PROPERTY CASE DIGESTS
Aleezah Gertrude Regado
Lopez vs. Orosa., Jr. and Plaza Theatre, Inc.
Facts:
Sometime in May, 1946, Vicente Orosa, Jr., invited Lopez to make an investment in
the theatre business. Although Lopez expressed his unwillingness to invest of the
same, he agreed to supply the lumber necessary for the construction of the
proposed theatre, and at Orosa's request and assurance that the latter would be
personally liable for any account that the said construction might incur, Lopez further
agreed that payment therefore would be on demand and not cash on delivery basis.
With this, Lopez delivered the lumber which was used for the construction of the
Plaza Theatre on May 17, 1946, up to December 4 of the same year. The total cost
of materials amounted to P62,255.85 but Lopez was only paid P20,848.50, thus
leaving a balance of P41,771.35. Orosa and Rustia, corporation president, promised
Lopez to obtain a bank loan to satisfy the balance, to which assurance Lopez had to
accede. Unknown to Lopez, Orosa and Rustia already secured a loan for P30,000
from the PNB with the Luzon Surety Company as surety, and the corporation in turn
executed a mortgage on the land and building in favor of said company as counter-
security. As the land at that time was not yet brought under the operation of the
Torrens System, the mortgage on the same was registered on 16 November 1946,
under Act 3344. Subsequently, when the corporation applied for the registration of
the land under Act 496, such mortgage was not revealed and thus OCT O-391 was
correspondingly issued on October 25, 1947, without any encumbrance appearing
thereon.
Persistent demand from Lopez caused Vicente Orosa, Jr. to execute, on 17 March
1947, an alleged "deed of assignment" of his 420 shares of stock of the Plaza
Theater, Inc., at P100 per share or with a total value of P42,000 in favor of the
creditor, and as the obligation still remained unsettled, Lopez filed on 12 November
1947, a complaint with the CFI Batangas against Vicente Orosa Jr. and Plaza
Theatre, Inc., praying that defendants be sentenced to pay him jointly and severally
the sum of P41,771.35 with legal interest from the filing of the action; that in case
defendants fail to pay the same, that the building and the land owned by the
corporation be sold at public auction and the proceeds thereof be applied to said
indebtedness. Plaintiff also caused the annotation of a notice of lis pendens on said
properties with the Register of Deeds.
The surety company upon discovery that the land was already registered under the
Torrens System and that there was a notice of lis pendens thereon, filed a petition for
review of the decree of the land registration court in order to annotate the lights and
interests of the surety company over said properties. Lopez opposed by asserting
that the amount demanded by him constituted a preferred lien over the properties of
the obligors; that the surety company was guilty of negligence when it failed to
present an opposition to the application for registration of the property; and that if
any annotation of the rights and interest of said surety would ever be made, same
must be subject to the lien in his favor. The court ruled that Orosa and the Plaza
Theatre, Inc., were jointly liable for the unpaid balance of the cost of lumber used in
the construction of the building and the plaintiff thus acquired the materialman's lien
over the same; the lien being merely confined to the building and did not extend to
the land on which the construction was made.
Issues/ Held
1. Whether materialman’s lien for the value of the materials used in the construction
of a building attaches to the building alone and does not extend to the land on which
the building is adhered to.
YES. 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
could mean only one thing — that a building is by itself an immovable property (cf.
Leung Yee v. Strong Machinery). In the absence of any specific provision of law to
the contrary, a building is an immovable property, irrespective of whether or not said
structure and the land on which it is adhered to belong to the same owner.
2. Whether the lower court and the CA erred in not providing that the materialman’s
lien is superior to the mortgage executed in favor of the surety company not only on
the building but also on the land.
No. A close examination of Article 1923 (5) of the Civil Code reveals that the law
gives preference to unregistered refectionary credits only with respect to the real
estate upon which the refection or work was made.
ART. 1923. With respect to determinate real property and real rights of the
debtor, the following are preferred:
xxx xxx xxx
5. Credits for refection, not entered or recorded, with respect to the estate
upon which the refection was made, and only with respect to other credits
different from those mentioned in four preceding paragraphs.
This being so, the inevitable conclusion must be that the lien so created attaches
merely to the immovable property for the construction or repair of which the
obligation was incurred. In the case at bar, the lien for the unpaid value of the lumber
 PROPERTY CASE DIGESTS
Aleezah Gertrude Regado

used in the construction of the building attaches only to said structure and to no
other property of the obligors. Thus, the materialman's lien could be charged only to
the building for which the credit was made or which received the benefit of refection,
the interest of the mortgagee over the land is superior and cannot be made subject
to the said materialman's lien.

