Ladera, et. al. vs. Hodges, et. al. , O.G No. 8027-R, September 23, 1952

Facts: Paz G. Ladera entered into a contract with C.N Hodges, whereby the latter promised to sell a parced of land to the former subject to the stipulation of the contract saying that the failure of the purchaser to pay within sixty days after it fell due would render the contract annulled or rescinded. Furthermore, it is likewise stipulated that the sums of money paid under the contract would be considered rentals and the owner would be at liberty to dispose of the said lands with all its improvements to other persons as if this contract had never been made. After the execution of the contract, Ladera built a house on the lot. Upon her failure to pay, Hodges filed an action for ejectment. The court decided that Ladera is to vacate and surrender possession of the lot. Also, on that day, Ladera paid Hodges P188.50 which the latter recorded as rental payment. A writ of execution was then issued and the City Sheriff levied upon all rights, interest and participation over the house. The Sheriff then sold the house to Avelina A. Magno who in turn sold the house to Manuela Villa. But this transaction was not recorded. Upon knowledge of this, Ladera went to see the Sheriff and paid him to redeem the property but was received as rental payment. This amount, however, was not turned over to Hodges.

Issue: Whether or not the house built on a land owned by another person, should be regarded in law as movable or personal property

Held: No. The sale of the land was not made without the proper publication required by law of the sale of immovable property. In this instance, the determination of whether or not the house in dispute is an immovable or movable property is vital. The undisputed rule is whether it is immovable by destination (place by the owner of the tenement), an immovable by incorporation (attachment not necessarily made by the owner of the tenement) or an accession. A true building is an immovable or real property whether the owner of the land is a usufructuary or lessee erects it. Moreover, when Ladera built the house in question, she was not a mere lessee but occupied the land under a valid contract with Hodges to sell it to her. Thus, the object of the levy and the sale was real property. The publication in a newspaper in a general circulation was made making the execution sale void and conferred no title to the purchaser. Furthermore, there was a valid exercise of redemption. So, at the time Magno sold the property to Villa, Magno no longer had title over the property strengthening the fact that since there was no title, the subsequent sale was null and void.

Evangelista v. Alto SuretyEvangelista v. Alto Surety

Facts: In 1949, Santos Evangelista instituted Civil Case No. 8235 of the CFI Manila (Santos Evangelista vs. Ricardo Rivera) for a sum of money. On the same date, he obtained a writ of attachment, which was levied upon a house, built by Rivera on a land situated in Manila and leased to him, by filing copy of said writ and the corresponding notice of attachment with the Office of the Register of Deeds of Manila. In due course, judgment was rendered in favor of Evangelista, who bought the house at public auction held in compliance with the writ of execution issued in said case on 8 October 1951. The corresponding definite deed of sale was issued to him on 22 October 1952, upon expiration of the period of redemption. When Evangelista sought to take possession of the house, Rivera refused to surrender it, upon the ground that he had leased the property from the Alto Surety & Insurance Co., Inc. and that the latter is now the true owner of said property. It appears that on 10 May 1952, a definite deed of sale of the same house had been issued to Alto Surety, as the highest bidder at an auction sale held, on 29 September 1950, in compliance with a writ of execution issued in Civil Case 6268 of the same court (Alto Surety & Insurance vs. Maximo Quiambao, Rosario Guevara and Ricardo Rivera)" in which judgment for the sum of money, had been rendered in favor of Alto Surety. Hence, on 13 June 1953, Evangelista instituted an action against Alto Surety and Ricardo Rivera, for the purpose of establishing his title over said house, and securing possession thereof, apart from recovering damages. After due trial, the CFI Manila rendered judgment for Evangelista, sentencing Rivera and Alto Surety to deliver the house in question to Evangelista and to pay him, jointly and severally, P40.00 a month from October 1952, until said delivery. The decision was however reversed by the Court of Appeals, which absolved Alto Surety from the complaint on account that although the writ of attachment in favor of Evangelista had been filed with the Register of Deeds of Manila prior to the sale in favor of Alto Surety, Evangelista did not acquire thereby a preferential lien, the attachment having been levied as if the house in question were immovable property.

Issue: Whether or not a house constructed by the lessee of the land on which it is built, should be dealt with, for purpose of attachment, as immovable property?

Held: The court ruled that the house is not personal property, much less a debt, credit or other personal property not capable of manual delivery, but immovable property. As held in Laddera vs. Hodges (48 OG 5374), "a true building is immovable or real property, whether it is erected by the owner of the land or by a usufructuary or lessee. The opinion that the house of Rivera should have been attached, as "personal property capable of manual delivery, by taking and safely keeping in his custody", for it declared that "Evangelista could not have validly purchased Ricardo Rivera's house from the sheriff as the latter was not in possession thereof at the time he sold it at a public auction is untenable. Parties to a deed of chattel mortgage may agree to consider a house as personal property for purposes of said contract. However, this view is good only insofar as the contracting parties are concerned. It is based, partly, upon the principle of estoppel. Neither this principle, nor said view, is applicable to strangers to said contract. The rules on execution do not allow, and should not be interpreted as to allow, the special consideration that parties to a contract may have desired to impart to real estate as personal property, when they are not ordinarily so. Sales on execution affect the public and third persons. The regulation governing sales on execution are for public officials to follow. The form of proceedings prescribed for each kind of property is suited to its character, not to the character which the parties have given to it or desire to give it. The regulations were never intended to suit the consideration that parties, may have privately given to the property levied upon. The court therefore affirms the decision of the CA with cost against Alto Surety.

NAVARRO V. PINEDA9 SCRA 631 FACTS:Pineda and his mother executed real estate and chattel mortgages in favor of Navarro, to secure a loan they got from the latter. The REM covered a parcel of land owned by the mother while the chattel mortgage covered a residential house. Due to the failure to pay the loan, they asked for extensions to pay for the loan. On the second extension, Pineda executed a PROMISE wherein in case of default in payment, he wouldnt ask for any additional extension and there would be no need for any formal demand. In spite of this, they still failed to pay.

Navarro then filed for the foreclosure of the mortgages. The court decided in his favor.

HELD:Where a house stands on a rented land belonging to another person, it may be the subject matter of a chattel mortgage as personal property if so stipulated in the document of mortgage, and in an action by the mortgagee for the foreclosure, the validity of the chattel mortgage cannot be assailed by one of the parties to the contract of mortgage. Furthermore, although in some instances, a house of mixed materials has been considered as a chattel between the parties and that the validity of the contract between them, has been recognized, it has been a constant criterion that with respect to third persons, who are not parties to the contract, and specially in execution proceedings, the house is considered as immovable property.

TUMALAD V. VICENCIO 41 SCRA 143

FACTS:Vicencio and Simeon executed a chattel mortgage in favor of plaintiffs Tumalad over their house, which was being rented by Madrigal and company. This was executed to guarantee a loan, payable in one year with a 12% per annum interest. The mortgage was extrajudicially foreclosed upon failure to pay the loan. The house was sold at a public auction and the plaintiffs were the highest bidder. A corresponding certificate of sale was issued. Thereafter, the plaintiffs filed an action for ejectment against the defendants, praying that the latter vacate the house as they were the proper owners.

HELD:Certain deviations have been allowed from the general doctrine that buildings are immovable property such as when through stipulation, parties may agree to treat as personal property those by their nature would be real property. This is partly based on the principle of estoppel wherein the principle is predicated on statements by the owner declaring his house as chattel, a conduct that may conceivably stop him from subsequently claiming otherwise. In the case at bar, though there be no specific statement referring to the subject house as personal property, yet by ceding, selling or transferring a property through chattel mortgage could only have meant that defendant conveys the house as chattel, or at least, intended to treat the same as such, so that they should not now be allowed to make an inconsistent stand by claiming otherwise.

Lopez v. OrosaLOPEZ V. OROSA AND PLAZA THEATREG.R. Nos. L-10817-18 February 28, 1958

FACTS:

-Petitioner Lopez was engaged in doing business under the trade name Lopez-Castelo Sawmill.

Orosa, a resident of the same province as Lopez, invited the latter to make an investment in the theatre business. Lopez declined to invest but agreed to supply the lumber necessary for the construction of the proposed theatre. They had an oral agreement that Orosa would be personally liable for any account that the said construction might incur and that payment would be on demand and not cash on delivery basis.

