Recommended Book: Commentaries and Jurisprudence on the Civil Code of the

Philippines, Vol. II, Arturo M. olentino

I. Preliminar! Provisions "Art #$#%
II. Classification of Propert! "Arts #$&'#$(%
a. Immova)le Propert! "Art #$&%
i. B! nature * #$& "$% + "(%
ii.B! incorporation * #$& ",%, "-%, + ".%
B! destination * #$& "#%, "&%, "/%, and "0%
iii.
B! analo1! * #$& "$2%
iv.
). Mova)le Propert! "Art #$/'#$(%
Cases
$. 3eun1 4ee vs. 5tron1 Machiner! -. Phil /##
,. 6avao 5a7mill vs. Castillo /$ Phil .20
-. Machiner! + 8n1ineerin1 5upplies vs. CA 0/ Phil .2
#. Associated Insurance vs. Isa)eli!a $2- Phil 0.,
&. Mindanao Bus Compan! vs. Cit! Assessor / 5 $0.
/. Bd. 9f Assessment Appeals vs. Meralco $2 5 /(
.. umalad vs. Vicencio #$ 5 $#-
(. Punsalan vs. 3acsamana $,$ 5 --$
0. Makati 3easin1 vs. :earever $,, 5 ,0/
$2. Meralco 5ecurities vs. Central Bd. 9f Assessment Appeals $$# 5 ,/2
$$. Meralco 5ecurities vs. Bd. 9f Assessment Appeals $$# 5 ,.-
$,. Calte; vs. Bd. 9f Assessment Appeals $$# 5 ,0/
$-. Prudential Bank vs. Panis $&- 5 -02
$#. Ben1uet Corp. vs. Central Bd. 9f Assessment Appeals ,$( 5 ,.$
$&. 5er1<s Products Inc vs. PCI 3easin1 and =inance Inc. --( 5 #00
$/. sai vs. CA -// 5 -,#
c. Importance and 5i1nificance of Classification
i. =rom the point of vie7 of
$. Criminal la7
,. =orms of contracts involvin1 mova)le or immova)les
-. Prescription
#. Venue
&. a;ation
ii.6ifferences )et7een real ri1hts and personal ri1hts
Leung Yee v. Strong Machinery Company
37 Phil. 644
=acts:
he >Compa?ia A1ricola =ilipina@ )ou1ht a considera)le Auantit! of rice'
cleanin1 machiner! compan! from the defendant machiner! compan!, and e;ecuted
a chattel mort1a1e thereon to secure pa!ment of the purchaseprice. It included in the
mort1a1e deed the )uildin1 of stron1 materials in 7hich the machiner! 7as installed,
7ithout an! reference to the land on 7hich it stood. he inde)tedness secured )! this
instrument not havin1 )een paid 7hen it fell due, the mort1a1ed propert! 7as sold )! the
sheriff, in pursuance of the terms of the mort1a1e instrument. A fe7 7eeks thereafter, on or
a)out the $#th of Januar!, $0$#, the >Compa?ia A1ricola =ilipina@ e;ecuted a deed of sale
of the land upon 7hich the )uildin1 stood to themachiner! compan!, )ut this deed of sale,
althou1h e;ecuted in a pu)lic document, 7as not re1istered. he machiner! compan! 7ent
into possession of the )uildin1 at or a)out the time 7hen this sale took place, that is to sa!,
the month of 6ecem)er, $0$-, and it has continued in possession ever since. At or a)out
the time 7hen the chattel mort1a1e 7as e;ecuted in favor of themachiner! compan!, the
mort1a1or, the >Compa?ia A1ricola =ilipina@ e;ecuted another mort1a1e to the plaintiff
upon the )uildin1, separate and apart from the land on 7hich it stood. Bpon the failure of
the mort1a1or to pa! the amount of the inde)tedness secured )! the mort1a1e, the plaintiff
secured Cud1ment for that amount, levied e;ecution upon the )uildin1, )ou1htit in at the
sheriff<s sale on or a)out the $(th of 6ecem)er, $0$#.his action 7as instituted )! the
plaintiff to recover possession of the )uildin1 from themachiner! compan!. he trial Cud1e
1ave Cud1ment in favor of the machiner! compan!. Dence, this appeal.
Issue:
:hether or not the trial Cud1e erred in sustainin1 the machiner! compan! on the 1round
that it had its title to the )uildin1 re1istered prior to the date of re1istr! of
plaintiff<s certificate.
Deld:
:e conclude that the rulin1 in favor of the machiner! compan! cannot )e sustained on the
1round assi1ned )! the trial Cud1e. :e are of opinion, ho7ever, that the Cud1ment must )e
sustained on the 1round that the a1reed statement of facts in the court )elo7 discloses that
neither the purchase of the )uildin1 )! the plaintiff nor his inscription of the
sheriff<s certificate of sale in his favor 7as made in 1ood faith, and that the machiner!
compan! must )e held to )e the o7ner of the propert! Article $&## of the Ee7 Civil Code, it
appearin1 that the compan! first took possession of the propert!F and further, that the
)uildin1 and the land 7ere sold to the machiner! compan!lon1 prior to the date of the
sheriff<s sale to the plaintiff. But it appearin1 that he had full kno7led1e of the machiner!
compan!<s claim of o7nership 7hen he e;ecuted the indemnit! )ond and )ou1ht in the
propert! at the sheriff<s sale, and it appearin1 further that the machiner! compan!<s claim
of o7nership 7as 7ell founded, he cannot )e said to have )een an innocentpurchaser for
value. De took the risk and must stand )! the conseAuencesF and it is in this sense that 7e
find that he 7as not a purchaser in 1ood faith.
he decision of the trial court is here)! affirmed.
Davao Sawmill Co. v. Castillo
/$ Phil. .20
=acts:
he 6avao 5a7 Mill Co., Inc., is the holder of a lum)er concession from the Government of
the PhilippineIslands. It has operated a sa7mill in thesi tio of Maa, )arrio of i1atu,
municipalit! of 6avao, Province of6avao. Do7ever, the land upon 7hich the )usiness 7as
conducted )elon1ed to another person. 9n theland the sa7mill compan! erected a )uildin1
7hich housed the machiner! used )! it. 5ome of theimplements thus used 7ere clearl!
personal propert!, the conflict concernin1 machines 7hich 7ere placedand mounted on
foundations of cement. In the contract of lease )et7een the sa7mill compan! and
theo7ner of the land there appeared the follo7in1 provision:
hat on the e;piration of the period a1reed upon, all the improvements and )uildin1s
introduced anderected )! the part! of the second part shall pass to the e;clusive
o7nership of the part! of the first part7ithout an! o)li1ation on its part to pa! an! amount
for said improvements and )uildin1sF also, in theevent the part! of the second part should
leave or a)andon the land leased )efore the time hereinstipulated, the improvements and
)uildin1s shall like7ise pass to the o7nership of the part! of the firstpart as thou1h the time
a1reed upon had e;pired: Provided, ho7ever, hat the machineries andaccessories are not
included in the improvements 7hich 7ill pass to the part! of the first part on thee;piration or
a)andonment of the land leased.
he trial Cud1e found that those properties 7ere personal in nature and as a conseAuence
a)solved the
defendants from the complaint.
Issue:
:hether or not the trial Cud1e erred in findin1 that the su)Cect properties are personal in
nature.
Deld:
As connectin1 up 7ith the facts, it should further )e e;plained that the 6avao 5a7 Mill Co.,
Inc., has on anum)er of occasions treated the machiner! as personal propert! )!
e;ecutin1 chattel mort1a1es in favorof third persons. 9ne of such persons is the appellee
)! assi1nment from the ori1inal mort1a1es.
Article --#, para1raphs $ and &, of the H9ldICivil Code, is in point. Accordin1 to the Code,
real propert!
consists of
$. 3and, )uildin1s, roads and constructions of all kinds adherin1 to the soilF
&. Machiner!, liAuid containers, instruments or implements intended )! the o7ner of an!
)uildin1 or landfor use in connection 7ith an! industr! or trade )ein1 carried on therein and
7hich are e;pressl! adaptedto meet the reAuirements of such trade of industr!.
Appellant emphasiJes the first para1raph, and appellees the last mentioned para1raph. :e
entertain nodou)t that the trial Cud1e and appellees are ri1ht in their appreciation of the
le1al doctrines flo7in1 fromthe facts.
As a rule, the machiner! should )e considered as personal, since it 7as not placed on the
land )! theo7ner of the land immo)iliJation )! destination on purpose cannot 1enerall! )e
made )! a person, 7hosepossession of the propert! is onl! temporar!, other7ise 7as 7ill
)e forced to presume that )e intended to1ive the propert! permanentl! to the o7ner of the
land. In this case, the! had stipulated that the land inthe end there)! )e acted as an a1ent
for the o7ner of the land. In this sense the propert! "machines foruse in the sa7mill%
)ecame real propert!.
he Cud1ment appealed from is here)! affirmed.
ngineering an! Machinery Corporation v. C"
#acts$
Pursuant to a contract, petitioner undertook to install air conditionin1 s!stem in private
respondent<s )uildin1. he )uildin1 7as later sold to the Eational Investment and
6evelopment Corporation 7hich took possession of it. Bpon EI6C<s failure to compl! 7ith
certain conditions, the sale 7as rescinded. EI6C reported to respondent that there 7ere
certain defects in the air conditionin1 s!stem. Respondent filed a complaint a1ainst
petitioner for non'compliance 7ith the a1reed plans and specifications. Petitioner moved to
dismiss the complaint on the 1round of the /'month prescription of 7arrant! a1ainst hidden
defects. Private respondent averred that the contract 7as not of sale )ut for a piece of
7ork, the action for dama1es of 7hich prescri)es after $2 !ears.
%ssue$
Is a contract for the fa)rication and installation of a central air'conditionin1 s!stem in a
)uildin1, one of KsaleK or Kfor a piece of 7orkKL
&el!$
A contract for a piece of 7ork, la)or and materials ma! )e distin1uished from a contract of
sale )! the inAuir! as to 7hether the thin1 transferred is one not in e;istence and 7hich
7ould never have e;isted )ut for the order, of the person desirin1 it. In such case, the
contract is one for a piece of 7ork, not a sale. 9n the other hand, if the thin1 su)Cect of the
contract 7ould have e;isted and )een the su)Cect of a sale to some other person even if
the order had not )een 1iven, then the contract is one of sale. he distinction )et7een the
t7o contracts depends on the intention of the parties. hus, if the parties intended that at
some future date an o)Cect has to )e delivered, 7ithout considerin1 the 7ork or la)or of the
part! )ound to deliver, the contract is one of sale. But if one of the parties accepts the
undertakin1 on the )asis of some plan, takin1 into account the 7ork he 7ill emplo!
personall! or throu1h another, there is a contract for a piece of 7ork.
