Republic of the PhilippinesSUPREME COURTManila

Republic of the PhilippinesSUPREME COURTManilaEN BANCG.R. No. L-11658 February 15, 1918LEUNG YEE,plaintiff-appellant,vs.FRANK L. STRONG MACHINERY COMPANY and J. G. WILLIAMSON,defendants-appellees.Booram and Mahoney for appellant.Williams, Ferrier and SyCip for appellees.CARSON,J.:The "Compaia Agricola Filipina" bought a considerable quantity of rice-cleaning machinery company from the defendant machinery company, and executed a chattel mortgage thereon to secure payment of the purchase price. It included in the mortgage deed the building of strong materials in which the machinery was installed, without any reference to the land on which it stood. The indebtedness secured by this instrument not having been paid when it fell due, the mortgaged property was sold by the sheriff, in pursuance of the terms of the mortgage instrument, and was bought in by the machinery company. The mortgage was registered in the chattel mortgage registry, and the sale of the property to the machinery company in satisfaction of the mortgage was annotated in the same registry on December 29, 1913.A few weeks thereafter, on or about the 14th of January, 1914, the "Compaia Agricola Filipina" executed a deed of sale of the land upon which the building stood to the machinery company, but this deed of sale, although executed in a public document, was not registered. This deed makes no reference to the building erected on the land and would appear to have been executed for the purpose of curing any defects which might be found to exist in the machinery company's title to the building under the sheriff's certificate of sale. The machinery company went into possession of the building at or about the time when this sale took place, that is to say, the month of December, 1913, and it has continued in possession ever since.At or about the time when the chattel mortgage was executed in favor of the machinery company, the mortgagor, the "Compaia Agricola Filipina" executed another mortgage to the plaintiff upon the building, separate and apart from the land on which it stood, to secure payment of the balance of its indebtedness to the plaintiff under a contract for the construction of the building. Upon the failure of the mortgagor to pay the amount of the indebtedness secured by the mortgage, the plaintiff secured judgment for that amount, levied execution upon the building, bought it in at the sheriff's sale on or about the 18th of December, 1914, and had the sheriff's certificate of the sale duly registered in the land registry of the Province of Cavite.At the time when the execution was levied upon the building, the defendant machinery company, which was in possession, filed with the sheriff a sworn statement setting up its claim of title and demanding the release of the property from the levy. Thereafter, upon demand of the sheriff, the plaintiff executed an indemnity bond in favor of the sheriff in the sum of P12,000, in reliance upon which the sheriff sold the property at public auction to the plaintiff, who was the highest bidder at the sheriff's sale.This action was instituted by the plaintiff to recover possession of the building from the machinery company.The trial judge, relying upon the terms of article 1473 of the Civil Code, gave judgment in favor of the machinery company, on the ground that the company had its title to the building registered prior to the date of registry of the plaintiff's certificate.Article 1473 of the Civil Code is as follows:If the same thing should have been sold to different vendees, the ownership shall be transfer to the person who may have the first taken possession thereof in good faith, if it should be personal property.Should it be real property, it shall belong to the person acquiring it who first recorded it in the registry.Should there be no entry, the property shall belong to the person who first took possession of it in good faith, and, in the absence thereof, to the person who presents the oldest title, provided there is good faith.The registry her referred to is of course the registry of real property, and it must be apparent that the annotation or inscription of a deed of sale of real property in a chattel mortgage registry cannot be given the legal effect of an inscription in the registry of real property. By its express terms, the Chattel Mortgage Law contemplates and makes provision for mortgages of personal property; and the sole purpose and object of the chattel mortgage registry is to provide for the registry of "Chattel mortgages," that is to say, mortgages of personal property executed in the manner and form prescribed in the statute. The building of strong materials in which the rice-cleaning machinery was installed by the "Compaia Agricola Filipina" was real property, and the mere fact that the parties seem to have dealt with it separate and apart from the land on which it stood in no wise changed its character as real property. It follows that neither the original registry in the chattel mortgage of the building and the machinery installed therein, not the annotation in that registry of the sale of the mortgaged property, had any effect whatever so far as the building was concerned.We conclude that the ruling in favor of the machinery company cannot be sustained on the ground assigned by the trial judge. We are of opinion, however, that the judgment must be sustained on the ground that the agreed statement of facts in the court below discloses that neither the purchase of the building by the plaintiff nor his inscription of the sheriff's certificate of sale in his favor was made in good faith, and that the machinery company must be held to be the owner of the property under the third paragraph of the above cited article of the code, it appearing that the company first took possession of the property; and further, that the building and the land were sold to the machinery company long prior to the date of the sheriff's sale to the plaintiff.It has been suggested that since the provisions of article 1473 of the Civil Code require "good faith," in express terms, in relation to "possession" and "title," but contain no express requirement as to "good faith" in relation to the "inscription" of the property on the registry, it must be presumed that good faith is not an essential requisite of registration in order that it may have the effect contemplated in this article. We cannot agree with this contention. It could not have been the intention of the legislator to base the preferential right secured under this article of the code upon an inscription of title in bad faith. Such an interpretation placed upon the language of this section would open wide the door to fraud and collusion. The public records cannot be converted into instruments of fraud and oppression by one who secures an inscription therein in bad faith. The force and effect given by law to an inscription in a public record presupposes the good faith of him who enters such inscription; and rights created by statute, which are predicated upon an inscription in a public registry, do not and cannot accrue under an inscription "in bad faith," to the benefit of the person who thus makes the inscription.Construing the second paragraph of this article of the code, the supreme court of Spain held in its sentencia of the 13th of May, 1908, that:This rule is always to be understood on the basis of the good faith mentioned in the first paragraph; therefore, it having been found that the second purchasers who record their purchase had knowledge of the previous sale, the question is to be decided in accordance with the following paragraph. (Note 2, art. 1473, Civ. Code, Medina and Maranon [1911] edition.)Although article 1473, in its second paragraph, provides that the title of conveyance of ownership of the real property that is first recorded in the registry shall have preference, this provision must always be understood on the basis of the good faith mentioned in the first paragraph; the legislator could not have wished to strike it out and to sanctionbad faith, just to comply with a mere formality which, in given cases, does not obtain even in real disputes between third persons. (Note 2, art. 1473, Civ. Code, issued by the publishers of theLa Revista de los Tribunales, 13th edition.)The agreed statement of facts clearly discloses that the plaintiff, when he bought the building at the sheriff's sale and inscribed his title in the land registry, was duly notified that the machinery company had bought the building from plaintiff's judgment debtor; that it had gone into possession long prior to the sheriff's sale; and that it was in possession at the time when the sheriff executed his levy. The execution of an indemnity bond by the plaintiff in favor of the sheriff, after the machinery company had filed its sworn claim of ownership, leaves no room for doubt in this regard. Having bought in the building at the sheriff's sale with full knowledge that at the time of the levy and sale the building had already been sold to the machinery company by the judgment debtor, the plaintiff cannot be said to have been a purchaser in good faith; and of course, the subsequent inscription of the sheriff's certificate of title must be held to have been tainted with the same defect.Perhaps we should make it clear that in holding that the inscription of the sheriff's certificate of sale to the plaintiff was not made in good faith, we should not be understood as questioning, in any way, the good faith and genuineness of the plaintiff's claim against the "Compaia Agricola Filipina." The truth is that both the plaintiff and the defendant company appear to have had just and righteous claims against their common debtor. No criticism can properly be made of the exercise of the utmost diligence by the plaintiff in asserting and exercising his right to recover the amount of his claim from the estate of the common debtor. We are strongly inclined to believe that in procuring the levy of execution upon the factory building and in buying it at the sheriff's sale, he considered that he was doing no more than he had a right to do under all the circumstances, and it is highly possible and even probable that he thought at that time that he would be able to maintain his position in a contest with the machinery company. There was no collusion on his part with the common debtor, and no thought of the perpetration of a fraud upon the rights of another, in the ordinary sense of the word. He may have hoped, and doubtless he did hope, that the title of the machinery company would not stand the test of an action in a court of law; and if later developments had confirmed his unfounded hopes, no one could question the legality of the propriety of the course he adopted.But it appearing that he had full knowledge of the machinery company's claim of ownership