1. Davao Sawmill Co. v Castillo 61 Phi.

709

2.B.H. Berkenkotter v Cu Unjieng 61 Phil. 663

3.Enrique Lopez v Vicente Orosa 103 Phil. 98

4.Tumalad v Vicencio 41 SCRA 143

5. Associated Insurance & Surety Company, Inc. v. Iya 103 Phil 972

6.Makati Leasing v Wearever Textile Mills, Inc. 122 SCRA 296

7.Board of Assessment Appeals v Manila Electric Company 10 SCRA 63

8.Manila Electric Co. v. Central Board of Assessment Appeals 114 SCRA 273

9.CALTEX (Philippines) Inc. v Central Board of Assessment Appeals 114 SCRA 296

10.Benguet Corporation v Central Board of Assessment Appeals 218 SCRA 271

1. Davao Sawmill Co. v Castillo 61 Phi. 709

DAVAO SAW MILL vs. APRONIANO G. CASTILLO and DAVAO LIGHT & POWER CO., INC.
G.R. No. L-40411 August 7, 1935

Facts:
Davao Saw Mill Co., Inc., is the holder of a lumber concession from the Government of the
Philippine Islands. However, the land upon which the business was conducted belonged to
another person. On the land the sawmill company erected a building which housed the
machinery used by it. Some of the implements thus used were clearly personal property, the
conflict concerning machines which were placed and mounted on foundations of cement. In the
contract of lease between the sawmill company and the owner of the land there appeared the
following provision: That on the expiration of the period agreed upon, all the improvements and
buildings introduced and erected by the party of the second part shall pass to the exclusive
ownership of the lessor without any obligation on its part to pay any amount for said
improvements and buildings; which do not include the machineries and accessories in the
improvements.

In another action wherein the Davao Light & Power Co., Inc., was the plaintiff and the Davao,
Saw, Mill Co., Inc., was the defendant, a judgment was rendered in favor of the plaintiff in that
action against the defendant; a writ of execution issued thereon, and the properties now in
question were levied upon as personalty by the sheriff. No third party claim was filed for such
properties at the time of the sales thereof as is borne out by the record made by the plaintiff
herein
It must be noted also that on number of occasion, Davao Sawmill treated the machinery as
personal property by executing chattel mortgages in favor of third persons. One of such is the
appellee by assignment from the original mortgages.

The lower court rendered decision in favor of the defendants herein. Hence, this instant appeal.

Issue:
whether or not the machineries and equipments were personal in nature.

Ruling/ Rationale:
Yes. The Supreme Court affirmed the decision of the lower court.

Machinery which is movable in its nature only becomes immobilized when placed in a plant by
the owner of the property or plant, but not when so placed by a tenant, a usufructuary, or any
person having only a temporary right, unless such person acted as the agent of the owner.

2. B.H. Berkenkotter v Cu Unjieng 61 Phil. 663

B.H. BERKENKOTTER, plaintiff-appellant, vs. CU UNJIENG E HIJOS, YEK TONG LIN FIRE
AND MARINE INSURANCE COMPANY, MABALACAT SUGAR COMPANY and THE
PROVINCE SHERIFF OF PAMPANGA, defendants-appellees.

Facts: On April 26, 1926, the Mabalacat Sugar Co., Inc., owner of the sugar central situated in
Mabalacat, Pampanga, obtained from the defendants, Cu Unjieng e Hijos, a loan secured by a
first mortgage constituted on two parcels and land "with all its buildings, improvements, sugar-
cane mill, steel railway, telephone line, apparatus, utensils and whatever forms part or is
necessary complement of said sugar-cane mill, steel railway, telephone line, now existing or
that may in the future exist is said lots."