Materialman’s lien-A type of lien that gives a security interest in property to someone
who supplies materials used during work performed on that property. Essentially, a
mechanic's lien by another name.
 PROPERTY CASE DIGESTS
Aleezah Gertrude Regado

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

ASSOCIATED INSURANCE and SURETY COMPANY, INC., plaintiff,
vs.
ISABEL IYA, ADRIANO VALINO and LUCIA VALINO, defendants.
Facts:
Valino & Valino were the owners and possessors of a house of strong materials in
Rizal, which they purchased on installment basis. To enable her to purchase on
credit rice from NARIC, Valino filed a bond (P11,000) subscribed by Associated
Insurance and Surety Co Inc, and as a counter-guaranty, Valino executed an alleged
chattel mortgage on the aforementioned house in favour of the surety company. At
the same time, the parcel of land which the house was erected was registered in the
name of Philippine Realty Corporation.
Valino, to secure payment of an indebtedness (P12,000) executed a real estate
mortgage over the lot and the house in favour of Iya.
Valino failed to satisfy her obligation to NARIC, so the surety company was
compelled to pay the same pursuant to the undertaking of the bond. In turn, surety
company demanded reimbursement from Valino, and as they failed to do so, the
company foreclosed the chattel mortgage over the house. As a result, public sale
was conducted and the property was awarded to the surety company.
The surety company then learned of the existence of the real estate mortgage over
the lot and the improvements thereon; thus, they prayed for the exclusion of the
residential house from the real estate mortgage and the declaration of its ownership
in virtue of the award given during bidding.
Held:
The building is subject to the real estate mortgage, in favour of Iya. Iya’s right to
foreclose not only the land but also the building erected thereon is recognised.
While it is true that real estate connotes the land and the building constructed
thereon, it is obvious that the inclusion of the building, separate and distinct from the
land, in the enumeration of what may constitute real properties (Article 415), could
only mean that a building is by itself an immovable property. Moreover, in view of the
absence of any specific provision to the contrary, a building is an immovable property
irrespective of whether or not said structure and the land on which it is adhered to
belong to the same owner.
A building certainly cannot be divested of its character of a realty by the fact that the
land on which it is constructed belongs to another.
In the case at bar, as personal properties could only be the subject of a chattel
mortgage and as obviously the structure in question is not one, the execution of the
chattel mortgage covering said building is clearly invalid and a nullity. While it is true
that said document was correspondingly registered in Chattel Mortgage Registry of
Rizal, this act produced no effect whatsoever, for where the interest conveyed is in
the nature of real property, the registration of the document in the registry of chattels
is merely a futile act. Thus, the registration of the chattel mortgage of a building of
strong materials produced no effect as far as the building is concerned.

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

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

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

Bicerra v. Teneza
[G.R. No. L-16218. November 29, 1962.]
En Banc, Makalintal (J): 10 concur.

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

ISSUE:
W/N the action involves title to real propety.
W/N the dismissal of the complaint was proper.

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

1. House is immovable property even if situated on land belonging to a different

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

2. Recovery of damages not exceeding P2,000 and involving no real property belong
to the Justice of the Peace Court
The complaint is for recovery of damages, the only positive relief prayed for. Further,
a declaration of being the owners of the dismantled house and/or of the materials in
no wise constitutes the relief itself which if granted by final judgment could be
enforceable by execution, but is only incidental to the real cause of action to recover
damages. As this is a case for recovery of damages where the demand does not
exceed PhP 2,000 and that there is no real property litigated as the house has
ceased to exist, the case is within the jurisdiction of the Justice of the Peace Court
(as per Section 88, RA 296 as amended) and not the CFI (Section 44, id.)
 PROPERTY CASE DIGESTS
Aleezah Gertrude Regado

Leung Yee vs Frank Strong Machinery Co

37 Phil. 644 – Civil Law – Law on Property – Multiple Sale to Different Vendees
– Real vs Personal Property

In 1913, Compania Agricola Filipina (CAF) was indebted to two personalities: Leung
Yee and Frank L. Strong Machinery Co. CAF purchased some rice cleaning
machines from Strong Machinery. CAF installed the machines in a building. As
security for the purchase price, CAF executed a chattel mortgage on the rice
cleaning machines including the building where the machines were installed. CAF
failed to pay Strong Machinery, hence the latter foreclosed the mortgage – the same
was registered in the chattel mortgage registry.