when he executed the indemnity bond and bought in the property at the sheriff's sale, and it appearing further that the machinery company's claim of ownership was well founded, he cannot be said to have been an innocent purchaser for value. He took the risk and must stand by the consequences; and it is in this sense that we find that he was not a purchaser in good faith.One who purchases real estate with knowledge of a defect or lack of title in his vendor cannot claim that he has acquired title thereto in good faith as against the true owner of the land or of an interest therein; and the same rule must be applied to one who has knowledge of facts which should have put him upon such inquiry and investigation as might be necessary to acquaint him with the defects in the title of his vendor. A purchaser cannot close his eyes to facts which should put a reasonable man upon his guard, and then claim that he acted in good faith under the belief that there was no defect in the title of the vendor. His mere refusal to believe that such defect exists, or his willful closing of his eyes to the possibility of the existence of a defect in his vendor's title, will not make him an innocent purchaser for value, if afterwards develops that the title was in fact defective, and it appears that he had such notice of the defects as would have led to its discovery had he acted with that measure of precaution which may reasonably be acquired of a prudent man in a like situation. Good faith, or lack of it, is in its analysis a question of intention; but in ascertaining the intention by which one is actuated on a given occasion, we are necessarily controlled by the evidence as to the conduct and outward acts by which alone the inward motive may, with safety, be determined. So it is that "the honesty of intention," "the honest lawful intent," which constitutes good faith implies a "freedom from knowledge and circumstances which ought to put a person on inquiry," and so it is that proof of such knowledge overcomes the presumption of good faith in which the courts always indulge in the absence of proof to the contrary. "Good faith, or the want of it, is not a visible, tangible fact that can be seen or touched, but rather a state or condition of mind which can only be judged of by actual or fancied tokens or signs." (Wildervs.Gilman, 55 Vt., 504, 505; Cf. Cardenas Lumber Co.vs.Shadel, 52 La. Ann., 2094-2098; Pinkerton Bros. Co.vs.Bromley, 119 Mich., 8, 10, 17.)We conclude that upon the grounds herein set forth the disposing part of the decision and judgment entered in the court below should be affirmed with costs of this instance against the appellant. So ordered.Arellano, C.J., Johnson, Araullo, Street and Malcolm, JJ.,concur.Torres, Avancea and Fisher, JJ.,took no part.Republic of the PhilippinesSUPREME COURTManilaEN BANCG.R. No. L-40411 August 7, 1935DAVAO SAW MILL CO., INC.,plaintiff-appellant,vs.APRONIANO G. CASTILLO and DAVAO LIGHT & POWER CO., INC.,defendants-appellees.Arsenio Suazo and Jose L. Palma Gil and Pablo Lorenzo and Delfin Joven for appellant.J.W. Ferrier for appellees.MALCOLM,J.:The issue in this case, as announced in the opening sentence of the decision in the trial court and as set forth by counsel for the parties on appeal, involves the determination of the nature of the properties described in the complaint. The trial judge found that those properties were personal in nature, and as a consequence absolved the defendants from the complaint, with costs against the plaintiff.The Davao Saw Mill Co., Inc., is the holder of a lumber concession from the Government of the Philippine Islands. It has operated a sawmill in thesitioof Maa, barrio of Tigatu, municipality of Davao, Province of Davao. 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 party of the first part without any obligation on its part to pay any amount for said improvements and buildings; also, in the event the party of the second part should leave or abandon the land leased before the time herein stipulated, the improvements and buildings shall likewise pass to the ownership of the party of the first part as though the time agreed upon had expired: Provided, however, That the machineries and accessories are not included in the improvements which will pass to the party of the first part on the expiration or abandonment of the land leased.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 in that action; 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. Indeed the bidder, which was the plaintiff in that action, and the defendant herein having consummated the sale, proceeded to take possession of the machinery and other properties described in the corresponding certificates of sale executed in its favor by the sheriff of Davao.As connecting up with the facts, it should further be explained that the Davao Saw Mill Co., Inc., has on a number of occasions treated the machinery as personal property by executing chattel mortgages in favor of third persons. One of such persons is the appellee by assignment from the original mortgages.Article 334, paragraphs 1 and 5, of the Civil Code, is in point. According to the Code, real property consists of 1. Land, buildings, roads and constructions of all kinds adhering to the soil;x x x x x x x x x5. 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 of industry.Appellant emphasizes the first paragraph, and appellees the last mentioned paragraph. We entertain no doubt that the trial judge and appellees are right in their appreciation of the legal doctrines flowing from the facts.In the first place, it must again be pointed out that the appellant should have registered its protest before or at the time of the sale of this property. It must further be pointed out that while not conclusive, the characterization of the property as chattels by the appellant is indicative of intention and impresses upon the property the character determined by the parties. In this connection the decision of this court in the case of Standard Oil Co. of New Yorkvs. Jaramillo ( [1923], 44 Phil., 630), whetherobiter dictaor not, furnishes the key to such a situation.It is, however not necessary to spend overly must time in the resolution of this appeal on side issues. It is machinery which is involved; moreover, machinery not intended by the owner of any building or land for use in connection therewith, but intended by a lessee for use in a building erected on the land by the latter to be returned to the lessee on the expiration or abandonment of the lease.A similar question arose in Puerto Rico, and on appeal being taken to the United States Supreme Court, it was held that 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. In the opinion written by Chief Justice White, whose knowledge of the Civil Law is well known, it was in part said:To determine this question involves fixing the nature and character of the property from the point of view of the rights of Valdes and its nature and character from the point of view of Nevers & Callaghan as a judgment creditor of the Altagracia Company and the rights derived by them from the execution levied on the machinery placed by the corporation in the plant. Following the Code Napoleon, the Porto Rican Code treats as immovable (real) property, not only land and buildings, but also attributes immovability in some cases to property of a movable nature, that is, personal property, because of the destination to which it is applied. "Things," says section 334 of the Porto Rican Code, "may be immovable either by their own nature or by their destination or the object to which they are applicable." Numerous illustrations are given in the fifth subdivision of section 335, which is as follows: "Machinery, vessels, instruments or implements intended by the owner of the tenements for the industrial or works that they may carry on in any building or upon any land and which tend directly to meet the needs of the said industry or works." (See alsoCode Nap., articles 516, 518et seq. to and inclusive of article 534, recapitulating the things which, though in themselves movable, may be immobilized.) So far as the subject-matter with which we are dealing machinery placed in the plant it is plain, both under the provisions of the Porto Rican Law and of the Code Napoleon, that machinery which is movable in its nature only becomes immobilized when placed in a plant by the owner of the property or plant. Such result would not be accomplished, therefore, by the placing of machinery in a plant by a tenant or a usufructuary or any person having only a temporary right. (Demolombe, Tit. 9, No. 203; Aubry et Rau, Tit. 2, p. 12, Section 164; Laurent, Tit. 5, No. 447; and decisions quoted in Fuzier-Herman ed. Code Napoleon under articles 522et seq.) The distinction rests, as pointed out by Demolombe, upon the fact that one only having a temporary right to the possession or enjoyment of property is not presumed by the law to have applied movable property belonging to him so as to deprive him of it by causing it by an act of immobilization to become the property of another. It follows that abstractly speaking the machinery put by the Altagracia Company in the plant belonging to Sanchez did not lose its character of movable property and become immovable by destination. But in the concrete immobilization took place because of the express provisions of the lease under which the Altagracia held, since the lease in substance required the putting in of improved machinery, deprived the tenant of any right to charge against the lessor the cost such machinery, and it was expressly stipulated that the machinery so put in should become a part of the plant belonging to the owner without compensation to the lessee. Under such conditions the tenant in putting in the machinery was acting but as the agent of the owner in compliance with the obligations resting upon him, and the immobilization of the machinery which resulted arose in legal effect from the act of the owner in giving by contract a permanent destination to the machinery.x x x x x x x x xThe machinery levied upon by Nevers & Callaghan, that is, that which was placed in the plant by the Altagracia Company, being, as regards Nevers & Callaghan, movable property, it follows that they had the right to levy on it under the execution upon the judgment in their favor, and the exercise of that right did not in a legal sense conflict with the claim of Valdes, since as to him the property was a part of the realty which, as the result of his obligations under the lease, he could not, for the purpose of collecting his debt, proceed separately against. (Valdesvs. Central Altagracia [192], 225 U.S., 58.)Finding no reversible error in the record, the judgment appealed from will be affirmed, the costs of this instance to be paid by the appellant.Villa-Real, Imperial, Butte, and Goddard, JJ., concur.