Lopez delivered the which was used for construction amounting to P62,255.85. He was paid only P20,848.50, leaving a balance of P41,771.35.

The land on which the building was erected previously owned by Orosa, was later on acquired by the corporation.

. As Lopez was pressing Orosa for payment, the latter and president of the corporation promised to obtain a bank loan by mortgaging the properties of the Plaza Theatre., out of which the unpaid balance would be satisfied. But unknown to Lopez, the corporation already obtained a loan with Luzon Surety Company as surety, and the corporation in turn executed a mortgage on the land and building in favor of the said company as counter-security.

Due to the persistent demands of Lopez, Orosa executed a deed of assignment over his shares of stock in the corporation.

As it remained unsettled, Lopez filed a case against Orosa and Plaza theatre praying that they be sentenced to pay him jointly and severally of the unpaid balance; and in case defendants fail to pay, the land and building owned by the corporation be sold in public auction with the proceeds be applied to the balance; or the shares of stock be sold in public auction.

The lower court held that defendants were jointly liable for the unpaid balance and Lopez thus acquired the material mans lien over the construction. The lien was merely confined to the building and did not extend to the on which the construction was made.

Lopez tried to secure a modification of the decision, but was denied.

ISSUES:

Whether the material mans lien for the value of the materials used in the construction of the building attaches to said structure alone and doesnt extend to the land on which the building is adhered to.

Whether the lower court and CA erred in not providing that the material mans liens is superior to the mortgage executed in favor of surety company not only on the building but also on the land.

HELD:

-The material mans lien could be charged only to the building for which the credit was made or which received the benefit of refection, the lower court was right in, holding at the interest of the mortgagee over the land is superior and cannot be made subject to the material man's lien.

-Generally, real estate connotes the land and the building constructed thereon, it is obvious that the inclusion of the building in the enumeration of what may constitute real properties could only mean one thingthat a building is by itself an immovable property.

-In 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.

-The law gives preference to unregistered refectionary credits only with respect to the real estate upon which the refectionary or work was made.

- 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 the construction of the building attaches only to said structure and to no other property of the obligors.

Mindanao Bus Co. v. City Assessor DigestG.R. No. L-17870 29 September 1962

Facts: Petitioner is a public utility company engaged in the transport of passengers and cargo by motor vehicles in Mindanao with main offices in Cagayan de Oro (CDO). Petitioner likewise owned a land where it maintains a garage, a repair shop and blacksmith or carpentry shops. The machineries are placed thereon in wooden and cement platforms. The City Assessor of CDO then assessed a P4,400 realty tax on said machineries and repair equipment. Petitioner appealed to the Board of Tax Appeals but it sustained the City Assessor's decision, while the Court of Tax Appeals (CTA) sustained the same.Note: This is merely a case digest to aid in remembering the important points of a case. It is still advisable for any student of law to read the full text of assigned cases.

Issue: Whether or not the machineries and equipments are considered immobilized and thus subject to a realty tax

Held: The Supreme Court decided otherwise and held that said machineries and equipments are not subject to the assessment of real estate tax.Said equipments are not considered immobilized as they are merely incidental, not esential 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

Tsai v. CAOctober 2, 2001

FACTS:

Ever Textile Mills, Inc. (EVERTEX) obtained loan from Philippine Bank of Communications (PBCom), secured by a deed of Real and Chattel Mortgage over the lot where its factory stands, and the chattels located therein as enumerated in a schedule attached to the mortgage contract. PBCom again granted a second loan to EVERTEX which was secured by a Chattel Mortgage over personal properties enumerated in a list attached thereto. These listed properties were similar to those listed in the first mortgage deed. After the date of the execution of the second mortgage mentioned above, EVERTEX purchased various machines and equipments. Upon EVERTEX's failure to meet its obligation to PBCom, the latter commenced extrajudicial foreclosure proceedings against EVERTEX under Act 3135 and Act 1506 or "The Chattel Mortgage Law". PBCom then consolidated its ownership over the lot and all the properties in it. It leased the entire factory premises to Ruby Tsai and sold to the same the factory, lock, stock and barrel including the contested machineries.

EVERTEX filed a complaint for annulment of sale, reconveyance, and damages against PBCom, alleging inter alia that the extrajudicial foreclosure of subject mortgage was not valid, and that PBCom, without any legal or factual basis, appropriated the contested properties which were not included in the Real and Chattel Mortgage of the first mortgage contract nor in the second contract which is a Chattel Mortgage, and neither were those properties included in the Notice of Sheriff's Sale.

ISSUES:1) W/N the contested properties are personal or movable properties 2) W/N the sale of these properties to a third person (Tsai) by the bank through an irregular foreclosure sale is valid.

HELD:

1) Nature of the Properties and Intent of the Parties

The nature of the disputed machineries, i.e., that they were heavy, bolted or cemented on the real property mortgaged does not make them ipso facto immovable under Article 415 (3) and (5) of the New Civil Code. While it is true that the properties appear to be immobile, a perusal of the contract of Real and Chattel Mortgage executed by the parties herein reveal their intent, that is - to treat machinery and equipment as chattels.

In the first mortgage contract, reflective of the true intention of PBCOM and EVERTEX was the typing in capital letters, immediately following the printed caption of mortgage, of the phrase "real and chattel." So also, the "machineries and equipment" in the printed form of the bank had to be inserted in the blank space of the printed contract and connected with the word "building" by typewritten slash marks. Now, then, if the machineries in question were contemplated to be included in the real estate mortgage, there would have been no necessity to ink a chattel mortgage specifically mentioning as part III of Schedule A a listing of the machineries covered thereby. It would have sufficed to list them as immovables in the Deed of Real Estate Mortgage of the land and building involved. As regards the second contract, the intention of the parties is clear and beyond question. It refers solely to chattels. The inventory list of the mortgaged properties is an itemization of 63 individually described machineries while the schedule listed only machines and 2,996,880.50 worth of finished cotton fabrics and natural cotton fabrics.

UNDER PRINCIPLE OF STOPPELAssuming arguendo that the properties in question are immovable by nature, nothing detracts the parties from treating it as chattels to secure an obligation under the principle of estoppel. As far back as Navarro v. Pineda, an immovable may be considered a personal property if there is a stipulation as when it is used as security in the payment of an obligation where a chattel mortgage is executed over it.

2) Sale of the Properties Not Included in the Subject of Chattel Mortgage is Not Valid

The auction sale of the subject properties to PBCom is void. Inasmuch as the subject mortgages were intended by the parties to involve chattels, insofar as equipment and machinery were concerned, the Chattel Mortgage Law applies. Section 7 provides thereof that: "a chattel mortgage shall be deemed to cover only the property described therein and not like or substituted property thereafter acquired by the mortgagor and placed in the same depository as the property originally mortgaged, anything in the mortgage to the contrary notwithstanding." Since the disputed machineries were acquired later after the two mortgage contracts were executed, it was consequently an error on the part of the Sheriff to include subject machineries with the properties enumerated in said chattel mortgages.

As the lease and sale of said personal properties were irregular and illegal because they were not duly foreclosed nor sold at the auction, no valid title passed in its favor. Consequently, the sale thereof to Ruby Tsai is also a nullity under the elementary principle of nemo dat quod non habet, one cannot give what one does not have.

Makati Leasing vs. Wearever TextileMakati Leasing and Financial Corporation vs. Wearever Textile Mills, Inc.G.R. No. L-58469. May 16, 1983.

De Castro, J.

Doctrine: Where a chattel mortgage is constituted on a machinery permanently attached to the ground, the machinery is to be considered as personal property.

Facts: Wearever Textile Mills, Inc. discounted and assigned several receivables with Makati Leasing and Financial Corp. under a Receivable Purchase Agreement so that the latter would lend money to the former. In order to secure the collection of the receivables assigned, Wearever executed a Chattel Mortgage over certain raw materials inventory as well as a machinery (Artos Aero Dryer Stentering Range). Upon default of Wearever in paying what is due, Makati Leasing filed a petition for extrajudicial foreclosure of the properties mortgaged to it. The Sheriff assigned to execute such foreclosure, however, failed to enter the premises of Wearever to effect the seizure of the machinery. Afterwhich, petitioner filed a complaint for a judicial foreclosure with the RTC of Rizal which was granted even after the motion for reconsideration filed by the private respondent. Enforcing then the writ of seizure issued by the lower court, the Sheriff removed the main drive motor of the machinery. Upon appeal, CA reversed the ruling of the RTC and ordered the return of the motor to Wearever since the said machinery cannot be the subject of a replevin and chattel mortgage for it is a real property pursuant to Art. 415 (3) of the NCC. CA argued that the machinery is attached to the ground by means of bolts and the only way to remove it from the respondents plant would be to drill out or destroy the concrete floor which is why all that the sheriff could do to enforce the writ was to take the main drive motor of the machinery. Hence, this petition for certiorari.