On October 5, 1926, shortly after said mortgage had been constituted, the Mabalacat Sugar
Co., Inc., decided to increase the capacity of its sugar central by buying additional machinery
and equipment, so that instead of milling 150 tons daily, it could produce 250. The estimated
cost of said additional machinery and equipment was approximately P100,000. In order to carry
out this plan, B.A. Green, president of said corporation, proposed to the plaintiff, B.H.
Berkenkotter, to advance the necessary amount for the purchase of said machinery and
equipment, promising to reimburse him as soon as he could obtain an additional loan from the
mortgagees, the herein defendants Cu Unjieng e Hijos. Having agreed to said proposition made
in a letter dated October 5, 1926, B.H. Berkenkotter, on October 9th of the same year, delivered
the sum of P1,710 to B.A. Green, president of the Mabalacat Sugar Co., Inc., the total amount
supplied by him to said B.A. Green having been P25,750. Furthermore, B.H. Berkenkotter had a
credit of P22,000 against said corporation for unpaid salary. With the loan of P25,750 and said
credit of P22,000, the Mabalacat Sugar Co., Inc., purchased the additional machinery and
equipment now in litigation.

On June 10, 1927, B.A. Green, president of the Mabalacat Sugar Co., Inc., applied to Cu
Unjieng e Hijos for an additional loan of P75,000 offering as security the additional machinery
and equipment acquired by said B.A. Green and installed in the sugar central after the
execution of the original mortgage deed, on April 27, 1927, together with whatever additional
equipment acquired with said loan. B.A. Green failed to obtain said loan.

The appellant contends that the installation of the machinery and equipment claimed by him in
the sugar central of the Mabalacat Sugar Company, Inc., was not permanent in character
inasmuch as B.A. Green, in proposing to him to advance the money for the purchase thereof,
made it appear in the letter, Exhibit E, that in case B.A. Green should fail to obtain an additional
loan from the defendants Cu Unjieng e Hijos, said machinery and equipment would become
security therefor, said B.A. Green binding himself not to mortgage nor encumber them to
anybody until said plaintiff be fully reimbursed for the corporation's indebtedness to him.

ISSUE: 1. Are the additional machines also considered mortgaged?

2. Whether the improvements/machineries incorporated considered real property

HELD:

1. Yes. MORTGAGE OF REAL ESTATE INCLUDES IMPROVEMENTS AND FIXTURES.

— It is a rule, established by the Civil Code and also by the Mortgage Law, with which the
decisions of the courts of the United States are in accord, that 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. Article 334 , paragraph 5, of the Civil Code gives the character of real property to
"machinery, liquid containers, instruments or implements intended by the owner of any building
or land for use in connection with any industry or trade being carried on therein and which are
expressly adapted to meet the requirements of such trade or industry.

If the installation of the machinery and equipment in question in the central of the Mabalacat
Sugar Co., Inc., in lieu of the other of less capacity existing therein, for its sugar industry,
converted them into real property by reason of their purpose, it cannot be said that their
incorporation therewith was not permanent in character because, 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.

Note: Art 334 in this case is now Art 415 of the NCC.

3.Enrique Lopez v Vicente Orosa 103 Phil. 98

G.R. Nos. L-10817-18 February 28, 1958

 ENRIQUE LOPEZ, petitioner,

vs.

VICENTE OROSA, JR., and PLAZA THEATRE, INC., respondents.

Facts:

After agreeing to make an investment in Orosa’s theatre business and his assurance
that he would be personally liable for any account that the said construction might incur,
Lopez delivered the lumber which was used for the construction of the Plaza Theatre.
But of the total cost of the materials amounting to P62,255.85, Lopez was paid only
P20848.50.

Plaza Theatre was erected on a piece of land formerly owned by Orosa, and was
acquired by the corporation. As Lopez was pressing Orosa for payment of remaining
unpaid obligation, the latter promised to obtain a bank loan by mortgaging the properties
of Plaza Theatre. Unknown to Lopez, the corporation already got a loan from a bank
with Luzon Surety Company as surety, and the corporation in turn executed a mortgage
on the land and building in favor of said company as counter-security.

Persistent demand from Lopez caused Orosa to execute an alleged “deed of

assignment” of his 480 shares of stock of Plaza Theatre, at P100 per share; and as the
obligation still remain unsettled, Lopez filed a complaint against Orosa and Plaza
Theatre Inc, praying that xxx in case defendants fail to pay, the building and land owned
by corporation be sold at public auction, or the shares of the capital stock be sold, and
the proceeds thereof be applied to said indebtedness.