The Lawphil Project - Arellano Law FoundationDAVAO SAW MILL CO. VS. CASTILLO61 SCRA 709FACTS:Petitioner is the holder of a lumber concession. It operated a sawmill on a land, which it doesnt own. Part of the lease agreement was a stipulation in which after the lease agreement, all buildings and improvements would pass to the ownership of the lessor, which would not include machineries and accessories. In connection to this, petitioner had in its sawmill machineries and other equipment wherein some were bolted in foundations of cement. HELD:The machinery must be classified as personal property.The lessee placed the machinery in the building erected on land belonging to another, with the understanding that the machinery was not included in the improvements which would pass to the lessor on the expiration of the lease agreement. The lessee also treated the machinery as personalproperty in executing chattel mortgages in favor of third persons. The machinery was levied upon by the sheriff as personalty pursuant to a writ of execution obtained without any protest being registered.Furthermore, machinery only becomes immobilized when placed in a plant by the owner of the property or plant, but not when so placed by a tenant, usufructuary, or any person having temporary right, unless such person acted as the agent of the owner.

Republic of the PhilippinesSUPREME COURTManilaEN BANCG.R. No. L-7057 October 29, 1954MACHINERY & ENGINEERING SUPPLIES, INC., petitioner,vs.THE HONORABLE COURT OF APPEALS, HON. POTENCIANO PECSON, JUDGE OF THE COURT OF FIRST INSTANCE OF MANILA, IPO LIMESTONE CO., INC., and ANTONIO VILLARAMA,respondents.Vicente J. Francisco for petitioner.Capistrano and Capistrano for respondents.CONCEPCION,J.:This is an appeal bycertiorari, taken by petitioner Machinery and Engineering Supplies Inc., from a decision of the Court of Appeals denying an original petition forcertiorarifiled by said petitioner against Hon. Potenciano Pecson, Ipo Limestone Co., Inc., and Antonio Villarama, the respondents herein.The pertinent facts are set forth in the decision of the Court of Appeals, from which we quote:On March 13, 1953, the herein petitioner filed a complaint for replevin in the Court of First Instance of Manila, Civil Case No. 19067, entitled "Machinery and Engineering Supplies, Inc., Plaintiff, vs. Ipo Limestone Co., Inc., and Dr. Antonio Villarama, defendants", for the recovery of the machinery and equipment sold and delivered to said defendants at their factory in barrio Bigti, Norzagaray, Bulacan. Upon application ex-parte of the petitioner company, and upon approval of petitioner's bond in the sum of P15,769.00, on March 13,1953, respondent judge issued an order, commanding the Provincial Sheriff of Bulacan to seize and take immediate possession of the properties specified in the order (Appendix I, Answer). On March 19, 1953, two deputy sheriffs of Bulacan, the said Ramon S. Roco, and a crew of technical men and laborers proceeded to Bigti, for the purpose of carrying the court's order into effect. Leonardo Contreras, Manager of the respondent Company, and Pedro Torres, in charge thereof, met the deputy sheriffs, and Contreras handed to them a letter addressed to Atty. Leopoldo C. Palad, ex-oficio Provincial Sheriff of Bulacan, signed by Atty. Adolfo Garcia of the defendants therein, protesting against the seizure of the properties in question, on the ground that they are not personal properties. Contending that the Sheriff's duty is merely ministerial, the deputy sheriffs, Roco, the latter's crew of technicians and laborers, Contreras and Torres, went to the factory. Roco's attention was called to the fact that the equipment could not possibly be dismantled without causing damages or injuries to the wooden frames attached to them. As Roco insisted in dismantling the equipment on his own responsibility, alleging that the bond was posted for such eventuality, the deputy sheriffs directed that some of the supports thereof be cut (Appendix 2). On March 20, 1953, the defendant Company filed an urgent motion, with a counter-bond in the amount of P15,769, for the return of the properties seized by the deputy sheriffs. On the same day, the trial court issued an order, directing the Provincial Sheriff of Bulacan to return the machinery and equipment to the place where they were installed at the time of the seizure (Appendix 3). On March 21, 1953, the deputy sheriffs returned the properties seized, by depositing them along the road, near the quarry, of the defendant Company, at Bigti, without the benefit of inventory and without re-installing hem in their former position and replacing the destroyed posts, which rendered their use impracticable. On March 23, 1953, the defendants' counsel asked the provincial Sheriff if the machinery and equipment, dumped on the road would be re-installed tom their former position and condition (letter, Appendix 4). On March 24, 1953, the Provincial Sheriff filed an urgent motion in court, manifesting that Roco had been asked to furnish the Sheriff's office with the expenses, laborers, technical men and equipment, to carry into effect the court's order, to return the seized properties in the same way said Roco found them on the day of seizure, but said Roco absolutely refused to do so, and asking the court that the Plaintiff therein be ordered to provide the required aid or relieve the said Sheriff of the duty of complying with the said order dated March 20, 1953 (Appendix 5). On March 30, 1953, the trial court ordered the Provincial Sheriff and the Plaintiff to reinstate the machinery and equipment removed by them in their original condition in which they were found before their removal at the expense of the Plaintiff (Appendix 7). An urgent motion of the Provincial Sheriff dated April 15, 1953, praying for an extension of 20 days within which to comply with the order of the Court (appendix 10) was denied; and on May 4, 1953, the trial court ordered the Plaintiff therein to furnish the Provincial Sheriff within 5 days with the necessary funds, technical men, laborers, equipment and materials to effect the repeatedly mentioned re-installation (Appendix 13). (Petitioner's brief, Appendix A, pp. I-IV.)Thereupon petitioner instituted in the Court of Appeals civil case G.R. No. 11248-R, entitled "Machinery and Engineering Supplies, Inc. vs. Honorable Potenciano Pecson, Provincial Sheriff of Bulacan, Ipo Limestone Co., Inc., and Antonio Villarama." In the petition therein filed, it was alleged that, in ordering the petitioner to furnish the provincial sheriff of Bulacan "with necessary funds, technical men, laborers, equipment and materials, to effect the installation of the machinery and equipment" in question, the Court of Firs Instance of Bulacan had committed a grave abuse if discretion and acted in excess of its jurisdiction, for which reason it was prayed that its order to this effect be nullified, and that, meanwhile, a writ of preliminary injunction be issued to restrain the enforcement o said order of may 4, 1953. Although the aforementioned writ was issued by