CAF also sold the land (where the building was standing) to Strong Machinery.
Strong Machinery took possession of the building and the land.

On the other hand, Yee, another creditor of CAF who engaged in the construction of
the building, being the highest bidder in an auction conducted by the sheriff,
purchased the same building where the machines were installed. Apparently CAF
also executed a chattel mortgage in favor Yee. Yee registered the sale in the registry
of land. Yee was however aware that prior to his buying, the property has been sold
in favor of Strong Machinery – evidence is the chattel mortgage already registered
by Strong Machinery (constructive notice).

ISSUE: Who is the owner of the building?

HELD: The SC ruled that Strong Machinery has a better right to the contested
property. Yee cannot be regarded as a buyer in good faith as he was already aware
of the fact that there was a prior sale of the same property to Strong Machinery.

The SC also noted that the Chattel Mortgage Law expressly contemplates provisions
for chattel mortgages which only deal with personal properties. The fact that the
parties dealt the building as if it’s a personal property does not change the nature of
the thing. It is still a real property. Its inscription in the Chattel Mortgage registry does
not modify its inscription the registry of real property.
 PROPERTY CASE DIGESTS
Aleezah Gertrude Regado

THE STANDARD OIL COMPANY OF NEW YORK, petitioner,

vs.
JOAQUIN JARAMILLO, as register of deeds of the City of Manila, respondent.
G.R. No. L-20329 March 16, 1923

Facts:
On November 27, 1922, Gervasia de la Rosa, Vda. de Vera, was the lessee of a
parcel of land situated in the City of Manila and owner of the house of strong
materials built thereon, upon which date she executed a document in the form of a
chattel mortgage to convey to the Standard Oil. Co. by way of mortgage both the
leasehold interest in said lot and the building to which it stands After said document
had been duly acknowledged and delivered, it was then presented to Joaquin
Jaramillo, Register of Deeds of the City of Manila, for the purpose of having the
same recorded. Upon examination of the instrument, the Jaramillo was of the
opinion that it was not chattel mortgage, for the reason that the interest therein
mortgaged did not appear to be personal property, within the meaning of the Chattel
Mortgage Law, and registration was refused on this ground only.

Issue:
Whether or not the deed may be registered in the chattel mortgage registry?

Held:
Yes it may be registered. The duties of a register of deeds in respect to the
registration of chattel mortgages are purely of a ministerial character, and he is
clothed with no judicial or quasi-judicial power to determine the nature of the
property, whether real or personal, which is the subject of the mortgage. Generally
speaking, he should accept the qualification of the property adapted by the person
who presents the instrument for registration and should place the instrument on
record, upon payment of the proper fee, leaving the effects of registration to be
determined by the court if such question should arise for legal determination.The
efficacy of the act of recording a chattel mortgage consists in the fact that registration
operates as constructive notice of the existence of the contract, and the legal effects
of the instrument must be discovered in the document itself, in relation with the fact
of notice. Registration adds nothing to the instrument, considered as a source of title,
and affects nobody’s rights except as a species of constructive notice
 PROPERTY CASE DIGESTS
Aleezah Gertrude Regado

PUNSALAN, JR. V. VDA. DE LACSAMANA G.R. No. L-55729 March 28, 1983

Immovable Property Case

FACTS:

Punsalan was the owner of a piece of land, which he mortgaged in favor of PNB.
Due to his failure to pay, the mortgage was foreclosed and the land was sold in a
public auction to which PNB was the highest bidder.

On a relevant date, while Punsalan was still the possessor of the land, it secured a
permit for the construction of a warehouse.

A deed of sale was executed between PNB and Punsalan. This contract was
amended to include the warehouse and the improvement thereon. By virtue of these
instruments, respondent Lacsamana secured title over the property in her name.

