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.

Petitioner’s 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

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

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.

Bicerra v. Teneza
G.R. No. L-16218, 6 SCRA 648

DOCTRINE: A house is classified as immovable property by reason of its adherence to the soil
on which it is built (Article 415, paragraph 1, Civil Code). This classification holds true regardless
of the fact that the house may be situated on land belonging to a different owner. But once the
house is demolished it ceases to exist, hence its character as an immovable likewise ceases.

FACTS:
The Bicerras are supposedly the owners of the house (PhP 20,000) built on a lot owned by them
in Lagangilang, Abra which the Tenezas forcibly demolished in January 1957, claiming to be the
owners thereof. The materials of the house were placed in the custody of the barrio lieutenant.
The Bicerras filed a complaint claiming actual damages of P200, moral and consequential
damages amounting to P600, and the costs. The CFI Abra dismissed the complaint claiming that
the action was within the exclusive (original) jurisdiction of the Justice of the Peace Court of
Lagangilang, Abra.

The Supreme Court affirmed the order appealed. Having been admitted in forma pauperis, no
costs were adjudged.

ISSUE:
WON the house is immovable property even if it is on the land of another

HELD:
House is immovable property even if situated on land belonging to a different owner; Exception,
when demolished.

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.

Piansay v. David
12 SCRA 227

DOCTRINE: regardless of the validity of a contract constituting a chattel mortgage on a house,

the same cannot and does not bind third persons, who are not parties to the contract of their
privies.

FACTS:
David obtained a loan from Uy Kim secured with a chattel mortgage on a house in Tondo. David
failed to pay, thus was Kim foreclosed. Kim then bought the house at the resulting public auction.
Thereafter, Kim sold the same to Marcos Mangubat, who later filed a complaint against David for
the collection of a portrion of the loan. The complaint was later amended to implead Uy Kim and
Piansay praying that the auction sale and deed of absolute sale executed by Uy Kim in favor of
Piansay be annulled. CFI Manila ordered David to pay and annulled the chattel mortgage. CA
affirmed. David was ordered to pay and the house was levied upon. To prevent the sale at the
public auction, Piansay and Uy Kim filed a petition for
certiorari and mandamus with preliminary injunction before the CA; it was denied.

Subsequently, Piansay and Uy Kim instituted an action against David and Mangubat praying that
judgment be rendered declaring Piansay as the true owner and restrain the levy and sale to public
auction. David demanded from Piansay the payment of the rentals for the use and occupation of
the house; the latter claims it is his property. Mangubat, on one hand, moved to dismiss the
complaint on the ground of res adjudicata and lack of personality to sue; it was granted. CA
affirmed explaining that Uy Kim had no right to foreclose the chattel mortgage because it was in
reality a mere contract of an unsecured loan. Piansay assailed Mangubat's right to levy execution
upon the house alleging that the same belongs to him, he having bought it from Uy Kim who
acquired it at the auction sale.

ISSUE:
WON the chattel mortgage and sale are valid - NO
HELD:
Upon the theory that the chattel mortgage and sale in favor of Uy Kim had been annulled in the
original decision, as affirmed by the CA, the fact is that said order became final and executory
upon the denial of the petition for certiorari and mandamus. Hence, Uy Kim and Piansay are now
barred from asserting that the chattel mortgage and sale are valid. At any rate, regardless of the
validity of a contract constituting a chattel mortgage on a house, as between the parties to said
contract, the same cannot and does not bind third persons, who are not parties to the contract of
their privies. As a consequence, the sale of the house in question in the proceedings for the
extrajudicial foreclosure of said chattel mortgage, is null and void insofar as defendant Mangubat
is concerned, and did not confer upon Uy Kim, as buyer in said sale, any dominical right in and to
said house, so that she could not have transmitted to her assignee Piansay any such right as
against Mangubat. In short, they do not have a cause of action against Mangubat and David.

BENGUET CORPORATION VS. CENTRAL BOARD

OF ASSESSMENT APPEALS (CBAA) GR NO.
106041 January 29, 1993
July 31, 2017
FACTS:

The realty tax assessment involved in this case amounts to Php 11, 319,304.00. It has been
imposed on the petitioner's tailings dam and the land thereunder over its protest.

The controversy arose in 1985 when the Provincial Assessor of Zambales assessed the said
properties as taxable improvements. The assessment was appealed to the Board of
Assessments Appeals of the Province of Zambales. The appeal was dismissed.