the Court of Appeals, the same subsequently dismissed by the case for lack of merit, with costs against the petitioner, upon the following grounds:While the seizure of the equipment and personal properties was ordered by the respondent Court, it is, however, logical to presume that said court did not authorize the petitioner or its agents to destroy, as they did, said machinery and equipment, by dismantling and unbolting the same from their concrete basements, and cutting and sawing their wooden supports, thereby rendering them unserviceable and beyond repair, unless those parts removed, cut and sawed be replaced, which the petitioner, not withstanding the respondent Court's order, adamantly refused to do. The Provincial Sheriff' s tortious act, in obedience to the insistent proddings of the president of the Petitioner, Ramon S. Roco, had no justification in law, notwithstanding the Sheriffs' claim that his duty was ministerial. It was the bounden duty of the respondent Judge to give redress to the respondent Company, for the unlawful and wrongful acts committed by the petitioner and its agents. And as this was the true object of the order of March 30, 1953, we cannot hold that same was within its jurisdiction to issue. The ministerial duty of the Sheriff should have its limitations. The Sheriff knew or must have known what is inherently right and inherently wrong, more so when, as in this particular case, the deputy sheriffs were shown a letter of respondent Company's attorney, that the machinery were not personal properties and, therefore, not subject to seizure by the terms of the order. While it may be conceded that this was a question of law too technical to decide on the spot, it would not have costs the Sheriff much time and difficulty to bring the letter to the court's attention and have the equipment and machinery guarded, so as not to frustrate the order of seizure issued by the trial court. But acting upon the directives of the president of the Petitioner, to seize the properties at any costs, in issuing the order sought to be annulled, had not committed abuse of discretion at all or acted in an arbitrary or despotic manner, by reason of passion or personal hostility; on the contrary, it issued said order, guided by the well known principle that of the property has to be returned, it should be returned in as good a condition as when taken (Bachrach Motor Co., Inc.,vs.Bona, 44 Phil., 378). If any one had gone beyond the scope of his authority, it is the respondent Provincial Sheriff. But considering that fact that he acted under the pressure of Ramon S. Roco, and that the order impugned was issued not by him, but by the respondent Judge, We simply declare that said Sheriff' act was most unusual and the result of a poor judgment. Moreover, the Sheriff not being an officer exercising judicial functions, the writ may not reach him, for certiorarilies only to review judicial actions.The Petitioner complains that the respondent Judge had completely disregarded his manifestation that the machinery and equipment seized were and still are the Petitioner's property until fully paid for and such never became immovable. The question of ownership and the applicability of Art. 415 of the new Civil Code are immaterial in the determination of the only issue involved in this case. It is a matter of evidence which should be decided in the hearing of the case on the merits. The question as to whether the machinery or equipment in litigation are immovable or not is likewise immaterial, because the only issue raised before the trial court was whether the Provincial Sheriff of Bulacan, at the Petitioner's instance, was justified in destroying the machinery and in refusing to restore them to their original form , at the expense of the Petitioner. Whatever might be the legal character of the machinery and equipment, would not be in any way justify their justify their destruction by the Sheriff's and the said Petitioner's. (Petitioner's brief, Appendix A, pp. IV-VII.)A motion for reconsideration of this decision of the Court of Appeals having been denied , petitioner has brought the case to Us for review by writ ofcertiorari. Upon examination of the record, We are satisfied, however that the Court of Appeals was justified in dismissing the case.The special civil action known as replevin, governed by Rule 62 of Court, is applicable only to "personal property".Ordinarily replevin may be brought to recover any specific personal property unlawfully taken or detained from the owner thereof, provided such property is capable of identification and delivery;but replevin will not lie for the recovery of real propertyor incorporeal personal property. (77 C. J. S. 17) (Emphasis supplied.)When the sheriff repaired to the premises of respondent, Ipo Limestone Co., Inc., machinery and equipment in question appeared to be attached to the land, particularly to the concrete foundation of said premises, in a fixed manner, in such a way that the former could not be separated from the latter "without breaking the material or deterioration of the object." Hence, in order to remove said outfit, it became necessary, not only to unbolt the same, but , also, to cut some of its wooden supports. Moreover, said machinery and equipment were "intended by the owner of the tenement for an industry" carried on said immovable and tended." For these reasons, they were already immovable property pursuant to paragraphs 3 and 5 of Article 415 of Civil Code of the Philippines, which are substantially identical to paragraphs 3 and 5 of Article 334 of the Civil Code of Spain. As such immovable property, they were not subject to replevin.In so far as an article, including a fixture annexed by a tenant, is regarded as part of the realty, it is not the subject for personality; . . . .. . . the action of replevin does not lie for articles so annexed to the realty as to be part as to be part thereof, as, for example, a house or a turbine pump constituting part of a building's cooling system; . . . (36 C. J. S. 1000 & 1001)Moreover, as the provincial sheriff hesitated to remove the property in question, petitioner's agent and president, Mr. Ramon Roco, insisted "on the dismantling athis own responsibility," stating that., precisely, "that is the reason why plaintiff posted a bond ." In this manner, petitioner clearly assumed the corresponding risks.Such assumption of risk becomes more apparent when we consider that, pursuant to Section 5 of Rule 62 of the Rules of Court, the defendant in an action for replevin is entitled to the return of the property in dispute upon the filing of a counterbond, as provided therein. In other words, petitioner knew that the restitution of said property to respondent company might be ordered under said provision of the Rules of Court, and that, consequently, it may become necessary for petitioner to meet the liabilities incident to such return.Lastly, although the parties have not cited, and We have not found, any authority squarely in point obviously real property are not subject to replevin it is well settled