Petitioner then sought for the annulment of the deed of sale. Among his allegations
was that the bank did not own the building and thus, it should not be included in the
said deed.

Petitioner’s complaint was dismissed for improper venue. The trial court held that the
action being filed in actuality by petitioner is a real action involving his right over a
real property.

ISSUE:

W/N the trial court erred in dismissing the case on the ground of improper venue.
W/N the warehouse is an immovable and must be tried in the province where the
property lies.

HELD:

Warehouse claimed to be owned by petitioner is an immovable or real property.

Buildings are always immovable under the Code. A building treated separately from
the land on which it is stood is immovable property and the mere fact that the parties
to a contract seem to have dealt with it separate and apart from the land on which it
stood in no wise changed its character as immovable property.
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Aleezah Gertrude Regado

PRUDENTIAL BANK, petitioner,

vs.
HONORABLE DOMINGO D. PANIS, Presiding Judge of Branch III, Court of First
Instance of Zambales and Olongapo City; FERNANDO MAGCALE & TEODULA
BALUYUT-MAGCALE, respondents.
G.R. No. L-50008 August 31, 1987

Facts:
Spouses Magcale secured a loan from Prudential Bank. As security, respondent’s
spouses executed a real estate mortgage, their residential building as security. Since
the respondents was not able to fulfil their obligation, the security was extrajudiciaily
foreclosed and was eventually sold in a public auction. Hence this case, to assail the
validity of the mortgage and to recover the foreclosed land.
Issue:
Whether or not a real estate mortgage can be instituted on the building of a land
belonging to another
Held:
While it is true that a mortgage of land necessarily includes in the absence of
stipulation of the improvements thereon, buildings, still a building in itself may
be mortgaged by itself apart from the land on which it is built. Such a mortgage
would still be considered as a REM for the building would still be considered as
immovable property even if dealt with separately and apart from the land. The
original mortgage on the building and right to occupancy of the land was executed
before the issuance of the sales patent and before the government was
divested of title to the land. Under the foregoing, it is evident that the
mortgage executed by private respondent on his own building was a valid
mortgage.
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Aleezah Gertrude Regado

CONRADO P. NAVARRO, plaintiff-appellee, vs. RUFINO G. PINEDA, RAMONA consider a house as personal property for the purposes of said contract, is good only
REYES, ET AL., defendants-appellants. insofar as the contracting parties are concerned.
G.R. No. L-18456 November 30, 1963 Hence, if a house belonging to a person stands on a rented land belonging to
another person, it may be mortgaged as a personal property is so stipulated in the
FACTS: document of mortgage. It should be noted, however, that the principle is predicated
Defendants Rufino G. Pineda and his mother Juana Gonzales, borrowed from on statements by the owner declaring his house to be a chattel, a conduct that may
plaintiff Conrado P. Navarro, the sum of P2,500.00, payable after 6 months. To conceivably estop him from subsequently claiming otherwise. The doctrine,
secure the indebtedness, Rufino executed a document captioned "DEED OF REAL therefore, gathered from these cases is that although in some instances, a house of
ESTATE and CHATTEL MORTGAGES", whereby Juana Gonzales, by way of Real mixed materials has been considered as a chattel between them, has been
Estate Mortgage hypothecated a parcel of land, belonging to her, and Rufino G. recognized, it has been a constant criterion nevertheless that, with respect to third
Pineda, by way of Chattel Mortgage, mortgaged his two-story residential house, persons, who are not parties to the contract, and specially in execution proceedings,
erected on a lot belonging to Atty. Vicente Castro and one motor truck, registered in the house is considered as an immovable property (Art. 1431, New Civil Code).
his name.
When the mortgage debt became due and payable, the defendants, after demands
made on them, failed to pay and even after two extensions as to the period when
payments became due. In due course, the plaintiff filed a complaint for foreclosure of
the mortgage and for damages. While the case is being heard, the parties submitted
a Stipulation of Facts, wherein the defendants admitted the indebtedness, the
authenticity and due execution of the Real Estate and Chattel Mortgages and leaving
the only issue in the case as whether or not the residential house, subject of the
mortgage can be considered a Chattel.
Despite such stipulation of facts, the lower court later on ruled and ordered
defendants to pay the amount owing plus 12% compounded interest per annum to
Navarro (90) days from receipt of the Order which further ordered defendant to
deliver immediately to the Provincial Sheriff of Tarlac the personal properties used as
security.

