaged property in the registry
had any effect on the buildings nature as immovable property.

Tsai v. CA
G.R. No. 120098
DOCTRINE: Even if the properties are immovable by nature,
nothing detracts the parties from treating them as chattels to
secure an obligation under the principle of estoppel.
FACTS:

EVERTEX secured a loan from PBC, guaranteed by real

estate and chattel mortgage over a parcel of land where the
factory stands, and the chattels located therein, as included in
a schedule attached to the mortgage contract. another loan was
obtained secured by a chattel mortgage over properties with
similar descriptions listed in the first schedule.

During the date of execution of the second mortgage.

EVERTEX purchased machineries and equipment.

Due to business reverses, EVERTEX filed for

insolvency proceedings. It failed to pay its obligation and thus,
PBC initiated extrajudicial foreclosure of the mortgages.

PBC was the highest bidder in the public auctions,

making it the owner of the properties. It then leased the
factory premises to Tsai.

Afterwards, EVERTEX sought the annulment of the

sale and conveyance of the properties to PBC as it was
allegedly a violation of the insolvency law.

The RTC held that the lease and sale were irregular as it
involved properties not included in the schedule of the
mortgage contract.
ISSUE:
Whether or not the (immovable) properties in question can be
entered into a chattel mortgage. -- YES
HELD:
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, as

in the case at bar. While it is true that the controverted

properties appear to be immobile, a perusal of the contract of
real estate mortgage and chattel mortgage by the parties gives
a contrary indication. Both the trial and appellate courts show
that the intention was to treat the machineries as movables or
personal property.
Assuming that the properties were considered immovables,
nothing detracts the parties from treating it as chattels to
secure an obligation under the principle of estoppel.

Mindanao Bus Co. v. City Assessor and Treasurer

G.R. No. L-17870

appealed to the Court of Tax Appeals (CTA) who sustained the

respondent city assessor's ruling.

DOCTRINE: Movable equipment, to be immobilized in

contemplation of Article 415 of the Civil Code, must be the
essential and principal elements of an industry or works which
are carried on in a building or on a piece of land. Thus, where
the business is one of transportation, which is carried on
without a repair or service shop, and its rolling equipment is
repaired or serviced in a shop belonging to another, the tools
and equipment in its repair shop which appear movable are
merely incidentals and may not be considered immovables,
and, hence, not subject to assessment as real estate for
purposes of the real estate tax.

ISSUE:
Whether or not the machineries and the equipments are
considered immobilized and thus subject to a realty tax. -- NO

FACTS:
Petitioner is a public utility solely engaged in transporting
passengers and cargoes by motor trucks, over its authorized
lines in the Island of Mindanao, collecting rates approved by
the Public Service Commission.
The petitioner 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.

HELD:
The Supreme Court held a decision for the petition for review
to be set aside and the equipments in question declared not
subject to assessment as real estate for the purposes of the real
estate tax.
The law that governs the determination of the question at issue
is as follows:
Art. 415. The following are immovable property:
xxx

xxx

xxx

(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; (Civil Code of the Phil.)

These machineries have never been or were never used as

industrial equipments to produce finished products for sale,
nor to repair machineries, parts and the like offered to the
general public indiscriminately for business or commercial
purposes for which petitioner has never engaged in,

Aside from the element of essentiality the above-quoted

provision also requires that the industry or works be carried on
in a building or on a piece of land. Thus in the case of
Berkenkotter vs. Cu Unjieng, supra, the "machinery, liquid
containers, and instruments or implements" are found in a
building constructed on the land. A sawmill would also be
installed in a building on land more or less permanently, and
the sawing is conducted in the land or building.