that, when the restitution of what has been ordered, the goods in question shall be returned in substantially the same condition as when taken (54 C.J., 590-600, 640-641). Inasmuch as the machinery and equipment involved in this case were duly installed and affixed in the premises of respondent company when petitioner's representative caused said property to be dismantled and then removed, it follows that petitioner must also do everything necessary to the reinstallation of said property in conformity with its original condition.Wherefore, the decision of the Court of Appeals is hereby affirmed, with costs against the petitioner. So ordered.Pablo, Bengzon, Padilla, Montemayor, Reyes, A., Jugo, Bautista Angelo and Reyes, J.B.L., JJ.,concur.Paras, C.J.,concurs in the result.Republic of the PhilippinesSUPREME COURTManilaEN BANCG.R. Nos. L-10837-38 May 30, 1958ASSOCIATED INSURANCE and SURETY COMPANY, INC.,plaintiff,vs.ISABEL IYA, ADRIANO VALINO and LUCIA VALINO,defendants.ISABEL IYA,plaintiff,vs.ADRIANO VALINO, LUCIA VALINO and ASSOCIATED INSURANCE and SURETY COMPANY. INC.,defendants.Jovita L. de Dios for defendant Isabel Iya.M. Perez Cardenas and Apolonio Abola for defendant Associated Insurance and Surety Co., Inc.FELIX,J.:Adriano Valino and Lucia A. Valino, husband and wife, were the owners and possessors of a house of strong materials constructed on Lot No. 3, Block No. 80 of the Grace Park Subdivision in Caloocan, Rizal, which they purchased on installment basis from the Philippine Realty Corporation. On November 6, 1951, to enable her to purchase on credit rice from the NARIC, Lucia A. Valino filed a bond in the sum of P11,000.00 (AISCO Bond No. G-971) subscribed by the Associated Insurance and Surety Co., Inc., and as counter-guaranty therefor, the spouses Valino executed an allegedchattelmortgage on the aforementioned house in favor of the surety company, which encumbrance was duly registered with theChattel Mortgage Register of Rizalon December 6, 1951. It is admitted that at the time said undertaking took place, the parcel of land on which the house is erected was still registered in the name of the Philippine Realty Corporation. Having completed payment on the purchase price of the lot, the Valinos were able to secure onOctober 18, 1958, a certificate of title in their name (T.C.T. No. 27884). Subsequently, however, oron October 24, 1952, the Valinos, to secure payment of an indebtedness in the amount of P12,000.00, executed areal estate mortgageover the lot and the house in favor of Isabel Iya, which was duly registered and annotated at the back of the certificate of title.On the other hand, as Lucia A. Valino, failed to satisfy her obligation to the NARIC, the surety company was compelled to pay the same pursuant to the undertaking of the bond. In turn, the surety company demanded reimbursement from the spouses Valino, and as the latter likewise failed to do so, the company foreclosed the chattel mortgage over the house. As a result thereof, a public sale was conducted by the Provincial Sheriff of Rizal onDecember 26, 1952, wherein the property was awarded to the surety company for P8,000.00, the highest bid received therefor. The surety company then caused the said house to be declared in its name for tax purposes (Tax Declaration No. 25128).Sometime inJuly, 1953, the surety company learned of the existence of the real estate mortgage over the lot covered by T.C.T. No. 26884 together with the improvements thereon; thus, said surety company instituted Civil Case No. 2162 of the Court of First Instance of Manila naming Adriano and Lucia Valino and Isabel Iya, the mortgagee, as defendants. The complaint prayed for the exclusion of the residential house from the real estate mortgage in favor of defendant Iya and the declaration and recognition of plaintiff's right to ownership over the same in virtue of the award given by the Provincial Sheriff of Rizal during the public auction held on December 26, 1952. Plaintiff likewise asked the Court to sentence the spouses Valino to pay said surety moral and exemplary damages, attorney's fees and costs. Defendant Isabel Iya filed her answer to the complaint alleging among other things, that in virtue of the real estate mortgage executed by her co-defendants, she acquired a real right over the lot and the house constructed thereon; that the auction sale allegedly conducted by the Provincial Sheriff of Rizal as a result of the foreclosure of thechattelmortgage on the house was null and void for non-compliance with the form required by law. She, therefore, prayed for the dismissal of the complaint and anullment of the sale made by the Provincial Sheriff. She also demanded the amount of P5,000.00 from plaintiff as counterclaim, the sum of P5,000.00 from her co-defendants as crossclaim, for attorney's fees and costs.Defendants spouses in their answer admitted some of the averments of the complaint and denied the others. They, however, prayed for the dismissal of the action for lack of cause of action, it being alleged that plaintiff was already the owner of the house in question, and as said defendants admitted this fact, the claim of the former was already satisfied.OnOctober 29, 1953, Isabel Iya filed another civil action against the Valinos and the surety company (Civil Case No. 2504 of the Court of First Instance of Manila) stating that pursuant to the contract of mortgage executed by the spouses Valino on October 24, 1952, the latter undertook to pay a loan of P12,000.00 with interest at 12% per annum or P120.00 a month, which indebtedness was payable in 4 years, extendible for only one year; that to secure payment thereof, said defendants mortgaged the house and lot covered by T.C.T. No. 27884 located at No. 67 Baltazar St., Grace Park Subdivision, Caloocan, Rizal; that the Associated Insurance and Surety Co., Inc., was included as a party defendant because it claimed to have an interest on the residential house also covered by said mortgage; that it was stipulated in the aforesaid real estate mortgage that default in the payment of the interest agreed upon would entitle the mortgagee to foreclose the same even before the lapse of the 4-year period; and as defendant spouses had allegedly failed to pay the interest for more than 6 months, plaintiff prayed the Court to order said defendants to pay the sum of P12,000.00 with interest thereon at 12% per annum from March 25, 1953, until fully paid; for an additional sum equivalent to 20% of the total obligation as damages, and for costs. As an alternative in case such demand may not be met and satisfied plaintiff prayed for a decree of foreclosure of the land, building and other improvements thereon to be sold at public auction and the proceeds thereof applied to satisfy the demands of plaintiff; that the Valinos, the surety company and any other person claiming interest on the mortgaged properties be barred and foreclosed of all rights, claims or equity of redemption in said properties; and for deficiency judgment in case the proceeds of the sale of the mortgaged property would be insufficient to