ISSUE/S:
Whether or not the residential house, subject of the mortgage can be considered a
chattel and still remain valid

RULING/RATIO:
Yes, this Court agrees with the trial court in declaring the deed of chattel mortgage
valid solely on the ground that the house mortgaged was erected on the land which
belonged to a third person, but also and principally on the doctrine of estoppel, in
that "the parties have so expressly agreed" in the mortgage to consider the house as
chattel "for its smallness and mixed materials of sawali and wood”.
It is undeniable that the parties to a contract may by agreement treat as personal
property that which by nature would be real property. There cannot be any question
that a building of mixed materials may be the subject of a chattel mortgage, in which
case, it is considered as between the parties as personal property. The matter
depends on the circumstances and the intention of the parties. It should be noted,
though, that the view that parties to a deed of chattel mortgagee may agree to
 PROPERTY CASE DIGESTS
Aleezah Gertrude Regado

TUMALAD vs. VICENCIO, G.R. No. L-30173, September 30, 1971

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.

ISSUE:

W/N the chattel mortgage was null and void ab initio because only personal
properties can be subject of a chattel mortgage.

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.
 PROPERTY CASE DIGESTS
Aleezah Gertrude Regado

MAKATI LEASING AND FINANCE CORP. V. WEAREVER TEXTILE MILLS, INC.

Parties to a contract may by agreement treat as personal property that which by

nature is a real property, as long as no interest of 3rd party would be prejudiced.

FACTS:
To obtain financial accommodations from Makati Leasing, Wearever Textile
discounted and assigned several receivables under a Receivable Purchase
Agreement with Makati Leasing. To secure the collection of receivables, it executed
a chattel mortgage over several raw materials and a machinery – Artos Aero Dryer
Stentering Range (Dryer).

Wearever defaulted thus the properties mortgaged were extrajudicially foreclosed.

The sheriff, after the restraining order was lifted, was able to enter the premises of
Wearever and removed the drive motor of the Dryer. The CA reversed the order of
the CFI, ordering the return of the drive motor since it cannot be the subject of a
replevin suit being an immovable bolted to the ground. Thus the case at bar.

ISSUE:
Whether the dryer is an immovable property

HELD: NO
The SC relied on its ruling in Tumalad v. Vicencio, that if a house of strong materials
can be the subject of a Chattel Mortgage as long as the parties to the contract agree
and no innocent 3rd party will be prejudiced then moreso that a machinery may
treated as a movable since it is movable by nature and becomes immobilized only by
destination. And treating it as a chattel by way of a Chattel Mortgage, Wearever is
estopped from claiming otherwise
 PROPERTY CASE DIGESTS
Aleezah Gertrude Regado

was movable or personal property on its own, all of them have become “immobilized
Serg’s Products, Inc. vs. PCI Leasing G.R. No. 137705. August 22, 2000 by destination because they are essential and principal elements in the industry.”

FACTS: However, contracting parties may validly stipulate that a real property be considered
PCI Leasing and Finance filed a complaint for sum of money, with an application for as personal. After agreeing to such stipulation, they are consequently estopped from
a writ of replevin. claiming otherwise.Under the principle of estoppel, a party to a contract is ordinarily
Judge issued a writ of replevin directing its sheriff to seize and deliver the precluded from denying the truth of any material fact found therein.
machineries and equipment to PCI Leasing after 5 days and upon the payment of
the necessary expenses. Section 12.1 of the Agreement between the parties provides “The PROPERTY is,
The sheriff proceeded to petitioner's factory, seized one machinery, with word that he and shall at all times be and remain, personal property notwithstanding that the
would return for other machineries. PROPERTY or any part thereof may now be, or hereafter become, in any manner
Petitioner (Serg’s Products) filed a motion for special protective order to defer affixed or attached to or embedded in, or permanently resting upon, real property or
enforcement of the writ of replevin. any building thereon, or attached in any manner to what is permanent.”
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. The machines are personal property and they are proper subjects of the Writ of
Petitioner asserted that properties sought to be seized were immovable as defined in Replevin
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
 PROPERTY CASE DIGESTS
Aleezah Gertrude Regado