Clearl!, the contract in Auestion is one for a piece of 7ork. It is not petitionerMs line of
)usiness to manufacture air'conditionin1 s!stems to )e sold Koff'the'shelf.K Its )usiness
and particular field of e;pertise is the fa)rication and installation of such s!stems as
ordered )! customers and in accordance 7ith the particular plans and specifications
provided )! the customers. Eaturall!, the price or compensation for the s!stem
manufactured and installed 7ill depend 1reatl! on the particular plans and specifications
a1reed upon 7ith the customers. he remed! a1ainst violations of the 7arrant! a1ainst
hidden defects is either to 7ithdra7 from the contract "redhi)itor! action% or to demand a
proportionate reduction of the price "accion quanti manoris%, 7ith dama1es in either case.
:hile it is true that Article $&.$ of the Civil Code provides for a prescriptive period of si;
months for a redhi)itor! action, a cursor! readin1 of the ten precedin1 articles to 7hich it
refers 7ill reveal that said rule ma! )e applied onl! in case of implied 7arrantiesF and
7here there is an e;press 7arrant! in the contract, as in the case at )ench, the prescriptive
period is the one specified in the e;press 7arrant!, and in the a)sence of such period, Kthe
1eneral rule on rescission of contract, 7hich is four !ears "Article $-(0, Civil Code% shall
appl!K. It 7ould appear that this suit is )arred )! prescription )ecause the complaint 7as
filed more than four !ears after the e;ecution of the contract and the completion of the air'
conditionin1 s!stem. Do7ever, a close scrutin! of the complaint filed in the trial court
reveals that the ori1inal action is not reall! for enforcement of the 7arranties a1ainst hidden
defects, )ut one for )reach of the contract itself. he 1overnin1 la7 is Article $.$&.
Do7ever, inasmuch as this provision does not contain a specific prescriptive period, the
1eneral la7 on prescription, 7hich is Article $$## of the Civil Code, 7ill appl!. 5aid
provision states, inter alia, that actions Kupon a 7ritten contractK prescri)e in ten "$2% !ears.
5ince the 1overnin1 contract 7as e;ecuted on 5eptem)er $2, $0/, and the complaint 7as
filed on Ma! (, $0.$, it is clear that the action has not prescri)ed. he mere fact that the
private respondent accepted the 7ork does not, ipso facto, relieve the petitioner from
lia)ilit! for deviations from and violations of the 7ritten contract, as the la7 1ives him ten
"$2% !ears 7ithin 7hich to file an action )ased on )reach thereof.
"ssociate! %nsurance ' Surety v. %ya
HG.R. Eos. 3'$2(-.'-(. Ma! -2, $0&(.I
8n Banc, =eli; "J%: 0 concur
Facts: 5pouses Adriano and 3ucia A. Valino 7ere the o7ners and possessors of a house
of stron1 materials constructed on 3ot -, Block (2 of the Grace Park 5u)division in
Caloocan, RiJal, 7hich the! purchased on installment )asis from the Philippine Realt!
Corporation. 9n / Eovem)er $0&$, to ena)le her to purchase on credit rice from the
EARIC, 3ucia Valino filed a )ond "P$$,222.22F AI5C9 Bond 0.$% su)scri)ed )! the
Associated Insurance + 5uret! Co. and as counter'1uarant! therefor, the Valinos e;ecuted
an alle1ed chattel mort1a1e on the aforementioned house in favor of the suret! compan!,
7hich encum)rance 7as dul! re1istered 7ith the Chattel Mort1a1e Re1ister of RiJal on /
6ecem)er $0&$. It is admitted that at the time said undertakin1 took place, the parcel of
land on 7hich the house is erected 7as still re1istered in the name of the Philippine Realt!
Corporation. Davin1 completed pa!ment on the purchase price of the lot, the Valinos 7ere
a)le to secure on $( 9cto)er $0&(, a certificate of title in their name "C ,.((#%.
5u)seAuentl!, ho7ever, or on ,# 9cto)er $0&,, the Valinos, to secure pa!ment of an
inde)tedness in the amount of P$,,222.22, e;ecuted a real estate mort1a1e over the lot
and the house in favor of Isa)el I!a, 7hich 7as dul! re1istered and annotated at the )ack
of the certificate of title. 3ater, 3ucia A. Valino failed to satisf! her o)li1ation to the EARIC,
the suret! compan! 7as compelled to pa! the same pursuant to the undertakin1 of the
)ond. he suret! compan! demanded reim)ursement from the Valinos, 7ho failed to do so.
he compan! foreclosed the chattel mort1a1e over the house as a conseAuence. A pu)lic
sale 7as conducted thereafter )! the Provincial 5heriff of RiJal on ,/ 6ecem)er $0&,,
7herein the propert! 7as a7arded to the suret! compan! for P(,222.22, the hi1hest )id
received therefor. he suret! compan! then caused the said house to )e declared in its
name for ta; purposes "a; 6eclaration ,&$,(%.
5ometime in Jul! $0&-, the suret! compan! learned of the e;istence of the real estate
mort1a1e over the lot covered )! C ,/((# to1ether 7ith the improvements thereonF
thus, said suret! compan! instituted Civil Case ,$/, 7ith the C=I Manila namin1 Adriano
and 3ucia Valino and Isa)el I!a, the mort1a1ee, as defendants. 9n the other hand, on ,0
9cto)er $0&-, Isa)el I!a filed a civil action a1ainst the Valinos and the suret! compan!
"Civil Case ,&2# 7ith C=I Manila% pra!in1 for a decree of foreclosure of the land, )uildin1
and improvements thereon to )e sold at pu)lic auction and the proceeds applied to satisf!
the demandsF this pursuant to the contract of mort1a1e as the Valinos have failed to pa!
interest for more than / months alread!F the suret! compan! included as it claims to have
an interest on the residential house covered )! said mort1a1e.
he t7o cases 7ere Cointl! heard upon a1reement of the parties, 7ho su)mitted the same
on a stipulation of facts, after 7hich the Court rendered Cud1ment dated ( March $0&/,
holdin1 that the chattel mort1a1e in favor of the Associated Insurance + 5uret! 7as
preferred and superior over the real estate mort1a1e su)seAuentl! e;ecuted in favor of
Isa)el I!a. It 7as ruled that as the Valinos 7ere not !et the re1istered o7ner of the land on
7hich the )uildin1 in Auestion 7as constructed at the time the first encum)rance 7as
made, the )uildin1 then 7as still a personalt! and a chattel mort1a1e over the same 7as
proper. Do7ever, as the mort1a1ors 7ere alread! the o7ners of the lot at the time the
contract 7ith Isa)el I!a 7as entered into, the )uildin1 7as transformed into a real propert!
and the real estate mort1a1e created thereon 7as like7ise adCud1ed as proper. he
residential )uildin1 7as, therefore, ordered e;cluded from the foreclosure pra!ed for )!
Isa)el I!a, althou1h the latter could e;ercise the ri1ht of a Cunior encum)rancer. he
spouses Valino 7ere ordered to pa! the amount demanded )! said mort1a1ee or in their
default to have the parcel of land su)Cect of the mort1a1e sold at pu)lic auction for the
satisfaction of I!aMs claim.
he 5upreme Court reversed the decision of the lo7er court, reco1niJed Isa)el I!aMs ri1ht
to foreclose not onl! the land )ut also the )uildin1 erected thereon, and ordered that the
proceeds of the sale thereof at pu)lic auction "if the land has not !et )een sold%, )e applied
to the unsatisfied Cud1ment in favor of Isa)el I!a. he decision ho7ever is 7ithout preCudice
to an! ri1ht that the Associated Insurance + 5uret! ma! have a1ainst the Valinos on
account of the mort1a1e of said )uildin1 the! e;ecuted in favor of said suret! compan!.
:ithout pronouncement as to costs.
(. )ature o* property encum+ere! is the !ecisive *actor in !etermination o*
pre*erential right
he decisive factor in resolvin1 the issue as to 7hich of these encum)rances should
receive preference over the other is the determination of the nature of the structure liti1ated
upon, for 7here it )e considered a personalt!, the foreclosure of the chattel mort1a1e and
the su)seAuent sale thereof at pu)lic auction, made in accordance 7ith the Chattel
Mort1a1e 3a7 7ould )e valid and the ri1ht acAuired )! the suret! compan! therefrom
7ould certainl! deserve prior reco1nitionF other7ise, appellantMs claim for preference must
)e 1ranted.
,. -uil!ing always immova+le
:hile it is true that 1enerall!, real estate connotes the land and the )uildin1 constructed
thereon, it is o)vious that the inclusion of the )uildin1, separate and distinct from the land,
in the enumeration of 7hat ma! constitute real properties "Art. #$&, ne7 Civil Code% could
onl! mean one thin1: that a )uildin1 is )! itself an immova)le propert!. Moreover, and in
vie7 of the a)sence of an! specific provision to the contrar!, a )uildin1 is an immova)le
propert! irrespective of 7hether or not said structure and the land on 7hich it is adhered to
)elon1 to the same o7ner.K "3opeJ vs. 9rosa%.
3. -uil!ing cannot +e !iveste! o* character as realty when constructe! on lan!
+elonging to another
A )uildin1 certainl! cannot )e divested of its character of a realt! )! the fact that the land
on 7hich it is constructed )elon1s to another. o hold it the other 7a!, the possi)ilit! is not
remote that it 7ould result in confusion, for to cloak the )uildin1 7ith an uncertain status
made dependent on the o7nership of the land, 7ould create a situation 7here a permanent
fi;ture chan1es its nature or character as the o7nership of the land chan1es hands.