Issue: Whether the machinery is a personal property.

Held: Yes. By destination, it is a real property but by virtue of the intention of the parties stipulated in their chattel mortgage contract, the machinery was intended to be a personal property. The Court made reference to its ruling in Tumalad v. Vicencio and Standard Oil Co. of New York v. Jaramillo where it held that a real property may be considered as a 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, and once the parties so agreed, they are already stopped from claiming otherwise. Private respondent contended that its characterization of the subject machinery as chattel in their agreement should not be appreciated against it because it had never represented nor agreed in such as it was merely required and dictated on by the petitioner to sign a chattel mortgage in blank form. The Court was not persuaded by its contention as the said issue was not duly raised in the lower and appellate courts nor will the said signing in blank by the respondent make the contract void but merely voidable by a proper action in court. Furthermore as it was undeniable that it benefited from the chattel mortgage, it cannot be allowed to impugn its efficacy for equity reasons.

Caveat: Anyone who claims this digest as his own without proper authority shall be held liable under the law of Karma.

Serg's v. PCI LeasingSergs Products, Inc. vs. PCI Leasing G.R. No. 137705. August 22, 2000

FACTS: PCI Leasing and Finance filed a complaint for sum of money, with an application for a writ of replevin. 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. The sheriff proceeded to petitioner's factory, seized one machinery, with word that he would return for other machineries. Petitioner (Sergs Products) filed a motion for special protective order to defer enforcement of the writ of replevin. PCI Leasing opposed the motion on the ground that the properties were still personal and therefore can still be subjected to seizure and writ of replevin. Petitioner asserted that properties sought to be seized were immovable as defined in Article 415 of the Civil Code. Sheriff was still able to take possession of two more machineries In its decision on the original action for certiorari filed by the Petitioner, the appellate court, Citing the Agreement of the parties, held that the subject machines were personal property, and that they had only been leased, not owned, by petitioners; and 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 became real property by virtue of immobilization.

Ruling: Petitioners contend that the subject machines used in their factory were not proper subjects of the Writ issued by the RTC, because they were in fact real property.

Writ of Replevin: Rule 60 of the Rules of Court provides that writs of replevin are issued for the recovery of personal property only.

Article 415 (5) of the Civil Code provides that 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

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.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.

However, 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.

Section 12.1 of the Agreement between the parties provides The PROPERTY is, and shall at all times be and remain, personal property notwithstanding that the PROPERTY or any part thereof may now be, or hereafter become, in any manner affixed or attached to or embedded in, or permanently resting upon, real property or any building thereon, or attached in any manner to what is permanent.

The machines are personal property and they are proper subjects of the Writ of Replevin

Jose Burgos vs. Chief of StaffG.R. No L-64261December 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.

Berkenkotter v. Cu Unjieng

Facts: On 26 April 1926, the Mabalacat Sugar Company obtained from Cu Unjieng e Hijos, a loan secured by a first mortgage constituted on 2 parcels of land "with all its buildings, improvements, sugar-cane mill, steel railway, telephone line, apparatus, utensils and whatever forms part or is a necessary complement of said sugar-cane mill, steel railway, telephone line, now existing or that may in the future exist in said lots.On 5 October 1926, the Mabalacat Sugar Company decided to increase the capacity of its sugar central by buying additional machinery and equipment, so that instead of milling 150 tons daily, itcould produce 250. Green proposed to the 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, Cu Unjieng e Hijos, and that in case Green should fail to obtain an additional loan from Cu Unjieng e Hijos, said machinery and equipment would become security therefore, said Green binding himself not to mortgage nor encumber them to anybody until Berkenkotter be fully reimbursed for the corporation's indebtedness to him .Having agreed to said proposition made in a letter dated 5 October 1926, Berkenkotter, on 9 October 1926, delivered the sum of P1,710 to Green, the total amount supplied by him to Green having beenP25,750. Furthermore, 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. On 10 June 1927, Green applied to Cu Unjieng e Hijos for an additional loan of P75,000 offering as security the additional machinery and equipment acquired by said Green and installed in the sugar central after the execution of the original mortgage deed, on 27 April 1927, together with whatever additional equipment acquired with said loan. Green failed to obtain said loan. Hence, abovementioned mortgage was in effect.

Issue:Are the additional machines also considered mortgaged?

Held:Article 1877 of the Civil Code provides that mortgage includes all natural accessions, improvements, growing fruits, and rents not collected when the obligation falls due, and the amount of any indemnities paid or due the owner by the insurers of the mortgaged property or by virtue of the exercise of the power of eminent domain, with the declarations, amplifications, and limitations established by law, whether the state continues in the possession of the person who mortgaged it or whether it passes into the hands of a third person. It is a rule, 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. 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. The installation of a machinery and equipment in a mortgaged sugar central, in lieu of another of less capacity, for the purpose of carrying out the industrial functions of the latter and increasing production, constitutes a permanent improvement on said sugar central and subjects said machinery and equipment to the mortgage constituted thereon

Star Two (SPV-AMC), Inc., vs Paper City Corporation of the Philippines, G.R. No. 169211, March 6, 2013

Facts:

From 1990-1991, Paper City applied for and was granted four (4) loans and credit accommodations by Rizal Commercial Banking Corporation (RCBC), now substituted by Star Two (SPV-AMC), Inc by virtue of Republic Act No. 9182. The loans were secured by four (4) Deeds of Continuing Chattel Mortgages on its machineries and equipments found inside its paper plants. However, RCBC eventually executed a unilateral Cancellation of Deed of Contining Chattel Mortgage. In 1992, RCBC, as the trustee bank, together with Metrobank and Union Bank, entered into a Mortgage Trust Indenture (MTI), with Paper City. In the said MTI, Paper City acquired additional loans secured by five (5) Deed of Real Estate Mortgage, plus real and personal properties in an annex to the MTI, which covered the machineries and equipment of Paper City. The MTI was later on amended and supplemented three (3) times, wherein the loan was increased and included the same mortgages with an additional building and other improvements inthe plant site. Paper City was able to comply with the loans but only until 1997 due to an economic crisis. RCBC filed a petition for extra-judicial foreclosure against the real estate executed by Paper City including all the improvements because of payment default. The property was foreclosed and subjected to public acution. The three banks and the highest bidder were issued a Certificate of Sale. Paper City filed a complaint alleging that the sale was null and void due to lack of prior notice. During the pendency of the complaint, Paper City filed a motion to remove machinery out of the foreclosed land and building, that the same were not included in the foreclosure of the real estate mortgage. The trial court denied the motion, ruling that the machineries and equipment were included. Thereafter, Paper City's Motion for Reconsideration, the trial court granted the same and justified the reversal by finding that the machineries and equipment are chattels by agreement thru the four Deeds of Continuing Chattel Mortgages; and that the deed of cancellation executed by RCBC of said mortgage was not valid because it was one unilaterally. RCBC's Motion for Reconsideration was denied. The case was petitioned at CA that 1. That Paper City gave its consent to consider the disputedmachineries and equipment as real properties when they signed the MTI's and all its amendments; 2. That the machineries and equipment are the same as inthe MTI's, hence treated by agreement of the parties as real properties. The CA affirmed the orders of the trial court because it relied on the plain language of the MTI's stating that nowhere from any of the MTIs executed by the parties can we find the alleged "express" agreement adverted to by petitioner. There is no provision in any of the parties MTI, which expressly states to the effect that the parties shall treat the equipments and machineries as real property. On the contrary, the plain and unambiguous language of the aforecited MTIs, which described the same as personal properties, contradicts petitioners claims.

Issue:

Whether the subsequent contracts of the parties such as Mortgage Trust Indenture as well as the subsequent supplementary amendments included in its coverage of mortgaged properties the subject machineries and equipment; and

Whether or not the subject machineries and equipment were considered real properties and should therefore be included in the extra-judicial foreclosure which in turn were sold to the banks

Ruling:

Petition was granted.