As a defense, Orosa contended that the shares of stocks were personal properties and
cannot be made to cover and satisfy the obligation. it was thus prayed that he be
declared exempted from payment of deficiency in case the proceeds from the sale of
properties are not enough.

The surety company, upon discovery that the land was already registered, file a petition
to annotate the rights and interests of the surety company over the said properties,
which was opposed by Lopez who asserted that he has preferred lien over the
properties.

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The two cases were heard jointly, and lower court held that Orosa were liable for the
unpaid balance of the cost of lumber used in the construction, and Lopez thus acquired
materialman’s lien over it. In making the pronouncement that tyhe lien was merely
confined to the building and did not extend to the land where it was built, the trial jduge
took into consideration that xxx codal provisions specifying that refection credits are
preferred could refer to buildings which are also classified as real properties upon which
the refaction was made. Orosa were thus required to xxx with respect tohe building,
said mortgage was subject to materialmen’s lien in favor of Lopez.

Lopez tried to secure a modification of decision in so far as it declared that lien did not
extend to the land, but was denied by court. Hence, the appeal.

Issue:

Whether a materialmen’s lien for the value of materials used in the construction of
building attaches to said structure alone, and does not extend to the land on which
building is adhered to.

Held:

Yes. Such lien attaches to structure alone, and does not extend to the land where the
building is.
In view of employment of the phrase, “real estate or immovable property”, and in as
much as said provision does not contain any specification delimiting the lien to the
building, said article must be construed as to embrace both the land and building or the
structure adhering thereto. SC cannot subscribe to this view, for while it is true that real
estate connotes land and building constructed thereon, it is obvious that the inclusion of
the building, separate and distinct from the land, in the enumeration of what may
constitute real properties could mean only one thing – that the building is by itself an
immovable property. Moreover, in view of the absence of any specific provision of law
to the contrary, 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.

A close examination of the provision of the Civil Code reveals that the law gives
preference to unregistered refectionary credits only with respect to the real estate upon
the refection or work was made. The conclusion is that it must be that the lien so
created attaches merely to the immovable property for the construction or repair of
which the obligation was incurred. Therefore, the lien in favor of appellant for the
unpaid value of the lumber used in construction of the building attaches only to said
structure and to no other property of the obligors.

Wherefore, and on the strength of the foregoing considerations, the decision appealed
from is hereby affirmed, with costs against appellant. It is so ordered.

4.Tumalad v Vicencio 41 SCRA 143

TUMALAD V. VICENCIO

Although a building is an immovable; the parties to a contract may by agreement treat as

personal property that which by nature is a real property however they are estopped from
subsequently claiming otherwise.
FACTS:

Alberta Vicencio and Emiliano Simeon received a loan of P4, 800 from Gavino and Generosa
Tumalad. To guaranty said loan, Vicencio executed a chattel mortgage in favor of Tumalad over
their house of strong materials which stood on a land which was rented from the Madrigal &
Company, Inc. When Vicencio defaulted in paying, the house was extrajudicially foreclosed,
pursuant to their contract. It was sold to Tumalad and they instituted a Civil case in the
Municipal Court of Manila to have Vicencio vacate the house and pay rent.

The MTC decided in favor of Tumalad ordering Vicencio to vacate the house and pay rent until
they have completely vacated the house. Vicencio is questioning the legality of the chattel
mortgage on the ground that 1) the signature on it was obtained thru fraud and 2) the mortgage
is a house of strong materials which is an immovable therefore can only be the subject of a
REM. On appeal, the CFI found in favor of Tumalad, and since the Vicencio failed to deposit the
rent ordered, it issued a writ of execution, however the house was already demolished pursuant
to an order of the court in an ejectment suit against Vicencio for non-payment of rentals. Thus
the case at bar.

ISSUE:

Whether or not the chattel mortgage is void since its subject is an immovable

HELD:

NO.