4. .ecution o* a chattel mortgage over a +uil!ing invali! an! a nullity
As personal properties could onl! )e the su)Cect of a chattel mort1a1e "5ection $, Act
-0&,%, the e;ecution of the chattel mort1a1e coverin1 a )uildin1 is clearl! invalid and a
nullit!. :hile it is true that said document 7as correspondin1l! re1istered in the Chattel
Mort1a1e Re1ister, this act produced no effect 7hatsoever for 7here the interest conve!ed
is in the nature of a real propert!, the re1istration of the document in the re1istr! of chattels
is merel! a futile act. hus, the re1istration of the chattel mort1a1e of a )uildin1 of stron1
materials produce no effect as far as the )uildin1 is concerned (Leung Yee vs. Strong
Machinery Co., 37 Phil., !!".
/. )o right ac0uire! +y chattel mortgage cre!itor who purchases real properties in
an e.tra1u!icial *oreclosure sale
A mort1a1e creditor 7ho purchases real properties at an e;traCudicial foreclosure sale
thereof )! virtue of a chattel mort1a1e constituted in his favor, 7hich mort1a1e has )een
declared null and void 7ith respect to said real properties, acAuires no ri1ht thereto )!
virtue of said sale (#e la $iva vs. %h &eo, ' Phil., ())".
M%)D")"2 -3S C2. vs. C%4Y "SSSS25
=AC5:

Mindanao Bus Compan! is a pu)lic utilit! en1a1ed in transportin1 passen1ers and car1oes
)! motor trucks in Mindanao has its main offices in Ca1a!an de 9ro. he compan! is also
o7ner to the land 7here it maintains and operates a 1ara1e, a repair shop, )lacksmith and
carpentr! shopsF the machineries are place on 7ooden and cement platforms.
he Cit! Assessor of Ca1a!an de 9ro Cit! assessed at P#,#22 said maintenance and
repair eAuipment. he compan! appealed the assessment to the Board of a; Appeals on
the 1round that the same are not realt!. he Board of a; Appeals of the Cit! sustained the
cit! assessor, so the compan! filed 7ith the Court of a; Appeals a petition for the revie7 of
the assessment. he CA held that the Compan! 7as lia)le to the pa!ment of the realt!
ta; on its maintenance and repair eAuipment. Dence, the compan! filed a petition for
revie7 7ith the 5upreme Court.
I55B8:
:hether or not the machineries assessed )! the respondent are real propertiesL
D836:
Para1raph & of Article #$& of the Ee7 Civil 7hich provides machiner!, receptacles,
instruments or implements intended )! the o7ner of the tenement for an industr! or 7orks
7hich ma! )e carried on in a )uildin1 or on a piece of land, and 7hich tend directl! to meet
the needs of the said industr! or 7orks are immova)le properties. Mova)le eAuipments to
)e immo)iliJed in contemplation of the la7 must first )e Kessential and principal elementsK
of an industr! or 7orks 7ithout 7hich such industr! or 7orks 7ould )e Kuna)le to function
or carr! on the industrial purpose for 7hich it 7as esta)lished.K
he tools and eAuipments in Auestion in this instant case are, )! their nature, not essential
and principal elements of petitionerMs )usiness of transportin1 passen1ers and car1oes )!
motor trucks. he! are merel! incidentals'acAuired as mova)les and used onl! for
e;pedienc! to facilitate andNor improve its service. 8ven 7ithout such tools and
eAuipments, its )usiness ma! he carried on.
the eAuipments in Auestion are destined onl! to repair or service the transportation
)usiness, 7hich is not carried 9n in a )uildin1 or permanentl! on a piece of land, as
demanded )! the la7. 5aid eAuipments ma! not, therefore, )e deemed real propert!.
-2"5D 2# "SSSSM)4 "PP"LS 6. M")%L" LC45%C C2MP")Y
(7 SC5" 68
#"C4S$
Cit! Assessor of OC declared the steel to7ers for real propert! ta; under a; 6eclarations.
After den!in1 the respondent<s petition to cancel these declarations, an appeal 7as taken
7ith the CA 7hich held that the steel to7ers come under the e;ception of >poles@
under the franchise 1iven to M8RA3C9F the steel to7ers are personal propertiesF and
the Cit! reasurer is lia)le for the refund of the amount paid.

&LD$
he steel to7ers of an electric compan! don<t constitute real propert! for the purposes of
real propert! ta;.
4umala! v. 6icencio
HG.R. Eo. 3'-2$.-. 5eptem)er -2, $0.$.I
8n Banc, Re!es JB3 "J%: $2 concur
Facts: 9n $ 5eptem)er $0&& Vicencio and 5imeon, defendants'appellants, e;ecuted a
chattel mort1a1e in favor of the umalads, plaintiff'appellees over their house of stron1
materials located at &&2 Int. -, OueJon Boulevard, Ouiapo, Manila, over 3ot /'B and .'B,
Block ,&&#, 7hich 7ere )ein1 rented from Madri1al + Compan!, Inc. he mort1a1e 7as
re1istered in the Re1istr! of 6eeds of Manila on , 5eptem)er $0&&. he mort1a1e 7as
e;ecuted to 1uarantee a loan of P#,(22.22 received from the umalads, pa!a)le 7ithin one
!ear at $,P per annum. he mode of pa!ment 7as P$&2.22 monthl!, startin1 5eptem)er,
$0&&, up to Jul! $0&/, and the lump sum of P-,$&2 7as pa!a)le on or )efore Au1ust,
$0&/. It 7as also a1reed that default in the pa!ment of an! of the amortiJations 7ould
cause the remainin1 unpaid )alance to )ecome immediatel! due and pa!a)le, the Chattel
Mort1a1e enforcea)le, and the 5heriff of Manila authoriJed the Mort1a1or<s propert! after
necessar! pu)lication. :hen Vicencio and 5imeon defaulted in pa!in1, the mort1a1e 7as
e;traCudiciall! foreclosed, and on ,. March $0&/, the house 7as sold at pu)lic auction
pursuant to the said contract. As hi1hest )idder, the umalads 7ere issued the
correspondin1 certificate of sale.
9n $( April $0&/, the umalads commenced Civil Case #-2.- in the municipal court of
Manila, pra!in1, amon1 other thin1s, that the house )e vacated and its possession
surrendered to them, and for Vicencio and 5imeon to pa! rent of P,22.22 monthl! from ,.
March $0&/ up to the time the possession is surrendered. 9n ,$ 5eptem)er $0&/, the
municipal court rendered its decision in favor of the umalads. Davin1 lost therein,
appealed to the court a Auo "Civil Case -200-% 7hich also rendered a decision a1ainst
them. 9n appeal, the case 7as certified to the 5upreme Court )! the Court of Appeals "CA'
G.R. Eo. ,.(,#'R% for the reason that onl! Auestions of la7 are involved. Plaintiffs'
appellees failed to file a )rief and this appeal 7as su)mitted for decision 7ithout it.
Eearl! a !ear after the foreclosure sale the mort1a1ed house had )een demolished on $#
and $& Januar! $0&. )! virtue of a decision o)tained )! the lessor of the land on 7hich the
house stood.
he 5upreme Court reversed the decision appealed from and entered another dismissin1
the complaint, 7ith costs a1ainst plaintiffs'appellees.
(. "nswer a mere statement an! not evi!ence9 "llegations or averments !etermines
1uris!iction
It has )een held in 5upia and Batiaco vs. Ouintero and A!ala that Kthe ans7er is a mere
statement of the facts 7hich the part! filin1 it e;pects to prove, )ut it is not evidenceF and
further, that 7hen the Auestion to )e determined is one of title, the Court is 1iven the
authorit! to proceed 7ith the hearin1 of the cause until this fact is clearl! esta)lished. In the
case of 5! vs. 6alman, 7herein the defendant 7as also a successful )idder in an auction
sale, it 7as like7ise held )! the Court that in detainer cases the claim of o7nership Kis a
matter of defense and raises an issue of fact 7hich should )e determined from the
evidence at the trial.K :hat determines Curisdiction are the alle1ations or averments in the
complaint and the relief asked for.
,. #rau! an! !eceit ren!ers a contract voi!a+le or annulla+le: an! not voi! a+ initio9
Claim o* ownership +y virtue o* voi!a+le contract *ails without evi!ence that steps
were ma!e to annul the same
=raud or deceit does not render a contract void a) initio, and can onl! )e a 1round for
renderin1 the contract voida)le or annulla)le pursuant to Article $-02 of the Ee7 Civil
Code, )! a proper action in court. In the present case, the char1e of fraud, deceit or
tricker!, the conterntions are not supported )! evidence. =urther, there is nothin1 on record
to sho7 that the mort1a1e has )een annulled. Eeither is it disclosed that steps 7ere taken
to nullif! the same. Dence, defendants'appellantsM claim of o7nership on the )asis of a
voida)le contract 7hich has not )een voided fails.
3. -uil!ings as immova+le
he rule a)out the status of )uildin1s as immova)le propert! is stated in 3opeJ vs. 9rosa,
Jr. and PlaJa heatre, Inc., cited in Associated Insurance 5uret! Co., Inc. vs. I!a, et al. $/
to the effect that the inclusion of the )uildin1, separate and distinct from the land, in the
enumeration of 7hat ma! constitute real properties "art. #$&, Ee7 Civil Code% could onl!
mean one thin1 that a )uildin1 is )! itself an immova)le propert! irrespective of 7hether or
not said structure and the land on 7hich it is adhered to )elon1 to the same o7ner.
4. Deviations allowe!: parties; treatment o* real property as personal property9 cases
Certain deviations, ho7ever, have )een allo7ed for various reasons. In the case of
Manaran1 and Manaran1 vs. 9filada, it 7as held that Kit is undenia)le that the parties to a
contract ma! )! a1reement treat as personal propert! that 7hich )! ,nature 7ould )e real
propert!K, citin1 5tandard 9il Compan! of Ee7 4ork vs. Jaramillo. In the latter case, the
mort1a1or conve!ed and transferred to the mort1a1ee )! 7a! of mort1a1e Kthe follo7in1
descri)ed personal propert!.K he Kpersonal propert!K consisted of leasehold ri1hts and a
)uildin1. In the case of 3una vs. 8ncarnacion, the su)Cect of the contract desi1nated as
Chattel Mort1a1e 7as a house of mi;ed materials, and the Court held therein that it 7as a
valid Chattel mort1a1e )ecause it 7as so e;pressl! desi1nated and specificall! that the
propert! 1iven as securit! Kis a house of mi;ed materials, 7hich )! its ver! nature is
considered personal propert!.K In Eavarro vs. Pineda, the Court stated that the vie7 that
parties to a deed of chattel mort1a1e ma! a1ree to consider a house as personal propert!
for the purposes of said contract, Mis 1ood onl! insofar as the contractin1 parties are
concerned. It is )ased, partl!, upon the principle of estoppelM "8van1elista vs. Alto 5uret!%.