The petitioner seasonably elevated the matter to the CBAA which reversed the dismissal
of the appeal but, on the merits, agreed that "The tailings dam and the lands submerged
thereunder were subject to realty tax.

ISSUE:

Whether the tailings dam is subject to realty tax because it is an improvement upon the
land.

RULING:
Yes. The Real Property Tax Code does not carry a definition of "real property" and simply
says that the realty tax is imposed on "real property, such as lands, buildings, machinery
and other improvements affixed or attached to real property." In the absence of such a
definition, we apply Article 415 of the Civil Code, the pertinent portions: Par (1) and (3).

Sec. 2 of C.A. No. 470, otherwise known as the Assessment Law, provides that the realty
tax is due "on the real property, including land, buidings, machinery and other
improvements" not specifically exempted in Sec. 3 thereof. A reading of that section
shows that the tailings dam of the petitioner does not fall under any of the classes exempt
real properties therein enumerated.

Is the tailings dam an improvement on the mine?

Under Section 3 of the Real Property Tax Code:

Improvement - 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 adopt it for new or
future purposes.

The term has also been interpreted as "artificial alterations of the physical condition of
the ground that are reasonably permanent in character.

A structure constitutes an improvement so as to partake of the status of realty would

depend upon the degree of permanence intended in its construction and use. The
expression "permanent" as applied to an improvement does not imply that the
improvement must be used perpetually but only until the purpose to which the principal
realty is devoted has been accomplished. It is sufficient that the improvement is intended
to remain as long as the land to which it is annexed is still used for the said purpose.

The court is convinced that the subject dam falls within the definition of an
"improvement" because it is permanent in character and it enhances the value and utility
of petitioner's mine. Moreover, the immovable nature of the dam defines its character as
real property under Article 415 of the Civil Code and thus makes it taxable under Section
38 of the Real Property Tax Code.

Mindanao Bus Co. v. City Assessor and Treasurer

G.R. No. L-17870

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.

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.

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,

The City Assessor of CDO then assessed a P4,400 realty tax on said machineries and repair
equipment. This was then appealed to the Court of Tax Appeals (CTA) who sustained the
respondent city assessor's ruling.

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

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.)

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.

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

Capitol Wireless Inc. vs. Provincial Treasurer of Batangas G.R. no. 180110

Facts:
Petitioner Capitol Wireless Inc. (Capwire) is a Philippine corporation in the business of providing international
telecommunications services. As such provider, Capwire has signed agreements with other local and foreign
telecommunications companies covering an international network of submarine cable systems uch as the Asia Pacific Cable
Network System (APCN). Petitioner Capwire claims that it is co-owner only of the so-called "Wet Segment" of the APCN, while the
landing stations or terminals and Segment E of APCN located in Nasugbu, Batangas are allegedly owned by the Philippine Long
Distance Telephone Corporation (PLDT). Moreover, it alleges that the Wet Segment is laid in international, and not Philippine,
waters. Capwire claims that as co-owner, it does not own any particular physical part of the cable system but, consistent with its
financial contributions, it owns the right to use a certain capacity of the said system.8 This property right is allegedly reported in
its financial books as "Indefeasible Rights in Cable Systems." However, for loan restructuring purposes, Capwire claims that "it was
required to register the value of its right," hence, itengaged an appraiser to "assess the market value of the international submarine
cable system and the cost to Capwire."
As a result, the respondent Provincial Assessor of Batangas (Provincial Assessor) issued the following Assessments of Real
Property (ARP) against Capwire. n essence, the Provincial Assessor had determined that the submarine cable systems described
in Capwire's Sworn Statement of True Value of Real Properties are taxable real property, a determination that was contested by
Capwire in an exchange of letters between the company and the public respondent

Issue: whether submarine wires or cables used for communications may be taxed like other real estate.