1.Repeatedly, the parties stipulated that the properties mortgaged by Paper City to RCBC are various parcels of land including the buildings and existing improvements thereon as well as the machineries and equipments, which as stated in the granting clause of the original mortgage, are "more particularly described and listed that is to say, the real and personal properties listed in Annexes A and B x x x of which the Paper City is the lawful and registered owner." Significantly, Annexes "A" and "B" are itemized listings of the buildings, machineries and equipments typed single spaced in twenty-seven pages of the document made part of the records. As held in Gateway Electronics Corp. v. Land Bank of the Philippines,49 the rule in this jurisdiction is that the contracting parties may establish any agreement, term, and condition they may deem advisable, provided they are not contrary to law, morals or public policy. The right to enter into lawful contracts constitutes one of the liberties guaranteed by the Constitution.

2.Contrary to the finding of the CA, the Extra-Judicial Foreclosure of Mortgage includes the machineries and equipments of respondent. Considering that the Indenture which is the instrument of the mortgage that was foreclosed exactly states through the Deed of Amendment that the machineries and equipments listed in Annexes "A" and "B" form part of the improvements listed and located on the parcels of land subject of the mortgage, such machineries and equipments are surely part of the foreclosure of the "real estate properties, including all improvements thereon" as prayed for in the petition. The real estate mortgages which specifically included the machineries and equipments were subsequent to the chattel mortgages. Without doubt, the real estate mortgages superseded the earlier chattel mortgages.The real estate mortgage over the machineries and equipments is even in full accord with the classification of such properties by the Civil Code of the Philippines as immovable property. Thus:Article 415. The following are immovable property:(1) Land, buildings, roads and constructions of all kinds adhered to the soil;xxxx(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;

Davao Sawmill Co. vs CastilloPosted on June 21, 2013Davao Sawmill Co. vs Castillo61 PHIL 709GR No. L-40411August 7, 1935

A tenant placed machines for use in a sawmill on the landlord's land.

FACTSDavao Sawmill Co., operated a sawmill. The land upon which the business was conducted was leased from another person. On the land, Davao Sawmill erected a building which housed the machinery it used. Some of the machines were mounted and placed on foundations of cement. In the contract of lease, Davo Sawmill agreed to turn over free of charge all improvements and buildings erected by it on the premises with the exception of machineries, which shall remain with the Davao Sawmill. In an action brought by the Davao Light and Power Co., judgment was rendered against Davao Sawmill. A writ of execution was issued and the machineries placed on the sawmill were levied upon as personalty by the sheriff. Davao Light and Power Co., proceeded to purchase the machinery and other properties auctioned by the sheriff.

ISSUEAre the machineries real or personal property?

HELDArt.415 of the New Civil Code provides that Real Property consists of:

(1) Lands, buildings, roads and constructions of all kinds adhered to the soil;

xxx

(5) Machinery, receptacles, instruments or implements intended by the owner pf the tenement for an industry ot 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;

Appellant should have registered its protest before or at the time of the sale of the property. While not conclusive, the appellant's characterization of the property as chattels is indicative of intention and impresses upon the property the character determined by the parties.

Machinery is naturally movable. However, machinery may be immobilized by destination or purpose under the following conditions:

General Rule: The machinery only becomes immobilized if placed in a plant by the owner of the property or plant.

Immobilization cannot be made by a tenant, a usufructuary, or any person having only a temporary right.

Exception: The tenant, usufructuary, or temporary possessor acted as agent of the owner of the premises; or he intended to permanently give away the property in favor of the owner.

As a rule, therefore, the machinery should be considered as Personal Property, since it was not placed on the land by the owner of the said land.Yap vs. TaadaJulian S. Yap vs. Hon. Santiago O. Taada andGoulds Pumps International (Phil), Inc.,G.R. No. L-32917, July 18, 1988

Narvasa, J.

Doctrine: Article 415, par. 3 of the Civil Code considers and immovable property as everything attached to an immovable in a fixed manner, in such a way that it cannot be separated therefrom without breaking the material or deteriorating the object. The pump does not fit this description. It could be, and was, in fact,separated from Yaps premises without being broken of suffering deterioration. Obviously, the separation or removal of the pump involved nothing more complicated that the loosening of bolts or dismantling of other fasteners.

Facts: The case began in the City Court of Cebu with the filing of Goulds Pumps International (Phil), Inc. of a complaint against Yap and his wife seeking recovery of P1,459.30, representing the balance of the price and installation cost of a water pump in the latters premises. The Court rendered judgment in favor of herein respondent after they presented evidence ex-parte due to failure of petitioner Yap to appear before the Court. Petitioner then appealed to the CFI, particularly to the sale of Judge Tanada. For again failure to appear for pre-trial, Yap was declared in default. He filed for a motion for reconsideration which was denied by Judge Tanada. On October 15, 1969, Tanada granted Goulds Motion for Issuance of Writ of Execution. Yap forthwith filed an Urgent Motion for Reconsideration of the said Order. In the meantime, the Sheriff levied on the water pump in question and by notice scheduled the execution sale thereof. But in view of the pendency of Yaps motion, suspension of sale was directed by Judge Tanada. It appears, however, that this was not made known to the Sheriff whocontinued with the auction sale and sold the property to the highest bidder, Goulds. Because of such, petitioner filed a Motion to Set Aside Execution Sale and to Quash Alias Writ of Execution. One of his arguments was that the sale was made without the notice required by Sec. 18, Rule 29 of the New Rules of Court, i.e. notice by publication in case of execution of sale of real property, the pump and its accessories being immovable because attached to the ground with the character of permanency. Such motion was denied by the CFI.

Issue: Whether or not the pump and its accessories are immovable property

Held: No. The water pump and its accessories are NOT immovable properties. The argument of Yap that the water pump had become immovable property by its being installed in his residence is untenable. Article 415, par. 3 of the Civil Code considers and immovable property as everything attached to an immovable in a fixed manner, in such a way that it cannot be separated therefrom without breaking the material or deteriorating the object. The pump does not fit this description. It could be, and was, in fact,separated from Yaps premises without being broken of suffering deterioration. Obviously, the separation or removal of the pump involved nothing more complicated that the loosening of bolts or dismantling of other fasteners.

ENGINEERING AND MACHINERY CORP. VS. COURT OF APPEALSG.R. No. 52267 January 24, 1996

Facts:Almeda and Engineering signed a contract, wherein Engineering undertook to fabricate, furnish and install the air-conditioning system in the latters building along Buendia Avenue, Makati in consideration of P210,000.00. Petitioner was to furnish the materials, labor, tools and all services required in order to so fabricate and install said system. The system was completed in 1963 and accepted by private respondent, who paid in full the contract price.Almeda learned from the employees of NIDC of the defects of the air-conditioning system of the building. Almeda spent for the repair of the air-conditioning system. He now sues Engineering for the refund of the repair. Engineering contends that the contract was of sale and the claim is barred by prescription since the responsibility of a vendor for any hidden faults or defects in the thing sold runs only for 6 months (Arts 1566, 1567, 1571). Almeda contends that since it was a contract for a piece of work, hence the prescription period was ten years (Hence Art 1144 should apply on written contracts).RTC found that Engineering failed to install certain parts and accessories called for by the contract, and deviated from the plans of the system, thus reducing its operational effectiveness to achieve a fairly desirable room temperature.

Issue:

1) Whether the contract for the fabrication and installation of a central air-conditioning system in a building, one of sale or for a piece of work? CONTRACT FOR PIECE OF WORK.2) Corrollarily whether the claim for refund was extinguished by prescription? NO.