In a case, a mort1a1ed house )uilt on a rented land 7as held to )e a personal propert!, not
onl! )ecause the deed of mort1a1e considered it as such, )ut also )ecause it did not form
part of the land, for it is no7 settled that an o)Cect placed on land )! one 7ho had onl! a
temporar! ri1ht to the same, such as the lessee or usufructuar!, does not )ecome
immo)iliJed )! attachment "ValdeJ vs. Central Alta1racia, cited in 6avao 5a7mill vs.
Castillo%. Dence, if a house )elon1in1 to a person stands on a rented land )elon1in1 to
another person, it ma! )e mort1a1ed as a personal propert! as so stipulated in the
document of mort1a1e. It should )e noted, ho7ever that the principle is predicated on
statements )! the o7ner declarin1 his house to )e a chattel, a conduct that ma!
conceiva)l! estop him from su)seAuentl! claimin1 other7ise. "3adera vs. C.E. Dod1es%.
/. &ouse treate! +y parties as chattel9 *actors to !etermine
In the contract, the house on rented land is not onl! e;pressl! desi1nated as Chattel
Mort1a1eF it specificall! provides that Kthe mort1a1or voluntaril! cedes, sells and transfers
)! 7a! of Chattel Mort1a1e the propert! to1ether 7ith its leasehold ri1hts over the lot on
7hich it is constructed and participationFK 7hcih could onl! have meant to conve! the house
as chattel, or at least, intended to treat the same as such, so that the! should not no7 )e
allo7ed to make an inconsistent stand )! claimin1 other7ise. Moreover, the su)Cect house
stood on a rented lot to 7hich defendants'appellants merel! had a temporar! ri1ht as
lessee, and althou1h this can not in itself alone determine the status of the propert!, it does
so 7hen com)ined 7ith other factors to sustain the interpretation that the parties,
particularl! the mort1a1ors, intended to treat the house as personalit!.
6. stoppel9 Party in chattel mortgage cannot 0uestion vali!ity o* chattel mortgage
entere! into
Inlike in the I!a cases, 3opeJ vs. 9rosa, Jr. and PlaJa heatreand 3eun1 4ee vs. =. 3.
5tron1 Machiner! and :illiamson, 7herein third persons assailed the validit! of the chattel
mort1a1e, it is the defendants'appellants themselves, as de)tors'mort1a1ors, 7ho are
attackin1 the validit! of the chattel mort1a1e in this case. he doctrine of estoppel therefore
applies to the herein defendants'appellants, havin1 treated the su)Cect house as
personalt!.
7. Chattel mortgage covere! +y "ct (/78: Chattel Mortgage Law
Chattel mort1a1es are covered and re1ulated )! the Chattel Mort1a1e 3a7, Act $&2(.
5ection $# of this Act allo7s the mort1a1ee to have the propert! mort1a1ed sold at pu)lic
auction throu1h a pu)lic officer in almost the same manner as that allo7ed )! Act -$-&, as
amended )! Act #$$(, provided that the reAuirements of the la7 relative to notice and
re1istration are complied 7ith. In the present case, the parties specificall! stipulated that
Kthe chattel mort1a1e 7ill )e enforcea)le in accordance 7ith the provisions of 5pecial Act
-$-&.
8. Mortgagors entitle! to remain in possession without rent within re!emption perio!
Eearl! a !ear after the foreclosure sale the mort1a1ed house had )een demolished on $#
and $& Januar! $0&. )! virtue of a decision o)tained )! the lessor of the land on 7hich the
house stood. he C=I sentenced the mort1a1ors to pa! a monthl! rent of P,22.22 from the
time the chattel mort1a1e 7as foreclosed until 7hen it 7as torn do7n )! the sheriff. he
Court ruled that the mort1a1ors 7ere entitled to remain in possession 7ithout an!
o)li1ation to pa! rent durin1 the one !ear redemption period after the foreclosure sale.
5ection / of Act -$-& provides that the de)tor'mort1a1or ma!, at an! time 7ithin one !ear
from and after the date of the auction sale, redeem the propert! sold at the e;tra Cudicial
foreclosure sale. 5ection . of the same Act allo7s the purchaser of the propert! to o)tain
from the court the possession durin1 the period of redemption: )ut the same provision
e;pressl! reAuires the filin1 of a petition 7ith the proper C=I and the furnishin1 of a )ond. It
is onl! upon filin1 of the proper motion and the approval of the correspondin1 )ond that the
order for a 7rit of possession issues as a matter of course. Eo discretion is left to the court.
In the a)sence of such a compliance, as in the instant case, the purchaser can not claim
possession durin1 the period of redemption as a matter of ri1ht. In such a case, the
1overnin1 provision is 5ection -#, Rule -0, of the Revised Rules of Court 7hich also
applies to properties purchased in e;traCudicial foreclosure proceedin1s.
<. 5entals receive! !uring re!emption perio! cre!ite! to re!emption price
Before the e;piration of the $'!ear period 7ithin 7hich the Cud1ment'de)tor or mort1a1or
ma! redeem the propert!, the purchaser thereof is not entitled, as a matter of ri1ht, to
possession of the same. hus, 7hile it is true that the Rules of Court allo7 the purchaser to
receive the rentals if the purchased propert! is occupied )! tenants, he is, nevertheless,
accounta)le to the Cud1ment'de)tor or mort1a1or as the case ma! )e, for the amount so
received and the same 7ill )e dul! credited a1ainst the redemption price 7hen the said
de)tor or mort1a1or effects the redemption. 6ifferentl! stated, the rentals receiva)le from
tenants, althou1h the! ma! )e collected )! the purchaser durin1 the redemption period, do
not )elon1 to the latter )ut still pertain to the de)tor of mort1a1or. he rationale for the
Rule, it seems, is to secure for the )enefit of the de)tor or mort1a1or, the pa!ment of the
redemption amount and the conseAuent return to him of his properties sold at pu)lic
auction. "Re!es vs. Damada, reiteratin1 Chan v. 8spe%
(7. Case prematurely *ile!
he period of redemption had not !et e;pired 7hen action 7as instituted in the court of
ori1in, and that plaintiffs'appellees did not choose to take possession under 5ection ., Act
-$-&, as amended, 7hich is the la7 selected )! the parties to 1overn the e;traCudicial
foreclosure of the chattel mort1a1e. Eeither 7as there an alle1ation to that effect. 5ince
plaintiffs'appelleesM ri1ht to possess 7as not !et )orn at the filin1 of the complaint, there
could )e no violation or )reach thereof. :herefore, the ori1inal complaint stated no cause
of action and 7as prematurel! filed.
((. Court;s authority to review errors not assigne!
8ven if there 7as no assi1nment of error to that effect, the 5upreme Court is clothed 7ith
ample authorit! to revie7 palpa)le errors not assi1ned as such if it finds that their
consideration is necessar! in arrivin1 at a Cust decision of the case.
P3)="L") 6. L"CS"M")"
Buildings are always treated as immovable or real property under the Code even if
it was dealt with separately from the land upon which it stood
#"C4S$
5ome land )elon1in1 to Antonio PunJalan 7as foreclosed )! the Philippine Eational
Bank arlac, Branch in failure of the former to pa! the mort1a1ed fee amountin1 to P$2
1rand 5ince PEB 7as the hi1hest )idder, the land 7ent to PEB.
5ometime $0.#, 7hile the propert! 7as still in the possession of PunJalan, PunJalan
constructed a7arehouse on the said land )! virtue of the permit secured from the Municipal
Ma!or of Bam)an, arlac. 5u)seAuentl!, in $0.(, a contract of sale 7as entered into )!
PEB and Remedios Vda. 6e 3acsamana, 7hom in lieu of the said sale secured a title over
the propert! involvin1 the 7arehouse alle1edl! o7ned and constructed )! the plaintiff.
PunJalan filed a suit for annulment of the 6eed of 5ale 7ith dama1es a1ainst PEB and
3acsamana )efore the Court of =irst Instance of RiJal, Branch -$, impu1nin1 the validit! of
the sale of the )uildin1, reAuestin1 the same to )e declared null and void and that
dama1es in the total sum of P,-, ,22 more or less )e a7arded to him.
Respondent 3acsamana in his ans7er averred the affirmative defense of lack of cause of
action contendin1 that she 7as a purchaser for value, 7hile, PEB filed a Motion to 6ismiss
on the 1round of improper venue, invokin1 that the )uildin1 7as a real propert! under
Article #$& of the Civil Code, and therefore, 5ection # "a% of the Rules of Court should
appl!.
PunJalan filed a Motion for Reconsideration assertin1 that the action he filed is limited to
the annulment of sale and that, it does not involved o7nership of or title to propert! )ut
denied )! the court for lack of merit. A motion for pre'trial 7as also set )! PunJalan )ut 7as
also denied )! the court invokin1 that the case 7as alread! dismissed.
Dence, a petition for certiorari 7as filed )! the petitioner.
%SS3$
:hether or not the Cud1ment rendered )! the court is proper.
&LD$
:hile it is true that the petitioner does not directl! seek the recover! of the title or
possession of the propert! in Auestion, his action for annulment of sale and his claim for
dama1es are closel! intert7ined 7ith the issue of o7nership of the )uildin1, 7hich, under
the la7, is considered immova)le propert!, the recover! of 7hich is petitioners primar!
o)Cective. he prevalent doctrine is that an action for the annulment or rescission of a sale
of real propert! does not operate to efface the o)Cective and nature of the case, 7hich is to
recover said propert!. It is a real action. Respondent Court did not err in dismissin1 the
case on the 1round of improper venue under 5ection $, Rule # 7hich 7as timel! raised
under 5ection $ Rule $/ of the Rules of Court.
Personal 9)servation: he venue 7as improperl! laid )! the petitioner in the case at )ar.
5uch 1round 7as sufficient to render dismissal of the case, as the same is one of the
1rounds provided for under Rule $/ "c% of the Rules of Court.
he 6enial of >Motion to 6ismiss@ rendered )! the court in the instant case is appeala)le. If
such denial constitute 1rave a)use of discretion on the part of the court , PunJalan ma! file
either Prohi)ition or Certiorari under Rule /& of the Rules of Court
Ma>ati Leasing vs. ?earever 4e.tile
#acts$
:earever e;tile in order to o)tain a financial accommodation from Makati 3easin1,
discounted andassi1ned several receiva)les 7ith the former under a Receiva)le Purchase
A1reement. o secure thecollection of the receiva)les assi1ned, :aerever e;ecuted a
Chattel Mort1a1e over certain ra7materials inventor! as 7ell as a machiner! descri)ed as
an Artos Aero 6r!er 5tenterin1 Ran1e.