The City Assessor of CDO then assessed a P4,400 realty tax on

said machineries and repair equipment. This was then

But in the case at bar the equipments 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 equipments may not, therefore,
be deemed real property.
Resuming what we have set forth above, we hold that the
equipments in question are not absolutely essential to the
petitioner's transportation business, and petitioner's business
is not carried on in a building, tenement or on a specified land,
so said equipment may not be considered real estate within the
meaning of Article 415 (c) of the Civil Code.
Said equipments are not considered immobilized as they are
merely incidental, not essential and principal to the business of
the petitioner. The transportation business could be carried on
without repair or service shops of its rolling equipment as they
can be repaired or services in another shop belonging to
another

Davao Sawmill Co. v. Castillo

G.R. No. 40411,
DOCTRINE: Generally, machinery becomes immobilized when
placed by the owner of the plant or property. This rule does not
apply should the machinery be placed by any other person
such as a tenant or usufructuary.
FACTS:

The petitioner company operates a sawmill in barrio

Tigatu, Davao.

Said facility contained both movable and immovable

property (machines and other such implements).

However, the land on which it is situated belongs to

another person.

The parties executed a lease contract providing that

upon the expiration or termination of such lease, the following
shall happen:
o
The ownership of all structures and improvements
introduced by the petitioner company shall be transferred to
the respondents without any cost or obligation to pay.
o
The machines and their accessories shall not be
included in said transfer.

It was noted by the court that in a previous case

between the two parties, judgment was rendered against the
petitioner company upon which a writ of execution was
brought against its machines (as personalty) in favor of
Castilllo, et al.

Additionally, the records of the current case reflected

that the petitioner company had treated its machinery as
personal property by executing chattel mortgages on them in
favor of third persons.

Petitioner company contends that its machines are

immovable under the first and fifth paragraphs of Article 334
(now Article 415) of the Civil Code.
ISSUE:

W/N the machines of the petitioner company are movable or

immovable property.
HELD:
The machines are movable.
The court observed that the petitioner company failed to
register its protest at the time its machines were sold.
Generally, this inaction would be inconclusive but it is
indicative of the intention impressed upon the property in
question.
This is so because while machines are generally movable
property, they may nevertheless be immobilized by
destination or purpose subject to several conditions.
This conclusion finds its ground under the fifth paragraph of
Article 415. Here, machinery becomes immobilized when
placed by the owner of the plant or property. This rule does not
apply should the machinery be placed by any other person
such as a tenant or usufructuary.
Applying the rule to the case on hand, the machinery was
placed by the petitioner company who was merely a lessee. As
such, the equipment was never immobilized in the first place.

Makati Leasing and Financial

Wearever Textile Mills, Inc.
G.R. No. L-58469

Corporation

v.

DOCTRINE: 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.
FACTS:
The private respondent Wearever Textile Mills, Inc.,
discounted and assigned several receivables with the former
under a Receivable Purchase Agreement in order to obtain
financial accommodations from herein petitioner Makati
Leasing and Finance Corporation. 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 default, petitioner filed a petition for extrajudicial
foreclosure of the properties mortgage to it. 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.
Acting on petitioner's application for replevin, 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 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.
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 enfore the writ was to take the main
drive motor of said machinery. The appellate court rejected
petitioner's argument that private respondent is estopped from
claiming that the machine is real property by constituting a
chattel mortgage thereon.
ISSUE:
Whether or not the property in suit is real property NO. It is
a personal property
HELD:
Examining the records of the instant case, We find no logical
justification to exclude the rule out, as the appellate court did,
the present case from the application of the abovequoted
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.
In rejecting petitioner's assertion on the applicability of the
Tumalad doctrine, the Court of Appeals lays stress on the fact
that the house involved therein was built on a land that did not
belong to the owner of such house. But the law makes no
distinction with respect to the ownership of the land on which
the house is built and We should not lay down distinctions not
contemplated by law.
It must be pointed out that the characterization of the subject
machinery as chattel by the private respondent is indicative of
intention and impresses upon the property the character
determined by the parties. As stated in Standard Oil Co. of
New York v. Jaramillo, 44 Phil. 630, it is undeniable that the
parties to a contract may by agreement treat as personal
property that which by nature would be real property, as long
as no interest of third parties would be prejudiced thereby.