Held: Yes. Submarine or undersea communications cables are akin to electric transmission lines which this Court has recently
declared in Manila Electric Company v. City Assessor and City Treasurer of Lucena City, as "no longer exempted from real
property tax" and may qualify as "machinery" subject to real property tax under the Local Government Code. To the extent that
the equipment's location is determinable to be within the taxing authority's jurisdiction, the Court sees no reason to distinguish
between submarine cables used for communications and aerial or underground wires or lines used for electric transmission, so
that both pieces of property do not merit a different treatment in the aspect of real property taxation. Both electric lines and
communications cables, in the strictest sense, are not directly adhered to the soil but pass through posts, relays or landing
stations, but both may be classified under the term "machinery" as real property under Article 415(5) of the Civil Code for the
simple reason that such pieces of equipment serve the owner's business or tend to meet the needs of his industry or works that
are on real estate. Even objects in or on a body of water may be classified as such, as "waters" is classified as an immovable
under Article 415(8) of the Code. A classic example is a boathouse which, by its nature, is a vessel and, therefore, a personal
property but, if it is tied to the shore and used as a residence, and since it floats on waters which is immovable, is considered
real property. Besides, the Court has already held that "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."
Thus, absent any showing from Capwire of any express grant of an exemption for its lines and cables from real property taxation,
then this interpretation applies and Capwire's submarine cable may be held subject to real property tax.
Berkenkotter vs Cu Unjieng 61 Phil 663

Berkenkotter - plaintiff-appellant
CU UNJIENG E HIJOS - defendants-appellees.

Facts:
The Mabalacat Sugar Co., Inc., owner of the sugar central, obtained from the defendants, Cu
Unjieng e Hijos, a loan secured two parcels and land "with all its buildings, improvements, etc.
and whatever forms part or is necessary complement of said sugar-cane mill ... now existing or
that may in the future exist is said lots."

Shortly after said mortgage had been constituted, the Mabalacat Sugar Co., Inc., bought
additional machinery and equipment. Plaintiff, B.H. Berkenkotter, was asked by the company
president, B.A. Green, to advance the necessary amount for the purchase of said machinery and
equipment. Plaintiff was promised to get reimbursement when an additional loan from the
mortgagees is obtained. Green failed to obtain said loan.

Appellant's Contention:
Installation of the machinery and equipment claimed by him in the sugar central was not
permanent in character ... in case Green should fail to obtain an additional loan said machinery
and equipment would become security for the company's debt to him.

Issue:
Whether or not the additional machinery and equipment is considered an improvement subject to
the mortgage executed in favor of Mabalacat Sugar Co., Inc. by Cu Unjieng e Hijos.

Held:
Yes.
The installation of the machinery and equipment in question in the central converted them into
real property by reason of their purpose. As essential and principal elements of a sugar central,
without them the sugar central would be unable to function or carry on the industrial purpose for
which it was established. Inasmuch as the central is permanent in character, the necessary
machinery and equipment installed for carrying on the sugar industry for which it has been
established must necessarily be permanent.

Case Cited: Bischoff vs. Pomar and Compania General de Tabacos (cited with approval in the
case of Cea vs. Villanueva)

(1) in a mortgage of real estate, the improvements on the same are included; therefore, all objects
permanently attached to a mortgaged building or land, although they may have been placed there
after the mortgage was constituted, are also included.

(2) when it was stated in the mortgage that the improvements, buildings, and machinery that
existed thereon were also comprehended, it is indispensable that the exclusion thereof be
stipulated between the contracting parties.
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.

Jose Burgos vs. Chief of Staff

G.R. No L-64261
December 26, 1984
Facts:
Two warrants were issued against petitioners for the search on the premises of “Metropolitan Mail”
and “We Forum” newspapers and the seizure of items alleged to have been used in subversive
activities. Petitioners prayed that a writ of preliminary mandatory and prohibitory injunction be issued
for the return of the seized articles, and that respondents be enjoined from using the articles thus
seized as evidence against petitioner.

Petitioners questioned the warrants for the lack of probable cause and that the two warrants issued
indicated only one and the same address. In addition, the items seized subject to the warrant were
real properties.

Issue: Whether or not the two warrants were valid to justify seizure of the items.

Held:

The defect in the indication of the same address in the two warrants was held by the court as a
typographical error and immaterial in view of the correct determination of the place sought to be
searched set forth in the application. The purpose and intent to search two distinct premises was
evident in the issuance of the two warrant.

As to the issue that the items seized were real properties, the court applied the principle in the case
of Davao Sawmill Co. v. Castillo, ruling “that machinery which is movable by nature becomes
immobilized when placed by the owner of the tenement, property or plant, but not so when placed by
a tenant, usufructuary, or any other person having only a temporary right, unless such person acted
as the agent of the owner.” In the case at bar, petitioners did not claim to be the owners of the land
and/or building on which the machineries were placed. This being the case, the machineries in
question, while in fact bolted to the ground remain movable property susceptible to seizure under a
search warrant.