Although a building is by itself an immovable property, parties to a contract may treat as

personal property that which by nature would be real property and it would be valid and good
only insofar as the contracting parties are concerned. By principle of estoppel, the owner
declaring his house to be a chattel may no longer subsequently claim otherwise.

When Vicencio executed the Chattel Mortgage, it specifically provides that the mortgagor cedes,
sells and transfers by way of Chattel mortgage. They intended to treat it as chattel therefore are
now estopped from claiming otherwise. Also the house stood on rented land which was held in
previous jurisprudence to be personalty since it was placed on the land by one who had only
temporary right over the property thus it does not become immobilized by attachment.
[Vicencio though was not made to pay rent since the action was instituted during the period of
redemption therefore Vicencio still had a right to remain in possession of the property]

5. Associated Insurance & Surety Company, Inc. v. Iya 103 Phil 972

G.R. Nos. L-10837-38 May 30, 1958

ASSOCIATED INSURANCE and SURETY COMPANY, INC., plaintiff,

vs.

ISABEL IYA, ADRIANO VALINO and LUCIA VALINO, defendants.

Facts:

Valino & Valino were the owners and possessors of a house of strong materials in Rizal,
which they purchased on installment basis. To enable her to purchase on credit rice
from NARIC, Valino filed a bond (P11,000) subscribed by Associated Insurance and
Surety Co Inc, and as a counter-guaranty, Valino executed an alleged chattel mortgage
on the aforementioned house in favour of the surety company. At the same time, the
parcel of land which the house was erected was registered in the name of Philippine
Realty Corporation.

Valino, to secure payment of an indebtedness (P12,000) executed a real estate

mortgage over the lot and the house in favour of Iya.

Valino failed to satisfy her obligation to NARIC, so the surety company was compelled
to pay the same pursuant to the undertaking of the bond. In turn, surety company
demanded reimbursement from Valino, and as they failed to do so, the company
foreclosed the chattel mortgage over the house. As a result, public sale was conducted
and the property was awarded to the surety company.

The surety company then learned of the existence of the real estate mortgage over the
lot and the improvements thereon; thus, they prayed for the exclusion of the residential
house from the real estate mortgage and the declaration of its ownership in virtue of the
award given during bidding.

Iya alleged that she acquired a real right over the lot and the house constructed
thereon, and that the auction sale resulting from the foreclosure of chattel mortgage
was null and void.

Surety company argued that as the lot on which the house was constructed did not
belong to the spouses at the time the chattel mortgage was executed, the house might
be considered as personal property, and they prayed that the said building be excluded
from the real estate mortgage.

Issue:

There is no question over Iya’s right over the land by real estate mortgage; however, as
the building instructed thereon has been the subject of two mortgages, controversy
arise as to which of these encumbrances should receive preference over the other.

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Held:

The building is subject to the real estate mortgage, in favour of Iya. Iya’s right to
foreclose not only the land but also the building erected thereon is recognised.

While it is true that real estate connotes the land and the building constructed thereon, it
is obvious that the inclusion of the building, separate and distinct from the land, in the
enumeration of what may constitute real properties (Article 415), could only mean that a
building is by itself an immovable property. Moreover, in view of the absence of any
specific provision to the contrary, 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.

A building certainly cannot be divested of its character of a realty by the fact that the
land on which it is constructed belongs to another.

In the case at bar, as personal properties could only be the subject of a chattel
mortgage and as obviously the structure in question is not one, the execution of the
chattel mortgage covering said building is clearly invalid and a nullity. While it is true
that said document was correspondingly registered in Chattel Mortgage Registry of
Rizal, this act produced no effect whatsoever, for where the interest conveyed is in the
nature of real property, the registration of the document in the registry of chattels is
merely a futile act. Thus, the registration of the chattel mortgage of a building of strong
materials produced no effect as far as the building is concerned.

6.Makati Leasing v Wearever Textile Mills, Inc. 122 SCRA 296

MAKATI LEASING and FINANCE CORPORATION, Petitioner,

vs.

WEAREVER TEXTILE MILLS, INC., and HONORABLE COURT OF APPEALS, Respondents.