Board of Assessment Appeals v. MERALCO

10 SCRA 68
DOCTRINE: The steel towers or poles of MERALCO are not
real properties because 1) they are not adhered to the soil, 2)
they are not attached to an immovable property and can be
dismantled without breaking or deteriorating the material and
3) they are not machineries nor instruments or implements
intended for the industry or works on the land
FACTS:
Generated by its hydroelectric plant, MERALCOs electric
power is transmitted from Laguna to Manila through electric
transmission wires. 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.
Three steel towers were the subject of this dispute. When
inspected, the findings disclose that there was no concrete
foundation but there was adobe stone underneath. Further, it
could not be ascertained whether said adobe stone was
purposely or not.
From this, the City Assessor of Quezon City declared the steel
towers subject to real property tax. MERALCO, however,
protested the assessment saying that the steel towers are
considered poles and according to their franchise, it is exempt
from taxation
ISSUE:
Whether or not the steel towers or poles of the MERALCO are
considered real properties, hence subject to real property tax?
HELD:

The Supreme Court held in the negative. The Court said that
the steel towers are personal properties. The Court based their
ruling on the enumeration of immovable properties in Art. 415
of the Civil Code.
First, the steel towers do not come within the objects
mentioned in par. 1, because they do not constitute buildings
or constructions adhered to the soil.Moreover, they are not
construction analogous to buildings nor adhering to the soil
because as per description, 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.
Second, they can not be included under paragraph 3 since 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. In
fact, each of these steel towers or supports consists of steel
bars joined together by means of bolts, which can be
disassembled by unscrewing the bolts and reassembled by
screwing the same.
Lastly, they do not fall under paragraph 5, as they are not
machineries, receptacles, instruments or implements. SC said
that even if they were machineries, receptacles, instruments or
implements, they are not intended for industry or works on the
land. MERALCO is not engaged in an industry or works in the
land in which the steel supports or towers are constructed.

Machinery & Engineering Supplies, Inc. v. CA

G.R. No. L-7057
DOCTRINE: When the machinery and equipment in question
appeared to be attached to the land, particularly to the
concrete foundation of said premises, in a fixed manner, in
such a way that the former could not be separated from the
latter "without breaking the material or deterioration of the
object or that in order to remove said outfit, it became
necessary, not only to unbolt the same, but , also, to cut some
of its wooden supports and when, said machinery and
equipment were "intended by the owner of the tenement for an
industry" carried on said immovable and tended, it becomes
immovable property pursuant to paragraphs 3 and 5 of Article
415 of Civil Code of the Philippines.
FACTS:

On 13 March 1953, Machinery & Engineering Supplies,

Inc. (the Petitioner) filed a complaint for replevin in the
Court of First Instance (CFI) of Manila for the recovery of the
machinery and equipment sold and delivered to Ipo Limestone
Co., Inc and Dr. Antonio Villarama (the Respondents) at
their factory in Barrio Bigti, Norzagaray, Bulacan.

Upon application ex-parte of the Petitioner and upon

approval of its bond sum of P15,769.00, herein Respondent
Judge issued an order directing the Provincial Sheriff of
Bulacan to seize and take immediate possession of the
properties specified in the said order.

On 19 March 1953, two deputy sheriffs of Bulacan,

Ramon S. Roco and a crew of technician and laborers
proceeded to Bigti to carry out the CFIs order.

Leonardo Contreras, herein Respondent Companys

Manager met the sheriffs and handed the latter a letter
addressed to Atty. Leopoldo C. Paled, ex-officio Provincial

Sheriff of Bulacan, signed by the Respondent Companys

counsel, protesting against the seizure of the properties on the
ground that the same are not personal properties.

Roco and the deputy sheriffs contended that their duty

is ministerial and went ahead to the factory. At the factory,
Roccos attention was called to the fact that the equipment
could not possibly be dismantled without causing damages or
injuries to the wooden frames attached to them but Roco
insisted in dismantling the same on his own responsibility and
alleged that the bond was posted for such eventuality. Thus,
the deputy sheriffs directed that some of the machines
supports be cut.

On 20 March 1953, the Respondent Company filed an

urgent motion, with a counter-bond in the amount of P15,769
for the return of the properties seized by the sheriffs. On the
same day, the trial court issued an order, directing the
Provincial Sheriff of Bulacan to return the machinery and
equipment to the place where they were installed at the time of
seizure.