Bpon :eareverMs default, Makati 3easin1 filed a petition for e;traCudicial foreclosure of the
propertiesmort1a1e to it. Do7ever, the 6eput! 5heriff assi1ned to implement the
foreclosure failed to 1ain entr!into :eareverMs premises and 7as not a)le to effect the
seiJure of the machiner!. Makati 3easin1thereafter filed a complaint for Cudicial foreclosure
7ith the C=I RiJal.
RC then issued a 7rit of seiJure, the enforcement of 7hich 7as restrained upon
:eareverMs filin1 ofa motion for reconsideration. finall! issued on $$ =e)ruar! $0($, an
order to )reak open the premisesof :earever to enforce said 7rit.
he sheriff enforcin1 the seiJure order, repaired to the premises of :earever and removed
the main
drive motor of the su)Cect machiner!.
CA set aside the orders of the RC and ordered the return of the drive motor seiJed )! the
sheriffafter rulin1 that the machiner! in suit cannot )e the su)Cect of replevin, much less of
a chattelmort1a1e, )ecause it is a real propert! pursuant to Article #$& of the ne7 Civil
Code. CA also reCectedthe ar1ument that :earever is estopped from claimin1 that the
machine is real propert! )!constitutin1 a chattel mort1a1e thereon. A motion for
reconsideration 7as filed )! Makati 3easin1, )utit 7as denied. Dence this petition.
%ssue$
:hether the machiner! in suit is real or personal propert!L
&el!$
If a house of stron1 materials, like 7hat 7as involved in the a)ove umalad case, ma! )e
consideredas personal propert! for purposes of e;ecutin1 a chattel mort1a1e thereon as
lon1 as the parties tothe contract so a1ree and no innocent third part! 7ill )e preCudiced
there)!, there is a)solutel! noreason 7h! a machiner!, 7hich is mova)le in its nature and
)ecomes immo)iliJed onl! )! destinationor purpose, ma! not )e like7ise treated as such.
his is reall! )ecause one 7ho has so a1reed isestopped from den!in1 the e;istence of
the chattel mort1a1e.
It must )e pointed out that the characteriJation of the su)Cect machiner! as chattel )! the
privaterespondent is indicative of intention and impresses upon the propert! the character
determined )! theparties. As stated in 5tandard 9il Co. of Ee7 4ork vs. Jaramillo, ## Phil.
/-2, it is undenia)le that theparties to a contract ma! )! a1reement treat as personal
propert! that 7hich )! nature 7ould )e realpropert!, as lon1 as no interest of third parties
7ould )e preCudiced there)!.
Meralco 5ecurities v. Central Board of Assessment Appeals
G.R. Eo. 3'#/,#& Ma! -$, $0(,
HAAuino, J.:I
=acts: Petitioner Auestions the decision of the respondent 7hich held that petitioner<s
pipeline is su)Cect to realt! ta;. Pursuant to a concession, petitioner installed a pipeline
s!stem from Manila to Batan1as. Mean7hile, the provincial assessor of 3a1una treated the
pipeline as real propert!. 5o, petitioner appealed the assessments to the Board of
Assessment Appeals of 3a1una. he )oard upheld the assessments and the decision
)ecame final and e;ecutor! after the lapse of fifteen da!s from the date of receipt of a cop!
of the decision )! the appellant. Meralco 5ecurities contends that the Court of a; Appeals
has no Curisdiction to revie7 the decision of the Central Board of Assessment Appeals and
no Cudicial revie7 of the BoardMs decision is provided for in the Real Propert! a; Code.
Dence, the petitioner<s recourse to file a petition for certiorari.
Deld: it 7as held that certiorari 7as properl! availed of in this case. It is a 7rit issued )! a
superior court to an inferior court, )oard or officer e;ercisin1 Cudicial or Auasi'Cudicial
functions 7here)! the record of a particular case is ordered to )e elevated for revie7 and
correction in matters of la7.
he rule is that as to administrative a1encies e;ercisin1 Auasi'Cudicial po7er there is an
underl!in1 po7er in the courts to scrutiniJe the acts of such a1encies on Auestions of la7
and Curisdiction even thou1h no ri1ht of revie7 is 1iven )! the statute. he purpose of
Cudicial revie7 is to keep the administrative a1enc! 7ithin its Curisdiction and protect
su)stantial ri1hts of parties affected )! its decisions. he revie7 is a part of the s!stem of
checks and )alances 7hich is a limitation on the separation of po7ers and 7hich forestalls
ar)itrar! and unCust adCudications. Judicial revie7 of the decision of an official or
administrative a1enc! e;ercisin1 Auasi'Cudicial functions is proper in cases of lack of
Curisdiction, error of la7, 1rave a)use of discretion, fraud or collusion or in case the
administrative decision is corrupt, ar)itrar! or capricious
M8RA3C9 V B9AR6 9= A55855M8E
=AC5:'here are t7o oil stora1e tanks installed in $0/0 )! Meralco on a lot in 5an
Pascual, Batan1as7hich it leased in $0/( from Calte; "Phil.%, Inc. he tanks are 7ithin the
Calte; refiner! compound.he! have a total capacit! of &//,222 )arrels. he! are used for
storin1 fuel oil for MeralcoMs po7er plants.'he stora1e tanks are made of steel plates
7elded and assem)led on the spot. heir )ottoms
reston a foundation consistin1 of compacted earth as the outermost la!er,
a sand pad as theintermediate la!er and a t7o'inch thick )ituminous asphalt stratum as the
top la!er. he )ottom of each tank is in contact 7ith the asphalt la!er. he steel sides of the
tank are directl! supportedunderneath )! a circular 7all made of concrete, ei1hteen inches
thick, to prevent the tank fromslidin1. Dence, accordin1 to Meralco, the tank is not attached
to its foundation. It is not anchored or 7elded to the concrete circular 7all. Its )ottom plate
is not attached to an! part of the foundation )!)olts, scre7s or similar devices. he tank
merel! sits on its foundation. 8ach empt! tank can )efloated )! floodin1 its dike'inclosed
location 7ith 7ater four feet deep.'he Board concludes that 7hile the tanks rest or sit on
their foundation, the foundation itself andthe 7alls, dikes and steps, 7hich are inte1ral parts
of the tanks, are affi;ed to the land 7hile thepipelines are attached to the tanks. In $0.2,
the municipal treasurer of Bauan, Batan1as, on the)asis of an assessment made )! the
provincial assessor, reAuired Meralco to pa! realt! ta;es onthe t7o tanks. =or the five'!ear
period from $0.2 to $0.#, the ta; and penalties amounted toP#-$,.2-.0/.
he Board reAuired Meralco to pa! the ta; and penalties as a condition for entertainin1 its
appeal from the adverse decision of the Batan1as )oard of assessment appeals.'he
Central Board of Assessment Appeals ruled that the tanks to1ether 7ith the foundation,
7alls,dikes, steps, pipelines and other appurtenances constitute ta;a)le improvements. Me
ralcocontends that the said oil stora1e tanks do not fall 7ithin an! of the kinds of real
propert!enumerated in article #$& of the Civil Code and, therefore, the! cannot )e
cate1oriJed as realt! )!nature, )! incorporation, )! destination nor )! analo1!. 5tress is
laid on the fact that the tanks arenot attached to the land and that the! 7ere placed on
leased land, not on the land o7ned )!Meralco.
I55B8::NE the oil tanks are considered as real propert!
D836: 485.':hile the t7o stora1e tanks are not em)edded in the land, the! ma!,
nevertheless, )e consideredas improvements on the land, enhancin1 its utilit! and
renderin1 it useful to the oil industr!. It isundenia)le that the t7o tanks have )een installed
7ith some de1ree of permanence as receptaclesfor the considera)le Auantities of oil
needed )! Meralco for its operations.'=or purposes of ta;ation, the term Kreal propert!K
ma! include thin1s 7hich should 1enerall! )ere1arded as personal propert!. It is a familiar
phenomenon to see thin1s classed as real propert!for purposes of ta;ation 7hich
on 1eneral principle mi1ht )e considered personal propert!.
A66II9EA3: )aka lan1 ipa'compare: he case of Board of
Assessment Appeals vs. Manila8lectric Compan!, $$0 Phil. -,(, 7herein MeralcoMs steel
to7ers 7ere held not to )e su)Cect torealt! ta;, is not in point )ecause in that case the steel
to7ers 7ere re1arded as poles and under its franchise MeralcoMs poles are e;empt from
ta;ation. Moreover, the steel to7ers 7ere notattached to an! land or )uildin1. he! 7ere
remova)le from their metal frames.
C"L4@ P&%LS. 6. C)45"L -2"5D 2# "SSSSM)4 "PP"LS
((4 SC5" ,<6
#"C4S$
he Cit! Assessor characteriJed the items in 1as stations of petitioner as ta;a)le realt!.
hese items included under1round tanks, elevated tank, elevated 7ater tanks, 7ater
tanks, 1asoline pumps,computin1 pumps, etc. hese items are not o7ned )! the
lessor of the land 7herein the
eAuipment are installed. Bpon e;piration of the lease a1reement, the eAuipment
should )e returned in 1ood condition.

&LD$
he eAuipment and machiner! as appurtenances to the 1as station )uildin1 or shed o7ned
)! Calte; and 7hich fi;tures are necessar! to the operation of the 1as station, for 7ithout
them the 1as station 7ould )e useless, and 7hich have )een attached and fi;ed
permanentl! to the 1as station site or em)edded therein, are ta;a)le improvements
and machiner! 7ithin the meanin1 of the Assessment 3a7 and the Real Propert!
a; Code.
Pru!ential -an> v. Panis
HG.R. Eo. 3'&222(. Au1ust -$, $0(..I
=irst 6ivision, Paras "J%: # concur.