G.R. No. L-58469

May 16, 1983

FACTS:
Respondent Wearever Textile Mills, Inc. (Wearever) discounted and assigned several
receivables with petitioner Makati Leasing and Finance Corporation (Makati Leasing) in order to
obtain financial accommodations from the latter. To secure the collection of the receivables
assigned, Wearever executed a Chattel Mortgage over certain raw materials inventory and a
machinery described as an Artos Aero Dryer Stentering Range.

Upon Wearever’s default, Makati Leasing filed a petition for extrajudicial foreclosure of the
properties mortgage to it. Due to failure to effect the seizure of the machinery, Makati Leasing
filed a complaint for judicial foreclosure with the CFI. Upon an application for replevin, the CFI
issued a writ of seizure. Eventually, the sheriff enforced the order, repaired to the premises of
Wearever, and removed the main drive motor of the subject machinery.

On petition of Wearever, the CA set aside the orders of CFI and ordered the return of the drive
motor. It ruled that the machinery cannot be the subject of replevin, much less of a chattel
mortgage, because it is a real property pursuant to Article 415 of the NCC, 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
enforce the writ was to take the main drive motor of said machinery. It ruled that Wearever was
not estopped from claiming that the machine is real property by constituting a chattel mortgage
thereon.

ISSUE:

Is the subject machinery a real or a personal property

HELD:

The machinery is personal property.

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.
Thus, if a house of strong materials (as held in a previous 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.

Equity dictates that one should not benefit at the expense of another. Private respondent
Wearever could not now therefore, be allowed to impugn the efficacy of the chattel mortgage
after it has benefited therefrom.

7.Board of Assessment Appeals v Manila Electric Company 10 SCRA 63

Board of Assessment Appeals v. MERALCO [G.R. No. L-15334. January 31, 1964.]

Posted by LADY ESQUIRE on JUNE 28, 2012

En Banc, Paredes (J): 8 concur, 1 concur in result, 1 took no part.

Facts: On 20 October 1902, the Philippine Commission enacted Act 484 which authorized the
Municipal Board of Manila to grant a franchise to construct, maintain and operate an electric
street railway and electric light, heat and power system in the City of Manila and its suburbs to
the person or persons making the most favorable bid. Charles M. Swift was awarded the said
franchise on March 1903, the terms and conditions of which were embodied in Ordinance 44
approved on 24 March 1903. Meralco became the transferee and owner of the franchise.
Meralco’s electric power is generated by its hydro-electric plant located at Botocan Falls,
Laguna and is transmitted to the City of Manila by means of electric transmission wires, running
from the province of Laguna to the said City. These electric transmission wires which carry high
voltage current, are fastened to insulators attached on steel towers constructed by respondent
at intervals, from its hydroelectric plant in the province of Laguna to the City of Manila. Meralco
has constructed 40 of these steel towers within Quezon City, on land belonging to it.

On 15 November 1955, City Assessor of Quezon City declared the aforesaid steel towers for
real property tax under Tax Declaration 31992 and 15549. After denying Meralco’s petition to
cancel these declarations an appeal was taken by Meralco to the Board of Assessment Appeals
of Quezon City, which required Meralco to pay the amount of P11,651.86 as real property tax on
the said steel towers for the years 1952 to 1956. Meralco paid the amount under protest, and
filed a petition for review in the Court of Tax Appeals which rendered a decision on 29
December 1958, ordering the cancellation of the said tax declarations and the City Treasurer of
Quezon City to refund to Meralco the sum of P11,651.86. The motion for reconsideration having
been denied, on 22 April 1959, the petition for review was filed.

Issue: Whether or not the steel towers of an electric company constitute real property for the
purposes of real property tax.

Held: The steel towers of an electric company don’t constitute real property for the purposes of
real property tax.

Steel towers are not immovable property under paragraph 1, 3 and 5 of Article 415.

The steel towers or supports do not come within the objects mentioned in paragraph 1, because
they do not constitute buildings or constructions adhered to the soil. They are not constructions
analogous to buildings nor adhering to the soil. As per description, given by the lower court, they
are removable and merely attached to a square metal frame by means of bolts, which when
unscrewed could easily be dismantled and moved from place to place.