Held:

1) A contract for a piece of work, labor and materials may be distinguished from a contract of sale by the inquiry as to whether the thing transferred is one not in existence and which would never have existed but for the order, of the person desiring it. In such case, the contract is one for a piece of work, not a sale. On the other hand, if the thing subject of the contract would have existed and been the subject of a sale to some other person even if the order had not been given, then the contract is one of sale.A contract for the delivery at a certain price of an article which the vendor in the ordinary course of his business manufactures or procures for the general market, whether the same is on hand at the time or not is a contract of sale, but if the goods are to be manufactured specially for the customer and upon his special order, and not for the general market, it is a contract for a piece of work .The contract in question is one for a piece of work. It is not petitioners line of business to manufacture air-conditioning systems to be sold off-the-shelf. Its business and particular field of expertise is the fabrication and installation of such systems as ordered by customers and in accordance with the particular plans and specifications provided by the customers. Naturally, the price or compensation for the system manufactured and installed will depend greatly on the particular plans and specifications agreed upon with the customers.2)The original complaint is one for damages arising from breach of a written contract and not a suit to enforce warranties against hidden defects we here with declare that the governing law is Article 1715 (supra). However, inasmuch as this provision does not contain a specific prescriptive period, the general law on prescription, which is Article 1144 of the Civil Code, will apply. Said provision states, inter alia, that actions upon a written contract prescribe in ten (10) years. Since the governing contract was executed on September 10, 1962 and the complaint was filed on May 8, 1971, it is clear that the action has not prescribed.

Board of Assessment Appeals, Q.C. vs Meralco10 SCRA 68GR No. L-15334January 31, 1964

FACTSOn November 15, 1955, the QC City Assessor declared the MERALCO's steel towers subject to real property tax. After the denial of MERALCO's petition to cancel these declarations, an appeal was taken to the QC Board of Assessment Appeals, which required respondent to pay 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 (CTA) which rendered a decision ordering the cancellation of the said tax declarations and the refunding to MERALCO by the QC City Treasurer of P11,651.86.

ISSUEAre the steel towers or poles of the MERALCO considered real or personal properties?

HELDPole long, comparatively slender, usually cylindrical piece of wood, timber, object of metal or the like; an upright standard to the top of which something is affixed or by which something is supported.

MERALCO's steel supports consists of a framework of 4 steel bars/strips which are bound by steel cross-arms atop of which are cross-arms supporting 5 high-voltage transmission wires, and their sole function is to support/carry such wires. The exemption granted to poles as quoted from Part II, Par.9 of respondent's franchise is determined by the use to which such poles are dedicated.

It is evident that the word poles, as used in Act No. 484 and incorporated in the petitioner's franchise, should not be given a restrictive and narrow interpretation, as to defeat the very object for which the franchise was granted. The poles should be taken and understood as part of MERALCO's electric power system for the conveyance of electric current to its consumers.

Art. 415 of the NCC classifies the following as immovable property:

(1) Lands, buildings, roads and constructions of all kinds adhered to the soil;

xxx

(3) Everything attached to an immovable in a fixed manner, in such a way that it cannot be separated therefrom without breaking the material or deterioration of the object;

xxx

(5) Machinery, receptacles, instruments or implements intended by the owner pf the tenement for an industry ot 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;

Following these classifications, MERALCO's steel towers should be considered personal property. It should be noted that the steel towers:

(a) are neither buildings or constructions adhered to the soil;

(b) are not attached to an immovable in a fixed manner they can be separated without breaking the material or deterioration of the object;

are not machineries, receptacles or instruments, and even if they are, they are not intended for an industry to be carried on in the premises.

MERALCO VS. CBAA

This case is about the imposition of the realty tax on two oil storage tanks installed in 1969 by Manila Electric Company on a lot in San Pascual, Batangas which it leased in 1968 from Caltex (Phil.), Inc. The storage tanks are made of steel plates welded and assembled on the spot. Their bottoms rest on a foundation consisting of compacted earth as the outermost layer. The tank is not attached to its foundation. It is not anchored or welded to the concrete circular wall. Its bottom plate is not attached to any part of the foundation by bolts, screws or similar devices. The tank merely sits on its foundation. Pipelines were installed on the sides of each tank and are connected to the pipelines of the Manila Enterprises Industrial Corporation. The Board concludes that while the tanks restor sit on their foundation, the foundation itself and the walls, dikes and steps, which are integral parts of the tanks, are affixed to the land while the pipelines are attached to the tanks and required Meralco to pay realty taxes on the two tanks.

Issue:Whether or not the 2 oil tanks installed by Meralco in Batangas is a subject to a realty tax.

Held: The SC ruled that while the two storage tanks are not embedded in the land, they may, nevertheless, be considered as improvements on the land, enhancing its utility and rendering it useful to the oil industry. It is undeniable that the two tanks have been installed with some degree of permanence as receptacles for the considerable quantities of oil needed by Meralco for its operations. Thus, the two tanks should be held subject to realty tax because they were considered real property. Henceforth, the petition is dismissed. The Board's questioned decision and resolution are affirmed.

Fels Energy vs. BatangasFels Energy, Inc. vs. Province of BatangasG.R. No. 168557. February 16, 2007.

Callejo Sr., J.

Doctrine: In Consolidated Edison Company of New York, Inc., et al. v. The City of New York, et al., a power company brought an action to review property tax assessment. On the citys motion to dismiss, the Supreme Court of New York held that the barges on which were mounted gas turbine power plants designated to generate electrical power, the fuel oil barges which supplied fuel oil to the power plant barges, and the accessory equipment mounted on the barges were subject to real property taxation.

Moreover, Article 415 (9) of the New Civil Code provides that docks and structures which, though floating, are intended by their nature and object to remain at a fixed place on a river, lake, or coast are considered immovable property. Thus, power barges are categorized as immovable property by destination, being in the nature of machinery and other implements intended by the owner for an industry or work which may be carried on in a building or on a piece of land and which tend directly to meet the needs of said industry or work.

Facts: On January 18, 1993, NPC entered into a lease contract with Polar Energy, Inc. over 330 MW diesel engine power barges moored at Balayan Bay in Calaca, Batangas. The contract, denominated as an Energy Conversion Agreement, was for a period of five years. Article 10 states that NPC shall be responsible for the payment of taxes. (other than (i) taxes imposed or calculated on the basis of the net income of POLAR and Personal Income Taxes of its employees and (ii) construction permit fees, environmental permit fees and other similar fees and charges. Polar Energy then assigned its rights under the Agreement to Fels despite NPCs initial opposition.

FELS received an assessment of real property taxes on the power barges from Provincial Assessor Lauro C. Andaya of Batangas City. FELS referred the matter to NPC, reminding it of its obligation under the Agreement to pay all real estate taxes. It then gave NPC the full power and authority to represent it in any conference regarding the real property assessment of the Provincial Assessor. NPC filed a petition with the LBAA. The LBAA ordered Fels to pay the real estate taxes. The LBAA ruled that the power plant facilities, while they may be classified as movable or personal property, are nevertheless considered real property for taxation purposes because they are installed at a specific location with a character of permanency. The LBAA also pointed out that the owner of the bargesFELS, a private corporationis the one being taxed, not NPC. A mere agreement making NPC responsible for the payment of all real estate taxes and assessments will not justify the exemption of FELS; such a privilege can only be granted to NPC and cannot be extended to FELS. Finally, the LBAA also ruled that the petition was filed out of time.

Fels appealed to the CBAA. The CBAA reversed and ruled that the power barges belong to NPC; since they are actually, directly and exclusively used by it, the power barges are covered by the exemptions under Section 234(c) of R.A. No. 7160. As to the other jurisdictional issue, the CBAA ruled that prescription did not preclude the NPC from pursuing its claim for tax exemption in accordance with Section 206 of R.A. No. 7160. Upon MR, the CBAA reversed itself.

Issue: Whether or not the petitioner may be assessed of real property taxes.

Held: YES. The CBAA and LBAA power barges are real property and are thus subject to real property tax. This is also the inevitable conclusion, considering that G.R. No. 165113 was dismissed for failure to sufficiently show any reversible error. Tax assessments by tax examiners are presumed correct and made in good faith, with the taxpayer having the burden of proving otherwise. Besides, factual findings of administrative bodies, which have acquired expertise in their field, are generally binding and conclusive upon the Court; we will not assume to interfere with the sensible exercise of the judgment of men especially trained in appraising property. Where the judicial mind is left in doubt, it is a sound policy to leave the assessment undisturbed. We find no reason to depart from this rule in this case.

In Consolidated Edison Company of New York, Inc., et al. v. The City of New York, et al., a power company brought an action to review property tax assessment. On the citys motion to dismiss, the Supreme Court of New York held that the barges on which were mounted gas turbine power plants designated to generate electrical power, the fuel oil barges which supplied fuel oil to the power plant barges, and the accessory equipment mounted on the barges were subject to real property taxation.