Facts: 9n $0 Eovem)er $0.$, =ernando A. Ma1cale and eodula Balu!ut Ma1cale
secured a loan of P.2,222.22 from Prudential Bank. o secure pa!ment of this loan, the
Ma1cales e;ecuted in favor of Prudential Bank a deed of Real 8state Mort1a1e over a ,'
store!, semi'concrete residential )uildin1 7ith 7arehouse space "total area of ,/- sA.m.%F
and 1rantin1 upon the mort1a1ee the ri1ht of occupanc! on the lot 7here the propert! is
erected. A rider is also included in the deed that in the event the 5ales Patent on the lot is
issued of Bureau of 3ands, the Re1ister of 6eeds is authoriJed to hold the Re1istration
until the mort1a1e is cancelled or annotate the encum)rance on the title upon authorit!
from the 5ecretar! of A1riculture and Eatural Resources, 7hich title 7ith annotation release
in favor of the mort1a1e. he Real 8state Mort1a1e 7as re1istered under the Provisions of
Act --## 7ith the Re1istr! of 6eeds of Qam)ales on ,- Eovem)er $0.$. 5u)seAuentl!, the
Ma1cales secured an additional loan from Prudential Bank, secured )! another deed of
Real 8state Mort1a1e re1isteed 7ith the Re1istr! of 6eeds in 9lon1apo Cit!, on , Ma!
$0.-.
9n ,# April $0.-, the 5ecretar! of A1riculture issued Miscellaneous 5ales Patent #../
over the parcel of land, possessor! ri1hts over 7hich 7ere mort1a1ed to rudential Bank, in
favor of the Ma1cales. 9n the )asis of the Patent, and upon its transcription in the
Re1istration Book of the Province of Qam)ales, 9C P',&&# 7as issued in the name of
=ernando Ma1cale, )! the 8;'9ficio Re1ister of 6eeds of Qam)ales, on $& Ma! $0.,.
=or failure of the Ma1cales to pa! their o)li1ation to the Bank after it )ecame due, the
deeds of Real 8state Mort1a1e 7ere e;traCudiciall! foreclosed. ConseAuent to the
foreclosure 7as the sale of the properties mort1a1ed to the )ank as the hi1hest )idder in a
pu)lic auction sale conducted )! the Cit! 5heriff on $, April $0.(. he auction sale 7as
held despite 7ritten reAuest from the Ma1cales throu1h counsel, dated ,0 March $0.(, for
the Cit! 5heriff to desist from 1oin1 7ith the scheduled pu)lic auction sale. he issue 7as
raised to the C= Qam)ales and 9lon1apo Cit! 7hich, on - Eovem)er $0.(, declared the
deeds of Real 8state Mort1a1e as null and void. he )ank filed a motion for
reconsideration on $# 6ecem)er $0.(, 7hich the court denied on $2 Januar! $0.0 for lack
of merit. Dence, the petition.
he 5upreme Court modified the decision of the C=I Qam)ales + 9lon1apo, declarin1 that
the 6eed of Real 8state Mort1a1e for P.2,222.22 is valid )ut rulin1 that the 6eed of Real
8state Mort1a1e for an additional loan of P,2,222.22 is null and void, 7ithout preCudice to
an! appropriate action the Government ma! take a1ainst private respondents.
(. -uil!ing separate an! !istinct *rom the lan!
In the enumeration of properties under Article #$& of the Civil Code of the Philippines, it is
o)vious that the inclusion of M)uildin1M separate and distinct from the land, in said provision
of la7 can onl! mean that a )uildin1 is )! itself an immova)le propert!. "3opeJ vs. 9rosa,
Jr., et al., 3'$2($.'$(, =e). ,(, $0&(F Associated Inc. and 5uret! Co., Inc. vs. I!a, et al., 3'
$2(-.'-(, Ma! -2, $0&(%.
,. -uil!ing can +e mortgage! apart *rom the lan! it is +uilt9 possessory rights may
+e vali!ly trans*erre! in a !ee! o* mortgage
:hile a mort1a1e of land necessaril! includes, in the a)sence of stipulation of the
improvements thereon, )uildin1sF still a )uildin1 )! itself ma! )e mort1a1ed apart from the
land on 7hich it has )een )uilt. 5uch a mort1a1e 7ould )e still a real estate mort1a1e for
the )uildin1 7ould still )e considered immova)le propert! even if dealt 7ith separatel! and
apart from the land "3eun1 4ee vs. 5tron1 Machiner! Co., -. Phil. /##%. Possessor! ri1hts
over said properties )efore title is vested on the 1rantee, ma! )e validl! transferred or
conve!ed as in a deed of mort1a1e "Vda. de Bautista vs. Marcos, - 5CRA #-( H$0/$I%.
3. " vali! real estate mortgage may +e constitute! on the +uil!ing erecte! on the
lan! +elonging to another
he ori1inal mort1a1e 7as e;ecuted "$0 Eovem)er $0.$% )efore the issuance of the final
patent ",# April $0.,% and )efore the 1overnment 7as divested of its title to the land "$&
Ma! $0.,%, an event 7hich takes effect onl! on the issuance of the sales patent and its
su)seAuent re1istration in the 9ffice of the Re1ister of 6eeds "Visa!an Realt! Inc. vs.
Meer, 0/ Phil. &$&F 6irector of 3ands vs. 6e 3eon, $$2 Phil. ,(F 6irector of 3ands vs.
Jurado, 3'$#.2,, Ma! ,-, $0/$F Pe?a, K3a7 on Eatural ResourcesK, p. #0%. In the case at
)ar, it is evident that the mort1a1e e;ecuted )! Ma1cale on his o7n )uildin1 7hich 7as
erected on the land )elon1in1 to the 1overnment is to all intents and purposes a valid
mort1a1e.
4. Pu+lic lan! act an! 5" 737 not violate! in *irst mortgage
As to restrictions appearin1 to the Ma1cales< titleF 5ections $,$, $,, and $,# of the Pu)lic
3and Act refer to land alread! acAuired under the Pu)lic 3and Act or an! improvement
thereon. 5ection , of RA .-2 refers to encum)rance or alienation )efore the patent is
issued )ecause it refers specificall! to encum)rance or alienation on the land itself and
does not mention an!thin1 re1ardin1 the improvements e;istin1 thereon. Both have no
application to the assailed mort1a1e in the case at )arF as the former, the mort1a1e 7as
e;ecuted )efore such eventualit!, and the latter, it does not encum)er nor alienate the land.
/. Mortgage ma!e a*ter issuance o* Sales Patent an 2C4 prohi+ite!9 stoppel !oes
not give vali!ating e**ect to a voi! contract
As re1ards the second mort1a1e e;ecuted, such mort1a1e e;ecuted after the issuance of
the sales patent and of the 9ri1inal Certificate of itle, falls sAuarel! under the prohi)itions
stated in 5ections $,$, $,, and $,# of the Pu)lic 3and Act and 5ection , of RA .-2, and is
therefore null and void. 8ven if the title 7as voluntar! surrendered to the )ank for the
mort1a1e to )e annotated 7ithout the prior approval of the Ministr! of Eatural ResourcesF
in pari delicto ma! not )e invoked to defeat the polic! of the 5tate neither ma! the doctrine
of estoppel 1ive a validatin1 effect to a void contract. Indeed, it is 1enerall! considered that
as )et7een parties to a contract, validit! cannot )e 1iven to it )! estoppel if it is prohi)ited
)! la7 or is a1ainst pu)lic polic! "$0 Am. Jur. (2,%. It is not 7ithin the competence of an!
citiJen to )arter a7a! 7hat pu)lic polic! )! la7 seeks to preserve "GonJalo Pu!at + 5ons,
Inc. vs. 6e los Amas and Alino, supraF Arsenal vs. IAC, $#- 5CRA &# H$0(/I%. 5uch does
not, ho7ever, preclude ne7 contracts that ma! )e entered into in accordance 7ith the
reAuirements of the la7. An! ne7 transaction, ho7ever, 7ould )e su)Cect to 7hatever steps
the Government ma! take for the reversion of the land in its favor.
A.5. )o. (7674( Banuary ,<: (<<3
-)A34 C25P25"4%2): petitioner,
vs.
C)45"L -2"5D 2# "SSSSM)4 "PP"LS: -2"5D 2# "SSSSM)4
"PP"LS 2# ="M-"LS: P526%)C%"L "SSSS25 2# ="M-"LS: P526%)C 2#
="M-"LS: an! M3)%C%P"L%4Y 2# S") M"5CL%)2: respondents.
$omulo, Ma*anta, +uenaventura, Sayoc , #e los %ngeles for petitioner.

C53=: J.:
he realt! ta; assessment involved in this case amounts to P$$,-$0,-2#.22. It has )een
imposed on the petitionerMs tailin1s dam and the land thereunder over its protest.
he controvers! arose in $0(& 7hen the Provincial Assessor of Qam)ales assessed the
said properties as ta;a)le improvements. he assessment 7as appealed to the Board of
Assessment Appeals of the Province of Qam)ales. 9n Au1ust ,#, $0((, the appeal 7as
dismissed mainl! on the 1round of the petitionerMs Kfailure to pa! the realt! ta;es that fell
due durin1 the pendenc! of the appeal.K
he petitioner seasona)l! elevated the matter to the Central Board of Assessment
Appeals,
(
one of the herein respondents. In its decision dated March ,,, $002, the Board
reversed the dismissal of the appeal )ut, on the merits, a1reed that Kthe tailin1s dam and
the lands su)mer1ed thereunder "7ere% su)Cect to realt! ta;.K
=or purposes of ta;ation the dam is considered as real propert! as it comes 7ithin the
o)Cect mentioned in para1raphs "a% and ")% of Article #$& of the Ee7 Civil Code. It is a
construction adhered to the soil 7hich cannot )e separated or detached 7ithout )reakin1
the material or causin1 destruction on the land upon 7hich it is attached. he immova)le
nature of the dam as an improvement determines its character as real propert!, hence
ta;a)le under 5ection -( of the Real Propert! a; Code. "P.6. #/#%.
Althou1h the dam is partl! used as an anti'pollution device, this Board cannot accede to
the reAuest for ta; e;emption in the a)sence of a la7 authoriJin1 the same.
;;; ;;; ;;;
:e find the appraisal on the land su)mer1ed as a result of the construction of the tailin1s
dam, covered )! a; 6eclaration Eos.