They cannot be included under paragraph 3, as they are not attached to an immovable in a
fixed manner, and they can be separated without breaking the material or causing deterioration
upon the object to which they are attached. Each of these steel towers or supports consists of
steel bars or metal strips, joined together by means of bolts, which can be disassembled by
unscrewing the bolts and reassembled by screwing the same.

These steel towers or supports do not also fall under paragraph 5, for they are not machineries
or receptacles, instruments or implements, and even if they were, they are not intended for
industry or works on the land.

Petitioner is not engaged in an industry or works on the land in which the steel supports or
towers are constructed.

The Supreme Court affirmed the decision appealed from, with costs against the petitioners.

8. Manila Electric Co. v. Central Board of Assessment Appeals 114 SCRA 273
 Manila Electric Company vs. Central Board of
Assessment Appeals, et al.
GR No. L-47943 | May 31, 1982 | Aquino, J.

Recit-Ready Case Summary: Meralco installed storage tanks on a lot. and was assessed
to pay realty taxes for it. Meralco raised the issue that the tanks are not real property and
should not be taxed with realty taxes because the tanks are not embedded on land. SC held
that while the two storage tanks are not embedded in the land, they may be considered as
improvements on the land, enhancing its utility and rendering it useful to the oil industry,
which are taxable under the provisions of the Real Property Tax Code.

Doctrine: STORAGE TANKS NOT EMBEDDED IN THE LAND CONSIDERED TAXABLE

IMPROVEMENTS UNDER SECTION 3(k)

OF THE REAL PROPERTY TAX CODE. — While the two storage tanks are not embedded
in the land, they may, nevertheless, be considered as taxable improvements on the land,
enhancing its utility and rendering it useful to the oil industry as defined under Section 3 (k)
of the Real Property Tax Code. It is undeniable that the two tanks have been installed with
some degree of permanence at receptacles for the considerable qualities of oil needed by
Meralco for its operations. Oil storage tanks were held to be taxable realty in Standard Oil
Co. of New Jersy versus Atlantic City, 15 Atl. 2nd 271.

FACTS: Petitioner installed two storage tanks on a lot it leased from Caltex (Phil.) for storing
fuel oil for its power plants. The tanks are made of steel plates welded and assembled on the
spot and pipelines installed on the sides of each tank. They are not attached to the land but
merely sit on concrete foundations. On assessment made by the Provincial Assessor in 1970,
the Municipal Treasurer of Bauan, Batangas required petitioner to pay realty taxes on the two
tanks. Payment of the realty taxes was upheld by the Batangas Board of Assessment Appeals
and subsequently by the Central Board of Assessment Appeals. A motion for reconsideration
was filed with the Board but the same was denied Hence, the present petition. Petitioner
claims that said oil storage tanks do not fall within any of the kinds of real property
enumerated in Article 415 of the Civil Code.

ISSUE: Whether or not oil storage tanks fall within any of the kinds of real property enumerated
in Article 415 of the Civil Code?

RULING: YES, because said storage tanks are considered improvements on the land,
enhancing its utility and rendering it useful to the oil industry, which are taxable under the
provisions of the Real Property Tax Code.
 Section 2 of the Assessment Law (CA No. 470) provides that the realty tax is due "on real
property, including land, buildings, machinery, and other improvements" not specifically
exempted in section 3 thereof. This provision is reproduced with some modification in the
Real Property Tax Code (PD No. 464) which provides

"Sec. 38. Incidence of Real Property Tax. — They shall be levied, assessed and collected in
all provinces, cities and municipalities an annual ad valorem tax on real property, such as
land, buildings, machinery and other improvements affixed or attached to real property not
hereinafter specifically exempted."

The Code contains the following definition in its section 3:

"k) Improvements — is a valuable addition made to property or an amelioration in its

condition, amounting to more than mere repairs or replacement of waste, costing labor or
capital and intended to enhance its value, beauty or utility or to adapt it for new or further
purposes."