satisfy the claim of plaintiff.Defendant surety company, in answer to this complaint insisted on its right over the building, arguing 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 only as a personal property and that the encumbrance thereof and the subsequent foreclosure proceedings made pursuant to the provisions of the Chattel Mortgage Law were proper and legal. Defendant therefore prayed that said building be excluded from the real estate mortgage and its right over the same be declared superior to that of plaintiff, for damages, attorney's fees and costs.Taking side with the surety company, defendant spouses admitted the due execution of the mortgage upon the land but assailed the allegation that the building was included thereon, it being contended that it was already encumbered in favor of the surety company before the real estate mortgage was executed, a fact made known to plaintiff during the preparation of said contract and to which the latter offered no objection. As a special defense, it was asserted that the action was premature because the contract was for a period of 4 years, which had not yet elapsed.The two cases were jointly heard upon agreement of the parties, who submitted the same on a stipulation of facts, after which the Court rendered judgment dated March 8, 1956, holding that the chattel mortgage in favor of the Associated Insurance and Surety Co., Inc., was preferred and superior over the real estate mortgage subsequently executed in favor of Isabel Iya. It was ruled that as the Valinos were not yet the registered owner of the land on which the building in question was constructed at the time the first encumbrance was made, the building then was still a personality and a chattel mortgage over the same was proper. However, as the mortgagors were already the owner of the land at the time the contract with Isabel Iya was entered into, the building was transformed into a real property and the real estate mortgage created thereon was likewise adjudged as proper. It is to be noted in this connection that there is no evidence on record to sustain the allegation of the spouses Valino that at the time they mortgaged theirhouse and lotto Isabel Iya, the latter was told or knew that part of the mortgaged property, i.e., thehouse, had previously been mortgaged to the surety company.The residential building was, therefore, ordered excluded from the foreclosure prayed for by Isabel Iya, although the latter could exercise the right of a junior encumbrance. So the spouses Valino were ordered to pay the amount demanded by said mortgagee or in their default to have the parcel of land subject of the mortgage sold at public auction for the satisfaction of Iya's claim.There is no question as to appellant's right over the land covered by the real estate mortgage; however, as the building constructed thereon has been the subject of 2 mortgages; controversy arise as to which of these encumbrances should receive preference over the other. The decisive factor in resolving the issue presented by this appeal is the determination of the nature of the structure litigated upon, for where it be considered a personality, the foreclosure of the chattel mortgage and the subsequent sale thereof at public auction, made in accordance with the Chattel Mortgage Law would be valid and the right acquired by the surety company therefrom would certainly deserve prior recognition; otherwise, appellant's claim for preference must be granted. The lower Court, deciding in favor of the surety company, based its ruling on the premise that as the mortgagors were not the owners of the land on which the building is erected at the time the first encumbrance was made, said structure partook of the nature of a personal property and could properly be the subject of a chattel mortgage. We find reason to hold otherwise, for as this Court, defining the nature or character of a building, has said:. . . while it is true that generally, 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 (Art. 415, new Civil Code) could only mean one thing that abuilding is byitself an immovable property . . . Moreover, and 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. (Lopezvs. Orosa, G.R. Nos.supra, p. 98).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. To hold it the other way, the possibility is not remote that it would result in confusion, for to cloak the building with an uncertain status made dependent on the ownership of the land, would create a situation where a permanent fixture changes its nature or character as the ownership of the land changes hands. In the case at bar, as personal properties could only be the subject of a chattel mortgage (Section 1, Act 3952) 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 the Chattel Mortgage Register of Rizal, this act produced no effect whatsoever for where the interest conveyed is in the nature of a real property, the registration of the document in the registry of chattels is merely a futile act. Thus, the registration of the chattel mortgage of a building of strong materials produce no effect as far as the building is concerned (Leung Yeevs. Strong Machinery Co., 37 Phil., 644). Nor can we give any consideration to the contention of the surety that it has acquired ownership over the property in question by reason of the sale conducted by the Provincial Sheriff of Rizal, for as this Court has aptly pronounced:A mortgage creditor who purchases real properties at an extrajudicial foreclosure sale thereof by virtue of a chattel mortgage constituted in his favor, which mortgage has been declared null and void with respect to said real properties, acquires no right thereto by virtue of said sale (De la Rivavs. Ah Keo, 60 Phil., 899).Wherefore the portion of the decision of the lower Court in these two cases appealed from holding the rights of the surety company, over the building superior to that of Isabel Iya and excluding the building from the foreclosure prayed for by the latter is reversed and appellant Isabel Iya's right to foreclose not only the land but also the building erected thereon is hereby recognized, and the proceeds of the sale thereof at public auction (if the land has not yet been sold), shall be applied to the unsatisfied judgment in favor of Isabel Iya. This decision however is without prejudice to any right that the Associated Insurance and Surety Co., Inc., may have against the spouses Adriano and Lucia Valino on account of the mortgage of said building they executed in favor of said surety company. Without pronouncement as to costs. It is so ordered.Paras, C.J., Bengzon, Montemayor, Reyes, A., Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L., and Endencia, JJ.,concur.ASSOCIATED INSURANCE AND SURETY COMPANY V. IYA, ET. AL103 SCRA 972FACTS:Spouses Valino were the owners of a house, payable on installments from Philippine Realty Corporation. To be able to purchase on credit rice from NARIC, they filed a surety bond subscribed by petitioner and therefor, they executed an alleged chattel mortgage on the house in favor of the surety company.