On 2 March 1953, the deputy sheriffs returned the said

properties by depositing them along the road near the quarry
of the Respondent Company, without inventory and reinstallation in its former position and replacing the destroyed
posts, which rendered its use impracticable.

On 23 March 1953, Respondents counsel asked the

provincial sheriff if the machinery and equipment dumped on
the road would be re-installed to their former position and
condition. The next day, the provincial sheriff filed an urgent
motion in court manifesting the Roco had been asked to
furnish the sheriffs office with the expenses, laborers,
technical men and equipment to carry into effect the courts
order, among other things but that Roco absolutely refused
and asking the Court that Respondent Company be ordered to

provide the required aid or relieve the sheriff of the duty of

complying to the said order.

On 30 March 1953, the trial court ordered the

provincial sheriff and the Petitioner Company to reinstate the
machinery and equipment removed by them in their original
condition. An urgent motion of the provincial sheriff dated 15
April 1953 requesting for an extension was denied and on 4
May 1953, the trial court ordered the Petitioner Company to
furnish the provincial sheriff with the necessary funds and
technical crew and laborers to reinstate the machinery and
equipment.

The case was appealed before the Court of Appeals but

the latter dismissed the same for lack of merit.

Hence this petition filed before the Supreme Court (the

SC). The Petitioner argued that the respondent judge had
completely disregarded his manifestation that the machinery
and equipment seized were and still are the Petitioner's
property until fully paid for and such never became
immovable. The question of ownership and the applicability of
Art. 415 of the new Civil Code are immaterial in the
determination of the only issue involved in this case.
ISSUE:
Whether the machineries and equipments can be considered
as personal properties subject to replevin. -- NO
HELD:
The SC held that the special civil action known as replevin,
governed by Rule 62 of Court, is applicable only to "personal
property". When the sheriff repaired to the premises of
respondent company, the machinery and equipment in
question appeared to be attached to the land, particularly to
the concrete foundation of said premises, in a fixed manner, in
such a way that the former could not be separated from the

latter "without breaking the material or deterioration of the

object." Hence, in order to remove said outfit, it became
necessary, not only to unbolt the same, but, also, to cut some
of its wooden supports. Moreover, said machinery and
equipment were "intended by the owner of the tenement for an
industry" carried on said immovable and tended." For these
reasons, they were already immovable property pursuant to
paragraphs 3 and 5 of Article 415 of Civil Code of the
Philippines, which are substantially identical to paragraphs 3
and 5 of Article 334 of the Civil Code of Spain. As such
immovable property, they were not subject to replevin.

Punsalan, Jr. v. Vda. De Lacsamana

121 SCRA 331
DOCTRINE: Buildings are always immovable under the Civil
Code. Separate treatment by the parties of building from the
land in which it stood does not change the immovable
character of the building.
FACTS:
Punsalan was the owner of a piece of land, which he mortgaged
in favor of PNB. Due to his failure to pay, the mortgage was
foreclosed and the land was sold in a public auction to which
PNB was the highest bidder.
On a relevant date, while Punsalan was still the possessor of
the land, it secured a permit for the construction of a
warehouse.
A deed of sale was executed between PNB and Punsalan. This
contract was amended to include the warehouse and the
improvement thereon. By virtue of these instruments,
respondent Lacsamana secured title over the property in her
name.
Petitioner then sought for the annulment of the deed of sale.
Among his allegations was that the bank did not own the
building and thus, it should not be included in the said deed.
Petitioners complaint was dismissed for improper venue. The
trial court held that the action being filed in actuality by
petitioner is a real action involving his right over a real
property.
ISSUE:
Whether or not the warehouse is an immovable and must be
tried in the province where the property lies.

HELD:
Warehouse claimed to be owned by petitioner is an
immovable or real property. Buildings are always immovable
under the Civil Code. A building treated separately from the
land on which it is 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 did not
change its character as immovable property.