Manarang vs. Ofilada Case Digest G.R. No. L-8133 May 18, 1956
Facts:
Lucia Manarang obtained a loan of 200 pesos from Ernesto Esteban. She executed
a chattel mortgage over a house of mixed materials to secure its payment. When
she failed to pay the loan, Esteban brought an action for the recovery of the money
he loaned to her. Judgment was rendered in favor of the former. Execution was
issued against the mortgaged property.
Before the property could be sold in a judicial sale, Manarang offered to pay the
amount of 227 pesos representing the amount of judgment, interest, costs, and
sheriff fees. The sheriff refused the tender unless the amount of 260 pesos
representing the payment of the publication of the notice of sale is paid also.
Manarang filed a petition to compel the sheriff to accept the amount of 227 pesos
and to annul the notice of sale. The contention of Manarang is that the house in
question should be considered as personal property and publication of notice of sale
is not necessary. The Court of First Instance held that although sometimes real
property may be considered as personal property, the sheriff is duty bound to cause
the publication of notice of sale to make the sale valid and to prevent it from being
declared void or voidable; and that the sheriff did not err in causing the publication of
the notice. Consequently, the petition was dismissed.
In determining whether property remains personal or real, the following must be
considered: its annexation to the soil, either actual or constructive and the intention
of the parties.
The house was made subject of a contract but it does not give the character of one
of personal property to it although it is the intention of the parties when they
executed the chattel mortgage.
This is because the rules on execution does not allow special consideration that the
parties to a contract may have desired to impart to real estate when they are not
ordinarily so. When the rules speak of personal property, it means a property which
is ordinarily considered as such and when it speaks of real property, it means
property which is generally known as real property. The rules were never intended to
suit the consideration that parties may have given to the property levied upon.
The mere fact that a house was the subject of a chattel mortgage and was
considered as personal property by the parties, it does not make the house a
personal property for purposes of the notice to be given for its sale at public auction.
This is to prevent confusion and misunderstanding.

Issue:

Whether the house made of mixed materials and subject of a chattel mortgage is
one of personal or real property.

Held:

The house is a real property.

The general principle of law is that a building permanently fixed to the freehold
becomes part of it; that is, a house is a real estate belonging to the owner of the land
on which it stands, even though it was erected against his will or without his consent.
(Accessory follows the principal.)

However, where improvement is made with the consent of the landowner, it shall
remain as personal property.
 PROPERTY CASE DIGESTS
Aleezah Gertrude Regado

Evangelista v. Alto Surety 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
Facts: he sold it at a public auction” is untenable. Parties to a deed of chattel mortgage may
In 1949, Santos Evangelista instituted Civil Case No. 8235 of the CFI Manila (Santos agree to consider a house as personal property for purposes of said contract.
Evangelista vs. Ricardo Rivera) for a sum of money. On the same date, he obtained However, this view is good only insofar as the contracting parties are concerned. It is
a writ of attachment, which was levied upon a house, built by Rivera on a land based, partly, upon the principle of estoppel. Neither this principle, nor said view, is
situated in Manila and leased to him, by filing copy of said writ and the applicable to strangers to said contract. The rules on execution do not allow, and
corresponding notice of attachment with the Office of the Register of Deeds of should not be interpreted as to allow, the special consideration that parties to a
Manila. In due course, judgment was rendered in favor of Evangelista, who bought contract may have desired to impart to real estate as personal property, when they
the house at public auction held in compliance with the writ of execution issued in are not ordinarily so. Sales on execution affect the public and third persons. The
said case on 8 October 1951. The corresponding definite deed of sale was issued to regulation governing sales on execution are for public officials to follow. The form of
him on 22 October 1952, upon expiration of the period of redemption. When proceedings prescribed for each kind of property is suited to its character, not to the
Evangelista sought to take possession of the house, Rivera refused to surrender it, character which the parties have given to it or desire to give it. The regulations were
upon the ground that he had leased the property from the Alto Surety & Insurance never intended to suit the consideration that parties, may have privately given to the
Co., Inc. and that the latter is now the true owner of said property. It appears that on property levied upon. The court therefore affirms the decision of the CA with cost
10 May 1952, a definite deed of sale of the same house had been issued to Alto against Alto Surety.
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
 PROPERTY CASE DIGESTS
Aleezah Gertrude Regado