The spouses didnt own yet the land on which the house was constructed on at the time of the undertaking. After being able to purchase the land, to be able to secure payment for indebtedness, the spouses executed a real estate mortgage in favor of Iya.The spouses were not able to satisfy obligation with NARIC, petitioner was compelled to pay. The spouses werent able to pay the surety company despite demands and thus, the company foreclosed the chattel mortgage. It later learned of the real estate mortgage over the house and lot secured by the spouses. This prompted the company to file an action against the spouses. Also, Iya filed another civil action against the spouses, asserting that she has a better right over the property.

The trial court heard the two cases jointly and it held that the surety company had a preferred right over the building as since when the chattel mortgage was secured, the land wasnt owned yet by the spouses making the building then a chattel and not a real property.HELD: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. To hold it the other way, the possibility is not remote that it would result in confusion, for to cloak the building with an uncertain status made dependent on ownership of the land, would create a situation where a permanent fixture changes its nature or character as the ownership of the land changes hands. In the case at bar, as personal properties may be the only subjects of a chattel mortgage, the execution of the chattel mortgage covering said building is null and void.

Republic of the PhilippinesSUPREME COURTManila

EN BANC

G.R. No. L-17870 September 29, 1962MINDANAO BUS COMPANY, petitioner, vs.THE CITY ASSESSOR & TREASURER and the BOARD OF TAX APPEALS of Cagayan de Oro City,respondents.

Binamira, Barria and Irabagon for petitioner.Vicente E. Sabellina for respondents.LABRADOR, J.:This is a petition for the review of the decision of the Court of Tax Appeals in C.T.A. Case No. 710 holding that the petitioner Mindanao Bus Company is liable to the payment of the realty tax on its maintenance and repair equipment hereunder referred to.

Respondent City Assessor of Cagayan de Oro City assessed at P4,400 petitioner's above-mentioned equipment. Petitioner appealed the assessment to the respondent Board of Tax Appeals on the ground that the same are not realty. The Board of Tax Appeals of the City sustained the city assessor, so petitioner herein filed with the Court of Tax Appeals a petition for the review of the assessment.

In the Court of Tax Appeals the parties submitted the following stipulation of facts:

Petitioner and respondents, thru their respective counsels agreed to the following stipulation of facts:

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

2. That petitioner has its main office and shop at Cagayan de Oro City. It maintains Branch Offices and/or stations at Iligan City, Lanao; Pagadian, Zamboanga del Sur; Davao City and Kibawe, Bukidnon Province;

3. That the machineries sought to be assessed by the respondent as real properties are the following:

(a) Hobart Electric Welder Machine, appearing in the attached photograph, marked Annex "A";

(b) Storm Boring Machine, appearing in the attached photograph, marked Annex "B";

(c) Lathe machine with motor, appearing in the attached photograph, marked Annex "C";

(d) Black and Decker Grinder, appearing in the attached photograph, marked Annex "D";

(e) PEMCO Hydraulic Press, appearing in the attached photograph, marked Annex "E";

(f) Battery charger (Tungar charge machine) appearing in the attached photograph, marked Annex "F"; and

(g) D-Engine Waukesha-M-Fuel, appearing in the attached photograph, marked Annex "G".