Prudential Bank v. Panis

153 SCRA 390

Tumalad v. Vicencio
41 SCRA 143

FACTS:
Plaintiff-spouses Magcale secured two loans over a 2-storey
residential building.

DOCTRINE: The view that parties to a deed of chattel

mortgage may agree to consider a house as personal property
for the purposes of said contract, "is good only insofar as the
contracting parties are concerned. It is based, partly, upon the
principle of estoppel.

For failure of the plaintiffs to pay their obligation to defendant

Bank after it became due, the deed of the Real Estate Mortgage
were extrajudicially foreclosed.
ISSUE: WON a valid real estate mortgage can be constituted
on the building. -- YES
HELD:
Inclusion of building separate and distinct from land, in the
provision of law can only mean that a building is by itself an
immovable property. A building by itself may be mortgaged
apart from the land on which it has been built.

FACTS:
On 1 September 1955 defendants executed a chattel mortgage
in favor of plaintiffs over their house located at Quiapo,
Manila, which were being rented from Madrigal & Company,
Inc. The mortgage was registered in the Registry of Deeds of
Manila on 2 September 1955. The mortgage was executed to
guarantee a loan of P4,800.00 received from plaintiffs. It was
also agreed that default in the payment of any of the
amortizations, would cause the remaining unpaid balance to
become immediately due and Payable and the Chattel
Mortgage will be enforceable in accordance with the provisions
of Special Act No. 3135, and for this purpose, the Sheriff of the
City of Manila or any of his deputies is hereby empowered and
authorized to sell all the Mortgagor's property after the
necessary publication in order to settle the financial debts of
P4,800.00, plus 12% yearly interest, and attorney's fees.
When defendants defaulted in paying, the mortgage was
extrajudicially foreclosed, and the house was sold at public
auction pursuant to the said contract. As highest bidder,
plaintiffs were issued the corresponding certificate of sale.
Thereafter, plaintiffs commenced Civil Case No. 43073 in the
municipal court of Manila, praying, among other things, that
the house be vacated and its possession surrendered to them,
and for defendants to pay rent of P200.00 monthly from 27
March 1956 up to the time the possession is surrendered.
MTC granted petition.

Defendants, in their answers in both the municipal court and

court a quo impugned the legality of the chattel mortgage,
claiming that they are still the owners of the house. During the
pendency of the appeal to the Court of First Instance,
defendants failed to deposit the rent as ordered in the decision
of the municipal court. As a result, the court granted plaintiffs
motion for execution. However, the judgment regarding the
surrender of possession to plaintiffs could not be executed
because the subject house had been already demolished
pursuant to the order of the court in a separate civil case for
ejectment against the present defendants for non-payment of
rentals on the land on which the house was constructed.
ISSUE:
W/N the house may be a subject of a Chattel Mortgage. YES,
it may be the subject of a chattel mortgage.
HELD:
Defendants predicate their theory of nullity of the chattel
mortgage on the ground that the subject matter of the
mortgage is a house of strong materials, and, being an
immovable, it can only be the subject of a real estate mortgage
and not a chattel mortgage.
The rule about the status of buildings as immovable property is
that it is obvious that the inclusion of the building, separate
and distinct from the land, in the enumeration of what may
constitute real properties could only mean one thing that a
building is by itself an immovable property irrespective of
whether or not said structure and the land on which it is
adhered to belong to the same owner.
It is undeniable that the parties to a contract may by
agreement treat as personal property that which by nature
would be real property. The view that parties to a deed of
chattel mortgage may agree to consider a house as personal
property for the purposes of said contract, "is good only insofar

as the contracting parties are concerned. It is based, partly,

upon the principle of estoppel.
In a case, a mortgaged house built on a rented land was held to
be a personal property, not only because the deed of mortgage
considered it as such, but also because it did not form part of
the land for it is now settled that an object placed on land by
one who had only a temporary right to the same, such as the
lessee or usufructuary, does not become immobilized by
attachment. Hence, if a house belonging to a person stands on
a rented land belonging to another person, it may be
mortgaged as a personal property as so stipulated in the
document of mortgage. It should be noted, however that the
principle is predicated on statements by the owner declaring
his house to be a chattel, a conduct that may conceivably estop
him from subsequently claiming otherwise.
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
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 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,
because it is the defendants themselves, as debtorsmortgagors, who are attacking the validity of the chattel
mortgage in this case, the doctrine of estoppel therefore
applies to the defendants, having treated the subject house as
personalty.