22,'2,/2 and 22,'2,//, to )e in accordance 7ith the 5chedule of Market Values for
Qam)ales 7hich 7as revie7ed and allo7ed for use )! the Ministr! "6epartment% of =inance
in the $0($'$0(, 1eneral revision. Eo serious attempt 7as made )! Petitioner'Appellant
Ben1uet Corporation to impu1n its reasona)leness, i.e., that the P&2.22 per sAuare meter
applied )! Respondent'Appellee Provincial Assessor is indeed e;cessive and
unconsciona)le. Dence, 7e find no cause to distur) the market value applied )!
Respondent Appellee Provincial Assessor of Qam)ales on the properties of Petitioner'
Appellant Ben1uet Corporation covered )! a; 6eclaration Eos. 22,'2,/2 and 22,'2,//.
his petition for certiorari no7 seeks to reverse the a)ove rulin1.
he principal contention of the petitioner is that the tailin1s dam is not su)Cect to realt! ta;
)ecause it is not an KimprovementK upon the land 7ithin the meanin1 of the Real Propert!
a; Code. More particularl!, it is claimed R
"$% as re1ards the tailin1s dam as an KimprovementK:
"a% that the tailin1s dam has no value separate from and independent of the mineF hence,
)! itself it cannot )e considered an improvement separatel! assessa)leF
")% that it is an inte1ral part of the mineF
"c% that at the end of the minin1 operation of the petitioner corporation in the area, the
tailin1s dam 7ill )enefit the local communit! )! servin1 as an irri1ation facilit!F
"d% that the )uildin1 of the dam has stripped the propert! of an! commercial value as the
propert! is su)mer1ed under 7ater 7astes from the mineF
"e% that the tailin1s dam is an environmental pollution control device for 7hich petitioner
must )e commended rather than penaliJed 7ith a realt! ta; assessmentF
"f% that the installation and utiliJation of the tailin1s dam as a pollution control device is a
reAuirement imposed )! la7F
",% as re1ards the valuation of the tailin1s dam and the su)mer1ed lands:
"a% that the su)Cect properties have no market value as the! cannot )e sold independentl!
of the mineF
")% that the valuation of the tailin1s dam should )e )ased on its incidental use )! petitioner
as a 7ater reservoir and not on the alle1ed cost of construction of the dam and the annual
)uild'up e;penseF
"c% that the Kresidual value formulaK used )! the Provincial Assessor and adopted )!
respondent CBAA is ar)itrar! and erroneousF and
"-% as re1ards the petitionerMs lia)ilit! for penalties for
non'declaration of the tailin1s dam and the su)mer1ed lands for realt! ta; purposes:
"a% that 7here a ta; is not paid in an honest )elief that it is not due, no penalt! shall )e
collected in addition to the )asic ta;F
")% that no other minin1 companies in the Philippines operatin1 a tailin1s dam have )een
made to declare the dam for realt! ta; purposes.
he petitioner does not dispute that the tailin1s dam ma! )e considered realt! 7ithin the
meanin1 of Article #$&. It insists, ho7ever, that the dam cannot )e su)Cected to realt! ta;
as a separate and independent propert! )ecause it does not constitute an Kassessa)le
improvementK on the mine althou1h a considera)le sum ma! have )een spent in
constructin1 and maintainin1 it.
o support its theor!, the petitioner cites the follo7in1 cases:
$. Municipality of Cota*ato v. Santos (-'. Phil. )3", 7here this Court considered the dikes
and 1ates constructed )! the ta;pa!er in connection 7ith a fishpond operation as inte1ral
parts of the fishpond.
,. +islig +ay Lum*er Co. v. Provincial /overnment of Surigao (-'' Phil. 3'3", involvin1 a
road constructed )! the tim)er concessionaire in the area, 7here this Court did not impose
a realt! ta; on the road primaril! for t7o reasons:
In the first place, it cannot )e disputed that the o7nership of the road that 7as constructed
)! appellee )elon1s to the 1overnment )! ri1ht of accession not onl! )ecause it is
inherentl! incorporated or attached to the tim)er land . . . )ut also )ecause upon the
e;piration of the concession said road 7ould ultimatel! pass to the national
1overnment. . . . In the second place, 7hile the road 7as constructed )! appellee primaril!
for its use and )enefit, the privile1e is not e;clusive, for . . . appellee cannot prevent the
use of portions of the concession for homesteadin1 purposes. It is also dut! )ound to allo7
the free use of forest products 7ithin the concession for the personal use of individuals
residin1 in or 7ithin the vicinit! of the land. . . . In other 7ords, the 1overnment has
practicall! reserved the ri1hts to use the road to promote its varied activities. 5ince, as
a)ove sho7n, the road in Auestion cannot )e considered as an improvement 7hich
)elon1s to appellee, althou1h in part is for its )enefit, it is clear that the same cannot )e the
su)Cect of assessment 7ithin the meanin1 of 5ection , of C.A.
Eo. #.2.
Apparentl!, the realt! ta; 7as not imposed not )ecause the road 7as an inte1ral part of the
lum)er concession )ut )ecause the 1overnment had the ri1ht to use the road to promote
its varied activities.
-. &en0ric1 v. 23in La1es $eservoir Co. (-!! Pacific ((!", an American case, 7here it 7as
declared that the reservoir dam 7ent 7ith and formed part of the reservoir and that the dam
7ould )e K7orthless and useless e;cept in connection 7ith the outlet canal, and the 7ater
ri1hts in the reservoir represent and include 7hatever utilit! or value there is in the dam and
head1ates.K
#. 4ntario Silver Mining Co. v. 5i6on (-! Pacific !)(", also from the Bnited 5tates. his
case involved drain tunnels constructed )! plaintiff 7hen it e;panded its minin1 operations
do7n7ard, resultin1 in a constantl! increasin1 flo7 of 7ater in the said mine. It 7as held
that:
:hatever value the! have is connected 7ith and in fact is an inte1ral part of the mine itself.
Just as much so as an! shaft 7hich descends into the earth or an under1round incline,
tunnel, or drift 7ould )e 7hich 7as used in connection 7ith the mine.
9n the other hand, the 5olicitor General ar1ues that the dam is an assessa)le
improvement )ecause it enhances the value and utilit! of the mine. he primar! function of
the dam is to receive, retain and hold the 7ater comin1 from the operations of the mine,
and it also ena)les the petitioner to impound 7ater, 7hich is then rec!cled for use in the
plant.
here is also ample Curisprudence to support this vie7, thus:
. . . he said eAuipment and machiner!, as appurtenances to the 1as station )uildin1 or
shed o7ned )! Calte; "as to 7hich it is su)Cect to realt! ta;% and 7hich fi;tures are
necessar! to the operation of the 1as station, for 7ithout them the 1as station 7ould )e
useless and 7hich have )een attached or affi;ed permanentl! to the 1as station site or
em)edded therein, are ta;a)le improvements and machiner! 7ithin the meanin1 of the
Assessment 3a7 and the Real Propert! a; Code. "Calte; HPhil.I Inc. v. CBAA, $$# 5CRA
,0/%.
:e hold that 7hile the t7o stora1e tanks are not em)edded in the land, the! ma!,
nevertheless, )e considered as improvements on the land, enhancin1 its utilit! and
renderin1 it useful to the oil industr!. It is undenia)le that the t7o tanks have )een installed
7ith some de1ree of permanence as receptacles for the considera)le Auantities of oil
needed )! M8RA3C9 for its operations. "Manila 8lectric Co. v. CBAA, $$# 5CRA ,.-%.
he pipeline s!stem in Auestion is indu)ita)l! a construction adherin1 to the soil. It is
attached to the land in such a 7a! that it cannot )e separated therefrom 7ithout
dismantlin1 the steel pipes 7hich 7ere 7elded to form the pipeline. "M8RA3C9 5ecurities
Industrial Corp. v. CBAA, $$# 5CRA ,/$%.
he ta; upon the dam 7as properl! assessed to the plaintiff as a ta; upon real estate.
"=la;'Pond :ater Co. v. Cit! of 3!nn, $/ E.8. .#,%.
he oil tanks are structures 7ithin the statute, that the! are desi1ned and used )! the
o7ner as permanent improvement of the free hold, and that for such reasons the! 7ere
properl! assessed )! the respondent ta;in1 district as improvements. "5tandard 9il Co. of
Ee7 Jerse! v. Atlantic Cit!, $& A ,d. ,.$%
he Real Propert! a; Code does not carr! a definition of Kreal propert!K and simpl! sa!s
that the realt! ta; is imposed on Kreal propert!, such as lands, )uildin1s, machiner! and
other improvements affi;ed or attached to real propert!.K In the a)sence of such a
definition, 7e appl! Article #$& of the Civil Code, the pertinent portions of 7hich state:
Art. #$&. he follo7in1 are immova)le propert!.
"$% 3ands, )uildin1s and constructions of all kinds adhered to the soilF
;;; ;;; ;;;
"-% 8ver!thin1 attached to an immova)le in a fi;ed manner, in such a 7a! that it cannot )e
separated therefrom 7ithout )reakin1 the material or deterioration of the o)Cect.
5ection , of C.A. Eo. #.2, other7ise kno7n as the Assessment 3a7, provides that the
realt! ta; is due Kon the real propert!, includin1 land, )uildin1s, machiner! and other
improvementsK not specificall! e;empted in 5ection - thereof. A readin1 of that section
sho7s that the tailin1s dam of the petitioner does not fall under an! of the classes of
e;empt real properties therein enumerated.
Is the tailin1s dam an improvement on the mineL 5ection -"k% of the Real Propert! a;
Code defines improvement as follo7s:
"k% Improvements R is a valua)le addition made to propert! or an amelioration in its
condition, amountin1 to more than mere repairs or replacement of 7aste, costin1 la)or or
capital and intended to enhance its value, )eaut! or utilit! or to adopt it for ne7 or further
purposes.
he term has also )een interpreted as Kartificial alterations of the ph!sical condition of the
1round that arereasona*ly permanent in character.K
,
he Court notes that in the 9ntario case the plaintiff admitted that the mine involved therein
could not )e operated 7ithout the aid of the drain tunnels, 7hich 7ere indispensa)le to the
successful development and e;traction of the minerals therein. his is not true in the
present case.
8ven 7ithout the tailin1s dam, the petitionerMs minin1 operation can still )e carried out
)ecause the primar! function of the dam is merel! to receive and retain the 7astes and
7ater comin1 from the mine. here is no alle1ation that the 7ater comin1 from the dam is
the sole source of 7ater for the minin1 operation so as to make the dam an inte1ral part of
the mine. In fact, as a result of the construction of the dam, the petitioner can no7 impound
and rec!cle 7ater 7ithout havin1 to spend for the )uildin1 of a 7ater reservoir. And as the
petitioner itself points out, even if the petitionerMs mine is shut do7n or ceases operation,
the dam ma! still )e used for irri1ation of the surroundin1 areas, a1ain unlike in the 9ntario
case.