4. That these machineries are sitting on cement or wooden platforms as may be seen in the attached photographs which form part of this agreed stipulation of facts;

5. That petitioner is the owner of the land where it maintains and operates a garage for its TPU motor trucks; a repair shop; blacksmith and carpentry shops, and with these machineries which are placed therein, its TPU trucks are made; body constructed; and same are repaired in a condition to be serviceable in the TPU land transportation business it operates;

6. That these machineries have never been or were never used as industrial equipments to produce finished products for sale, nor to repair machineries, parts and the like offered to the general public indiscriminately for business or commercial purposes for which petitioner has never engaged in, to date.1awphl.ntThe Court of Tax Appeals having sustained the respondent city assessor's ruling, and having denied a motion for reconsideration, petitioner brought the case to this Court assigning the following errors:

1. The Honorable Court of Tax Appeals erred in upholding respondents' contention that the questioned assessments are valid; and that said tools, equipments or machineries are immovable taxable real properties.

2. The Tax Court erred in its interpretation of paragraph 5 of Article 415 of the New Civil Code, and holding that pursuant thereto the movable equipments are taxable realties, by reason of their being intended or destined for use in an industry.

3. The Court of Tax Appeals erred in denying petitioner's contention that the respondent City Assessor's power to assess and levy real estate taxes on machineries is further restricted by section 31, paragraph (c) of Republic Act No. 521; and

4. The Tax Court erred in denying petitioner's motion for reconsideration.

Respondents contend that said equipments, tho movable, are immobilized by destination, in accordance with paragraph 5 of Article 415 of the New Civil Code which provides:

Art. 415. The following are immovable properties:

x x x x x x x x x

(5) Machinery, receptacles, instruments or implements intended by the owner of the tenement for an industry or works which may be carried on in a building or on a piece of land, and which tend directly to meet the needs of the said industry or works. (Emphasis ours.)

Note that the stipulation expressly states that the equipment are placed on wooden or cement platforms. They can be moved around and about in petitioner's repair shop. In the case of B. H. Berkenkotter vs. Cu Unjieng, 61 Phil. 663, the Supreme Court said:

Article 344 (Now Art. 415), 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 and 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 principle 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. (Emphasis ours.)

So that movable equipments to be immobilized in contemplation of the law must first be "essential and principal elements" of an industry or works without which such industry or works would be "unable to function or carry on the industrial purpose for which it was established." We may here distinguish, therefore, those movable which become immobilized by destination because they are essential and principal elements in the industry for those which may not be so considered immobilized because they are merely incidental, not essential and principal. Thus, cash registers, typewriters, etc., usually found and used in hotels, restaurants, theaters, etc. are merely incidentals and are not and should not be considered immobilized by destination, for these businesses can continue or carry on their functions without these equity comments. Airline companies use forklifts, jeep-wagons, pressure pumps, IBM machines, etc. which are incidentals, not essentials, and thus retain their movable nature. On the other hand, machineries of breweries used in the manufacture of liquor and soft drinks, though movable in nature, are immobilized because they are essential to said industries; but the delivery trucks and adding machines which they usually own and use and are found within their industrial compounds are merely incidental and retain their movable nature.

Similarly, the tools and equipments in question in this instant case are, by their nature, not essential and principle municipal elements of petitioner's business of transporting passengers and cargoes by motor trucks. They are merely incidentals acquired as movables and used only for expediency to facilitate and/or improve its service. Even without such tools and equipments, its business may be carried on, as petitioner has carried on, without such equipments, before the war. The transportation business could be carried on without the repair or service shop if its rolling equipment is repaired or serviced in another shop belonging to another.

The law that governs the determination of the question at issue is as follows:

Art. 415. The following are immovable property:

x x x x x x x x x

(5) Machinery, receptacles, instruments or implements intended by the owner of the tenement for an industry or works which may be carried on in a building or on a piece of land, and which tend directly to meet the needs of the said industry or works; (Civil Code of the Phil.)

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

But in the case at bar the equipments in question are destined only to repair or service the transportation business, which is not carried on in a building or permanently on a piece of land, as demanded by the law. Said equipments may not, therefore, be deemed real property.

Resuming what we have set forth above, we hold that the equipments in question are not absolutely essential to the petitioner's transportation business, and petitioner's business is not carried on in a building, tenement or on a specified land, so said equipment may not be considered real estate within the meaning of Article 415 (c) of the Civil Code.

WHEREFORE, the decision subject of the petition for review is hereby set aside and the equipment in question declared not subject to assessment as real estate for the purposes of the real estate tax. Without costs.

So ordered.

Bengzon, C.J., Padilla, Bautista Angelo, Reyes, J.B.L., Paredes, Dizon and Makalintal, JJ., concur.Regala, Concepcion and Barrera JJ., took no part.Mindanao Bus Co. vs. City Assessor and TreasurerG.R. No. L-17870. September 29, 1962.Labrador, J.Doctrine: Movable equipment, to be immobilized in contemplation of Article 415 of the Civil Code, must be the essential and principal elements of an industry or works which are carried on in a building or on a piece of land. Thus, where the business is one of transportation, which is carried on without a repair or service shop, and its rolling equipment is repaired or serviced in a shop belonging to another, the tools and equipment in its repair shop which appear movable are merely incidentals and may not be considered immovables , and, hence, not subject to assessment as real estate for purposes of the real estate tax.

Facts: Respondent City Assessor of Cagayan de Oro City assessed at P4,400 petitioners equipment in its repair or service shop. Petitioner appealed the assessment to the respondent Board of Tax Appeals on the ground that the same are not realty. The Board of Tax Appeals of the City sustained the city assessor, so petitioner herein filed with the Court of Tax Appeals a petition for the review of the assessment. The Court of Tax Appeals having sustained the respondent city assessors ruling, and having denied a motion for reconsideration, petitioner brought the case to this Court.

Issue: Whether the Tax Court erred in its interpretation of paragraph 5 of Article 415 of the New Civil Code, and holding that pursuant thereto, the movable equipments are taxable realties, by reason of their being intended or destined for use in an industry.

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

Similarly, the tool and equipment in question in this instant case are, by their nature, not essential and principal elements of petitioners business of transporting passengers and cargoes by motor trucks. They are merely incidentals acquired as movables and used only for expediency to facilitate and/or improve its service. Even without such tools and equipment, its business may be carried on, as petitioner has carried on without such equipments, before the war. The transportation business could be carried on without the repair or service shop if its rolling equipment is repaired or serviced in another shop belonging to another.

Article 415 of the Civil Code requires that the industry or works be carried on in a building or on a piece of land. But in the case at bar the equipments in question are destined only to repair or service the transportation business, which is not carried on in a building or permanently on a piece of land, as demanded by the law. Said equipment may not, therefore, be deemed as real property.