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

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

In another action wherein the Davao Light & Power Co., Inc., was the plaintiff and
the Davao, Saw, Mill Co., Inc., was the defendant, a judgment was rendered in favor
of the plaintiff in that action against the defendant; a writ of execution issued thereon,
and the properties now in question were levied upon as personalty by the sheriff. No
third party claim was filed for such properties at the time of the sales thereof as is
borne out by the record made by the plaintiff herein

It must be noted also that on number of occasion, Davao Sawmill treated the
machinery as personal property by executing chattel mortgages in favor of third
persons. One of such is the appellee by assignment from the original mortgages.

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

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

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

Machinery which is movable in its nature only becomes immobilized when placed in
a plant by the owner of the property or plant, but not when so placed by a tenant, a
usufructuary, or any person having only a temporary right, unless such person acted
as the agent of the owner.

Tsai v. CA
October 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.
PROPERTY CASE DIGESTS
Aleezah Gertrude Regado
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 STOPPEL
Assuming 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. ##

MINDANAO BUS COMPANY v. THE CITY ASSESSOR & TREASURER and the
BOARD OF TAX APPEALS of Cagayan de Oro City
G.R. No. L-17870 September 29, 1962
FACTS:
Petitioner is a public utility solely engaged in transporting passengers and cargoes
by motor trucks. It owns a land where it maintains and operates a garage for its TPU
motor trucks; a repair shop; blacksmith and carpentry shops, and with machineries
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.
The machineries have never been or were never used as industrial equipment 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.
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.
The CTA held the petitioner liable to the payment of the realty tax on its maintenance
and repair equipment mentioned above. Hence, this petition.
ISSUE:
Should the tools and equipment in the petitioner company’s repair shop be
considered immovable taxable real properties?
DOCTRINE:
NO. Movable equipment 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.” The tools and equipment are 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. 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.
PROPERTY CASE DIGESTS
Aleezah Gertrude Regado
Caltex Philippines, Inc. v. Board of Assessment Appeals, G.R. No. L-50466
(May 31, 1982) Case Digest
Facts:
Caltex loaned machines and equipment to gas station operators under a lease
agreement, which stipulated that upon demand, the operators shall return to Caltex
the machines and equipment. The lessor of the land does not become the owner of
the machines and equipment. Caltex retains their ownership.
The City Assessor characterized the said machines and equipment as taxable realty.
However, the City Board of Tax Appeals ruled that they are personalty. The Assessor
appealed to the Central Board of Assessment Appeals.
The Board held that the said machines are real property within the meaning of Sec.
3(k) & (m) and 38 of the Real Property Tax Code, PD 464, and that the Civil Code
definitions of real and personal property in Articles 415 and 416 are not applicable in
this case.
Issue:
Whether or not the said machines and equipment are real property subject to realty
tax?
Held:
The said machines and equipment are considered real property.
Section 2 of the Assessment Law provides that the realty tax is due "on real property,
including land, buildings, machinery, and other improvements" not specifically
exempted in section 3 thereof.
This provision is reproduced with some modification in the Real Property Tax Code
which provides:
SEC. 38. Incidence of Real Property Tax.— There shall be levied, assessed and
collected in all provinces, cities and municipalities an annual ad valorem tax on real
property, such as land, buildings, machinery and other improvements affixed or
attached to real property not hereinafter specifically exempted.
The Code contains the following definitions in its section 3:
k) Improvements — is a valuable addition made to property or an amelioration in its
condition, amounting to more than mere repairs or replacement of waste, costing
 PROPERTY CASE DIGESTS
Aleezah Gertrude Regado

labor or capital and intended to enhance its value, beauty or utility or to adapt it for
new or further purposes.

m) Machinery — shall embrace machines, mechanical contrivances, instruments,

appliances and apparatus attached to the real estate. It includes the physical
facilities available for production, as well as the installations and appurtenant service
facilities, together with all other equipment designed for or essential to its
manufacturing, industrial or agricultural purposes (See sec. 3[f], Assessment Law).

The machines and equipment are necessary to the operation of the gas station, for
without them the gas station would be useless, and which have been attached or
affixed permanently to the gas station site or embedded therein, are taxable
improvements and machinery within the meaning of the Assessment Law and the
Real Property Tax Code.