Moreover, Article 415 (9) of the New Civil Code provides that docks and structures which, though floating, are intended by their nature and object to remain at a fixed place on a river, lake, or coast are considered immovable property. Thus, power barges are categorized as immovable property by destination, being in the nature of machinery and other implements intended by the owner for an industry or work which may be carried on in a building or on a piece of land and which tend directly to meet the needs of said industry or work.

Petitioners maintain nevertheless that the power barges are exempt from real estate tax under Section 234 (c) of R.A. No. 7160 because they are actually, directly and exclusively used by petitioner NPC, a government- owned and controlled corporation engaged in the supply, generation, and transmission of electric power.

We affirm the findings of the LBAA and CBAA that the owner of the taxable properties is petitioner FELS, which in fine, is the entity being taxed by the local government. As stipulated under Section 2.11, Article 2 of the Agreement:

OWNERSHIP OF POWER BARGES. POLAR shall own the Power Barges and all the fixtures, fittings, machinery and equipment on the Site used in connection with the Power Barges which have been supplied by it at its own cost. POLAR shall operate, manage and maintain the Power Barges for the purpose of converting Fuel of NAPOCOR into electricity.

It follows then that FELS cannot escape liability from the payment of realty taxes by invoking its exemption in Section 234 (c) of R.A. No. 7160. Indeed, the law states that the machinery must be actually, directly and exclusively used by the government owned or controlled corporation; nevertheless, petitioner FELS still cannot find solace in this provision because Section 5.5, Article 5 of the Agreement provides:

OPERATION. POLAR undertakes that until the end of the Lease Period, subject to the supply of the necessary Fuel pursuant to Article 6 and to the other provisions hereof, it will operate the Power Barges to convert such Fuel into electricity in accordance with Part A of Article 7.

It is a basic rule that obligations arising from a contract have the force of law between the parties. Not being contrary to law, morals, good customs, public order or public policy, the parties to the contract are bound by its terms and conditions.

Time and again, the Supreme Court has stated that taxation is the rule and exemption is the exception. The law does not look with favor on tax exemptions and the entity that would seek to be thus privileged must justify it by words too plain to be mistaken and too categorical to be misinterpreted. Thus, applying the rule of strict construction of laws granting tax exemptions, and the rule that doubts should be resolved in favor of provincial corporations, we hold that FELS is considered a taxable entity.

The mere undertaking of petitioner NPC under Section 10.1 of the Agreement, that it shall be responsible for the payment of all real estate taxes and assessments, does not justify the exemption. The privilege granted to petitioner NPC cannot be extended to FELS. The covenant is between FELS and NPC and does not bind a third person not privy thereto, in this case, the Province of Batangas.

It must be pointed out that the protracted and circuitous litigation has seriously resulted in the local governments deprivation of revenues. The power to tax is an incident of sovereignty and is unlimited in its magnitude, acknowledging in its very nature no perimeter so that security against its abuse is to be found only in the responsibility of the legislature which imposes the tax on the constituency who are to pay for it. The right of local government units to collect taxes due must always be upheld to avoid severe tax erosion. This consideration is consistent with the State policy to guarantee the autonomy of local governments and the objective of the Local Government Code that they enjoy genuine and meaningful local autonomy to empower them to achieve their fullest development as self-reliant communities and make them effective partners in the attainment of national goals.

In conclusion, we reiterate that the power to tax is the most potent instrument to raise the needed revenues to finance and support myriad activities of the local government units for the delivery of basic services essential to the promotion of the general welfare and the enhancement of peace, progress, and prosperity of the people.

RICARDO PRESBITERO vs, FERNANDEZ(Immovable Calinisan)

Facts:1) ESPERIDION Presbitero failed to furnish Nava the value of the properties under litigation.2) Presbitero was ordered by the lower court to pay Nava to settle his debts.3) Nava's counsel still tried to settle this case with Presbitero, out of court. But to no avail.4) Thereafter, the sheriff levied upon and garnished the sugar quotas allotted to the plantation and adhered to the Ma-ao Mill District and registered in the name of Presbitero as the original plantation owner.5) The sheriff was not able to present for registration thererof to the Registry of Deeds.6) The court then ordered Presbitero to segregate the portion of Lot 608 pertaining to Nava from the mass of properties belonging to the defendant within a period to expire on August 1960.7) Bottomline, Presbitero did not meet his obligations, and the auction sale was scheduled.8) Presbitero died after.9) RICARDO Presbitero, the estate administrator, then petitioned that the sheriff desist in holding the auction sale on the ground that the levy on the sugar quotas was invalid because the notice thereof was not registered with the Registry of Deeds.

Issue: W/N the sugar quotas are real (immovable) or personal properties.

Held:1) They are real properties.2) Legal bases:a) The Sugar Limitation Law xxx attaching to the land xxx (p 631)b) RA 1825xxx to be an improvement attaching to the land xxx (p 631)c) EO # 873"plantation" xxx to which is attached an allotment of centrifugal sugar.3) Under the express provisions of law, the sugar quota allocations are accessories to the land, and cannot have independent existence away from a plantation.4) Since the levy is invalid for non-compliance with law, xxx the levy amount to no levy at all

SIBAL v. VALDEZ

For the purpose of attachment and execution, and for the purposes of the Chattel Mortgage Law, "ungathered products" have the nature of personal property.

FACTS:

(this case has a lot of confusing facts, just read the original if this digest fails to compress everything) The Deputy Sheriff of the Province of Tarlac, by virtue of a writ of execution issued by the Court of First Instance of Pampanga, attached and sold to the defendant Emiliano J. Valdez the sugar cane planted by the plaintiff and his tenants on seven parcels of land. Included also in those attached were real properties wherein 8mout of the 11 parcels of land, house and camarin which was first acquired by Macondray & Co and then later on bought by Valdez in an auction. First Cause for petitioner: That Within one year from the date of the attachment and sale the plaintiff offered to redeem said sugar cane and tendered to the defendant Valdez the amount sufficient to cover the price paid by the latter, the interest thereon and any assessments or taxes which he may have paid thereon after the purchase, and the interest corresponding thereto and that Valdez refused to accept the money and to return the sugar cane to the plaintiff. Second Cause for petitioner: That Valdez was trying to harvest palay from four out of seven parcels of land. Petitioner filed for preliminary injunction to stop defendant from 1) distributing the lands 2) harvesting and selling the sugar canes, and 3) harvesting and selling the palay. The writ was issued which prevented defendant from planting and harvesting the lands. Defendant later appealed claiming that he was the owner of many of the alleged land thus he also owns the crops of it. The court awarded the defendant 9,439.08 because the petitioner unduly denied the defendant to plant in his land thus preventing him to profit thereto.

ISSUE:Whether the sugar cane is personal o real property? (The relevance of the issue is with regards to the sugar cane of the Petitioner which came from the land that now belongs to the defendant)

RULING:

It is contended that sugar cane comes under the classification of real property as "ungathered products" in paragraph 2 of article 334 of the Civil Code. Said paragraph 2 of article 334 enumerates as real property the following: Trees, plants, and ungathered products, while they are annexed to the land or form an integral part of any immovable property." That article, however, has received in recent years an interpretation by the Tribunal Supremo de Espaa, which holds that, under certain conditions, growing crops may be considered as personal property.

In some cases "standing crops" may be considered and dealt with as personal property. In the case of Lumber Co. vs. Sheriff and Tax Collector (106 La., 418) the Supreme Court said: "True, by article 465 of the Civil Code it is provided that 'standing crops and the fruits of trees not gathered and trees before they are cut down . . . are considered as part of the land to which they are attached, but the immovability provided for is only one in abstracto and without reference to rights on or to the crop acquired by others than the owners of the property to which the crop is attached. . . . The existence of a right on the growing crop is a mobilization by anticipation, a gathering as it were in advance, rendering the crop movable quoad the right acquired therein. Our jurisprudence recognizes the possible mobilization of the growing crop."

For the purpose of attachment and execution, and for the purposes of the Chattel Mortgage Law, "ungathered products" have the nature of personal property. SC lowered the award for damages to the defendant to 8,900.80 by acknowledging the fact that some of the sugar canes were owned by the petitioner and by reducing the calculated expected yield or profit that defendant would have made if petitioner did not judicially prevent him from planting and harvesting his lands.