However, the Court declared the two warrants null and void.

Probable cause for a search is defined as such facts and circumstances which would lead a
reasonably discreet and prudent man to believe that an offense has been committed and that the
objects sought in connection with the offense are in the place sought to be searched.

The Court ruled that the affidavits submitted for the application of the warrant did not satisfy the
requirement of probable cause, the statements of the witnesses having been mere generalizations.

Furthermore, jurisprudence tells of the prohibition on the issuance of general warrants. (Stanford vs.
State of Texas). The description and enumeration in the warrant of the items to be searched and
seized did not indicate with specification the subversive nature of the said items.

PEOPLE'S BANK AND TRUST COMPANY vs. DAHICAN LUMBER COMPANY (G.R. No. L-17500 May 16, 1967)

PEOPLE'S BANK AND TRUST COMPANY vs. DAHICAN LUMBER

COMPANY (G.R. No. L-17500 May 16, 1967)
Facts:

On September 8, 1948, Atlantic Gulf & Pacific Company of Manila, a West Virginia corporation licensed
to do business in the Philippines sold and assigned all its rights in the Dahican Lumber concession to
Dahican Lumber Company - hereinafter referred to as DALCO - for the total sum of $500,000.00, of
which only the amount of $50,000.00 was paid. Thereafter, to develop the concession, DALCO obtained
various loans from the People's Bank & Trust Company amounting, as of July 13, 1950, to P200,000.00.
In addition, DALCO obtained, through the BANK, a loan of $250,000.00 from the Export-Import Bank
of Washington D.C., evidenced by five promissory notes of $50,000.00 each, maturing on different dates,
executed by both DALCO and the Dahican America Lumber Corporation, a foreign corporation and a
stockholder of DALCO,

As security for the payment of the abovementioned loans, on July 13, 1950 DALCO executed in favor of
the BANK a deed of mortgage covering five parcels of land situated in the province of Camarines Norte
together with all the buildings and other improvements existing thereon and all the personal properties of
the mortgagor located in its place of business in the municipalities of Mambulao and Capalonga,
Camarines Norte. On the same date, DALCO executed a second mortgage on the same properties in favor
of ATLANTIC to secure payment of the unpaid balance of the sale price of the lumber concession
amounting to the sum of $450,000.00. Both deeds contained a provision extending the mortgage lien to
properties to be subsequently acquired by the mortgagor.

Both mortgages were registered in the Office of the Register of Deeds of Camarines Norte. In addition
thereto DALCO and DAMCO pledged to the BANK 7,296 shares of stock of DALCO and 9,286 shares
of DAMCO to secure the same obligation.

Upon DALCO's and DAMCO's failure to pay the fifth promissory note upon its maturity, the BANK paid
the same to the Export-Import Bank of Washington D.C., and the latter assigned to the former its credit
and the first mortgage securing it. Subsequently, the BANK gave DALCO and DAMCO up to April 1,
1953 to pay the overdue promissory note.c

After July 13, 1950 - the date of execution of the mortgages mentioned above - DALCO purchased
various machineries, equipment, spare parts and supplies in addition to, or in replacement of some of
those already owned and used by it on the date aforesaid. Pursuant to the provision of the mortgage deeds
quoted theretofore regarding "after acquired properties," the BANK requested DALCO to submit
complete lists of said properties but the latter failed to do so. In connection with these purchases, there
appeared in the books of DALCO as due to Connell Bros. Company (Philippines) - a domestic
corporation who was acting as the general purchasing agent of DALCO -the sum of P452,860.55 and to
DAMCO, the sum of P2,151,678.34.chan
On December 16, 1952, the Board of Directors of DALCO, in a special meeting called for the purpose,
passed a resolution agreeing to rescind the alleged sales of equipment, spare parts and supplies by
CONNELL and DAMCO to it.

On January 13, 1953, the BANK, in its own behalf and that of ATLANTIC, demanded that said
agreements be cancelled but CONNELL and DAMCO refused to do so. As a result, on February 12,
1953; ATLANTIC and the BANK, commenced foreclosure proceedings in the Court of First Instance of
Camarines Norte against DALCO and DAMCO.

Upon motion of the parties the Court, on September 30, 1953, issued an order transferring the venue of
the action to the Court of First Instance of Manila.