As correctl! o)served )! the CBAA, the Sendrick case is also not applica)le )ecause it
involved 7ater reservoir dams used for different purposes and for the )enefit of the
surroundin1 areas. B! contrast, the tailin1s dam in Auestion is )ein1 used e6clusively for
the )enefit of the petitioner.
Curiousl!, the petitioner, 7hile vi1orousl! ar1uin1 that the tailin1s dam has no separate
e;istence, Cust as vi1orousl! contends that at the end of the minin1 operation the tailin1s
dam 7ill serve the local communit! as an irri1ation facilit!, there)! impl!in1 that it can e;ist
independentl! of the mine.
=rom the definitions and the cases cited a)ove, it 7ould appear that 7hether a structure
constitutes an improvement so as to partake of the status of realt! 7ould depend upon the
de1ree of permanence inten0e0 in its construction an0 use. he e;pression KpermanentK
as applied to an improvement does not impl! that the improvement must )e used
perpetuall! )ut onl! until the purpose to 7hich the principal realt! is devoted has )een
accomplished. It is sufficient that the improvement is intended to remain as lon1 as the land
to 7hich it is anne;ed is still used for the said purpose.
he Court is convinced that the su)Cect dam falls 7ithin the definition of an KimprovementK
)ecause it is permanent in character and it enhances )oth the value and utilit! of
petitionerMs mine. Moreover, the immova)le nature of the dam defines its character as real
propert! under Article #$& of the Civil Code and thus makes it ta;a)le under 5ection -( of
the Real Propert! a; Code.
he Court 7ill also reCect the contention that the appraisal at P&2.22 per sAuare meter
made )! the Provincial Assessor is e;cessive and that his use of the Kresidual value
formulaK is ar)itrar! and erroneous.
Respondent Provincial Assessor e;plained the use of the Kresidual value formulaK as
follo7s:
A &2P residual value is applied in the computation )ecause, 7hile it is true that 7hen slime
fills the dike, it 7ill then )e covered )! another dike or sta1e, the sta1e covered is still there
and still e;ists and since onl! one face of the dike is filled, &2P or the other face is
unutiliJed.
In sustainin1 this formula, the CBAA 1ave the follo7in1 Custification:
:e find the appraisal on the land su)mer1ed as a result of the construction of the tailin1s
dam, covered )! a; 6eclaration Eos.
22,'2,/2 and 22,'2,//, to )e in accordance 7ith the 5chedule of Market Values for 5an
Marcelino, Qam)ales, 7hich is fift! "&2.22% pesos per sAuare meter for third class industrial
land "5E, pa1e $., Jul! &, $0(0% and 5chedule of Market Values for Qam)ales 7hich 7as
revie7ed and allo7ed for use )! the Ministr! "6epartment% of =inance in the $0($'$0(,
1eneral revision. Eo serious attempt 7as made )! Petitioner'Appellant Ben1uet
Corporation to impu1n its reasona)leness, i.e, that the P&2.22 per sAuare meter applied )!
Respondent'Appellee Provincial Assessor is indeed e;cessive and unconsciona)le. Dence,
7e find no cause to distur) the market value applied )! Respondent'Appellee Provincial
Assessor of Qam)ales on the properties of Petitioner'Appellant Ben1uet Corporation
covered )! a; 6eclaration Eos. 22,'2,/2 and 22,'2,//.
It has )een the lon1'standin1 polic! of this Court to respect the conclusions of Auasi'Cudicial
a1encies like the CBAA, 7hich, )ecause of the nature of its functions and its freAuent
e;ercise thereof, has developed e;pertise in the resolution of assessment pro)lems. he
onl! e;ception to this rule is 7here it is clearl! sho7n that the administrative )od! has
committed 1rave a)use of discretion callin1 for the intervention of this Court in the e;ercise
of its o7n po7ers of revie7. here is no such sho7in1 in the case at )ar.
:e disa1ree, ho7ever, 7ith the rulin1 of respondent CBAA that it cannot take co1niJance
of the issue of the propriet! of the penalties imposed upon it, 7hich 7as raised )! the
petitioner for the first time onl! on appeal. he CBAA held that this Kis an entirel! ne7
matter that petitioner can take up 7ith the Provincial Assessor "and% can )e the su)Cect of
another protest )efore the 3ocal Board or a ne1otiation 7ith the local sanggunian . . ., and
in case of an adverse decision )! either the 3ocal Board or the local sanggunian, "it can%
elevate the same to this Board for appropriate action.K
here is no need for this time'7astin1 procedure. he Court ma! resolve the issue in this
petition instead of referrin1 it )ack to the local authorities. :e have studied the facts and
circumstances of this case as a)ove discussed and find that the petitioner has acted in
1ood faith in Auestionin1 the assessment on the tailin1s dam and the land su)mer1ed
thereunder. It is clear that it has not done so for the purpose of evadin1 or dela!in1 the
pa!ment of the Auestioned ta;. Dence, 7e hold that the petitioner is not su)Cect to penalt!
for its
non'declaration of the tailin1s dam and the su)mer1ed lands for realt! ta; purposes.
:D8R8=9R8, the petition is 6I5MI5586 for failure to sho7 that the Auestioned decision
of respondent Central Board of Assessment Appeals is tainted 7ith 1rave a)use of
discretion e;cept as to the imposition of penalties upon the petitioner 7hich is here)! 58
A5I68. Costs a1ainst the petitioner. It is so ordered.
Serg;s Pro!ucts v. PC% Leasing
#acts$ 9n $- =e)ruar! $00(, PCI 3easin1 and =inance, Inc. filed a complaint for sum of
mone!, 7ith anapplication for a 7rit of replevin. 9n / March $00(, upon an e;'parte
application of PCI 3easin1, Cud1eissued a 7rit of replevin directin1 its sheriff to seiJe and
deliver the machineries and eAuipment to PCI3easin1 after & da!s and upon the pa!ment
of the necessar! e;penses. 9n ,# March $00(, thesheriff proceeded to petitionerMs factor!,
seiJed one machiner! 7ith 7ord that the return for the othermachineries. 9n ,& March
$00(, petitioners filed a motion for special protective order, invokin1 thepo7er of the court
to control the conduct of its officers and amend and control its processes, pra!in1for a
directive for the sheriff to defer enforcement of the 7rit of replevin. 9n / April $00(, the
sheriffa1ain sou1ht to enforce the 7rit of seiJure and take possession of the remainin1
properties. De 7asa)le to take t7o more, )ut 7as prevented )! the 7orkers from takin1 the
rest. 9n . April $00(, the!7ent to the CA via an ori1inal action for certiorari.
Citin1 the A1reement of the parties, the appellate court held that the su)Cect machines
7ere personalpropert!, and that the! had onl! )een leased, not o7ned, )! petitionersF and
ruled that the K7ords ofthe contract are clear and leave no dou)t upon the true intention of
the contractin1 parties.K It thusaffirmed the $( =e)ruar! $00( 9rder, and the -$ March
$00( Resolution of the lo7er court, and liftedthe preliminar! inCunction issued on $& June
$00(. A su)seAuent motion for reconsideration 7asdenied on ,/ =e)ruar! $000. Dence,
the petition for revie7 on certiorari.
%ssue$ :hether the machines are personal or real propert!L
&el!$ he machiner! 7ere essential and principal elements of their chocolate'makin1
industr!. Dence,althou1h each of them 7as mova)le or personal propert! on its o7n, all of
them have )ecomeKimmo)iliJed )! destination )ecause the! are essential and principal
elements in the industr!.K hemachines are thus, real, not personal, propert! pursuant to
Article #$& "&% of the Civil Code.
Contractin1 parties ma! validl! stipulate that a real propert! )e considered as personal.
After a1reein1to such stipulation, the! are conseAuentl! estopped from claimin1 other7ise.
Bnder the principle ofestoppel, a part! to a contract is ordinaril! precluded from den!in1 the
truth of an! material fact foundtherein. hus, said machines are proper su)Cects of the :rit
of 5eiJure "compare umalad v. Vicencio%.
he holdin1 that the machines should )e deemed personal propert! pursuant to the 3ease
A1reementis 1ood onl! insofar as the contractin1 parties are concerned. Dence, 7hile the
parties are )ound )!the A1reement, third persons actin1 in 1ood faith are not affected )!
its stipulation characteriJin1 thesu)Cect machiner! as personal. In the present case,
ho7ever, there is no sho7in1 that an! specificthird part! 7ould )e adversel! affected.
4S"% 6. C2354 2# "PP"LS
336 SC5" 3,4

#"C4S$
8V8R8T secured a loan from PBC, 1uaranteed )! a real estate and chattel
mort1a1e over a parcel of land 7here the factor! stands, and the chattels located therein,
as included in a schedule attached to the mort1a1e contract. Another loan 7as
o)tained secured )! a chattel mort1a1e over
properties 7ith similar descriptions listed in the first schedule. 6urin1 the date of
e;ecution of the second mort1a1e, 8V8R8T purchased machineries and
eAuipment.

6ue to )usiness reverses, 8V8R8T filed for insolvenc! proceedin1s. It failed to
pa! its o)li1ation and thus, PBC initiated e;traCudicial foreclosure of the mort1a1es.
PBC 7as the hi1hest )idder in the pu)lic auctions, makin1 it the o7ner of the
properties. It then leased the factor! premises
to sai. After7ards, 8V8R8T sou1ht the annulment of the sale and conve!ance of
the properties to PBC as it 7as alle1edl! a violation of the IE593V8EC4 3A:.

he RC held that the lease and sale 7ere irre1ular as it involved properties not
included in theschedule of the mort1a1e contract.
&LD$
:hile it is true that the controverted properties appear to )e immo)ile, a perusal of
the contract of R8M and CM e;ecuted )! the parties 1ives a contrar! indication. In
the case at )ar, )oth the trial and appellate courts sho7 that the intention 7as to treat
the machineries as mova)les or
personal propert!.

Assumin1 that the properties 7ere considered immova)les, nothin1 detracts the
parties from treatin1 it as chattels to secure an o)li1ation under the principle of
estoppel.