Luis Marcos Laurel vs Hon. Zeus AbrogarGR No. 155076January 13, 2009

FACTSLaurel was charged with Theft under Art. 308 of the RPC for allegedly taking, stealing, and using PLDT's international long distance calls by conducting International Simple Resale (ISR) a method of outing and completing international long-distance calls using lines, cables, antennae, and/or air wave frequency which connect directly to the local/domestic exchange facilities of the country where the call is destined. PLDT alleged that this service was stolen from them using their own equipment and caused damage to them amounting to P20,370,651.92.PLDT alleges that the international calls and business of providing telecommunication or telephone service are personal properties capable of appropriation and can be objects of theft.

ISSUEWON Laurel's act constitutes Theft

HELDArt.308, RPC: Theft is committed by any person who, with intent to gain but without violence against, or intimidation of persons nor force upon things, shall take personal property of another without the latters consent.

Elements of Theft under Art.308, RPC:

There be taking of Personal Property;Said Personal Property belongs to another;Taking be done with Intent to Gain;Taking be done without the owners consent;No violence against, or intimidation of, persons or force upon thingsPersonal Property anything susceptible of appropriation and not included in Real Property

Thus, the term personal property as used in Art.308, RPC should be interpreted in the context of the Civil Code's definition of real and personal property. Consequently, any personal property, tangible or intangible, corporeal or incorporeal, capable of appropriation may be the subject of theft (*US v Carlos; US v Tambunting; US v Genato*), so long as the same is not included in the enumeration of Real Properties under the Civil Code.

The only requirement for personal property to capable of theft, is that it be subject to appropriation.

Art. 416 (3) of the Civil Code deems Forces of Nature which are brought under the control of science, as Personal Property.

The appropriation of forces of nature which are brought under control by science can be achieved by tampering with any apparatus used for generating or measuring such forces of nature, wrongfully redirecting such forces of nature from such apparatus, or using any device to fraudulently obtain such forces of nature.

In the instant case, the act of conducting ISR operations by illegally connecting various equipment or apparatus to PLDTs telephone system, through which petitioner is able to resell or re-route international long distance calls using PLDTs facilities constitute Subtraction.

Moreover, interest in business should be classified as personal property since it is capable of appropriation, and not included in the enumeration of real properties.

Therefore, the business of providing telecommunication or telephone service are personal property which can be the object of theft under Art. 308 of the RPC. The act of engaging in ISR is an act of subtraction penalized under the said article.

While international long-distance calls take the form of electrical energy and may be considered as personal property, the said long-distance calls do not belong to PLDT since it could not have acquired ownership over such calls. PLDT merely encodes, augments, enhances, decodes and transmits said calls using its complex communications infrastructure and facilities.

Since PLDT does not own the said telephone calls, then it could not validly claim that such telephone calls were taken without its consent.

What constitutes Theft is the use of the PLDT's communications facilities without PLDT's consent. The theft lies in the unlawful taking of the telephone services & businesses.

The Amended Information should be amended to show that the property subject of the theft were services and business of the offended party.

! PNB v. Aznar, et al. G.R. 171805 May 30, 2011

! Facts: This case is consolidated with G.R. 172021, Merelo and Matias Aznar v. PNB 1958: Rural Insurance and Surety Company, Inc. (RISCO) ceased operation due to business reverses - In plaintiffs (Anzar et al.) desire to rehabilitate RISCO, they contributed a total amount of P212,720.00 - This was used to purchase 3 parcels of land in Cebu - 2 in the Minicipality of Talisay and 1 in the District of Lahug, Cebu City - Marami yung nag-contribute for the P212k, lahat sila kasama ni Aznar as defendants After the purchase of the lots, titles were issued in the name of RISCO The amount contributed by plaintiffs constituted as liens and encumbrances on the properties as annotated in the titles of said lots - Such annotation was made pursuant to the Minutes of the Special Meeting of the Board of Directors of RISCO on March 14, 1961, and a part of it says: - And that the respective contributions above-mentioned (Aznar et al.) shall constitute as their lien or interest on the property described above, if and when said property are titled in the name of RISCO, subject to registration as their adverse claim in pursuance of the Provision of Land Registration Act, until such time their respective contributions are refunded to them completely Thereafter, various subsequent annotations were made on the same titles, including the Notice of Attachment and Writ of Execution both dated August 3,1962 in favour of Philippine National Bank (PNB) As a result, a Certificate of Sale was issued in favor of PNB, being the lone and highest bidder of the 3 parcels of land - This prompted Aznar et al. to file the instant case seeking the quieting of their supposed title to the subject properties Trial court ruled against PNB on the basis that there was an express trust created over the subject properties whereby RISCO was the trustee and the stockholders, Aznar, et al., were the beneficiaries Court of Appeals opined that the monetary contributions made by Aznar, et al. to RISCO can only be characterised as a load secured by a lien on the subjected lots, rather than an expressed trust !

Issue: Whether or not there was a trust contract between RISCO and Aznar, et al. !

Held: NO. At the outset, the Court agrees with the Court of Appeals that the agreement contained in the Minutes of the Special Meeting of the RISCO Board of Directors held on March 14, 1961 was a loan by the therein named stockholders to RISCO. Careful perusal of the Minutes relied upon by plaintiffs-appellees in their claim, showed that their contributions shall constitute as lien or interest on the property. The term lien as used in the Minutes is defined as "a discharge on property usually for the payment of some debt or obligation. Hence, from the use of the word "lien" in the Minutes, We find that the money contributed by plaintiffs-appellees was in the nature of a loan, secured by their liens and interests duly annotated on the titles. The annotation of their lien serves only as collateral and does not in any way vest ownership of property to plaintiffs. !We are not persuaded by the contention of Aznar, et al., that the language of the subject Minutes created an express trust. Trust is the right to the beneficial enjoyment of property, the legal title to which is vested in another. It is a fiduciary relationship that obliges the trustee to deal with the property for the benefit of the beneficiary. Express trusts are intentionally created by the direct and positive acts of the settlor or the trustor - by some writing, deed, or will or oral declaration. It is created not necessarily by some written words, but by the direct and positive acts of the parties. The creation of an express trust must be manifested with reasonable certainty and cannot be inferred from loose and vague declarations or from ambiguous circumstances susceptible of other interpretations. At most, what Aznar, et al., had was merely a right to be repaid the amount loaned to RISCO. Unfortunately, the right to seek repayment or reimbursement of their contributions used to purchase the subject properties is already barred by prescription 10 Years because it was based on a written contract (the minutes by the Board of Directors) in 1961 and the quieting of the title suit was brought only in 1998 WHEREFORE, the petition of Aznar, et al., in G.R. No. 172021 is DENIED for lack of merit. The petition of PNB in G.R. No. 171805 is GRANTED. The Complaint, docketed as Civil Case No. CEB-21511, filed by Aznar, et al., is hereby DISMISSED. No costs.

LO V. KJS ECO-FRAMEWORK SYSTEM PHIL INC G.R. NO 149420 (2003)

FACTS: Respondent KJS Eco-Framework System is a corporation engaged in the sale of steel scaffoldings, while petitioner Sonny Lo, doing business under the name of Sans Enterprises, is a building contractor.1. In February 1990, petitioner ordered scaffolding equipments from the respondent amounting to P540, 425.80. He paid a down payment of P150,000 and the balance was to be paid in 10 monthly installments2. However, Lo was only able to pay the first 2 monthly installments due to financial difficulties despite demands from the respondent3. In October 1990, petitioner and respondent executed a deed of assignment whereby petitioner assigned to respondent his receivables of P335,462.14 from Jomero Realty Corp4. But when respondent tried to collect the said credit from Jomero Realty Corp, the latter refused to honor the deed of assignment because it claimed that the petitioner was also indebted to it. As such, KJS sent Lo a demand letter but the latter refused to pay, claiming that his obligation had been extinguished when they executed the deed of assignment5. Subsequently, respondent filed an action for recovery of sum of money against petitioner.6. Petitioner argued that his obligation was extinguished with the execution of the deed of assignment of credit. Respondent alleged that Jomero Realty Corp refused to honor the deed of assignment because it claimed that the petitioner had outstanding indebtedness to it7. The trial court dismissed the complaint on the ground that the assignment of credit extinguished the bligation8. Upon appeal, CA reversed the trial court decision and held in favor of KJS. CA held thata. Petitioner failed to comply with his warranty under the deedb. The object of the deed did not exist at the time of the transaction, rendering it void under Art 1409 NCCc. Petitioner violated the terms of the deed of assignment when he failed to execute and do all acts necessary to effectually enable the respondent to recover the collectibles

ISSUE: WON the deed of assignment extinguished the petitioners obligation

HELD: No, the petitioners obligation was not extinguished with the execution of the deed of assignment.