Therefore, the machines and equipment are real property subject to realty tax.

Meralco v. City Assessor GR No. 166102
Before the Court is a Petition for Review on Certiorari seeking the reversal of the
Decision1 dated May 13, 2004 and Resolution dated November 18, 2004 of the
Court of Appeals in CA-G.R. SP No. 67027. The appellate court affirmed the
Decision3 dated May 3, 2001 of the Central Board of Assessment Appeals (CBAA) in
CBAA Case No. L-20-98, which, in turn, affirmed with modification the Decision4
dated June 17, 19985 of the Local Board of Assessment Appeals (LBAA) of Lucena
City, Quezon Province, as regards Tax Declaration Nos. 019-6500 and 019-7394,
ruling that MERALCO is liable for real property tax on its transformers, electric posts
(or poles), transmission lines, insulators, and electric meters, beginning 1992.
MERALCO failed to persuade the Court of Appeals that the transformers,
transmission lines, insulators, and electric meters mounted on the electric posts of
MERALCO were not real properties. The appellate court invoked the definition of
"machinery" under
Section 199(o) of the Local Government Code and then wrote that:
We firmly believe and so hold that the wires, insulators, transformers and electric
meters mounted on the poles of [MERALCO] may nevertheless be considered as
improvements on the land, enhancing its utility and rendering it useful in distributing
electricity. The said properties are actually, directly and exclusively used to meet the
needs of [MERALCO] in the distribution of electricity.
In addition, "improvements on land are commonly taxed as realty even though for
some purposes they might be considered personalty. It is a familiar personalty
phenomenon to see things classed as real property for purposes of taxation which
on general principle might be considered personal property."
Issue: Whether or not the transformers, electric posts (or poles), transmission lines,
insulators, and electric meters are real properties.
Held: While the Local Government Code still does not provide for a specific definition
of "real property," Sections 199(o) and 232 of the said Code, respectively, gives an
extensive definition of what constitutes "machinery" and unequivocally subjects such
machinery to real property tax.
The Court reiterates that the machinery subject to real property tax under the Local
Government Code "may or may not be attached, permanently or temporarily to the
real property;" and the physical facilities for production, installations, and
PROPERTY CASE DIGESTS
Aleezah Gertrude Regado
appurtenant service facilities, those which are mobile, self-powered or self-propelled,
or are not permanently attached must (a) be actually, directly, and exclusively used
to meet the needs of the particular industry, business, or activity; and (2) by their
very nature and purpose, be designed for, or necessary for manufacturing, mining,
logging, commercial, industrial, or agricultural purposes.
Article 415, paragraph (1) of the Civil Code declares as immovables or real
properties "[l]and, buildings, roads and constructions of all kinds adhered to the soil."
The land, buildings, and roads are immovables by nature "which cannot be moved
from place to place," whereas the constructions adhered to the soil are immovables
by incorporation "which are essentially movables, but are attached to an immovable
in such manner as to be an integral part thereof."57 Article 415, paragraph (3) of the
Civil Code, referring to "[ejverything 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," are likewise immovables by incorporation. In contrast,
the Local Government Code considers as real property machinery which "may or
may not be attached, permanently or temporarily to the real property," and even
those which are "mobile."
Article 415, paragraph (5) of the Civil Code considers as immovables or real
properties "[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." The Civil Code, however, does not define "machinery."
The properties under Article 415, paragraph (5) of the Civil Code are immovables by
destination, or "those which are essentially movables, but by the purpose for which
they have been placed in an immovable, partake of the nature of the latter because
of the added utility derived therefrom."58 These properties, including machinery,
become immobilized if the following requisites concur: (a) they are placed in the
tenement by the owner of such tenement; (b) they are destined for use in the
industry or work in the tenement; and (c) they tend to directly meet the needs of said
industry or works.59 The first two requisites are not found anywhere in the Local
Government Code.
Furthermore, in Caltex (Philippines), Inc. v. Central Board of Assessment Appeals,62
the Court acknowledged that "[i]t is a familiar phenomenon to see things classed as
real property for purposes of taxation which on general principle might be considered
personal property[.]" Therefore, for determining whether machinery is real property
subject to real property tax, the definition and requirements under the Local
Government Code are controlling.