Sergs Products and Goquiola v. PCI Leasing and

Finance
338 SCRA 499
DOCTRINE: After agreeing to a contract stipulating that a real
or immovable property be considered as personal or movable,
a party is estopped from subsequently claiming otherwise.
Hence, such property is a proper subject of a writ of replevin
obtained by the other contracting party.
FACTS:
PCI Leasing and Finance, Inc. filed a complaint with the RTC
for a sum of money with an application for a writ of replevin.
Upon an ex-parte application of PCI Leasing, respondent 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.
Sergs filed a motion for special protective order. This motion
was opposed by PCI Leasing on the ground that the properties
[were] still personal and therefore still subject to seizure and a
writ of replevin.
In their Reply, petitioners asserted that the properties sought
to be seized were immovable as defined in Article 415 of the
Civil Code, the parties agreement to the contrary
notwithstanding. They argued that to give effect to the
agreement would be prejudicial to innocent third parties. They
further stated that PCI Leasing was estopped from treating
these machineries as personal because the contracts in which
the alleged agreement were embodied were totally sham and
farcical.
Citing the Agreement of the parties, the appellate court held
that the subject machines were personal property, and that
they had only been leased, not owned, by petitioners. It also

ruled that the words of the contract are clear and leave no
doubt upon the true intention of the contracting parties.
ISSUE:
Whether or not the machineries purchased and imported by
SERGS became real property by virtue of immobilization.
HELD:
The machineries herein are real properties but are considered
personal by the parties agreement.
The Court will resolve whether the said machines are personal,
not immovable, property which may be a proper subject of a
writ of replevin. Rule 60 of the Rules of Court provides that
writs of replevin are issued for the recovery of personal
property only. Section 3 thereof reads:
SEC. 3. Order. -- Upon the filing of such affidavit and
approval of the bond, the court shall issue an order and the
corresponding writ of replevin describing the personal
property alleged to be wrongfully detained and requiring the
sheriff forthwith to take such property into his custody.
On the other hand, Article 415 of the Civil Code enumerates
immovable or real property as follows:
ART. 415. The following are immovable property:
x x x....................................x x x....................................x x x
(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;
x x x....................................x x x....................................x x x

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. Indisputably, 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. In that sense, petitioners are correct in arguing that
the said machines are real, not personal, property pursuant to
Article 415 (5) of the Civil Code.
Be that as it may, we disagree with the submission of the
petitioners that the said machines are not proper subjects of
the Writ of Seizure.
The Court has held that contracting parties may validly
stipulate that a real property be considered as personal. After
agreeing to such stipulation, they are consequently estopped
from claiming otherwise. Under the principle of estoppel, a
party to a contract is ordinarily precluded from denying the
truth of any material fact found therein.
Hence, in Tumalad v. Vicencio, the Court upheld the intention
of the parties to treat a house as a personal property because it
had been made the subject of a chattel mortgage.
It should be stressed, however, that our holding -- that the
machines should be deemed personal property pursuant to the
Lease Agreement is good only insofar as the contracting
parties are concerned. Hence, while the parties are bound by
the Agreement, third persons acting in good faith are not
affected by its stipulation characterizing the subject machinery
as personal. In any event, there is no showing that any specific
third party would be adversely affected.