An assignment of credit is an agreement by virtue of which the owner of a credit, known as the assignor, by a legal cause, such as sale, dacion en pago, exchange or donation, and without the consent of the debtor, transfers his credit and accessory rights to another, known as the assignee, who acquires the power to enforce it to the same extent as the assignor could enforce it against the debtor.

In dacion en pago, as a special mode of payment, the debtor offers another thing to the creditor who accepts it as equivalent of payment of an outstanding debt. In order that there be a valid dation in payment, the following are the requisites: (1) There must be the performance of the prestation in lieu of payment (animo solvendi) which may consist in the delivery of a corporeal thing or a real right or a credit against the third person; (2) There must be some difference between the prestation due and that which is given in substitution (aliud pro alio); (3) There must be an agreement between the creditor and debtor that the obligation is immediately extinguished by reason of the performance of a prestation different from that due. The undertaking really partakes in one sense of the nature of sale, that is, the creditor is really buying the thing or property of the debtor, payment for which is to be charged against the debtors debt. As such, the vendor in good faith shall be responsible, for the existence and legality of the credit at the time of the sale but not for the solvency of the debtor, in specified circumstances.

Hence, it may well be that the assignment of credit, which is in the nature of a sale of personal property, produced the effects of a dation in payment which may extinguish the obligation. However, as in any other contract of sale, the vendor or assignor is bound by certain warranties. More specifically, the first paragraph of Article 1628 of the Civil Code provides:The vendor in good faith shall be responsible for the existence and legality of the credit at the time of the sale, unless it should have been sold as doubtful; but not for the solvency of the debtor, unless it has been so expressly stipulated or unless the insolvency was prior to the sale and of common knowledge.

From the above provision, petitioner, as vendor or assignor, is bound to warrant the existence and legality of the credit at the time of the sale or assignment. When Jomero claimed that it was no longer indebted to petitioner since the latter also had an unpaid obligation to it, it essentially meant that its obligation to petitioner has been extinguished by compensation. In other words, respondent alleged the non-existence of the credit and asserted its claim to petitioners warranty under the assignment. Therefore, it necessary for the petitioner to make good its warranty and pay the obligation.

Furthermore, the petitioner breached his obligation under the Deed of Assignment, to execute and do all such further acts and deeds as shall be reasonably necessary to effectually enable said ASSIGNEE to recover whatever collectibles said ASSIGNOR has in accordance with the true intent and meaning of these presents.

Indeed, by warranting the existence of the credit, petitioner should be deemed to have ensured the performance thereof in case the same is later found to be inexistent. He should be held liable to pay to respondent the amount of his indebtedness.ARCADIO and MARIA LUISA CARANDANG, Petitioners, vs. HEIRS OF QUIRINO A. DE GUZMAN, namely: MILAGROS DE GUZMAN, VICTOR DE GUZMAN, REYNALDO DE GUZMAN, CYNTHIA G. RAGASA and QUIRINO DE GUZMAN, JR., Respondents. G.R. No. 160347; November 29, 2006

TOPIC: RULE ON COMPULSORY JOINDER OF INDISPENSABLE PARTIES (CO-OWNERS OF PERSONAL PROPERTIES)

NATURE OF THE CASE: This case reached the Supreme Court as an appeal to the decision of the CA ruling against the spouses Carandang and denying their motion for reconsideration. The CA affirmed the RTCs decision that Milagros de Guzman, the decedents wife, is not an indispensable party in the complaint, hence, her non-inclusion in the case does not warrant a dismissal of the complaint.

FACTS: Spouses Carandang and the decedent Quirino de Guzman were stockholders and corporate officers of Mabuhay Broadcasting System (MBS). The Carandangs have equities at 54 % while Quirino has 46%.

When the capital stock of MBS was increased on November 26, 1983, the Carandangs subscribed P345,000 from it, P293,250 from the said amount was loaned by Quirino to the Carandangs. In the subsequent increase in MBS capital stock on March 3, 1989, the Carandangs subscribed again to the increase in the amount of P93,750. But, P43,125 out of the mentioned amount was again loaned by Quirino.

When Quirino sent a demand letter to the Carandangs for the payment of the loan, the Carandangs refused to pay. They contend that a pre-incorporation agreement was executed between Arcadio Carandang and Quirino, whereby Quirino promised to pay for the stock subscriptions of the Arcadio without cost, in consideration for Arcadios technical expertise, his newly purchased equipment, and his skill in repairing and upgrading radio/communication equipment therefore, there is no indebtedness on the part of the Carandangs.

Thereafter, Quirino filed a complaint seeking to recover the P336,375 total amount of the loan together with damages. The RTC ruled in favor of Quirino and ordered the Carandangs to pay the loan plus interest, attorneys fees, and costs of suit. The Carandangs appealed the trial courts decision to the CA, but the CA affirmed the same. The subsequent Motion for Reconsideration filed by the Carandangs were also denied. Hence, this appeal to the SC.

SPOUSES CARANDANG: Three of the four checks used to pay their stock subscriptions were issued in the name of Milagros de Guzman, the decedents wife. Thus, Milagros should be considered as an indispensable party in the complaint. Being such, the failure to join Milagros as a party in the case should cause the dismissal of the action by reason of a jurisprudence stating that: (i)f a suit is not brought in the name of or against the real party in interest, a motion to dismiss may be filed on the ground that the complaint states no cause of action."

ISSUE: Whether or not the RTC should have dismissed the case for failure to state a cause of action, considering that Milagros de Guzman, allegedly an indispensable party, was not included as a party-plaintiff.

HELD: No. Although the spouses Carandang were correct in invoking the aforementioned doctrine, the ground set forth entails an examination of whether the parties presently pleaded are interested in the outcome of the litigation, and not whether all persons interested in such outcome are actually pleaded. The first query seeks to answer the question of whether Milagros is a real party in interest, while the latter query is asking if she is an indispensable party. Since the issue of this case calls for the definition of an indispensable party, invoking the abovementioned doctrine is irrelevant to the case because the doctrine talks about a real party in interest and not an indispensable party. Although it is important to take note that an indispensable party is also a real party in interest.

*Definitions:> Real party in interest the party who stands to be benefited or injured by the judgment of the suit, or the party entitled to the avails of the suit.> Indispensable party a party in interest without whom no final determination can be had of an action> Necessary party one who is not indispensable but who ought to be joined as a party if complete relief is to be accorded as to those already parties, or for a complete determination or settlement of the claim subject of the action> Pro-forma parties those who are required to be joined as co-parties in suits by or against another party as may be provided by the applicable substantive law or procedural rule. An example is provided by Section 4, Rule 3 of the Rules of Court:Sec. 4. Spouses as parties. Husband and wife shall sue or be sued jointly, except as provided by law.Pro-forma parties can either be indispensable, necessary or neither indispensable nor necessary. The third case occurs if, for example, a husband files an action to recover a property which he claims to be part of his exclusive property. The wife may have no legal interest in such property, but the rules nevertheless require that she be joined as a party.

Quirino and Milagros de Guzman were married before the effectivity of the Family Code on 3 August 1988. As they did not execute any marriage settlement, the regime of conjugal partnership of gains govern their property relations.

All property acquired during the marriage, whether the acquisition appears to have been made, contracted or registered in the name of one or both spouses, is presumed to be conjugal unless the contrary is proved. Credits are personal properties, acquired during the time the loan or other credit transaction was executed. Therefore, credits loaned during the time of the marriage are presumed to be conjugal property.

Assuming that the four checks are credits, they are assumed to be conjugal properties of Quirino and Milagros. There being no evidence to the contrary, such presumption subsists. As such, Quirino de Guzman, being a co-owner of specific partnership property, is certainly a real party in interest.

Now, with regard to the discussion on the effect of non-inclusion of parties in the complaint filed: in indispensable parties, when an indispensable party is not before the court, the action should be dismissed. The absence of an indispensable party renders all subsequ