While the two storage tanks are not embedded in the land, they may, nevertheless, be
considered as improvements on the land, enhancing its utility and rendering it useful to the oil
industry. It is undeniable that the two tanks have been installed with some degree of
permanence as receptacles for the considerable quantities of oil needed by Meralco for its
operations.

PROPERTY - Divina

9. .CALTEX (Philippines) Inc. v Central Board of Assessment Appeals 114 SCRA 296

CASE DIGEST: CALTEX (PHILIPPINES) INC., petitioner, vs. CENTRAL BOARD OF

ASSESSMENT APPEALS and CITY ASSESSOR OF PASAY, respondents. (G.R. No. L-50466,
May 31, 1982)

FACTS: This case is about the realty tax on machinery and equipment installed by Caltex
(Philippines) Inc. in its gas stations located on leased land.

The machines and equipment consists of underground tanks, elevated tank, elevated water
tanks, water tanks, gasoline pumps, computing pumps, water pumps, car washer, car hoists,
truck hoists, air compressors and tireflators.
Said machines and equipment are loaned by Caltex to gas station operators under an
appropriate lease agreement or receipt. It is stipulated in the lease contract that the operators,
upon demand, shall return to Caltex the machines and equipment in good condition as when
received, ordinary wear and tear excepted.

The lessor of the land, where the gas station is located, does not become the owner of the
machines and equipment installed therein. Caltex retains the ownership thereof during the term
of the lease.

ISSUE: Are the pieces of machinery and equipment subject to realty tax despite them having
been placed by a lessee?

HELD: Yes, they are subject to realty tax.

Here, the question is whether the gas station equipment and machinery permanently affixed by
Caltex to its gas station and pavement (which are indubitably taxable realty) should be subject
to the realty tax. This question is different from the issue raised in the Davao Saw Mill case.

Improvements on land are commonly taxed as realty even though for some purposes they might
be considered personalty.

10.Benguet Corporation v Central Board of Assessment Appeals 218 SCRA 271

CASE DIGEST: BENGUET CORPORATION VS. CENTRAL BOARD OF ASSESSMENT

APPEALS (CBAA). GR NO. 106041 JANUARY 29, 1993

FACTS:

A realty tax assessment has been imposed on the petitioner's tailings dam and the land
thereunder by the Provincial Assessor of Zambales claiming that the said properties are taxable
improvements.

Petitioner, on the other hand, argued that the tailings dam cannot be said and classified as an
improvement upon the land within the meaning of the Real Property Tax Code and thus is not
subject to realty tax. It claimed that the tailings dam has no value separate from and
independent of the mine and is actually an integral part of the latter. It is submerged underwater
wastes from the mine and serves only as a pollution control device which is a requirement
imposed by law for mine business. It also claimed that the dam will eventually benefit the local
community as an irrigation facility after its mining operation.

ISSUE:
Whether the tailings dam is an improvement upon the land, which is real property and is
therefore subject to realty tax.

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 applicable in this case are found in Article
415 paragraphs (1) and (3).

The tailings dam in this case is an improvement upon the mine. The Real Property Tax Code
defines improvement as a valuable addition made to property or amelioration in its condition,
amounting to more than mere repairs or replacement of waste, costing labor or capital and
intended to enhance its value, beauty, or utility or to adapt it for new or future purposes.

The term has also been interpreted as "artificial alterations of the physical condition of the
ground that is 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 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.

xxx

Personal Note:

Real Property Tax applies to real properties. There is no provision in the Real Property Tax
Code which particularly says that tailings dam is taxable because it is real property. But the Real
Property Tax Code itself refers to the Civil Code provision defining what real properties are. The
provisions under the Civil Code where the tailings dam belongs or classified are paragraphs (1)
and (3) of Art. 415. The nature of this dam being immovable as it has adhered to the soil and
attached to the mine in a fixed manner in such a way that it cannot be separated without
breaking or deterioration of the mine makes it falls within the meaning of a real property that is
covered by the Real Property Tax Code. Furthermore, having a permanent character makes it
also falls within the meaning of an improvement which the RPT Code itself defines to be
taxable.