On August 30, 1958, upon motion of all the parties, the Court ordered the sale of all the machineries,
equipment and supplies of DALCO, and the same were subsequently sold for a total consideration of
P175,000.00 which was deposited in court pending final determination of the action. By a similar
agreement one-half (P87,500.00) of this amount was considered as representing the proceeds obtained
from the sale of the "undebated properties" (those not claimed by DAMCO and CONNELL), and the
other half as representing those obtained from the sale of the "after acquired properties".

ISSUE:

WON the "after acquired properties" were subject to the deeds of mortgage mentioned heretofore.
Assuming that they are subject thereto,
WON the mortgages are valid and binding on the properties aforesaid inspite of the fact that they were not
registered in accordance with the provisions of the Chattel Mortgage Law.

HELD:

Under the fourth paragraph of both deeds of mortgage, it is crystal clear that all property of every nature
and description taken in exchange or replacement, as well as all buildings, machineries, fixtures, tools,
equipments, and other property that the mortgagor may acquire, construct, install, attach; or use in, to
upon, or in connection with the premises - that is, its lumber concession - "shall immediately be and
become subject to the lien" of both mortgages in the same manner and to the same extent as if already
included therein at the time of their execution. Such stipulation is neither unlawful nor immoral, its
obvious purpose being to maintain, to the extent allowed by circumstances, the original value of the
properties given as security.

Article 415 does not define real property but enumerates what are considered as such, among them being
machinery, receptacles, instruments or replacements intended by owner of the tenement for an industry or
works which may be carried on in a building or on a piece of land, and shall tend directly to meet the
needs of the said industry or works

Serg’s 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.

Serg’s 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 SERG’S 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.

Makati Leasing and Financial Corporation v. Wearever Textile Mills, Inc.

G.R. No. L-58469

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.

Metropolitan Bank v. Alejo

364 SCRA 812

DOCTRINE: In a suit to nullify an existing TCT in which a real estate mortgage is annotated, the
mortgagee is an indispensable party. In such suit, a decision canceling the TCT and the mortgage
annotation is subject to a petition for annulment of judgment, because the non-joinder of the
mortgagee deprived the court of jurisdiction to pass upon the controversy.

FACTS:
Spouses Acampado obtained a loan from petitioner and as security for their payment of the credit
accommodations, they executed a real estate mortgage in Valenzuela City. The land was also
located in Valenzuela and the TCT covering it is registered in the Registry of deeds in the same
city.

On June 1996, a Complaint for Declaration of Nullity of TCT was filed by Respondent Sy Tan Se
against Spouses Acampado.

Despite being the registered mortgagee of the real property covered by the title sought to be
annulled, petitioner was not made a party to the case nor was it notified of its existence.
The spouses defaulted in the payment of their loan. Thereafter,extrajudicial foreclosure
proceedings over the mortgaged property were initiated and then the sheriff of Valenzuela
conducted an auction sale of the property, during which petitioner submitted the highest and
winning bid. A Certificate of Sale was issued in its favor and the sale was entered in the Registry
of Deeds of Valenzuela.

When the redemption period lapsed exactly a year after, petitioner executed an Affidavit of
Consolidation of Ownership to enable the Registry of Deeds of Valenzuela to issue a new TCT in
its name however petitioner was informed that an RTC decision declared the TCT as null and
void for having proceeded from an illegitimate source.

ISSUE:
Whether or not the judgment of the RTC that declared the TCT as null and void should be
annulled?

HELD:
The Court held in the affirmative.

The Rules of Court provide that no final determination can be had of an action wherein the
indispensable party is not joined in the complaint either as the defendant or the complainant.

It is undisputed that the property covered by the TCT was mortgaged to petitioner, and that the
mortgage was annotated on it before the institution of Civil Cas. It is also undisputed that all
subsequent proceedings pertaining to the foreclosure of the mortgage were entered in the
Registry of Deeds. The nullification and cancellation of TCT carried with it the nullification and
cancellation of the mortgage annotation.

Although a mortgage affects the land itself and not merely the TCT covering it, the cancellation of
the TCT and the mortgage annotation exposed petitioner to real prejudice. Evidently, the
nullification of the TCT adversely affected its property rights, considering that a real mortgage is
a real right and a real property by itself.

Because petitioner falls under the definition of an indispensable party, it should have been
impleaded as defendant in the civil case questioning the title.