Manila Electric Co., v. Central Board of Assessment

Appeals
114 SCRA 273
DOCTRINE: Oil storage tanks were held to be taxable realty.
For purposes of taxation, the term "real property" may include
things which should generally be regarded as personal
property.
FACTS:
The case is about the imposition of the realty tax on two oil
storage tanks installed in 1969 by Manila Electric Company in
Batangas which it leased in 1968 from Caltex (Phil.), Inc. The
tanks are within the Caltex refinery compound, and are used
for storing fuel oil for Meralco's power plants.
According to Meralco, the storage tanks are made of steel
plates welded and assembled on the spot. Their bottoms rest
on a foundation consisting of compacted earth as the
outermost layer, a sand pad as the intermediate layer and a
two-inch thick bituminous asphalt stratum as the top layer.
The bottom of each tank is in contact with the asphalt layer.
Hence, it is not attached to its foundation.
On the other hand, according to the hearing commissioners of
the Central Board of Assessment Appeals (CBAA) states that
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.
The CBAA 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. They elevated the case to the SC.

ISSUE:
WON the storage tanks are considered improvements on real
property such that it is subject to real property tax. -- YES
HELD:
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 and, therefore, they cannot be categorized
as realty by nature, by incorporation, by destination nor by
analogy. Stress is laid on the fact that the tanks are not
attached to the land and that they were placed on leased land,
not on the land owned by Meralco.
The issue raised by Meralco has to be resolved in the light of
the provisions of the Assessment Law, Commonwealth Act No.
470, and the Real Property Tax Code, Presidential Decree No.
464 which took effect on June 1, 1974.
Section 2 of the Assessment Law provides that the realty tax is
due "on real property, including land, buildings, machinery,
and other improvements" not specifically exempted in section
3 thereof. This provision is reproduced with some modification
in the Real Property Tax Code which provides:
Sec. 38. Incidence of Real Property Tax. They 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.
The Code contains the following definition in its section 3:
k) Improvements is 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.

The SC holds that while the two storage tanks are 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. 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.
Oil storage tanks were held to be taxable realty in Standard Oil
Co. of New Jersey vs. Atlantic City, 15 Atl. 2nd 271.
For purposes of taxation, the term "real property" may include
things which should generally be regarded as personal
property. It is a familiar phenomenon to see things classed as
real property for purposes of taxation which on general
principle might be considered personal property (Standard Oil
Co. of New York vs. Jaramillo, 44 Phil. 630, 633).

Caltex Philippines v. Central Board of Assessment

Appeals
114 SCRA 296
DOCTRINE: Gasoline station equipment and machineries are
permanent fixtures for purposes of realty taxation.
FACTS:
Machines and equipment are loaned by Caltex to gas station
operators under an appropriate lease agreement or receipt. It
is stipulated in the lease contract that the operators, upon
demand, shall return to Caltex the machines and equipment in
good condition as when received, ordinary wear and tear
excepted.
The city assessor of Pasay City characterized the said items of
gas station equipment and machinery as taxable realty. The
city board of tax appeals ruled that they are personalty. The
assessor appealed to the Central Board of Assessment Appeals.
The Board said machines and equipment are real property
within the meaning of sections 3(k) & (m) and 38 of the Real
Property Tax Code, Presidential Decree No. 464, which took
effect on June 1, 1974, and that the definitions of real property
and personal property in articles 415 and 416 of the Civil Code
are not applicable to this case.
Caltex filed this certiorari petition wherein it prayed for the
setting aside of the Board's decision and for a declaration that t

he said machines and equipment are personal property not

subject to realty tax.
ISSUE:
Whether or not Gasoline station equipment and machineries
are permanent fixtures for purposes of realty taxation. -- YES
HELD:
The Supreme Court held that gasoline station equipment and
machineries are permanent fixtures for purposes of realty
taxation. Thus, they are subject to the real property tax. The
said equipment and machinery, as appurtenances to the gas
station building or shed owned by Caltex (as to which it is
subject to realty tax) and which fixtures are necessary to the
operation of the gas station, for without them the gas station
would be useless, and which have been attached or affixed
permanently to the gas station site or embedded therein, are
taxable improvements and machinery within the meaning of
the Assessment Law and the Real Property Tax Code.
The Central Board of Assessment Appeals did not commit a
grave abuse of discretion in upholding the city assessor's is
imposition of the realty tax on Caltex's gas station and
equipment.
WHEREFORE, the questioned decision and resolution of the
Central Board of Assessment Appeals are affirmed. The
petition for certiorari is dismissed for lack of merit.